<PAGE>
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) September 29, 1997
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP. (as depositor under a
Pooling and Servicing Agreement dated as of September 15, 1997 providing for,
inter alia, the issuance of Wilshire Funding Corporation Mortgage-Backed
Certificates, Series 1997-WFC1)
Credit Suisse First Boston Mortgage Securities Corp.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 333-33807 13-3320910
- --------------------------------------------------------------------------------
(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)
Registrant's telephone number, including area code (212) 325-2000
Not Applicable
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Exhibit Index Located on Page 2
<PAGE>
Items 1 through 6 and Item 8 are not included because they are not applicable.
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:
Exhibit Sequentially
Number Numbered
- ------- Exhibit
Page
-----------
7(c) Pooling and Servicing Agreement, dated 004
as of September 15, 1997 among Credit
Suisse First Boston Mortgage Securities
Corp., as depositor, Wilshire Mortgage
Funding Company V, Inc., as unaffiliated
seller, Wilshire Servicing Corporation,
as master servicer, and Bankers Trust
Company of California, N.A., as trustee
and back-up servicer.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES
CORP., Registrant
By: /s/ Allan J. Baum
----------------------------
Name: Allan J. Baum
Title: Vice President
Dated: September 29, 1997
3
<PAGE>
EXHIBIT 7(C)
EXECUTION COPY
- --------------------------------------------------------------------------------
POOLING AND SERVICING AGREEMENT
among
WILSHIRE MORTGAGE FUNDING COMPANY V, INC.,
as Unaffiliated Seller
WILSHIRE SERVICING CORPORATION,
as Master Servicer
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.,
as Depositor
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee and Back-Up Servicer
WILSHIRE FUNDING CORPORATION MORTGAGE BACKED CERTIFICATES,
SERIES 1997-WFC1
Dated as of September 15, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms..................... 1
Adjusted Class A-I Percentage....................... 1
Adjusted Class A-I Prepayment Percentage............ 2
Adjusted Subordinate Percentage..................... 2
Adjusted Subordinate Prepayment Percentage.......... 2
Advance Payment..................................... 2
Advances............................................ 2
Adverse Claim....................................... 2
Adverse REMIC Event................................. 2
Affiliate........................................... 2
Agreement........................................... 2
Assignment.......................................... 2
Authorized Officer.................................. 3
Available Distribution Amount....................... 3
Balloon Loan........................................ 4
Blended Rate........................................ 4
Business Day........................................ 5
CERCLA.............................................. 5
Certificate......................................... 5
Certificate Account................................. 5
Certificateholder................................... 5
Holder.............................................. 5
Certificate Principal Balance....................... 5
Certificate Register................................ 6
Chapter 13.......................................... 6
Civil Relief Act.................................... 6
Civil Relief Act Interest Shortfall................. 6
Class............................................... 6
Class A Certificate................................. 6
Class A Interest Distribution Amount................ 6
Class A Principal Distribution Amount............... 6
Class A-I Certificates.............................. 7
Class A-I Interest Distribution Amount.............. 7
Class A-I Pass-Through Rate......................... 7
Class A-I Percentage................................ 7
Class A-I Prepayment Percentage..................... 7
Class A-I Principal Distribution Amount............. 9
Class A-II Certificates............................. 10
Class A-II Interest Distribution Amount............. 10
Class A-II Pass-Through Rate........................ 10
Class A-II Principal Distribution Amount............ 10
Class A-III Certificates............................ 11
Class A-III Pass-Through Rate....................... 11
Class A-III Principal Distribution Amount........... 12
<PAGE>
Page
Class B Certificates................................ 13
Class B Pass-Through Rate........................... 13
Class B-1 Certificates.............................. 13
Class B-1 Interest Distribution Amount.............. 13
Class B-2 Certificates.............................. 13
Class B-2 Interest Distribution Amount.............. 13
Class B-3 Certificates.............................. 13
Class B-3 Interest Distribution Amount.............. 13
Class IO Certificates............................... 14
Class IO Interest Distribution Amount............... 14
Class IO Pass-Through Rate.......................... 14
Class M Certificates................................ 14
Class M-1 Certificates.............................. 14
Class M-1 Interest Distribution Amount.............. 14
Class M-1 Pass-Through Rate......................... 15
Class M-2 Certificates.............................. 15
Class M-2 Interest Distribution Amount.............. 15
Class M-2 Pass-Through Rate......................... 15
Class M-3 Certificates.............................. 15
Class M-3 Interest Distribution Amount.............. 15
Class M-3 Pass-Through Rate......................... 15
Class PO Certificates............................... 15
Class PO Mortgage Loan.............................. 15
Class PO Principal Distribution Amount.............. 16
Class PO Principal Percentage....................... 16
Class R-I Certificates.............................. 16
Class R-II Certificates............................. 16
Closing Date........................................ 16
Code................................................ 16
Collection Account.................................. 16
Collections......................................... 16
Condemnation Proceeds............................... 16
Credit Support...................................... 16
Cross Support Weighted Average Net Mortgage Rate.... 16
Cut-Off Date........................................ 17
DCR................................................. 17
Debt................................................ 17
Deferred Interest................................... 18
Deficient Valuation................................. 18
Deficit Percentage.................................. 18
Delinquency Advance................................. 18
Delinquent.......................................... 18
Determination Date.................................. 18
Depository.......................................... 18
Direct Participant.................................. 18
Disqualified Organization........................... 18
Distribution Date................................... 19
Dollar.............................................. 19
$................................................... 19
Due Date............................................ 19
Due Period.......................................... 19
Electronic Ledger................................... 19
ii
<PAGE>
Page
Eligible Account.................................... 19
Eligible Investments................................ 20
ERISA............................................... 21
Escrow Amounts...................................... 21
Event of Master Servicer Default.................... 21
Exception Report.................................... 21
FDIC................................................ 21
FHA................................................. 21
FHLMC............................................... 21
Final Scheduled Distribution Date................... 21
Fitch............................................... 21
FNMA................................................ 21
GAAP................................................ 21
Governmental Authority.............................. 21
Group I Certificates................................ 21
Holder.............................................. 21
Independent Public Accountant....................... 21
Indirect Participant................................ 21
Initial Certificate Principal Balance............... 22
Initial Credit Support.............................. 22
Insurance Policy.................................... 22
Insurance Proceeds.................................. 22
Junior Mortgage Loan................................ 22
Liquidated Mortgage Loan............................ 22
Liquidation Expenses................................ 22
Liquidation Proceeds................................ 23
List of Loans....................................... 23
Loan Collateral..................................... 23
Loan File........................................... 23
Loan File Documents................................. 23
Loan-to-Value Ratio................................. 23
Lock-Box............................................ 23
Lockbox Account..................................... 23
Lockbox Agreement................................... 23
Lockbox Bank........................................ 24
Manufactured Home................................... 24
Manufactured Housing Loan........................... 24
Master Servicer..................................... 24
Master Servicer Remittance Date..................... 24
Master Servicer's Monthly Report.................... 24
Master Servicing Fee................................ 24
Master Servicing Fee Rate........................... 24
Mixed Use Property.................................. 24
Monthly Payment..................................... 24
Moody's............................................. 24
Mortgage............................................ 24
Mortgage Loan....................................... 25
Mortgage Rate....................................... 25
Mortgaged Property.................................. 25
Mortgagor........................................... 25
Multifamily Property................................ 25
Net Insurance Proceeds.............................. 26
iii
<PAGE>
Page
Net Liquidation Proceeds............................ 26
Net Mortgage Rate................................... 26
Net Negative Amortization........................... 26
Non-Recoverable Advance............................. 26
Non-Surplus Percentage.............................. 26
Note................................................ 26
Notional Amount..................................... 26
Officer's Certificate............................... 26
Opinion of Counsel.................................. 27
Original Subordinate Principal Balance.............. 27
Originator.......................................... 27
Outstanding Advances................................ 27
Pass-Through Rate................................... 27
Percentage Interest................................. 27
Permitted Liens..................................... 27
Person.............................................. 27
PHH................................................. 28
PHH Mortgage Loans.................................. 28
PHH Servicing Fee................................... 28
PHH Servicing Fee Rate.............................. 28
Pool................................................ 28
Pool I.............................................. 28
Pool II............................................. 28
Pool III............................................ 28
Pool Deficit Amount................................. 28
Pool Surplus Amount................................. 28
Potentially Hazardous Property...................... 29
Principal Prepayment................................ 29
Prepayment Interest................................. 29
Prepayment Interest Shortfall....................... 29
Prepayment Period................................... 29
Preservation Expenses............................... 29
Primary Mortgage Insurance Policy................... 29
Principal Balance................................... 29
Qualified Liquidation............................... 30
Rating Agency....................................... 30
Real Estate......................................... 30
Realized Loss....................................... 30
Record Date......................................... 30
Records............................................. 30
Related Documents................................... 31
REMIC............................................... 31
REMIC I............................................. 31
REMIC I Regular Interest............................ 31
REMIC II............................................ 31
REMIC Provisions.................................... 31
REO Property........................................ 31
Report Date......................................... 31
Representation Letter............................... 31
Repurchase Price.................................... 32
Request for Release................................. 32
Required Certificateholders......................... 32
iv
<PAGE>
Page
Required Information................................ 32
Residual Certificates............................... 32
Responsible Officer................................. 32
RTC................................................. 32
Sale Agreement...................................... 32
Securities Act...................................... 33
Senior Certificates................................. 33
Senior Percentage................................... 33
Servicer............................................ 33
Servicing Officer................................... 33
Servicing Standard.................................. 33
Standard & Poor's................................... 33
Start-Up Day........................................ 33
Subordinate Certificates............................ 33
Subordinate Percentage.............................. 33
Subordinate Prepayment Percentage................... 33
Subordinate Principal Distribution Amount........... 34
Sub-Servicing Agreement............................. 35
Successor Servicer.................................. 35
Surplus Percentage.................................. 35
T&I Account......................................... 35
Tax................................................. 35
Taxes............................................... 35
Tax Matters Person.................................. 35
Time Share.......................................... 35
Time Share Loan..................................... 35
Trust Fund.......................................... 35
Trust Termination Date.............................. 35
Trustee Fee......................................... 35
Trustee's Fee Rate.................................. 36
U.S. Person......................................... 36
Unaffiliated Seller's Agreement..................... 36
Uncertificated REMIC I Regular Interests............ 36
Uncertificated REMIC I Regular Interest A........... 36
Uncertificated REMIC I Regular Interest B........... 36
Uncertificated REMIC I Regular Interest C........... 36
Uncertificated REMIC I Regular Interest D........... 37
Uncertificated REMIC I Regular Interest E........... 37
Uncertificated REMIC I Regular Interest F........... 37
Uncertificated REMIC I Regular Interest G........... 37
Uncertificated REMIC I Regular Interest H........... 37
Uncertificated REMIC I Regular Interest I........... 38
Uncertificated REMIC I Regular Interest J........... 38
Unregistered Certificates........................... 38
VA.................................................. 38
Voting Rights....................................... 38
Weighted Average Pool Net Mortgage Rate............. 38
Wilshire Seller..................................... 38
WSC................................................. 38
Section 1.02. Provisions of General Application......... 39
Section 1.03. Business Day Certificate.................. 39
Section 1.04. Trust Name................................ 39
v
<PAGE>
Page
ARTICLE II
TRANSFER OF TRUST ASSETS
Section 2.01. Conveyance of Trust Assets;
Establishment of the Trust.......................... 39
Section 2.02. Purposes and Powers....................... 40
Section 2.03. Possession of Loan Files; Access to Loan
Files............................................... 41
Section 2.04. Certification............................. 43
Section 2.05. Further Action Evidencing Assignments..... 43
Section 2.06. Grant of Security Interest; Intended
Characterization.................................... 44
Section 2.07. Transmission of Loan File Documents....... 46
Section 2.08. Miscellaneous REMIC Provisions............ 46
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. Representations, Warranties and
Covenants of the Unaffiliated Seller................ 48
Section 3.02. Representations and Warranties of the
Master Servicer..................................... 53
Section 3.03. Representations and Warranties of the
Depositor........................................... 55
Section 3.04. [Reserved................................. 57
Section 3.05. Representations and Warranties as to
each Mortgage Loan and the other Trust Assets. ..... 57
Section 3.06. Repurchases and Remedies............. 67
ARTICLE IV
SERVICING OF TRUST ASSETS
Section 4.01. Master Servicer and Servicers............. 68
Section 4.02. Collection of Certain Mortgage Loan
Payments............................................ 71
Section 4.03. Sub-Servicing Agreements Between Master
Servicer and Servicers.............................. 72
Section 4.04. Successor Servicers....................... 72
Section 4.05. Liability of Master Servicer.............. 73
Section 4.06. No Contractual Relationship Between
Servicer and Persons other than the Master
Servicer............................................ 73
Section 4.07. Assumption or Termination of Sub-
Servicing Agreements................................ 73
Section 4.08. Establishment of Lock-Box and Lock-Box
Account............................................. 74
Section 4.09. Deposits into Collection Account.......... 75
Section 4.10. [Reserved]................................ 76
Section 4.11. Master Servicer Reports................... 76
vi
<PAGE>
Page
Section 4.12. Delinquency Advances, Servicing Advances
and Prepayment Interest............................. 76
Section 4.13. Maintenance of Insurance and Tax
Services............................................ 77
Section 4.14. Due-on-Sale Clauses; Assumption and
Substitution Agreements............................. 79
Section 4.15. Realization Upon Defaulted Mortgage
Loans............................................... 80
Section 4.16. Servicing Compensation.................... 82
Section 4.17. Records, Inspections...................... 82
Section 4.18. Assignment of Agreement................... 83
Section 4.19. Removal of Master Servicer; Resignation
of Master Servicer; Term of Servicing............... 83
Section 4.20. Errors and Omissions Insurance; Fidelity
Bond................................................ 87
Section 4.21. Change in Business of the Master
Servicer............................................ 88
Section 4.22. Master Servicer Expenses.................. 88
Section 4.23. The Back-Up Servicer...................... 89
Section 4.24. Escrows for Taxes, Insurance,
Assessments and Similar Items; Taxes and Insurance
Accounts............................................ 90
Section 4.25. Master Servicer to Give Notice of
Certain Events and to Deliver Certain Information... 90
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates; Denominations........... 91
Section 5.02. Registration of Transfer and Exchange of
Certificates........................................ 92
Section 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates........................................ 95
Section 5.04. Persons Deemed Holders.................... 95
Section 5.05. Limitation on Transfer of Residual
Certificates........................................ 95
ARTICLE VI
DEPOSITS AND DISTRIBUTIONS
Section 6.01. Rights of the Holders..................... 96
Section 6.02. Establishment and Administration of the
Collection Account and Certificate Account.......... 96
Section 6.03. Investment of Amounts..................... 96
Section 6.04. Collections............................... 97
Section 6.05. Flow of Funds............................. 97
Section 6.06. Disbursement of Funds.....................100
Section 6.07. Allocation of Realized Losses.............100
Section 6.08. Reports to Certificateholders.............101
Section 6.09. Presentation of Certificates..............103
vii
<PAGE>
Page
ARTICLE VII
REMEDIES
Section 7.01. Limitation on Suits.......................103
Section 7.02. Restoration of Rights and Remedies........104
Section 7.03. Rights and Remedies Cumulative............104
Section 7.04. Delay or Omission Not Waiver..............104
Section 7.05. Control by Certificateholders.............105
Section 7.06. Waiver of Past Defaults...................105
Section 7.07. Undertaking for Costs.....................105
Section 7.08. Waiver of Stay or Extension Laws..........106
ARTICLE VIII
LIMITATION ON LIABILITY; INDEMNITIES
Section 8.01. Liabilities of Mortgagors.................106
Section 8.02. Liability of the Unaffiliated Seller,
Back-Up Servicer, Depositor and the Master
Servicer............................................106
Section 8.03. Relationship of Master Servicer...........107
Section 8.04. Indemnities of the Master Servicer........107
ARTICLE IX
THE TRUSTEE
Section 9.01. Certain Duties............................108
Section 9.02. Notice of Defaults........................110
Section 9.03. Certain Matters Affecting the Trustee.....110
Section 9.04. Trustee Not Liable for Certificates or
Mortgages...........................................112
Section 9.05. Trustee May Own Certificates..............112
Section 9.06. Eligibility Requirements for Trustee......112
Section 9.07. Resignation or Removal of Trustee.........113
Section 9.08. Successor Trustee.........................114
Section 9.09. Merger or Consolidation of Trustee........114
Section 9.10. Appointment of Co-Trustee or Separate
Trustee.............................................115
Section 9.11. Tax Matters...............................116
Section 9.12. Trustee's Fees and Expenses...............116
ARTICLE X
MISCELLANEOUS
Section 10.01. Termination of Agreement..................117
Section 10.02. Optional Purchase of Trust Assets........117
Section 10.03. Certain Notices upon Final Payment........118
Section 10.04. Beneficiaries.............................118
Section 10.05. Amendment.................................118
viii
<PAGE>
Page
Section 10.06. Notices...................................120
Section 10.07. Merger and Integration....................121
Section 10.08. Headings..................................121
Section 10.09. Certificates Nonassessable and Fully
Paid................................................121
Section 10.10. Severability of Provisions................121
Section 10.11. No Proceedings............................122
Section 10.12. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL................................122
Section 10.13. Counterparts..............................122
Section 10.14. Tax Matters...............................122
Section 10.15. REMIC.....................................123
Section 10.16. REMIC Status; Taxes......................123
Section 10.17. Additional Limitation on Action and
Imposition of Tax...................................124
Section 10.18. Appointment of Tax Matters Person........125
Exhibits
Exhibit A Form of Master Servicer's Monthly Report
Exhibit B-1 Form of Class A-I Certificates
Exhibit B-2 Form of Class A-II Certificates
Exhibit B-3 Form of Class A-III Certificates
Exhibit B-4 Form of Class IO Certificates
Exhibit B-5 Form of Class PO Certificates
Exhibit B-6 Form of Class M-1 Certificates
Exhibit B-7 Form of Class M-2 Certificates
Exhibit B-8 Form of Class M-3 Certificates
Exhibit B-9 Form of Class B-1 Certificates
Exhibit B-10 Form of Class B-2 Certificates
Exhibit B-11 Form of Class B-3 Certificates
Exhibit B-12 Form of Class R-I Certificates
Exhibit B-13 Form of Class R-II Certificates
Exhibit C Loan File Documents
Exhibit D Form of Trustee Certification
Exhibit E Request for Release
Exhibit F Form of Reassignment
Exhibit G Form of FDIC Release
Exhibit H Form of Liquidation Report
Exhibit I-1 Form of Transfer Certificate - Rule 144A
Investment Representation (Long-Form)
Exhibit I-2 Form of Rule 144A Investment Representation (Short
Form)
Exhibit I-3 Form of ERISA Representation
Exhibit J Form of Residual Transfer Certification
Schedules
Schedule I Pool I Loans
Schedule II Pool II Loans
Schedule III Pool III Loans
Schedule IV PHH Servicing Fee Rates
ix
<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of September 15, 1997, among
WILSHIRE MORTGAGE FUNDING COMPANY V, INC., a Delaware corporation, its
successors and permitted assigns, as Unaffiliated Seller (the "UNAFFILIATED
SELLER"), WILSHIRE SERVICING CORPORATION, a Delaware corporation ("WSC"), its
successors and permitted assigns, as Master Servicer (the "MASTER SERVICER"),
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP., a Delaware corporation, as
Depositor (the "DEPOSITOR"), and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a
national banking association chartered under the laws of the United States, its
successors and permitted assigns, as Trustee (the "TRUSTEE") and as Back-Up
Servicer (the "BACK-UP SERVICER").
W I T N E S S E T H:
-------------------
WHEREAS, the Unaffiliated Seller is a bankruptcy-remote corporation
formed for the sole purpose of transferring certain assets to the Depositor
which will in turn transfer certain assets to the Wilshire Funding Corporation
Mortgage-Backed Trust 1997-WFC1 (the "TRUST") established pursuant to this
Agreement;
WHEREAS, the Unaffiliated Seller has entered into the Sale Agreement,
dated as of September 15, 1997, by and between the Unaffiliated Seller and
Wilshire Funding Corporation (the "WILSHIRE SELLER") for the purpose of
acquiring a portfolio of Mortgage Loans;
WHEREAS, the Unaffiliated Seller, pursuant to the Unaffiliated
Seller's Agreement, has conveyed the Mortgage Loans to the Depositor and the
Depositor, pursuant to this Agreement, will convey the Mortgage Loans to the
Trustee;
WHEREAS, WSC is willing to act as the Master Servicer hereunder and
Bankers Trust Company of California, N.A. is willing to act as Trustee and as
the Back-Up Servicer hereunder; and
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used herein, the following
---------------------
terms shall have the following meanings:
"ADJUSTED CLASS A-I PERCENTAGE" means, with respect to any
Distribution Date, a percentage equal to the Class A-I Percentage for such
Distribution Date multiplied by the Non-Surplus Percentage for Pool I for such
Distribution Date.
<PAGE>
"ADJUSTED CLASS A-I PREPAYMENT PERCENTAGE" means, with respect to any
Distribution Date, a percentage equal to the Class A-I Prepayment Percentage for
such Distribution Date multiplied by the Non-Surplus Percentage for Pool I for
such Distribution Date.
"ADJUSTED SUBORDINATE PERCENTAGE" means, with respect to any
Distribution Date, a percentage equal to the Subordinate Percentage for such
Distribution Date multiplied by the Non-Surplus Percentage for Pool I for such
Distribution Date.
"ADJUSTED SUBORDINATE PREPAYMENT PERCENTAGE" means, with respect to
any Distribution Date, a percentage equal to the Subordinate Prepayment
Percentage for such Distribution Date multiplied by the Non-Surplus Percentage
for Pool I for such Distribution Date.
"ADVANCE PAYMENT" means, with respect to any Mortgage Loan, a payment
received from the related Mortgagor and intended as an early payment of one or
more upcoming Monthly Mortgage payments.
"ADVANCES" means Delinquency Advances and Servicing Advances.
"ADVERSE CLAIM" means any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than any security interest created under this
Agreement.
"ADVERSE REMIC EVENT" means (i) any event that could endanger the
status of either REMIC I or REMIC II as a REMIC or (ii) result in the imposition
of an unindemnified tax upon either REMIC I or REMIC II (including but not
limited to the tax on prohibited transactions as defined in Section 860F(a)(2)
of the Code).
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirect ly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "con trolled" have meanings correlative to the
foregoing.
"AGREEMENT" means this Pooling and Servicing Agreement, as amended
from time to time including all exhibits and schedules hereto.
"ASSIGNMENT" means, with respect to each Mortgage Loan, an assignment
of the Mortgage, notice of transfer or equivalent
2
<PAGE>
instrument sufficient under the laws of the jurisdiction wherein the related
Mortgaged Property is located to reflect of record the transfer of the Mortgage
to the Trustee for the benefit of the Certificateholders.
"AUTHORIZED OFFICER" means, with respect to any corporation or limited
liability company, the Chairman of the Board, the President, any Vice President,
the Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer
and each other officer of such corporation or the members and manager of such
limited liability company specifically authorized in resolutions of the Board of
Directors of such corporation or limited liability company to sign agreements,
instruments or other documents in connection with this Agreement on behalf of
such corporation or limited liability company, as the case may be.
"AVAILABLE DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date:
(a) the sum of:
(i) the aggregate amount of Monthly Payments due during or prior to
the related Due Period and received by the Master Servicer or any
Servicer on or before the related Determination Date, unless such
Monthly Payments have been included in the Available Distribution
Amount for any prior Distribution Date;
(ii) the aggregate amount of all Principal Prepayments and any other
payments and collections (other than Monthly Payments) received by the
Master Servicer or any Servicer in respect of each Mortgage Loan
during the related Prepayment Period, from any source, including
amounts received from the related Mortgagor, repurchase proceeds
pursuant to Section 3.06, Insurance Proceeds, Liquidation Proceeds
(net of related Liquidation Expenses) and condemnation awards, and
excluding interest and other earnings on amounts on deposit in the
Collection Account and the Certificate Account; and
(iii) the aggregate amount of Advances required to be remitted by the
Master Servicer and any payments of Prepayment Interest made by the
Master Servicer relating to such Distribution Date;
minus, to the extent included therein, (b) the sum of:
(i) the Master Servicing Fees for such Due Period, prepayment
penalties, fees or premiums, late payment charges and assumption fees
and any excess interest charges paid by the Mortgagor by virtue of any
default or other non-compliance by the Mortgagor with the terms
3
<PAGE>
of the Mortgage Loan or any other instrument or document executed in
connection therewith or otherwise) payable therefrom and included
therein;
(ii) any amount 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 Master
Servicer has made a previously unreimbursed Advance;
(iii) amounts representing reimbursement of Nonrecoverable Advances
and other amounts permitted to be withdrawn from the Collection
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;
(v) all payments due on any Mortgage Loan on or prior to the Cut-off
Date;
(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; and
(vii) Principal Prepayments and other unscheduled collections of
principal received after the related Prepayment Period and included
therein.
"BALLOON LOAN" means a Mortgage Loan with a Monthly Payment that does
not fully amortize the principal amount of the Mortgage Loan over its term to
stated maturity and that requires a substantial principal payment at maturity.
"BLENDED RATE" means, with respect to any Distribution Date and any
Pool, the percentage per annum equivalent of a fraction,
(i) the numerator of which is equal to the sum of:
(A) the product of:
(1) the Weighted Average Pool Net Mortgage Rate for such
Pool and such Distribution Date; and
(2) the Non-Surplus Percentage of the aggregate Principal
Balance of the Mortgage
4
<PAGE>
Loans in such Pool (other than the Class PO Principal
Percentage of each Class PO Mortgage Loan in the case of
Pool I) immediately prior to such Distribution Date; and
(B) the product of:
(1) the Cross Support Weighted Average Net Mortgage Rate for
such Distribution Date; and
(2) the Pool Deficit Amount for such Pool and for such
Distribution Date;
(ii) and the denominator of which is equal to the sum of the
Certificate Principal Balances of the related Class of Class A
Certificates plus, in the case of Pool I, the Subordinate
Certificates, immediately prior to such Distribution Date.
"BOOK-ENTRY CERTIFICATE" means, any Certificate registered in the name
of the Depository or its nominee.
"BUSINESS DAY" means any day other than a Saturday or a Sunday, or
another day on which banks in the State of New York, the State of California or
the State of Oregon (or such other states in which the Corporate Trust Office or
the principal offices of the Master Servicer are subsequently located, as
specified in writing by such party to the other parties hereto) are required, or
authorized by law, to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
"CERTIFICATE" means any Class A-I, Class A-II, Class A-III, Class IO,
Class PO, Class M-1, Class M-2, Class M-3, Class B-1, Class B-2, Class B-3,
Class R-I, or Class R-II Certificate executed and authenticated by the Trustee
for the benefit of the Certificateholders in substantially the form or forms
attached as Exhibits hereto, each such Certificate (other than the Residual
Certificates) evidencing an interest designated as a "regular interest" in REMIC
II for purposes of the REMIC Provisions.
"CERTIFICATE ACCOUNT" means the account established as the Certificate
Account pursuant to Section 6.02.
"CERTIFICATEHOLDER" or "HOLDER" means the Person in whose name a
Certificate is registered in the Certificate Register.
"CERTIFICATE PRINCIPAL BALANCE" means, on any date and with respect to
any Class of Certificates, the Initial Certificate Principal Balance of such
Class less the sum of (i) all amounts previously distributed to Holders of such
Class
5
<PAGE>
with respect to principal pursuant to Section 6.05 and (ii) all amounts of
Realized Losses previously allocated to such Class pursuant to Section 6.07;
provided, however, that on each Distribution Date, after distributions of
principal and interest are made, the Certificate Principal Balance of the
outstanding Class or Classes (if such Classes have equal priority for the
payment of principal) of Certificates with the lowest priority for principal
distributions will be reduced (but not below zero) by the amount necessary for
the aggregate Certificate Principal Balance of the Certificates (excluding the
Class PO Certificates) to equal the aggregate Principal Balance of the Mortgage
Loans (excluding the applicable Class PO Principal Percentage of the Principal
Balance of each Class PO Mortgage Loan), provided that if, after distributions
--------
of principal on any Distribution Date, the aggregate Principal Balance of the
Pool II Loans or Pool III Loans is increased as a result of Net Negative
Amortization on the Mortgage Loans in such Pool, the Certificate Principal
Balance of the Class or Classes of Certificates that were entitled to receive
payments of principal with respect to the Mortgage Loans in such Pool on such
Distribution Date will be increased by such amount of Net Negative Amortization
for such Distribution Date, in proportion to the respective amounts of such
entitlements.
"CERTIFICATE REGISTER" has the meaning set forth in Section 5.02(a)
hereof.
"CHAPTER 13" means Chapter 13 of the United States Bankruptcy Code, as
amended.
"CIVIL RELIEF ACT" means the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"CIVIL RELIEF ACT INTEREST SHORTFALL" means any shortfall in interest
collections on any Mortgage Loan resulting from the application of the Civil
Relief Act.
"CLASS" means each of the Class A-I, Class A-II, Class A-III, Class
IO, Class PO, Class M-1, Class M-2, Class M-3, Class B-1, Class B-2, Class B-3,
Class R-I or Class R-II Certificates, as appropriate.
"CLASS A CERTIFICATE" means each of the Class A-I, Class A-II or Class
A-III Certificates, as appropriate.
"CLASS A INTEREST DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date and the Class A Certificates, the aggregate of the Class A-I
Interest Distribution Amount, Class A-II Interest Distribution Amount and Class
A-III Interest Distribution Amount for such Distribution Date.
"CLASS A PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date and the Class A Certificates, the aggregate of the Class A-I
Principal Distribution Amount,
6
<PAGE>
Class A-II Principal Distribution Amount and Class A-III Principal Distribution
Amount for such Distribution Date.
"CLASS A-I CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-1 hereto.
"CLASS A-I INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class A-I Certificates for such Distribution Date and (ii) the
Class A-I Pass-Through Rate minus (b) such Class' pro rata share (based on the
respective amount of interest due to each Class of Certificates on such
Distribution Date absent any reduction) of the amount of Prepayment Interest
Shortfalls and Civil Relief Act Interest Shortfalls for such Distribution Date
on such Distribution Date.
"CLASS A-I PASS-THROUGH RATE" means, with respect to any Distribution
Date and the Class A-I Certificates, 7.25% per annum.
"CLASS A-I PERCENTAGE" means, with respect to any Distribution Date,
the percentage equivalent of (i) the Certificate Principal Balance of the Class
A-I Certificates divided by (ii) the sum of the Certificate Principal Balances
of the Class A-I Certificates and Subordinate Certificates, in each case
immediately preceding such Distribution Date.
"CLASS A-I PREPAYMENT PERCENTAGE" means, with respect to any
Distribution Date, the percentage indicated below:
Class A-I Prepayment
Distribution Date Percentage
- -------------------------------- ------------------------------
October 1997 through September 100%
2002...........................
October 2002 through September the Class A-I Percentage for
2003........................... such Distribution Date, plus
70% of the Subordinate
Percentage for such
Distribution Date;
October 2003 through September the Class A-I Percentage
2004........................... for such Distribution Date, plus
60% of the Subordinate
Percentage for such
Distribution Date.
October 2004 through September the Class A-I Percentage for
2005........................... such Distribution Date, plus
40% of the Subordinate
Percentage for such
Distribution Date;
7
<PAGE>
October 2005 through September the Class A-I Percentage for
2006........................... such Distribution Date, plus
20% of the Subordinate
Percentage for such
Distribution Date; and
October 2006 and thereafter..... the Class A-I Percentage for
such Distribution Date;
provided, however, that (a) for any Distribution Date on which the Senior
Percentage is greater than the Senior Percentage as of the Closing Date,
the Class A-I Prepayment Percentage for such Distribution Date will be
100%; (b) for any Distribution Date on which the Class A-I Certificates
remain outstanding, the Class A-I Prepayment Percentage will not be reduced
below the Class A-I Percentage for such Distribution Date plus 70% of the
Subordinate Percentage for such Distribution Date; and (c) no reduction of
the Class A-I Prepayment Percentage will occur on any Distribution Date
unless:
(A) (i) as of such Distribution Date as to which any such reduction
applies, the aggregate Principal Balance of the Mortgage Loans
delinquent 60 days or more (including for this purpose any Mortgage
Loans in foreclosure and Mortgage Loans with respect to which the
related Mortgaged Property has been acquired by the Trust Fund),
averaged over the preceding three months, as a percentage of the
aggregate Principal Balance of all Mortgage Loans averaged over the
preceding three months, does not exceed 4%; and
(ii) as of such Distribution Date, cumulative Realized Losses with
respect to the Mortgage Loans do not exceed (a) 10% of the Original
Subordinate Principal Balance if such Distribution Date occurs between
and including October 2002 and September 2003, (b) 15% of the Original
Subordinate Principal Balance if such Distribution Date occurs between
and including October 2003 and September 2004, (c) 20% of the Original
Subordinate Principal Balance if such Distribution Date occurs between
and including October 2004 and September 2005, (d) 25% of the Original
Subordinate Principal Balance if such Distribution Date occurs between
and including October 2005 and September 2006, and (e) 30% of the
Original Subordinate Principal Balance if such Distribution Date
occurs during or after October 2006; or
(B) (i) as of such Distribution Date, the aggregate Principal Balances of
Mortgage Loans delinquent 60 days or more (including for this purpose
any Mortgage Loans in foreclosure and Mortgage Loans with respect to
which the related Mortgaged Property has been acquired by the
8
<PAGE>
Trust Fund) does not exceed 50% of the aggregate Certificate Principal
Balance of the Subordinate Certificates as of such date; and
(ii) cumulative Realized Losses with respect to the Mortgage Loans do
not exceed (a) 30% of these Original Subordinate Principal Balance if
such Distribution Date occurs between and including October 2002 and
September 2003, (b) 35% of the Original Subordinate Principal Balance
if such Distribution Date occurs between and including October 2003
and September 2004, (c) 40% of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including October
2004 and September 2005, (d) 45% of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including October
2005 and September 2006, and (e) 50% of the Original Subordinate
Principal Balance if such Distribution Date occurs during or after
October 2006; and
provided, further, that if on any Distribution Date the application of the
Class A-I Prepayment Percentage to principal distributions on the Class A
Certificates would reduce the outstanding Certificate Principal Balance of
the Class A Certificates below zero, the Class A-I Prepayment Percentage
for such Distribution Date will be limited to the percentage necessary to
reduce the Certificate Principal Balance of the Class A Certificates to
zero and the Subordinate Prepayment Percentage will be increased
accordingly.
"CLASS A-I PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date and the Class A-I Certificates, an amount equal to the sum of:
(i) the Adjusted Class A-I Percentage of the portion of the Available
Distribution Amount for such Distribution Date that is attributable to the
principal portion of Monthly Payments due on the Mortgage Loans in Pool I
(after the deduction of the Class PO Principal Percentage of such amount
attributable to any Class PO Mortgage Loan), whether or not received by the
Master Servicer or any Servicer; and
(ii) the Adjusted Class A-I Prepayment Percentage of the portion of the
Available Distribution Amount that is attributable to (a) any amounts
received in connection with the repurchase of a Mortgage Loan in Pool I
(after the deduction of the Class PO Principal Percentage of such amount
attributable to any Class PO Mortgage Loan and less the portion of such
repurchase proceeds allocable to interest), (b) the aggregate Net
Liquidation Proceeds, Net Insurance Proceeds and condemnation awards
received in connection with a Mortgage Loan in Pool I (after the deduction
of the Class PO Principal Percentage of such
9
<PAGE>
amount attributable to any Class PO Mortgage Loan and less the portion of
such amount allocable to interest), and (c) all full and partial Principal
Prepayments by the Mortgagors of Mortgage Loans in Pool I (after deduction
of the Class PO Principal Percentage of such amounts attributable to any
Class PO Mortgage Loans).
"CLASS A-II CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-2 hereto.
"CLASS A-II INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class A-II Certificates and (ii) the Class A-II Pass-Through Rate
minus (b) the sum of (i) such Class' pro rata share (based on the respective
amount of interest due to each Class of Certificates on such Distribution Date
absent any reduction) of the amount of Prepayment Interest Shortfalls and Civil
Relief Act Interest Shortfalls on such Distribution Date and (ii) the amount
which the Certificate Principal Balance of the Class A-II Certificates is
increased on such Distribution Date as a result of Net Negative Amortization,
pursuant to the definition of Certificate Principal Balance herein.
"CLASS A-II PASS-THROUGH RATE" means, with respect to any Distribution
Date and the Class A-II Certificates, a per annum rate equal to the lesser of:
(a) the Weighted Average Pool Net Mortgage Rate for Pool II for such
Distribution Date; and
(b) the Blended Rate for Pool II for such Distribution Date.
"CLASS A-II PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date and the Class A-II Certificates, an amount equal to the sum
of:
(i) the Non-Surplus Percentage for Pool II of the portion of the Available
Distribution Amount for such Distribution Date that is attributable to the
sum of (a) the principal portion of Monthly Payments on the Mortgage Loans
in Pool II, whether or not received by any Servicer or the Master Servicer,
(b) any amounts received in connection with the repurchase of a Mortgage
Loan in Pool II during the preceding calendar month (less the portion of
such repurchase proceeds allocable to interest), (c) the aggregate Net
Liquidation Proceeds, Net Insurance Proceeds and condemnation awards
received by the Master Servicer or any Servicer in connection with a
Mortgage Loan in Pool II (less the portion of such amount allocable to
interest), and (d) all full and partial Principal Prepayments by the
Mortgagors of Mortgage Loans in the related Pool;
10
<PAGE>
(ii) the related Surplus Percentages of the principal portion of all Monthly
Payments, whether or not received, and the related Surplus Percentages of
all unscheduled payments of principal on the Mortgage Loans in Pool I and
Pool III and included in the Available Distribution Amount for such
Distribution Date multiplied by the Deficit Percentage for Pool II for such
Distribution Date;
(iii) the Surplus Percentage of all unscheduled payments of principal on
the Mortgage Loans in Pool II and Pool III that are not allocated to the
Subordinate Certificates in accordance with clause (iv) of the definition
of the Subordinate Principal Distribution Amount, multiplied by a fraction,
the numerator of which is equal to the Certificate Principal Balance of the
Class A-II Certificates and the denominator of which is the aggregate
Certificate Principal Balance of the Class A-II and Class A-III
Certificates, in each case immediately prior to such Distribution Date; and
(iv) if the Certificate Principal Balance of the Class A-I Certificates
has been reduced to zero, the amounts described in clause (ii) of the
definition of the Class A-I Principal Distribution Amount, multiplied by a
fraction, the numerator of which is equal to the Certificate Principal
Balance of the Class A-II Certificates and the denominator of which is the
aggregate Certificate Principal Balance of the Class A-II and Class A-III
Certificates, in each case immediately prior to such Distribution Date.
"CLASS A-III CERTIFICATES" means those Certificates issued by the
Trust in substantially the form of Exhibit B-3 hereto.
"CLASS A-III INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class A-III Certificates and (ii) the Class A-III Pass-Through
Rate for such Distribution Date minus (b) the sum of (i) such Class' pro rata
share (based on the respective amount of interest due to each Class of
Certificates on such Distribution Date absent any reduction) of the amount of
Prepayment Interest Shortfalls and Civil Relief Act Interest Shortfalls on such
Distribution Date and (ii) the amount which the Certificate Principal Balance of
the Class A-III Certificates is increased on such Distribution Date as a result
of Net Negative Amortization, pursuant to the definition of Certificate
Principal Balance herein.
"CLASS A-III PASS-THROUGH RATE" means, with respect to any
Distribution Date and the Class A-III Certificates, a per annum rate equal to
the lesser of:
(a) the Weighted Average Pool Net Mortgage Rate for Pool III for such
Distribution Date; and
11
<PAGE>
(b) the Blended Rate for Pool III for such Distribution Date.
"CLASS A-III PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date and the Class A-III Certificates, an amount equal to the sum
of:
(i) the Non-Surplus Percentage for Pool III of the portion of the Available
Distribution Amount for such Distribution Date that is attributable to the
sum of (a) the principal portion of Monthly Payments on the Mortgage Loans
in Pool III, whether or not received by any Servicer or the Master
Servicer, (b) any amounts received in connection with the repurchase of a
Mortgage Loan in Pool III during the preceding calendar month (less the
portion of such repurchase proceeds allocable to interest), (c) the
aggregate Net Liquidation Proceeds, Net Insurance Proceeds and condemnation
awards received by the Master Servicer or any Servicer in connection with a
Mortgage Loan in Pool III (less the portion of such amount allocable to
interest), and (d) all full and partial Principal Prepayments by the
Mortgagors of Mortgage Loans in the related Pool;
(ii) the related Surplus Percentages of the principal portion of all
Monthly Payments, whether or not received, and the related Surplus
Percentages of all unscheduled payments of principal on the Mortgage Loans
in Pool I and Pool II and included in the Available Distribution Amount for
such Distribution Date multiplied by the Deficit Percentage for Pool III
for such Distribution Date;
(iii) the Surplus Percentage of all unscheduled payments of principal on
the Mortgage Loans in Pool II and Pool III that are not allocated to the
Subordinate Certificates in accordance with clause (iv) of the definition
of the Subordinate Principal Distribution Amount, multiplied by a fraction,
the numerator of which is equal to the Certificate Principal Balance of the
Class A-III Certificates and the denominator of which is the aggregate
Certificate Principal Balance of the Class A-II Certificates and Class A-
III Certificates, in each case immediately prior to such Distribution Date;
(iv) if the Certificate Principal Balance of the Class A-I Certificates
has been reduced to zero, the amounts described in clause (ii) of the
definition of the Class A-I Principal Distribution Amount, multiplied by a
fraction, the numerator of which is equal to the Certificate Principal
Balance of the Class A-III Certificates and the denominator of which is the
aggregate Certificate Principal Balance of the Class A-II Certificates and
Class A-III Certificates, in each case immediately prior to such
Distribution Date.
12
<PAGE>
"CLASS B CERTIFICATES" means the Class B-1, Class B-2 and Class B-3
Certificates.
"CLASS B PASS-THROUGH RATE" means, on any Distribution Date and each
Class B Certificates, the Blended Rate for Pool I with respect to such
Distribution Date.
"CLASS B-1 CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-11 hereto.
"CLASS B-1 INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class B-1 Certificates for such Distribution Date and (ii) the
applicable Class B Pass-Through Rate for such Distribution Date minus (b) the
sum of (i) such Class' pro rata share (based on the respective amount of
interest due to each Class of Certificates on such Distribution Date absent any
reduction) of the amount of Prepayment Interest Shortfalls and Civil Relief Act
Interest Shortfalls on such Distribution Date and (ii) the amount by which the
Certificate Principal Balance of the Class B-1 Certificates is increased on such
Distribution Date as a result of Net Negative Amortization, pursuant to the
definition of Certificate Principal Balance herein.
"CLASS B-2 CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-12 hereto.
"CLASS B-2 INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class B-2 Certificates for such Distribution Date and (ii) the
applicable Class B Pass-Through Rate for such Distribution Date minus (b) the
sum of (i) such Class' pro rata share (based on the respective amount of
interest due to each Class of Certificates on such Distribution Date absent any
reduction) of the amount of Prepayment Interest Shortfalls and Civil Relief Act
Shortfalls on such Distribution Date and (ii) the amount by which the
Certificate Principal Balance of the Class B-2 Certificates is increased on such
Distribution Date as a result of Net Negative Amortization, pursuant to the
definition of Certificate Principal Balance herein.
"CLASS B-3 CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-12 hereto.
"CLASS B-3 INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class B-3 Certificates for such Distribution Date and (ii) the
applicable Class B Pass-Through Rate for such Distribution Date minus (b) the
sum of (i)
13
<PAGE>
such Class' pro rata share (based on the respective amount of interest due to
each Class of Certificates on such Distribution Date absent any reduction) of
the amount of Prepayment Interest Shortfalls and Civil Relief Act Interest
Shortfalls on such Distribution Date and (ii) the amount by which the
Certificate Principal Balance of the Class B-3 Certificates is increased on such
Distribution Date as a result of Net Negative Amortization, pursuant to the
definition of Certificate Principal Balance herein.
"CLASS IO CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-4 hereto.
"CLASS IO INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Notional Amount for such
Distribution Date and (ii) the Class IO Pass-Through Rate for such Distribution
Date minus (b) such Class' pro rata share (based on the respective amount of
interest due to each Class of Certificates on such Distribution Date absent any
reduction) of the amount of Prepayment Interest Shortfalls and Civil Relief Act
Interest Shortfalls on such Distribution Date.
"CLASS IO PASS-THROUGH RATE" means, on any Distribution Date, a per
annum rate equal to the Blended Rate for Pool I for such Distribution Date minus
the weighted average of the Pass-Through Rates on the Class A-I, Class M-1,
Class M-2 and Class M-3 Certificates, weighted on the basis of their respective
Certificate Principal Balances immediately prior to such Distribution Date (but
not less than 0.00%).
"CLASS M CERTIFICATES" means the Class M-1, Class M-2 and Class M-3
Certificates.
"CLASS M-1 CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-8 hereto.
"CLASS M-1 INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class M-1 Certificates for such Distribution Date and (ii) the
Class M-1 Pass-Through Rate for such Distribution Date minus (b) the sum of (i)
such Class' pro rata share (based on the respective amount of interest due to
each Class of Certificates on such Distribution Date absent any reduction) of
the amount of Prepayment Interest Shortfalls and Civil Relief Act Interest
Shortfalls on such Distribution Date and (ii) the amount by which the
Certificate Principal Balance of the Class M-1 Certificates is increased on such
Distribution Date as a result of Net Negative Amortization, pursuant to the
definition of Certificate Principal Balance herein.
14
<PAGE>
"CLASS M-1 PASS-THROUGH RATE" means, on any Distribution Date, the
lesser of (i) 7.25% per annum and (ii) the Blended Rate for Pool I with respect
to such Distribution Date.
"CLASS M-2 CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-9 hereto.
"CLASS M-2 INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class M-2 Certificates for such Distribution Date and (ii) the
Class M-2 Pass-Through Rate for such Distribution Date minus (b) the sum of (i)
such Class' pro rata share (based on the respective amount of interest due to
each Class of Certificates on such Distribution Date absent any reduction) of
the amount of Prepayment Interest Shortfalls and Civil Relief Act Interest
Shortfalls on such Distribution Date and (ii) the amount which the Certificate
Principal Balance of the Class M-2 Certificates is increased on such
Distribution Date as a result of Net Negative Amortization, pursuant to the
definition of Certificate Principal Balance herein.
"CLASS M-2 PASS-THROUGH RATE" means, on any Distribution Date, the
lesser of (i) 7.25% per annum and (ii) the Blended Rate for Pool I with respect
to such Distribution Date.
"CLASS M-3 CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-10 hereto.
"CLASS M-3 INTEREST DISTRIBUTION AMOUNT" means, on any Distribution
Date, an amount equal to (a) the product of (i) the Certificate Principal
Balance of the Class M-3 Certificates for such Distribution Date and (ii) the
Class M-3 Pass-Through Rate for such Distribution Date minus (b) the sum of (i)
such Class' pro rata share (based on the respective amount of interest due to
each Class of Certificates on such Distribution Date absent any reduction) of
the amount of Prepayment Interest Shortfalls and Civil Relief Act Interest
Shortfalls on such Distribution Date and (ii) the amount which the Certificate
Principal Balance of the Class M-3 Certificates is increased on such
Distribution Date as a result of Net Negative Amortization, pursuant to the
definition of Certificate Principal Balance herein..
"CLASS M-3 PASS-THROUGH RATE" means, on any Distribution Date, the
lesser of (i) 7.25% per annum and (ii) the Blended Rate for Pool I with respect
to such Distribution Date.
"CLASS PO CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-6 hereto.
"CLASS PO MORTGAGE LOAN" means each Mortgage Loan in Pool I for which
the Class PO Principal Percentage is greater than zero.
15
<PAGE>
"CLASS PO PRINCIPAL DISTRIBUTION AMOUNT" means, on any Distribution
Date, an aggregate amount equal to the product of, with respect to each Class PO
Mortgage Loan, (i) the Class PO Principal Percentage with respect thereto and
(ii) the sum of (a) the portion of the Available Distribution Amount that is
attributable to principal of such Class PO Mortgage Loan and (b) if the
aggregate Certificate Principal Balance of the Subordinate Certificates has not
been reduced to zero, the principal amount of any Realized Loss incurred with
respect to any Class PO Mortgage Loan.
"CLASS PO PRINCIPAL PERCENTAGE" means, for each Mortgage Loan in Pool
I, the percentage, if any, equal to the difference (if such difference is a
positive number) between (i) 100% and (ii) the percentage equivalent of the Net
Mortgage Rate for such Mortgage Loan divided by 7.25%.
"CLASS R-I CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-14 hereto.
"CLASS R-II CERTIFICATES" means those Certificates issued by the Trust
in substantially the form of Exhibit B-15 hereto.
"CLOSING DATE" means September 29, 1997.
"CODE" means the Internal Revenue Code of 1986.
"COLLECTION ACCOUNT" means the account established as the Collection
Account pursuant to Section 6.02.
"COLLECTIONS" has the meaning set forth in Section 4.09 hereof.
"CONDEMNATION PROCEEDS" means all awards, compensation and settlements
in respect of a taking of all or part of the Loan Collateral with respect to any
Mortgaged Property by exercise of the power of condemnation or the right of
eminent domain.
"CREDIT SUPPORT" means, with respect to any Class of Subordinate
Certificates, on any Distribution Date, the percentage equivalent of (a) the
aggregate Certificate Principal Balance of (i) such Class and (ii) all Classes
of Subordinate Certificates with a lower priority in accordance with Section
6.05(a) divided by (b) the aggregate Certificate Principal Balance of all the
Certificates (other than the Class PO Certificates), before the allocation of
any Realized Losses on such Distribution Date and prior to the application of
any distributions of principal to be made on such Distribution Date.
"CROSS SUPPORT WEIGHTED AVERAGE NET MORTGAGE RATE" means, with respect
to any Distribution Date, the percentage equivalent of a fraction:
16
<PAGE>
(a) the numerator of which is equal to the sum of:
(i) the product of:
(A) the Pool Surplus Amount with respect to Pool I for such
Distribution Date; and
(B) the Weighted Average Pool Net Mortgage Rate with respect to
Pool I for such Distribution Date;
(ii) the product of:
(A) the Pool Surplus Amount with respect to Pool II for such
Distribution Date; and
(B) the Weighted Average Pool Net Mortgage Rate with respect to
Pool II for such Distribution Date; and
(iii) the product of:
(A) the Pool Surplus Amount with respect to Pool III for such
Distribution Date; and
(B) the Weighted Average Pool Net Mortgage Rate with respect to
Pool III for such Distribution Date; and
(b) the denominator of which is equal to the sum of the Pool Surplus
Amounts with respect to each Pool.
"CUT-OFF DATE" means the opening of business on September 15, 1997,
after application of payments due on or before September 15, 1997.
"DCR" means Duff & Phelps Credit Rating Co or any successor thereto.
"DEBT" means, for any Person, (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (d) obligations of such Person
as lessee under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by any lien or other charge
upon property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations, (f) obligations of
such Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above, and (g)
liabilities
17
<PAGE>
in respect of unfunded vested benefits under plans covered by ERISA.
"DEFERRED INTEREST" means, with respect to any Negative Amortization
Loan and any Due Period, the amount of accrued interest, if any, that exceeds
the Monthly Payment on such Mortgage Loan.
"DEFICIENT VALUATION" means, with respect to any Mortgage Loan, the
dollar amount of any reduction in the principal balance owed by the related
mortgagor, as ordered by a court in connection with a bankruptcy proceeding with
respect to the related Mortgagor.
"DEFICIT PERCENTAGE" means, with respect to any Pool and any
Distribution Date, a fraction, expressed as a percentage, the numerator of which
is equal to the Pool Deficit Amount for such Pool and such Distribution Date,
and the denominator of which is equal to the aggregate Pool Deficit Amounts for
all Pools and such Distribution Date.
"DELINQUENCY ADVANCE" means "Delinquency Advance" as that term is
defined in Section 4.12(a) hereof.
"DELINQUENT" means a Mortgage Loan is "Delinquent" if any payment
contractually due thereon is not made by the close of business on the Due Date
therefor. Such Mortgage Loan is "30 days Delinquent" if such payment has not
been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was first due, or, if
there is no such corresponding day (e.g., as when a 30-day month follows a 31-
---
day month in which a payment was due on the 31st day of such month), then on the
last day of such immediately succeeding month. Similarly for "60 days
Delinquent", "90 days Delinquent", and so on.
"DETERMINATION DATE" means, with respect to any Distribution Date, the
15th day of the month in which such Distribution Date occurs, or if such day is
not a Business Day, the preceding Business Day.
"DEPOSITORY" means The Depository Trust Company, 7 Hanover Square, New
York, New York 10004 and any successor Depository hereafter named.
"DIRECT PARTICIPANT" means any broker-dealer, bank or other financial
institution for which the Depository holds the Book-Entry Certificates from time
to time as a securities depository.
"DISQUALIFIED ORGANIZATION" means 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
18
<PAGE>
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 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 and (v)
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 REMIC I or REMIC II 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" means the 25th calendar day of each month (or the
immediately succeeding Business Day if such day is not a Business Day),
commencing October 27, 1997.
"DOLLAR" and "$" mean lawful currency of the United States of America.
"DUE DATE" means the day of the calendar month in which the Monthly
Payment on a Mortgage Loan is due.
"DUE PERIOD" means the period from and including the sixteenth day of
the calendar month preceding the calendar month in which any Distribution Date
occurs to and including the fifteenth day of the calendar month in which such
Distribution Date occurs.
"ELECTRONIC LEDGER" means the electronic master record of the Mortgage
Loans maintained by the Master Servicer or any Servicer.
"ELIGIBLE ACCOUNT" means a segregated account, which may be an account
maintained with the Trustee or with the Lockbox Bank, which is either (a)
maintained with a depository institution or trust company that is not an
Affiliate of either the Unaffiliated Seller or the Master Servicer whose long
term unsecured debt obligations are rated at least AA or its equivalent by
Standard & Poor's and Moody's, or (b) a trust account maintained with the trust
department of a federally or state chartered depository institution that is
acting in a
19
<PAGE>
fiduciary capacity and that is not an Affiliate of either the Unaffiliated
Seller or the Master Servicer.
"ELIGIBLE INVESTMENTS" means any of the following (which may be
purchased by or through the Trustee or any of its Affiliates):
(a) obligations of, or guaranteed as to the full and timely payment of
principal and interest by, the United States or obligations of any agency
or instrumentality thereof, when such obligations are backed by the full
faith and credit of the United States;
(b) repurchase agreements on obligations specified in clause (a);
provided, that the short-term debt obligations of the party agreeing to
--------
repurchase are rated no less than A-1+ by Standard & Poor's and P-1 by
Moody's;
(c) federal funds, certificates of deposit, time deposits and bankers'
acceptances (which shall each have an original maturity of not more than 90
days and, in the case of bankers' acceptances, shall in no event have an
original maturity of more than 365 days) of any United States depository
institution or trust company incorporated under the laws of the United
States or any state; provided, that the short-term obligations of such
--------
depository institution or trust company are rated no less than A-1 by
Standard & Poor's and P-1 by Moody's;
(d) commercial paper (having original maturities of not more than 30
days) of any corporation incorporated under the laws of the United States
or any state thereof which on the date of acquisition is rated no less than
A-1 by Standard & Poor's and P-1 by Moody's;
(e) securities of money market funds or mutual funds rated AAm or
better by Standard & Poor's and Aa1 by Moody's; and
provided that no instrument described above is permitted to evidence
--------
either the right to receive (a) only interest or only principal with
respect to obligations underlying such instrument or (b) both principal and
interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument
provided a yield to maturity at par greater than 120% of the yield to
maturity at par of the underlying obligations; and provided, further, that
-------- -------
no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
20
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AMOUNTS" means "Escrow Amounts" as that term is defined in
Section 4.24 hereof.
"EVENT OF MASTER SERVICER DEFAULT" means "Event of Master Servicer
Default" as that term is defined in Section 4.19.
"EXCEPTION REPORT" has the meaning set forth in Section 2.04 hereof.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHA" means the Federal Housing Administration.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FINAL SCHEDULED DISTRIBUTION DATE" means August 25, 2027.
"FITCH" means Fitch Investors Service, L.P. or any successor thereto.
"FNMA" means the Federal National Mortgage Association.
"GAAP" means generally accepted accounting principles as in effect in
the United States, consistently applied, as of the date of such application.
"GOVERNMENTAL AUTHORITY" means the United States of America, any
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"GROUP I CERTIFICATES" means the Class A-I Certificates and the
Subordinate Certificates.
"HOLDER" means a Person in whose name a Certificate is registered in
the Certificate Register.
"INDEPENDENT PUBLIC ACCOUNTANT" means any of (a) Arthur Andersen &
Co., (b) Deloitte & Touche, (c) Coopers & Lybrand, (d) Ernst & Young (e) KPMG
Peat Marwick and (f) Price Waterhouse (and any successors of the foregoing);
provided, that such firm is independent with respect to the Master Servicer or
- --------
any Servicer, as the case may be, within the meaning of the Securities Act.
"INDIRECT PARTICIPANT" means any financial institution for whom any
Direct Participant holds an interest in a Book-Entry Certificate.
21
<PAGE>
"INITIAL CERTIFICATE PRINCIPAL BALANCE" means, with respect to each
Class of Certificates, the amount set forth below:
Class Initial Certificate Principal Balance
----- -------------------------------------
A-I $ 46,655,248.00
A-II $ 35,584,475.00
A-III $ 26,166,367.00
PO $ 1,682,950.00
M-1 $ 8,807,123.00
M-2 $ 6,605,342.00
M-3 $ 5,137,489.00
B-1 $ 9,908,014.00
B-2 $ 1,834,817.00
B-3 $ 4,403,561.76
"INITIAL CREDIT SUPPORT" means, for any Class of Subordinate
Certificates, the percentage equivalent of (a) the initial aggregate Certificate
Principal Balance of (i) such Class and (ii) all Classes of Subordinate
Certificates with lower payment priorities pursuant to Section 6.05(a) divided
by (b) the initial aggregate Certificate Principal Balance of all the
Certificates (other than the Class PO Certificates).
"INSURANCE POLICY" means any hazard, title, flood or primary mortgage
or other insurance policy relating to a Mortgage Loan.
"INSURANCE PROCEEDS" means, for any Distribution Date, all insurance
proceeds received by the Master Servicer or any Servicer during the related
Prepayment Period (including, without limitation, the proceeds of any hazard
insurance, flood insurance or title insurance policies, and payments made by the
Master Servicer or any Servicer pursuant hereto in respect of a deductible
clause in any blanket policy) that are not Liquidation Proceeds, that are not
applied to the restoration or repair of the related Property or other servicing
expenses or released to the related Mortgagor in accordance with the normal
servicing procedures of the Master Servicer or such Servicer, and were applied
by the Master Servicer or such Servicer to reduce the Principal Balance of the
related Mortgage Loan or to pay interest on the related Mortgage Loan.
"JUNIOR MORTGAGE LOAN" means any Mortgage Loan that is secured by a
second or more junior lien on the related Mortgaged Property.
"LIQUIDATED MORTGAGE LOAN" means "Liquidated Mortgage Loan" as that
term is defined in Section 4.15(b) hereof.
"LIQUIDATION EXPENSES" means customary and reasonable out-of-pocket
expenses exclusive of overhead which are incurred
22
<PAGE>
by the Master Servicer in connection with the liquidation of any defaulted
Mortgage Loan, such expenses, including, without limitation, legal fees and
expenses, any unreimbursed Servicing Advances expended by the Master Servicer
with respect to such Mortgage Loan.
"LIQUIDATION PROCEEDS" means, with respect to any Liquidated Mortgage
Loan, any amounts (including the proceeds of any Insurance Policy and the
proceeds from the sale of REO Property) recovered by the Master Servicer or any
Servicer in connection with such Liquidated Mortgage Loan, whether through
trustee's sale, foreclosure sale or otherwise.
"LIST OF LOANS" means a list containing the Required Information with
respect to each Mortgage Loan and attached to the Sale Agreement and delivered
to the Trustee on computer readable magnetic tape or disk.
"LOAN COLLATERAL" means, with respect to any Mortgage Loan, the
related Mortgage Property and any personal property securing the related
Mortgage Loan, including any lessor's interest in such property, whether
characterized or recharacterized as an ownership or security interest.
"LOAN FILE" means, with respect to any Mortgage Loan, the file or
files containing related Loan File Documents.
"LOAN FILE DOCUMENTS" means those items listed on Exhibit C hereto.
"LOAN-TO-VALUE RATIO" means, with respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is equal to the
outstanding Principal Balance of such Mortgage Loan as of the Cut-Off Date,
plus, in the case of each Junior Mortgage Loan, the aggregate outstanding
principal balance of each mortgage loan senior thereto, and the denominator is
equal to the value of the related Mortgaged Property as determined in accordance
with a broker's price opinion or appraisal obtained generally not earlier than
18 months prior to the Cut-Off Date.
"LOCK-BOX" means "Lock-Box" as that term is defined in Section 4.08(a)
hereof.
"LOCKBOX ACCOUNT" means the account in the name of the Trust at the
Lockbox Bank to which all Collections in respect of the Mortgage Loans (other
than the PHH Mortgage Loans) shall be remitted by the Mortgagors and the Master
Servicer, which shall be an Eligible Account.
"LOCKBOX AGREEMENT" means the agreement between the Master Servicer
and the Lockbox Bank providing that all funds received into a particular lockbox
on a Business Day shall be
23
<PAGE>
remitted directly to the Collection Account by the close of the following
Business Day.
"LOCKBOX BANK" means Bank of America Oregon, N.A., or any successor
thereto.
"MANUFACTURED HOME" means a new or used unit of manufactured housing.
"MANUFACTURED HOUSING LOAN" means a Mortgage Loan made to finance the
purchase of a Manufactured Home.
"MASTER SERVICER" means Wilshire Servicing Corporation or any
successor or permitted assign under the terms of this Agreement.
"MASTER SERVICER REMITTANCE DATE" means, with respect to any
Distribution Date, the Business Day immediately preceding such Distribution
Date.
"MASTER SERVICER'S MONTHLY REPORT" means the report in substantially
the form of Exhibit A hereto.
"MASTER SERVICING FEE" means, for each calendar month, as to each
Mortgage Loan, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment made by the
Mortgagor, interest for the number of days covered by such payment of interest)
at the applicable Master Servicing Fee Rate on the Principal Balance of such
Mortgage Loan immediately preceding the Distribution Date occurring in such
month.
"MASTER SERVICING FEE RATE" means 0.375% per annum with respect to
each of the Mortgage Loans other than the PHH Mortgage Loans and the sum of
0.05% per annum and the PHH Servicing Fee Rate for each of the PHH Mortgage
Loans.
"MIXED USE PROPERTY" means a property occupied for both residential
and commercial purposes.
"MONTHLY PAYMENT" means the scheduled monthly payment on a Mortgage
Loan for any month.
"MOODY'S" means Moody's Investors Service, Inc., a nationally
recognized statistical rating organization, or any successor thereto.
"MORTGAGE" means the mortgage, deed of trust or other instrument
creating a lien on the Loan Collateral.
24
<PAGE>
"MORTGAGE LOAN" means:
(a) either
(i) a fixed rate closed-end (which term includes a revolving line
of credit under which no additional amounts may be drawn) mortgage loan and
promissory note including the right to payment of any interest or finance
charges and other obligations of the Mortgagor with respect thereto, listed
on the List of Loans and conveyed to the Trust by the Depositor as part of
the Trust Assets; or
(ii) an adjustable rate closed-end (which term includes a
revolving line of credit under which no additional amounts may be drawn)
mortgage loan and promissory note including the right to payment of any
interest or finance charges and other obligations of the Mortgagor with
respect thereto, listed on the List of Loans and conveyed to the Trust by
the Depositor as part of the Trust Assets;
(b) all security interests or liens and real and personal property
subject thereto from time to time purporting to secure payment by the
related Mortgagor;
(c) all guarantees, indemnities and warranties and proceeds thereof,
proceeds of insurance policies, Uniform Commercial Code financing
statements, certificates of title or other title documentation and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Mortgage Loan;
(d) all Collections with respect to any of the foregoing;
(e) all Records with respect to any of the foregoing; and
(f) all proceeds of any of the foregoing.
"MORTGAGE RATE" means the annual rate of interest borne by a Mortgage
Note, which is set forth in the related Mortgage Note.
"MORTGAGED PROPERTY" means the underlying real property securing a
Mortgage Loan.
"MORTGAGOR" means, with respect to any Mortgage Loan, the Person or
Persons primarily obligated to make payments in respect thereto.
"MULTIFAMILY PROPERTY" means a multifamily residential rental property
consisting of five or more dwelling units.
25
<PAGE>
"NET INSURANCE PROCEEDS" means, as to any Mortgage Loan, any Insurance
Proceeds received with respect thereto net of amounts payable therefrom to the
Master Servicer or any Servicer in respect of Servicing Advances and
unreimbursed Advances relating to such Mortgage Loan.
"NET LIQUIDATION PROCEEDS" means, as to any Liquidated Mortgage Loan,
Liquidation Proceeds net of amounts payable therefrom to the Master Servicer or
any Servicer in respect of Liquidation Expenses and unreimbursed Advances
relating to such Mortgage Loan.
"NET MORTGAGE RATE" means, as to each Mortgage Loan, with respect to
any date of determination, a rate per annum equal to the excess of the Mortgage
Rate in effect as of the Due Date in the preceding calendar month over the sum
of the Master Servicing Fee Rate and the Trustee Fee Rate.
"NET NEGATIVE AMORTIZATION" means, with respect to the Pool II Loans
or the Pool III Loans and any Distribution Date, the amount, if any, by which
the aggregate Principal Balance of such Mortgage Loans increases after the
distributions to be made on such Distribution Date.
"NON-RECOVERABLE ADVANCE" means any Advance which the Master Servicer
has determined will not ultimately be recovered from the related Mortgage Loan.
"NON-SURPLUS PERCENTAGE" means, with respect to any Pool and any
Distribution Date, a fraction, expressed as a percentage, the numerator of which
is equal to the aggregate Certificate Principal Balance of the related Class of
Class A Certificates and, in the case of Pool I, the Subordinate Certificates,
and the denominator of which is equal to the aggregate Principal Balance of the
Mortgage Loans in the related Pool (other than the Class PO Principal Percentage
of each Class PO Mortgage Loan in the case of Pool I), but not more than 100%
nor less than 0%.
"NOTE" means the original executed promissory note evidencing the
indebtedness of an Mortgagor under a Mortgage Loan or if such Mortgage is not
evidenced by a promissory note, the original executed document or other
instrument primarily evidencing the indebtedness of the Mortgagor under such
Mortgage Loan.
"NOTIONAL AMOUNT" means, on any Distribution Date, an amount equal to
the sum of the Certificate Principal Balances of the Class A-I, Class M-1, Class
M-2 and Class M-3 Certificates, immediately prior to such Distribution Date.
"OFFICER'S CERTIFICATE" means, with respect to any Person, a
certificate signed by the Chairman of the Board, Vice
26
<PAGE>
Chairman of the Board, the President, a Vice President, Member or the Treasurer
of such Person.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
counsel to the Unaffiliated Seller or the Master Servicer), which opinion is
reasonably acceptable to the Trustee. With respect to 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, the Master Servicer
and the Trustee, (ii) not have any direct financial interest in the Depositor,
the Master Servicer or the Trustee or in any affiliate of any of them and (iii)
not be connected with the Depositor, the Master Servicer or the Trustee as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"ORIGINAL SUBORDINATE PRINCIPAL BALANCE" means, with respect to the
Subordinate Certificates, the aggregate Certificate Principal Balance of the
Subordinate Certificates as of the Cut-Off Date.
"ORIGINATOR" means the Person that originated the Mortgage Loan
pursuant to a written agreement with the related Mortgagor.
"OUTSTANDING ADVANCES" means, as of any date with respect to a
Mortgage Loan, the total amount of Delinquency Advances and Servicing Advances
made on such Mortgage Loan for which the Master Servicer or any Servicer has not
been reimbursed.
"PASS-THROUGH RATE" means any of the Class A-I Pass-Through Rate, the
Class A-II Pass-Through Rate, the Class A-III Pass-Through Rate, the Class IO
Pass-Through Rate, the Class M-1 Pass-Through Rate, the Class M-2 Pass-Through
Rate, the Class M-3 Pass-Through Rate and the Class B Pass-Through Rate.
"PERCENTAGE INTEREST" means the percentage interest (which may be
expressed as a fraction) evidenced by any Certificate, which (a) in the case of
the Class A, Class B, Class M or Class PO 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 IO Certificates and the Residual Certificates, is set
forth on the face thereof.
"PERMITTED LIENS" has the meaning set forth in Section 3.05.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, limited
27
<PAGE>
liability company, trust, association, joint venture, Governmental Authority or
any other entity of whatever nature.
"PHH" means PHH Mortgage Services Corporation.
"PHH MORTGAGE LOANS" means the Mortgage Loans serviced by PHH pursuant
to a Sub-Servicing Agreement and designated as such on the List of Loans.
"PHH SERVICING FEE" means, for each calendar month, as to each PHH
Mortgage Loan, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment made by the
Mortgagor, interest for the number of days covered by such payment of interest)
at the applicable PHH Servicing Fee Rate on the Principal Balance of such
Mortgage Loan immediately preceding the Distribution Date occurring in such
month.
"PHH SERVICING FEE RATE" means the rate per annum set forth in
Schedule IV with respect to each PHH Mortgage Loan.
"POOL" means, any of Pool I, Pool II or Pool III, as applicable.
"POOL I" means, the pool of fixed rate Mortgage Loans indicated as
being contained in Pool I on the List of Loans.
"POOL II" means, the pool of adjustable rate Mortgage Loans indicated
as being contained in Pool II on the List of Loans.
"POOL III" means, the pool of adjustable rate Mortgage Loans indicated
as being contained in Pool III on the List of Loans.
"POOL DEFICIT AMOUNT" means, with respect to each Pool and any
Distribution Date, the amount, if any, by which the Certificate Principal
Balance of the related Class of Class A Certificates, and, in the case of Pool
I, the Subordinate Certificates, immediately prior to such Distribution Date
exceeds the aggregate Principal Balance of the Mortgage Loans in such Pool
(other than the Class PO Principal Percentage of each Class PO Mortgage Loan in
the case of the Pool I Loans) immediately prior to such Distribution Date.
"POOL SURPLUS AMOUNT" means, with respect to any Distribution Date and
each Pool, the amount (but not less than zero) by which the aggregate Principal
Balance of the Mortgage Loans in such Pool (other than the Class PO Principal
Percentage of each Class PO Mortgage Loan in the case of the Pool I Loans)
exceeds the Certificate Principal Balance of the Group I, Class A-II or Class A-
III Certificates, as applicable.
28
<PAGE>
"POTENTIALLY HAZARDOUS PROPERTY" means "Potentially Hazardous
Property" as that term is defined in Section 4.15(a) hereof.
"PRINCIPAL PREPAYMENT" means, with respect to any Mortgage Loan, any
payment of principal made by the related Mortgagor other than the principal
portion of (i) Monthly Payments and (ii) Advance Payments.
"PREPAYMENT INTEREST" means, as of any Distribution Date, the lesser
of (I) the excess of (x) one month's interest due on the aggregate amount of
Principal Prepayments on the Mortgage Loans during the preceding Prepayment
Period over (y) the aggregate amount of interest paid by the Mortgagors in
respect of the amounts of such Principal Prepayments, and (II) the aggregate
Master Servicing Fee payable on such Distribution Date; provided that the
portion of the Master Servicing Fee that constitutes the PHH Servicing Fee shall
only be included to the extent of Principal Prepayments in full on the PHH
Mortgage Loans.
"PREPAYMENT INTEREST SHORTFALL" means, with respect to any
Distribution Date, the excess, if any, of (x) the amount described in Clause I
of the definition of Prepayment Interest over (y) the aggregate Master Servicing
Fee payable on such Distribution Date; provided that the portion of the Master
Servicing Fee that constitutes the PHH Servicing Fee shall only be included to
the extent of Principal Prepayments in full on the PHH Mortgage Loans.
"PREPAYMENT PERIOD" means, as to any Distribution Date, the calendar
month preceding the month of distribution.
"PRESERVATION EXPENSES" means reasonable and customary expenditures
made by the Master Servicer in connection with a foreclosed Mortgage Loan prior
to the liquidation thereof, including, without limitation, expenditures for real
estate property taxes and assessments, payments to senior lienholders or holders
of any ground lease, hazard insurance premiums, property restoration or
preservation.
"PRIMARY MORTGAGE INSURANCE POLICY" means a policy of primary mortgage
guaranty insurance issued by an insurance company or provided by the FHA or the
VA with respect to any Mortgage Loan.
"PRINCIPAL BALANCE" means, with respect to any Mortgage Loan, as of
the date of any determination, the sum of: (i) 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, and (ii) with
respect to any Negative Amortization Loan, the amount of any Deferred Interest
on such Mortgage Loan that is or has been added to the principal balance
thereof, minus the sum of (i) all amounts
29
<PAGE>
previously received or Advances made by the Master Servicer or any Servicer in
respect of principal of such Mortgage Loans that have been distributed to
Certificateholders pursuant to Section 6.05; and (ii) all Realized Losses
allocated to Certificateholders with respect thereto on any previous
Distribution Date.
"QUALIFIED LIQUIDATION" shall have the meaning set forth from time to
time in the definition thereof at Section 860F(a)(4) of the Code (or any
successor statute thereto) and applicable to the Trust.
"RATING AGENCY" means any nationally recognized statistical
organization rating the Certificates at the request of the Unaffiliated Seller;
as of the date hereof: (i) with respect to the Class A, Class IO, Class PO and
Class M Certificates, DCR, Fitch and Moody's and (ii) with respect to the Class
B Certificates, DCR.
"REAL ESTATE" means all Loan Collateral whose perfection is governed
by state real estate statutes or other state real estate law.
"REALIZED LOSS" means an amount determined by the Master Servicer and
evidenced by an Officer's Certificate delivered to the Trustee, in connection
with any Mortgage Loan equal to (a) with respect to any Liquidated Loan (other
than a Liquidated Loan with respect to which a Deficient Valuation has
occurred), 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 Master Servicer from the related Collection Account
with respect to such Mortgage Loan, or (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.
"RECORD DATE" means, with respect to any Distribution Date the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"RECORDS" means all documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) prepared and
maintained by the Master Servicer or by or on behalf of the Unaffiliated Seller
with respect to the Mortgage Loans and the related Mortgagors.
30
<PAGE>
"RELATED DOCUMENTS" means the Sale Agreement, the Unaffiliated
Seller's Agreement and all documents and instruments required to be delivered
hereunder and thereunder.
"REMIC" means a "real estate mortgage investment conduit", within the
meaning of Section 860D of the Code.
"REMIC I" means the corpus of the trust created by this Agreement
consisting of (a) the Mortgage Loans listed in the List of Loans, 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) REO Property, (c) the Collection Account and the Certificate Account and all
amounts deposited therein pursuant to the applicable provisions of this
Agreement, (d) any insurance policies with respect to the Mortgage Loans and (e)
all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property.
"REMIC I REGULAR INTEREST" means any of the ten separate non-
certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance set forth in Section 2.08.
"REMIC II" means the segregated pool of assets consisting of all of
the REMIC I Regular Interests, with respect to which a separate REMIC election
is to be made.
"REMIC PROVISIONS" means 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" means Loan Collateral acquired by the Master Servicer
or any Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure or otherwise in connection with a defaulted Mortgage Loan.
"REPORT DATE" has the meaning set forth in Section 4.11.
"REPRESENTATION LETTER" means letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Book-Entry
Certificates registered in the Certificate Register under the nominee name of
the Depository.
31
<PAGE>
"REPURCHASE PRICE" means, with respect to any Mortgage Loan, the
amount equal to the sum of (i) the Principal Balance of such Mortgage Loan
immediately prior to the repurchase date, (ii) any accrued and unpaid interest
thereon, calculated at the Mortgage Rate and (iii) all Outstanding Advances
related to such Mortgage Loan at the time of the repurchase minus any Net
-----
Liquidation Proceeds received with respect thereto and not previously applied to
reduce the Principal Balance of such Mortgage Loan, which amount has been
deposited into the Collection Account pursuant to Section 4 of the Sale
Agreement or Sections 3.06 or 10.02 of this Agreement.
"REQUEST FOR RELEASE" means the form set forth as Exhibit E hereto.
"REQUIRED CERTIFICATEHOLDERS" means Holders who hold Senior
Certificates evidencing at least 51% of the Senior Certificates or, if the
Senior Certificates are no longer outstanding, Holders who hold at least 51% in
aggregate Voting Rights in the Subordinate Certificates; provided, however, that
-------- -------
for purposes of Section 10.05(b), such percentage shall be increased from 51% to
66%.
"REQUIRED INFORMATION" means with respect to a Mortgage Loan, (a) the
name and address of the Mortgagor, (b) the outstanding principal balance of the
Mortgage Loan, (c) the maturity date, (d) the interest rate, (e) the current
Monthly Payment, (f) the value of the related Mortgaged Property determined in
accordance with a broker's price opinion or appraisal generally obtained not
earlier than 18 months prior to the Cut-Off Date, (g) the Loan-to-Value Ratio as
of the Cut-Off Date, and (h) the type of Mortgaged Property, occupancy status
and the Mortgage Loan purpose; provided, that the Master Servicer's obligation
--------
to furnish any portion of the Required Information to any Person shall not
require the Master Servicer to fail to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors.
"RESIDUAL CERTIFICATES" means, together, the Class R-I and the Class
R-II Certificates.
"RESPONSIBLE OFFICER" means any Vice President, any Assistant Vice
President, any Assistant Secretary, any Assistant Treasurer, any Corporate Trust
officer 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.
"RTC" means the Resolution Trust Corporation.
"SALE AGREEMENT" means the Loan Sale Agreement dated as of September
15, 1997, by and between the Unaffiliated Seller and
32
<PAGE>
Wilshire Funding Corporation, providing for the transfer of the Mortgage Loans
to the Unaffiliated Seller.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR CERTIFICATES" means, collectively, the Class A-I, Class A-II,
Class A-III, Class PO and Class IO Certificates.
"SENIOR PERCENTAGE" means, on any Distribution Date, the percentage
equivalent of (i) the sum of the Certificate Principal Balances of the Class A
Certificates and Class PO Certificates divided by (ii) the sum of the
Certificate Principal Balances of all of the Certificates, in each case,
immediately prior to such Distribution Date.
"SERVICER" means any Person with whom the Master Servicer has entered
into a Sub-Servicing Agreement as permitted by Section 4.03 hereof.
"SERVICING OFFICER" means any officer or employee of the Master
Servicer involved in, or responsible for, the administration and servicing of
Mortgage Loans whose name appears on a list of servicing officers attached to
Officer's Certificates furnished to the Trustee and the Back-Up Servicer, as
such lists may be amended from time to time.
"SERVICING STANDARD" means servicing, collection and investor
reporting systems and procedures consistent with (i) those systems and
procedures set forth in the WSC Servicing Guide, (ii) this Agreement, (iii)
applicable law and (iv) customary and prudent practices in the residential
mortgage loan servicing industry.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, or its successor in interest.
"START-UP DAY" means the Closing Date.
"SUBORDINATE CERTIFICATES" means the Class M-1, Class M-2, Class M-3,
Class B-1, Class B-2 and Class B-3 Certificates.
"SUBORDINATE PERCENTAGE" means, with respect to any Distribution Date,
100% minus the Class A-I Percentage for such Distribution Date.
-----
"SUBORDINATE PREPAYMENT PERCENTAGE" means, with respect to any
Distribution Date, a percentage equal to 0% for any Distribution Date prior to
October 2002, 30% of the Subordinate Percentage for any Distribution Date
occurring from October 2002 to September 2003, 40% of the Subordinate Percentage
for any Distribution Date occurring from October 2003 to September 2004, 60% of
the Subordinate Percentage for any Distribution Date
33
<PAGE>
occurring from October 2004 to September 2005, 80% of the Subordinate
Percentage for any Distribution Date occurring from October 2005 to September
2006, and 100% of the Subordinate Percentage thereafter; provided that for any
Distribution Date on which the Senior Percentage is greater than the Senior
Percentage as of the Cut-Off Date, the Subordinate Prepayment Percentage will
be 0%; and provided further that no increase in the Subordinate Prepayment
Percentage will occur on any Distribution Date on which the Class A-I Prepayment
Percentage is not permitted to decrease in accordance with the definition
thereof.
"SUBORDINATE PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount equal to the sum of:
(i) the Adjusted Subordinate Percentage of the portion of the
Available Distribution Amount with respect to such Distribution Date that
is attributable to the principal portion of Monthly Payments due on the
Mortgage Loans in Pool I (after the deduction of the Class PO Principal
Percentage of such amount attributable to any Class PO Mortgage Loan),
whether or not received by the Master Servicer or any Servicer;
(ii) the Adjusted Subordinate Prepayment Percentage of portion of the
Available Distribution Amount that is attributable to (a) any amounts
received in connection with the repurchase of any Mortgage Loan in Pool I
(after the deduction of the Class PO Principal Percentage of such amount
attributable to any Class PO Mortgage Loan and less the portion of such
repurchase proceeds allocable to interest), (b) the aggregate Net
Liquidation Proceeds, Net Insurance Proceeds and condemnation awards
received in respect of a Mortgage Loan in Pool I (after the deduction of
the Class PO Principal Percentage of such amount attributable to any Class
PO Mortgage Loan and less the portion of such amount allocable to
interest), and (c) all full and partial Principal Prepayments by the
Mortgagors of Mortgage Loans in Pool I (after the deduction of the Class PO
Principal Percentage of such amount attributable to any Class PO Mortgage
Loan);
(iii) the Subordinate Percentage for such Distribution Date of (a)
the sum of the related Surplus Percentages for Pool II and Pool III for
such Distribution Date multiplied by the principal portion of Monthly
Payments due on the Mortgage Loans in Pool II and Pool III, respectively,
whether or not received by the Master Servicer or any Servicer, multiplied
by (b) the Deficit Percentage for Pool I for such Distribution Date; and
(iv) the Subordinate Prepayment Percentage of (a) the sum of the
related Surplus Percentages for Pool II and Pool III for such Distribution
Date multiplied by the principal portion of all payments received on the
Mortgage Loans in
34
<PAGE>
Pool II and Pool III (other than Monthly Payments), respectively,
multiplied by (b) the Deficit Percentage for Pool I for such Distribution
Date.
"SUB-SERVICING AGREEMENT" means any written contract between the
Master Servicer and any Servicer, relating to servicing, and collection of the
Mortgage Loans.
"SUCCESSOR SERVICER" means any successor to the Master Servicer, which
may include the Back-Up Servicer.
"SURPLUS PERCENTAGE" means, with respect to any Pool and any
Distribution Date, a percentage equal to 100% minus the Non-Surplus Percentage
for such Pool and such Distribution Date.
"T&I ACCOUNT" means "T&I Account" as that term is defined in Section
4.24 hereof.
"TAX" or "TAXES" means all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, profits,
withholding, excise, property, sales, use, occupation and franchise taxes
(including, in each such case, any interest, penalties or additions attributable
to or imposed on or with respect to any such taxes, charges, fees or other
assessments) imposed by the United States, any state or political subdivision
thereof, any foreign government or any other jurisdiction or taxing authority.
"TAX MATTERS PERSON" means the Person appointed as such pursuant to
Section 10.18.
"TIME SHARE" means the right to occupy residential real property
during a certain period of time in each calendar year, along with an undivided
fee simple interest, as a tenant in common with all others having a right to
occupy such property, in the related Real Estate.
"TIME SHARE LOAN" means a Mortgage Loan secured by an interest in a
Time Share.
"TRUST FUND" means, collectively, the assets of REMIC I and REMIC II.
"TRUST TERMINATION DATE" means "Trust Termination Date" as that term
is defined in Section 10.01.
"TRUSTEE FEE" means an amount payable to the Trustee on each
Distribution Date pursuant to Section 9.12 hereof and in accordance with Section
6.04 hereof, and equal to one-twelfth of the product of (i) the Trustee's Fee
Rate and (ii) the aggregate Principal Balances of the Mortgage Loans as of the
opening of business on the first day of the related Due Period (or, in the case
of the first Distribution Date, as of the Cut-Off Date).
35
<PAGE>
"TRUSTEE'S FEE RATE" means 0.020% per annum.
"U.S. PERSON" means 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 (except, in the
case of a partnership, as otherwise provided in regulations), 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.
"UNAFFILIATED SELLER'S AGREEMENT" means the Unaffiliated Sellers'
Agreement dated as of September 15, 1997 between the Unaffiliated Seller and the
Depositor.
"UNCERTIFICATED REMIC I REGULAR INTERESTS" means Uncertificated REMIC
I Regular Interest A, Uncertificated REMIC I Regular Interest B, Uncertificated
REMIC I Regular Interest C, Uncertificated REMIC I Regular Interest D,
Uncertificated REMIC I Regular Interest E, Uncertificated REMIC I Regular
Interest F, Uncertificated REMIC I Regular Interest G, Uncertificated REMIC I
Regular Interest H, Uncertificated REMIC I Regular Interest I and Uncertificated
REMIC I Regular Interests J.
"UNCERTIFICATED REMIC I REGULAR INTEREST A" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class A-I Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the sum of the Class
A-I Pass-Through Rate and Class IO Pass-Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST B" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class M-1 Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the sum of the Class
M-1 Pass-Through Rate and the Class IO Pass-Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST C" means an uncertificated partial
undivided beneficial ownership interest in REMIC I having a principal balance
equal to the Principal Balance of the Mortgage Loans and REO Property from time
to time multiplied by a fraction, the numerator of which is the Certificate
Principal Balance of the Class M-2 Certificates and the denominator of which is
the aggregate Certificate Principal
36
<PAGE>
Balance of all of the Certificates, and which bears interest at a rate equal to
the sum of the Class M-2 Pass-Through Rate and the Class IO Pass-Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST D" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class M-3 Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the sum of the Class
M-3 Pass-Through Rate and the Class IO Pass-Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST E" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class A-II Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the Class A-II Pass-
Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST F" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class A-III Certificates and the
denominator of which is the aggregate Certificate Principal Balance of all of
the Certificates, and which bears interest at a rate equal to the Class A-III
Pass-Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST G" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class PO Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to 0.00% per annum.
"UNCERTIFICATED REMIC I REGULAR INTEREST H" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class B-1 Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the Class B Pass-
Through Rate.
37
<PAGE>
"UNCERTIFICATED REMIC I REGULAR INTEREST I" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class B-2 Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the Class B Pass-
Through Rate.
"UNCERTIFICATED REMIC I REGULAR INTEREST J" means an uncertificated
partial undivided beneficial ownership interest in REMIC I having a principal
balance equal to the Principal Balance of the Mortgage Loans and REO Property
from time to time multiplied by a fraction, the numerator of which is the
Certificate Principal Balance of the Class B-3 Certificates and the denominator
of which is the aggregate Certificate Principal Balance of all of the
Certificates, and which bears interest at a rate equal to the Class B Pass-
Through Rate.
"UNREGISTERED CERTIFICATES" means, collectively, the Class B-1, Class
B-2, Class B-3, Class R-I and Class R-II Certificates.
"VA" means the Veterans Administration.
"VOTING RIGHTS" means the portion of the aggregate voting rights of
all the Certificates evidenced by a Certificate. 98% of all Voting Rights will
be allocated among the Certificates (other than the Class IO Certificates and
Class R Certificates) in proportion to their Certificate Principal Balances, 1%
of all Voting Rights will be allocated among the Class IO Certificates in
proportion to their Percentage Interests and 0.5% and 0.5% of all Voting Rights
will be allocated to the Class R-I Certificates and Class R-II Certificates,
respectively, in proportion to their Percentage Interests.
"WEIGHTED AVERAGE POOL NET MORTGAGE RATE" means, with respect to any
Distribution Date and each Pool, the weighted average of the Net Mortgage Rates
on the Mortgage Loans in such Pool as of the Due Dates for such Mortgage Loans
in the second preceding Due Period, weighted on the basis of the Principal
Balance of each such Mortgage Loan immediately prior to such Distribution Date;
provided that for the purposes of such calculation, the Class PO Principal
Percentage of each Class PO Mortgage Loan will be excluded and the Net Mortgage
Rate on the remaining portion of such Principal Balance will be deemed to be
equal to 7.25% per annum.
"WILSHIRE SELLER" means Wilshire Funding Corporation in its capacity
as seller under the Sale Agreement.
"WSC" means Wilshire Servicing Corporation, a Delaware corporation,
and its successors.
38
<PAGE>
Section 1.02. Provisions of General Application. For all purposes of
---------------------------------
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
(b) All terms used in Article 9 of the UCC, and not specifically
defined herein, are used herein as defined in such Article 9.
(c) The terms defined in this Article include the plural as well as
the singular.
(d) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(e) References to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
Section 1.03. Business Day Certificate. On the Closing Date (with
------------------------
respect to the remainder of the calendar year 1997) and thereafter, within 15
days prior to the end of the calendar year while this Agreement remains in
effect (with respect to the succeeding calendar years), the Master Servicer
shall provide the Trustee and the Back-Up Servicer a certificate of a Servicing
Officer specifying the days other than Saturdays or Sundays on which banks in
the States of Oregon, California and New York are required, or authorized by
law, to close.
Section 1.04. Trust Name. The trust created hereby shall be
----------
designated the "Wilshire Funding Corporation Mortgage Backed Trust 1997-WFC1"
and all legal actions maintained or taken by the Master Servicer or the Trustee
in respect of the Trust Assets, except as otherwise required by law, shall
indicate that they are taken by the Master Servicer or the Trustee in such
capacity on behalf of the Trust.
ARTICLE II
TRANSFER OF TRUST ASSETS
Section 2.01. Conveyance of Trust Assets; Establishment of the Trust.
------------------------------------------------------
(a) On the Closing Date, the Depositor, with the execution and delivery of this
Agreement and on the terms set forth herein does hereby grant, transfer, assign,
set over and otherwise convey to the Trustee, on behalf of the Trust, for the
benefit of the Holders of the Certificates, without recourse (except to the
extent specified herein), all
39
<PAGE>
right, title and interest of the Depositor in, to and under the Trust Fund
including, without limitation, (a) the Mortgage Loans listed in the List of
Loans, 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) REO Property, (c) the Collection Account and the
Certificate Account and all amounts deposited therein pursuant to the applicable
provisions of this Agreement, (d) any insurance policies with respect to the
Mortgage Loans and (e) all proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or other liquid property.
In connection with such transfer and assignment, the Depositor does
hereby also irrevocably transfer, assign, set over and otherwise convey to the
Trustee all of its rights under the Unaffiliated Seller's Agreement (other than
its rights to indemnification thereunder).
In connection with the Depositor's assignment, the Depositor shall
direct, and hereby represents and warrants that it has directed, the
Unaffiliated Seller to deliver to and deposit with, or cause to be delivered to
and deposited with, the Trustee, on or before the Closing Date, the Loan File
Documents for each Mortgage Loan so assigned. Neither the Trustee, the
Depositor nor the Master Servicer shall be liable for any failure by the
Unaffiliated Seller to comply with the document delivery requirements.
(b) The Depositor does hereby establish, pursuant to the further
provisions of this Agreement and the laws of the State of New York, an express
trust to be known, for convenience, as "Wilshire Funding Corporation Mortgage-
Backed Trust 1997-WFC1" and does hereby appoint Bankers Trust Company of
California, N.A. as Trustee in accordance with the provisions of this Agreement.
(c) On the Closing Date the Trustee shall issue the Certificates,
registered in such names as the Depositor shall direct, and shall deliver the
Certificates as directed by the Depositor.
Section 2.02. Purposes and Powers. The purpose of the Trust is to
-------------------
engage in the following activities, and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of the Mortgage Loans
and the Trust Assets in connection therewith; (ii) activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith, including the investment of moneys in accordance
with this Agreement; and (iii) such other activities as may be required in
connection with conservation of the Trust Assets and distributions to the
Holders of the Certificates.
40
<PAGE>
Section 2.03. Possession of Loan Files; Access to Loan Files. (a)
----------------------------------------------
The Trustee, by its execution of this Agreement, does hereby acknowledge the
conveyance of the Trust Assets and declares that the Trustee will hold such
Trust Assets conveyed by the Depositor and all other Trust Assets in trust, for
the use and benefit of the Holders of the Certificates subject to the terms and
provisions hereof. The Trustee shall act as the custodian with respect to the
Loan File Documents; provided, however, that the Trustee may, upon receipt of a
-------- -------
Request for Release from the Master Servicer, release any Loan File Document to
the Master Servicer, for the limited purpose, if necessary, of temporarily
assisting the Master Servicer to conduct collection and other servicing
activities. The Trustee shall not be under any duty or obligation to inspect,
review or examine any document, instrument, certificate, agreement or other
papers to determine that they are valid, legal, genuine, enforceable, in
recordable form, sufficient, duly authorized or appropriate for the represented
purpose or that they are other than what they purport to be on their face.
(b) The Trustee shall hold and acknowledges that it is holding the
Loan File Documents (except for those noted on the Exception Report given to the
Depositor, the Unaffiliated Seller and the Master Servicer on the Closing Date)
as the Trustee with respect thereto. The Trustee shall not have any
responsibility, duty, obligation or liability with respect to the Master
Servicer acting as a custodian hereunder or with respect to any document,
agreement, certificate or instrument held or purported to be held by the Master
Servicer.
(c) The Master Servicer, upon receipt of any Loan File Documents in
accordance with Section 2.03(a) hereof, shall have and perform the following
powers and duties:
(i) hold such Loan File Documents on behalf of the Trustee for
the benefit of the Trust and the Holders of the Certificates, and maintain
a current inventory thereof;
(ii) implement policies and procedures in accordance with the
Master Servicer's normal business practices with respect to the handling
and custody of such Loan File Documents so that the integrity and physical
possession of the Loan File Documents will be maintained; and
(iii) attend to all details in connection with maintaining
custody of such Loan File Documents on behalf of the Trustee on behalf of
the Trust and the Holders of the Certificates.
(d) The Master Servicer, upon receipt of any Loan File Documents in
accordance with Section 2.03(a) hereof, agrees that it does not and will not
have or assert any beneficial ownership interest in the related Mortgage Loans
or the Loan File Documents or any other Trust Asset. Promptly upon the Trust's
acquisition
41
<PAGE>
thereof, the Master Servicer shall mark conspicuously each original or copy of a
contractual document with an Mortgagor, and its master data processing records
evidencing each Mortgage Loan with a legend, evidencing that each Mortgage Loan
has been assigned to the Trustee for the benefit of the Trust, together with all
right and title thereto and interest therein as provided herein.
(e) The Master Servicer, upon receipt of any Loan File Documents in
accordance with Section 2.03(a) hereof, shall maintain such Loan File Documents
in its possession at its office located in Portland, Oregon, or at such other
offices of the Master Servicer as shall from time to time be identified by prior
written notice to the Trustee. Subject to the foregoing, the Master Servicer
may temporarily move individual Loan File Documents or any portion thereof
without notice as necessary to conduct collection and other servicing
activities.
(f) The Depositor authorizes the Trustee and does hereby make,
constitute and appoints the Trustee, with full power of substitution, as the
true and lawful attorney-in-fact of the Depositor with power, (A) in the case of
an Assignment by the RTC or the FDIC in blank, to fill in the blank and (B) and
the case of a Note with an endorsement by the Wilshire Seller, the RTC or the
FDIC in blank, to endorse the Note, using a stamp provided to the Trustee by WSC
which reads as follows:
"Pay to the order of Bankers Trust Company of California, N.A., as
Trustee under that certain Pooling and Servicing Agreement dated as of
September 15, 1997 for Wilshire Funding Corporation Mortgage-Backed
Trust 1997-WFC1; without recourse."
The Depositor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is coupled with an interest
and shall be irrevocable for the term of this Agreement.
(g) WSC will provide to the Trustee the stamps described in Section
2.03(f) hereof within 15 days of the Closing Date. The Trustee will complete
the assignments and endorsements as described above within thirty Business Days
of receipt of such stamps.
(h) If WSC is in possession of such policy, WSC shall deliver to the
Trustee the original lender's title insurance policy with respect to each
Mortgage Loan, together with any endorsements thereto, by the twenty-first
Business Day following the Closing Date. Within 30 days following the Closing
Date, the Trustee will notify the Master Servicer if the Trustee has not yet
received all of such title insurance policies.
42
<PAGE>
(i) The Trustee shall segregate and maintain continuous custody of all
mortgage documents constituting the Loan File Documents in secure and fireproof
facilities in accordance with customary standards for such custody. The Trustee
makes no representations as to and shall not be responsible to verify (i) the
validity, legality, enforceability, sufficiency, due authorization,
recordability or genuineness of any document in the Loan File Documents or of
any of the Mortgage Loans or (ii) the collectability, insurability,
effectiveness or suitability of any Mortgage Loan.
Section 2.04. Certification. On the Closing Date, the Trustee shall
-------------
ascertain that all documents listed in Item 1 of Exhibit C hereto as a "Loan
File Document" are in its possession, and shall deliver to the Unaffiliated
Seller, the Master Servicer, and the Depositor a certification in the form of
Exhibit D hereto (the "EXCEPTION REPORT") to the effect that, as to each
Mortgage Loan (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), with the exception of the documents listed on the schedule
attached thereto: (i) all documents required to be delivered pursuant to
Section 2.03 hereof are in its possession and (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage
Loan. Within 30 days following the Closing Date, the Trustee shall ascertain
that all documents listed in Exhibit C (other than item number 4) hereto as a
"Loan File Document" are in its possession, and shall deliver to the
Unaffiliated Seller, the Master Servicer, and the Depositor an Exception Report
to the effect that, as to each Mortgage Loan (other than any Mortgage Loan paid
in full or any Mortgage Loan specifically identified in such certification as
not covered by such certification), with the exception of the documents listed
on the schedule attached thereto: (i) all documents required to be delivered
pursuant to Section 2.03 hereof are in its possession and (ii) such documents
have been reviewed by it and appear regular on their face and relate to such
Mortgage Loan.
Section 2.05. Further Action Evidencing Assignments. (a) The
-------------------------------------
Unaffiliated Seller agrees that it shall cooperate with the Master Servicer and
the Trustee, and the Master Servicer agrees to cause the Unaffiliated Seller to,
from time to time, at the Unaffiliated Seller's expense, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or appropriate, or that the Master Servicer may reasonably
request, in order to perfect, protect or more fully evidence the transfer of the
Trust Assets to the Trust or to enable the Trustee to exercise or enforce any of
its rights hereunder.
(b) The Master Servicer shall promptly (and in no event later than
180 days following the Closing Date) request from the Trustee and submit for
recording in the appropriate public office for real property records, each
Assignment. With
43
<PAGE>
respect to any Assignment, as to which the related recording information is
unavailable within such 180-day period following the Closing Date, such
Assignment shall be submitted for recording not later than 60 days after receipt
of such information but in no event later than one year after the Closing Date.
The Master Servicer shall supply the Trustee with, and the Trustee shall retain,
a copy of each Assignment submitted for recording. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Unaffiliated Seller shall, pursuant to the Sale Agreement require the related
Seller promptly to prepare a substitute Assignment or cure such defect, as the
case may be, and thereafter the Master Servicer shall submit each such
Assignment for recording. Within 210 days of the Closing Date, the Unaffiliated
Seller shall deliver to the Trustee each original Assignment, with evidence of
recording thereon, and a copy of each Assignment which has been submitted for
recording but has not yet been returned from the recording office.
(c) Within 360 days after the Closing Date, the Trustee shall notify
the Master Servicer in writing indicating the loans for which the Trustee has
not received the original Assignment, or a copy of an Assignment as set forth in
subparagraph (b) above.
(d) The Trustee hereby grants to the Master Servicer a power of
attorney to execute all documents on behalf of the Trustee as may be necessary
or desirable to effectuate the foregoing.
Section 2.06. Grant of Security Interest; Intended Characterization.
-----------------------------------------------------
(a) It is intended that the conveyances by the Depositor to the Trustee of the
Mortgage Loans as provided for in Section 2.01 be construed as a sale by the
Depositor to the Trustee of the Mortgage Loans for the benefit of the
Certificateholders. Further, it is not intended that any such conveyance be
deemed to be a pledge of the Mortgage Loans by the Depositor to the Trustee to
secure a debt or other obligation of the Depositor. However, in the event that
the Mortgage Loans are held to be property of the Depositor or of the
Unaffiliated Seller or if for any reason this Agreement is held or deemed to
create a security interest in the Mortgage Loans, then it is intended that (a)
this Agreement shall also be deemed to be a security agreement within the
meaning of Articles 8 and 9 of the New York Uniform Commercial Code and the
Uniform Commercial Code of any other applicable jurisdiction; (b) the
conveyances provided for in this Section 2.01 shall be deemed to be (1) a grant
by the Depositor to the Trustee of a security interest in all of the Depositor's
right (including the power to convey title thereto), title and interest, whether
now owned or hereafter acquired, in and to (A) the Mortgage Loans, including
with respect to each Mortgage Loan, the Mortgage Notes, the Mortgages, any
related insurance policies and all other documents in the related Mortgage
Files, (B) all amounts payable pursuant to the
44
<PAGE>
Mortgage Loans in accordance with the terms thereof and (C) any and all general
intangibles consisting of, arising from or relating to any of the foregoing, and
all proceeds 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 or the
Collection Account, whether in the form of cash, instruments, securities or
other property and (2) an assignment by the Depositor to the Trustee of any
security interest in any and all of the Depositor's or the Unaffiliated Seller's
right (including the power to convey title thereto), title and interest, whether
now owned or hereafter acquired, in and to the property described in the
foregoing clauses (1)(A), (B) and (C) granted by the Unaffiliated Seller to the
Depositor pursuant to the Unaffiliated Seller's Agreement; (c) the possession by
the Trustee or any other agent of the Trustee of Mortgage Notes or such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party," or
possession by a purchaser or a person designated by such secured party, for
purposes of perfecting the security interest pursuant to the New York Uniform
Commercial Code and the Uniform Commercial Code of any other applicable
jurisdiction (including, without limitation, Section 9-305, 8-313 or 8-321
thereof); and (d) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
(b) The Depositor and, at the Depositor's direction, the Unaffiliated
Seller and the Trustee shall, to the extent consistent with this Agreement, take
such reasonable actions as may be necessary to ensure that, if this Agreement
were deemed to create a security interest in the Mortgage Loans and the other
property described above, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement. Without limiting the
generality of the foregoing, the Depositor shall prepare and deliver to the
Trustee not less than 15 days prior to any filing date and, the Trustee shall
forward for filing, or shall cause to be forwarded for filing, at the expense of
the Depositor, 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 in or lien on the
Mortgage Loans as evidenced by an Officer's Certificate of the Depositor,
including without limitation (x) continuation statements, and (y) such other
statements as may be occasioned by (1) any change of name of the Unaffiliated
Seller, the Depositor or the Trustee (such preparation and filing shall be at
the expense of the Trustee, if occasioned by a change in the Trustee's name),
(2) any change of location of the place of
45
<PAGE>
business or the chief executive office of the Unaffiliated Seller or the
Depositor or (3) any transfer of any interest of the Unaffiliated Seller or the
Depositor in any Mortgage Loan.
(c) Neither the Unaffiliated Seller nor the Depositor shall take any
action inconsistent with the sale by the Unaffiliated Seller and the Depositor
of all of their respective right, title and interest in and to the Trust Fund
and shall indicate or shall cause to be indicated in their respective records
and records held on their respective behalf that ownership of each Mortgage Loan
and the other property of the Trust Fund is held by the Trustee on behalf of the
Trust. In addition, the Unaffiliated Seller and the Depositor shall respond to
any inquiries from third parties with respect to ownership of a Mortgage Loan or
any other property of the Trust Fund by stating that it is not the owner of such
Mortgage Loan and that ownership of such Mortgage Loan or other property of the
Trust Fund is held by the Trustee on behalf of the Certificateholders.
Section 2.07. Transmission of Loan File Documents. Written
-----------------------------------
instructions as to the method of shipment and shipper(s) the Trustee is directed
to utilize in connection with transmission of files and loan documents in the
performance of the Trustee's duties hereunder shall be delivered by the Master
Servicer to the Trustee prior to any shipment of any Loan Files and loan
documents hereunder. In the event that the Master Servicer fails to provide
such written instructions, the Trustee shall be hereby authorized by the Master
Servicer to use a nationally recognized courier servicer. The Master Servicer
will arrange for the provision of such services at its sole cost and expense
(or, at the Trustee's option, reimburse the Trustee for all costs and expenses
incurred by the Trustee consistent with such instructions or for having used an
overnight courier service) and will maintain such insurance in connection with
shipment of the Loan Files against loss or damage to files and loan documents as
the Master Servicer deems appropriate. Without limiting the generality of the
provisions of Section 8.04(b) hereof, it is expressly agreed that in no event
shall the Trustee have any liability for any losses or damages to any Person
with respect to the Loan Files arising out of actions of the Trustee consistent
with instructions of the Master Servicer.
Section 2.08. Miscellaneous REMIC Provisions.
------------------------------
(a) The Trust shall elect that REMIC I and REMIC II shall be treated
as REMICs under Section 860D of the Code. Any inconsistencies or ambiguities in
this Agreement or in the administration of the Trust shall be resolved in a
manner that preserves the validity of such REMIC elections.
(b) The Class A-I, Class A-II, Class A-III, Class IO, Class PO, Class
M-1, Class M-2, Class M-3, Class B-1, Class B-2, and Class B-3 Certificates are
hereby designated as "regular interests" with respect to REMIC II and the Class
R-II
46
<PAGE>
Certificates are hereby designated as the single class of "residual interest"
with respect to REMIC II. The Uncertificated REMIC I Regular Interest A,
Uncertificated REMIC I Regular Interest B, Uncertificated REMIC I Regular
Interest C, Uncertificated REMIC I Regular Interest D, Uncertificated REMIC I
Regular Interest E, Uncertificated REMIC I Regular Interest F, Uncertificated
REMIC I Regular Interest G, Uncertificated REMIC I Regular Interest H,
Uncertificated REMIC I Regular Interest I and Uncertificated REMIC I Regular
Interest J are hereby designated as "regular interests" with respect to REMIC I
and the Class R-I Certificates are hereby designated as the single class of
"residual interest" with respect to REMIC I.
(c) The Uncertificated REMIC I Regular Interests shall have the
following characteristics and terms:
<TABLE>
<CAPTION>
Original Final
Class Corresponding REMIC II Principal Interest Payment
Designation Regular Interests Balance Rate Date
- ------------------------ ---------------------- -------------- --------- ---------------
<S> <C> <C> <C> <C>
Uncertificated REMIC I A-I, IO $46,655,248.00 (1) August 25, 2027
Regular Interest A
Uncertificated REMIC I M-1, IO $ 8,807,123.00 (2) August 25, 2027
Regular Interest B
Uncertificated REMIC I M-2, IO $ 6,605,342.00 (3) August 25, 2027
Regular Interest C
Uncertificated REMIC I M-3, IO $ 5,137,489.00 (4) August 25, 2027
Regular Interest D
Uncertificated REMIC I A-II 35,584,475.00 (5) August 25, 2027
Regular Interest E
Uncertificated REMIC I A-III $26,166,367.00 (6) August 25, 2027
Regular Interest F
Uncertificated REMIC I PO $ 1,682,950.00 (7) August 25, 2027
Regular Interest G
Uncertificated REMIC I B-1 $ 9,908,014.00 (8) August 25, 2027
Regular Interest H
Uncertificated REMIC I B-2 $ 1,834,817.00 (9) August 25, 2027
Regular Interest I
Uncertificated REMIC I B-3 $ 4,403,561.76 (10) August 25, 2027
Regular Interest J
</TABLE>
(1) Sum of Class A-I Pass-Through Rate and Class IO Pass-Through Rate.
(2) Sum of Class M-1 Pass-Through Rate and Class IO Pass-Through Rate
(3) Sum of Class M-2 Pass-Through Rate and Class IO Pass-Through Rate
(4) Sum of Class M-3 Pass-Through Rate and Class IO Pass-Through Rate.
(5) Class A-II Pass-Through Rate
(6) Class A-III Pass-Through Rate
(7) 0.00%
(8) Class B-1 Pass-Through Rate
(9) Class B-2 Pass-Through Rate
47
<PAGE>
(10) Class B-3 Pass-Through Rate
The Uncertificated REMIC I Regular Interests shall be issued as non-certificated
interests and recorded on the records of REMIC I as being issued to and held by
the Trustee on behalf of REMIC II.
(d) On each Distribution Date, the Available Distribution Amount shall
be applied as principal of particular Uncertificated REMIC I Regular Interests
in amounts corresponding to the aggregate respective amounts required to be
applied as principal of their corresponding REMIC II regular interest (as set
forth herein).
(e) The Available Distribution Amount shall be applied as interest to
particular Uncertificated REMIC I Regular Interests in an amount corresponding
to the interest accrued on the Certificate Principal Balances of such
Uncertificated REMIC I Regular Interests at the interest rate for such
Uncertificated REMIC I Regular Interest as stated in Section 2.08(c).
No distributions will be made on the Class R-I Certificate, except
that any distribution of the proceeds of the final remaining assets of REMIC I
shall be distributed to the holder thereof upon presentation and surrender of
the Class R-I Certificate.
(f) The Startup Day is hereby designated as the "Start-Up Date" of
each REMIC within the meaning of Section 860G(a)(9) of the Code.
(g) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the
Treasury regulations, the "latest possible maturity date" by which the
Certificate Principal Balance of each Class of Certificates representing a
regular interest in the REMIC would be reduced to zero is June 25, 2027, which
is the Distribution Date immediately following the latest scheduled maturity of
any Mortgage Loan.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. Representations, Warranties and Covenants of the
------------------------------------------------
Unaffiliated Seller. The Unaffiliated Seller represents and warrants to the
- -------------------
Master Servicer, the Trustee, for its own benefit and for the benefit of the
Holders of the Certificates and the Depositor, as of the Closing Date, as
follows:
(i) The Unaffiliated Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
jurisdiction of organization and is duly qualified to do business, and is
in good standing in
48
<PAGE>
each jurisdiction in which the nature of its business requires it to be so
qualified;
(ii) The Unaffiliated Seller has the power and authority to own and
convey all of its properties and assets and to execute and deliver this
Agreement and the Related Documents and to perform the transactions
contemplated hereby and thereby;
(iii) The execution, delivery and performance by the Unaffiliated
Seller of this Agreement, the Sale Agreement, the Unaffiliated Seller's
Agreement and the Related Documents to which it is a party and the
transactions contemplated hereby and thereby, (A) have been duly authorized
by all necessary action on the part of the Unaffiliated Seller, (B) do not,
in any material respect, contravene or cause the Unaffiliated Seller to be
in default under (x) the Unaffiliated Seller's "Certificate of
Incorporation" or "Bylaws", (y) any contractual restriction contained in
any indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note, or other agreement or instrument binding on or
affecting the Unaffiliated Seller or its property or (z) any law, rule,
regulation, order, writ, judgment, award, injunction, or decree applicable
to, binding on or affecting the Unaffiliated Seller or its property and (C)
do not result in or require the creation of any material Adverse Claim upon
or with respect to any of the property of the Unaffiliated Seller;
(iv) This Agreement, the Certificates and any Related Documents to
which the Unaffiliated Seller is a party have each been duly executed and
delivered on behalf of the Unaffiliated Seller;
(v) No consent of, or other action by, and no notice to or filing
with, any Governmental Authority or any other party, is required for the
due execution, delivery and performance by the Unaffiliated Seller of this
Agreement, or the Related Documents;
(vi) Each of this Agreement and each of the Related Documents is the
legal, valid and binding obligation of the Unaffiliated Seller enforceable
against the Unaffiliated Seller in accordance with its respective terms,
subject to bankruptcy laws and other similar laws of general application
affecting creditors, and subject to the application of rules of equity,
including those respecting the availability of specific performance;
(vii) There is no pending or, to the best knowledge of the
Unaffiliated Seller, threatened action, suit, proceeding or investigation,
against or affecting the Unaffiliated Seller, its officers or managers, or
the property of the Unaffiliated Seller, in any court or tribunal, or
before any
49
<PAGE>
arbitrator of any kind or before or by any Governmental Authority which may
result in a material adverse change in the business, condition (financial
or otherwise) or operations of the Unaffiliated Seller or its performance
hereunder;
(viii) No injunction, writ, restraining order or other order against
or affecting the Unaffiliated Seller, its officers, managers or property
has been issued by a Governmental Authority;
(ix) The Unaffiliated Seller has complied in all material respects
with all applicable laws, rules, regulations, and orders with respect to
it, its business and properties and all Mortgages and all restrictions
contained in any indenture, loan or credit agreement, mortgage, security
agreement, bond, note, or other agreement or instrument binding on or
affecting the Unaffiliated Seller or its property;
(x) The Unaffiliated Seller has filed on a timely basis all tax
returns (federal, state, and local) required to be filed and has paid or
made adequate provisions for the payment of all taxes, assessments, and
other governmental charges due from the Unaffiliated Seller (if any);
(xi) With respect to the Unaffiliated Seller, there has occurred no
event which has a material adverse effect on the Unaffiliated Seller's
operations, including its ability to perform its obligations under this
Agreement;
(xii) The Unaffiliated Seller is solvent and will not become
insolvent after giving effect to the transactions contemplated by this
Agreement; the Unaffiliated Seller has not incurred Debts beyond its
ability to pay; the Unaffiliated Seller, after giving effect to the
transactions contemplated by this Agreement, will have an adequate amount
of capital to conduct its business in the foreseeable future; and the
transfer of the Mortgage Loans hereunder is made in good faith and without
intent to hinder, delay or defraud present or future creditors of the
Unaffiliated Seller;
(xiii) For federal income tax reporting and accounting purposes, the
Unaffiliated Seller will treat the transfer of each Mortgage Loan pursuant
to the Sale Agreement as an absolute assignment of the Unaffiliated
Seller's right, title and ownership interest in, such Mortgage Loan to the
Unaffiliated Seller and has not in any other manner accounted for or
treated the transactions in the Mortgage Loans by the Unaffiliated Seller
contemplated thereby;
(xiv) The principal place of business and chief execu tive office of
the Unaffiliated Seller are located at the
50
<PAGE>
address of the Unaffiliated Seller set forth in Section 10.06 and there are
currently no, and during the past four months there have not been any,
other locations where the Unaffiliated Seller is located (as that term is
used in the UCC) or keeps Records;
(xv) Each Mortgage Loan was purchased by the Unaffiliated Seller on
the Closing Date pursuant to the Sale Agreement; any amendments or waivers
in respect thereto have been delivered to the Trustee; no such amendment or
waiver is material in any respect; and all conditions precedent for the
purchase under the Sale Agreement were satisfied;
(xvi) The Sale Agreement represents the entire agreement of the
Wilshire Seller and the Unaffiliated Seller with respect to the subject
matter thereof;
(xvii) The stock of the Unaffiliated Seller is 100% owned by Wilshire
Funding Corporation;
(xviii) Neither the Unaffiliated Seller nor the Trust is an
"investment company" or "under the control of an investment company" as
such terms are defined in the Investment Company Act of 1940, as amended;
(xix) The Trust will not be treated as an association taxable as a
corporation, and the Unaffiliated Seller will take no action inconsistent
with such treatment;
(xx) The Trust is not a "taxable mortgage pool"; the Unaffiliated
Seller will take no action inconsistent with such tax characterization;
(xxi) No certificate of an officer, statement furnished in writing or
report delivered or to be delivered pursuant to the terms hereof by the
Unaffiliated Seller contains or will contain any untrue statement of a
material fact or omits to state any material fact necessary to make the
certificate, statement or report not misleading.
(xxii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
court or any federal, state or other governmental authority or agency that
are required in connection with the execution, delivery and performance by
the Unaffiliated Seller of this Agreement, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which
any appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom taken, and
are
51
<PAGE>
adequate to authorize the consummation of the transactions contemplated by
this Agreement on the part of the Unaffiliated Seller and the performance
by the Unaffiliated Seller of its obligations under this Agreement.
(xxiii) The Unaffiliated Seller will not incur, create, assume or
suffer to exist any Adverse Claim on any of its properties, revenues or
assets, whether now owned or hereafter acquired;
(xxiv) The Unaffiliated Seller will not engage in any business
activity other than issuing the Certificates, acquiring and holding
Mortgages securing the Certificates and entering into and performing its
obligations under those agreements contemplated hereby, together with the
Sale Agreement and the other Related Documents and engaging in any
activities incidental thereto;
(xxv) The Unaffiliated Seller will not incur, create, assume or
suffer to exist or otherwise become or be liable in respect of any Debt,
obligation or certificate other than in respect of or relating to (a) the
Certificates, (b) the related placement agent agreement, or (c) taxes,
assessments or governmental charges not yet due and payable;
(xxvi) The Unaffiliated Seller will not make, incur, assume or suffer
to exist any ownership interest or investment in any Person other than the
Trust;
(xxvii) Except for the transactions contemplated hereby, and by the
Sale Agreement, the Unaffiliated Seller will not sell, transfer, release or
otherwise dispose of any of, or grant options, warrants or other rights
with respect to any of, its assets to any Person other than as contemplated
or permitted by the Unaffiliated Seller's Agreement. The Unaffiliated
Seller will not merge with or consolidate with or into any other Person;
(xxviii) The Unaffiliated Seller will promptly deliver to the Trustee
any amendment or waiver of any Mortgage Loan;
(xxix) The Unaffiliated Seller will not impede the Master Servicer or
the Trustee from exercising any right or remedy to which it is entitled
under a Mortgage Loan;
(xxx) The statistical information regarding the Mortgage Loans set
forth in the Prospectus Supplement dated September 25, 1997 relating to the
Certificates offered thereby is a fair and accurate presentation of such
statistical information, which is accurate in all material respects as of
its date; and
(xxxi) (A) immediately prior to assigning each Mortgage Loan to the
Depositor, the Unaffiliated Seller was
52
<PAGE>
the sole owner and had full right to transfer the Mortgage Loan to the
Depositor and such Mortgage Loan has not been sold, assigned or pledged to
any other Person, and immediately prior to the transfer of the Mortgage
Loan to the Depositor, the Unaffiliated Seller was the owner of record of
the related Mortgage and the indebtedness evidenced by the related Mortgage
Note; (B) the Unaffiliated Seller's Agreement constitutes the valid
transfer, assignment, set-over and conveyance to the Depositor of all
right, title and interest of the Unaffiliated Seller in and to the Mortgage
Loans sold thereunder, free and clear of any Adverse Claim (except for any
Permitted Liens on the related Loan Collateral set forth in the List of
Loans); (C) without limiting the generality of the foregoing, the
Unaffiliated Seller has duly fulfilled all obligations on its part to be
fulfilled under or in connection with the Mortgage Loans and has done
nothing to impair the rights of the Depositor or the Trust in the Mortgage
Loans or the proceeds with respect thereto, including, without limitation,
paid in full all taxes and other charges payable in connection with the
Mortgage Loans and the transfer of the Mortgage Loans to the Depositor or
the Trust Fund, which could impair or become an Adverse Claim to the
Depositor or the Trust Fund's interest in such Mortgage Loans; and (D) the
transfer, assignment and conveyance of the related Mortgage Loans by the
Unaffiliated Seller pursuant to the Unaffiliated Seller's Agreement is not
subject to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction;
Section 3.02. Representations and Warranties of the Master Servicer.
------------------------------------- ---------------
The Master Servicer hereby represents, warrants and covenants to the
Unaffiliated Seller, the Depositor, the Trustee for its own benefit and for the
benefit of the Holders of the Certificates that, as of the Closing Date:
(a) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
is duly qualified to do business, and is in good standing in each
jurisdiction in which the nature of its business requires it to be so
qualified.
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
Agreement have been duly authorized by all necessary corporate action on
the part of the Master Servicer.
(c) This Agreement, assuming due authorization, execution and delivery
by the other parties hereto, constitutes a valid, legal and binding
obligation of the Master Servicer, enforceable against it in accordance
with the terms hereof, except as the enforcement hereof may be
53
<PAGE>
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law).
(d) The Master Servicer is not in violation of, and the execution,
delivery and performance of this Agreement by the Master Servicer and its
compliance with the terms hereof will not constitute a violation with
respect to, any existing law or regulation or any order or decree of any
court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which violation would have consequences that would
materially adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or would have
consequences that would materially adversely affect its performance
hereunder. The execution, delivery and performance of this Agreement by
the Master Servicer and its compliance with the terms hereof will not in
any material respect conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice, lapse of
time or both) a default under, the charter documents or by-laws of the
Master Servicer, or any material indenture, agreement, mortgage, deed of
trust or other instrument to which the Master Servicer is a party or by
which it is bound, or result in the creation or imposition of any lien
encumbrance upon any of its material properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other instrument.
(e) No litigation, actions, proceedings or investigations are pending
or, to the best of the Master Servicer's knowledge, threatened against the
Master Servicer which would have consequences that would prohibit its
entering into this Agreement or that would materially and adversely affect
the condition (financial or otherwise) or operations of the Master Servicer
or its properties or would have consequences that would materially
adversely affect its performance hereunder, or the validity or
enforceability of this Agreement, or prevent the consummation on the part
of the Master Servicer of any of the transactions contemplated by this
Agreement.
(f) No certificate of an officer, statement furnished in writing or
report delivered or to be delivered pursuant to the terms hereof by the
Master Servicer contains or will contain any untrue statement of a material
fact or omits to state any material fact necessary to make the certificate,
statement or report not misleading.
(g) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required
to be taken,
54
<PAGE>
given or obtained, as the case may be, by or from any court or any federal,
state or other governmental authority or agency that are required in
connection with the execution, delivery and performance by the Master
Servicer of this Agreement, have been duly taken, given or obtained, as the
case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement on the
part of the Master Servicer and the performance by the Master Servicer of
its obligations under this Agreement.
Section 3.03. Representations and Warranties of the Depositor. The
-----------------------------------------------
Depositor hereby represents and warrants to the Master Servicer, the
Unaffiliated Seller, the Back-Up Servicer, the Trustee for its own benefit and
for the benefit of the Holders of the Certificates that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing in each jurisdiction in
which the nature of its business requires it to be so qualified.
(b) The execution and delivery of this Agreement by the Depositor and
its performance and compliance with the terms of this Agreement have been
duly authorized by all necessary corporate action on the part of the
Depositor.
(c) This Agreement, assuming due authorization, execution and delivery
by the other parties hereto, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the
terms hereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Depositor is not in violation of, and the execution, delivery
and performance of this Agreement by the Depositor and its compliance with
the terms hereof will not constitute a violation with respect to, any
existing law or regulation or any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or
governmental agency, which violation would have consequences that would
materially adversely affect the condition (financial or other) or
operations of the Depositor or its properties or would have consequences
that would adversely
55
<PAGE>
affect its performance hereunder. The execution, delivery and performance
of this Agreement by the Depositor and its compliance with the terms hereof
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice, lapse of time or
both) a default under, the charter documents or by-laws of the Depositor,
or any material indenture, agreement, mortgage, deed of trust or other
instrument to which the Depositor is a party or by which it is bound, or
result in the creation or imposition of any lien encumbrance upon any of
its material properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument.
(e) No litigation, actions, proceedings or investigations are pending
or, to the best of the Depositor's knowledge, threatened against the
Depositor which would have consequences that would prohibit its entering
into this Agreement or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Depositor or its
properties or would have consequences that would adversely affect its
performance hereunder, or the validity or enforceability of this Agreement,
or prevent the consummation on the part of the Depositor of any of the
transactions contemplated by this Agreement.
(f) No certificate of an officer, statement furnished in writing or
report delivered or to be delivered pursuant to the terms hereof by the
Depositor contains or will contain any untrue statement of a material fact.
(g) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required
to be taken, given or obtained, as the case may be, by or from any court or
any federal, state or other governmental authority or agency that are
required in connection with the execution, delivery and performance by the
Depositor of this Agreement, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement on the
part of the Depositor and the performance by the Depositor of its
obligations under this Agreement.
(h) The Depositor is conveying to the Trust the entire interest in the
Mortgage Loans which the Depositor has acquired from the Unaffiliated
Seller, free and clear of any
56
<PAGE>
Adverse Claims created by, or for the benefit of, the Depositor.
Section 3.04. [Reserved].
----------
Section 3.05. Representations and Warranties as to each Mortgage Loan
-------------------------------------------------------
and the other Trust Assets.
- --------------------------
(a) The Unaffiliated Seller represents and warrants to the Master Servicer,
the Depositor, the Back-Up Servicer, the Trustee for its own benefit and for the
benefit of the Holders of the Certificates, as to each Mortgage Loan, that it
has entered into the Sale Agreement with the Wilshire Seller, that each Mortgage
Loan was purchased from the Wilshire Seller pursuant to the Sale Agreement, and
that the Wilshire Seller has made the following representations and warranties
in respect of the Mortgage Loans conveyed pursuant to the Sale Agreement, which
representations and warranties are or will be true and correct as of the Closing
Date (unless otherwise specified):
(i) (A) the information with respect to each Mortgage Loan
set forth in the List of Loans is true and correct; (B) such Mortgage
Loan is denominated and payable in Dollars; (C) except for the Balloon
Loans, each Mortgage Loan will provide for a schedule of payments
which are, if timely paid, sufficient to fully pay the principal
balance of such Mortgage Loan on or before its maturity date and to
pay interest at the applicable interest rate (without giving effect to
any contingent interest or shared appreciation feature); (D) to the
best of its knowledge, the down payment, if any, described in the Loan
File was paid in the manner stated in the Loan File; (E) to the best
of the Wilshire Seller's or the Unaffiliated Seller's knowledge, the
Loan Collateral, if any, the purchase of which was financed by the
seller thereof under the Mortgage Loan, has been delivered to and
accepted by the Mortgagor; (F) except as otherwise noted on the
Exception Report and to the best of the Wilshire Seller's or the
Unaffiliated Seller's knowledge, the related Loan File is complete and
the contractual documents contained therein constitute the entire
agreement with respect to the Mortgage Loan with respect to the
Mortgagor, the Originator and the Wilshire Seller; and (G) except as
otherwise noted on the Exception Report, each Loan File contains a
true and complete original of any (1) Note and (2) Mortgage;
(ii) no Mortgage Loan was more than 89 days Delinquent, not
more than 7.09%, 7.54% and 8.23% of the Mortgage Loans in Pool I, Pool
II and Pool III, respectively, were 30-59 days Delinquent and not more
than 2.82%, 2.01% and 3.23% of the Mortgage Loans in Pool I, Pool II
and Pool III, respectively, were 60-89
57
<PAGE>
days Delinquent, in each case by aggregate Principal Balance as of the
close of business on the Cut-Off Date;
(iii) (A) the proceeds of the Mortgage Loan have been fully
disbursed, and there is no obligation on the part of any Person to
make future advances thereunder; (B) any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with;
(C) all costs, fees and expenses incurred in making or closing or
recording the Mortgage Loans were paid;
(iv) (A) such Mortgage Loan has not been satisfied,
subordinated or rescinded, and no provision of the Mortgage Loan has
been waived, altered or modified in any respect, except by instruments
or documents identified in the Loan File; 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 List of
Loans. 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 related policy, and which assumption agreement is part of the
Mortgage File and the terms of which are reflected in the List of
Loans; (B) such Mortgage Loan is not and will not be subject to any
right of rescission, set-off, recoupment, counterclaim or defense,
whether arising out of transactions concerning the Mortgage Loan
between the Mortgagor and the Originator or otherwise, and no such
claim has been asserted with respect thereto; (C) to the best
knowledge of the Wilshire Seller, there is no homestead or other
exemption available to the Mortgagor which would interfere with the
right to sell the Loan Collateral at a trustee's sale or the right to
foreclose on the Mortgage; and (D) the Mortgagor has not notified the
Wilshire Seller and the Wilshire Seller has no knowledge of any relief
requested or allowed to the Mortgagor under the Civil Relief Act;
(v) (A) immediately prior to assigning such Mortgage Loan to the
Unaffiliated Seller, the Wilshire Seller was the sole owner and had
full right to transfer the Mortgage Loan to the Unaffiliated Seller
and such Mortgage Loan has not been sold, assigned or pledged to any
other Person, and immediately prior to the transfer of the Mortgage
Loan to the Unaffiliated Seller, the Wilshire Seller was the owner of
record of the related Mortgage and the indebtedness evidenced by
58
<PAGE>
the related Mortgage Note; (B) the Sale Agreement constitutes the
valid transfer, assignment, set-over and conveyance to the
Unaffiliated Seller of all right, title and interest of the Wilshire
Seller in and to the Mortgage Loans sold thereunder, free and clear of
any Adverse Claim (except for any Permitted Liens on the related Loan
Collateral set forth in the List of Loans); (C) without limiting the
generality of the foregoing, the Wilshire Seller has duly fulfilled
all obligations on its part to be fulfilled under or in connection
with the Mortgage Loan and has done nothing to impair the rights of
the Unaffiliated Seller or the Trust in the Mortgage Loan or the
proceeds with respect thereto, including, without limitation, paid in
full all taxes and other charges payable in connection with the
Mortgage Loan and the transfer of the Mortgage Loan to the
Unaffiliated Seller or the Trust, which could impair or become an
Adverse Claim to the Unaffiliated Seller or the Trust's interest in
such Mortgage Loan; and (D) the transfer, assignment and conveyance of
the related Mortgage Loans by the Wilshire Seller pursuant to the Sale
Agreement is not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction;
(vi) to the best knowledge of the Wilshire Seller and of
the Unaffiliated Seller, (A) there is no Adverse Claim in respect of
the Loan Collateral (including any mechanics' lien or claim for work,
labor or material or tax or assessment lien) and (B) either (1) no
consent for the Mortgage Loan is required by the holder of any
Permitted Lien or (2) such consent has been obtained and is contained
in the Loan File;
(vii) to the best knowledge of the Wilshire Seller and of
the Unaffiliated Seller, (A) there is no default, breach, violation,
or event permitting acceleration under the Mortgage Loan, and no event
has occurred which, with notice and the expiration of any grace or
cure period or both, would constitute a default, breach, violation, or
event permitting acceleration under such Mortgage Loan; (B) there are
no proceedings or investigations pending or threatened before any
Governmental Authority (1) asserting the invalidity of such Mortgage
Loan, (2) asserting the bankruptcy or insolvency of the related
Mortgagor, (3) seeking the payment of such Mortgage Loan or (4)
seeking any determination or ruling that might materially and
adversely affect the validity or enforceability of such Mortgage Loan;
and (C) to the best of the Wilshire Seller's or the Unaffiliated
Seller's knowledge, no Mortgagor on such Mortgage Loan is bankrupt,
insolvent, or is unable to make payment of its obligations when due;
59
<PAGE>
(viii) each Mortgage Note and Mortgage (1) constitutes the legal,
valid and binding obligation of the Mortgagor thereunder enforceable
against the Mortgagor in accordance with its terms (except as may be
limited by laws affecting creditors' rights generally) and (2)
contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for the realization
against the Loan Collateral for the benefit of the security afforded
thereby;
(ix) the Mortgage Loan was assigned by the Wilshire Seller
to the Unaffiliated Seller without any conduct constituting fraud or
misrepresentation on the part of the Wilshire Seller, and the Wilshire
Seller has no knowledge of any specific fact which should have led it
to expect at the time of assignment of such Mortgage Loan that the
Mortgage Loan would not be paid in full when due;
(x) (A) all parties which have had any ownership interest
or servicing rights in the Mortgage Loan, including the Wilshire
Seller, are (or, during the period in which they held and disposed of
such interest, were) in compliance in all material respects with any
and all applicable licensing requirements of the laws of the state
wherein the Mortgagor or the Loan Collateral is located; and (B) the
Mortgage Loan was not originated in, nor is subject to the laws of any
jurisdiction, the laws of which would make the transfer of the
Mortgage Loan to the Unaffiliated Seller or the Trust unlawful;
(xi) such Mortgage Loan does not contravene in any material
respect any laws, rules or regulations applicable thereto (including,
without limitation, the Real Estate Settlement Procedures Act and any
other laws, rules and regulations relating to usury, consumer
protection, truth-in-lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices
and privacy);
(xii) each Mortgage Loan (other than the PHH Mortgage
Loans) immediately prior to its sale pursuant to the Sale Agreement
was being serviced by the Master Servicer;
(xiii) (A) the Wilshire Seller has performed any and all
acts required to be performed (if any) to preserve the rights and
remedies of the Trustee in any insurance policies applicable to the
Mortgage Loans; and (B) each insurance policy with respect to the
Mortgage Loan or the Loan Collateral is a valid,
60
<PAGE>
binding, enforceable and subsisting insurance policy of its respective
kind and is in full force and effect;
(xiv) to the best knowledge of the Wilshire Seller and of
the Unaffiliated Seller, the Loan Collateral is in good repair and
free and clear of any damage that would affect materially and
adversely the value of the Mortgage Loan Collateral as security for
the Mortgage Loan;
(xv) to the best knowledge of the Unaffiliated Seller and
the Wilshire Seller:
(A) (1) all of the improvements which were included for the
purpose of determining the appraised value of the Loan Collateral
lie wholly within the boundaries and building restriction lines
of such property, and no improvements on adjoining properties
encroach upon the Loan Collateral and (2) no improvement located
on or being part of the Loan Collateral is in violation of any
applicable zoning law or regulation, and all inspections,
licenses and certificates required to be made or issued with
respect to all occupied portions of the Loan Collateral and, with
respect to the use and occupancy of the same, including, but not
limited to, certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities;
(B) with respect to each Mortgage Loan secured by 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 such deed of trust, and no fees or expenses are or will
become payable by the Unaffiliated Seller or the Trust to the
trustee under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor;
(C) the Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event the related security for the
Mortgage Loan is sold without the prior consent of the mortgagee
thereunder;
(D) the Loan Collateral constituting residential Real
Estate is lawfully occupied under applicable law and the
Unaffiliated Seller has no actual knowledge that such Loan
Collateral is not so occupied;
61
<PAGE>
(E) except as otherwise noted in the Exception Report, the
Mortgage is contained in the Loan File, each such document was
recorded, and all subsequent assignments have been recorded in
the appropriate jurisdictions wherein such recordation is
necessary to perfect the lien thereof as against creditors of the
Originator;
(F) a lender's title insurance policy, issued in standard
American Land Title Association form, or other form acceptable to
lenders generally in the applicable jurisdiction, by a title
insurance company authorized to transact business in the state in
which the related Loan Collateral is situated, together with any
applicable endorsement, in an amount at least equal to the
original principal balance of such Mortgage Loan, insuring the
mortgagee's interest under the related Mortgage Loan as the
holder of a valid first (or, if so specified in the List of Loans
with respect to such Mortgage Loan, second or third) mortgage
lien of record on the real property described in the Mortgage
Loan is in full force and effect (or, in the case of a Junior
Mortgage Loan, insuring the mortgagee's interest in any Mortgage
Loan that is secured by a lien that is senior to such Junior
Mortgage Loan); except as set forth in the Exception Report, a
true and complete original copy of such lender's title insurance
policy is in the Loan File; and no claims have been made under
such lender's title insurance policy, and neither the Wilshire
Seller nor the Wilshire Seller has done, by act or omission,
anything which would impair the coverage of such lender's title
insurance policy;
(G) the improvements relating to any Loan Collateral are
covered by a valid and existing hazard insurance policy with a
generally acceptable carrier that provides for fire and extended
coverage customarily applicable in the mortgage industry;
(H) a flood insurance policy, if customarily required in
the mortgage industry in the area in which the Loan Collateral is
situated, is in effect with respect to each Loan Collateral with
a generally acceptable carrier in an amount representing coverage
customarily applicable in the mortgage industry;
(I) either (1) any taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges or ground
rents which previously
62
<PAGE>
became due and owing have been paid, or (2) an escrow of funds
has been established in an amount sufficient to pay for every
such item which remains unpaid and which has been assessed but is
not yet due and payable. Except for payments in the nature of
escrow payments, including, without limitation, taxes and
insurance payments, the Master Servicer and the Servicers have
not advanced funds, or induced, solicited or knowingly received
any advance of funds by a party other than the Mortgagor,
directly or indirectly, for the payment of any amount required by
the Mortgage Loan, except for interest accruing from the date of
the Mortgage Loan or date of disbursement of the Mortgage
proceeds, whichever is greater, to the day which precedes by one
month the due date of the first installment of principal and
interest, and none of the escrow payments or other amounts
advanced by the Master Servicer or the Servicers have been
capitalized under any Mortgage Note or Mortgage; and
(J) there is no proceeding pending or, to the best of the
Unaffiliated Seller's or the Wilshire Seller's knowledge,
threatened for the total or partial condemnation of the Loan
Collateral, nor is such a proceeding currently occurring, and
such property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, so as to
affect materially and adversely the value of the Loan Collateral
as security for the Mortgage Loan or the use for which the
premises were intended;
(xvi) upon receipt of each Mortgage Loan by the Trust Fund
pursuant to Article II hereof, the Trust Fund has a perfected, first-
priority security interest in each Mortgage Loan and the proceeds
thereof;
(xvii) each Mortgage is a "qualified mortgage" for purposes
of the REMIC Provisions.
(xviii) the Mortgage is a valid, existing and enforceable
lien, of the priority set forth in the List of Loans, on the Real
Estate constituting Loan Collateral, 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 that are
acceptable to mortgage lending institutions generally and are
specifically referred to in the lender's title
63
<PAGE>
insurance policy referred to in paragraph (xv)(F) above, and that 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 Loan Collateral (collectively,
"Permitted Liens"). Any security agreement, chattel mortgage or
equivalent document related to and delivered in connection with the
Mortgage Loan as additional Loan Collateral establishes and creates a
valid, existing and enforceable first lien and first priority security
interest on the property described therein and the Wilshire Seller has
full right to sell and assign the same to the Purchaser;
(xix) to the best knowledge of the Wilshire Seller, the Mortgage
Note is not and has not been secured by any collateral except the lien
of the corresponding Mortgage on the Mortgaged Property and the
security interest of any applicable security agreement or chattel
mortgage referred to in (xviii) above;
(xx) 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 Originator, the Wilshire
Seller, the Mortgagor, or anyone on behalf of the Mortgagor or (B)
contains any other similar provisions which may constitute a "buydown"
provision. No Mortgage Loan has a shared appreciation or other
contingent interest feature; not more than 1.60% and 22.79% of the
Mortgage Loans in Pool II and Pool III, respectively, in each case by
aggregate Principal Balance, contain provisions permitting negative
amortization;
(xxi) except with respect to not more than 28.09% of the
Mortgage Loans by aggregate Principal Balance as of the Cut-Off Date,
each Mortgage Loan that has a Loan-to-Value Ratio as of the Cut-Off
Date in excess of 80% is subject to a primary mortgage insurance
policy issued by an insurance company duly qualified as such under the
laws of the state where the Loan Collateral is located, licensed to
write the insurance provided and approved as a primary mortgage
insurer by FNMA and FHLMC; such insurance policy insures that portion
of the Mortgage Loan in excess of 75% of the Appraised Value of the
Loan Collateral. All provisions of such insurance policy 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 insurance policy obligates the Mortgagor
64
<PAGE>
thereunder to maintain such insurance and to pay all premiums and
charges in connection therewith, and the Mortgage Interest Rate does
not include the amount of any such premium. Approximately 7.26% of
the Mortgage Loans are insured by the Federal Housing Administration
and approximately 5.40% of the Mortgage Loans are guaranteed by the
Department of Veterans Affairs;
(xxii) the Wilshire 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);
(xxiii) the Loan Collateral with respect to each Mortgage Loan
is Real Estate owned by the Mortgagor in fee simple, provided that
each Time Share Loan is additionally secured by an interest in the
Time Share, and provided further that each Manufactured Housing Loan
may be additionally secured by a security interest in the Manufactured
Home;
(xxiv) each Manufactured Home has a minimum of 400 square feet
of living space and a minimum width in excess of 102 inches and which
is a kind customarily used at a fixed location;
(xxv) no more than 9.83%, 0.31% and 23.03% of the Mortgage Loans
in Pool I, Pool II and Pool III, respectively, are Balloon Loans; no
more than 0.58%, 0.40% and 0.39% of the Mortgage Loans in Pool I, Pool
II and Pool III, respectively, are Manufactured Housing Loans; no more
than 3.80%, 7.75% and 7.41% of the Mortgage Loans in Pool I, Pool II
and Pool III, respectively, are secured by unimproved land; no more
than 1.85%, 0.33% and 1.97% of the Mortgage Loans in Pool I, Pool II
and Pool III, respectively, are secured by Mixed Use Properties; no
more than 0.67%, 2.94% and 1.70% of the Mortgage Loans in Pool I, Pool
II and Pool III, respectively, are secured by Multifamily Properties;
no more than 0.16%, 0.00% and 0.17% of the Mortgage Loans in Pool I,
Pool II and Pool III, respectively, are secured by Time Shares; none
of the Mortgage Loans are secured by properties that are being used
for commercial purposes only, and none of such properties are zoned
for commercial use only;
(xxvi) to the best knowledge of the Wilshire Seller, not more
than 0.69% of the Mortgagors are currently the subject of a Chapter 13
bankruptcy proceeding since the date of acquisition of the Mortgage
Loan by the Wilshire Seller; each such Mortgagor has paid all amounts
due to the bankruptcy
65
<PAGE>
trustee in accordance with the Plan in respect of past due amounts
under the Mortgage Loan, and, as of the Cut-Off Date, the Mortgagor is
not 30 days or more Delinquent in respect of any amounts due under the
Mortgage Loan since the date of such Plan; and
(xxvii) as to each Mortgage Loan that was Delinquent as of the
Cut-Off Date with a stated maturity date prior to the Cut-Off Date,
the Wilshire Seller has mailed to the Mortgagor a unilateral
modification agreement extending the stated maturity date, waiving any
prior defaults by the Mortgagor in respect of Delinquent payments, and
agreeing to accept the Monthly Payment determined in accordance with
the original Mortgage Note, which Monthly Payment will fully amortize
the Mortgage Note prior to the stated maturity date, and a copy of
each such agreement is in the related Loan File;
(xxviii) each Mixed Use Property contains at least one complete
residential unit that is occupied by a natural person as a principal
residence and contains other units being used for commercial purposes;
(xxix) to the best knowledge of the Wilshire Seller, except for
not more than three Mortgage Loans, as of the Cut-Off Date none of the
Mortgage Loans are subject to the Home Ownership and Equity Protection
Act of 1994; all notices required to be delivered to the related
Mortgagor pursuant to the Home Ownership and Equity Protection Act of
1994 have been delivered and all other requirements of that Act have
been complied with for each such Mortgage Loan; and
(xxx) the amortized Loan-to-Value Ratio in the List of Loans
reflects the value of the Mortgaged Property as determined in an
appraisal or a broker's price opinion; the appraiser or broker was
appointed by the Wilshire Seller, had no interest, direct or indirect,
in the Loan Collateral or in any loan secured thereby, and its
compensation is not affected by the value assigned to such collateral;
and any such appraisal or opinion was dated generally not earlier than
18 months prior to the Closing Date.
(b) The Depositor hereby assigns to the Trustee on behalf of the Trust its
rights under the Sale Agreement (such rights having been assigned to the
Depositor by the Unaffiliated Seller) to cause the Wilshire Seller to repurchase
any Mortgage Loan conveyed by the Wilshire Seller and the Unaffiliated Seller,
as to which there has occurred an uncured breach of a representation or warranty
(without regard to any qualification as to knowledge) which materially and
adversely affects the value of, or the interests of the Trust in, any Mortgage
Loan in respect of the
66
<PAGE>
representations and warranties with respect to the Mortgage Loans set forth in
such Sale Agreement. The Trustee hereby acknowledges such assignment, and the
Master Servicer on the Trustee's behalf agrees to exercise such rights as
provided herein.
(c) The representations and warranties described in this Section 3.05 shall
survive the assignment of the Mortgage Loans to the Trust.
Section 3.06. Repurchases and Remedies. (a) Upon discovery by
------------------------
either of the Unaffiliated Seller or the Master Servicer, or actual knowledge of
a Responsible Officer of the Trustee, of (i) a breach of any of the
representations and warranties set forth in Section 3.05, without regard to any
limitation set forth in such representation or warranty concerning the knowledge
of the Wilshire Seller or the Unaffiliated Seller as to the facts stated
therein, (ii) a failure to make any filing or take any action required by
Section 2.05 hereof or (iii) an exception set forth in an Exception Report
prepared by the Trustee pursuant to Section 2.04, which materially and adversely
affects the value of, or the interests of the Trust in, any Mortgage Loan, the
party discovering such breach shall give prompt written notice to the others and
the Depositor. Any exception set forth on the Exception Report shall not, in
and of itself, be deemed material and adverse to such value or interests;
provided, however, that delivery of such Exception Report to the Depositor, the
Unaffiliated Seller, the Master Servicer and the Trustee shall constitute notice
pursuant to this Section 3.06(a), which notice shall be deemed to have been
given on the date on which such exception materially and adversely affects the
value of, or the interests of the Trust Fund in the related Mortgage Loan; and
provided further that the failure of the Trustee to receive an original
Assignment or copy of an assignment within 360 days of the Closing Date in
accordance with Section 2.05(c) will be deemed to be material and adverse.
If, on the Distribution Date in the month following the expiration of
a 60 day period following the date of any notice referred to in the immediately
preceding paragraph, such breach or failure shall remain uncured, the Mortgage
Loan as to which the breach or failure relates shall be repurchased or purchased
for the Repurchase Price as follows:
(i) in respect of matters set forth in Section 3.05(a), or due to a
failure to make any filing or take any action required by Section 2.05
hereof, by the Unaffiliated Seller;
(ii) in respect of matters set forth in Section 3.05(b) the Master
Servicer on the Trustee's behalf shall enforce the Unaffiliated Seller's
right to effect a repurchase of such Mortgage Loan against the Wilshire
67
<PAGE>
Seller; provided that if such breach or failure causes such Mortgage Loan
to be other than a "qualified mortgage" under Section 860G(a)(3) of the
Code, such repurchase or purchase shall occur within 90 days of the
discovery of the defect; and
(iii) in respect of any Mortgage Loan listed on an Exception Report
prepared by the Trustee pursuant to Section 2.04 the exception for which
materially and adversely affects the value of, or the interests of the
Trust Fund in, such Mortgage Loan, by the Unaffiliated Seller.
(b) Following confirmation by the Master Servicer that the Repurchase
Price has been deposited in the Collection Account and receipt by the Trustee of
a written Request for Release in the form of Exhibit E hereto from the Master
Servicer, the Trustee on behalf of the Trust shall release such Mortgage Loan
and the related Loan File to the Unaffiliated Seller or the Wilshire Seller, as
the case may be, and the Trustee on behalf of the Trust shall assign to such
party or its designee, all of the Trust's right, title and interest in such
purchased or repurchased Mortgage Loan, and all property and rights conveyed to
the Trustee relating thereto, without recourse, representation or warranty,
except as to the absence of liens, charges or encumbrances created by or arising
as a result of actions of the Trustee and except as to liens, charges or
encumbrances created or arising out of this Agreement. The Trustee and the
Unaffiliated Seller shall execute and deliver to the Unaffiliated Seller or the
Wilshire Seller, as the case may be, an assignment, prepared and furnished to
the Trustee substantially in the form of Exhibit F to vest ownership of the
repurchased Mortgage Loan in such party. The repurchase and purchase
obligations pursuant to this Section 3.06 constitute the sole remedy available
to the Trustee and the Holders of the Certificates for a breach of a
representation or warranty or agreement of the Unaffiliated Seller or the
Wilshire Seller, set forth in this Article III. For the purposes of this
Agreement, a Mortgage Loan has not been "repurchased" or "purchased" by the
Unaffiliated Seller, the Wilshire Seller or the Master Servicer, as the case may
be, pursuant to this Section 3.06 unless the Repurchase Price therefor has been
deposited into the Collection Account.
ARTICLE IV
SERVICING OF TRUST ASSETS
Section 4.01. Master Servicer and Servicers. (a) Acting directly or
-----------------------------
through one or more Servicers as provided in Section 4.03 hereof, the Master
Servicer shall service and administer the Mortgage Loans in accordance with the
Servicing Standard. Unless otherwise specified herein with respect to specific
obligations of the Master Servicer, the Master Servicer shall service and
administer the Mortgage Loans in accordance
68
<PAGE>
with the Servicing Standard, and, subject only to the terms of the respective
Mortgage Loans, shall have full power and authority (subject to Section 10.16(e)
hereof), acting alone or through Servicers as provided herein, to do or cause to
be done any and all things in connection with such servicing and administration
which it may deem necessary or desirable. The Master Servicer shall promptly
notify the Back-Up Servicer in writing of any event, circumstance or occurrence
which materially adversely affects the ability of the Master Servicer to service
the Mortgage Loans or to otherwise perform and carry out its duties,
responsibilities and obligations under and in accordance with the Servicing
Standard.
(b) The duties of the Master Servicer shall include, without
limitation, collecting and posting of all payments, responding to inquiries by
Mortgagors or by federal, state or local government authorities with respect to
the Mortgage Loans, investigating delinquencies, reporting tax information to
Mortgagors in accordance with its customary practices and all applicable law,
accounting for collections and furnishing monthly and annual statements to the
Back-Up Servicer and the Trustee with respect to distributions and making
Delinquency Advances and Servicing Advances pursuant hereto. The Master
Servicer's duties and obligations hereunder shall commence on the date hereof,
and the Master Servicer shall have no obligations or liabilities hereunder with
respect to the prior servicing of the Mortgage Loans. The Master Servicer shall
follow the provisions of this Agreement and the Servicing Standard. The Master
Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby.
(c) Subject to Section 10.16(e) hereof, consistent with the Servicing
Standard, the Master Servicer may, on behalf of itself, the Holders of the
Certificates, the Trust and the Trustee, effect modifications of any Mortgage
Loan if, in the Master Servicer's reasonable determination made in good faith,
such modification is necessary to maximize collections with respect to such
Loan.
The Master Servicer shall include in each Master Servicer's Monthly
Report the aggregate Principal Balances of all Mortgage Loans which were subject
to such modifications during the related Due Period, as well as the aggregate
Principal Balances of all Mortgage Loans which were subject to such
modifications since the Cut-Off Date and through the end of the related Due
Period.
The Master Servicer agrees that it will not renew, extend,
renegotiate, compromise, settle or release any Note or Mortgage Loan, except
upon payment in full thereof, unless all Mortgagors on such Note or Mortgage
Loan shall first release and discharge the FDIC, the Depositor, each Seller, the
Unaffiliated Seller, the Trust and the Trustee, the Back-Up Servicer and the
69
<PAGE>
Master Servicer, their agents and assigns (the "RELEASED PARTIES"), from and
against all claims, demands and causes of action which any such Mortgagor may
have against any such Released Party arising from or growing out of any act or
omission occurring prior to the date of such release. Such release is to be in
the form of Exhibit G hereto. To the extent the Master Servicer does not obtain
such release, it will not renew, extend, renegotiate, compromise, settle or
release any Note or Mortgage Loan, except upon payment in full thereof. If the
Master Servicer fails to obtain such release, and renews, extends, renegotiates,
compromises or settles any Note or Mortgage Loan in violation of this Section,
the Master Servicer agrees to indemnify and hold the Released Parties harmless
from any and all claims, demands, losses, damages, penalties, fines,
forfeitures, judgments, legal fees and other costs, fees, and expenses suffered
by the Released Parties as a result of the Master Servicer's failure to obtain a
release.
(d) Consistent with the Servicing Standard the Master Servicer may,
on behalf of itself, the Holders of the Certificates, the Trust and the Trustee,
enter into an assumption agreement whereby a new Mortgagor agrees to assume
liability on a Mortgage Loan, provided, that (i) at the time of such assumption
--------
(x) the related Loan is either a defaulted Mortgage Loan or the Master Servicer
reasonably believes that such Loan's becoming a defaulted Mortgage Loan is
imminent and (y) the new Mortgagor agrees to repay a principal balance on such
Mortgage Loan which is at least equal to the Master Servicer's good faith
estimate of the Net Liquidation Proceeds which would be recovered with respect
to such loan (excluding any potential for a deficiency judgment against the
prior Mortgagor) if the related Loan Collateral were to be liquidated in a
commercially reasonably manner and (ii) no such assumption shall extend the
maturity date of such Mortgage Loan beyond the latest maturity date of any other
Mortgage Loan then held by the Trust. The ability of the Master Servicer to
effect assumptions pursuant to this Section 4.01(d) is independent of the Master
Servicer's rights and obligations under Section 4.14 hereof.
(e) Subject to Sections 4.03 through 4.07 hereof, the Master Servicer
may, and is hereby authorized to, perform any of its servicing responsibilities
with respect to all or certain of the Mortgage Loans through a Servicer as it
may from time to time designate, but no such designation of a Servicer shall
serve to release the Master Servicer from any of its obligations under this
Agreement.
(f) Without limiting the generality of the foregoing, but subject to
Sections 4.15 and 10.16(e) hereof, the Master Servicer on behalf of the Trustee,
is authorized and empowered, pursuant to a special or limited power of attorney
hereby granted by the Trust and the Trustee, to execute and deliver, on behalf
of itself, the Trust and the Trustee, (i) any and all instruments of
satisfaction or cancellation or of partial or full release or
70
<PAGE>
discharge and all other comparable instruments with respect to the Mortgage
Loans and with respect to the Mortgaged Properties, (ii) to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Mortgaged Property on behalf of the Trust and (iii) to hold
title to any Mortgaged Property upon such foreclosure or deed in lieu of
foreclosure in the name of the Master Servicer on behalf of the Trust. Subject
to Section 4.17 hereof, the Trust and the Trustee shall promptly sign and return
to the Master Servicer and any Servicer any special or limited powers of
attorney and other documents as the Master Servicer or such Servicer shall
reasonably request to enable the Master Servicer and such Servicer to carry out
their respective servicing and administrative duties hereunder as are delivered
to the Trustee accompanied by a certificate of a Servicing Officer to the effect
that the Trustee's signature is required pursuant to this Agreement (and neither
the Trust nor the Trustee shall have any liability for any misuse of any such
special or limited powers of attorney).
(g) The Master Servicer shall give prompt notice to the Trustee of any
action, of which the Master Servicer has actual knowledge, to (i) assert a claim
against the Trust or (ii) assert jurisdiction over the Trust.
(h) Servicing Advances incurred by the Master Servicer or any Servicer
in connection with the servicing of the Mortgage Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Mortgaged Property shall be recoverable by the Master Servicer or such
Servicer to the extent described in Section 4.12(b) hereof.
(i) All accounting and loan servicing records pertaining to the
Mortgage Loans shall be maintained in a manner consistent with the Servicing
Standard, and in such manner as will permit the Trustee, the Back-Up Servicer or
their respective duly authorized representatives and designees to examine and
audit and make legible reproductions of records during reasonable business hours
upon reasonable notice. All such records, including but not limited to all
transaction registers and loan ledger histories, shall be maintained for the
period required under applicable law.
Section 4.02. Collection of Certain Mortgage Loan Payments. (a) The
--------------------------------------------
Master Servicer shall, as required by the Servicing Standard, make all
reasonable efforts to collect 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 with respect
to the Mortgage Loans as it follows with respect to comparable mortgage loans in
its own servicing portfolio; provided, that the Master Servicer shall always at
--------
least follow collection procedures that are consistent with or better than the
Servicing Standard. Consistent with the foregoing, the Master
71
<PAGE>
Servicer may in its discretion and subject to Section 4.01(c) hereof (i) waive
any assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) modify
payments of monthly principal and interest on any Mortgage Loan becoming subject
to the terms of the Civil Relief Act, as amended, in accordance with the Master
Servicer's general policies relating to comparable mortgage loans subject to
such Act.
The Master Servicer may modify and extend the maturity of a Balloon
Loan which matures, to protect against a Realized Loss and which is not
otherwise paid in full at such maturity date by the related Mortgagor; provided
--------
that the rescheduled final maturity date of such Mortgage Loan is not for a
period in excess of one year, the related Mortgage Rate is not decreased, the
Mortgagor does not receive any additional proceeds and that such Mortgage Loan
fully amortizes by such rescheduled final maturity date; and provided further
-------- -------
that the Mortgagor executes a written modification agreement agreeing to such
modifications.
(b) The Master Servicer shall apply all Advance Payments received by
it with respect to any Mortgage Loan as set forth in the related Note, and in a
manner consistent with the Master Servicer's standard procedures and applicable
law.
Section 4.03. Sub-Servicing Agreements Between Master Servicer and
----------------------------------------------------
Servicers. The Master Servicer may enter into Sub-Servicing Agreements for the
- ---------
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under any such Sub-Servicing Agreement. For purposes of this
Agreement, the Master Servicer shall be deemed to have received payments on
Mortgage Loans when any Servicer has received such payments. The Master
Servicer covenants that any such Sub-Servicing Agreement shall be consistent
with and not in violation of the provisions of this Agreement. The Master
Servicer shall give written notice to the Back-Up Servicer, the Depositor, the
Trustee of the appointment of any Servicer, and shall provide to each of them a
copy of the related Sub-Servicing Agreement.
Section 4.04. Successor Servicers. The Master Servicer may terminate
-------------------
any Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and directly service the related Mortgage Loans itself
or enter into a Sub-Servicing Agreement with a successor Servicer that qualifies
under Section 4.03 hereof.
In the event of termination of any Servicer, all servicing obligations
of such Servicer shall be assumed simultaneously by the Master Servicer without
any act or deed on the part of such Servicer or the Master Servicer, and the
Master
72
<PAGE>
Servicer either shall service directly the related Mortgage Loans or shall enter
into a Sub-Servicing Agreement with a successor Servicer. The Master Servicer
shall give written notice to the Back-Up Servicer of the termination of any
Servicer.
Any Sub-Servicing Agreement, except for the PHH Sub-Servicing
Agreement, shall include the provision that such agreement may be immediately
terminated, without cause and without payment of any penalty or fee, by (x) the
Back-Up Servicer or (y) the Trustee, in either case in the event that the Master
Servicer shall, for any reason, no longer be the Master Servicer (including
termination due to a Master Servicer default), together with a provision stating
that none of the Depositor, the Back-Up Servicer or the Trustee shall be deemed
a party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Servicer, except as set forth herein. No
termination fee shall be paid from the Trust Fund with respect to the
termination without cause of PHH as the Servicer under the PHH Sub-Servicing
Agreement unless there shall have been delivered to the Trustee and the Master
Servicer an Opinion of Counsel that such payment will not cause an Adverse REMIC
Event.
Section 4.05. Liability of Master Servicer. The Master Servicer
----------------------------
shall not be relieved of its obligations under this Agreement notwithstanding
any Sub-Servicing Agreement or any of the provisions of this Agreement relating
to agreements or arrangements between the Master Servicer and a Servicer or
otherwise, and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. Nothing contained in any such Sub-Servicing
Agreement shall be deemed to limit or modify this Agreement. The Master
Servicer shall be entitled to enter into any agreement with a Servicer for
indemnification of the Master Servicer by such Servicer.
Section 4.06. No Contractual Relationship Between Servicer and
------------------------------------------------
Persons other than the Master Servicer. Any Sub-Servicing Agreement and any
- --------------------------------------
other transactions or services relating to the Mortgage Loans involving a
Servicer shall be deemed to be between the Servicer and the Master Servicer
alone and none of the Depositor, the Unaffiliated Seller, the Back-Up Servicer
or the Trustee shall be deemed a party thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Servicer, except as set
forth in Sections 4.05 and 4.07 hereof. The Master Servicer shall be solely
liable for all fees owed by it to any Servicer, irrespective of whether the
Master Servicer's compensation pursuant to this Agreement is sufficient to pay
such fees.
Section 4.07. Assumption or Termination of Sub-Servicing Agreements.
-----------------------------------------------------
Subject to the second paragraph of Section 4.04 hereof, in connection with the
assumption of the responsibilities, duties and liabilities and of the authority,
73
<PAGE>
power and rights of the Master Servicer hereunder pursuant to Section 4.19
hereof, it is understood and agreed that the Master Servicer's rights and
obligations under any Sub-Servicing Agreement then in force between the Master
Servicer and a Servicer may be assumed or terminated by the assuming party at
its option.
The Master Servicer shall, upon request of the Trustee or of the Back-
Up Servicer, but at the expense of the Master Servicer, deliver to the assuming
party documents and records relating to each Sub-Servicing Agreement and an
accounting of amounts collected and held thereunder and otherwise use its best
reasonable efforts to effect the orderly and efficient transfer of the Sub-
Servicing Agreements to the assuming party.
Section 4.08. Establishment of Lock-Box and Lock-Box Account. (a)
----------------------------------------------
Prior to the Closing Date, the Master Servicer shall (i) establish and maintain
the Lock-Box Account, (ii) enter into the Lock-Box Agreement and (iii) within 30
days of the Closing Date, notify each Mortgagor to remit all payments with
respect to the Mortgage Loans to the Lock-Box Account. If, at any time, the
Lock-Box Account ceases to be maintained at the Lock-Box Bank, the Master
Servicer shall within ten Business Days of obtaining actual knowledge of such
cessation establish a new lock-box account which shall be an Eligible Account,
transfer any cash and/or any investments from the Lock-Box Account to such new
lock-box account and from the date such new lock-box account is established, it
shall be the "Lock-Box Account", provided that notice of such new lock-box
account is given to each Rating Agency and the Trustee. In the event that a
Successor Servicer is appointed, the Trustee, the Lock-Box Bank and such
Successor Servicer will enter into a new lock-box agreement replacing the Lock-
Box Agreement and such new lock-box agreement shall be the "Lock-Box Agreement"
for all purposes hereunder.
(b) The Master Servicer shall instruct, or cause any Servicer to
instruct, all Mortgagors to make payments only to the Lock-Box, unless, due to
special collection circumstances (by way of illustration, a delinquent Mortgagor
who is willing to send payment by Federal Express courier, "mailgram" or other
manner not in a form eligible for receipt directly by the Lock-Box Account) such
payment must be made to the Master Servicer, in which event such amounts shall
be deposited by the Master Servicer in the Lock-Box Account in accordance with
this Section 4.08. The Master Servicer shall instruct the Lock-Box Bank to
remit by wire transfer of immediately available funds (x) Escrow Amounts to the
appropriate T&I Account, as directed by the Master Servicer and (y) all other
Collections in the Lock-Box Account to the Collection Account, in each case on
the next Business Day following their receipt by the Lock-Box Bank; provided
that the Servicer of the PHH Mortgage Loans shall deposit such amounts in
accordance with the Sub-Servicing agreement for such Mortgage Loans.
74
<PAGE>
(c) For all purposes of this Agreement, no amounts shall be considered
to be on deposit in the Lock-Box Account unless such amounts are available for
withdrawal therefrom in "good funds"; i.e., until any check or "Automated
----
Clearing House" transfer has "cleared". The Master Servicer shall have the
right to withdraw from the Lock-Box Account the amount of any misapplied payment
or other amount deposited therein in error. The Master Servicer is not required
to deposit any amounts received by the Master Servicer to the Lock-Box Account
in accordance with the provisions hereof until the Master Servicer has
determined that such amounts relate to the Mortgage Loans and such amounts are
available as "good funds".
Section 4.09. Deposits into Collection Account. The Master Servicer
--------------------------------
shall deposit (with respect to any such amounts it receives directly), or cause
to be deposited (except with respect to the PHH Mortgage Loans), to the
Collection Account, on a daily basis in accordance with Section 4.08(b) hereof,
the following payments and collections received or made by it, without
duplication, except to the extent that such collections include Escrow Amounts,
which shall be deposited to the appropriate T&I Account, together with all
Delinquency Advances made, and Prepayment Interest paid, by the Master Servicer
on the related Master Servicer Remittance Date, pursuant to Section 4.12 hereof;
(such amounts set forth below together with such Delinquency Advances and
Prepayment Interest, "COLLECTIONS"):
(i) all payments on the Mortgage Loans;
(ii) all payments received as a result of the enforcement of the
Trustee's rights under the Unaffiliated Seller's Agreement or the
Unaffiliated Seller's rights under the Sale Agreement;
(iii) all Net Liquidation Proceeds or Net Insurance Proceeds
with respect to the Mortgage Loans;
(iv) all amounts required to be deposited by the Master Servicer
pursuant to Section 4.13(c) hereof;
(v) any amount required to be deposited by the Master Servicer in
connection with losses with respect to funds invested pursuant to Section
6.03 hereof;
(vi) all Condemnation Proceeds affecting any Loan Collateral that
are not released to the Mortgagor in accordance with the Master Servicer's
normal servicing procedures, the Note, the Mortgagor or applicable law; and
(vii) any other amounts required to be deposited in the
Collection Account pursuant to the terms hereof.
75
<PAGE>
The Master Servicer shall deposit in the Collection Account all
Collections on the PHH Mortgage Loans upon receipt by the Master Servicer from
the related Servicer.
Section 4.10. [Reserved].
----------
Section 4.11. Master Servicer Reports. Not later than 12:00
-----------------------
noon Pacific time on the fifteenth calendar day of each month (or the
immediately preceding Business Day if such calendar day is not a Business Day),
the Master Servicer shall deliver or cause to be delivered to the Trustee the
related Master Servicer's Monthly Report on computer readable magnetic tape or
diskette in a mutually agreed upon format. This report shall also contain (i) a
summary report of Mortgage Loan payment activity for such month, (ii) exception
payment reports for Mortgage Loans with respect to which scheduled payments due
in such month were not made, (iii) an itemization by category of all amounts to
be paid on the Distribution Date, and (iv) a trial balance in the form of a
computer tape. Not later than 12:00 noon Pacific time on the eighteenth
calendar day of each month (or the immediately succeeding business day if such
calendar day falls on a Saturday or Sunday or a holiday) (each a "REPORT DATE"),
the Master Servicer shall deliver or cause to be delivered to the Trustee such
Master Servicer's Monthly Report on computer readable magnetic tape or diskette
such information as is necessary for the Trustee to report items in 6.08(b).
Section 4.12. Delinquency Advances, Servicing Advances and
--------------------------------------------
Prepayment Interest. (a) Not later than 10:00 a.m. Pacific time on each Master
- -------------------
Servicer Remittance Date, the Master Servicer shall advance funds (each such
advance, a "DELINQUENCY ADVANCE") to the Collection Account in the amount of any
Monthly Payment that is due during the related Due Period and not received by
the Master Servicer or any Servicer as of the related Determination Date;
provided, however, that the Master Servicer will not be required to make any
- -------- -------
such Delinquency Advance if the Master Servicer determines in reasonable good
faith that such Delinquency Advance would be a Non-Recoverable Advance. Such
determination by the Master Servicer will be evidenced by a certificate signed
by a Servicing Officer delivered to the Trustee no later than the Report Date
for the related Distribution Date. Each Delinquency Advance shall increase the
Outstanding Advances with respect to the related Mortgage Loan. The Master
Servicer shall be permitted to fund Delinquency Advances from its own funds, and
from amounts then on deposit in the Collection Account in excess of the
Available Distribution Amount for the related Master Servicer Remittance Date.
The Master Servicer may recover Delinquency Advances (i) from the
Collection Account out of collections on the Mortgage Loan whose delinquency
gave rise to such Delinquency Advance subsequent to the related Due Period, from
Liquidation Proceeds and/or Insurance Proceeds recovered on account of such
Mortgage Loan to the extent of the amount of such Delinquency
76
<PAGE>
Advance prior to, or after, the deposit of such Liquidation Proceeds and/or
Insurance Proceeds in the Collection Account and (ii) from the Collection
Account generally, if such Delinquency Advance has been determined to be a Non-
Recoverable Advance.
(b) The Master Servicer will advance all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations with respect
to defaulted Mortgage Loans, including, but not limited to, the cost of (i)
Preservation Expenses, (ii) any enforcement or judicial proceedings, including
foreclosures, and any reasonable legal expenses in connection with the assertion
by a Mortgagor of any claim or defense that the Mortgagor may have had against
the originator in connection with the sale, financing or construction of such
Mortgagor's home and which the Mortgagor asserts against the Master Servicer and
(iii) the management and liquidation of REO Property, but shall only pay such
costs and expenses to the extent the Master Servicer reasonably believes such
costs and expenses will be recovered from the related Mortgage Loan and will
increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
expenditure, if customary and reasonable, and exclusive of overhead, together
with any Servicing Advance as defined in Section 4.15(a) hereof, will constitute
a "SERVICING ADVANCE." The Master Servicer may recover a Servicing Advance from
the Mortgagor to the extent permitted by the related Mortgage Loan, from the
Collection Account out of collections on the related Mortgage Loan, or from
Liquidation Proceeds realized upon the liquidation of the related Mortgage Loan,
from Insurance Proceeds collected with respect to the related Mortgage Loan
prior to, or after, the deposit of such Liquidation Proceeds and/or Insurance
Proceeds in the Collection Account.
(c) the Master Servicer shall, not later than 10:00 a.m. Pacific time
on the related Master Servicer Remittance Date, deposit in the Collection
Account the Prepayment Interest, if any, for the related Prepayment Period.
Section 4.13. Maintenance of Insurance and Tax Services. (a)
-----------------------------------------
The Master Servicer shall cause to be maintained with respect to each Mortgage
Loan with an unpaid Principal Balance of $2,000 or greater a hazard insurance
policy with a generally acceptable carrier that provides for fire and extended
coverage, and which provides for a recovery by the Master Servicer on behalf of
the Trust and its assignees of insurance proceeds relating to such Mortgage
Loan, in an amount not less than the least of (i) the outstanding principal
balance of the Mortgage Loan, (ii) the minimum amount required to compensate for
damage or loss on a replacement cost basis and (iii) the full insurable value of
the improvements which are a part of the related Mortgaged Property, but in any
case not less than the amount necessary to avoid the application of any co-
insurance clause.
77
<PAGE>
(b) If a Mortgage Loan with an unpaid Principal Balance of $2,000 or
greater relates to a Mortgaged Property in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, at the time of origination, and if such loan has been specifically
identified as being in such an area in the List of Loans or other writing
delivered to the Master Servicer by the FDIC, the Master Servicer shall cause to
be maintained with respect thereto a flood insurance policy in a form meeting
the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount that provides
for coverage, and which provides for a recovery by the Master Servicer on behalf
of the Trust of insurance proceeds relating to such Mortgage Loan, in an amount
not less than the least of (i) the outstanding principal balance of the Mortgage
Loan, (ii) the minimum amount required to fully compensate for damage or loss to
the improvements which are a part of the related Mortgaged Property on a
replacement cost basis and (iii) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973, the National Flood
Insurance Act of 1968 or Flood Insurance Reform Act of 1994, as amended, but in
each case in an amount not less than such amount as is necessary to avoid the
application of any co-insurance clause contained in the related hazard insurance
policy. The Master Servicer shall indemnify the Trust out of the Master
Servicer's own funds for any loss to the Trust resulting from the Master
Servicer's failure to maintain such flood and hazard insurance required by this
Section.
(c) In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Master
Servicer as loss payee and provides coverage in an amount equal to the aggregate
Principal Balance of the Mortgage Loans without co-insurance, and otherwise
complies with the requirements of this Section 4.13, the Master Servicer shall
be deemed conclusively to have satisfied its obligations with respect to fire,
flood and hazard insurance coverage under this Section 4.13, it being understood
and agreed that such blanket policy may contain a deductible clause, in which
case the Master Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with Sections
4.13(a) and (b) hereof, and there shall have been a loss which would have been
covered by such policy, deposit in the Collection Account from the Master
Servicer's own funds the difference, if any, between the amount that would have
been payable under a policy complying with Sections 4.13(a) and (b) and the
amount paid under such blanket policy. Upon the request of the Back-Up
Servicer, the Master Servicer shall cause to be delivered to the requesting
party a copy of such policy.
(d) The Master Servicer shall maintain in full force and effect a
Primary Mortgage Insurance Policy with respect to
78
<PAGE>
each Mortgage Loan for which such coverage is in effect as of the Closing Date.
Such coverage (to the extent not provided by FHA or the VA) shall be maintained
until the Loan-to-Value Ratio of the related Mortgage Loan is reduced to 75% or
less. The Master Servicer will not cancel or refuse to renew any such Primary
Mortgage Insurance Policy in effect on the Closing Date that is required to be
kept in force pursuant to this Section 4.13(d) unless a replacement Primary
Mortgage Insurance Policy for such cancelled or non-renewed policy has been
obtained. The Master Servicer shall not take any action which would result in
non-coverage under any applicable Primary Mortgage Insurance Policy of any loss
which but for the actions of the Master Servicer would have been covered
thereunder. In connection with any assumption or substitution agreement entered
into or to be entered into pursuant to Section 4.14, the Seller shall promptly
notify the insurer under the related Primary Mortgage Insurance Policy, if any,
of such assumption or substitution of liability in accordance with the terms of
such policy and shall take all actions which may be required by such insurer as
a condition to the continuation of coverage under the Primary Mortgage Insurance
Policy. If such Primary Mortgage Insurance Policy is terminated as a result of
such assumption or substitution of liability, the Master Servicer shall obtain a
replacement Primary Mortgage Insurance Policy as provided above.
In connection with its activities as servicer, the Master Servicer
agrees to prepare and present on behalf of the Trustee for the benefit of the
Certificateholders, claims to the insurer under any Primary Mortgage Insurance
Policy in a timely fashion in accordance with the terms of such policies and, in
this regard, to take such action as shall be necessary to permit recovery under
any Primary Mortgage Insurance Policy respecting a defaulted Mortgage Loan.
Pursuant to Section 4.09, any amounts collected by the Master Servicer under any
Primary Mortgage Insurance Policy shall be deposited in the Collection Account.
(e) If any Person asserts that on any Mortgage Loan the borrower has
procured credit, life, accident, health or disability insurance or the like, the
Master Servicer's sole obligation shall be to examine the related file
maintained by the Master Servicer and, if evidence corroborating the assertion
is found, refer such Person to the underwriter of such insurance.
Section 4.14. Due-on-Sale Clauses; Assumption and Substitution
------------------------------------------------
Agreements. When a Mortgaged Property has been or is about to be conveyed by
- ----------
the Mortgagor (whether by absolute conveyance or by contract of sale, and
whether or not the Mortgagor remains liable under the Note and/or Mortgage), the
Master Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise the Trust's rights to accelerate the maturity
of the related Mortgage Loan under any "due-on-sale" clause contained in the
related Mortgage or Note; provided, that the Master Servicer shall not exercise
--------
any such right if the "due-on-sale" clause is not enforceable under
79
<PAGE>
applicable law or under the related Note or if the Master Servicer is prohibited
by law from doing so or the Master Servicer may not exercise such right if, in
the reasonable belief of the Master Servicer, determined in accordance with the
Servicing Standard the value of the Mortgage Loan would be enhanced by waiving
such provision. In such event, the Master Servicer, subject to Section 4.01(d)
hereof, shall enter into an assumption and modification agreement with the
person to whom such Mortgaged Property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Note and, unless
prohibited by applicable law or the documents in the related File, the Mortgagor
remains liable thereon. If the foregoing is not permitted under applicable law
or the documents in the related File, the Master Servicer is authorized, subject
to Section 4.01(d) hereof, 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 Note; provided, that the Mortgage Loan, as assumed, shall conform in all
--------
respects to the requirements, representations and warranties of the Unaffiliated
Seller's Agreement.
The Master Servicer shall forward to the Trustee the original of such
assumption or substitution agreement, which copy shall be added by the Trustee
to the related Loan File and which shall, for all purposes, be considered a part
of such Loan File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such assumption or
substitution agreement, no material term of the Note (including but not limited
to the related Mortgage Rate and the Monthly Payment on the related Mortgage
Loan) may be changed and all such terms shall remain as in effect immediately
prior to the assumption or substitution, the stated maturity and the Principal
Balance of such Mortgage Loan shall not be changed nor shall any required
Monthly Payments of principal or interest be deferred or forgiven.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Master Servicer
may be restricted by law from preventing, for any reason whatsoever.
Section 4.15. Realization Upon Defaulted Mortgage Loans. (a)
-----------------------------------------
The Master Servicer shall, consistent with the Servicing Standard, foreclose
upon or otherwise comparably effect the ownership in the name of the Master
Servicer on behalf of the Trust of Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments. The foregoing is subject to the proviso that the Master
Servicer shall not advance its own funds unless it shall reasonably believe that
it can recover such funds from
80
<PAGE>
future payments and doing so will increase Net Liquidation Proceeds on the
Mortgage Loans. Any amounts so advanced, if customary and reasonable, and
exclusive of overhead, shall constitute "Servicing Advances" within the meaning
of Section 4.12(b) hereof. Notwithstanding the foregoing, with respect to any
Mortgage Loan as to which the Master Servicer has received notice of, or has
actual knowledge of, the presence of any toxic or hazardous substance on the
related Mortgaged Property (a "POTENTIALLY HAZARDOUS PROPERTY"), the Master
Servicer shall not, on behalf of the Trust, either (i) obtain title to such
Mortgaged Property as a result of or in lieu of foreclosure or otherwise, or
(ii) otherwise acquire possession of, or take any other action with respect to,
such Mortgaged Property, if, as a result of any such action, the Trust would be
considered to hold title to, be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of, such Mortgaged Property within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") from time to time, or any comparable law. The Master
Servicer shall not be required to make Delinquency Advances with respect to a
Mortgage Loan relating to a Potentially Hazardous Property. In the event the
Master Servicer requires any professional guidance with respect to CERCLA, the
Master Servicer may, at the expense of the Master Servicer, obtain an Opinion of
Counsel experienced in CERCLA matters, and shall be fully protected in relying
on any such Opinion of Counsel.
(b) The Master Servicer shall determine with respect to each
defaulted Mortgage Loan when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts (other than from deficiency
judgments) it expects to recover from or on account of such defaulted Mortgage
Loan, whereupon such Mortgage Loan shall become a "Liquidated Mortgage Loan".
Any such determination shall be evidenced by delivery of a Liquidation Report in
substantially the form of Exhibit H hereto to the Trustee.
(c) The Master Servicer shall sell any REO Property within three full
years after the taxable year of acquisition by the Trust, unless the Master
Servicer obtains for the Trustee an opinion of counsel experienced in federal
income tax matters, addressed to the Trustee and the Master Servicer, to the
effect that the holding by the Trust of such REO Property for a greater
specified period will not result in the imposition of taxes on "Prohibited
Transactions" of REMIC I or REMIC II as defined in Section 860F of the Code or
cause REMIC I or REMIC II to fail to qualify as a REMIC under the REMIC
Provisions at any time that any Certificates are outstanding.
(d) Notwithstanding the generality of the foregoing provisions, the
Master Servicer shall manage, conserve, protect and operate each REO Property
for the Holders solely for the purpose of its prompt disposition and sale in a
manner which does not cause such REO Property to fail to qualify as "foreclosure
81
<PAGE>
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by REMIC I or REMIC II of any "income from non-permitted assets" within
the meaning of Section 860F(a)(2)(B) of the Code or any "net income from
foreclosure property" which is subject to taxation under the REMIC Provisions.
Pursuant to its efforts to sell such REO Property, the Master Servicer shall
either itself or through an agent selected by the Master Servicer protect and
conserve such REO Property in the same manner and to such extent as is customary
in the locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Holders, rent the same, or
any part thereof, as the Master Servicer deems to be in the best interest of the
Holders for the period prior to the sale of such REO Property. The net income
from the sale of an REO Property shall be deposited in the Collection Account.
(e) The Master Servicer shall file reports of foreclosure and
abandonment as required by Section 6050J of the Code.
Section 4.16. Servicing Compensation. As compensation for its
----------------------
activities hereunder, the Master Servicer shall be entitled to the Master
Servicing Fee from amounts available therefor in the Collection Account, as
provided in Section 6.04(d) hereof. The right to receive the Master Servicing
Fee may not be transferred in whole or in part except in connection with the
transfer of all of the Master Servicer's responsibilities and obligations under
this Agreement or except as otherwise provided herein. Notwithstanding the
foregoing, the Master Servicer may pay any portion of the Servicing Fee to a
Servicer. The Master Servicer shall pay or cause to be paid from the Master
Servicing Fee any Insurance Premium Fee payable on any Distribution Date.
Section 4.17. Records, Inspections. (a) The Master Servicer,
--------------------
during the period it is servicer hereunder, shall, consistent with standard
industry practices, maintain such books of account and other records as will
enable the Trustee and/or the Back-Up Servicer (if either so elects, in its sole
discretion) to determine the status of each Mortgage Loan.
(b) The Master Servicer shall provide to representatives of the
Trustee and the Depositor, without charge, reasonable access on reasonable prior
notice during normal business hours and with reasonable frequency to the
documentation regarding the Mortgage Loans. The Master Servicer will permit,
without charge, any representative designated by the Depositor or the Trustee to
visit and inspect the servicing operations and its records relating to the Loans
on reasonable prior notice during normal business hours with reasonable
frequency during the term of the Certificates, and make copies thereof or
extracts therefrom and to discuss the affairs, finances, and accounts of the
Master Servicer with its principal officers, as applicable, and its independent
accountants. Any expense incidental to the
82
<PAGE>
exercise by the Depositor of any right under this Section 4.17(b) shall be borne
by such Person and, with respect to the Trustee, by the Person requesting the
Trustee to undertake such inspection. Nothing in this Section 4.17(b) shall
derogate from the obligation of the Master Servicer to observe any applicable
law prohibiting disclosure of information regarding the Mortgagors, and the
failure of the Master Servicer to provide access as provided in this Section
4.17(b) as a result of such obligation shall not constitute a breach of this
Section 4.17(b).
To the extent that such information is not otherwise available to the
public, none of the Trustee, the Depositor, the Back-Up Servicer, nor any
representative thereof shall disseminate any information relating to the Master
Servicer obtained pursuant to this Agreement without the Master Servicer's
written consent, except to the extent provided for in this Agreement or to the
extent that it is necessary to do so (i) in working with legal counsel,
auditors, rating agencies, liquidity and credit providers, taxing authorities,
or other regulatory bodies or other governmental agencies or (ii) pursuant to
any law, rule, regulation, order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction over the Trustee, the
Depositor, the Back-Up Servicer, and the Trustee, and the Back-Up Servicer shall
use all reasonable efforts to assure the confidentiality of any such
disseminated non-public information.
(c) Upon any change in the format of the computer tape maintained by
the Master Servicer in respect of the Mortgage Loans, the Master Servicer shall
notify the Back-Up Servicer and the Trustee in advance and shall deliver a copy
of such new format to the Depositor, the Back-Up Servicer and the Trustee;
provided, that the Master Servicer agrees to co-operate reasonably and in good
- --------
faith with the Trustee and the Back-Up Servicer with respect to any and all
issues relating to such format change.
Section 4.18. Assignment of Agreement. The Master Servicer may
-----------------------
not assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Trustee and the Depositor.
Section 4.19. Removal of Master Servicer; Resignation of Master
-------------------------------------------------
Servicer; Term of Servicing. (a) If any of the following events (each, an
- ---------------------------
"EVENT OF MASTER SERVICER DEFAULT") shall occur and be continuing:
(i) Any failure by the Master Servicer (x) to deposit to the
Collection Account all Collections received by the Master Servicer directly
within two Business Days following the Business Day on which such amounts
are deposited by the Master Servicer to its general account (which shall be
within one Business Day following the Business Day of the Master Servicer's
receipt of such
83
<PAGE>
amount) and are determined by the Master Servicer to relate to the Mortgage
Loans or (y) to deposit to the Collection Account any amount required to be
deposited thereon pursuant to Section 4.12(a) or 4.12(c) hereof by the
related Master Servicer Remittance Date; or
(ii) Failure on the part of the Master Servicer or of the
Unaffiliated Seller to observe or perform any term, covenant or agreement
in this Agreement (other than those covered by clause (i) above) or a
failure to comply with the provisions of the Servicing Standard, which
failure materially adversely affects the rights of the Holders of the
Certificates and which continues unremedied for 30 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Unaffiliated Seller,
the Depositor, the Trustee, or Certificateholders who, in the aggregate,
hold Certificates evidencing Voting Rights of 10% or more; or
(iii) Any proceeding shall be instituted against the Master
Servicer seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or any of its Debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property) shall
occur; or
(iv) The commencement by the Master Servicer of a voluntary case
or proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Master Servicer in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Master Servicer or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admis sion by it in writing of its
inability to pay its Debts
84
<PAGE>
generally as they become due, or the taking of corporate action by the
Master Servicer in furtherance of any such action;
(v) The Master Servicer shall fail to deliver a report expressly
required by this Agreement, and the continuance of such failure for a
period of three Business Days after the date upon which written notice of
such failure shall have been given to the Master Servicer by the Seller,
the Depositor, or the Trustee (except that such three Business Day period
shall be deemed not to run as to any portion of such report during such
time as the Master Servicer's failure to provide such information is for
cause or inability beyond its control and the Master Servicer provides the
Trustee, the Depositor with an Officer's Certificate of the Master Servicer
to such effect);
then the Trustee at the direction of the Required Certificateholders shall,
in each case by delivery to the Master Servicer of a written notice
specifying the occurrence of any of the foregoing events terminate the
servicing responsibilities of the Master Servicer hereunder, without
demand, protest or further notice of any kind, all of which are hereby
waived by the Master Servicer, at which such time the Back-Up Servicer
shall become the Successor Servicer; provided, that, in the event any of
--------
the events described in subsections (i)(y), (iii) or (iv) shall have
occurred, termination of the duties and responsibilities of the Master
Servicer shall automatically occur, without, demand, protest, or further
notice of any kind, all of which are expressly waived by the Master
Servicer; provided that in the case of a proceeding described in subsection
--------
(iii) brought by a third party and not consented to by the Master Servicer,
an Event of Master Servicer Default shall not be deemed to have occurred
until the earliest to occur of (A) the failure of the relevant court to
grant the Master Servicer's motion to dismiss such proceeding within 90
days of the filing of such motion, (B) the denial of the Master Servicer's
motion to dismiss such proceeding by the relevant court, (C) the failure of
the Master Servicer to file such a motion within 30 days of the notice of
the proceeding and (D) the subsequent withdrawal by the Master Servicer of
its motion to dismiss such proceeding.
The Trustee shall give notice of the occurrence of any Event of Master
Servicer Default to the Seller, the Depositor, the Master Servicer, the Rating
Agencies, the Back-Up Servicer and each Certificateholder.
In the event that the Back-Up Servicer becomes the Successor Servicer,
the parties hereby agree that there shall no longer be the requirement to have a
Back-Up Servicer.
85
<PAGE>
(b) The Master Servicer shall not resign from the obligations and
duties hereby imposed on it, except with the consent of the Required
Certificateholders or upon determination that its duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of applic
able law with any other activities carried on by it, the other activities of the
Master Servicer so causing such a conflict being of a type and nature carried on
by the Master Servicer at the date of this Agreement. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to the effect that such duties are not so permissible (the
cost of which shall be borne by the Master Servicer) to such effect which shall
be delivered to the Trustee and to the Back-up Servicer. Promptly upon any
resignation pursuant to this clause (c), the Unaffiliated Seller shall notify
each Rating Agency, the Depositor and the Trustee thereof.
(c) Except as may be required by law, no removal or resignation of
the Master Servicer shall become effective until the Back-Up Servicer or other
Successor Servicer shall have assumed all of the Master Servicer's
responsibilities and obliga tions hereunder.
(d) If, at the time the Master Servicer is removed or resigns there
is no Back-Up Servicer or the Back-Up Servicer is unable to act as Successor
Servicer and the Trustee does not appoint a different Successor Servicer, then
the Trustee shall become the Successor Servicer.
(e) Upon removal or resignation of the Master Servicer, the Master
Servicer also shall promptly (and in any event no later than five Business Days
subsequent to such removal or resignation) deliver or cause to be delivered to
the Back-Up Servicer all the books and records (including, without limitation,
records kept in electronic form) that the Master Servicer has maintained for the
Mortgage Loans, including all tax bills, assessment notices, insurance premium
notices and all other documents as well as all original documents then in the
Master Servicer's possession. The Master Servicer may retain copies of any such
books and records.
(f) Any collections received by the Master Servicer after removal or
resignation shall be endorsed by it and remitted directly and immediately to the
Back-Up Servicer. The Master Servicer shall be entitled to receive the Master
Servicing Fee through the day on which it is terminated as Master Servicer
(which may be pro rated for a partial month).
To the extent that the Master Servicer, at the time of its removal or
resignation, has theretofore expended any amounts as Delinquency Advances or as
Servicing Advances with respect to any Mortgage Loan, which Delinquency Advances
or Servicing Advances remain unreimbursed as of such date ("UNRECOVERED
ADVANCES") the Master Servicer shall thereafter be entitled to
86
<PAGE>
receive from the Back-Up Servicer, monthly, such information as may be generated
by the Back-Up Servicer as may be reasonably necessary to enable the Master
Servicer to monitor the recovery of, and collection efforts undertaken with
respect to, the Unrecovered Advances, which information will include details of
collection activities, payment records and trial balances. To the extent that
the Back-Up Servicer or other Successor Servicer receives any amounts which
relate to reimbursement for Unrecovered Advances made by the prior Master
Servicer, such amounts shall be remitted to the prior Master Servicer on the
related Distribution Date. To the extent that the Master Servicer, based upon
the information supplied by the Back-Up Servicer, believes that any
discrepancies exist between actual Unrecovered Advances received by the Back-Up
Servicer and the amounts forwarded to the Master Servicer as recovered
Unrecovered Advances, the Master Servicer and the Back-Up Servicer shall attempt
in good faith to reconcile such discrepancies.
(g) The Back-Up Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any succession to become the
Successor Servicer. The Master Servicer agrees to cooperate reasonably with the
Back-Up Servicer in effecting the termination of the Master Servicer's servicing
responsibilities and rights hereunder and shall promptly provide to the Back-Up
Servicer all documents and records reasonably requested by it to enable it to
assume the Master Servicer's functions hereunder and shall promptly also
transfer to the Back-Up Servicer all amounts which then have been or should have
been deposited in the Lock-Box Account, or in the Collection Account, or which
are thereafter received with respect to the Mortgage Loans. The Back-Up
Servicer shall not be held liable by reason of any failure to make, or any delay
in making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Master Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Master Servicer.
(h) The Master Servicer which is being removed or is resigning shall
give notice to the Mortgagors of the transfer of the servicing to the Back-Up
Servicer. Said notice shall be a joint notice of servicing transfer in the form
required by applicable law.
Section 4.20. Errors and Omissions Insurance; Fidelity Bond. The
---------------------------------------------
Master Servicer shall keep in force during the term of this Agreement a policy
or policies of insurance covering errors and omissions for failure in the
performance of the Master Servicer's obligations under this Agreement, which
policy or policies shall be in such form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Master Servicer shall also maintain a fidelity bond in the form and amount
that would meet the requirements of FNMA or FHLMC if it were the purchaser of
the
87
<PAGE>
Mortgage Loans. The Master Servicer shall be deemed to have complied with this
provision if an affiliate of the Master Servicer has such errors and omissions
and fidelity bond coverage and, by the terms of such insurance policy or
fidelity bond, the coverage afforded thereunder extends to the Master Servicer.
Any such errors and omissions policy and fidelity bond shall by its terms not be
cancelable (but may be transferred to a different carrier) without thirty days
prior written notice to the Trustee. Upon the request of the Trustee, the
Master Servicer shall furnish copies of all binders and policies or certificates
evidencing that such bonds and insurance policies are in full force and effect.
The Master Servicer shall also cause each Servicer to maintain a policy of
insurance covering errors and omissions and a fidelity bond which would meet the
requirements set forth above. The Master Servicer (and any affiliated Servicer)
will be deemed to have satisfied its obligations under this Section 4.20 if an
Affiliate of the Master Servicer maintains such insurance, and if the coverage
thereunder applies to the Master Servicer.
Section 4.21. Change in Business of the Master Servicer. The
-----------------------------------------
Unaffiliated Seller has entered into this Agreement with the Master Servicer in
reliance upon its ability to perform the servicing duties without any delegation
thereof; the adequacy of its plant, personnel, records and procedures; its
integrity, reputation and financial standing and the continuance of each of the
foregoing. The Master Servicer shall not (a) make any material change in the
character of its servicing business; or (b) merge with or into or consolidate
with or into, or convey, transfer, lease or otherwise dispose of all or
substantially all of its assets (whether now owned or hereafter acquired), or
acquire all or substantially all of the assets or capital stock or other
ownership interest of, any other corporation, unless (x) the Master Servicer has
notified each Rating Agency, and the Trustee, at least 30 days prior to such
action and (y) the Trustee has consented to such action (such consent not to be
unreasonably withheld). It is acknowledged by all parties hereto that it is the
intent of the Master Servicer hereafter to assume the business of Wilshire
Credit Corporation.
Section 4.22. Master Servicer Expenses. Unless otherwise provided or
------------------------
contemplated herein, the Master Servicer shall be required to pay all expenses
incurred by it in connection with its obligations under this Agreement,
including fees and disbursements of independent accountants, taxes imposed on
the Master Servicer, expenses incurred in connection with distributions and
reports to the Depositor, the Back-Up Servicer and/or to the Trustee, all costs
and expenses of filing and recording, including the costs of any searches deemed
necessary or appropriate by the Master Servicer from time to time to establish
and determine the validity and the continuing lien priority of the Trustee's
security interest in the Trust Asset, the ongoing fees and reasonable expenses
of each Rating Agency, and shall not be entitled to reimbursement therefor.
88
<PAGE>
Section 4.23. The Back-Up Servicer. (a) Prior to assuming any of the
--------------------
Master Servicer's rights and obligations hereunder the Back-Up Servicer shall
only be responsible to perform those duties specifically imposed upon it by the
provisions hereof. Such duties generally relate to following procedures which
would permit the Back-Up Servicer to assume some or all of the Master Servicer's
rights and obligations hereunder with reasonable dispatch, following notice.
The Back-Up Servicer, prior to assuming any of the Master Servicer's
duties hereunder may not resign hereunder unless it arranges for a successor
Back-Up Servicer reasonably acceptable to each Rating Agency, the Master
Servicer and the Depositor with not less than 60 days' notice delivered to the
Master Servicer and the Depositor. Prior to its becoming Successor Servicer,
the Back-Up Servicer shall have only those duties and obligations imposed by it
under this Agreement, and shall have no obligations or duties under any
agreement to which it is not a party, including but not limited to the various
agreements named herein. In its capacity as Successor Servicer and as Back-Up
Servicer, Bankers Trust Company of California, N.A. shall in no event be liable
for any obligations of the Unaffiliated Seller or the Master Servicer to any
party, whether hereunder or under any other agreement, which are not related to
servicing functions, including, without limitation, any repurchase obligations.
(b) The Back-Up Servicer agrees to indemnify the Trust, the Trustee,
the Depositor, each Holder of a Certificate, the Master Servicer and the
Unaffiliated Seller, and any of their respective directors, officers, employees
or agents from, and hold them harmless against, any and all costs, expenses
(including reasonable attorney fees and disbursements), losses, claims, damages
and liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, or was imposed upon the Trust, the Trustee, the
Depositor, the Holder of such Certificate, the Master Servicer, or the
Unaffiliated Seller and their respective directors, officers, employees and
agents through the Back-Up Servicer's acts or omissions in violation of this
Agreement, except to the extent such indemnified party's own bad faith, willful
misconduct or negligence contributes to the costs, expense, loss, claim, damage
or liability.
(c) The Master Servicer shall not have liability, direct or indirect,
to any party, for the acts or omissions of the Back-Up Servicer, whenever such
acts or omissions occur whenever such liability is imposed.
(d) The Back-Up Servicer shall not be obligated to maintain the Lock-
Box Account or to follow the WSC Servicing Guide, but may instead follow the
Servicing Standards set forth in clauses (ii) through (iv) of such definition.
89
<PAGE>
Section 4.24. Escrows for Taxes, Insurance, Assessments and Similar
-----------------------------------------------------
Items; Taxes and Insurance Accounts. The Master Servicer shall establish and
- -----------------------------------
maintain one or more taxes and insurance accounts ("T&I ACCOUNTS") as impound
accounts and shall deposit and retain therein all collections from the
Mortgagors for the payment of taxes, assessments, primary mortgage insurance
premiums, if applicable, or comparable items for the account of the Mortgagors
as required by the terms of the Mortgage Loans (collectively, "ESCROW AMOUNTS").
T&I Accounts shall be maintained in banking or savings institutions whose
accounts are insured by the FDIC. Withdrawals of amounts so collected from the
T&I Accounts may be made only to effect timely payment of taxes, assessments,
primary mortgage insurance policy premiums, if applicable, or comparable items,
to reimburse the Master Servicer out of related collections for any payments
made, to refund to any Mortgagors any sums as may be determined to be overages,
to pay interest to the Mortgagors on balances in the T&I Accounts or to clear
and terminate the T&I Accounts as of their respective termination days. As part
of its servicing duties, the Master Servicer shall pay to the Mortgagors
interest on funds in the T&I Accounts to the extent required by law.
Section 4.25. Master Servicer to Give Notice of Certain Events and to
-------------------------------------------------------
Deliver Certain Information. (a) The Master Servicer shall deliver to the
- ---------------------------
Trustee and the Depositor as soon as available, but in any event within 120 days
after the end of each of its fiscal years which ends December 31, a consolidated
balance sheet of its parent company, as at such last day of the fiscal year, and
a statement of income and retained earnings, for each such fiscal year, each
prepared in accordance with GAAP, in reasonable detail, and certified without
qualification by an Independent Public Accountant, who may also render other
services to the Master Servicer, or any of its Affiliates and certified by the
chief financial officer of its parent company as fairly presenting the financial
position and the results of operations of its parent company as at and for the
year ending on its date and as having been prepared in accordance with GAAP.
For as long as the Master Servicer is Wilshire Servicing Corporation, the
delivery of the financial statements of Wilshire Financial Services Group Inc.
shall be deemed to satisfy the Master Servicer's obligations hereunder.
(b) The Master Servicer shall, and shall cause any Servicer (to the
extent such Person is in any manner receiving Collections) hereunder to, deliver
to the Trustee, and the Depositor on or before March 31st of each year,
beginning with March 31, 1998 an Officer's Certificate stating, as to each
signer thereof, that (a) a review of the activities of the Master Servicer or
the Servicer, as the case may be, during the preceding calendar year and of
performance under this Agreement has been made under such officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Master Servicer or Servicer, as the case may be, has fulfilled all its
respective obligations under this Agreement throughout
90
<PAGE>
such year in all material respects, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and remedies therefor being pursued.
(c) The Master Servicer shall promptly (but in any event within three
Business Days) notify the Trustee and the Depositor upon receiving actual
knowledge of any event which constitutes an Event of Master Servicer Default.
(d) The Trustee shall promptly deliver to each Rating Agency a copy
of any report or certificate delivered to the Trustee pursuant to this Section
4.25 and notify each Rating Agency and each Holder of a Certificate upon
obtaining knowledge of any event described in Section 4.25(c).
(e) On or before the last day of June of each year, commencing in
1998, the Master Servicer, at its own expense, shall cause to be delivered to
the Trustee, the Depositor, and each Rating Agency a letter or letters of a firm
of independent, nationally recognized certified public accountants reasonably
acceptable to the Trustee stating that such firm has, with respect to the Master
Servicer's or the Servicer's overall servicing operations examined such
operations in accordance with the requirements of the Uniform Single Attestation
Program for Mortgage Bankers, and stating such firm's conclusions relating
thereto.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates; Denominations. All Certificates
-------------------------------
shall be executed by manual or facsimile signature on behalf of the Trustee by
an authorized officer and authenticated by the manual or facsimile signature of
an authorized officer. Certificates bearing the signatures of individuals who
were at the time of the execution of the Certificates the authorized officers of
the Trustee shall bind the Trustee, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the delivery of such
Certificates or did not hold such offices at the date of such Certificates. All
Certificates issued hereunder shall be dated the date of their authentication
and issued in registered form.
The Certificates shall be in the forms set forth in Exhibit B-1
through B-15 hereto.
The Class A-I, Class A-II, Class A-III, Class PO, Class M-1, Class M-2
and Class M-3 Certificates are issuable in minimum denominations of $25,000
original principal amount (or original notional amount) and integral multiples
of $1 in excess thereof (with the exception of one odd-denomination Certificate
of each
91
<PAGE>
Class). The Class IO Certificates will be issued in fully-registered form only
in minimum Percentage Interests of 20% and integral multiples thereof.
The Class B-1, Class B-2, and Class B-3 are issuable in minimum
denominations of $250,000 original principal amount (or original notional
amount) and integral multiples of $1 in excess thereof (with the exception of
one odd-denomination Certificate of each Class).
The Class R-I and R-II Certificates are issuable in minimum Percentage
Interests of 10% and integral multiples thereof.
Section 5.02. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee, as registrar, shall cause to be kept a register (the
"CERTIFICATE REGISTER") in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided.
(b) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement, and shall
represent, in the aggregate, the same Percentage Interests, as the Certificates
surrendered upon such registration of transfer or exchange.
(c) No service charge shall be made to a Holder for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(d) It is intended that the Book-Entry Certificates be registered so
as to participate in a book-entry system with the Depository, as set forth
herein. The Book-Entry Certificates shall, except as otherwise provided in the
next paragraph, be initially issued in the form of a single fully Book-Entry
Certificate of each class. Upon initial issuance, the ownership of each such
Book-Entry Certificate shall be registered in the Certificate Register in the
name of Cede & Co., or any successor thereto, as nominee for the Depository.
The Master Servicer and the Trustee are hereby authorized to execute and deliver
the Representation Letter with the Depository. With respect to Book-Entry
Certificates registered in the Certificate Register in the name of Cede & Co.,
as nominee of the Depository, the Depositor, the Unaffiliated Seller, the Master
Servicer, the Back-Up Servicer and the Trustee shall have no responsibility or
obligation to Direct or Indirect Participants or beneficial
92
<PAGE>
owners for which the Depository holds Book-Entry Certificates from time to time
as a Depository. Without limiting the immediately preceding sentence, the
Depositor, the Unaffiliated Seller, the Master Servicer, the Back-Up Servicer
and the Trustee shall have no responsibility or obligation with respect to (i)
the accuracy of the records of the Depository, Cede & Co., or any Direct or
Indirect Participant with respect to any Ownership Interest, (ii) the delivery
to any Direct or Indirect Participant or any other Person, other than a Holder
of a Trust Interest, of any notice with respect to the Book-Entry Certificates
or (iii) the payment to any Direct or Indirect Participant or any other Person,
of any amount with respect to any distribution of principal or interest on the
Book-Entry Certificates. Upon delivery by the Depository to the Trustee of
written notice to the effect that the Depository has determined to substitute a
new nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of interest by the mailing of checks or drafts to the
holder of a Book-Entry Certificate appearing as holders of Certificates at the
close of business on a Record Date, the name "Cede & Co." in this Agreement
shall refer to such new nominee of the Depository.
(e) In the event that (i) the Depository or the Master Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Book-Entry Certificates and the Master Servicer or the Depositor
is unable to locate a qualified successor or (ii) the Master Servicer at its
sole option elects to terminate the book-entry system through the Depository,
the Book-Entry Certificates shall no longer be restricted to being registered in
the Certificate Register in the name of Cede & Co. (or a successor nominee) as
nominee of the Depository. At that time, the Master Servicer may determine that
the Book-Entry Certificates shall be registered in the name of and deposited
with a successor depository operating a global book-entry system, as may be
acceptable to the Master Servicer, or such depository's agent or designee but,
if the Master Servicer does not select such alternative global book-entry
system, then the Book-Entry Certificates, upon surrender to the Trustee of the
Book-Entry Certificates registered to Cede & Co., may be registered in
definitive form and in whatever name or names holders of the Certificates
transferring Book-Entry Certificates shall designate, in accordance with the
provisions hereof; provided, however, that any such reregistration shall be at
-------- -------
the expense of the Master Servicer.
(f) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Book-Entry Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Book-Entry Certificates, as the case may be, and all notices
with respect to such Book-Entry Certificates, as the case may be, shall be made
and given, respectively, in the manner provided in the Representation Letter.
93
<PAGE>
(g) No transfer, sale or other disposition of any Unregistered
Certificate shall be made unless such transfer, sale or other disposition is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended and effective registration or qualification under applicable
state securities laws or "Blue Sky" laws, or is made in a transaction that does
not require such registration or qualification as evidenced by delivery to the
Trustee of an Opinion of Counsel. The transferee and the transferor shall in
addition deliver a transfer certificate in the form of Exhibit I hereto. None
of the Master Servicer, the Depositor, the Unaffiliated Seller, the Back-Up
Servicer or the Trustee is obligated under this Agreement to register any
Unregistered Certificate under the Securities Act of 1933, as amended or any
other securities law or to take any action not otherwise required under this
Agreement to permit the transfer of any Unregistered Certificate without such
registration or qualification or an exemption therefrom.
Upon the written request of any Certificateholder, the Master Servicer, as
soon as reasonably practicable, shall provide the requesting Certificateholder
and a prospective investor designated by such Certificateholder the information
required under Rule 144A(d)(4) promulgated under the Securities Act of 1933, as
amended.
(h) No transfer of any portion of any Certificate shall be made unless
the prospective transferee shall have provided to the Trustee and the Master
Servicer a written certification (substantially in the form of Exhibit I-3
hereto) to the effect that such transferee is not an employee benefit or other
plan subject to the prohibited transaction provisions of the ERISA or Section
4975 of 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 within the meaning of the Department of Labor regulation at 29 C.F.R.
(S)2510.3-101 or otherwise; provided, however, that so long as any Certificate
is held by the Depository, the foregoing representation shall be deemed to have
been made by each transferee of any Certificate.
(i) Subject to the restrictions set forth in this Agreement, upon
surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall execute,
authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate dated the date of authentication by the Trustee,
and evidencing, in the aggregate the same Percentage Interests. At the option
of the Holders of the Certificates, Certificates may be exchanged for other
Certificates representing in the aggregate the same Percentage Interests upon
surrender of the Certificates to be exchanged at such office. Whenever any
Certificates are so surrendered for exchange, the Trustee shall
94
<PAGE>
execute, authenticate and deliver the Certificates which the Holders of the
Certificate making the exchange is entitled to receive. No service charge shall
be made for any transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates. All
Certificates surrendered for transfer and exchange shall be cancelled by the
Trustee.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee such security or
indemnity as may reasonably be required by it to save it 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 bearing a number not contemporaneously
outstanding. Upon the issuance of any new Certificate under this Section 5.03,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and its fees
and expenses connected therewith. Any duplicate Certificate issued pursuant to
this Section 5.03 shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the mutilated,
destroyed, lost or stolen Certificate shall be found at any time.
Section 5.04. Persons Deemed Holders. Prior to due presentation of a
----------------------
Certificate for registration of transfer and subject to the provisions of
Section 5.02 hereof, the Master Servicer, the Depositor, the Unaffiliated
Seller, the Back-Up Servicer and the Trustee may treat the Person in whose name
any Certificate is registered as the owner of such Certificate for the purpose
of receiving remittances pursuant to Section 6.05 hereof and for all other
purposes whatsoever, and the Master Servicer, the Depositor, the Unaffiliated
Seller, the Back-Up Servicer, and the Trustee shall not be affected by notice to
the contrary.
Section 5.05. Limitation on Transfer of Residual Certificates. No
-----------------------------------------------
sale or other transfer of record or beneficial ownership of a Residual
Certificate (whether pursuant to a purchase, a transfer resulting from a default
under a secured lending agreement or otherwise) shall be made to a Disqualified
Organization. In no event shall the Trustee accept surrender for transfer,
registration of transfer, or register the transfer, of any Residual Certificate
nor authenticate and make available any new Residual Certificate unless the
Trustee has received an affidavit from the proposed transferee in the form
attached hereto as Exhibit J. Each holder of a Residual Certificate by
95
<PAGE>
his acceptance thereof, shall be deemed for all purposes to have consented to
the provisions of this Section 5.05.
ARTICLE VI
DEPOSITS AND DISTRIBUTIONS
Section 6.01. Rights of the Holders. (a) Amounts held by the
---------------------
Trustee for future distribution to the Certificate holders, including, without
limitation, in the Collection Account, shall not be distributed except in
accordance with the terms of this Agreement.
Section 6.02. Establishment and Administration of the Collection
--------------------------------------------------
Account and Certificate Account. The Trustee shall cause to be established and
- -------------------------------
maintained at all times the Collection Account and Certificate Account on behalf
of and in the name of the Trustee for the benefit of the Certificateholders.
The Collection Account and Certificate Account shall each be an Eligible Account
initially established at the office of the Trustee, bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Trust. The Trustee, in its capacity as Trustee, shall possess all right,
title and interest in all funds on deposit from time to time in the Collection
Account and in the Certificate Account and in all proceeds thereof, and such
Accounts shall be under the sole dominion and control of the Trustee.
If, at any time, the Collection Account or the Certificate Account
ceases to be an Eligible Account, the Trustee shall within 10 Business Days
establish a new Account which shall be an Eligible Account, transfer any cash
and/or any investments to such new Account and from the date such new Account is
established such new Account shall be the "Collection Account" or the
"Certificate Account".
Section 6.03. Investment of Amounts. To the extent there are
---------------------
uninvested amounts in the Collection Account or the Certificate Account prior to
11:00 a.m. New York City time of any Business Day, the Trustee shall, at the
written direction of the Master Servicer, invest such amounts in Eligible
Investments. All such investments shall be made in the name of the Trustee.
The maturity of such investments shall be no later than the day preceding the
next Distribution Date; provided, that the funds will be available for
--------
distribution on such Distribution Date pursuant to this Agreement. The choice
of Eligible Investments shall be determined by the Master Servicer; provided,
--------
that if the Master Servicer does not notify the Trustee of any such choice, the
Trustee shall not invest such funds. The Master Servicer shall be entitled to
any income on such investments and shall be liable for any losses thereon and
shall deposit the amount of losses immediately upon realization without any
right of
96
<PAGE>
reimbursement. The Trustee shall, on the fifth Business Day of the month
following each Distribution Date, remit by wire transfer to the Master Servicer
the net investment income earned with respect to the Collection Account.
Section 6.04. Collections. (a) The Master Servicer shall remit or
-----------
cause to be remitted by wire transfer to the Collection Account, as appropriate
(i) within five Business Days after the Closing Date, the aggregate amount of
all Collections received by the Master Servicer from but excluding the Cut-Off
Date through and including the Closing Date and (ii) beginning from and
excluding the Closing Date, all Collections (other than penalty interest, late
charges, prepayment penalties and premiums, modification fees and assumption and
substitution fees and Escrow Amounts), including all payments by or on behalf of
the Mortgagors on the Mortgage Loans and all amounts with respect to the
Mortgage Loans, as collected not later than one Business Day following the
Business Day on which such amounts are received by the Lock-Box Bank (or by the
Master Servicer directly and are identified by the Master Servicer as relating
to the Mortgage Loans); provided, however, that it shall not be necessary for
-------- -------
the Master Servicer to remit Collections on any Business Day when the aggregate
amount in the Master Servicer's possession from the Collections prior to such
Business Day is less than $1,000.
(b) The Master Servicer shall provide the Lock-box Bank with
instructions to transfer by wire transfer in immediately available funds all
amounts on deposit in the Lock-box Account which constitute Collections to the
Collection Account on each Business Day during the term of this Agreement.
(c) On each Determination Date, the Master Servicer shall determine
the Available Distribution Amount.
(d) On each Master Servicer Remittance Date, the Master Servicer shall
direct the Trustee to remit to the Master Servicer the aggregate Master
Servicing Fees, and to pay to the Trustee the Trustee's Fee, in each case from
amounts then on deposit in the Collection Account, and to deposit the Available
Distribution Amount to the Certificate Account.
Section 6.05. Flow of Funds. (a) On each Distribution Date the
-------------
Trustee shall distribute from the Certificate Account the Available Distribution
Amount in the following order of priority as follows:
(i) concurrently, (i) to the Class IO Certificates, the Class IO
Interest Distribution Amount for such Distribution Date and any portion of
any Class IO Interest Distribution Amount remaining unpaid from any
preceding Distribution Date and (ii) to the Class A Certificates, the
related Class A Interest Distribution Amount for such Distribution Date and
any portion of the related Class A
97
<PAGE>
Interest Distribution Amount remaining unpaid from any preceding
Distribution Date;
(ii) concurrently, to the holders of the Class PO Certificates and
Class A Certificates, in reduction of their Certificate Principal Balances,
until the Certificate Principal Balances thereof have been reduced to zero:
(A) the Class PO Principal Distribution Amount for such Distribution Date
and any portion of the Class PO Principal Distribution Amount remaining
unpaid from any preceding Distribution Date, and (B) the related Class A
Principal Distribution Amounts for such Distribution Date, respectively;
provided that any shortfall in amounts due pursuant to this Section
6.05(a)(ii) will be allocated (X) to the Class PO Certificates in an amount
equal to the Class PO Principal Percentage of the amount of the shortfall
attributable to payments due but not received on the Class PO Mortgage
Loans, and (Y) otherwise, among the Class A Certificates applied pro rata
in proportion to the Certificate Principal Balance of each such Class
immediately preceding such Distribution Date;
(iii) to the holders of the Class M-1 Certificates, the Class M-1
Interest Distribution Amount for such Distribution Date and any portion of
the Class M-1 Interest Distribution Amount remaining unpaid from any
preceding Distribution Date;
(iv) to the holders of the Class M-1 Certificates, the portion of the
Subordinate Principal Distribution Amount for such Distribution Date
allocated thereto pursuant to Section 6.05(b);
(v) to the holders of the Class M-2 Certificates, the Class M-2
Interest Distribution Amount for such Distribution Date and any portion of
the Class M-2 Interest Distribution Amount remaining unpaid from any
preceding Distribution Date;
(vi) to the holders of the Class M-2 Certificates, the portion of the
Subordinate Principal Distribution Amount for such Distribution Date
allocated thereto pursuant to Section 6.05(b);
(vii) to the holders of the Class M-3 Certificates, the Class M-3
Interest Distribution Amount for such Distribution Date and any portion of
the Class M-3 Interest Distribution Amount remaining unpaid from any
preceding Distribution Date;
(viii) to the holders of the Class M-3 Certificates, the portion of
the Subordinate Principal Distribution Amount for such Distribution Date
allocated thereto pursuant to Section 6.05(b);
98
<PAGE>
(ix) to the holders of the Class B-1 Certificates, the Class B-1 Interest
Distribution Amount for such Distribution Date and any portion of the Class
B-1 Interest Distribution Amount remaining unpaid from any preceding
Distribution Date;
(x) to the holders of the Class B-1 Certificates, the portion of the
Subordinate Principal Distribution Amount for such Distribution Date
allocated thereto pursuant to Section 6.05(b);
(xi) to the holders of the Class B-2 Certificates, the Class B-2
Interest Distribution Amount for such Distribution Date and any portion of
the Class B-2 Interest Distribution Amount remaining unpaid from any
preceding Distribution Date;
(xii) to the holders of the Class B-2 Certificates, the portion of the
Subordinate Principal Distribution Amount for such Distribution Date
allocated thereto pursuant to Section 6.05(b);
(xiii) to the holders of the Class B-3 Certificates, the Class B-3
Interest Distribution Amount for such Distribution Date and any portion of
the Class B-3 Interest Distribution Amount remaining unpaid from any
preceding Distribution Date;
(xiv) to the holders of the Class B-3 Certificates, the portion of the
Subordinate Principal Distribution Amount for such Distribution Date
allocated thereto pursuant to Section 6.05(b);
(xv) to the holders of any Class of Certificates to which Realized
Losses will be allocated on such Distribution Date in accordance with
Section 6.07 (after distribution of the amounts set forth in clauses (i)
through (xiv) above), any portion of the Available Distribution Amount on
such Distribution Date remaining after distribution of the amounts set
forth in clauses (i) through (xiv) above, but only to the extent of the
amount of Realized Losses allocated on such Distribution Date (with such
amount to be allocated to any such Class of Certificates on a pro rata
basis in accordance with the amount of Realized Losses allocated to each
such Class on such Distribution Date); and
(xvi) to the holders of the Class R-I Certificates, the balance
remaining.
(b) The Subordinate Principal Distribution Amount will be allocated to the
Subordinate Certificates on a pro rata basis in accordance with their respective
Certificate Principal Balances and; provided, however, that if, on any
Distribution Date, the Credit Support for any Class of Subordinate Certificates
is less
99
<PAGE>
than the Initial Credit Support for such Class, (i) the amount set forth in
clause (ii) and (iv) of the definition of Subordinate Principal Distribution
Amount will be allocated among the Class of Subordinate Certificates with the
highest payment priority and those Classes of Subordinate Certificates with
respect to which the Credit Support is at least equal to the Initial Credit
Support, pro rata based on the respective Certificate Principal Balances
thereof, and (ii) the remainder of the Subordinate Principal Distribution Amount
will be allocated to the Subordinate Certificates on a pro rata basis in
accordance with their respective Certificate Principal Balances.
Section 6.06. Disbursement of Funds. All distributions shall be made
---------------------
pursuant to Section 6.05 by wire transfer of immediately available funds to the
account of the Person entitled thereto at a bank or other entity having
appropriate facilities therefor if such Person shall have so notified the
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date; provided that, a Certificateholder
--------
shall only be entitled to receive distributions by wire transfer if such
Certificateholder is the registered Holder of Certificates having an initial
aggregate principal amount equal to or in excess of $5,000,000 or a Percentage
Interest equal to or in excess of 25%; and in all other cases by check mailed to
each such Certificateholder at such Holder's address appearing in the
Certificate Register.
Section 6.07. Allocation of Realized Losses. On each Distribution
-----------------------------
Date, following the application of the Available Distribution Amount as
described in Section 6.05 above, and after taking into account such application,
the Realized Losses, if any, with respect to the related Prepayment Period (as
reduced by the amount, if any, set forth in Section 6.05(xv)) shall be allocated
as a reduction in the Certificate Principal Balance of the Certificates, in the
following order of priority: (1) to the Class B-3 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero; (2) to the Class
B-2 Certificates until the Certificate Principal Balance thereof has been
reduced to zero; (3) to the Class B-1 Certificates until the Certificate
Principal Balance thereof has been reduced to zero; (4) to the Class M-3
Certificates until the Certificate Principal Balance thereof has been reduced to
zero; (5) to the Class M-2 Certificates until the Certificate Principal Balance
thereof has been reduced to zero; (6) to the Class M-1 Certificates until the
Certificate Principal Balance thereof has been reduced to zero; and (7) to the
Class PO Certificates, to the extent of the Class PO Principal Percentage of the
principal portion of any Realized Loss with respect to any Class PO Mortgage
Loan and to the Class A Certificates, on a pro rata basis, the remainder of any
Realized Losses, in each case until the Certificate Principal Balances thereof
has been reduced to zero. All such allocations to a Class of Certificates shall
be on a pro rata basis in accordance with the Percentage Interest represented by
each Certificate of such Class.
100
<PAGE>
Section 6.08. Reports to Certificateholders. (a) On each
-----------------------------
Distribution Date, concurrently with the distribution to the Certificateholders,
the Trustee shall furnish to the Certificateholders, the Depositor and each
Rating Agency, a report, based solely on information provided to the Trustee by
the Master Servicer in the Master Servicer's Monthly Report, containing the
following information:
(i) the amount of the distribution with respect to each Class of
the Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any prepayments or other
unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to interest;
(iv) the Certificate Principal Balance (or Notional Amount) for
the related Class of Certificates as of such Distribution Date together
with the principal amount of the Certificates of the related Class (based
on a Certificate in the original principal amount or Notional Amount of
$1,000) then outstanding, in each case after giving effect to any payment
of principal on such Distribution Date;
(v) the Pass-Through Rate for the next Distribution Date;
(vi) the amount of any Delinquency Advances for such Distribution
Date, and the amount of any unreimbursed Delinquency Advances or
unreimbursed Servicing Advances remaining after such Distribution Date; and
(vii) the amount of any Repurchase Prices deposited into the
Collection Account.
Items (i) through (iii) above shall, with respect to the Certificates
be presented on the basis of a Certificate having an original $1,000
denomination and on an aggregate basis. Each calendar year following any year
during which the Certificates are outstanding, the Trustee shall furnish a
report to each Certificateholder of record at any time during such calendar year
as to the aggregate of amounts reported pursuant to items (i), (ii) and (iii)
above with respect to the related Certificates for such calendar year.
(b) In addition, on each Distribution Date the Trustee, based upon
information provided to it by the Master Servicer, will distribute to each
Certificateholder (which shall be DTC as long as the Certificates are in book-
entry form), the following
101
<PAGE>
information as of the close of business on the last business day of the prior
calendar month:
(i) the total number of Mortgage Loans in the Trust and the
aggregate principal balances thereof, together with the number and
aggregate principal balances of Mortgage Loans in the Trust (a) 31-60 days
delinquent, (b) 61-90 days delinquent and (c) 91 or more days delinquent;
(ii) the number and aggregate principal balance of all Mortgage
Loans in the Trust in foreclosure proceedings (and whether any such
Mortgage Loans are also included in any of the statistics described in the
foregoing clause (i));
(iii) the number and aggregate principal balance of all Mortgage
Loans in the Trust relating to "REO" properties (and whether any such
Mortgage Loans are also included in any of the statistics described in the
foregoing clause (i)); and
(iv) the book value of any "REO" property in the Trust.
(c) Annually, in January of each year, the Trustee shall furnish to
each Person which was a Certificateholder during the prior calendar year a
statement showing the aggregate interest and the aggregate principal received by
such Person with respect to the Certificates during the prior calendar year,
together with any standard federal income tax reporting form for such
information, and information furnished by the Trustee pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated thereunder to assist
the Certificateholders in computing their market discount.
(d) The Depositor and the Master Servicer, on behalf of
Certificateholders and the Trust (the "TRUST PARTIES") hereby authorize the
Trustee to include the loan level information with respect to the Mortgage Loans
contained in reports provided to the Trustee by the Master Servicer hereunder
and, if so directed by an Authorized Officer of the Master Servicer in writing
to the Trustee, the monthly report to the Certificateholders prepared by the
Trustee (the "INFORMATION") on The Bloomberg, an on-line computer based on-line
information network maintained by Bloomberg L.P. ("BLOOMBERG") or on any other
on-line computer based on-line information network or service, including Intex
Solutions ("INFORMATION NETWORK"), or in other electronic or print information
services deemed acceptable by the Master Servicer as designated in writing to
the Trustee by an Authorized Officer of the Master Servicer. The Trust Parties
agree not to commence any actions or proceedings, or otherwise assert any
claims, against the Trustee or its affiliates or any of the Trustee's or its
affiliates' respective agents, representatives, directors, officers or employees
(collectively, the "DESIGNATED
102
<PAGE>
PARTIES"), arising out of, or related to or in connection with the dissemination
and/or use of any Information by the Trustee, including, but not limited to,
claims based on allegations of inaccurate or incomplete information by the
Trustee to Bloomberg or to any Information Network or otherwise (other than in
connection with the Trustee's negligence or willful misconduct). The Trust
Parties waive their rights to assert any such claims against the Designated
Parties and fully and finally release the Designated Parties from any and all
such claims, demands, obliga tions, actions and liabilities (other than in
connection with such Designated Parties' negligence or willful misconduct). The
Trustee makes no representations or warranties, expressed or implied, of any
kind whatsoever with respect to the accuracy, adequacy, timeliness,
completeness, merchantability or fitness for any particular purpose of any
Information in any form or manner. The authorizations, covenants and
obligations of the Trust Parties under this section shall be irrevocable and
shall survive the termination of this Agreement.
Section 6.09. Presentation of Certificates. Upon receipt of
----------------------------
notice of the final Distribution Date with respect to any Class, the Trustee
will notify each affected Certificateholder that the next Distribution Date will
be the final Distribution Date. In the event that a Certificateholder fails to
deliver its Certificate(s) for cancellation on the final Distribution Date, by
its purchase of a Certificate it agrees to indemnify the Unaffiliated Seller,
the Seller, the Depositor, the Trustee, and the Trust against all claims with
respect to such Certificate(s) arising following such Distribution Date. Claims
against the Trust for payment on such Certificate shall be void unless made
within three years from the Trust termination date.
ARTICLE VII
REMEDIES
Section 7.01. Limitation on Suits. No Certificate holder shall
-------------------
have any right to institute any proceeding, judicial or otherwise, with respect
to this Agreement, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) there is a continuing Event of Master Servicer Default and such
Certificateholder has previously given written notice to the Trustee of a
continuing Event of Master Servicer Default;
(b) the Required Certificateholders shall have made written request
to the Trustee to institute proceedings in respect of such Event of Master
Servicer Default in its own name as Trustee hereunder;
103
<PAGE>
(c) such Certificateholders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee, for 30 days after its receipt of such notice,
request and offer of indemnity, has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Required
Certificateholders;
it being understood and intended that no one or more Certificate holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Agreement to affect, disturb or prejudice the rights of any
other Certificateholders, or to obtain or to seek to obtain priority or
preference over any other Certificateholders or to enforce any right under this
Agreement, except in the manner herein provided and for the ratable benefit of
all the Certificateholders as provided herein.
Section 7.02. Restoration of Rights and Remedies. If the
----------------------------------
Trustee or any Certificateholder has instituted any proceeding to enforce any
right or remedy under this Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Certificateholder, then and in every such case, subject to any
determination in such proceeding, the Unaffiliated Seller, the Trustee and the
Certificateholders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee, and
the Certificateholders shall continue as though no such proceeding had been
instituted.
Section 7.03. Rights and Remedies Cumulative. Except as
------------------------------
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates in Section 5.04, no right or remedy
herein conferred upon or reserved to the Trustee or to the Certificateholders is
intended to be exclusive of any other right or remedy and every right and remedy
shall, to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 7.04. Delay or Omission Not Waiver. No delay or
----------------------------
omission of the Trustee or of any Certificateholder to exercise any right or
remedy accruing upon any Event of Master Servicer Default shall impair any such
right or remedy or constitute a waiver of any such Event of Master Servicer
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Certificateholders may
104
<PAGE>
be exercised from time to time, and as often as may be deemed expedient, as
permitted under the terms hereof, by the Trustee or by the Certificateholders,
as the case may be.
Section 7.05. Control by Certificateholders. (a) Subject to
-----------------------------
Section 7.06 hereof, the Required Certificateholders shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided, that (i) such direction shall not be in conflict with any
--------
rule of law or with this Agreement, (ii) such direction shall not involve any
action for which the Trustee reasonably believes it may not obtain compensation
for hereunder or, if the Trustee determines that such compensation is not
available, such Certificateholders have not offered the Trustee reasonable
indemnity for the cost of such actions, and (iii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
(b) Prior to the occurrence of an Event of Master Servicer Default
hereunder and after the curing or waiver of all Events of Default which may have
occurred, the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Required
Certificateholders; 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 examination shall be paid by the Master Servicer if an
Event of Master Servicer Default shall have occurred and be continuing, and
otherwise by the Certificateholders requesting the investigation.
Section 7.06. Waiver of Past Defaults. The Required
-----------------------
Certificateholders may on behalf of the Certificateholders of all the
Certificates waive any past default hereunder and its consequences.
Upon any such waiver, such default shall cease to exist, and any Event
of Master Servicer Default arising therefrom shall be deemed to have been cured,
for every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 7.07. Undertaking for Costs. All parties to this
---------------------
Agreement agree, and each Certificateholder by the acceptance of a Certificate
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the
105
<PAGE>
enforcement of any right or remedy under this Agreement, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and disbursements, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 7.07 shall not apply to any suit instituted by the Unaffiliated Seller,
by the Depositor, by the Trustee, by any Certificateholder or group of
Certificateholders holding in the aggregate more than 10% of the Voting Rights
of the outstanding Certificates, or to any suit instituted by any
Certificateholder for the enforcement of the payment of any principal of or
interest on any Certificate.
Section 7.08. Waiver of Stay or Extension Laws. The
--------------------------------
Unaffiliated Seller covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Unaffiliated Seller (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VIII
LIMITATION ON LIABILITY; INDEMNITIES
Section 8.01. Liabilities of Mortgagors. No obligation or
-------------------------
liability of any Mortgagor under any of the Mortgage Loans is intended to be
assumed by the Unaffiliated Seller, the Depositor, the Master Servicer, the
Trust, the Trustee, the Back-Up Servicer, the Holder of any Certificate under or
as a result of this Agreement and the transactions contemplated hereby and, to
the maximum extent permitted and valid under mandatory provisions of law, the
Unaffiliated Seller, the Master Servicer, the Back-Up Servicer, the Trustee and
the Holders of each Trust Interest expressly disclaim such assumption.
Section 8.02. Liability of the Unaffiliated Seller, Back-Up
---------------------------------------------
Servicer, Depositor and the Master Servicer. (a) The Back-Up Servicer, the
- -------------------------------------------
Depositor and the Master Servicer shall each be liable in accordance herewith
only to the extent of the obligations specifically imposed by this Agreement.
106
<PAGE>
(b) None of the Depositor, the Master Servicer, the Back-Up Servicer,
nor any of the directors, officers, employees or agents of the Depositor or the
Master Servicer, shall be under any liability to each other, the Trust, or the
Holder of any Trust Interest for any action taken, or for refraining from the
taking of any action, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Master
-------- -------
Servicer, or any such Person against any breach of warranties or representations
made herein, or against any specific liability imposed on each such party
pursuant to this Agreement or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations or
duties hereunder. The Master Servicer, the Back-Up Servicer, and any director,
officer, employee or agent of the Back-Up Servicer or of the Master Servicer may
rely in good faith on any document of any kind which, prima facie, is properly
----- -----
executed and submitted by any appropriate Person respecting any matters arising
hereunder.
(c) The Unaffiliated Seller shall be generally liable for, and shall
pay, any and all obligations of the Trust, to the extent that the payment of any
such obligations is not the responsibility of any other Person.
Section 8.03. Relationship of Master Servicer. The relationship of
-------------------------------
the Master Servicer (and of any Successor Servicer under this Agreement) to the
Trustee, the Depositor and the Back-Up Servicer under this Agreement is intended
by the parties hereto to be that of an independent contractor and not of a joint
venturer, partner or agent of the Trustee, the Depositor or the Back-Up
Servicer.
Section 8.04. Indemnities of the Master Servicer. (a) The
----------------------------------
Master Servicer agrees to indemnify the Trust, the Trustee, the Depositor, each
Holder of a Certificate, the Back-Up Servicer and the Unaffiliated Seller, and
any of their respective directors, officers, employees or agents from, and hold
them harmless against, any and all costs, expenses (including reasonable
attorney fees and disbursements), losses, claims, damages and liabilities to the
extent that such cost, expense, loss, claim, damage or liability arose out of,
or was imposed upon the Trust, or with respect to any taxes imposed on the
Trust, the Trustee, the Depositor, the Holder of such Certificate, the Back-Up
Servicer, or the Unaffiliated Seller and their respective directors, officers,
employees and agents through the Master Servicer's acts or omissions in
violation of this Agreement (other than with respect to recourse on the Mortgage
Loans and subject to the servicing standard set forth in Section 4.01), except
to the extent such indemnified party's own bad faith, willful misconduct or
negligence contributes to the costs, expense, loss, claim, damage or liability.
107
<PAGE>
(b) The Master Servicer also agrees to indemnify the Trustee, its
directors, officers, employees or agents from, and hold it harmless against, any
and all losses, liabilities, damages, claims, expenses (including attorneys fees
and disbursements), fines or penalties, or judgments arising out of or in
connection with the performance by the Trustee of its duties hereunder, or the
issuance of the Certificates except to the extent such indemnified party's own
bad faith, willful misconduct or negligence contributes to the loss, liability,
damage, claim or expense.
(c) This Section 8.04 shall survive the termination of this
Agreement, the resignation or removal of WSC as Master Servicer, and the
resignation or removal of the Trustee, with respect to the acts or omissions of
WSC while it acted as Master Servicer.
(d) This indemnification provision shall apply to and bind each
Successor Servicer (including, without limitation, the Back-Up Servicer) with
respect to its acts and omissions during the period it shall act as Master
Servicer.
ARTICLE IX
THE TRUSTEE
Section 9.01. Certain Duties. (a) Except during the occurrence
--------------
and continuance of an Event of Master Servicer Default, the Trustee undertakes
to perform such duties and only such duties as are specifically set forth in
this Agreement, and no implied covenants or obligations shall be read into this
Agreement against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement; but in the case of
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Agreement.
(c) In case an Event of Master Servicer Default of which a
Responsible Officer of the Trustee has actual knowledge has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs; provided, however, that no provision
-------- -------
in this Agreement shall be construed to limit the obligations of the Trustee to
provide notices under Section 9.02.
108
<PAGE>
(d) No provision of this Agreement shall be construed to require the
Trustee to exercise any of its duties under this Agreement in any case in which
the Trustee has not been offered reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in the exercise of
such duty.
(e) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
------
(i) this Section shall not be construed to limit the effect of
Section 9.01(a) and (b);
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
written direction of the Required Certificateholders or other applicable
percentage of Certificateholders 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
(iv) 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.
(f) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 9.01.
(g) The Trustee shall have no liability in connection with activities
of the Master Servicer or compliance of the Master Servicer or the Unaffiliated
Seller with statutory or regulatory requirements related to the Trust Fund. The
Trustee makes no representations or warranties with respect to the Trust Fund or
the validity or sufficiency of any assignment of the Mortgage Loans to the
Unaffiliated Seller or to the Trustee. Notwithstanding anything in this
Agreement to the contrary, the Trustee shall have no duty or obligation to
supervise, verify or monitor the performance of the Master Servicer nor
recompute, recalculate or verify any information provided to it by the Master
Servicer.
109
<PAGE>
(h) For all purposes under this Agreement, the Trustee shall not be
deemed to have notice of any Event of Master Servicer Default hereof unless a
Responsible Officer has actual knowledge thereof or unless written notice of
such an Event of Master Servicer Default is received by the Trustee at the
Corporate Trust Office, and such notice references this Agreement.
(i) The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Agreement, or to enter any
appearance or in any way defend in any suit in which it may be made defendant,
or to take any steps in the execution of the trusts hereby created or in the
enforcement of any rights and powers hereunder until it shall be indemnified to
its satisfaction against any and all costs and expenses, outlays and counsel
fees and other reasonable disbursements and against all liability, except
liability that is adjudicated in connection with any action so taken.
(j) Subject to the other provisions of this Agreement and without
limiting the generality of this Section 9.01, the Trustee shall have no duty (A)
to see to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance of any
such recording or filing or depositing or to any rerecording, refiling or
redepositing of any thereof, (B) to see to any insurance, (C) to see to the
payment or discharge of any Tax of any kind owing with respect to, assessed or
levied against, any part of the Trust from funds available in the Collection
Account, (D) to confirm or verify the contents of any reports or certificates of
the Master Servicer delivered to the Trustee pursuant to this Agreement believed
by the Trustee to be genuine and to have been signed or presented by the proper
party or parties;
(k) 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.
Section 9.02. Notice of Defaults. Within five Business Days
------------------
after the earlier of a Responsible Officer (i) receiving actual knowledge and
(ii) receiving written notice, of an Event of Master Servicer Default or of any
default hereunder, the Trustee shall transmit to the Depositor and all
Certificate holders, as their names and addresses appear in the Certificate
Register and the Rating Agency, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived.
Section 9.03. Certain Matters Affecting the Trustee.
-------------------------------------
Subject to the provisions of Section 9.01:
110
<PAGE>
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) Whenever in the performance of its duties hereunder the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate or Opinion of Counsel with respect to its
actions or its inaction;
(c) The Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in reliance thereon;
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Certificateholders pursuant to this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(e) Prior to the occurrence of an Event of Master Servicer Default,
or after the curing of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper or document,
unless requested in writing so to do by the Required Certificateholders;
provided, however, that if the payment within a reasonable time to the Trustee
- -------- -------
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Master Servicer or, if paid by the Trustee,
shall be reimbursed by the Master Servicer upon demand; and
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian (which may be Affiliates of the Trustee) and the
Trustee shall not be liable
111
<PAGE>
for any acts or omissions of the Master Servicer hereunder or of such agents,
attorneys or custodians appointed with due care by it hereunder.
Section 9.04. Trustee Not Liable for Certificates or Mortgages.
------------------------------------------------
(a) The Trustee makes no representations as to the validity or sufficiency of
this Agreement or any Related Document, the Certificates (other than the
execution and authentication thereof) or of any Mortgage Loan. The Trustee
shall not be accountable for the use or application by the Unaffiliated Seller
of funds paid to the Unaffiliated Seller in consideration of conveyance of the
Mortgage Loans to the Trust.
(b) The Trustee shall have no responsibility or liability for or with
respect to: the validity of any security interest in any Loan Collateral; the
perfection of any such security interest (whether as of the date hereof or at
any future time) or the maintenance of or the taking of any action to maintain
such perfection; the existence or validity of any Mortgage, the validity of the
assignment of any Mortgage Loan to the Trust or of any intervening assignment;
the review of any Mortgage Loan, any Loan File or the Electronic Ledger (except
as otherwise specified herein); the completeness of any Loan File, the receipt
by it or its custodian of any Mortgage Loan or Loan File (it being understood
that the Trustee has not reviewed and does not intend to review such matters);
the performance or enforcement of any Mortgage Loan; the performance of the
Master Servicer; the compliance by the Unaffiliated Seller or the Master
Servicer with any covenant or the breach by the Unaffiliated Seller or the
Master Servicer of any warranty or representation made hereunder or in any
related document or the accuracy of any such warranty or representation; any
investment of monies in the Collection Account or any loss resulting therefrom;
the acts or omissions of the Master Servicer or the Back-Up Servicer or any
Mortgagor or originator of the related Mortgage Loans; any action of the Master
Servicer taken in the name of the Trustee; any action by the Trustee taken at
the instruction of the Master Servicer, the Unaffiliated Seller or the Required
Certificate holders. No recourse shall be had for any claim based on any
provision of this Agreement, the Certificates or any Mortgage Loan against the
Trustee in its individual capacity, and the Trustee shall not have any personal
obligation, liability or duty whatsoever to any Certificateholder, or any other
Person with respect to any such claim, and any such claim shall be asserted
solely against the Trust or any indemnitor who shall furnish indemnity as
provided herein.
Section 9.05. Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times (a) be a corporation,
112
<PAGE>
depository institution, or trust company organized and doing business under the
laws of the United States of America or any state thereof authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $100,000,000, (b) be subject to supervision or examination by
Federal or state authority and (c) have a long-term unsecured debt rating of not
less than A from each Rating Agency (or to the extent not rated by the Rating
Agency, not less than an equivalent rating from each nationally recognized
statistical rating organization that the Master Servicer requested to rate such
debt) or such other rating as may be acceptable to the Rating Agency, and the
Required Certificateholders. If such institution publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section 9.06,
the combined capital and surplus of such institution 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.
Section 9.07. Resignation or Removal of Trustee. (a) The
---------------------------------
Trustee may at any time resign and be discharged from the Trust hereby created
by giving 30 days' written notice thereof to the Master Servicer, the Back-Up
Servicer, the Depositor, the Unaffiliated Seller, each Certificateholder, and
each Rating Agency. Upon receiving such notice of resignation, the Required
Certificateholders shall promptly appoint a successor Trustee by written
instrument, a counterpart of which instrument shall be delivered to each of the
Unaffiliated Seller, each Certificateholder, the successor Trustee and the
predecessor Trustee. A copy of such instrument shall be delivered to each
Rating Agency. If no successor Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.06 and shall fail to resign after
written request therefor by the Required Certificateholders, or if at any time
the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation, or the
Required Certificateholders may remove the Trustee. If the Trustee is removed
under the authority of the immediately preceding sentence, the Required
Certificateholders shall promptly appoint a successor Trustee by written
instrument, a counterpart of which instrument shall be delivered to each of the
Unaffiliated Seller, each
113
<PAGE>
Certificateholder, the successor Trustee and the predecessor Trustee. Copies of
such instrument shall also be delivered by the Master Servicer to each Rating
Agency.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provi sions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. (a) Any successor Trustee
-----------------
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
each of the Unaffiliated Seller, the Master Servicer, each Certificateholder and
to its predecessor Trustee an instrument accepting such appointment hereunder,
and thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee. The predecessor Trustee shall deliver or cause to be delivered to
the successor Trustee or its custodian any related documents and statements held
by it or its custodian hereunder (provided, that so long as no Event of Master
--------
Servicer Default shall have occurred, the Master Servicer shall continue as
custodian of the Loan Files hereunder); and the Unaffiliated Seller, the Master
Servicer and the predecessor Trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for the full and certain
vesting and confirmation in the successor Trustee of all such rights, powers,
duties and obligations.
(b) No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such accep tance such successor Trustee shall
be eligible under the provisions of Section 9.06.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this Section 9.08, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to each Certificateholder at its address as shown in the
Certificate Register and to each Rating Agency. If the Master Servicer fails to
mail such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Unaffiliated Seller.
Section 9.09. Merger or Consolidation of Trustee. Any
----------------------------------
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation shall be eligible
--------
114
<PAGE>
under the provisions of Section 9.06, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
(a) 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 Asset may at the time be located, the Trustee shall have the power
and may execute and deliver all instruments to appoint one or more Persons to
act as a co-trustee or co-trustees, or separate trustee or separate trustees, of
all or any part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Certificateholders, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
9.06 and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 9.08.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act)
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as Successor 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 or any portion
thereof in any such jurisdiction) shall be exercised and performed singly
by such separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation or
remove any separate trustee or co-trustee.
(c) 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
115
<PAGE>
each of them. Every instrument appointing any separate trustee or co-trustee
shall refer to this Agreement and the conditions of this Article. Each separate
trustee and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of appointment,
either jointly with the 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 Master Servicer, and to
the Back-Up Servicer, the Depositor.
(d) 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 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. Tax Matters. (a) The Trustee shall prepare all
-----------
tax returns and any other information, returns or reports, if any, that need to
be filed for the Trust. The Trustee shall execute and file all such tax returns
and other information, returns or reports.
(b) Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements with respect to
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for any such withholding.
Section 9.12. Trustee's Fees and Expenses. (a) On each
---------------------------
Distribution Date, the Trustee shall be entitled to withdraw from the Collection
Account, pursuant to Section 6.04, the Trustee's Fee. The Master Servicer
covenants and agrees to pay from the Certificate Account to the Trustee and any
co-trustee from time to time, and the Trustee and any co-trustee shall be
entitled to, reasonable compensation to be withdrawn from the Collection Account
pursuant to Section 6.05, or directly (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by each of them in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee and any co-trustee. The Master Servicer will pay or
reimburse the Trustee and any co-trustee upon request, from the Collection
Account, or directly, for all reasonable expenses, disbursements and advances
incurred or made by the Trustee or any co-trustee in accordance with any
116
<PAGE>
of the provisions of this Agreement (including the reasonable compensation and
the expenses and disbursements of its counsel and of all persons not regularly
in its employ, and the expenses incurred by the Trustee or any co-trustee in
connection with the appointment of an office or agency pursuant to Section 9.10)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith.
ARTICLE X
MISCELLANEOUS
Section 10.01. Termination of Agreement. The respective
------------------------
obligations and responsibilities of the Unaffiliated Seller, the Master
Servicer, the Depositor, the Back-Up Servicer and the Trustee created hereby
(other than obligations expressly stated to survive the termination of the
Trust) shall terminate on the date (the "TRUST TERMINATION DATE") which is the
earlier to occur of:
(i) the day after the day on which the Certificates are paid in
full (including payment pursuant to Section 10.02 below); and
(ii) the date that is 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the United Kingdom, living on the date hereof; and
(iii) the August 25, 2032 Distribution Date.
Section 10.02. Optional Purchase of Trust Assets. (a) On any
---------------------------------
Distribution Date on or after the Distribution Date on which the then-
outstanding aggregate Principal Balances of the Mortgage Loans in the Trust is
less than or equal to ten percent of the aggregate Principal Balance of the
Mortgage Loans as of the Cut-Off Date, the Master Servicer, acting directly or
through one or more affiliates (other than the Wilshire Seller or the Seller,
may determine to purchase and may cause the purchase from the Trust of all (but
not fewer than all) Mortgage Loans in the Trust and all property theretofore
acquired in respect of any such Mortgage Loan by foreclosure, deed in lieu of
foreclosure, or otherwise then remaining in the Trust at a price equal to the
sum of (x) the greater of (i) 100% of the aggregate Principal Balance of the
related Mortgage Loans and related accrued interest as of the day of purchase
minus the amount actually remitted by the Master Servicer representing the
related Available Distribution Amount on the related Master Servicer Remittance
Date for the related Due Period and (ii) the fair market value of such Mortgage
Loans (disregarding accrued interest), and (y) the amount of any difference
between the related Available Distribution Amount actually remitted by the
Master Servicer on such Master Servicer Remittance Date and the
117
<PAGE>
Available Distribution Amount due on the related Master Servicer Remittance Date
(such amount, the "TERMINATION PRICE"). The right of the Holder of the Class R-
I Certificates so to exercise such optional purchase right is superior to such
right of the Master Servicer. The Master Servicer may only exercise such
optional right if the Holder of the Class R-I Certificates explicitly decline to
do so. In connection with such purchase, the Master Servicer shall remit to the
Trustee all amounts then on deposit in the Collection Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. It is intended that such purchase will be made
pursuant to a Qualified Liquidation of each REMIC.
(b) In connection with any such purchase, the Master Servicer shall
provide to the Trustee an Opinion of Counsel, at the expense of the Master
Servicer, experienced in federal income tax matters to the effect that such
purchase constitutes a Qualified Liquidation of each REMIC held by the Trust.
(c) Promptly following any such purchase, the Trustee will release the
Loan Files to the Master Servicer, or otherwise upon its order.
Section 10.03. Certain Notices upon Final Payment. The Master
----------------------------------
Servicer shall give the Trustee, each Rating Agency, each Certificateholder, the
Back-Up Servicer, the Depositor and the Unaffiliated Seller at least 30 days'
prior written notice of the date on which the Trust is expected to terminate in
accordance with Section 10.01, or the date on which the Certificates will be
optionally redeemed in accordance with Section 10.02. Not later than the fifth
Business Day in the Due Period in which the final distribution in respect to the
Certificates is payable to the Certificateholders, the Trustee shall mail to the
Holders of the Certificates a notice specifying the procedures with respect to
such final distribution. The Trustee shall give a copy of such notice to each
Rating Agency at the time such notice is given to Certificateholders. Following
the final distribution thereon, the Certificates shall become void, no longer
outstanding and no longer evidence any right or interest in the Mortgage Loans
or the Loan Files or any proceeds of the foregoing.
Section 10.04. Beneficiaries. This Agreement will inure to the
-------------
benefit of and be binding upon the parties hereto, the Holders of the
Certificates, and their respective successors and permitted assigns. No other
Person will have any right or obligation hereunder.
Section 10.05. Amendment. (a) This Agreement may be amended
---------
from time to time by the Unaffiliated Seller, the Back-Up Servicer, the
Depositor, the Master Servicer and the Trustee, without the consent of any of
the Holders of the Certificates, (i) to cure any ambiguity or defect of, to
correct or supplement any provisions herein which may be inconsistent with any
other
118
<PAGE>
provisions herein or to add any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; (ii) upon receipt of an Opinion of Counsel
experienced in federal income tax matters to the effect that no entity-level tax
will be imposed on the Trust or upon the transferor of a Residual Certificate as
a result of the ownership of any Residual Certificate by an Disqualified
Organization, removing the restriction on transfer set forth in Section 5.05
hereof or (iii) complying with the requirements of the Code and the regulations
proposed or promulgated thereunder; provided, however, that such action shall
-------- -------
not, as evidenced by an Opinion of Counsel delivered to the Trustee, adversely
affect in any material respect the interests of any Holder or cause an Adverse
REMIC Event.
(b) This Agreement may also be amended from time to time by the
Unaffiliated Seller, the Master Servicer, the Back-Up Servicer, the Depositor
and the Trustee, with the consent of Required Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of the Certificates; provided, however, that no such amendment shall
-------- -------
(a) reduce in any manner the amount of, or delay the timing of, collections of
payments on the Mortgage Loans or distributions which are required to be made on
any Certificate then outstanding, (b) reduce the percentage required to consent
to any such amendment, (c) cause an Adverse REMIC Event or (d) modify this
Section 10.05(b) without the consent of the Holders of all of the Holders of the
Certificates. The Master Servicer may set a record date for purposes of
determining the holders entitled to give a written consent or waive compliance
as authorized or permitted by this Section 10.05(b). Such record date shall not
be more than 30 days prior to the first solicitation to such consent or waiver.
(c) Promptly after the execution of any amendment or consent pursuant
to this Section 10.05, the Trustee shall furnish a copy of such amendment to
each Holder of a Certificate and, not later than the tenth Business Day
preceding the effectiveness of any such amendment, to each Rating Agency.
(d) The manner of obtaining consents and of evidencing the
authorization of the execution thereof by Holders of the Certificates be subject
to such reasonable requirements as the Trustee may prescribe.
(e) The Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Trustee's own rights, duties or immunities
under this Agreement or otherwise.
(f) In connection with any amendment pursuant to this Section 10.05,
the Trustee shall be entitled to receive an Opinion of Counsel to the effect
that such amendment is autho rized or permitted by the Agreement.
119
<PAGE>
Section 10.06. Notices. (a) All communications and notices to the
-------
parties hereto shall be in writing and delivered as follows:
If to the Unaffiliated
Seller at: Wilshire Mortgage
Funding Company V, Inc.
1705 S.W. Taylor Street
Portland, Oregon 97205
Attn: Lawrence Mendelsohn
Telephone: (503) 223-5600
Telecopier: (503) 223-8799
with a copy to the Master Servicer.
If to the Master Servicer, at: Wilshire Servicing Corporation
1776 S.W. Madison Street
Portland, Oregon 97205
Attn: Andrew Wiederhorn
Telephone: (503) 223-5600
Telecopier: (503) 223-8799
with copies to
Chris DiAngelo
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10109
Telephone: (212) 259-6718
Telecopier: (212) 259-6719
If to the Trustee, at: Bankers Trust Company of California, N.A.
3 Park Plaza
16th Floor
Irvine, CA 92614
Attn: Wilshire Funding Corporation
Mortgage-Backed Certificates,
Series 1997-WFC1
Telephone: (714) 253-7575
Telecopier: (714) 253-7577
If to the Depositor: Credit Suisse First Boston Mortgage
Securities Corp.
11 Madison Avenue
New York, New York 10010
Attn: Vice President
Mortgage Products Group
120
<PAGE>
If to the Rating
Agencies: Moody's Investors Service
99 Church Street
New York, New York 10007
Attn: Wilshire Funding 1997-WFC1
Telephone: (212) 553-0300
Telecopier: (212) 553-0881
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, IL 60603
Attn: MBS Monitoring Group
Telephone: (312) 368-3100
Telecopier: (312) 263-2852
Fitch Investors Service, L.P.
One State Street Plaza
New York, NY 10004
Telephone: (212) 908-0500
Telecopier: (212) 480-4438
or at such other address as the party may designate by notice to the other
parties hereto, which shall be effective when received.
(b) All communications and notices to Certificateholders given
pursuant hereto shall be in writing and mailed first class mail, postage prepaid
at the address shown above, or, in the case of the Certificateholders, at the
address shown in the Certificate Register. Such notices shall be deemed given
when mailed.
Section 10.07. Merger and Integration. Except as specifically stated
----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section 10.08. Headings. The headings herein are for purposes of
--------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 10.09. Certificates Nonassessable and Fully Paid. The
-----------------------------------------
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and, upon authentication
thereof by the Trustee, each Certificate shall be deemed fully paid.
Section 10.10. Severability of Provisions. If any one or more of the
--------------------------
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement, and shall in no way affect the validity or enforceability of the
other provisions
121
<PAGE>
of this Agreement, the rights of the Certificateholders or the rights of the
Trustee.
Section 10.11. No Proceedings. The Master Servicer, the Depositor and
--------------
the Unaffiliated Seller each hereby agrees that it will not, directly or
indirectly institute, or cause to be instituted, against the Unaffiliated Seller
or the Trust any proceeding of the type referred to in Section 7.01(c) so long
as there shall not have elapsed one year plus one day since the Trust
Termination Date.
Section 10.12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
------------------------------------------------------
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
- -----
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE UNAFFILIATED SELLER, THE MASTER SERVICER, THE BACK-UP
SERVICER, THE DEPOSITOR AND THE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON RECEIPT THEREOF. THE UNAFFILIATED SELLER, THE MASTER SERVICER
AND THE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS,
--------------------
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE UNAFFILIATED
SELLER, THE MASTER SERVICER AND THE TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY SUCH PERSON TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE UNAFFILIATED SELLER, THE MASTER SERVICER, THE BACK-UP
SERVICER, THE DEPOSITOR AND THE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
Section 10.13. Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be an original, but all of which together shall
constitute one and the same instrument.
Section 10.14. Tax Matters. (a) The Trustee shall prepare all tax
-----------
returns and any other information, returns or reports, if any, that need to be
filed for the Trust including, without limitation, those necessary to meet the
requirements of Sections 6050H, 6050J and 6050P of the Code. The Trustee shall
execute and file all such tax returns and other information, returns or reports.
122
<PAGE>
(b) The Master Servicer shall take all action reasonably necessary to
assure compliance with the provisions of the Code relating to (i) certain
withholding requirements applicable to non-U.S. Person taxpayers; (ii) backup
withholding requirements and (iii) certain taxpayer certification requirements
relating to clauses (i) and (ii) above.
Section 10.15. REMIC. The Master Servicer and the Trustee covenant
-----
and agree for the benefit of the Holders (i) to take no action which would
result in the termination of REMIC status for either REMIC, (ii) not to engage
in any "Prohibited Transaction", as such term is defined in Section 860F(a)(2)
of the Code and (iii) not to engage in any other action which may result in the
imposition of any other taxes under the Code.
Section 10.16. REMIC Status; Taxes. (a) The Tax Matters Person
-------------------
shall prepare and file or cause to be filed with the Internal Revenue Service
Federal tax or information returns with respect to each REMIC and the
Certificates containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations, and shall
furnish to Holders such statements or information at the times and in such
manner as may be required thereby. For this purpose, the Tax Matters Person
may, but need not, rely on any proposed regulations of the United States
Department of the Treasury. The Tax Matters Person shall indicate the election
to treat each REMIC as a REMIC (which election shall apply to the taxable period
ending December 31, 1997 and each calendar year thereafter) in such manner as
the Code or applicable Treasury regulations may prescribe. The Trustee, as Tax
Matters Person appointed pursuant to Section 10.18 hereof shall sign all tax
information returns filed pursuant to this Section 10.16. The Tax Matters
Person shall provide information necessary for the computation of tax imposed on
the transfer of a Residual Certificate to a Disqualified Organization, or an
agent of a Disqualified Organization, or a pass-through entity in which a
Disqualified Organization is the record holder of an interest.
(b) The Tax Matters Person shall timely file all reports required to
be filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Certificateholders, such as the Internal Revenue Service's Form 1066
and Schedule Q and the form required under Section 6050K of the Code, if
applicable to REMICs. Furthermore, the Tax Matters Person shall report to
Holders, if required, with respect to the allocation of expenses pursuant to
Section 212 of the Code in accordance with the specific instructions to the Tax
Matters Person by the Seller with respect to such allocation of expenses. The
Tax Matters Person shall collect any forms or reports from the Holders
determined by the Seller to be required under applicable federal, state and
local tax laws.
123
<PAGE>
(c) The Tax Matters Person shall provide to the Internal Revenue
Service and to persons described in Section 860E(e)(3) and (6) of the Code the
information described in Treasury Regulation Section 1.860D-1(b)(5)(ii), or any
successor regulation thereto. Such information will be provided in the manner
described in Treasury Regulation Section 1.860E-2(a)(5), or any successor
regulation thereto.
(d) The Seller and the Depositor covenant and agree to within ten
Business Days after the Startup Day provide to the Trustee any information
necessary to enable the Trustee to meet its obligations under subsections (b)
and (c) above.
(e) The Trustee, the Depositor, the Unaffiliated Seller and the Master
Servicer each covenants and agrees for the benefit of the Holders (i) to take no
action or fail to take any action, which would, if taken or not taken, as the
case may be, result in the termination of "REMIC" status for either REMIC, (ii)
not to engage in any "prohibited transaction", as such term is defined in
Section 860F(a)(2) of the Code and (iii) not to engage in any other action which
may result in the imposition on the Trust of any other taxes under the Code,
including, without limitation, for purposes of this paragraph any alteration,
modification, amendment, extension, waiver or forbearance with respect to any
Mortgage Loan.
(f) The Trust shall, for federal income tax purposes, maintain books
on a calendar year basis and report income on an accrual basis.
(g) No Eligible Investment shall be sold prior to its stated maturity
(unless sold pursuant to a plan of liquidation in accordance with Section 10.02
hereof).
(h) Neither the Seller nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the Trustee,
the Seller may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received an opinion of counsel experienced
in federal income tax matters to the effect that such transaction does not
result in a tax imposed on the Trustee or cause a termination of REMIC status
for either REMIC; provided, however, that such transaction is otherwise
-------- -------
permitted under this Agreement.
Section 10.17. Additional Limitation on Action and Imposition of Tax.
-----------------------------------------------------
(a) Except as otherwise provided in this Agreement, the Trustee shall not,
without having obtained an opinion of counsel experienced in federal income tax
matters to the effect that such transaction does not result in a tax imposed on
the Trust or cause a termination of REMIC status for either REMIC,
124
<PAGE>
(i) sell any assets in the Trust Estate, (ii) accept any contribution of assets
after the Startup Day or (iii) agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited transactions"
as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" as defined in Section 860G(c) of the Code, on any
contribution to either REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, such tax shall be paid by (i) the
Trustee, if such tax arises out of or results from the Trustee's negligence or
willful misconduct, (ii) the Master Servicer, if such tax arises out of or
results from a breach by the Master Servicer of any of its obligations under
this Agreement, or otherwise (iii) the Certificateholders of the Residual
Certificates in proportion to their Percentage Interests. To the extent such
tax is chargeable against the Certificateholders of the Residual Certificates,
notwithstanding anything to the contrary contained herein, the Trustee is hereby
authorized to retain from amounts otherwise distributable to the Holders of the
Residual Certificates on any Payment Date sufficient funds for the payment of
such tax.
Section 10.18. Appointment of Tax Matters Person. A Tax Matters
---------------------------------
Person will be appointed by the Certificateholders of the Residual Certificates
for all purposes of the Code and such Tax Matters Person will perform, or cause
to be performed, such duties and take, or cause to be taken, such actions, as
are required to be performed or taken by the Tax Matters Person under the Code.
The Trustee hereby agrees to act as the Tax Matters Person (or as the attorney-
in-fact and agent for any Person that is the Tax Matters Person) (and the
Trustee is hereby appointed by the Certificateholders as the Tax Matters Person
and each Certificateholder consents to such appointment) for each REMIC held by
the Trust.
125
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pooling and
Servicing Agreement to be executed by their respective officers thereunto duly
authorized on the day and year first above written.
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.,
as Depositor
By _________________________
Name:
Title:
WILSHIRE MORTGAGE FUNDING COMPANY V, INC., as
Unaffiliated Seller
By ____________________________
Name: Lawrence Mendelsohn
Title: President
WILSHIRE SERVICING CORPORATION,
as Master Servicer
By ____________________________
Name: Lawrence Mendelsohn
Title: President
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee and as Back-Up Servicer
By ____________________
Name:
Title:
126
