AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1996
REGISTRATION NO. 333-7569
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3416059
(State of incorporation) (I.R.S. Employer Identification No.)
250 Vesey Street
World Financial Center
North Tower - 10th Floor
New York, New York 10281-1310
(Address of principal executive offices)
-------------------------------
Richard M. Fuscone
Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
World Financial Center
North Tower - 10th Floor
New York, New York 10281-1310
(Name and address of agent for service)
------------------------------
With a copy to:
Renwick D. Martin
Brown & Wood LLP
One World Trade Center
New York, New York 10048
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time on or after the effective date of the registration statement,
as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. /x/
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offer. / / _______________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION> Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to Be Registered Registered(1) Per Unit(2) Offering Price(2) Fee
<S> <C> <C> <C> <C>
Asset Backed Securities . . . . . . . . $1,000,000,000 100% $1,000,000,000 $344,828(3)
</TABLE>
(1) This Registration Statement relates to the initial offering from time
to time of $1,000,000,000 aggregate principal amount of Asset Backed Securities
and to any resales thereof in market making transactions by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, an affiliate of the Registrant, to the
extent required.
(2) Estimated solely for purposes of calculating the registration fee on the
basis of the proposed maximum aggregate offering price.
(3) Of this amount, $435 was previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PURSUANT TO RULE 429 OF THE SECURITIES AND EXCHANGE COMMISSION'S RULES
AND REGULATIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE PROSPECTUS
AND PROSPECTUS SUPPLEMENT CONTAINED IN THIS REGISTRATION STATEMENT ALSO
RELATE TO THE REGISTRANT'S REGISTRATION STATEMENT ON FORM S-11 (REGISTRATION
NO. 33-74332) AND THIS REGISTRATION STATEMENT CONSTITUTES A POST-EFFECTIVE
AMENDMENT THERETO.
<PAGE>
EXPLANATORY NOTE
This Registration Statement includes a basic prospectus and an
illustrative form of prospectus supplement for use in an offering of Asset
Backed Securities. The description in the form of prospectus supplement
of credit enhancement mechanisms or other features is intended merely as an
illustration of the principal features of a possible series of Asset Backed
Securities; the features applicable to any actual series of Asset Backed
Securities may include some, all or none of the features so illustrated,
and may include any features specified in the prospectus.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER __, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated _______, 199_)
$______________
Merrill Lynch Mortgage Investors Inc.
Depositor
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES _______
The Series 199_-_ Mortgage Pass-Through Certificates (the
"Certificates") will consist of ____ classes of Certificates, designated as
the Class ( ) Certificates, Class ( ) Certificates and Class ( ) Certificates
(the Class ( ) Certificates, collectively, the "Subordinate Certificates").
As further described herein, losses on the Mortgage Loans will be allocated
to the Subordinate Certificates prior to allocation to the Class ( )
Certificates. See "Description of the Certificates -- Distributions --
Priority" herein. (For purposes of this form of Prospectus Supplement, a
reference to "Class ( ) Certificates" may include one or more classes.)
The Certificates will represent in the aggregate the entire beneficial
interest in a trust fund (the "Trust Fund") to be established by Merrill
Lynch Mortgage Investors Inc. (the "Depositor"). The Trust Fund will consist
primarily of (a pool (the "Mortgage Pool") of (conventional), (fixed rate)
(adjustable rate) mortgage loans, with terms to maturity of not more than ___
years (the "Mortgage Loans"), secured by first (and/or junior) liens on one-
to four-family residential properties,) (mortgage participations,) mortgage
pass-through certificates, mortgage-backed securities evidencing interests
therein or secured thereby (the "MBS"),) (and) (certain direct obligations
of the United States, agencies thereof or agencies created thereby (the
"Government Securities")). The Mortgage Loans were originated or acquired
by ___________ (the "Mortgage Asset Seller") and will be sold to the
Depositor on or prior to the date of initial issuance of the Certificates.
The Class ( )(, Class ( ) and Class ( )) Certificates will evidence
approximately an initial ___% undivided interest in the Trust Fund and the
Subordinate Certificates, in the aggregate, will evidence approximately an
initial ___% undivided interest in the Trust Fund. Only the Class ( )
Certificates are being offered hereby.
INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, CERTAIN CONSIDERATIONS SET
FORTH UNDER THE CAPTION "SPECIAL CONSIDERATIONS" (HEREIN AND) IN THE PROSPECTUS.
(The MBS will (consist of) (include) the following series and classes
of securities: (identify title(s) and class(es) of MBS)(, including (title(s)
and class(es) of MBS).) (The (title(s) and class(es) of MBS) are
(subordinate) (interest-only) securities.) (See "Summary--The MBS."))
(The yield to investors in the (interest-only) Certificates will be
(extremely) sensitive to the rate and timing of principal payments (including
prepayments, repurchases, defaults and liquidations) in the Mortgage Loans
which may fluctuate significantly over time. An (extremely) rapid rate of
principal payments on the Mortgage Loans could result in the failure of
investors in the interest-only Certificates to recover their initial
investments.)
------------------------
Merrill Lynch & Co.
The date of this Prospectus Supplement is _____________, 199_
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the prospectus to which it relates
shall not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
<PAGE>
The characteristics of the Mortgage Loans are more fully described herein
under "Description of the Mortgage Pool."
Distributions on the Class ( ) Certificates will be made, to the extent
of available funds, on the __th day of each (month) (__) or, if any such day
is not a business day, on the next succeeding business day, beginning in
__________ (each, a "Distribution Date"). (As more fully described herein,
distributions allocable to interest, if any, on the Class ( ) Certificates
on each Distribution Date will be based on the (applicable) (then-applicable
variable) pass-through rate (the "Pass-Through Rate") and the aggregate
(principal balance (the "Certificate Balance")) (notional balance (the
"Notional Balance")) of such class (or each component thereof) outstanding
immediately prior to such Distribution Date. (The Pass-Through Rate
applicable to the Class ( ) Certificates from time to time will equal the
(sum of __% and the Index (as defined herein) subject to certain limitations)
(weighted average of the Class ( ) Remittance Rates (as defined herein) on
the Mortgage Loans. The Pass-Through Rate for the Class ( ) Certificates on
the first Distribution Date will be _% per annum (and is expected to change
thereafter because the weighted average of the Class ( ) Remittance Rates
is expected to change for succeeding Distribution Dates.) Distributions in
respect of principal, if any, of the Class ( ) Certificates will be made as
described herein under "Description of the Certificates -- Distributions --
Priority" and "--Calculations of Principal".)
(_______________ will act as master servicer of the Mortgage Loans (the
"Master Servicer"). The obligations of the Master Servicer with respect to
the Certificates will be limited to its contractual servicing obligations and
the obligation under certain circumstances to make Advances to the
Certificateholders. See "Description of the Certificates -- Advances"
herein. (The only) obligation of the Depositor with respect to the
Certificates will be to obtain from the Mortgage Asset Seller certain
representations and warranties with respect to the Mortgage Loans and to
assign to the Trustee the obligation of the Mortgage Asset Seller to
repurchase or substitute for any Mortgage Loan as to which there exists an
uncured material breach of any such representation or warranty.)
----------------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON
THE CLASS ( ) CERTIFICATES. THE CLASS ( ) CERTIFICATES DO NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE
OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CLASS ( ) CERTIFICATES
NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY
OR INSTRUMENTALITY OR BY THE DEPOSITOR, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.)
---------------------------
An election will (not) be made to treat the Trust Fund as a "real estate
mortgage investment conduit" (a "REMIC") for federal income tax purposes.
(The Class ( ) Certificates will constitute "regular interests" in the
REMIC.) See "Certain Federal Income Tax Consequences" herein and in the
Prospectus.
ii
<PAGE>
There is currently no secondary market for the Class ( ) Certificates.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter")
currently expects to make a secondary market in the Class ( ) Certificates,
but has no obligation to do so. There can be no assurance that such a market
will develop or, if it does develop, that it will continue. See "Plan of
Distribution" herein.
The Class ( ) Certificates offered hereby will be purchased by the
Underwriter from the Depositor and will be offered by the Underwriter from
time to time to the public in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. Proceeds to the Depositor from
the sale of the Class ( ) Certificates will be $____________ plus accrued
interest from the Cut-off Date, before deducting expenses payable by the
Depositor estimated at $_____________.
The Class ( ) Certificates are offered subject to prior sale, when, as
and if accepted by the Underwriter, and subject to approval of certain legal
matters by counsel for the Underwriter and certain other conditions. It is
expected that delivery of the Class ( ) Certificates (in book-entry form) (in
registered form) will be made on or about ___________, 199_, (through the
facilities of The Depository Trust Company) (at the offices of the
Underwriter, New York, New York) against payment therefor in immediately
available funds.
--------------------
THE CLASS ( ) CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT
CONSTITUTE PART OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR
AND ARE BEING OFFERED PURSUANT TO ITS PROSPECTUS DATED _______________, 199_,
OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS
PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION
REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND PROSPECTIVE
INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN
FULL. SALES OF THE CLASS ( ) CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Summary of Prospectus Supplement S
Description of the Mortgage Pool (MBS) S
Certain yield, Prepayment and Maturity Considerations S
Description of the Certificates S
Pooling and Servicing Agreement S
Use of Proceeds S
Certain Federal Income Tax Consequences S
ERISA Considerations S
Legal Investment S
Plan of Distribution S
Legal Matters S
Rating S
iii
<PAGE>
Prospectus
Prospectus Supplement
Available Information
Incorporation of Certain Information by Reference
Summary of Prospectus
Special Considerations
Description of the Trust Funds
Use of Proceeds
Yield Considerations
The Depositor
Description of the Certificates
Description of the Agreements
Description of Credit Support
Certain Legal Aspects of Mortgage Loans
Certain Federal Income Tax Consequences
State Tax Considerations
ERISA Considerations
Legal Investment
Plan of Distribution
Legal Matters
Financial Information
Rating
Index of Principal Definitions
-----------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS ( ) CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
-----------------------
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus in connection with the
offer contained in this Prospectus Supplement and the accompanying
Prospectus, and, if given, such information or representations must not be
relied upon as having been authorized by the Issuer, the Depositor or the
Underwriter. This Prospectus Supplement and the accompanying Prospectus
shall not constitute an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.
The delivery of this Prospectus Supplement and the accompanying Prospectus
at any time does not imply that the information herein is correct as of any
time subsequent to the date hereof.
iv
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and
in the accompanying Prospectus. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus Supplement or in the
Prospectus.
Title of Certificates Mortgage Pass-Through Certificates,
Series 199_-_, (the "Certificates").
Offered Certificates Class ( ), Class ( ), Class ( ) and Class ( )
Certificates. The Class ( ) Certificates are
not offered hereby.
Depositor Merrill Lynch Mortgage Investors Inc.,
a Delaware corporation and a wholly-owned,
limited purpose subsidiary of Merrill Lynch
Mortgage Capital Inc., which is a wholly-
owned indirect subsidiary of Merrill Lynch &
Co., Inc. The Depositor is an affiliate of
the Underwriter. Neither Merrill Lynch &
Co., Inc. nor any of its affiliates,
including the Depositor and the Underwriter,
has insured or guaranteed the Certificates
or the Mortgage Loans or is otherwise
obligated in respect thereof. See "The
Depositor" in the Prospectus.
Master Servicer _______________, a ________________.
See "Pooling and Servicing Agreement --
The Master Servicer" herein.
(Sub-Servicers _______________, a ________________)
Trustee _____________, a ____________________.
Cut-off Date ____________ 1, 199_.
Closing Date ______________ 1, 199_.
Distribution Dates Distributions on the Certificates will be
made by the Trustee, to the extent of
available funds, on the __ day of each (month)
( ) or, if any such __ day is not a business
day, then on the next succeeding business day,
beginning in ________ 19__ (each, a "Distri-
bution Date"), to the holders of record as
of the close of business on the (last
business day of the month preceding
the month) of each such distribution
(each, a "Record Date").
Denominations The Class ( ) Certificates will be issuable
(on the book-entry records of DTC and its
Participants)
<PAGE>
(in registered, certificated form) in
denominations of $_______ and integral
multiples of $_____________ in excess thereof
(, with one Certificate of such class
evidencing an additional amount equal to the
remainder of the Certificate Balance thereof).
(The Mortgage Pool The Mortgage Pool will consist of
((conventional), (fixed rate) (adjustable
rate) Mortgage Loans secured by (first)
(and/or)(junior) liens on one- to four-family
residential properties (the "Mortgaged
Properties") located in __ different states,)
(mortgage participations,) mortgage pass
through certificates, mortgage-backed
securities evidencing interests therein or
secured thereby (the "MBS"),) (and)
(certain direct obligations of the United
States, agencies thereof or agencies created
thereby (the "Government Securities")).
(The Mortgage Loans will have an aggregate
principal balance as of the Cut-off Date of
$________ and individual principal balances at
origination of at least $______________ but
not more than $__________, with an average
principal balance at origination of
approximately $_______. The Mortgage Loans
will have terms to maturity from the date of
origination or modification of not more
than ____ years, and a weighted average
remaining term to maturity of approximately
_____ months as of the Cut-off Date. The
Mortgage Loans will bear interest at Mortgage
Rates of at least _____% per annum but not
more than _____% per annum, with a weighted
average Mortgage Rate of approximately
____% per annum as of the Cut-off
Date. The Mortgage Loans will be acquired by
the Depositor on or before the Closing Date.
In connection with its acquisition of the
Mortgage Loans, the Depositor will be assigned
(and will in turn assign to the Trustee for
the benefit of the holders of the
Certificates) certain rights in respect of
representations and warranties described
herein that were made by the Mortgage
Asset Seller.)
(_____ of the Mortgage Loans, representing
_____% of the Mortgage Loans by aggregate
principal balance as of the Cut-off Date,
provide for scheduled payments of principal
and/or interest ("Monthly Payments") to
be due on the _____ day of each month; the
remainder of the
S-2
<PAGE>
Mortgage Loans provide for Monthly Payments
to be due on (identify day or days) of
each month (the date in any month on which a
Monthly Payment on a Mortgage Loan is first
due, the "Due Date"). (The rate per annum at
which interest accrues on each Mortgage Loan
is subject to adjustment on specified Due
Dates (each such date, an "Interest Rate
Adjustment Date") by adding a fixed percentage
amount (a "Gross Margin") to the value of the
then-applicable Index (as described below)
subject, in the case of substantially all
of the Mortgage Loans, to limitations on
the periodic adjustment of the related
Mortgage Rate, and to maximum and minimum
lifetime Mortgage Rates, as described herein.
___ of the Mortgage Loans, representing ___%
of the Mortgage Loans by aggregate principal
balance as of the Cut-off Date, provide for
Interest Rate Adjustment Dates to occur
(monthly); the remainder of the Mortgage Loans
provide for adjustments to the Mortgage Rate
to occur quarterly, semi-annually or annually.
(Each of the Mortgage Loans provides for an
initial fixed interest rate period;)_________
of the Mortgage Loans, representing _____% of
the Mortgage Loans by aggregate principal
balance as of the Cut-off Date, have not yet
experienced their first Interest Rate
Adjustment Date. The latest initial Interest
Rate Adjustment Date for any Mortgage Loan
is scheduled to occur on ________.))
(The amount of the Monthly Payment on each
Mortgage Loan is also subject to adjustment
on specified Due Dates (each such date, a
"Payment Adjustment Date") to an amount that
would amortize the outstanding principal
balance of the Mortgage Loan over its then
remaining amortization schedule and pay
interest at the applicable Mortgage Rate,
subject, in the case of (several) Mortgage
Loans, to payment caps, which limit the
amount by which the Monthly Payment may
adjust on any Payment Adjustment Date as
described herein. _______ of the Mortgage
Loans, representing __% of the Mortgage
Loans by aggregate principal balance as of
the Cut-off Date, provide for Payment
Adjustment Dates to occur annually, while
the remainder of the Mortgage Loans provide
for
S-3
<PAGE>
adjustments of the Monthly Payment to
occur monthly, quarterly or semi-annually.)
(Only in the case of ________ Mortgage Loans,
representing ____% of the Mortgage Loans by
aggregate principal balance as of the Cut-off
Date, does a Payment Adjustment Date
immediately follow each Interest Rate
Adjustment Date. As a result, and because
the application of payment caps may limit
the amount by which the Monthly Payments may
adjust in respect of certain Mortgage Loans,
the amount of a Monthly Payment may be more
or less than the amount necessary to amortize
the remaining principal balance of the
Mortgage Loan over its then remaining
amortization schedule and pay interest
at the then-applicable Mortgage Rate.
Accordingly, Mortgage Loans may be subject
to slower amortization (if the Monthly
Payment due on a Due Date is sufficient to
pay interest accrued to such Due Date at the
then-applicable Mortgage Rate but is not
sufficient to reduce principal in accordance
with the applicable amortization schedule),
to negative amortization (if interest accrued
to a Due Date at the applicable Mortgage Rate
is greater than the entire Monthly Payment
due on such Due Date) or to accelerated
amortization (if the Monthly Payment due on
a Due Date is greater than the amount
necessary to pay interest accrued to such
Due Date at the then-applicable Mortgage
Rate and to reduce principal in accordance
with the applicable amortization schedule).)
(__ Mortgage Loans, representing ____% of
the Mortgage Loans by aggregate principal
balance as of the Cut-off Date, permit
negative amortization. Substantially all of
the Mortgage Loans that permit negative
amortization contain provisions that limit
the extent to which the amount of their
respective original principal balances may
be exceeded as a result thereof.)
(__ Mortgage Loans, representing ____% of the
Mortgage Loans by aggregate principal balance
as of the Cut-off Date, provide for monthly
payments of principal based on amortization
schedules significantly longer than the
remaining term of such Mortgage Loans,
thereby leaving substantial outstanding
principal amounts due and
S-4
<PAGE>
payable (each such payment, a "Balloon
Payment") on their respective maturity dates,
unless prepaid prior thereto.)
For a further description of the Mortgage
Loans, see "Description of the Mortgage Pool"
herein.)
(The MBS (Title and issuer of underlying securities,
amount deposited or pledged, amount
originally issued, maturity date, interest
rate, (redemption provisions), description of
other material terms.)
(The Index As of any Interest Rate Adjustment Date, the
Index used to determine the Mortgage Rate on
each Mortgage Loan will be the ____________.
See "Description of the Mortgage Pool -- The
Index" herein.)
(Conversion of Mortgage Loans Approximately __% of the Mortgage Loans
(by aggregate principal balance as of the
Cut-off Date) (the "Convertible Mortgage
Loans") provide that, at the option of the
related Mortgagors, the adjustable interest
rate on such Mortgage Loans may be converted
to a fixed interest rate, provided that
certain conditions have been satisfied. Upon
notification from a Mortgagor of such
Mortgagor's intent to convert from an
adjustable interest rate to a fixed interest
rate, and prior to the conversion of any such
Mortgage Loan, the related Warrantying Party
(as defined herein) will be obligated to
purchase the Converting Mortgage Loan (as
defined herein) at the Conversion Price (as
defined herein). (In the event of a failure
by a Subservicer to purchase a "Converting
Mortgage Loan"), the Master Servicer is
required to use its best efforts to purchase
such Converted Mortgage Loan (as defined
herein) from the Mortgage Pool at the
Conversion Price during the one-month period
following the date of conversion.) In the
event that neither the related Warrantying
Party nor the Master Servicer purchases a
Converting or Converted Mortgage Loan, the
Mortgage Pool will thereafter include both
fixed-rate and adjustable-rate Mortgage
Loans. See "Certain Yield and Prepayment
Considerations" herein.)
Class ( ) Certificates The Class ( ), Class ( ) and Class ( )
Certificates (collectively, the
"Certificates") will be issued
S-5
<PAGE>
pursuant to a Pooling and Servicing
Agreement, to be dated as of the Cut-off
Date, among the Depositor, the Master
Servicer and the Trustee (the "Pooling
and Servicing Agreement"). The Class ( )
Certificates have an initial Certificate
Balance of $_______ (the initial "Class ( )
Balance"), representing an initial interest
of approximately ___% in a trust fund (the
"Trust Fund"), which will consist primarily
of the Mortgage Pool. The Class ( )
Certificates will have an initial Certificate
Balance of $________ (the initial "Class ( )
Balance"), representing an initial interest
of approximately ____% in the Trust Fund.
(The Class ( ) Certificates have an initial
Certificate Balance of $_______ (the initial
"Class ( ) Balance"), representing an
initial interest of approximately ___% in
the Trust Fund.) (The Class ( ) Certificates
will not have a Certificate Balance.)
Distributions on the Certificates will be
made on each Distribution Date. Distributions
will be made by check or wire transfer of
immediately available funds, as provided in
the Pooling and Servicing Agreement, to the
Certificateholders of record as of the (last
business day of the month preceding the
month) of such Distribution Date (each, a
"Record Date"), except that the final
distribution on the Class ( ) Certificates
will be made only upon presentation and
surrender of such holders' Certificates at
the office or agency specified in the
Pooling and Servicing Agreement. (As more
specifically described herein, the Class ( )
Balance will be adjusted from time to time on
each Distribution Date to reflect any
additions thereto resulting from allocations
of Mortgage Loan negative amortization to the
Class ( ) Certificates and any reductions
thereof resulting from distributions of
principal of the Class ( ) Certificates. As
further described herein, interest shall
accrue on the Class ( ) Balance at a Pass-
Through Rate thereon.
Pass-Through Rates on the
Class ( ), Class ( ) and
Class ( ) Certificates (The Pass-Through Rates on the Class ( ),
Class ( ) and Class ( ) Certificates are
fixed and are set forth on the cover hereof.)
(The Pass-Through Rate on the Class ( )
Certificates will be equal to the weighted
average of the Class ( )
S-6
<PAGE>
Remittance Rates in effect from time to
time on the Mortgage Assets. The Class ( )
Remittance Rate in effect for any Mortgage
Assets as of any date of determination (is
equal to the excess of the Mortgage Rate
thereon over __% per annum) ((i) prior to
its first Interest Rate Adjustment Date is
equal to the related Mortgage Rate then in
effect minus __ basis points (the "Net
Mortgage Rate") and (ii) from and after its
first Interest Rate Adjustment Date is equal
to the related Mortgage Rate then in effect
minus the excess of the related Gross
Margin over __ basis points.)) (The
Class ( ) Certificates (or a component
thereof) will not be entitled to distributions
of interest and will not have a Pass-Through
Rate.) (Describe any other method used to
calculate the Pass-Through Rate.) (Interest
on the Certificates will be calculated on
the basis of a 360-day year consisting of
twelve 30-day months. Interest will accrue
with respect to each Distribution Date during
the one-month period beginning on the ___
day of the month preceding the month of such
Distribution Date and ending on the ___ day
of the month of such Distribution Date (each,
an "Interest Accrual Period").)
Distributions on
the Certificates The Available Distribution Amount in respect
of a Distribution Date will be distributed
in the following amounts and order of
priority:
(describe the application of Available
Distribution Amount to make distributions
of interest and principal among the
Classes of Certificates)
(Interest on the Class ( ) Certificates at
the then-applicable Pass-Through Rate will
be reduced by the Class ( ) Certificates'
allocable share (calculated as described
herein) of ((i) the aggregate amount of
negative amortization in respect of the
Mortgage Loans for their respective Due Dates
occurring during the related Due Period and
(ii)) the aggregate portion of Prepayment
Interest Shortfalls incurred during the
related Due Period that was not covered by
the application of the Master Servicer's
servicing compensation for the related Due
Period. (The amount, if any, by which
the Class ( ) Interest Distribution
Amount for any Distribution Date is
S-7
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reduced as a result of negative amortization
on the Mortgage Loans shall constitute the
"Class Negative Amortization" for such
Distribution Date in respect of the Class ( )
Certificates and shall be added to the
Class ( ) Balance on such Distribution
Date.) (The Class ( ) Notional Amount will
equal the (sum of the) Class ( ) Balance.
The Class ( ) Notional Amount does not entitle
the Class ( ) Certificates (or a component
thereof) to any distributions of principal.)
If the Available Distribution Amount for any
Distribution Date is less than the Class ( )
Interest Distribution Amount for such
Distribution Date, the shortfall will be
part of the Class ( ) Interest Distribution
Amount distributable to holders of Class ( )
Certificates on subsequent Distribution
Dates, to the extent of available funds.
The Available Distribution Amount for any
Distribution Date generally includes:
(i) scheduled payments on the Mortgage Assets
due during or prior to the related Due Period
and collected as of the related Determination
Date (to the extent not distributed on
previous Distribution Dates) and certain
unscheduled payments and other collections on
the Mortgage Assets collected during the
related Due Period, net of amounts payable
or reimbursable to the Master Servicer
therefrom; (ii) any Advances made by the
Master Servicer for the related Distribution
Date; and (iii) that portion of the Master
Servicer's servicing compensation for the
related Due Period applied to cover
Prepayment Interest Shortfalls incurred
during the related Due Period. See
"Description of the Certificates --
Distributions -- Calculations of Interest"
herein.
Advances The Master Servicer is required to make
advances ("Advances") in respect of
delinquent Monthly Payments on the Mortgage
Loans, subject to the limitations described
herein. (The Trustee will be obligated to
make any such Advance if the Master Servicer
fails in its obligation to do so, to the
extent provided in the Pooling and Servicing
Agreement.) See "Description of the
Certificates -- Advances" herein and
"Description of the Certificates --
S-8
<PAGE>
Advances in Respect of Delinquencies" in the
Prospectus.
Subordination The rights of holders of the Subordinate
Certificates to receive distributions of
amounts collected on the Mortgage Loans
will be subordinate, to the extent described
herein, to the rights of holders of the
Class ( ) Certificates. This subordination
is intended to enhance the likelihood of
receipt by the holders of the Class ( )
Certificates of the full amount of the
Class ( ) Interest Distribution Amount and
the (ultimate receipt of principal equal to
the initial Class ( ) Balance). The protection
afforded to the holders of the Class ( )
Certificates by means of the subordination,
to the extent provided herein, will be
accomplished by the application of the
Available Distribution Amount to the
Class ( ) Certificates prior to the
application thereof to the Subordinate
Certificates (and by reducing the Class ( )
Interest Distribution Amount and the Class ( )
Balance by an amount equal to the interest
portion and the principal portion,
respectively, of Realized Losses allocated
to such class). See "Description of the
Certificates -- Subordination" herein.
(The Subordinate
Certificates The Class ( ) Certificates have an initial
Certificate Balance of $____________ (the
initial "Class ( ) Balance") and the Class ( )
Certificates have an initial Certificate
Balance of $________ (the initial "Class ( )
Balance"), representing ____% and _____%,
respectively, of the Mortgage Loans by
aggregate principal balance as of the Cut-off
Date. Interest shall accrue on the Class ( )
Balance and Class ( ) Balance at a Pass-
Through Rate equal to (____% per annum) (the
weighted average of the Net Mortgage Rates
in effect from time to time on the Mortgage
Loans).
(The Class ( ) Certificates, which have no
Pass-Through Rate and initially have a
Certificate Balance of $______________ (the
initial "Class ( ) Balance"), represent the
right to receive on any Distribution Date
the balance, if any, of the Available
Distribution Amount remaining after the
payment of all interest and principal
due on the other Classes of Certificates.
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<PAGE>
Subsequent to the first Distribution Date,
the Class ( ) Balance will equal the excess,
if any, of the aggregate Stated Principal
Balance of the Mortgage Loans over the sum
of the Class ( ) Balance, Class ( ) Balance
and Class ( ) Balance.)
(The Subordinate Certificates are not offered
hereby.))
(Special Prepayment
Considerations The rate of principal payments on the
Class ( ) Certificates collectively will
depend on the rate and timing of principal
payments (including prepayments, defaults
and liquidations) on the Mortgage Loans.
As is the case with mortgage-backed
securities generally, the Class ( )
Certificates are subject to substantial
inherent cash-flow uncertainties because
the Mortgage Loans may be prepaid at any
time. Generally, when prevailing interest
rates are increasing, prepayment rates on
mortgage loans tend to decrease, resulting
in a reduced return of principal to
investors at a time when reinvestment at
such higher prevailing rates would be
desirable. Conversely, when prevailing
interest rates are declining, prepayment
rates on mortgage loans tend to increase,
resulting in a greater return of principal
to investors at a time when reinvestment
at comparable yields may not be possible.
(The multiple class structure of the
Class ( ) Certificates results in the
allocation of prepayments among certain
classes as follows (to be included as
appropriate):
(SEQUENTIALLY PAYING CLASSES: (All) classes
of the Class ( ) Certificates are subject to
various priorities for payment of principal
as described herein. Distributions on classes
having an earlier priority of payment will be
immediately affected by the prepayment speed
of the Mortgage Loans early in the life of
the Mortgage Pool. Distributions on classes
with a later priority of payment will not be
directly affected by the prepayment speed
until such time as principal is distributable
on such classes; however, the timing of
commencement of principal
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<PAGE>
distributions and the weighted average lives
of such classes will be affected by the
prepayment speed experienced both before and
after the commencement of principal
distributions on such classes.)
((SCHEDULED) CERTIFICATES: Principal
distributions on the (Scheduled) Certificates
will be payable in amounts determined based
on schedules as described herein, provided
that the prepayment speed of the Mortgage
Loans each month remains (at a constant
level of) (between approximately ___%
(SPA)(CPR) (as defined herein) and)
___% (SPA)(CPR). (However, as discussed
herein, actual principal distributions are
likely to deviate from the described amounts,
because it is highly unlikely that the actual
prepayment speed of the Mortgage Loans each
month will remain at or near ___% (SPA)(CPR).)
If the prepayment speed of the Mortgage Loans
is consistently higher than ___% of
(SPA)(CPR), then the (Companion) Certificates
will be retired before all of the (Scheduled)
Certificates are retired, and the rate of
principal distributions and the weighted
average lives of the remaining (Scheduled)
Certificates will become significantly more
sensitive to changes in the prepayment speed
of the Mortgage Loans and principal
distributions thereon will be more likely
to deviate from the described amounts.)
((COMPANION) CERTIFICATES: Because of
the application of amounts available for
principal distributions among the Class ( ),
Class ( ) and Class ( ) Certificates in any
given month, first to the (Scheduled)
Certificates up to the described amounts and
then to the (Companion) Certificates, the
rate of principal distributions and the
weighted average lives of the (Companion)
Certificates will be extremely sensitive to
changes in the prepayment speed of the
Mortgage Loans. The weighted average lives
of the (Companion) Certificates will be
significantly more sensitive to changes
in the prepayment speed than that of
the (Scheduled) Certificates or a fractional
undivided interest in the Mortgage Loans.))
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<PAGE>
(Special Yield Considerations (The multiple class structure of the Senior
Certificates causes the yields of certain
classes to be particularly sensitive to
changes in the prepayment speed of the
Mortgage Loans and other factors, as follows
(to be included as appropriate):)
(INTEREST STRIP AND INVERSE FLOATER
CLASSES: The yield to investors on the
(identify classes) will be extremely
sensitive to the rate and timing of principal
payments on the Mortgage Loans (including
prepayments, defaults and liquidations),
which may fluctuate significantly over time.
A rapid rate of principal payments on the
Mortgage Loans could result in the failure
of investors in the (identify interest
strip and inverse floater strip classes) to
recover their initial investments, and a
slower than anticipated rate of principal
payments on the Mortgage Loans could adversely
affect the yield to investors on the (identify
non-strip inverse floater classes).)
((VARIABLE STRIP) CERTIFICATES. In addition
to the foregoing, the yield on the (Variable
Strip) Certificates will be materially
adversely affected to a greater extent than
the yields on the other Class ( ) Certificates
if the Mortgage Loans with higher Mortgage
Rates prepay faster than the Mortgage
Loans with lower Mortgage Rates, because
holders of the (Variable Strip) Certificates
generally have rights to relatively larger
portions of interest payments on the Mortgage
Loans with higher Mortgage Rates than on
Mortgage Loans with lower Mortgage Rates.)
(ADJUSTABLE RATE (INCLUDING INVERSE
FLOATER) CLASSES: The yield on the
(identify floating rate classes) will be
sensitive, and the yield on the (identify
inverse floater classes) will be extremely
sensitive, to fluctuations in the level of
(the index). THE PASS-THROUGH RATE ON THE
(IDENTIFY INVERSE FLOATER CLASSES) WILL VARY
INVERSELY WITH, AND AT A MULTIPLE OF, (THE
INDEX).)
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<PAGE>
(INVERSE FLOATER COMPANION CLASSES: In
addition to the foregoing, in the event of
relatively low prevailing interest rates
(including (the index)) and relatively high
rates of principal prepayments over an
extended period, while investors in the
(identify inverse floater companion classes)
may then be experiencing a high current
yield on such Certificates, such yield may
be realized only over a relatively short
period, and it is unlikely that such
investors would be able to reinvest such
principal prepayments on such Certificates
at a comparable yield.)
(RESIDUAL CERTIFICATES: Holders of the
Residual Certificates are entitled to receive
distributions of principal and interest as
described herein; however, holders of such
Certificates may have tax liabilities with
respect to their Certificates during the early
years of their term that substantially exceed
the principal and interest payable thereon
during such periods. (In addition, such
distributions will be reduced to the extent
that they are subject to United States federal
income tax withholding.)))
Optional Termination At its option, the Master Servicer may
purchase all of the Mortgage Assets, and
thereby effect termination of the Trust Fund
and early retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
of the Mortgage Loans remaining in the Trust
Fund is less than __% of the aggregate
principal balance of such Mortgage Loans
as of the Cut-off Date. (At its option, the
Master Servicer may also purchase any
Class ( ) Certificates on any Distribution
Date on which the Class ( ) Balance is less
than ___% of the original balance thereof.)
See "Pooling and Servicing Agreement
-- Termination" herein and "Description of
the Certificates -- Termination" in the
Prospectus.
Certain Federal Income Tax
Consequences (An election will be made to treat the Trust
Fund as a real estate mortgage investment
conduit ("REMIC") for federal income tax
purposes. Upon the issuance of the Class ( )
Certificates, Brown & Wood LLP, counsel to the
Depositor, will deliver its opinion generally
to the effect that
S-13
<PAGE>
assuming compliance with all provisions of
the Pooling and Servicing Agreement, for
federal income tax purposes, the Trust Fund
will qualify as a REMIC under Sections 860A
through 860G of the Internal Revenue Code of
1986 (the "Code").
For federal income tax purposes, the
Class ( ) Certificates will be the sole class
of "residual interests" in the REMIC and the
Class ( ), Class ( ) and Class ( )
Certificates will be the "regular interests"
in the REMIC and will be treated as debt
instruments of the REMIC.
The Class ( ) Certificates (may(will))(will
not) be treated as having been issued with
original issue discount for federal income
tax purposes. The prepayment assumption that
will be used for purposes of computing the
accrual of original issue discount, market
discount and premium, if any, for federal
income tax purposes will be equal to a
(constant prepayment rate ("CPR")) (standard
prepayment assumption ("SPA")) of ____%.
However, no representation is made that
the Mortgage Loans will prepay at
that rate or at any other rate.)
For further information regarding the federal
income tax consequences of investing in the
Class ( ) Certificates, see "Certain Federal
Income Tax Consequences" herein and in the
Prospectus.)
ERISA Considerations (A fiduciary of any employee benefit plan or
other retirement arrangement subject to
the Employee Retirement Income Security
Act of 1974, as amended ("ERlSA"), or
Section 4975 of the Code should review
carefully with its legal advisors whether
the purchase or holding of Class ( )
Certificates could give rise to a transaction
that is prohibited or is not otherwise
permitted either under ERISA or Section
4975 of the Code or whether there exists any
statutory or administrative exemption
applicable to an investment therein.)
(The U.S. Department of Labor has issued
an individual exemption, Prohibited
Transaction Exemption 90-29, to the
Underwriter that generally exempts from the
application of certain of the prohibited
transaction provisions of Section 406 of
ERISA,
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<PAGE>
and the excise taxes imposed on such
prohibited transactions by Section 4975(a)
and (b) of the Code and Section 502(i) of
ERISA, transactions relating to the purchase,
sale and holding of pass-through certificates
underwritten by the Underwriter such as the
Class ( ) Certificates and the servicing and
operation of asset pools, provided that
certain conditions are satisfied. A
fiduciary of any employee benefit plan
subject to ERISA or the Code should consult
with its legal advisors regarding the
requirements of ERISA and the Code.) See
"ERISA Considerations" herein and in the
Prospectus.
Rating It is a condition to the issuance of the
Class ( ) Certificates that they be rated
(not lower than) "___" by ________. A
security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning rating organization.
A security rating does not address the
frequency of prepayments (whether voluntary
or involuntary) of Mortgage Loans, or the
corresponding effect on yield to investors.
(The rating of the Class ( ) Certificates
does not address the possibility that the
holders of such Certificates may fail to
fully recover their initial investments.)
See "Special Considerations" and "Rating"
herein and "Yield Considerations" in
the Prospectus.
Legal Investment The appropriate characterization of the
Class ( ) Certificates under various
legal investment restrictions, and thus
the ability of investors subject to these
restrictions to purchase the Class ( )
Certificates, may be subject to significant
interpretative uncertainties. The Class ( )
Certificates (will) (will not) be "mortgage
related securities" within the meaning of the
Secondary Mortgage Market Enhancement Act of
1984 (so long as they are rated in at least
the second highest rating category by the
Rating Agency, and, as such, are legal
investments for certain entities
to the extent provided in SMMEA).
Accordingly, investors should consult
their own legal advisors to determine whether
and to what extent the Class ( ) Certificates
constitute legal investments for them.
See "Legal Investment" herein and in the
Prospectus.
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<PAGE>
(Registration of the Class
( ) Certificates The Class ( ) Certificates will be represented
by one or more global certificates registered
in the name of Cede & Co., as nominee of
The Depository Trust Company ("DTC"). No
person acquiring an interest in the Class ( )
Certificates (any such person, a "Class ( )
Certificate Owner") will be entitled to
receive a Certificate of such class
in fully registered, certificated form (a
"Definitive Class ( ) Certificate"), except
under the limited circumstances described in
the Prospectus under "Description of the
Certificates-Book-entry Registration and
Definitive Certificates". See
"Description of the Certificates-General"
herein and "Description of the Certificates-
Book-Entry Registration and Definitive
Certificates" in the Prospectus.)
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<PAGE>
DESCRIPTION OF THE (MORTGAGE POOL) (MBS)
GENERAL
The Trust Fund will consist primarily of (___ (conventional), (fixed
interest) (adjustable interest) rate Mortgage Loans with an aggregate
principal balance as of the Cut-off Date, after deducting payments of
principal due on such date, of $____________,) (mortgage participations),
mortgage pass-through certificates, mortgage-backed securities evidencing
interests therein or secured thereby (the "MBS"),) (and) (certain direct
obligations of the United States, agencies thereof or agencies created
thereby (the "Government Securities")). Each Mortgage Loan is evidenced by
a promissory note (a "Mortgage Note") and secured by a mortgage, deed of
trust or other similar security instrument (a "Mortgage" creating a first
(first or junior) lien on a one- to four- family residential property (a
"Mortgaged Property"). The Mortgaged Properties consist of (description of
one- to four-family residential properties). (Because no evaluation of any
mortgagor's financial condition has been conducted, investors should consider
all of the Mortgage Loans to be non-recourse loans so that, in the event of
mortgagor default, recourse may be had only against the specific property and
such limited other assets as have been pledged to secure a Mortgage Loan, and
not against the mortgagor's other assets.) All percentages of the Mortgage
Loans described herein are approximate percentages (except as otherwise
indicated) by aggregate principal balance as of the Cut-off Date.)
(The Mortgage Loans to be included in the Trust Fund will have been
originated or acquired by ________________ (the "Mortgage Asset Seller") and
will have been required to comply with the underwriting criteria described
herein. The Depositor will purchase the Mortgage Loans to be included in the
Mortgage Pool on or before the Closing Date from the Mortgage Asset Seller
pursuant to a seller's agreement (the "Seller's Agreement"), to be dated as
of ____________, 199_ between the Mortgage Asset Seller and the Depositor.
The Depositor will cause the Mortgage Loans in the Mortgage Pool to be
assigned to _______________, as Trustee, pursuant to the Pooling and
Servicing Agreement. _____________, in its capacity as Master Servicer, will
service the Mortgage Loans pursuant to the Pooling and Servicing Agreement.
Under the Seller's Agreement, _______________, as seller of the Mortgage
Loans to the Depositor, will make certain representations, warranties and
covenants to the Depositor relating to, among other things, the due execution
and enforceability of the Seller's Agreement and certain characteristics of
the Mortgage Loans, and will be obligated to repurchase or substitute for any
Mortgage Loans as to which there exists deficient documentation or an uncured
material breach of any such representation, warranty or covenant. Under the
Pooling and Servicing Agreement the Depositor will assign all its right,
title and interest in such representations, warranties and covenants
(including ____________________'s repurchase or substitution obligation) to
the Trustee for the Trust Fund. The Depositor will make (no) representations
or warranties with respect to the Mortgage Loans and will have no obligation
to repurchase or substitute for Mortgage Loans with deficient documentation
(or which are otherwise defective). _____________, as seller of the Mortgage
Loans to the Depositor, is selling such Mortgage Loans without recourse and,
accordingly, in such capacity, will have no obligations with respect to the
Certificates other than pursuant to such representations, warranties, covenants
and repurchase obligations. See "Description of the Agreements --
Representations and Warranties; Repurchases" in the Prospectus.)
(THE MBS
(Title and issuer of underlying securities, amount deposited or pledged,
amount originally issued, maturity date, interest rate, (redemption
provisions), together with description of other material terms.)
(Description of principal and interest distributions on the MBS.)
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<PAGE>
(Description of advances by the servicer of the mortgage loans
underlying the MBS.)
(Description of effect on the MBS of allocation of losses on the
underlying mortgage loans.)
As to each series of MBS included in the Trust Fund, the various classes
of certificates from such series ((including classes not in the Trust Fund
but from the same series as classes that are in the Trust Fund) are listed,
together with the related pass-through rates and certain other information
applicable thereto, in Annex A hereto.)
(CONVERTIBLE MORTGAGE LOANS
____% of the Mortgage Loans ("Convertible Mortgage Loans") provide that,
at the option of the related Mortgagors, the adjustable interest rate on such
Mortgage Loans may be converted to a fixed interest rate. The first month
in which any of the Mortgage Loans may convert is ____________, and the last
month in which any of the Mortgage Loans may convert is _____________. Upon
conversion, the Mortgage Rate will be converted to a fixed interest rate
determined in accordance with the formula set forth in the related Mortgage
Note which formula is intended to result in a Mortgage Rate which is not less
than the then current market interest rate (subject to applicable usury
laws). After such conversion, the monthly payments of principal and interest
will be adjusted to provide for full amortization over the remaining term to
scheduled maturity. Upon notification from a Mortgagor of such Mortgagor's
intent to convert from an adjustable interest rate to a fixed interest rate
and prior to the conversion of any such Mortgage Loan (a "Converting Mortgage
Loan"), the related Warrantying Party will be obligated to purchase the
Converting Mortgage Loan at a price equal to the outstanding principal
balance thereof plus accrued interest thereon net of any subservicing fees
(the "Conversion Price"). In the event of a failure by a Warrantying Party
to purchase a converting Mortgage Loan, the Master Servicer is required to
use its best efforts to purchase such Mortgage Loan following its conversion
(a "Converted Mortgage Loan") during the one-month period following the date
of conversion at the Conversion Price.
In the event that the related Warrantying Party fails to purchase a
Converting Mortgage Loan and the Master Servicer does not purchase a
Converted Mortgage Loan, neither the Depositor nor any of its affiliates nor
any other entity is obligated to purchase or arrange for the purchase of any
Converted Mortgage Loan. Any such Converted Mortgage Loan will remain in the
Mortgage Pool as a fixed-rate Mortgage Loan and will result in the Mortgage
Pool's having both fixed rate and adjustable rate Mortgage Loans. See
"Certain Yield and Prepayment Considerations" herein.
Following the purchase of any Converted Mortgage Loan as described
above, the purchaser will be entitled to receive an assignment from the
Trustee of such Mortgage Loan and the purchaser will thereafter own such
Mortgage Loan free of any further obligation to the Trustee or the
Certificateholders with respect thereto.)
(THE INDEX
As of any Payment Adjustment Date, the Index applicable to the
determination of the related Mortgage Rate will be a per annum rate equal to
______________, as most recently available as of the date ____ days prior to
the Payment Adjustment Date (the "Index"). Such average yields reflect the
yields for the week prior to that week in which the information is reported.
In the event that the Index is no longer available, an index reasonably
acceptable to the Trustee that is based on comparable information will be
selected by the Master Servicer. The Index is currently calculated based on
information reported in ___________.)
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(Approximately ___% of the Mortgage Loans have Due Dates that occur on
the ___ day of each month; approximately ___% of the Mortgage Loans have Due
Dates that occur on the ___ day of each month; approximately _____% of the
Mortgage Loans have Due Dates that occur on the ___ day of each month; and
the remainder of the Mortgage Loans have Due Dates that occur on the
fifteenth day of each month.)
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(As of the Cut-off Date, the Mortgage Loans had the following
characteristics: (i) Mortgage Rates ranging from _____% per annum to _______%
per annum; (ii) a weighted average Mortgage Rate of ______% per annum; (iii)
Gross Margins ranging from ____ basis points to ______ basis points; (iv) a
weighted average Gross Margin of ____ basis points; (v) principal balances
ranging from $_______ to $______; (vi) an average principal balance of
$_________; (vii) original terms to scheduled maturity ranging from _____
months to _________ months; (viii) a weighted average original term to
scheduled maturity of _____ months; (ix) remaining terms to scheduled
maturity ranging from ____ months to _____ months; (x) a weighted average
remaining term to scheduled maturity of ________ months; (xi) Cut-off Date
Loan-to-Value ("LTV") Ratios ranging from ______% to ________%; (xii) a
weighted average Cut-off Date LTV Ratio of _____%; (xiii) as to the _______%
of the Mortgage Loans to which such characteristic applies, (A) minimum
lifetime Mortgage Rates ranging from ____% per annum to ______ % per annum
and (B) a weighted average minimum lifetime Mortgage Rate of _______% per
annum; and (xiv) as to the__________% of Mortgage Loans to which such
characteristic applies and for which it may be currently calculated, (A)
maximum lifetime Mortgage Rate ranging from _______% per annum to ________%
per annum and (B) a weighted average maximum lifetime Mortgage Rate of
_________% per annum.)
(___% of the Mortgage Loans provide for Balloon Payments on their
respective maturity dates. Loans providing for Balloon Payments involve a
greater degree of risk than self-amortizing loans. See "Special
Considerations -- Balloon Payments" in the Prospectus.)
(The Mortgage Rate on each Mortgage Loan is subject to adjustment on
each Interest Rate Adjustment Date by adding the related Gross Margin to the
value of the Index (described below) as most recently announced a specified
number of days prior to such Interest Rate Adjustment Date, subject, in the
case of substantially all of the Mortgage Loans, to minimum and maximum
lifetime Mortgage Rates, with ranges specified below. The Mortgage Rates on
the Mortgage Loans generally are adjusted monthly; however, certain of the
Mortgage Loans provide for Interest Rate Adjustment Dates to occur quarterly
(___% of the Mortgage Loans), semi-annually (___% of the Mortgage Loans) or
annually (____% of the Mortgage Loans). Each of the Mortgage Loans provided
for an initial fixed interest rate period; _________Mortgage Loans,
representing ___% of the Mortgage Loans, have not experienced their first
Interest Rate Adjustment Dates. The latest initial Interest Rate Adjustment
Date for any Mortgage Loan is to occur in __________________________________
_________________.)
(Subject to the Payment Caps described below, the amount of the Monthly
Payment on each Mortgage Loan adjusts periodically on each Payment Adjustment
Date to an amount that would fully amortize the principal balance of the
Mortgage Loan over its then remaining amortization schedule and pay interest
at the Mortgage Rate in effect during the one month period preceding such
Payment Adjustment Date. Approximately __% of the Mortgage Loans provide
that an adjustment of the amount of the Monthly Payment on a Payment
Adjustment Date may not result in a Monthly Payment that increases by more
than ___% (nor, in some cases, decreases by more than ____%) of the amount
of the Monthly Payment in effect immediately prior to such Payment Adjustment
Date (each such provision, a "Payment Cap"); however, certain of those
Mortgage Loans also provide that the Payment Cap will not apply on certain
Payment Adjustment Dates or if the application thereof would result in the
principal balance of the Mortgage Loan exceeding (through negative
amortization) by a specified percentage the original principal balance
thereof. Generally, the related Mortgage Note provides that if, as a result
of negative amortization, the respective principal balance of the Mortgage
Loan reaches an amount specified therein (which as to most Mortgage Loans is
not greater than _% of the Mortgage Loan principal balance as of the
origination date thereof), the amount of the Monthly Payments due thereunder
will be increased as necessary to prevent further negative amortization.
(Only in the case of _____% of the Mortgage Loans does a Payment
Adjustment Date immediately follow each Interest Rate Adjustment Date. As
a result, and because application of Payment Caps may limit the amount by
which the Monthly Payments due on certain of the Mortgage Loans may adjust,
the amount of a Monthly Payment may be more or less than the amount necessary
to amortize the Mortgage Loan principal balance over the then remaining
amortization schedule at the applicable Mortgage Rate. Accordingly, Mortgage
Loans may be subject to slower amortization (if the
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<PAGE>
Monthly Payment due on a Due Date is sufficient to pay interest accrued
to such Due Date at the applicable Mortgage Rate but is not sufficient to
reduce principal in accordance with the applicable amortization schedule),
to negative amortization (if interest accrued to a Due Date at the applicable
Mortgage Rate is greater than the entire Monthly Payment due on such Due Date)
or to accelerated amortization (if the Monthly Payment due on a Due Date is
greater than the amount necessary to pay interest accrued to such Due Date
at the applicable Mortgage Rate and to reduce principal in accordance with
the applicable amortization schedule).)
(No Mortgage Loan currently prohibits principal prepayments; however,
certain of the Mortgage Loans impose fees or penalties ("Prepayment
Premiums") in connection with full or partial prepayments. Although
Prepayment Premiums are payable to the Master Servicer as additional
servicing compensation, the Master Servicer may waive the payment of any
Prepayment Premium only in connection with a principal prepayment that is
proposed to be made during the three month period prior to the scheduled
maturity of the related Mortgage Loan, or under certain other limited
circumstances.)
The following table sets forth the range of Mortgage Rates on the
Mortgage Loans as of the Cut-off Date:
Mortgage Rates as of the Cut-off Date
-------------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Mortgage Rate Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================= =======
Weighted Average
Mortgage Rate:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-20
<PAGE>
The following table sets forth the types of Mortgaged Properties
securing the Mortgage Loans:
Property Type
-------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Type Loans Number the Cut-off Date the Cut-off Date
- ---- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================= =======
</TABLE>
Note: Percentage totals may not add due to rounding.
(The following table sets forth the range of Gross Margins for the
Mortgage Loans:)
(Gross Margins)
---------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Mortgage Rate Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Gross Margin:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-21
<PAGE>
(The following table sets forth the frequency of adjustments to the
Mortgage Rates on the Mortgage Loans as of the Cut-off Date:)
(Frequency of Adjustments to Mortgage Rates)
--------------------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Frequency(A) Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Frequency of
Adjustments to
Mortgage Rate:
</TABLE>
Note: Percentage totals may not add due to rounding.
(A) _______ or ___% of Mortgage Loans have not experienced their first
Interest Rate Adjustment Date.
(The following table sets forth the frequency of adjustments to the
Monthly Payments on the Mortgage Loans as of the Cut-off Date:)
(Frequency of Adjustments to Monthly Payments)
----------------------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Frequency (A) Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Frequency of
Adjustments to
Monthly Payments:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-22
<PAGE>
(The following table sets forth the range of maximum lifetime Mortgage
Rates for the Mortgage Loans:)
(Maximum Lifetime Mortgage Rates)
---------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Maximum Number of Percent Principal Principal
Lifetime Mortgage by Balance as of Balance as of
Mortgage Rate Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Maximum Lifetime
Mortgage Rate:
</TABLE>
Note: Percentage totals may not add due to rounding.
(A) Represents Mortgage Loans without a lifetime rate cap.
(B) The lifetime rate caps for these Mortgage Loans are based upon the Index
as determined at a future point in time plus a fixed percentage.
Therefore, the rate is not determinable as of the Cut-off Date.
(C) This calculation does not include the ____ Mortgage Loans without a
lifetime rate cap or the ____ Mortgage Loans with lifetime rate caps
which are currently not determinable.
(The following table sets forth the range of minimum lifetime Mortgage
Rates on the Mortgage Loans:)
(Minimum Lifetime Mortgage Rates)
---------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Minimum Number of Percent Principal Principal
Lifetime Mortgage by Balance as of Balance as of
Mortgage Rate Loans Number the Cut-off Date the Cut-off Date
------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Minimum Lifetime
Mortgage Rate:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-23
<PAGE>
(A) Represents Mortgage Loans without interest rate floors.
(B) This calculation does not include the ____ Mortgage Loans without
interest rate floors.
The following table sets forth the range of principal balances of the
Mortgage Loans as of the Cut-off Date:
Principal Balances as of the Cut-off Date
-----------------------------------------
<TABLE>
<CAPTION> Percent by
Principal Aggregate Aggregate
Balance Number of Percent Principal Principal
as of the Mortgage by Balance as of Balance as of
Cut-off Date Loans Number the Cut-off Date the Cut-off Date
------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Average Principal Balance
as of the
Cut-off Date:
</TABLE>
Note: Percentage totals may not add due to rounding.
The following tables set forth the original and remaining terms to
maturity (in months) of the Mortgage Loans:
Original Term to Maturity in Months
-----------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Original Number of Percent Principal Principal
Term in Mortgage by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Original Term to Maturity:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-24
<PAGE>
The following tables set forth the purpose for which the Mortgage Loan
was originated, (the type of program under which it was originated and the
occupancy type).
Mortgage Loan Purpose
---------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Remaining Number of Percent Principal Principal
Term in Mortgage by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Original Term to Maturity:
</TABLE>
Note: Percentage totals may not add due to rounding.
(Mortgage Loan Documentation Program)
-------------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Remaining Number of Percent Principal Principal
Term in Mortgage by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Original Term to Maturity:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-25
<PAGE>
Mortgage Loan Occupancy Type
----------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Remaining Number of Percent Principal Principal
Term in Mortgage by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average
Original Term to Maturity:
</TABLE>
Note: Percentage totals may not add due to rounding.
Remaining Term to Maturity in Months
------------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Remaining Number of Percent Principal Principal
Term in Mortgage by Balance as of Balance as of
Months Loans Number the Cut-off Date the Cut-off Date
- ------------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average Remaining
Term to Maturity:
</TABLE>
Note: Percentage totals may not add due to rounding.
S-26
<PAGE>
The following tables set forth the respective years in which the
Mortgage Loans were originated and are scheduled to mature:
Mortgage Loan Year of Origination
---------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Year Loans Number the Cut-off Date the Cut-off Date
----------- --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
</TABLE>
Note: Percentage totals may not add due to rounding.
Mortgage Loan Year of Scheduled Maturity
----------------------------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
Year Loans Number the Cut-off Date the Cut-off Date
------------ --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
</TABLE>
Note: Percentage totals may not add due to rounding.
The following table sets forth the range of Original LTV Ratios of the
Mortgage Loans. An "Original LTV Ratio" is a fraction, expressed as a
percentage, the numerator of which is the principal balance of a Mortgage
Loan on the date of its origination, and the denominator of which is (in
general) the lesser of (i) the appraised value of the related Mortgaged
Property as determined by an appraisal thereof obtained in connection with
the origination of such Mortgage Loan and (ii) the sale price of such
Mortgaged Property at the time of such origination. There can be no
assurance that the value (determined through an appraisal or otherwise) of
a Mortgaged Property determined after origination of the related Mortgage
Loan will be equal to or greater than the value thereof (determined through
an appraisal or otherwise) obtained in connection with the origination. As
a result, there can be no assurance that the loan-to-value ratio for any
Mortgage Loan determined at any time following origination thereof will be
lower than the Original LTV Ratio, notwithstanding any positive amortization
of such Mortgage Loan.
S-27
<PAGE>
Original LTV Ratios
-------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Original Mortgage by Balance as of Balance as of
LTV Ratio Loans Number the Cut-off Date the Cut-off Date
------------ --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
Weighted Average Original
LTV Ratio:
</TABLE>
Note: Percentage totals may not add due to rounding.
The Mortgage Loans are secured by Mortgaged Properties in ________
different states. The table below sets forth the states in which the
Mortgaged Properties are located:
Geographic Distribution
-----------------------
<TABLE>
<CAPTION> Percent by
Aggregate Aggregate
Number of Percent Principal Principal
Mortgage by Balance as of Balance as of
State Loans Number the Cut-off Date the Cut-off Date
------------ --------- ------- ---------------- ----------------
<S> <C> <C> <C>
Total 100.00% $ 100.00%
========== ======= ================ =======
</TABLE>
Note: Percentage totals may not add due to rounding.
(regional breakdown to be provided as appropriate)
No more than ___% of the Mortgage Loans will be secured by Mortgaged
Properties located in any one zip code.
UNDERWRITING STANDARDS
All of the Mortgage Loans were originated or acquired by _______,
generally in accordance with the underwriting criteria described herein.
(Description of underwriting standards.)
S-28
<PAGE>
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for the
scheduled principal payments due on or before such date. Prior to the
issuance of the Class ( ) Certificates, a Mortgage Loan may be removed from
the Mortgage Pool as a result of incomplete documentation or otherwise, if
the Depositor deems such removal necessary or appropriate and may be prepaid
at any time. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Class ( ) Certificates unless
including such mortgage loans would materially alter the characteristics of
the Mortgage Pool as described herein. The Depositor believes that the
information set forth herein will be representative of the characteristics
of the Mortgage Pool as it will be constituted at the time the Class ( )
Certificates are issued, although the range of Mortgage Rates and maturities
and certain other characteristics of the Mortgage Loans in the Mortgage Pool
may vary.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of ____ classes to be designated as the Class (
) Certificates, the Class ( ) Certificates, the Class ( ) Certificates and
the Class ( ) Certificates. The Class ( ), Class ( ) and Class ( )
Certificates (the "Subordinate Certificates") will be subordinate to the
Class ( ) Certificates, as described herein. The Certificates represent in
the aggregate the entire beneficial ownership interest in a Trust Fund
consisting of: (i) the Mortgage Loans and all payments under and proceeds of
the Mortgage Loans received after the Cut-off Date (exclusive of payments of
principal and interest due on or before the Cut-off Date); (ii) any Mortgaged
Property acquired on behalf of the Trust Fund through foreclosure or deed in
lieu of foreclosure (upon acquisition, an "REO Property"); (iii) such funds
or assets as from time to time are deposited in the Certificate Account and
any account established in connection with REO Properties (the "REO
Account"); and (iv) the rights of the mortgagee under all insurance policies
with respect to the Mortgage Loans. Only the Class ( ) (, Class ( ) and
Class ( )) Certificates are offered hereby.
The Class ( ) Certificates will have an initial (Certificate Balance)
(Notional Balance) of $__________. The Class ( ) Certificates represent ___%
of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date. The Class ( ) Certificates will have an initial Certificate Balance
of $__________, representing ___% of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date. The Class ( ) Certificates will have
an initial Certificate Balance of $__________, representing ___% of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date.
The initial Certificate Balance of the Class ( ) Certificates will be (zero).
The Certificate Balance of any class of Certificates outstanding at any time
represents the maximum amount which the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund. The respective
Certificate Balances of the Class ( ), Class ( ) and Class ( ) Certificates
(respectively, the "Class ( ) Balance", "Class ( ) Balance" and "Class ( )
Balance") will in each case be (i) reduced by amounts actually distributed
on such class of Certificates that are allocable to principal and ((ii)
increased by amounts allocated to such class of Certificates in respect of
negative amortization on the Mortgage Loans (Describe Notional Balance.))
(The Certificate Balance of the Class ( ) Certificates (the "Class ( )
Balance") will at any time equal the aggregate Stated Principal Balance of
the Mortgage Loans minus the sum of the Class ( ) Balance, Class ( ) Balance
and Class ( ) Balance.) The Stated Principal Balance of any
S-29
<PAGE>
Mortgage Loan at any date of determination will equal (a) the Cut-off Date
Balance of such Mortgage Loan, plus ((b) any negative amortization added to
the principal balance of such Mortgage Loan on any Due Date after the Cut-off
Date to and including the Due Date in the Due Period for the most recently
preceding Distribution Date), minus (c) the sum of (i) the principal portion
of each Monthly Payment due on such Mortgage Loan after the Cut-off Date, to
the extent received from the mortgagor or advanced by the Master Servicer and
distributed to holders of the Certificates before such date of determination,
(ii) all principal prepayments and other unscheduled collections of principal
received with respect to such Mortgage Loan, to the extent distributed to
holders of the Certificates before such date of determination, and (iii) any
reduction in the outstanding principal balance of such Mortgage Loan
resulting out of a bankruptcy proceeding for the related mortgagor.
(None of the Class ( ) Certificates are offered hereby.)
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be
made on the ____ day of each month or, if such ____ day is not a business
day, then on the next succeeding business day, commencing in
____________________ 199_ (each, a " Distribution Date" ) . All
distributions (other than the final distribution on any Certificate) will be
made by the Master Servicer to the persons in whose names the Certificates
are registered at the close of business on each Record Date, which will be
the (last business day of the month) preceding the month in which the related
Distribution Date occurs. Such distributions will be made by wire transfer
in immediately available funds to the account specified by the
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder will have provided the Master Servicer
with wiring instructions no less than five business days prior to the related
Record Date and is the registered owner of Certificates the aggregate initial
principal amount of which is at least $ , or otherwise by check mailed
to such Certificateholder. The final distribution on any Certificate will be
made in like manner, but only upon presentment or surrender of such Certificate
at the location specified in the notice to the holder thereof of such final
distribution. All distributions made with respect to a class of Certificates
on each Distribution Date will be allocated pro rata among the outstanding
Certificates of such class based on their respective Percentage Interests.
The Percentage Interest evidenced by any Class ( ) Certificate is equal to
the initial denomination thereof as of the Closing Date, divided by the
initial Certificate Balance for such class. The aggregate distribution to
be made on the Certificates on any Distribution Date shall equal the
Available Distribution Amount.
The "Available Distribution Amount" for any Distribution Date is an
amount equal to (a) the sum of (i) the amount on deposit in the Certificate
Account as of the close of business on the related Determination Date, (ii)
the aggregate amount of any Advances made by the Master Servicer in respect
of such Distribution Date and (iii) the aggregate amount deposited by the
Master Servicer in the Certificate Account in respect of such Distribution
Date in connection with Prepayment Interest Shortfalls incurred during the
related Due Period, net of (b) the portion of the amount described in clause
(a)(i) hereof that represents (i) Monthly Payments due on a Due Date
subsequent to the end of the related Due Period, (ii) any voluntary principal
prepayments and other unscheduled recoveries on the Mortgage Loans received
after the end of the related Due Period or (iii) any amounts payable or
reimbursable therefrom to any person.
Calculations of Interest. The "Distributable Certificate Interest" in
respect of the Class ( ) Certificates for any Distribution Date represents
that portion of the Accrued Certificate Interest in respect of such class of
Certificates for such Distribution Date that is net of such class's allocable
share of (i) the aggregate portion of any Prepayment Interest Shortfalls
resulting from voluntary principal prepayments on the Mortgage Loans during
the related Due Period (that are not covered by the application of servicing
compensation of the Master Servicer for the related Due Period (such
uncovered aggregate portion, as to such Distribution Date,) the "Net
Aggregate Prepayment Interest Shortfall")(; and (ii) the aggregate of any
negative amortization in respect of the Mortgage Loans for their respective
Due Dates during the related Due Period (the aggregate of such negative
amortization, as to such Distribution Date, the "Aggregate Mortgage Loan
Negative Amortization").)
S-30
<PAGE>
The "Accrued Certificate Interest" in respect of the Class ( )
Certificates for any Distribution Date is equal to thirty days' interest
accrued during the related Interest Accrual Period at the Pass-Through Rate
applicable to such class of Certificates for such Distribution Date accrued
on the related (Certificate Balance) (Classes ( ) Notional Amount)
outstanding immediately prior to such Distribution Date. The Pass-Through
Rate applicable to the Class ( ) Certificates for any Distribution Date (is
fixed and is set forth on the cover hereof) (will equal the weighted average
of the Class ( ) Remittance Rates in effect for the Mortgage Assets as of the
commencement of the related Due Period (as to such Distribution Date, the
"Weighted Average Class ( ) Remittance Rate"). The "Class ( ) Remittance
Rate" in effect for any Mortgage Loan as of any date of determination
(a) prior to its first Interest Rate Adjustment Date, is equal to the related
Mortgage Rate then in effect minus ____ basis points and (b) from and after
its first Interest Rate Adjustment Date, is equal to the related Mortgage
Rate then in effect minus the excess of the related Gross Margin over ____
basis points (is equal to the excess of the Mortgage Rate thereon over ____%
per annum.) The "Interest Accrual Period" for the Certificates is the
calendar month preceding the month in which the Distribution Date occurs.)
(The Class ( ) Notional Amount will equal the (sum of the Class ( ) Balance.
The Class ( ) Notional Amount does not entitle the Class ( ) Certificate (or
a component thereof) to any distribution of principal.) (Interest will be
calculated on the basis of a 360-day year of twelve 30-day months.)
(The portion of Net Aggregate Prepayment Interest Shortfall (and the
Aggregate Mortgage Loan Negative Amortization) for any Distribution Date that
will be allocated to the Class ( ) Certificates on such Distribution Date
will be equal to the then applicable Class ( ) Interest Allocation
Percentage. The "Class ( ) Interest Allocation Percentage" for any
Distribution Date will equal a fraction, expressed as a percentage, the
numerator of which is equal to the product of (a) the Class ( ) Balance ((net
of any Uncovered Portion thereof)) outstanding immediately prior to such
Distribution Date, multiplied by (b) the Pass-Through Rate for the Class (
) Certificates for such Distribution Date, and the denominator of which is
the product of (x) the aggregate Stated Principal Balance of the Mortgage
Loans outstanding immediately prior to such Distribution Date, multiplied by
(y) the Weighted Average Net Mortgage Rate for such Distribution Date. The
"Net Mortgage Rate" in effect for any Mortgage Loan as of any date of
determination is equal to the related Mortgage Rate then in effect minus ____
basis points. (The "Uncovered Portion" of the Class ( ) Balance, as of any
date of determination, is the portion thereof representing the excess, if
any, of (a) the Class ( ) Balance then outstanding, over (b) the aggregate
Stated Principal Balance of the Mortgage Loans then outstanding.))
(The Class ( ) Certificates (or a component thereof) will not be
entitled to distributions of interest and will not have a Pass-Through Rate.)
Calculations of Principal. (Holders of the Class ( ) Certificates will
be entitled to receive on each Distribution Date, to the extent of the
balance of the Available Distribution Amount remaining after the payment of
the Class ( ) Interest Distribution Amount for such Distribution Date an
amount equal to the Class ( ) Principal Distribution Amount. The "Class (
) Principal Distribution Amount" for any Distribution Date will equal the sum
of (i) the product of the Scheduled Principal Distribution Amount and the
Class ( ) Scheduled Principal Distribution Percentage, (ii) the product of
the Senior Accelerated Percentage and all principal prepayments received
during the related Due Period, and (iii) to the extent not previously
advanced, (the lesser of the Class ( ) Scheduled Principal Distribution
Percentage of the Stated Principal Balance of the Mortgage Loans and the
Senior Accelerated Percentage of the Unscheduled Principal Distribution
Amount net of any prepayment amounts described in clause (ii) above. The
"Scheduled Principal Distribution Amount" for any Distribution Date is equal
to the aggregate of the principal portions of all Monthly Payments, including
Balloon Payments, due during or, if and to the extent not previously received
or advanced and distributed to Certificateholders on a preceding Distribution
Date, prior to the related Due Period, in each case to the extent paid by the
related mortgagor or advanced by the Master Servicer and included in the
Available Distribution Amount for such Distribution Date. The principal
portion of any Advances in respect of a Mortgage Loan delinquent as to its
Balloon Payment will constitute advances in respect of the principal portion
of such Balloon Payment.
S-31
<PAGE>
(The portion of the Class ( ) Principal Distribution Amount payable on
any Distribution Date shall be allocated to the Class ( ) Certificates as
follows: (Describe distributions which may be concurrent or sequential and
among different classes and may be based on a schedule of payments sometimes
referred to as a Schedule of PAC, TAC or Scheduled Balances for some and not
other classes.))
(The Class ( ) Scheduled Principal Distribution Percentage for any
Distribution Date represents the portion of the Scheduled Principal
Distribution Amount for such Distribution Date payable (subject to the
payment priorities described herein) on the Class ( ) Certificates. The
"Class ( ) Scheduled Principal Distribution Percentage" for any Distribution
Date will equal the lesser of (a) 100% and (b) a fraction, expressed as a
percentage, the numerator of which is the Class ( ) Balance outstanding
immediately prior to such Distribution Date, and the denominator of which is
the lesser of (i) the sum of the Class ( ) Balance, the Class ( ) Balance and
the Class ( ) Balance and (ii) the aggregate Stated Principal Balance of the
Mortgage Loans, in either case outstanding immediately prior to such
Distribution Date.)
The "Unscheduled Principal Distribution Amount" for any Distribution
Date is equal to the sum of: (a) all voluntary principal prepayments
received on the Mortgage Loans during the related Due Period; and (b) the
excess, if any, of (i) all unscheduled recoveries received on the Mortgage
Loans during the related Due Period, whether in the form of liquidation
proceeds, condemnation proceeds, insurance proceeds or amounts paid in
connection with the purchase of a Mortgage Loan out of the Trust Fund,
exclusive in each case of any portion thereof payable or reimbursable to the
Master Servicer in connection with the related Mortgage Loan, over (ii) the
respective portions of the net amounts described in the immediately preceding
clause (i) needed to cover interest (at the applicable Net Mortgage Rate in
effect from time to time) on the related Mortgage Loan from the date to which
interest was previously paid or advanced through the Due Date for such
Mortgage Loan in the related Due Period ((exclusive of any portion of such
interest added to the principal balance of such Mortgage Loan as negative
amortization).)
(The "Class Negative Amortization" in respect of any class of
Certificates for any Distribution Date is equal to such class' allocable
share of the Aggregate Mortgage Loan Negative Amortization for such
Distribution Date.)
Distributions on Certificates. The Available Distribution Amount in
respect of a Distribution Date will be distributed in the following amounts
and order of priority:
(describe the application of Available Distribution Amount to make
distributions of interest and principal among the Classes of Certificates)
SUBORDINATION
In order to increase the likelihood of distribution in full of the
interest and principal due to be distributed to the Class ( )
Certificateholders on each Distribution Date, holders of the Class ( )
Certificates have a right to distributions of the Available Distribution
Amount that is prior to the rights of the holders of the Subordinate
Certificates, to the extent necessary to satisfy such amounts of interest and
principal.
(The entitlement to the Class ( ) Certificates of the (entire) (a larger
percentage under certain circumstances of) Unscheduled Principal Distribution
Amount will accelerate the amortization of the Class ( ) Certificates
relative to the actual amortization of the Mortgage Loans.)
(To the extent that the Class ( ) Certificates are amortized faster
than the Mortgage Loans, without taking into account losses on the Mortgage
Loans, the percentage interest evidenced by the Class ( ) Certificates in the
Trust Fund will be decreased (with a corresponding increase in the interest
in the Trust Fund evidenced by the Subordinate Certificates), thereby
increasing, relative to their respective Certificate Balances, the
subordination afforded the Class ( ) Certificates by the Subordinate
Certificates.)
S-32
<PAGE>
(The principal portion of any Realized Losses will be allocated first
in reduction of the Subordinate Certificates (in the order specified here)
and then to the Class ( ) Certificates (in the order specified here). Any
loss realized on a Mortgage Loan that is finally liquidated equal to the
excess of the Stated Principal Balance of such Mortgage Loan remaining, if
any, plus interest thereon through the last day of the month in which such
Mortgage Loan was finally liquidated, after application of all amounts
received (net of amounts reimbursable to the Master Servicer or any Sub-
Servicer for Advances and expenses, including attorneys' fees) towards
interest and principal owing on the Mortgage Loan is referred to herein as
a "Realized Loss.")
ADVANCES
On the business day immediately preceding each Distribution Date, the
Master Servicer will be obligated to make advances (each, an "Advance") out
of its own funds, or funds held in the Certificate Account that are not
required to be part of the Available Distribution Amount for such
Distribution Date, in an amount equal to the aggregate of ((i)) all Monthly
Payments (net of the Servicing Fee), (other than Balloon Payments,) which
were due on the Mortgage Loans during the related Due Period and delinquent
as of the related Determination Date (and (ii) in the case of each Mortgage
Loan delinquent in respect of its Balloon Payment as of the related
Determination Date, an amount sufficient to amortize fully the principal
portion of such Balloon Payment over the remaining amortization term of such
Mortgage Loan and to pay interest at the Net Mortgage Rate in effect for such
Mortgage Loan for the one month period preceding its Due Date in the related
Due Period (but only to the extent that the related mortgagor has not made
a payment sufficient to cover such amount under any forbearance arrangement
that has been included in the Available Distribution Amount for such
Distribution Date)). The Master Servicer's obligations to make Advances in
respect of any Mortgage Loan will continue through liquidation of such
Mortgage Loan and out of its own funds from any amounts collected in respect
of the Mortgage Loan as to which such Advance was made, whether in the form
of late payments, insurance proceeds, liquidation proceeds, condemnation
proceeds or amounts paid in connection with the purchase of such Mortgage
Loan. Notwithstanding the foregoing, the Master Servicer will be obligated
to make any Advance only to the extent that it determines in its reasonable
good faith judgment that, if made, would be recoverable out of general funds
on deposit in the Certificate Account. Any failure by the Master Servicer to
make an Advance as required under the Pooling and Servicing Agreement will
constitute an event of default thereunder(, in which case the Trustee will be
obligated to make any such Advance, in accordance with the terms of the
Pooling and Servicing Agreement).
CERTAIN YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
The yield to maturity on the Class ( ) Certificates will be affected
by the rate of principal payments on the Mortgage Loans including, for this
purpose, prepayments, which may include amounts received by virtue of
liquidation due to default, repurchase, condemnation or insurance. The yield
to maturity on the Class ( ) Certificates will also be affected by the level
of the Index. The rate of principal payments on the Class ( ) Certificates
will correspond to the rate of principal payments (including prepayments) on
the related Mortgage Loans.
(Description of factors affecting yield, prepayment and maturity of the
Mortgage Loans and Class ( ) Certificates depending upon characteristics of
the Mortgage Loans.)
WEIGHTED AVERAGE LIFE OF THE CLASS ( ) CERTIFICATES
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of the Class ( )
Certificates will be influenced by the rate at which principal payments
(including scheduled payments and principal prepayments) on the Mortgage
Loans are made. Principal payments on the Mortgage Loans may be in the form
of scheduled amortization or
S-33
<PAGE>
prepayments (for this purpose, the term "prepayment" includes prepayments and
liquidations due to a default or other dispositions of the Mortgage Loans).
The table entitled "Percent of Initial Certificate Balance Outstanding
for the Class ( ) Certificates at the respective percentages of (CPR) (SPA)"
set forth below indicates the weighted average life of such Certificates and
sets forth the percentage of the initial principal amount of such
Certificates that would be outstanding after each of the dates shown at the
indicated percentages of (CPR)(SPA). The table has been prepared on the
basis of the following assumptions regarding the characteristics of the
Mortgage Loans: (i) an outstanding principal balance of $_________, a
remaining amortization term of ___ months and a term to balloon of ___
months: (ii) an interest rate equal to ____% per annum until the ____ Due
Date and thereafter an interest rate equal to ___% per annum (at an assumed
Index of ____%) and Monthly Payments that would fully amortize the remaining
balance of the Mortgage Loan over its remaining amortization term; (iii) the
Mortgage Loans prepay at the indicated percentage of (CPR)(SPA); (iv) the
maturity date of each of the Balloon Mortgage Loans is not extended; (v)
distributions on the Class ( ) Certificates are received in cash, on the
( )th day of each month, commencing in_____________; (vi) no defaults or
delinquencies in, or modifications, waivers or amendments respecting, the
payment by the mortgagors of principal and interest on the Mortgage Loans
occur; (vii) the initial Certificate Balance of the Class ( ) Certificates
is $________; (viii) prepayments represent payment in full of individual
Mortgage Loans and are received on the respective Due Dates and include
30 days' interest thereon; (ix) there are no repurchases of Mortgage Loans
due to breaches of any representation and warranty or otherwise; (x) the
Class ( ) Certificates are purchased on ________; (xi) the Servicing Fee
is ____% per annum; and (xii) the Index on each Interest Rate Adjustment
Date is ________% per annum.
Based on the foregoing assumptions, the table indicates the weighted
average life of the Class ( ) Certificates and sets forth the percentages of
the initial Certificate Balance of the Class ( ) Certificates that would be
outstanding after the Distribution Date in ___________ of each of the years
indicated, at various percentages of (CPR)(SPA). Neither (CPR)(SPA) nor any
other prepayment model or assumption purports to be a historical description
of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of mortgage loans, including the Mortgage Loans
included in the Mortgage Pool. Variations in the actual prepayment
experience and the balance of the Mortgage Loans that prepay may increase or
decrease the percentage of initial Certificate Balance (and weighted average
life) shown in the following table. Such variations may occur even if the
average prepayment experience of all such Mortgage Loans is the same as any
of the specified assumptions.
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<PAGE>
Percent of Initial Class ( ) Certificate Balance Outstanding
at the Following Percentages of (CPR)(SPA)
Distribution Date
- -----------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Percent . . . . . . . . . ___% __% __% __% __% __%
____________ __, 1997 . . . . . .
____________ __, 1998 . . . . . .
____________ __, 1999 . . . . . .
____________ __, 2000 . . . . . .
____________ __, 2001 . . . . . .
____________ __, 2002 . . . . . .
____________ __, 2003 . . . . . .
____________ __, 2004 . . . . . .
____________ __, 2005 . . . . . .
____________ __, 2006 . . . . . .
____________ __, 2007 . . . . . .
</TABLE>
Weighted Average Life
(Years) (+) . . . . . . . . . . . .
+ The weighted average life of the Class ( ) Certificates is determined
by (i) multiplying the amount of each distribution of principal by the number
of years from the date of issuance to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the total principal
distributions on such class of Certificates.
(Class ( ) Yield Consideration)
(Will describe assumption for various scenarios showing sensitivity of
certain classes to prepayment and default risks and set forth resulting
yield.)
S-35
<PAGE>
POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of ____________ 1, 199_ (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer and the Trustee.
Reference is made to the Prospectus for important information in
addition to that set forth herein regarding the terms and conditions of the
Pooling and Servicing Agreement and the Class ( ) Certificates. The
Depositor will provide to a prospective or actual Class ( ) Certificateholder
without charge, upon written request, a copy (without exhibits) of the
Pooling and Servicing Agreement.
ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Closing Date, the Depositor will assign or cause to
be assigned the Mortgage Loans, without recourse, to the Trustee for the
benefit of the Certificateholders. Prior to the Closing Date, the Depositor
will, as to each Mortgage Loan, deliver to the Trustee (or the custodian
hereinafter referred to), among other things, the following documents
(collectively, as to such Mortgage Loan, the "Mortgage File"): (i) the
original or, if accompanied by a "lost note" affidavit, a copy of the
Mortgage Note, endorsed by ____________________ which transferred such
Mortgage Loan, without recourse, in blank or to the order of Trustee; (ii)
the original Mortgage or a certified copy thereof, and any intervening
assignments thereof, or certified copies of such intervening assignments, in
each case with evidence of recording thereon; (iii) an assignment of the
Mortgage, executed by the ____________________ which transferred such
Mortgage Loan, in blank or to the order of the Trustee, in recordable form;
(iv) assignments of any related assignment of leases, rents and profits and
any related security agreement (if, in either case, such item is a document
separate from the Mortgage), executed by ____________________ which
transferred such Mortgage Loan, in blank or to the order of the Trustee; (v)
originals or certified copies of all assumption, modification and
substitution agreements in those instances where the terms or provisions of
the Mortgage or Mortgage Note have been modified or the Mortgage or Mortgage
Note has been assumed; and (vi) the originals or certificates of a lender's
title insurance policy issued on the date of the origination of such Mortgage
Loan or, with respect to each Mortgage Loan not covered by a lender's title
insurance policy, an attorney's opinion of title given by an attorney
licensed to practice law in the jurisdiction where the Mortgaged Property is
located. (The Pooling and Servicing Agreement will require the Depositor
promptly (and in any event within _____ days of the Closing Date) to cause
each assignment of the Mortgage described in clause (iii) above to be
submitted for recording in the real property records of the jurisdiction in
which the related Mortgaged Property is located. Any such assignment
delivered in blank will be completed to the order of the Trustee prior to
recording. The Pooling and Servicing Agreement will also require the
Depositor to cause the endorsements on the Mortgage Notes delivered in blank
to be completed to the order of the Trustee.)
THE MASTER SERVICER
General. ____________________, a __________________ corporation, will
act as Master Servicer (in such capacity, the "Master Servicer") for the
Mortgage Loans pursuant to the Pooling and Servicing Agreement. The Master
Servicer(, a wholly-owned subsidiary of __________,) (is engaged in the
mortgage banking business and, as such, originates, purchases, sells and
services mortgage loans. _________________ primarily originates mortgage
loans through a branch system consisting of _______________________ offices
in __________ states, and through mortgage loan brokers.)
The executive offices of the Master Servicer are located at
_______________, telephone number (__)__________.
S-36
<PAGE>
Delinquency and Foreclosure Experience. The following tables set forth
certain information concerning the delinquency experience (including pending
foreclosures) on one- to four- family residential mortgage loans included in
the Master Servicer's servicing portfolio (which includes mortgage loans that
are subserviced by others). The indicated periods of delinquency are based
on the number of days past due on a contractual basis. No mortgage loan is
considered delinquent for these purposes until 31 days past due on a
contractual basis.
<TABLE>
<CAPTION> As of December 31, 19 As of December 31, 19 As of , 19
---------------------- --------------------- ----------------
By Dollar By Dollar By Dollar
By No. of Amount By No. of Amount By No. of Amount of
Loans of Loans Loans of Loans Loans Loans
------ ---------- ------- -------- ------ -------
(Dollar Amount in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio ________ ________ $______ ________ $________
$______
Period of
Delinquency
31 to 59 days
60 to 89 days
90 days or more ________ ________ ________ ________ ________ ________
Total Delinquent ________ $______ _________ $______ _________
Loans $______
Percent of Portfolio % % % % %
%
Foreclosures pending
(1)
Percent of Portfolio % % % % %
%
Foreclosures
Percent of Portfolio % % % % %
%
</TABLE>
____________________
(1) Includes bankruptcies which preclude foreclosure.
There can be no assurance that the delinquency and foreclosure
experience of the Mortgage Loans comprising the Mortgage Pool will correspond
to the delinquency and foreclosure experience of the Master Servicer's
mortgage portfolio set forth in the foregoing tables. The aggregate
delinquency and foreclosure experience on the Mortgage Loans comprising the
Mortgage Pool will depend on the results obtained over the life of the
Mortgage Pool.
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<PAGE>
CERTIFICATE ACCOUNT
The Master Servicer is required to deposit on a daily basis all amounts
received with respect to the Mortgage Loans of the Mortgage Pool, net of its
servicing compensation, into a separate Certificate Account maintained with
____________. Interest or other income earned on funds in the Certificate
Account will be paid to the Master Servicer as additional servicing
compensation. See "Description of the Trust Funds -- Mortgage Assets" and
"Description of the Agreements -- Certificate Account and Other Collection
Accounts" in the Prospectus.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
(Include description of Servicing Standard)
-----------------------------------------
The principal compensation to be paid to the Master Servicer in respect
of its master servicing activities will be the Servicing Fee. The Servicing
Fee will be payable monthly only from amounts received in respect of interest
on each Mortgage Loan, will accrue at the Servicing Fee Rate and will be
computed on the basis of the same principal amount and for the same period
respecting which any related interest payment on such Mortgage Loan is
computed. The Servicing Fee Rate (with respect to each Mortgage Loan equals
___ % per annum) (equals the weighted average of the excesses of the Mortgage
Rates over the respective Net Mortgage Rates).
As additional servicing compensation, the Master Servicer is entitled
to retain all assumption fees, prepayment penalties and late payment charges,
to the extent collected from mortgagors, together with any interest or other
income earned on funds held in the Certificate Account and any escrow
accounts. The Servicing Standard requires the Master Servicer to, among
other things, diligently service and administer the Mortgage Loans on behalf
of the Trustee and in the best interests of the Certificateholders, but
without regard to the Master Servicer's right to receive such additional
servicing compensation. The Master Servicer is obligated to pay certain
ongoing expenses associated with the Mortgage Pool and incurred by the Master
Servicer in connection with its responsibilities under the Agreement. See
"Description of the Agreements -- Retained Interest; Servicing Compensation
and Payment of Expenses" in the Prospectus for information regarding other
possible compensation payable to the Master Servicer and for information
regarding expenses payable by the Master Servicer (and "Certain Federal
Income Tax Consequences" herein regarding certain taxes payable by the Master
Servicer).
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date the Master Servicer shall furnish to each
Certificateholder, to the Depositor, to the Trustee and to the Rating Agency
a statement setting forth certain information with respect to the Mortgage
Loans and the Certificates required pursuant to the Pooling and Servicing
Agreement. In addition, within a reasonable period of time after each
calendar year, the Master Servicer shall furnish to each person who at any
time during such calendar year was the holder of a Certificate a statement
containing certain information with respect to the Certificates required
pursuant to the Pooling and Servicing Agreement, aggregated for such calendar
year or portion thereof during which such person was a Certificateholder.
See "Description of the Certificates -- Reports to Certificateholders" in the
Prospectus.
VOTING RIGHTS
At all times during the term of this Agreement, the Voting Rights shall
be allocated among the Classes of Certificateholders in proportion to the
respective Certificate Balances of their Certificates ((net, in the case of
the Class ( ), Class ( ) and Class ( ) Certificates, of any Uncovered Portion
of the related Certificate Balance)). Voting Rights allocated to a class of
Certificateholders shall be allocated among such Certificateholders in
proportion to the Percentage Interests evidenced by their respective
Certificates.
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<PAGE>
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earliest of (i) the final payment or other
liquidation of the last Mortgage Loan or REO Property subject thereto, and
(ii) the purchase of all of the assets of the Trust Fund by the Master
Servicer. Written notice of termination of the Pooling and Servicing
Agreement will be given to each Certificateholder, and the final distribution
will be made only upon surrender and cancellation of the Certificates at the
office of the Certificate Registrar specified in such notice of termination.
Any such purchase by the Master Servicer of all the Mortgage Loans and
other assets in the Trust Fund is required to be made at a price equal to the
greater of (1) the aggregate fair market value of all the Mortgage Loans and
REO Properties then included in the Trust Fund, as mutually determined by the
Master Servicer and the Trustee, and (2) the excess of (a) the sum of (i) the
aggregate Purchase Price of all the Mortgage Loans then included in the Trust
Fund and (ii) the fair market value of all REO Properties then included in the
Trust Fund, as determined by an appraiser mutually agreed upon by the Master
Servicer and the Trustee, over (b) the aggregate of amounts payable or
reimbursable to the Master Servicer under the Pooling and Servicing Agreement.
Such purchase will effect early retirement of the then outstanding Class
( ) Certificates, but the right of the Master Servicer to effect such
termination is subject to the requirement that the aggregate Stated Principal
Balance of the Mortgage Loans then in the Trust Fund is less than __% of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date. (In
addition, the Master Servicer may at its option purchase any class or classes
of Class ( ) Certificates with a Certificate Balance less than __% of the
original balance thereof at a price equal to such Certificate Balance plus
accrued interest through _________.)
USE OF PROCEEDS
The net proceeds from the sale of Class ( ) Certificates will be used
by the Depositor to pay the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Class ( ) Certificates, _____________, counsel
to the Depositor, will deliver its opinion generally to the effect that,
assuming compliance with all provisions of the Pooling and Servicing
Agreement, for federal income tax purposes, the Trust Fund will qualify as
a REMIC under the Code.
For federal income tax purposes, the Class ( ) Certificates will be the
sole class of "residual interests" in the REMIC and the Class ( ), Class (
) and Class ( ) Certificates will be the "regular interests" in the REMIC and
will be treated as debt instruments of the REMIC.
See "Certain Federal Income Tax Consequences -- REMICS" in the
Prospectus.
(The Class ( ) Certificates (may)(will not) be treated as having been
issued with original issue discount for federal income tax reporting
purposes. The prepayment assumption that will be used in determining the
rate of accrual of original issue discount, market discount and premium, if
any, for federal income tax purposes will be based on the assumption that
subsequent to the date of any determination the Mortgage Loans will prepay
at a rate equal to ___% (CPR)(SPA). No representation is made that the
Mortgage Loans will prepay at that rate or at any other rate. See "Certain
Federal Income Tax Consequences -- REMICS -- Taxation of Owners of REMIC
Regular Certificates" and "--Original Issue Discount" in the Prospectus.)
S-39
<PAGE>
(The Class ( ) Certificates may be treated for federal income tax
purposes as having been issued at a premium. Whether any holder of such a
class of Certificates will be treated as holding a certificate with
amortizable bond premium will depend on such Certificateholder's purchase
price and the distributions remaining to be made on such Certificate at the
time of its acquisition by such Certificateholder. Holders of such class of
Certificates should consult their own tax advisors regarding the possibility
of making an election to amortize such premium. See "Certain Federal Income
Tax Consequences --REMICS -- Taxation of Owners of REMIC Regular Certificates"
and "-- Premium" in the Prospectus.)
(The Class ( ) Certificates will be treated as "qualifying real property
loans" within the meaning of Section 593(d) of the Code(, assets described
in Section 7701(a)(19)(C) of the Code) and "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code generally in the same proportion
that the assets of the REMIC underlying such Certificates would be so
treated.) (In addition, interest (including original issue discount) on the
Class ( ) Certificates will be interests described in Section 856(c)(3)(B)
of the Code to the extent that such Class ( ) Certificates are treated as
"real estate assets" under Section 856(c)(5)(A) of the Code.) (Moreover, the
Class ( ) Certificates will be "obligation(s) . . . which . . .(are)
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(C) of the Code.) (The Class ( ) Certificates will not be
considered to represent an interest in "loans . . . secured by an interest
in real property" within the meaning of Section 7701 (a)(19)(C)(v) of the
Code.) See "Certain Federal Income Tax Consequences -- REMICS --
Characterization of Investments in REMIC Certificates" in the Prospectus.)
For further information regarding the federal income tax consequences
of investing in the Class ( ) Certificates, see "Certain Federal Income Tax
Consequences -- REMICS" in the Prospectus.
ERISA CONSIDERATIONS
(A fiduciary of any employee benefit plan or other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such
plans, accounts or arrangements are invested, that is subject to the Employee
Retirement arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975
of the Code should carefully review with its legal advisors whether the
purchase or holding of Class ( ) Certificates could give rise to a
transaction that is prohibited or is not otherwise permitted either under
ERISA or Section 4975 of the Code.
(The U.S. Department of Labor issued an individual exemption, Prohibited
Transaction Exemption (90-29) (the "Exemption"), (on May 24, 1990) to the
Underwriter, which generally exempts from the application of the prohibited
transaction provisions of Section 406 of ERISA, and the excise taxes imposed
on such prohibited transactions pursuant to Sections 4975(a) and (b) of the
Code and Section 501(i) of ERISA, certain transactions, among others,
relating to the servicing and operation of mortgage pools and the purchase,
sale and holding of mortgage pass-through certificates underwritten by an
Underwriter (as hereinafter defined), provided that certain conditions set
forth in the Exemption are satisfied. For purposes of this Section "ERISA
Considerations", the term "Underwriter" shall include (a) Merrill Lynch,
Pierce, Fenner & Smith Incorporated, (b) any person directly or indirectly,
through one or more intermediaries, controlling, controlled by or under
common control with Merrill Lynch, Pierce, Fenner & Smith Incorporated and
(c) any member of the underwriting syndicate or selling group of which a
person described in (a) or (b) is a manager or co-manager with respect to
the Class ( ) Certificates.
The Exemption sets forth six general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of the Class ( )
Certificates to be eligible for exemptive relief thereunder. First, the
acquisition of the Class ( ) Certificates by certain employee benefit plans
subject to Section 4975 of the Code (each, a "Plan"), must be on terms that
are at least as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party. Second, the rights and interests
evidenced by the Class ( ) Certificates must not be subordinate to the rights
and interests evidenced by the other certificates of the same trust. Third,
the Class ( ) Certificates at the time of acquisition by the Plan
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<PAGE>
must be rated in one of the three highest generic rating categories by
Standard & Poor's Corporation, Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. or Fitch Investors Service, Inc. Fourth, the Trustee
cannot be an affiliate of any member of the "Restricted Group", which consists
of any Underwriter, the Depositor, the Master Servicer, each sub-servicer and
any mortgagor with respect to Mortgage Loans constituting more than 5% of the
aggregate unamortized principal balance of the Mortgage Loans as of the date
of initial issuance of the Class ( ) Certificates. Fifth, the sum of all
payments made to and retained by the Underwriter must represent not more than
reasonable compensation for underwriting the Class ( ) Certificates; the sum
of all payments made to and retained by the Underwriter must represent not
more than reasonable compensation for underwriting the Class ( )
Certificates; the sum of all payments made to and retained by the Depositor
pursuant to the assignment of the Mortgage Loans to the Trust Fund must
represent not more than the fair market value of such obligations; and the
sum of all payments made to and retained by the Master Servicer and any
sub-servicer must represent not more than reasonable compensation for such
person's services under the Agreement and reimbursement of such person's
reasonable expenses in connection therewith. Sixth, the investing Plan must
be an accredited investor as defined in Rule 501 (a)(1) of Regulation D of
the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
Because the Class ( ) Certificates are not subordinate to any other
class of Certificates, the second general condition set forth above is
satisfied with respect to such Certificates. It is a condition of the
issuance of the Class ( ) Certificates that they be rated (not lower than)
"____" by ___________________. A fiduciary of a Plan contemplating
purchasing a Class ( ) Certificate in the secondary market must make its own
determination that at the time of such acquisition, the Class ( )
Certificates continue to satisfy the third general condition set forth above.
The Depositor expects that the fourth general condition set forth above will
be satisfied with respect to the Class ( ) Certificates. A fiduciary of a
Plan contemplating purchasing a Class ( ) Certificate must make its own
determination that the first, third, fifth and sixth general conditions set
forth above will be satisfied with respect to such Class ( ) Certificate.
Before purchasing a Class ( ) Certificate, a fiduciary of a Plan should
itself confirm (a) that such Certificates constitute "certificates" for
purposes of the Exemption and (b) that the specific and general conditions
of the Exemption and the other requirements set forth in the Exemption would
be satisfied. In addition to making its own determination as to the
availability of the exemptive relief provided in the Exemption, the Plan
fiduciary should consider the availability of any other prohibited
transaction exemptions, in particular, Prohibited Transaction Class Exemption
83-1. See "ERISA Considerations" in the Prospectus.
Any Plan fiduciary considering whether to purchase a Class ( )
Certificate on behalf of a Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Code to such investment.
LEGAL INVESTMENT
The Class ( ) Certificates (will) (will not) constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA") (so long as they are rated in at least the second
highest rating category by the Rating Agency, and, as such, are legal
investments for certain entities to the extent provided in SMMEA). SMMEA
provided that states could override its provisions on legal investment and
restrict or condition investment in mortgage related securities by taking
statutory action on or prior to October 3, 1991. Certain states have enacted
legislation which overrides the preemption provisions of SMMEA.
The Depositor makes no representations as to the proper characterization
of the Class ( ) Certificates for legal investment or other purposes, or as
to the ability of particular investors to purchase the Class ( ) Certificates
under applicable legal investment restrictions. These uncertainties may
adversely affect the liquidity of the Class ( ) Certificates. Accordingly,
all institutions whose investment activities are subject to legal investment
laws and regulations, regulatory
S-41
<PAGE>
capital requirements or review by regulatory authorities should consult with
their own legal advisors in determining whether and to what extent the
Class ( ) Certificates constitute a legal investment under SMMEA or is subject
to investment, capital or other restrictions.
See "Legal Investment" in the Prospectus.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and the Underwriter, the Class ( )
Certificates will be purchased from the Depositor by the Underwriter, an
affiliate of the Depositor, upon issuance. Distribution of the Class ( )
Certificates will be made by the Underwriter from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds to the Depositor from the Certificates will be __% of the
initial aggregate principal balance thereof as of the Cut-off Date,
plus accrued interest from the Cut-off Date at a rate of __% per annum,
before deducting expenses payable by the Depositor. In connection with the
purchase and sale of the Class ( ) Certificates, the Underwriter may be
deemed to have received compensation from the Depositor in the form of
underwriting discounts.
The Depositor has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities,
including liabilities under the Securities Act of 1933.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Brown &
Wood LLP, New York, New York and for the Underwriter by Brown & Wood LLP.
RATING
It is a condition to issuance that the Class ( ) Certificates be rated
(not lower than) "______" by ________________. However, no person is
obligated to maintain the rating on the Class ( ) Certificates, and
_______________ is not obligated to monitor its rating following the Closing
Date.
________________'s ratings on mortgage pass-through certificates address
the likelihood of the receipt by holders thereof of payments to which they
are entitled. _____________'s ratings take into consideration the credit
quality of the mortgage pool, structural and legal aspects associated with
the certificates, and the extent to which the payment stream in the mortgage
pool is adequate to make payments required under the certificates.
_________________'s rating on the Class ( ) Certificates does not, however,
constitute a statement regarding frequency of prepayments on the Mortgage
Loans. (The rating of the Class ( ) Certificates does not address the
possibility that the holders of such Certificates may fail to fully recover
their initial investments.) See "Special Considerations" herein.
There can be no assurance as to whether any rating agency not requested
to rate the Class ( ) Certificates will nonetheless issue a rating and, if
so, what such rating would be. A rating assigned to the Class ( )
Certificates by a rating
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<PAGE>
agency that has not been requested by the Depositor to do so may be lower
than the rating assigned by ________________'s pursuant to the Depositor's
request.
The rating of the Class ( ) Certificates should be evaluated
independently from similar ratings on other types of securities. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
S-43
<PAGE>
ANNEX A
(TITLE, SERIES OF MBS)
TERM SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
CUT-OFF DATE: ( ) MORTGAGE POOL CUT-OFF DATE $( )
BALANCE:
DATE OF INITIAL ( ) REFERENCE DATE BALANCE: $( )
ISSUANCE:
RELATED TRUSTEE: ( ) PERCENT OF ORIGINAL MORTGAGE POOL ( )%
REMAINING
MATURITY DATE: ( )
AS OF REFERENCE DATE:
</TABLE>
<TABLE>
<CAPTION> Initial
Class Certificate
of Pass-Through Principal
Certificates Rate Balance Features
------------ ------------ ------------ --------
<S> <C> <C> <C>
( ) ( )% $( ) ( )
</TABLE>
(First MBS Distribution Date on which the MBS may receive a portion of
prepayments: (date))
<TABLE>
<CAPTION>
<S> <S> <S>
MINIMUM SERVICING FEE RATE:* ( )% per annum AS OF DATE OF
MAXIMUM SERVICING FEE RATE:* ( )% per annum INITIAL ISSUANCE
----------------
SPECIAL HAZARD AMOUNT: $( )
FRAUD LOSS AMOUNT: $( )
BANKRUPTCY AMOUNT: $( )
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of As of Date of
Delivery Date Initial Issuance
------------- ----------------
<S> <C> <C>
SENIOR PERCENTAGE ( )% ( )%
SUBORDINATE PERCENTAGE ( )% ( )%
</TABLE>
<TABLE>
<CAPTION>
Ratings: Rating Agency Class Voting Rights:
------------- ----- -------------
<S> <S> <S>
( ) ( )
( )
( )
( )
</TABLE>
A-2
<PAGE>
PROSPECTUS
- ----------
SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1996
ASSET BACKED CERTIFICATES
ASSET BACKED NOTES
(Issuable in Series)
MERRILL LYNCH MORTGAGE INVESTORS, INC.
Depositor
________
The Asset Backed Certificates (the "Certificates") and Asset Backed
Notes (the "Notes" and, together with the Certificates, the "Securities")
offered hereby and by Supplements to this Prospectus (the "Offered
Securities") will be offered from time to time in one or more series. Each
series of Certificates will represent in the aggregate the entire beneficial
ownership interest in a trust fund (with respect to any series, the "Trust
Fund") consisting of one or more segregated pools of various types of single
family and/or multifamily mortgage loans (or certain balances thereof)
(collectively, the "Mortgage Loans"), unsecured
home improvement installment sales contracts and installment loans
("Unsecured Home Improvement Loans"), mortgage participations ("Mortgage
Participations"), mortgage pass-through certificates, or mortgage-backed
securities evidencing interests therein or secured thereby (the "MBS"),
manufactured housing installment sale contracts or installment loan
agreements ("Contracts"), certain direct obligations of the United States,
agencies thereof or agencies created thereby (the "Government Securities"),
certain small business loans described herein or a combination of Mortgage
Loans, Unsecured Home Improvement Loans, Mortgage Participations, MBS,
Contracts, Government Securities and/or such small business loans (with
respect to any series, collectively, "Assets"). The Mortgage Loans, Mortgage
Participations and MBS are collectively referred to herein as the "Mortgage
Assets." If a series of Securities includes Notes, such Notes will be issued
and secured pursuant to an indenture and will represent indebtedness of the
Trust Fund. If so specified in the related Prospectus Supplement, the Trust
Fund for a series of Securities may include letters of credit, insurance
policies, guarantees, reserve funds or other types of credit support, or any
combination thereof (with respect to any series, collectively, "Credit
Support"), and currency or interest rate exchange agreements and other
financial assets, or any combination thereof (with respect to any series,
collectively, "Cash Flow Agreements"). See "Description of the Trust Funds,"
"Description of the Securities" and "Description of Credit Support."
Each series of Securities will consist of one or more classes of
Securities that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Securities in respect of certain distributions on the
Securities; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be
entitled to interest distributions, with disproportionately low, nominal or
no principal distributions; (v) provide for distributions of accrued interest
thereon commencing only following the occurrence of certain events, such as
the retirement of one or more other classes of Securities of such series;
(vi) provide for distributions of principal as described in the related
Prospectus Supplement; and/or (vii) provide for
distributions based on a combination of two or more components thereof with
one or more of the characteristics described in this paragraph, to the extent
of available funds, in each case as described in the related Prospectus
Supplement. Any such classes may include classes of Offered Securities. See
"Description of the Securities."
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the prospectus to which it relates
shall not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
<PAGE>
Principal and interest with respect to Securities will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Securities of any series will be made only from the assets of the related
Trust Fund.
The Securities of each series will not represent an obligation of or
interest in the Depositor, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, any Master Servicer, any Sub-Servicer or any of their
respective affiliates, except to the limited extent described herein and in
the related Prospectus Supplement. Neither the Securities nor any assets in
the related Trust Fund will be guaranteed or insured by any governmental
agency or instrumentality or by any other person, unless otherwise provided
in the related Prospectus Supplement. The assets in each Trust Fund will be
held in trust for the benefit of the holders of the related series of
Certificates pursuant to a Pooling and Servicing Agreement or a Trust
Agreement, as more fully described herein.
The yield on each class of Securities of a series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Assets in the related Trust Fund and the
timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein
and in the related Prospectus Supplement.
Prospective investors should review the information appearing under the
caption "Special Considerations" herein and such information as may be set
forth under the caption "Special Considerations" in the related Prospectus
Supplement before purchasing any Offered Security.
If so provided in the related Prospectus Supplement, one or more
elections may be made to treat the related Trust Fund or a designated portion
thereof as a "real estate mortgage investment conduit" for federal income tax
purposes. See also "Certain Federal Income Tax Consequences" herein.
________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________
Prior to issuance there will have been no market for the Securities of
any series and there can be no assurance that a secondary market for any
Offered Securities will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of the Offered
Securities of any series unless accompanied by the Prospectus Supplement for
such series.
Offers of the Offered Securities may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
________
MERRILL LYNCH & CO.
The date of this Prospectus is ______, 199_.
2
<PAGE>
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Securities covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is
in addition to the obligation of dealers to deliver a Prospectus and
Prospectus Supplement when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement
relating to the Offered Securities of each series will, among other things,
set forth with respect to such Securities, as appropriate: (i) a description
of the class or classes of Securities, the payment provisions with respect
to each such class and the Pass-Through Rate or interest rate or method of
determining the Pass-Through Rate or interest rate with respect to each such
class; (ii) the aggregate principal amount and distribution dates relating
to such series and, if applicable, the initial and final scheduled
distribution dates for each class; (iii) information as to the assets
comprising the Trust Fund, including the general characteristics of the
assets included therein, including the Assets and any Credit Support and Cash
Flow Agreements (with respect to the Securities of any series, the "Trust
Assets"); (iv) the circumstances, if any, under which the Trust Fund may be
subject to early termination; (v) additional information with respect to the
method of distribution of such Certificates; (vi) whether one or more REMIC
elections will be made and designation of the regular interests and residual
interests; (vii) the aggregate original percentage ownership interest in the
Trust Fund to be evidenced by each class of Securities; (viii) information
as to any Master Servicer, any Sub-Servicer and the Trustee, as applicable;
(ix) information as to the nature and extent of subordination with respect
to any class of Securities that is subordinate in right of payment to any
other class; and (x) whether such Securities will be initially issued in
definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a
part) under the Securities Act of 1933, as amended, with respect to the
Offered Securities. This Prospectus and the Prospectus Supplement relating
to each series of Securities contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661; and New
York Regional Office, Seven World Trade Center, 13th Floor, New York, New
York 10048. The Commission maintains a Web site at hhtp://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Depositor, that file electronically
with the Commission.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and
any Prospectus Supplement with respect hereto do not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
Offered Securities or an offer of the Offered Securities to any person in any
state or other jurisdiction in which such offer would be unlawful. The
delivery of this Prospectus and any Prospectus Supplement hereto at any time
does not imply that information herein is correct as of any time subsequent
to its date.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Securities of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Securities are issued, or
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Securities, pursuant to the applicable Agreement. Such reports may
be available to holders of interests in the Securities (the
"Securityholders") upon request to their respective DTC participants. See
"Description of the Securities-Reports to Securityholders" and "Description
of the Agreements-Evidence as to Compliance." The Depositor will file or
cause to be filed with the Commission such periodic reports with respect to
each Trust Fund as are required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the rules and regulations of the Commission
thereunder, as interpreted by the staff of the Commission thereunder.
3
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports
filed or caused to be filed by the Depositor with respect to a Trust Fund
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the termination of an offering of Offered Securities evidencing interests
therein. Upon request, the Depositor will provide or cause to be provided
without charge to each person to whom this Prospectus is delivered in
connection with the offering of one or more classes of Offered Securities,
a copy of any or all documents or reports incorporated herein by reference,
in each case to the extent such documents or reports relate to one or more
of such classes of such Offered Securities, other than the exhibits to such
documents (unless such exhibits are specifically incorporated by reference
in such documents). Requests to the Depositor should be directed in
writing to Merrill Lynch Mortgage Investors, Inc., 250 Vesey Street,
World Financial Center - North Tower, 10th Floor, New York, New York
10281-1310, Attention: Secretary, or by telephone at (212) 449-0357.
The Depositor has determined that its financial statements are not
material to the offering of any Offered Securities.
4
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . . . 4
SUMMARY OF PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 16
DESCRIPTION OF THE TRUST FUNDS . . . . . . . . . . . . . . . . . . . . . 22
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
YIELD CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 29
THE DEPOSITOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
DESCRIPTION OF THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . 35
DESCRIPTION OF THE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 43
DESCRIPTION OF CREDIT SUPPORT . . . . . . . . . . . . . . . . . . . . . . 66
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS . . . . . . . . . . . . . . . . . 67
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . 82
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 115
LEGAL INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 119
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 112
RATING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
INDEX OF PRINCIPAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 114
5
<PAGE>
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in
its entirety by reference to the more detailed information appearing
elsewhere in this Prospectus and by reference to the information with respect
to each series of Securities contained in the Prospectus Supplement to be
prepared and delivered in connection with the offering of such series. An
Index of Principal Definitions is included at the end of this Prospectus.
Title of Certificates . . . . . . Asset-Backed Certificates (the
"Certificates") and Asset Backed
Notes (the "Notes" and, together
with the Certificates, the
"Securities"), issuable in series.
Depositor . . . . . . . . . . . . Merrill Lynch Mortgage Investors,
Inc. (the "Depositor"), a wholly
owned subsidiary of Merrill Lynch
Mortgage Capital, Inc., which is a
wholly-owned indirect subsidiary
of Merrill Lynch & Co., Inc. The
Depositor is an affiliate of
Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Neither Merrill
Lynch & Co., Inc. nor any of its
affiliates, including the
Depositor and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, will
insure or guarantee the Certificates
or the Mortgage Loans or be otherwise
obligated in respect thereof.
Master Servicer . . . . . . . . . The master servicer or master
servicers (each, a "Master
Servicer"), if any, or a servicer
for substantially all the Mortgage
Loans for each series of
Securities, which servicer or master
servicer(s) may be affiliates of the
Depositor, will be named in the
related Prospectus Supplement. See
"Description of the Agreements-
General" and "-Collection and
Other Servicing Procedures."
Trustee . . . . . . . . . . . . . The trustee (the "Trustee") for
each series of Certificates will be
named in the related Prospectus
Supplement. See "Description of
the Agreements-The Trustee."
The Trust Assets . . . . . . . . Each series of Certificates will
represent in the aggregate the
entire beneficial ownership
interest in a Trust Fund. If a
series of Securities includes Notes,
such Notes will represent
indebtedness of the Trust Fund and
will be secured by a security
interest in the Assets of the Trust
Fund. A Trust Fund will consist
primarily of any of the following
assets (the Mortgage Assets,
Unsecured Home Improvement Loans,
Contracts, Government Securities
and the small business loans
described herein may be referred
to collectively or individually as
"Assets"):
(a) Mortgage Assets . . The Mortgage Assets with respect
to a series of Certificates will
consist of a pool of single family
and/or multifamily loans (or certain
balances thereof)
(collectively, the "Mortgage
Loans"), mortgage participations
("Mortgage Participations") or
mortgage pass-through certificates
or other mortgage-backed securities
evidencing interests in or secured
by Mortgage Loans(collectively, the
"MBS") or a combination of Mortgage
Loans, Mortgage Participations
and/or MBS. The Mortgage Loans will
not be guaranteed or insured by the
Depositor or any
6
<PAGE>
of its affiliates or, unless
otherwise provided in the Prospectus
Supplement, by any governmental
agency or instrumentality or other
person. The Mortgage Loans will be
secured by first and/or junior liens
on (i) one- to four-family
residential properties or security
interests in shares issued by
cooperative housing corporations
("Single Family Properties") and/or
(ii) residential properties
consisting of five or more dwelling
units, including mixed residential
and commercial structures
("Multifamily Properties"). The
Mortgage Loans may include
(i) closed-end and/or revolving
home equity loans or certain
balances thereof ("Home Equity
Loans") and/or (ii) home improvement
installment sales contracts and
installment loan agreements
("Home Improvement Contracts").
The Mortgaged Properties may be
located in any one of the fifty
states, the District of Columbia
or the Commonwealth of
Puerto Rico. The Prospectus
Supplement will indicate additional
jurisdictions (which may be outside
the United States), if any,
in which the
Mortgaged Properties may be located.
Unless otherwise provided in the
related Prospectus Supplement, all
Mortgage Loans will have individual
principal balances at origination of
not less than $25,000 and original
terms to maturity of not more than
40 years. All Mortgage Loans will
have been originated by persons
other than the Depositor, and all
Mortgage Assets will have been
purchased, either directly or
indirectly, by the Depositor on or
before the date of initial issuance
of the related series of
Certificates. The related
Prospectus Supplement will indicate
if any such persons are affiliates
of the Depositor.
Each Mortgage Loan may provide for
accrual of interest thereon at an
interest rate (a "Mortgage Rate")
that is fixed over its term or that
adjusts from time to time, or that
may be converted from an adjustable
to a fixed Mortgage Rate, or from a
fixed to an adjustable Mortgage
Rate, from time to time at the
mortgagor's election, in each case
as described in the related
Prospectus Supplement. Adjustable
Mortgage Rates on the Mortgage Loans
in a Trust Fund may be based on one
or more indices. Each Mortgage Loan
may provide for scheduled payments
to maturity, payments that adjust
from time to time to accommodate
changes in the Mortgage Rate or to
reflect the occurrence of certain
events, and may provide for negative
amortization or accelerated
amortization, in each case as
described in the related Prospectus
Supplement. Each Mortgage Loan may
be fully amortizing or require a
balloon payment due on its stated
maturity date, in each case as
described in the related Prospectus
Supplement. Each Mortgage Loan may
contain prohibitions on prepayment
or require payment of a premium or
a yield maintenance penalty in
connection with a prepayment, in
each case as described in the
related Prospectus Supplement. The
Mortgage Loans may provide for
payments of principal, interest or
both, on due dates that occur
monthly, quarterly, semi-annually or
at such other interval as is
specified in the related Prospectus
Supplement. See "Description of the
Trust Funds-Assets."
(b) Unsecured Home The Assets with respect to a
Improvement series of Securities may consist of
Loans . . .. . . . . . . or include home improvement
installment sales contracts or
installment loans that are
7
<PAGE>
unsecured ("Unsecured Home
Improvement Loans"). The Unsecured
Home Improvement Loans may have
any of the features described under
"(a) Mortgage Assets" above, except
that they will not be secured by a
lien on or other security interest
in any property. Unless the context
otherwise requires, references in
this Prospectus to Mortgage Loans,
Whole Loans and related terms shall
include Unsecured Home Improvement
Loans and related terms to the
extent relevant (e.g., a reference
----
to a Mortgaged Property or hazard
insurance does not relate to an
Unsecured Home Improvement
Contract).
(c) Contracts . . . . . The Contracts with respect to a
series of Securities will consist of
manufactured housing installment
sale contracts and installment loan
agreements secured by a security
interest in a new or used
manufactured home (each, a
"Manufactured Home"), and, to the
extent, if any, indicated in the
related Prospectus Supplement, by
real property. The Contracts will
not be insured or guaranteed by
the Depositor or any of its
affiliates or, unless otherwise
specified in the related Prospectus
Supplement, by any governmental
agency or instrumentality or any
other person. The Manufactured Homes
may be located in any of the fifty
states or any other jurisdiction
specified in the related Prospectus
Supplement. All Contracts will
have been originated by persons other
than the Depositor, and all Contracts
will have been purchased, either
directly or indirectly, by the
Depositor on or before the date
of initial issuance of the related
series of Certificates. The related
Prospectus Supplement will indicate
if any such persons are affiliates
of the Depositor. Each Contract may
provide for an annual percentage
rate thereon (a "Contract Rate")
that is fixed over its term or that
adjusts as described in the related
Prospectus Supplement. The manner
of determining scheduled payments
due on the Contract will be
described in the Prospectus
Supplement. The Prospectus
Supplement will describe the minimum
principal balance of the Contracts
at origination and the maximum
original term to maturity of the
Contracts.
(d) Government If so provided in the related
Securities. . . . . Prospectus Supplement, the Trust
Fund may include, in addition to
Mortgage Assets and/or Contracts,
certain direct obligations of the
United States, agencies thereof or
agencies created thereby which
provide for payment of interest
and/or principal (collectively,
"Government Securities").
(e) SBA Loans and SBA If so provided in the related
504 Loans . . . . . Prospectus Supplement, the Trust
Fund may include (i) the
unguaranteed portion of loans ("SBA
Loans") originated under the general
business loan program (the "Section
7(a) Program") of the U.S. Small
Business Association (the "SBA")
created pursuant to Section 7(a) of
the Small Business Act of 1953 (the
"SBA Act") and/or (ii) loans ("SBA
504 Loans") originated under the
SBA's 504 program (the "SBA 504 Loan
Program"). The loans originated by
the originators under the SBA 504
Loan Program are not guaranteed by
the SBA. Unless the context
otherwise requires, references in
this Prospectus to Mortgage Loans
and related terms
8
<PAGE>
shall include SBA Loans and SBA 504
Loans and related terms to the extent
relevant (e.g., a reference to a
----
Mortgaged Property or hazard insurance
does not relate to a SBA Loan or a
SBA 504 Loan).
(f) Collection Accounts Each Trust Fund will include one
or more accounts established and
maintained on behalf of the
Securityholders into which the
person or persons designated in
the related Prospectus Supplement
will, to the extent described herein
and in such Prospectus Supplement,
deposit all payments and collections
received or advanced with respect
to the Assets and other assets in the
Trust Fund. Such an account may be
maintained as an interest bearing
or a non-interest bearing account,
and funds held therein may be held as
cash or invested in certain
short-term, investment grade
obligations, in each case as
described in the related Prospectus
Supplement. See "Description of
the Agreements-Collection Account and
Related Accounts."
(g) Credit Support . . If so provided in the related
Prospectus Supplement, partial or
full protection against certain
defaults and losses on the Assets
in the related Trust Fund may be
provided to one or more classes of
Securities of the related series
in the form of subordination of one
or more other classes of Securities
of such series, which other classes
may include one or more classes of
Offered Securities, or by one or
more other types of credit support,
such as a letter of credit,
insurance policy, guarantee,
reserve fund or another type of
credit support, or a combination
thereof (any such coverage with
respect to the Securities of any
series, "Credit Support"). The
amount and types of coverage, the
identification of the entity
providing the coverage (if
applicable) and related
information with respect to each
type of Credit Support, if any, will
be described in the Prospectus
Supplement for a series of
Securities. The Prospectus
Supplement for any series
of Securities evidencing an
interest in a Trust Fund that
includes MBS will describe any
similar forms of credit support
that are provided by or
with respect to, or are
included as part of the trust fund
evidenced by or providing security
for, such MBS. See "Special
Considerations-Credit Support
Limitations" and "Description of
Credit Support."
(h) Cash Flow Agreements If so provided in the related
Prospectus Supplement, the Trust
Fund may include guaranteed
investment contracts pursuant to
which moneys held in the funds and
accounts established for the
related series will be invested at a
specified rate. The Trust Fund may
also include certain other
agreements, such as interest rate
exchange agreements, interest rate
cap or floor agreements, currency
exchange agreements or similar
agreements provided to reduce the
effects of interest rate or currency
exchange rate fluctuations
9
<PAGE>
on the Assets or on one or more
classes of Securities. (Currency
exchange agreements might be included
in the Trust Fund if some or all of
the Mortgage Assets (such as Mortgage
Loans secured by Mortgaged
Properties located outside the
United States) were denominated in
a non-United States currency.) The
principal terms of any such
guaranteed investment contract or
other agreement (any such
agreement, a "Cash Flow Agreement"),
including, without limitation,
provisions relating to the timing,
manner and amount of payments
thereunder and provisions relating
to the termination thereof, will be
described in the Prospectus
Supplement for the related series.
In addition, the related
Prospectus Supplement will provide
certain information with respect to
the obligor under any such Cash Flow
Agreement. The Prospectus Supplement
for any series of Securities
evidencing an interest in a Trust
Fund that includes MBS will
describe any cash flow agreements
that are included as part of the
trust fund evidenced by or providing
security for such MBS. See
"Description of the Trust Funds-Cash
Flow Agreements."
(i) Pre-Funding Account To the extent provided in a
Prospectus Supplement, the Depositor
will be obligated (subject only to
the availability thereof) to sell at
a predetermined price, and the Trust
Fund for the related series of
Securities will be obligated to
purchase (subject to the
satisfaction of certain conditions
described in the applicable
Agreement), additional Assets (the
"Subsequent Assets") from time to
time (as frequently as daily)
within the number of months specified
in the Prospectus Supplement after the
issuance of such series of
Securities having an
aggregate principal balance
approximately equal to the amount
on deposit in the Pre-Funding Account
(the "Pre-Funded Amount") for such
series on date of such issuance.
Description of Securities . . . . Each series of Certificates will
evidence an interest in the
related Trust Fund and will be issued
pursuant to a pooling and servicing
agreement or a trust agreement.
Pooling and servicing agreements
and trust agreements are referred to
herein as the "Agreements." If a
series of Securities includes
Notes, such Notes will represent
indebtedness of the related Trust
Fund and will be secured by a
security interest in the Assets of
the Trust Fund (or a specified
group thereof) pursuant to an
indenture.
Each series of Securities
will include one or more classes.
Each class of Securities (other than
certain Stripped Interest
Securities, as defined below) will
have a stated principal amount (a
"Security Balance") and except for
certain Stripped Principal
Securities, as defined below),
will accrue interest thereon based on
a fixed, variable or adjustable
interest rate (in the case of
Certificates, a "Pass-Through
Rate"). The related Prospectus
Supplement will specify the
Security Balance, if any, and the
Pass-Through Rate or interest rate
for each class of Securities or,
in the case of a variable or
adjustable Pass-Through Rate
or interest rate, the
method for determining the Pass-
Through Rate or interest rate.
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Distributions on Securities . . . Each series of Securities will
consist of one or more classes of
Securities that may (i) provide
for the accrual of interest thereon
based on fixed, variable or
adjustable rates; (ii) be senior
(collectively, "Senior Securities")
or subordinate (collectively,
"Subordinate Securities") to one
or more other classes of Securities
in respect of certain distributions
on the Securities; (iii) be entitled
to principal distributions, with
disproportionately low, nominal or
no interest distributions
(collectively, "Stripped Principal
Securities"); (iv) be entitled to
interest distributions, with
disproportionately low, nominal or
no principal distributions
(collectively, "Stripped Interest
Securities"); (v) provide for
distributions of accrued interest
thereon commencing only following
the occurrence of certain events,
such as the retirement of one or
more other classes of Securities
of such series (collectively,
"Accrual Securities"); (vi) provide
for distributions of principal
as described in the related Prospectus
Supplement; and/or (vii) provide
for distributions based on a
combination of two or more
components thereof with one or
more of the characteristics
described in this paragraph,
including a Stripped Principal
Security component and a
Stripped Interest Security
component, to the extent of
available funds, in each case as
described in the related Prospectus
Supplement. If so specified in
the related Prospectus Supplement,
distributions on one or more
classes of a series of Securities
may be limited to collections from a
designated portion of the Mortgage
Loans in the related Mortgage Pool
or Contracts in the related
Contract Pool (each such portion of
Mortgage Loans, a "Mortgage Loan
Group" and each such portion of the
Contracts, a "Contract Group"). See
"Description of the Securities--
General." Any such classes may
include classes of Offered
Securities. With respect to
Securities with two or more
components, references herein to
Security Balance, notional amount
and Pass-Through Rate or interest
rate refer to the principal
balance, if any, notional amount,
if any, and the Pass-Through Rate or
interest rate, if any, for any such
component.
The Securities will not be
guaranteed or insured by the
Depositor or any of its
affiliates, by any governmental
agency or instrumentality or by any
other person, unless otherwise
provided in the related Prospectus
Supplement. See "Special
Considerations-Limited
Assets" and "Description of the
Securities."
(a) Interest . . . . . . . . Interest on each class of Offered
Securities (other than Stripped
Principal Securities and certain
classes of Stripped Interest
Securities) of each series will
accrue at the applicable
Pass-Through Rate or interest rate
on the outstanding Security
Balance thereof and will be
distributed to Securityholders as
provided in the related Prospectus
Supplement. The specified date on
which distributions are to be made
is a "Distribution Date."
Distributions with respect to
interest on Stripped Interest
Securities may be made on
each Distribution Date on the
basis of a notional amount as
described in the related Prospectus
Supplement. Distributions of
interest with respect to one or
more classes of Securities may be
reduced to the extent of certain
delinquencies, losses, prepayment
interest shortfalls, and other
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<PAGE>
contingencies described herein and
in the related Prospectus Supplement.
See "Special Considerations-Average
Life of Securities; Prepayments;
Yields," "Yield Considerations" and
"Description of the Securities-
Distributions of Interest on the
Securities."
(b) Principal . . . . . . . The Securities of each series
initially will have an aggregate
Security Balance no greater than
the outstanding principal balance
of the Assets as of, unless the
related Prospectus Supplement
provides otherwise, the close of
business on the first day of the
month of formation of the related
Trust Fund (the "Cut-off Date"),
after application of scheduled
payments due on or before such date,
whether or not received. The Security
Balance of a Security outstanding
from time to time represents the
maximum amount that the holder
thereof is then entitled to
receive in respect of principal
from future cash flow on the assets
in the related Trust Fund. Unless
otherwise provided in the related
Prospectus Supplement, distributions
of principal will be made on each
Distribution Date to the class or
classes of Securities entitled
thereto until the Security
Balances of such Securities
have been reduced to zero. Unless
otherwise specified in the related
Prospectus Supplement, distributions
of principal of any class of
Securities will be made on a pro
rata basis among all of the
Securities of such class or by random
selection, as described in the related
Prospectus Supplement or otherwise
established by the related Trustee.
Stripped Interest Securities with no
Security Balance will not receive
distributions in respect of
principal. See "Description of the
Securities-Distributions of
Principal of the Securities."
Advances . . . . . . . . . . . . Unless otherwise provided in the
related Prospectus Supplement, the
Master Servicer will be obligated
as part of its servicing
responsibilities to make certain
advances that in its good faith
judgment it deems recoverable with
respect to delinquent scheduled
payments on the Whole Loans or
Contracts in such Trust Fund.
Neither the Depositor nor any of
its affiliates will have any
responsibility to make such
advances. Advances made by a
Master Servicer are reimbursable
generally from subsequent recoveries
in respect of such Whole Loans or
Contracts and otherwise to the
extent described herein and in the
related Prospectus Supplement. If
and to the extent provided in the
Prospectus Supplement for any
series, the Master Servicer will
be entitled to receive interest on
its outstanding advances, payable
from amounts in the related Trust
Fund. The Prospectus Supplement for
any series of Securities evidencing
an interest in a Trust Fund that
includes MBS will describe any
corresponding advancing obligation
of any person in connection with
such MBS. See "Description of the
Securities-Advances in Respect of
Delinquencies."
Termination . . . . . . . . . . . If so specified in the related
Prospectus Supplement, a series of
Securities may be subject to
optional early termination through
the repurchase of the Assets in
the related Trust Fund by the party
specified therein, under the
circumstances and in the manner
set forth therein. If so provided
in the related Prospectus Supplement,
upon the reduction of the Security
Balance
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<PAGE>
of a specified class or classes of
Securities to a specified percentage
or amount or on and after a date
specified in such Prospectus
Supplement, the party specified
therein will solicit bids for the
purchase of all of the Assets of
the Trust Fund, or of a sufficient
portion of such Assets to retire
such class or classes, or purchase
such Assets at a price set forth
in the related Prospectus Supplement.
In addition, if so provided in the
related Prospectus Supplement,
certain classes of Securities may
be purchased subject to similar
conditions. See "Description of
the Securities-Termination."
Registration of Securities . . . If so provided in the related
Prospectus Supplement, one or more
classes of the Offered Securities
will initially be represented by
one or more certificates or notes,
as applicable, registered
in the name of Cede & Co., as the
nominee of DTC. No person
acquiring an interest in Offered
Securities so registered will be
entitled to receive a definitive
certificate or note, as applicable,
representing such
person's interest except in the
event that definitive certificates
or notes, as applicable, are
issued under the limited
circumstances described herein.
See "Special Considerations-Book-
Entry Registration" and
"Description of the Securities-
Book-Entry Registration and
Definitive Securities."
Tax Status of the Certificates . The Certificates of each series
will constitute, as specified in the
related Prospectus Supplement,
either (i) "regular interests"
("REMIC Regular Certificates") and
"residual interests" ("REMIC
Residual Certificates") in a Trust
Fund treated as a real estate
mortgage investment conduit
("REMIC") under Sections 860A
through 860G of the Internal
Revenue Code of 1986, as amended (the
"Code"), (ii) interests ("Grantor
Trust Certificates") in a Trust Fund
treated as a grantor trust under
applicable provisions of the Code
or (iii) an interest in a Trust Fund
treated as a partnership for
purposes of federal and state
income tax.
(a) REMIC . . . . . . . . . REMIC Regular Certificates generally
will be treated as debt obligations
of the applicable REMIC for federal
income tax purposes. Certain REMIC
Regular Certificates may be issued
with original issue discount for
federal income tax purposes. See
"Certain Federal Income Tax
Consequences" herein and in the
related Prospectus Supplement.
The Offered Certificates evidencing
an interest in a Trust Fund
containing Mortgage Loans (not
including Unsecured Home Improvement
Loans, SBA Loans and SBA 504 Loans)
will be treated as (i) "qualifying
real property loans" within the
meaning of section 593(d)(1) of
the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) assets
described in section 7701(a)(19)(C)
of the Code and (iii) "real estate
assets" within the meaning of
section 856(c)(5)(A) of the Code,
in each case to the extent described
herein and in the Prospectus. See
"Certain Federal Income Tax
Consequences" herein and in the
related Prospectus Supplement.
(b) Grantor Trust . . . . . If the related Prospectus Supplement
specifies that the related Trust
Fund will be a grantor trust, the
Trust Fund will be classified as a
grantor trust and not as an
association taxable as a corporation
for federal income tax
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<PAGE>
purposes, and therefore holders of
Certificates will be treated as the
owners of undivided pro rata
interests in the Assets held by the
Trust Fund.
(c) Partnership . . . . . . If so specified in a Prospectus
Supplement, the related Trust Fund
will be treated as a partnership
for purposes of federal and state
income tax, and each
Certificateholder, by the acceptance
of a Certificate of such Trust
Fund, will agree to treat
the Trust Fund as a partnership in
which such Certificateholder is a
partner for federal income and
state tax purposes. Alternative
characterizations of such Trust
Fund and such Certificates are
possible, but would not result in
materially adverse tax consequences
to Certificateholders.
Investors are advised to consult
their tax advisors and to review
"Certain Federal Income Tax
Consequences" herein and in the
related Prospectus Supplement.
Tax Status of Notes . . . . . . . Unless otherwise specified in the
related Prospectus Supplement, Notes
of a series will be treated as
indebtedness for federal and state
income tax purposes and the
Noteholder, in accepting the Note,
will agree to treat such Note as
indebtedness. See "Certain Federal
Income Tax Consequences" herein and
in such Prospectus Supplement.
Investors are advised to consult
their tax advisors and to review
"Certain Federal Income Tax
Consequences" herein and in the
related Prospectus Supplement.
ERISA Considerations . . . . . . A fiduciary of an employee benefit
plan and certain other retirement
plans and arrangements, including
individual retirement accounts,
annuities, Keogh plans, and
collective investment funds and
separate accounts in which such
plans, accounts, annuities or
arrangements are invested, that is
subject to the Employee Retirement
Income Security Act of 1974, as
amended ("ERISA"), or Section 4975
of the Code should carefully review
with its legal advisors whether the
purchase or holding of Offered
Securities could give rise to a
transaction that is prohibited or is
not otherwise permissible either
under ERISA or Section 4975 of the
Code. See "ERISA Considerations"
herein and in the related Prospectus
Supplement. Certain classes of
Securities may not be transferred
unless the Trustee and the Depositor
are furnished with a letter of
representations or an opinion of
counsel to the effect that such
transfer will not result in a
violation of the prohibited
transaction provisions of ERISA and
the Code and will not subject the
Trustee, the Depositor or the Master
Servicer to additional obligations.
See "Description of the Securities-
General" and "ERISA Considerations".
Legal Investment . . . . . . . . Each Prospectus Supplement will
specify which class of Offered
Securities, if any, will constitute
"mortgage-related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA"). Institutions whose
investment activities are subject
to legal investment laws
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<PAGE>
and regulations or review by certain
regulatory authorities may be
subject to restrictions on
investment in certain classes of
the Offered Securities. See "Legal
Investment" herein and in the
related Prospectus Supplement.
Rating . . . . . . . . . . . . . At the date of issuance, as to
each series, each class of Offered
Securities will be rated not lower
than investment grade by one or
more nationally recognized
statistical rating agencies (each, a
"Rating Agency"). See "Rating"
herein and in the related Prospectus
Supplement.
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<PAGE>
SPECIAL CONSIDERATIONS
Investors should consider, in connection with the purchase of Offered
Securities, among other things, the following factors.
LIMITED LIQUIDITY
At the time of issuance of a series of Securities, there will be no
secondary market for any of the Securities. Merrill Lynch, Pierce, Fenner
& Smith Incorporated currently expects to make a secondary market in the
Offered Securities, but has no obligation to do so. There can be no
assurance that a secondary market for the Securities of any series will
develop or, if it does develop, that it will provide holders with liquidity
of investment or will continue while Securities of such series remain
outstanding.
LIMITED ASSETS
The Securities will not represent an interest in or obligation of the
Depositor, the Master Servicer or any of their affiliates. The only
obligations with respect to the Securities or the Assets will be the
obligations (if any) of the Warranting Party (as defined herein) pursuant to
certain limited representations and warranties made with respect to the
Mortgage Loans or Contracts, the Master Servicer's and any Sub-Servicer's
servicing obligations under the related Agreement (including the limited
obligation to make certain advances in the event of delinquencies on the
Mortgage Loans or Contracts, but only to the extent deemed recoverable) and,
if and to the extent expressly described in the related Prospectus
Supplement, certain limited obligations of the Master Servicer in connection
with an agreement to purchase or act as remarketing agent with respect to a
convertible ARM Loan (as defined herein) upon conversion to a fixed rate or
a different index. Since certain representations and warranties with respect
to the Mortgage Assets or Contracts may have been made and/or assigned in
connection with transfers of such Mortgage Assets or Contracts prior
to the Closing Date, the
rights of the Trustee and the Securityholders with respect to such
representations or warranties will be limited to their rights as an assignee
thereof. Unless otherwise specified in the related Prospectus Supplement,
none of the Depositor, the Master Servicer or any affiliate thereof will have
any obligation with respect to representations or warranties made by any
other entity. Unless otherwise specified in the related Prospectus
Supplement, neither the Securities nor the underlying Assets will be
guaranteed or insured by any governmental agency or instrumentality, or by
the Depositor, the Master Servicer, any Sub-Servicer or any of their
affiliates. Proceeds of the assets included in the related Trust Fund for
each series of Securities (including the Assets and any form of credit
enhancement) will be the sole source of payments on the Securities, and there
will be no recourse to the Depositor or any other entity in the event that
such proceeds are insufficient or otherwise unavailable to make all payments
provided for under the Securities.
Unless otherwise specified in the related Prospectus Supplement, a
series of Securities will not have any claim against or security interest in
the Trust Funds for any other series. If the related Trust Fund is
insufficient to make payments on such Securities, no other assets will be
available for payment of the deficiency. Additionally, certain amounts
remaining in certain funds or accounts, including the Collection Account and
any accounts maintained as Credit Support, may be withdrawn under certain
conditions, as described in the related Prospectus Supplement. In the event
of such withdrawal, such amounts will not be available for future payment of
principal of or interest on the Securities. If so provided in the Prospectus
Supplement for a series of Securities consisting of one or more classes of
Subordinate Securities, on any Distribution Date in respect of which losses
or shortfalls in collections on the Assets have been incurred, the amount of
such losses or shortfalls will be borne first by one or more classes of the
Subordinate Securities, and, thereafter, by the remaining classes of
Securities in the priority and manner and subject to the limitations
specified in such Prospectus Supplement.
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<PAGE>
AVERAGE LIFE OF SECURITIES; PREPAYMENTS; YIELDS
Prepayments (including those caused by defaults) on the Assets in any
Trust Fund generally will result in a faster rate of principal payments on
one or more classes of the related Securities than if payments on such Assets
were made as scheduled. Thus, the prepayment experience on the Assets may
affect the average life of each class of related Securities. The rate of
principal payments on pools of mortgage loans or manufactured housing
contracts varies between pools and from time to time is influenced by a
variety of economic, demographic, geographic, social, tax, legal and other
factors. There can be no assurance as to the rate of prepayment on the Assets
in any Trust Fund or that the rate of payments will conform to any model
described herein or in any Prospectus Supplement. If prevailing interest
rates fall significantly below the applicable mortgage interest rates,
principal prepayments are likely to be higher than if prevailing rates remain
at or above the rates borne by the Mortgage Loans underlying or comprising
the Mortgage Assets in any Trust Fund. As a result, the actual maturity of
any class of Securities evidencing an interest in a Trust Fund containing
Mortgage Assets could occur significantly earlier than expected. The
relationship of prevailing interest rates and prepayment rates on Contracts
will be discussed in the related Prospectus Supplement. In addition, certain
prepayments may result in the collection of less interest than would otherwise
be the case in the month of prepayment.
A series of Securities may include one or more classes of Securities
with priorities of payment and, as a result, yields on other classes of
Securities, including classes of Offered Securities, of such series may be
more sensitive to prepayments on Assets. A series of Securities may include
one or more classes offered at a significant premium or discount. Yields on
such classes of Securities will be sensitive, and in some cases extremely
sensitive, to prepayments on Mortgage Assets and, where the amount of
interest payable with respect to a class is disproportionately high, as
compared to the amount of principal, as with certain classes of Stripped
Interest Securities, a holder might, in some prepayment scenarios, fail to
recoup its original investment. A series of Securities may include one or
more classes of Securities, including classes of Offered Securities, that
provide for distribution of principal thereof from amounts attributable to
interest accrued but not currently distributable on one or more classes of
Accrual Securities and, as a result, yields on such Securities will be
sensitive to (a) the provisions of such Accrual Securities relating to the
timing of distributions of interest thereon and (b) if such Accrual
Securities accrue interest at a variable or adjustable Pass-Through Rate or
interest rate, changes in such rate. See "Yield Considerations" herein and,
if applicable, in the related Prospectus Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Securities will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Securities of such class will receive payments to which such
Securityholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Assets will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
series of Securities. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an
investor purchasing a Security at a significant premium might fail to recoup
its initial investment under certain prepayment scenarios. Each Prospectus
Supplement will identify any payment to which holders of Offered Securities
of the related series are entitled that is not covered by the applicable
rating.
MORTGAGE LOANS AND MORTGAGED PROPERTIES IN GENERAL
An investment in securities such as the Securities which generally
represent interests in Mortgage Loans may be affected by, among other things,
a decline in real estate values and changes in the mortgagors' financial
condition. No assurance can be given that values of the Mortgaged Properties
have remained or will remain at their levels on the dates
17
<PAGE>
of origination of the related Mortgage Loans. If the residential real estate
market should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans, and any secondary financing on the
Mortgaged Properties, become equal to or greater than the value of the
Mortgaged Properties, the actual rates of delinquencies, foreclosures and
losses could be higher than those now generally experienced in the mortgage
lending industry. In addition, in the case of Mortgage Loans that are subject
to negative amortization, due to the addition to principal balance of deferred
interest, the principal balances of such Mortgage Loans could be increased
to an amount equal to or in excess of the value of the underlying Mortgaged
Properties, thereby increasing the likelihood of default. To the extent that
such losses are not covered by the applicable Credit Support, if any, holders
of Securities of the series evidencing interests in the related Mortgage
Loans will bear all risk of loss resulting from default by mortgagors and
will have to look primarily to the value of the Mortgaged Properties for
recovery of the outstanding principal and unpaid interest on the defaulted
Mortgage Loans. Certain of the types of Mortgage Loans may involve additional
uncertainties not present in traditional types of loans. For example, certain
of the Mortgage Loans provide for escalating or variable payments by the
mortgagor under the Mortgage Loan, as to which the mortgagor is generally
qualified on the basis of the initial payment amount. In some instances the
Mortgagor's income may not be sufficient to enable them to continue to make
their loan payments as such payments increase and thus the likelihood of
default will increase. In addition to the foregoing, certain geographic
regions of the United States from time to time will experience weaker
regional economic conditions and housing markets, and, consequently, will
experience higher rates of loss and delinquency than will be experienced on
mortgage loans generally. The Mortgage Loans underlying certain series of
Certificates may be concentrated in these regions, and such concentration may
present risk considerations in addition to those generally present for
similar mortgage-backed securities without such concentration. Furthermore,
the rate of default on Mortgage Loans that are refinance or limited
documentation mortgage loans, and on Mortgage Loans with high Loan-to-Value
Ratios, may be higher than for other types of Mortgage Loans. Additionally,
a decline in the value of the Mortgaged Properties will increase the risk of
loss particularly with respect to any related junior Mortgage Loans. See "-
Junior Mortgage Loans."
Mortgage Loans secured by Multifamily Properties may entail risks of
delinquency and foreclosure, and risks of loss in the event thereof, that are
greater than similar risks associated with loans secured by Single Family
Properties. The ability of a borrower to repay a loan secured by an income-
producing property typically is dependent primarily upon the successful
operation of such property rather than upon the existence of independent
income or assets of the borrower; thus, the value of an income-producing
property typically is directly related to the net operating income derived
from such property. If the net operating income of the property is reduced
(for example, if rental or occupancy rates decline or real estate tax rates
or other operating expenses increase), the borrower's ability to repay the
loan may be impaired. In addition, the concentration of default, foreclosure
and loss risk for a pool of Mortgage Loans secured by Multifamily Properties
may be greater than for a pool of Mortgage Loans secured by Single Family
Properties of comparable aggregate unpaid principal balance because the pool
of Mortgage Loans secured by Multifamily Properties is likely to consist of
a smaller number of higher balance loans.
If applicable, certain legal aspects of the Mortgage Loans for a series
of Certificates may be described in the related Prospectus Supplement. See
also "Certain Legal Aspects of Mortgage Loans" herein.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and,
thus, will require substantial principal payments (i.e., balloon payments)
at their stated maturity. Mortgage Loans with balloon payments involve a
greater degree of risk because the ability of a mortgagor to make a balloon
payment typically will depend upon its ability either to timely refinance the
loan or to timely sell the related Mortgaged Property. The ability of a
mortgagor to accomplish either of these goals will be affected by
18
<PAGE>
a number of factors, including the level of available mortgage interest rates
at the time of sale or refinancing, the mortgagor's equity in the related
Mortgaged Property, the financial condition of the mortgagor, the value of the
Mortgaged Property, tax laws, prevailing general economic conditions and the
availability of credit for single family or multifamily real properties
generally.
JUNIOR MORTGAGE LOANS
Certain of the Mortgage Loans may be secured by junior liens and the
related first and other senior liens, if any (collectively, the "senior
lien"), may not be included in the Mortgage Pool. The primary risk to
holders of Mortgage Loans secured by junior liens is the possibility that
adequate funds will not be received in connection with a foreclosure of the
related senior lien to satisfy fully both the senior lien and the Mortgage
Loan. In the event that a holder of the senior lien forecloses on a
Mortgaged Property, the proceeds of the foreclosure or similar sale will be
applied first to the payment of court costs and fees in connection with the
foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any
other sums due and owing to the holder of the senior lien. The claims of the
holder of the senior lien will be satisfied in full out of proceeds of the
liquidation of the Mortgage Loan, if such proceeds are sufficient, before the
Trust Fund as holder of the junior lien receives any payments in respect of
the Mortgage Loan. If the Master Servicer were to foreclose on any Mortgage
Loan, it would do so subject to any related senior lien. In order for the
debt related to the Mortgage Loan to be paid in full at such sale, a bidder
at the foreclosure sale of such Mortgage Loan would have to bid an amount
sufficient to pay off all sums due under the Mortgage Loan and the senior
lien or purchase the Mortgaged Property subject to the senior lien. In the
event that such proceeds from a foreclosure or similar sale of the related
Mortgaged Property were insufficient to satisfy both loans in the aggregate,
the Trust Fund, as the holder of the junior lien, and, accordingly, holders
of the Certificates, would bear the risk of delay in distributions while a
deficiency judgment against the borrower was being obtained and the risk of
loss if the deficiency judgment were not realized upon. Moreover, deficiency
judgments may not be available in certain jurisdictions. In addition, a
junior mortgagee may not foreclose on the property securing a junior mortgage
unless it forecloses subject to the senior mortgage.
CONTRACTS AND MANUFACTURED HOMES IN GENERAL
An investment in Certificates evidencing an interest in a Trust Fund
containing Contracts may be affected by, among other things, a downturn in
national, regional or local economic conditions. The geographic location of
the Manufactured Homes in any Contract Pool at origination of the related
Contract will be set forth in the related Prospectus Supplement under "The
Contract Pool". Regional and local economic conditions are often volatile
and, historically, regional and local economic conditions, as well as
national economic conditions, have affected the delinquency, loan loss and
repossession experience of manufactured housing installment sales contracts
and/or installment loan contracts (hereinafter generally referred to as
"contracts" or "manufactured housing contracts"). Moreover, regardless of
its location, manufactured housing generally depreciates in value. Thus,
such Securityholders should expect that, as a general matter, the market
value of any Manufactured Home will be lower than the outstanding principal
balance of the related Contract. Sufficiently high delinquencies and
liquidation losses on the Contracts in an Contract Pool will have the effect
of reducing, and could eliminate, the protection against loss afforded by any
credit enhancement supporting any class of the related Securities. If such
protection is eliminated with respect to a class of Securities, the holders
of such Securities will bear all risk of loss on the related Contracts and
will have to rely on the value of the related Manufactured Homes for recovery
of the outstanding principal of and unpaid interest on any defaulted
Contracts in the related Contract Pool. See "Description of Credit Support."
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SECURITY INTERESTS AND CERTAIN OTHER LEGAL ASPECTS OF THE CONTRACTS
The Asset Seller in respect of a Contract will represent that such
Contract is secured by a security interest in a Manufactured Home.
Perfection of security interests in the Manufactured Homes and enforcement
of rights to realize upon the value of the Manufactured Homes as collateral
for the Contracts are subject to a number of Federal and state laws,
including the Uniform Commercial Code as adopted in each state and each
state's certificate of title statutes. The steps necessary to perfect the
security interest in a Manufactured Home will vary from state to state.
Because of the expense and administrative inconvenience involved, the Master
Servicer will not amend any certificates of title to change the lienholder
specified therein from the Asset Seller to the Trustee and will not deliver
any certificate of title to the Trustee or note thereon the Trustee's
interest. Consequently, in some states, in the absence of such an amendment,
the assignment to the Trustee of the security interest in the Manufactured
Home may not be effective or such security interest may not be perfected and,
in the absence of such notation or delivery to the Trustee, the assignment
of the security interest in the Manufactured Home may not be effective
against creditors of the Asset Seller or a trustee in bankruptcy of the Asset
Seller. In addition, numerous Federal and state consumer protection laws
impose requirements on lending under installment sales contracts and
installment loan agreements such as the Contracts, and the failure by the
lender or seller of goods to comply with such requirements could give rise
to liabilities of assignees for amounts due under such agreements and claims
by such assignees may be subject to set-off as result of such lender's or
seller's noncompliance. These laws would apply to the Trustee as assignee
of the Contracts. The Asset Seller of the Contracts to the Depositor will
warrant that each Contracts complies with all requirements of law and will
make certain warranties relating to the validity, subsistence, perfection and
priority of the security interest in each Manufactured Home securing a
Contract. A breach of any such warranty that materially adversely affects
any Contract would create an obligation of the Asset Seller to repurchase
such Contract unless such breach is cured. If the Credit Support is
exhausted and recovery of amounts due on the Contracts is dependent on
repossession and resale of Manufactured Homes securing Contracts that are in
default, certain other factors may limit the ability of the
Certificateholders to realize upon the Manufactured Home or may limit the
amount realized to less than the amount due. See "Certain Legal Aspects of
the Contracts."
UNSECURED HOME IMPROVEMENT LOANS
The obligations of the borrower under any Unsecured Home Improvement
Loan included in a Trust Fund will not be secured by an interest in the
related real estate or any other property, and the Trust Fund will be a
general unsecured creditor as to such obligations. In the event of a default
under an Unsecured Home Improvement Loan, the related Trust Fund will have
recourse only against the borrower's assets generally, along with all other
general unsecured creditors of the borrower. In a bankruptcy or insolvency
proceeding relating to a borrower on an Unsecured Home Improvement Loan, the
obligations of the borrower under such Unsecured Home Improvement Loan may
be discharged in their entirety, notwithstanding the fact that the portion
of such borrower's assets made available to the related Trust Fund as a
general unsecured creditor to pay amounts due and owing thereunder are
insufficient to pay all such amounts. A borrower on an Unsecured Home
Improvement Loan may not demonstrate the same degree of concern over
performance of the borrower's obligations under such Home Improvement Loan
as if such obligations were secured by the real estate or other assets owned
by such borrower.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of
credit, insurance policies, guarantees, reserve funds or other types of
credit support, or combinations thereof. Use of Credit Support will be
subject to the conditions and limitations described herein and in the related
Prospectus Supplement. Moreover, such Credit Support may not cover all
potential losses or risks; for example, Credit Support may or may not cover
fraud or negligence by a mortgage loan or contract originator or other
parties.
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A series of Securities may include one or more classes of Subordinate
Securities (which may include Offered Securities), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce
the risk to holders of Senior Securities of delinquent distributions or
ultimate losses, the amount of subordination will be limited and may decline
under certain circumstances. In addition, if principal payments on one or
more classes of Securities of a series are made in a specified order of
priority, any limits with respect to the aggregate amount of claims under any
related Credit Support may be exhausted before the principal of the lower
priority classes of Securities of such series has been repaid. As a result,
the impact of significant losses and shortfalls on the Assets may fall
primarily upon those classes of Securities having a lower priority of
payment. Moreover, if a form of Credit Support covers more than one series
of Securities (each, a "Covered Trust"), holders of Securities evidencing an
interest in a Covered Trust will be subject to the risk that such Credit
Support will be exhausted by the claims of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more
classes of Offered Securities, including the subordination of one or more
classes of Securities, will be determined on the basis of criteria
established by each Rating Agency rating such classes of Securities based on
an assumed level of defaults, delinquencies, other losses or other factors.
There can, however, be no assurance that the loss experience on the related
Assets will not exceed such assumed levels. See "-Limited Nature of Ratings,"
"Description of the Securities" and "Description of Credit Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to
periodic reduction in accordance with a schedule or formula. The Master
Servicer will generally be permitted to reduce, terminate or substitute all
or a portion of the credit enhancement for any series of Securities, if the
applicable Rating Agency indicates that the then-current rating thereof will
not be adversely affected. The rating of any series of Securities by any
applicable Rating Agency may be lowered following the initial issuance
thereof as a result of the downgrading of the obligations of any applicable
Credit Support provider, or as a result of losses on the related Assets
substantially in excess of the levels contemplated by such Rating Agency at
the time of its initial rating analysis. None of the Depositor, the Master
Servicer or any of their affiliates will have any obligation to replace or
supplement any Credit Support or to take any other action to maintain any
rating of any series of Securities.
SUBORDINATION OF THE SUBORDINATE CERTIFICATES; EFFECT OF LOSSES ON THE ASSETS
The rights of Subordinate Securityholders to receive distributions to
which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the
Master Servicer is paid its servicing fee, including any unpaid servicing
fees with respect to one or more prior Due Periods, and is reimbursed for
certain unreimbursed advances and unreimbursed liquidation expenses) and the
Senior Securityholders to the extent described in the related
Prospectus Supplement. As a result of the
foregoing, investors must be prepared to bear the risk that they may be
subject to delays in payment and may not recover their initial investments
in the Subordinate Securities. See "Description of the Securities-- General"
and "--Allocation of Losses and Shortfalls."
The yields on the Subordinate Securities may be extremely sensitive to
the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate
and amount of such losses assumed by an investor, the yields to maturity on
the Subordinate Securities may be lower than anticipated.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual Certificates will be required to report on
their federal income tax returns as ordinary income their pro rata share of
the taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "Certain Federal Income Tax
Consequences-REMICs." Accordingly, under certain circumstances, holders of
Offered Securities that constitute REMIC Residual Certificates may have
taxable income and
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tax liabilities arising from such investment during a taxable year in excess
of the cash received during such period. Individual holders of REMIC Residual
Certificates may be limited in their ability to deduct servicing fees and
other expenses of the REMIC. In addition, REMIC Residual Certificates are
subject to certain restrictions on transfer. Because of the special tax
treatment of REMIC Residual Certificates, the taxable income arising in a
given year on a REMIC Residual Certificate will not be equal to the taxable
income associated with investment in a corporate bond or stripped instrument
having similar cash flow characteristics and pre-tax yield. Therefore, the
after-tax yield on the REMIC Residual Certificate may be significantly less
than that of a corporate bond or stripped instrument having similar cash flow
characteristics. Additionally, prospective purchasers of a REMIC Residual
Certificate should be aware that recently issued temporary regulations
provide restrictions on the ability to mark-to-market certain "negative
value" REMIC residual interests. See "Certain Federal Income Tax
Consequences-REMICs."
BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of the
Securities will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be
registered in the names of the Securityholders or their nominees. Because of
this, unless and until Definitive Securities are issued, Securityholders will
not be recognized by the Trustee as "Securityholders" (as that term is to be
used in the related Agreement). Hence, until such time, Securityholders will
be able to exercise the rights of Securityholders only indirectly through DTC
and its participating organizations. See "Description of the Securities-
Book-Entry Registration and Definitive Securities.
DESCRIPTION OF THE TRUST FUNDS
ASSETS
The primary assets of each Trust Fund (the "Assets") will include
(i) single family and/or multifamily mortgage loans (or certain balances
thereof) (collectively, the "Mortgage Loans"),
including without limitation, Home Equity Loans and Home Improvement
Contracts, (ii) unsecured home improvement loans ("Unsecured Home Improvement
Loans"), (iii) mortgage participations ("Mortgage Participations"), (iv)
pass-through certificates or other mortgage-backed securities evidencing
interests in or secured by one or more Mortgage Loans or other similar
participations, certificates or securities ("MBS"), (v) manufactured housing
installment sale contracts and installment loan agreements (the "Contracts"),
(vi) direct obligations of the United States, agencies thereof or agencies
created thereby which are not subject to redemption prior to maturity at the
option of the issuer and are (a) interest-bearing securities, (b) non-
interest-bearing securities, (c) originally interest-bearing securities from
which coupons representing the right to payment of interest have been
removed, or (d) interest-bearing securities from which the right to payment
of principal has been removed (the "Government Securities"), (vii) certain
small business loans defined below ("SBA Loans" and "SBA 504 Loans") or
(viii) a combination of Mortgage Loans, Unsecured Home Improvement Loans,
Mortgage Participations, Contracts, MBS and Government Securities. As used
herein, "Mortgage Loans" refers to both whole Mortgage Loans (or certain
balances thereof) and Mortgage
Loans underlying Mortgage Participations or MBS. Mortgage Loans that secure,
or interests in which are evidenced by, MBS are herein sometimes referred to
as "Underlying Mortgage Loans." Mortgage Loans (or certain balances
thereof) that are not Underlying
Mortgage Loans are sometimes referred to as "Whole Loans." Any pass-through
certificates or other asset-backed certificates in which an MBS evidences an
interest or which secure an MBS are sometimes referred to herein also as MBS
or as "Underlying MBS." Mortgage Loans, Mortgage Participations and MBS are
sometimes referred to herein as "Mortgage Assets." The Mortgage Assets will
not be guaranteed or insured by Merrill Lynch Mortgage Investors, Inc. (the
"Depositor") or any of its affiliates or, unless otherwise provided in the
Prospectus Supplement, by any governmental agency or instrumentality or by
any other person. Each Asset will be selected by the Depositor for inclusion
in a Trust Fund from among those purchased, either directly or indirectly,
from a prior holder thereof (an "Asset Seller"), which may be an affiliate
of the Depositor and, with respect
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to Assets, which prior holder may or may not be the originator of such
Mortgage Loan or Contract or the issuer of such MBS.
Unless otherwise specified in the related Prospectus Supplement, the
Securities will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of
any other trust fund established by the Depositor. If specified in the
related Prospectus Supplement, the assets of a Trust Fund will consist of
certificates representing beneficial ownership interests in, or indebtedness
of, another trust fund that contains the Assets.
MORTGAGE LOANS
General
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Loan will be secured by (i) a lien on a Mortgaged Property
consisting of a one- to four-family residential property (a "Single Family
Property" and the related Mortgage Loan a "Single Family Mortgage Loan") or
a residential property consisting of five or more dwelling units in multi-
story structures (a "Multifamily Property" and the related Mortgage Loan a
"Multifamily Mortgage Loan") or (ii) a security interests in shares issued
by private cooperative housing corporations ("Cooperatives"). If so
specified in the related Prospectus Supplement, a Mortgaged Property may
include some commercial use. Mortgaged Properties will be located, unless
otherwise specified in the related Prospectus Supplement, in any one of the
fifty states, the District of Columbia or the Commonwealth of Puerto Rico. To
the extent specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by first and/or junior mortgages or deeds of trust or other
similar security instruments creating a first or junior lien on Mortgaged
Property. The Mortgaged Properties may include apartments owned by
Cooperatives. The Mortgaged Properties may include leasehold interests in
properties, the title to which is held by third party lessors. Unless
otherwise specified in the Prospectus Supplement, the term of any such
leasehold shall exceed the term of the related mortgage note by at least five
years. Each Mortgage Loan will have been originated by a person (the
"Originator") other than the Depositor. The related Prospectus Supplement
will indicate if any Originator is an affiliate of the Depositor. The
Mortgage Loans will be evidenced by promissory notes (the "Mortgage Notes")
secured by mortgages, deeds of trust or other security instruments (the
"Mortgages") creating a lien on the Mortgaged Properties.
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance
of the Mortgage Loan to the Value of the related Mortgaged Property. The
"Value" of a Mortgaged Property, other than with respect to Refinance Loans,
is generally the lesser of (a) the appraised value determined in an appraisal
obtained by the originator at origination of such loan and (b) the sales
price for such property. "Refinance Loans" are loans made to refinance
existing loans. Unless otherwise set forth in the related Prospectus
Supplement, the Value of the Mortgaged Property securing a Refinance Loan is
the appraised value thereof determined in an appraisal obtained at the time
of origination of the Refinance Loan. The Value of a Mortgaged Property as
of the date of initial issuance of the related series of Certificates may be
less than the value at origination and will fluctuate from time to time based
upon changes in economic conditions and the real estate market.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the dates
specified in such Prospectus Supplement and to the extent then applicable and
specifically known to the Depositor, with respect to the Mortgage Loans,
including
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(i) the aggregate outstanding principal balance and the largest, smallest and
average outstanding principal balance of the Mortgage Loans as of the
applicable Cut-off Date, (ii) the type of property securing the
Mortgage Loans, (iii) the weighted average (by principal balance) of the
original and remaining terms to maturity of the Mortgage Loans, (iv) the
earliest and latest origination date and maturity date of the Mortgage Loans,
(v) the range of the Loan-to-Value Ratios at origination of the Mortgage
Loans, (vi) the Mortgage Rates or range of Mortgage Rates and the weighted
average Mortgage Rate borne by the Mortgage Loans, (vii) the state or states
in which most of the Mortgaged Properties are located, (viii) information
with respect to the prepayment provisions, if any, of the Mortgage Loans,
(ix) with respect to Mortgage Loans with adjustable Mortgage Rates ("ARM
Loans"), the index, the frequency of the adjustment dates, the range of
margins added to the index, and the maximum Mortgage Rate or monthly payment
variation at the time of any adjustment thereof and over the life of the ARM
Loan and (x) information regarding the payment characteristics of the
Mortgage Loans, including without limitation balloon payment and other
amortization provisions. If specific information respecting the Mortgage
Loans is not known to the Depositor at the time Securities are initially
offered, more general information of the nature described above will be
provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
Securities at or before the initial issuance thereof and will be filed as
part of a Current Report on Form 8-K with the Securities and Exchange
Commission within fifteen days after such initial issuance.
The related Prospectus Supplement may specify whether the Mortgage
Loans include (i) closed-end and/or revolving home equity loans or certain
balances thereof ("Home Equity Loans"), which may be secured by Mortgages
that are junior to other liens on the related Mortgaged Property and/or (ii)
home improvement installment sales contracts or installment loan agreements
(the "Home Improvement Contracts") originated by a home improvement
contractor and secured by a Mortgage on the related Mortgaged Property that
is junior to other liens on the Mortgaged Property. Except as otherwise
described in the related Prospectus Supplement, the home improvements
purchased with the Home Improvement Contracts will generally be replacement
windows, house siding, roofs, swimming pools, satellite dishes, kitchen and
bathroom remodeling goods and solar heating panels. The related Prospectus
Supplement will specify whether the Home Improvement Contracts are partially
insured under Title I of the National Housing Act and, if so, the limitations
on such insurance.
Payment Provisions of the Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans will (i) have individual principal balances at origination
of not less than $25,000, (ii) have original terms to maturity of not more
than 40 years and (iii) provide for payments of principal, interest or both,
on due dates that occur monthly, quarterly or semi-annually or at such other
interval as is specified in the related Prospectus Supplement. Each Mortgage
Loan may provide for no accrual of interest or for accrual of interest
thereon at an interest rate (a "Mortgage Rate") that is fixed over its term
or that adjusts from time to time, or that may be converted from an
adjustable to a fixed Mortgage Rate or a different adjustable Mortgage
Rate, or from a fixed to an adjustable
Mortgage Rate, from time to time pursuant to an election or as otherwise
specified on the related Mortgage Note, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may provide for scheduled
payments to maturity or payments that adjust from time to time to accommodate
changes in the Mortgage Rate or to reflect the occurrence of certain events
or that adjust on the basis of other methodologies,
and may provide for negative amortization or accelerated amortization, in
each case as described in the related Prospectus Supplement. Each Mortgage
Loan may be fully amortizing or require a balloon payment due on its stated
maturity date, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may contain prohibitions on prepayment (a
"Lock-out Period" and, the date of expiration thereof, a "Lock-out Date") or
require payment of a premium or a yield maintenance penalty (a "Prepayment
Premium") in connection with a prepayment, in each case as described in the
related Prospectus Supplement. In the event that holders of any class or
classes of Offered Securities will be entitled to all or a portion of any
Prepayment Premiums collected
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in respect of Mortgage Loans, the related Prospectus Supplement will specify
the method or methods by which any such amounts will be allocated.
Mortgage Participations
Mortgage Participations will evidence an undivided participation
interest in Underlying Mortgage Loans. To the extent available to the
Depositor, the related Prospectus Supplement will contain information in
respect of the Underlying Mortgage Loans substantially similar to the
information described above in respect of Mortgage Loans. Such Prospectus
Supplement will also specify the amount of the participation interest and
describe the servicing provisions of the participation and servicing
agreements.
UNSECURED HOME IMPROVEMENT LOANS
The Unsecured Home Improvement Loans may consist of conventional
unsecured home improvement loans and FHA insured unsecured home improvement
loans. Except as otherwise set forth in the related Prospectus Supplement,
the Unsecured Home Improvement Loans will be fully amortizing and will bear
interest at a fixed or variable annual percentage rate. Unless the context
otherwise requires, references in this Prospectus to Mortgage Loans, Whole
Loans and related terms shall include Unsecured Home Improvement Loans and
related terms to the extent relevant (e.g., a reference to a Mortgaged
Property or hazard insurance does not relate to an Unsecured Home Improvement
Loan).
MBS
Any MBS will have been issued pursuant to a pooling and servicing
agreement, a trust agreement, an indenture or similar agreement (an "MBS
Agreement"). A seller (the "MBS Issuer") and/or servicer (the "MBS Servicer")
of the underlying Mortgage Loans (or Underlying MBS) will have entered into
the MBS Agreement with a trustee or a custodian under the MBS Agreement (the
"MBS Trustee"), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans or MBS evidenced by the MBS.
Distributions of any principal or interest, as applicable, will be made
on MBS on the dates specified in the related Prospectus Supplement. The MBS
may be issued in one or more classes with characteristics similar to the
classes of Securities described in this Prospectus. Any principal or
interest distributions will be made on the MBS by the MBS Trustee or the MBS
Servicer. The MBS Issuer or the MBS Servicer or another person specified in
the related Prospectus Supplement may have the right or obligation to
repurchase or substitute assets underlying the MBS after a certain date or
under other circumstances specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination or other forms
of credit support similar to that described for the Securities under
"Description of Credit Support" may be provided with respect to the MBS. The
type, characteristics and amount of such credit support, if any, will be a
function of certain characteristics of the Underlying
Mortgage Loans or Underlying MBS
evidenced by or securing such MBS and other factors and generally will have
been established for the MBS on the basis of requirements of either any
Rating Agency that may have assigned a rating to the MBS or the initial
purchasers of the MBS.
The Prospectus Supplement for a series of Securities evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available to the Depositor, (i) the aggregate approximate initial and
outstanding principal
amount or notional amount, as applicable, and type of the MBS to be included
in the Trust Fund, (ii) the original and remaining term to stated maturity
of the MBS, if applicable, (iii) whether such MBS is entitled only to
interest payments, only to principal payments or to both, (iv) the
pass-through or bond rate of the MBS or formula for determining such rates,
if any, (v) the
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applicable payment provisions for the MBS, including, but not
limited to, any priorities, payment schedules and subordination features,
(vi) the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
(vii) certain characteristics of the credit support, if any, such as
subordination, reserve funds, insurance policies, letters of credit or
guarantees relating to the related Underlying Mortgage Loans, the Underlying
MBS or directly to such MBS, (viii) the terms on which the related Underlying
Mortgage Loans or Underlying MBS for such MBS or the MBS may, or are required
to, be purchased prior to their maturity, (ix) the terms on which Mortgage
Loans or Underlying MBS may be substituted for those originally underlying
the MBS, (x) the servicing fees payable under the MBS Agreement, (xi) the
type of information in respect of the Underlying Mortgage Loans described
under "-Mortgage Loans-Mortgage Loan Information in Prospectus Supplements"
above, and the type of information in respect of the Underlying MBS described
in this paragraph, (xii) the characteristics of any cash flow agreements that
are included as part of the trust fund evidenced or secured by the MBS and
(xiii) whether the MBS is in certificated form or held
through a depository such as The Depository Trust Company or the Participants
Trust Company.
CONTRACTS
General
Unless otherwise specified in the related Prospectus Supplement, each
Contract will be secured by a security interest in a new or used Manufactured
Home. Such Prospectus Supplement will specify the states or other
jurisdictions in which the Manufactured Homes are located as of the related
Cut-off Date. The method of computing the "Loan-to-Value Ratio" of a
Contract will be described in the related Prospectus Supplement.
Contract Information in Prospectus Supplements
Each Prospectus Supplement will contain certain information,
as of the dates specified in such Prospectus Supplement
and to the extent then applicable and
specifically known to the Depositor, with respect to the Contracts, including
(i) the aggregate outstanding principal balance and the largest, smallest and
average outstanding principal balance of the Contracts as of the applicable
Cut-off Date, (ii) whether the Manufactured Homes were new or used as of the
origination of the related Contracts, (iii) the weighted average (by
principal balance) of the original and remaining terms to maturity of the
Contracts, (iv) the earliest and latest origination date and maturity date
of the Contracts, (v) the range of the Loan-to-Value Ratios at origination
of the Contracts, (vi) the Contract Rates or range of Contract Rates and the
weighted average Contract Rate borne by the Contracts, (vii) the state or
states in which most of the Manufactured Homes are located at origination,
(viii) information with respect to the prepayment provisions, if any, of the
Contracts, (ix) with respect to Contracts with adjustable Contract Rates
("ARM Contracts"), the index, the frequency of the adjustment dates, and the
maximum Contract Rate or monthly payment variation at the time of any
adjustment thereof and over the life of the ARM Contract, and (x) information
regarding the payment characteristics of the Contracts. If specific
information respecting the Contracts is not known to the Depositor at the
time Securities are initially offered, more general information of the nature
described above will be provided in the Prospectus Supplement, and specific
information will be set forth in a report which will be available to
purchasers of the related Securities at or before the initial issuance
thereof and will be filed as part of a Current Report on Form 8-K with the
Securities and Exchange Commission within fifteen dates after such initial
issuance.
Payment Provisions of the Contracts
Unless otherwise specified in the related Prospectus Supplement, all of
the Contracts will (i) have individual principal balances at origination of
not less than $1,000, (ii) have original terms to maturity of not more than
40 years and (iii) provide for payments of principal, interest or both, on
due dates that occur monthly or at such other interval as
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is specified in the related Prospectus Supplement. Each Contract may
provide for no accrual of interest or for accrual of interest thereon at an
annual percentage rate (a "Contract Rate") that is fixed over its term or
that adjusts from time to time, or as otherwise specified in the related
Prospectus Supplement. Each Contract may provide for scheduled payments to
maturity or payments that adjust from time to time to accommodate changes in
the Contract Rate as otherwise described in the related Prospectus Supplement.
GOVERNMENT SECURITIES
The Prospectus Supplement for a series of Securities evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types
of the Government Securities to be included in the Trust Fund, (ii) the
original and remaining terms to stated maturity of the Government Securities,
(iii) whether such Government Securities are entitled only to interest
payments, only to principal payments or to both, (iv) the interest rates of
the Government Securities or the formula to determine such rates, if any, (v)
the applicable payment provisions for the Government Securities and (vi) to
what extent, if any, the obligation evidenced thereby is backed by the full
faith and credit of the United States.
SBA LOANS
The SBA Loans will consist of the Unguaranteed Interests (as defined
below) in loans originated under Section 7(a) (the "Section 7(a) Program")
of the Small Business Act of 1953 (the "SBA Act"), which Act created the
Small Business Administration (the "SBA"). The Section 7(a) Program was
intended to encourage lenders to provide loans to existing qualifying small
businesses. Loans made under the Section 7(a) Program can be used to
construct, purchase, expand or convert facilities or to purchase building
equipment, leaseholds or materials. Money lent under the Section 7(a)
Program also can be used for working capital.
The SBA Loans are partially guaranteed by the SBA pursuant to a Small
Business Administration Loan Guaranty Agreement between the originator and
the SBA and pursuant to pertinent SBA regulations found at 13 C.F.R. parts
120 and 122. As to any SBA Loan, the right to receive the guaranteed portion
of the principal balance thereof together with interest thereon at a per
annum rate in effect from time to time plus a fee paid to the SBA's fiscal
and transfer agent is referred to herein as the "Guaranteed Interest." The
Guaranteed Interest varies from SBA Loan to SBA Loan, will not be included
in the related Trust Fund and Securityholders will have no right or interest
therein. As to any SBA Loan, the "Unguaranteed Interest" will equal all
payments and other recoveries on such SBA Loan not constituting the
Guaranteed Interest therein.
The SBA administers three levels of lender participation in the Section
7(a) Program. Under the first level, known as the "Guaranteed Participant
Program," the lender gathers and processes data from applicants and forwards
it, along with a request for the SBA's guaranty, to a local SBA office. The
SBA then completes an independent analysis and decides whether to guaranty
the loan. SBA turnaround time on such applications varies greatly, depending
on its backlog of loan applications.
Under the second level of lender participation, known as the "Certified
Lender Program," the lender (the "Certified Lender") gathers and processes
data from applicants and makes a request to the SBA, as in the Guaranteed
Participant Program procedure. The SBA then performs an expedited review of
the lender's credit analysis, which generally is completed within three
working days. The SBA requires that lenders originate loans meeting certain
portfolio and volume criteria before authorizing them to participate in the
Certified Lender Program.
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Under the third level of lender participation, known as the "Preferred
Lender Program", the lender (the "Preferred Lender") has the authority to
approve a loan and obligate the SBA to guarantee the loan without submitting
an application to the SBA for credit review. The lender is required to
notify the SBA of the approved loan and submit certain documents. The
standards established for participants in the Preferred Lender Program are
more stringent than those for participants in the Certified Lender Program
and involve meeting additional portfolio quality and volume requirements.
In addition, before being granted preferred lender status under the Preferred
Lender Program in a particular SBA district, the lender must have been a
Certified Lender under the Certified Lender Program in such SBA district for
at least 12 months.
Unless the context otherwise requires, references in this Prospectus to
Mortgage Loans, Whole Loans and related terms shall include SBA Loans and
related terms to the extent relevant (e.g., a reference to a Mortgaged
Property or hazard insurance does not relate to a SBA Loan).
SBA 504 LOANS
The SBA 504 Loans will consist of loans originated by the originators
under the SBA 504 Loan Program (the "SBA 504 Loan Program"). The SBA 504
Loan Program was established under the SBA Act to encourage lenders to
provide fixed asset financing to existing qualifying small businesses. SBA
504 Loans may be used for plant acquisition, construction, renovation,
expansion, land and site improvements, acquisition and installation of
machinery and equipment and the interest on interim financing. The
Originators provide at least 50% of project costs in a conventional loan
agreement with borrowers, with the SBA providing the remainder of the
financing. Each loan by the Originators must be approved by the SBA.
The funds used by the SBA to originate its portion of a project
generated pursuant to the SBA 504 Loan Program are generated by issuing SBA-
guaranteed debentures on behalf of a certified development company (a "CDC").
A CDC is a non-profit organization sponsored by private interests or by state
or local governments. The debentures are pooled monthly and sold through a
certificate mechanism to the public market. The loans originated by the
originators under the SBA 504 Loan Program are not guaranteed by the SBA.
Unless the context otherwise requires, references in this Prospectus to
Mortgage Loans, Whole Loans and related terms shall include SBA 504 Loans and
related terms to the extent relevant (e.g., a reference to a Mortgaged
Property or hazard insurance does not relate to a SBA 504 Loan).
PRE-FUNDING ACCOUNT
To the extent provided in a Prospectus Supplement, the Depositor will
be obligated (subject only to the availability thereof) to sell at a
predetermined price, and the Trust Fund for the related series of Securities
will be obligated to purchase (subject to the satisfaction of certain
conditions described in the applicable Agreement), additional Assets (the
"Subsequent Assets") from time to time (as frequently as daily) within
the number of months specified in the related Prospectus Supplement
after the issuance of such series of Securities having an aggregate
principal balance approximately equal to the amount on deposit in the Pre-
Funding Account (the "Pre-Funded Amount") for such series on date of such
issuance.
ACCOUNTS
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Securityholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Assets and
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other assets in the Trust Fund. Such an account may be maintained as an
interest bearing or a non-interest bearing account, and funds held therein may
be held as cash or invested in certain short-term, investment grade
obligations, in each case as described in the related Prospectus Supplement.
See "Description of the Agreement-Collection Account and Related Accounts."
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Assets in the related
Trust Fund may be provided to one or more classes of Securities in the
related series in the form of subordination of one or more other classes of
Securities in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee, reserve fund or
another type of credit support, or a combination thereof (any such coverage
with respect to the Securities of any series, "Credit Support"). The amount
and types of coverage, the identification of the entity providing the
coverage (if applicable) and related information with respect to each type
of Credit Support, if any, will be described in the Prospectus Supplement for
a series of Securities. See "Special Considerations-Credit Support
Limitations" and "Description of Credit Support."
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements,
such as interest rate exchange agreements, interest rate cap or floor
agreements, currency exchange agreements or similar agreements provided to
reduce the effects of interest rate or currency exchange rate fluctuations
on the Assets or on one or more classes of Securities. (Currency exchange
agreements might be included in the Trust Fund if some or all of the Mortgage
Assets (such as Mortgage Loans secured by Mortgaged Properties located
outside the United States) were denominated in a non-United States currency.)
The principal terms of any such guaranteed investment contract or other
agreement (any such agreement, a "Cash Flow Agreement"), including, without
limitation, provisions relating to the timing, manner and amount of payments
thereunder and provisions relating to the termination thereof, will be
described in the Prospectus Supplement for the related series. In addition,
the related Prospectus Supplement will provide certain information with
respect to the obligor under any such Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Securities will be
applied by the Depositor to the purchase of Assets, or the payment
of the financing incurred in such purchase, and to pay for certain
expenses incurred in connection with such purchase of Assets and sale of
Securities. The Depositor expects to sell the Securities from time to time,
but the timing and amount of offerings of Securities will depend on a number
of factors, including the volume of Assets acquired by the Depositor,
prevailing interest rates, availability of funds and general market
conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Security will depend on the price paid by the
Securityholder, the Pass-Through Rate of the Security, the receipt and timing
of receipt of distributions on the Security and the weighted average life of
the Assets in the related Trust Fund (which may be affected by prepayments,
defaults, liquidations or repurchases). See "Special Considerations."
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PASS-THROUGH RATE AND INTEREST RATE
Securities of any class within a series may have fixed, variable or
adjustable Pass-Through Rates or interest rates, which may or may not be
based upon the interest rates borne by the Assets in the related Trust Fund.
The Prospectus Supplement with respect to any series of Securities will
specify the Pass-Through Rate or interest rate for each class of such
Securities or, in the case of a variable or adjustable Pass-Through Rate or
interest rate, the method of determining the Pass-Through Rate or interest
rate; the effect, if any, of the prepayment of any Asset on the Pass-Through
Rate or interest rate of one or more classes of Securities; and whether the
distributions of interest on the Securities of any class will be dependent,
in whole or in part, on the performance of any obligor under a Cash Flow
Agreement.
If so specified in the related Prospectus Supplement, the effective
yield to maturity to each holder of Securities entitled to payments of
interest will be below that otherwise produced by the applicable Pass-Through
Rate or interest rate and purchase price of such Security because, while
interest may accrue on each Asset during a certain period, the distribution
of such interest will be made on a day which may be several days, weeks or
months following the period of accrual.
TIMING OF PAYMENT OF INTEREST
Each payment of interest on the Securities (or addition to the Security
Balance of a class of Accrual Securities) on a Distribution Date will include
interest accrued during the Interest Accrual Period for such Distribution
Date. As indicated above under "Pass-Through Rate and Interest Rate,"
if the Interest Accrual Period ends on a date other than the day before a
Distribution Date for the related series, the yield realized by the holders
of such Securities may be lower than the yield that would result if the
Interest Accrual Period ended on such day before the Distribution Date.
PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Securities will be affected by the rate of
principal payments on the Assets (including principal prepayments on Mortgage
Loans and Contracts resulting from both voluntary prepayments by the
borrowers and involuntary liquidations). The rate at which principal
prepayments occur on the Mortgage Loans and Contracts will be affected by a
variety of factors, including, without limitation, the terms of the Mortgage
Loans and Contracts, the level of prevailing interest rates, the availability
of mortgage credit and economic, demographic, geographic, tax, legal and
other factors. In general, however, if prevailing interest rates fall
significantly below the Mortgage Rates on the Mortgage Loans comprising or
underlying the Assets in a particular Trust Fund, such Mortgage Loans are
likely to be the subject of higher principal prepayments than if prevailing
rates remain at or above the rates borne by such Mortgage Loans. In this
regard, it should be noted that certain Assets may consist of Mortgage Loans
with different Mortgage Rates and the stated pass-through or pay-through
interest rate of certain MBS may be a number of percentage points higher or
lower than certain of the Underlying Mortgage Loans. The rate of principal
payments on some or all of the classes of Securities of a series will
correspond to the rate of principal payments on the Assets in the related
Trust Fund and is likely to be affected by the existence of Lock-out Periods
and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Assets, and by the extent to which the servicer of any such
Mortgage Loan is able to enforce such provisions. Mortgage Loans with a
Lock-out Period or a Prepayment Premium provision, to the extent enforceable,
generally would be expected to experience a lower rate of principal
prepayments than otherwise identical Mortgage Loans without such provisions,
with shorter Lock-out Periods or with lower Prepayment Premiums.
Because of the depreciating nature of manufactured housing, which limits
the possibilities for refinancing, and because the terms and principal
amounts of manufactured housing contracts are generally shorter and smaller
than the terms and principal amounts of mortgage loans secured by site-built
homes, changes in interest rates have a
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correspondingly smaller effect on the amount of the monthly payments on
manufactured housing contracts than on the amount of the monthly payments on
mortgage loans secured by site-built homes. Consequently, changes in
interest rates may play a smaller role in prepayment behavior of manufactured
housing contracts than they do in the prepayment behavior of loans secured by
mortgage on site-built homes. Conversely, local economic conditions and
certain of the other factors mentioned above may play a larger role in the
prepayment behavior of manufactured housing contracts than they do in the
prepayment behavior of loans secured by mortgages on site-built homes.
If the purchaser of a Security offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely,
if the purchaser of a Security offered at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is slower than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. In either
case, if so provided in the Prospectus Supplement for a series of Securities,
the effect on yield on one or more classes of the Securities of such series
of prepayments of the Assets in the related Trust Fund may be mitigated or
exacerbated by any provisions for sequential or selective distribution of
principal to such classes.
Unless otherwise specified in the related Prospectus Supplement, when
a full prepayment is made on a Mortgage Loan or a Contract, the obligor is
charged interest on the principal amount of the Mortgage Loan or Contract so
prepaid for the number of days in the month actually elapsed up to the date
of the prepayment. Unless otherwise specified in the related Prospectus
Supplement, the effect of prepayments in full will be to reduce the amount
of interest paid in the following month to holders of Securities entitled to
payments of interest because interest on the principal amount of any Mortgage
Loan or Contract so prepaid will be paid only to the date of prepayment
rather than for a full month. Unless otherwise specified in the related
Prospectus Supplement, a partial prepayment of principal is applied so as to
reduce the outstanding principal balance of the related Mortgage Loan or
Contract as of the Due Date in the month in which such partial prepayment is
received.
The timing of changes in the rate of principal payments on the Assets
may significantly affect an investor's actual yield to maturity, even if the
average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Assets and distributed on a Security, the greater the effect on such
investor's yield to maturity. The effect on an investor's yield of principal
payments occurring at a rate higher (or lower) than the rate anticipated by
the investor during a given period may not be offset by a subsequent like
decrease (or increase) in the rate of principal payments.
The Securityholder will bear the risk of being able to reinvest principal
received in respect of a Security at a yield at least equal to the yield
on such Security.
PREPAYMENTS-MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Assets
included in or comprising a Trust Fund and the rate at which payments are
made from any Credit Support or Cash Flow Agreement for the related series
of Securities may affect the ultimate maturity and the weighted average life
of each class of such series. Prepayments on the Mortgage Loans or Contracts
comprising or underlying the Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes
of the Securities of the related series.
If so provided in the Prospectus Supplement for a series of Securities,
one or more classes of Securities may have a final scheduled Distribution
Date, which is the date on or prior to which the Security Balance thereof is
scheduled to be reduced to zero, calculated on the basis of the assumptions
applicable to such series set forth therein.
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Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal
of such security will be repaid to the investor. The weighted average life
of a class of Securities of a series will be influenced by the rate at which
principal on the Mortgage Loans or Contracts comprising or underlying the
Assets is paid to such class, which may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
prepayments, in whole or in part, and liquidations due to default).
In addition, the weighted average life of the Securities may be
affected by the varying maturities of the Mortgage Loans or Contracts
comprising or underlying the Assets in a Trust Fund. If any Mortgage Loans
or Contracts comprising or underlying the Assets in a particular Trust
Fund have actual terms to maturity less than those assumed in calculating
final scheduled Distribution Dates for the classes of Securities of the
related series, one or more classes of such Securities may be fully paid
prior to their respective final scheduled Distribution Dates, even in the
absence of prepayments. Accordingly, the prepayment experience of the Assets
will, to some extent, be a function of the mix of Mortgage Rates or Contract
Rates and maturities of the Mortgage Loans or Contracts comprising or
underlying such Assets. See "Description of the Trust Funds."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model or the Standard Prepayment Assumption ("SPA") prepayment model, each
as described below. CPR represents a constant assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans
for the life of such loans. SPA represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans.
A prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per
annum of the then outstanding principal balance of such loans in the first
month of the life of the loans and an additional 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth month and
in each month thereafter during the life of the loans, 100% of SPA assumes a
constant prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption
purports to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of loans,
including the Mortgage Loans or Contracts underlying or comprising the
Assets.
The Prospectus Supplement with respect to each series of Securities may
contain tables, if applicable, setting forth the projected weighted average
life of each class of Offered Securities of such series and the percentage
of the initial Security Balance of each such class that would be outstanding
on specified Distribution Dates based on the assumptions stated in such
Prospectus Supplement, including assumptions that prepayments on the Mortgage
Loans comprising or underlying the related Assets are made at rates
corresponding to various percentages of CPR, SPA or such other standard
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of the weighted average life of the
Securities to various prepayment rates and will not be intended to predict
or to provide information that will enable investors to predict the actual
weighted average life of the Securities. It is unlikely that prepayment of
any Mortgage Loans or Contracts comprising or underlying the Assets for any
series will conform to any particular level of CPR, SPA or any other rate
specified in the related Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Type of Mortgage Asset or Contract
If so specified in the related Prospectus Supplement, a number of
Mortgage Loans may have balloon payments due at maturity, and because the
ability of a mortgagor to make a balloon payment typically will depend upon
its ability either to refinance the loan or to sell the related Mortgaged
Property, there is a risk that a number of Mortgage Loans
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having balloon payments may default at maturity. In the case of defaults,
recovery of proceeds may be delayed by, among other things, bankruptcy of the
mortgagor or adverse conditions in the market where the property is located.
In order to minimize losses on defaulted Mortgage Loans, the servicer may, to
the extent and under the circumstances set forth in the related Prospectus
Supplement, be permitted to modify Mortgage Loans that are in default or as
to which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a Mortgage Loan will tend to extend
the weighted average life of the Securities, thereby lengthening the period
of time elapsed from the date of issuance of a Security until it is retired.
With respect to certain Mortgage Loans, including ARM Loans, the
Mortgage Rate at origination may be below the rate that would result if the
index and margin relating thereto were applied at origination. With respect
to certain Contracts, the Contract Rate may be "stepped up" during its term
or may otherwise vary or be adjusted. Under the applicable underwriting
standards, the mortgagor under each Mortgage Loan or Contract generally will
be qualified on the basis of the Mortgage Rate or Contract Rate in effect at
origination. The repayment of any such Mortgage Loan or Contract may thus be
dependent on the ability of the mortgagor or obligor to make larger level
monthly payments following the adjustment of the Mortgage Rate or Contract
Rate. In addition, certain Mortgage Loans may be subject to temporary buydown
plans ("Buydown Mortgage Loans") pursuant to which the monthly payments made
by the mortgagor during the early years of the Mortgage Loan will be less
than the scheduled monthly payments thereon (the "Buydown Period"). The
periodic increase in the amount paid by the mortgagor of a Buydown Mortgage
Loan during or at the end of the applicable Buydown Period may create a
greater financial burden for the mortgagor, who might not have otherwise
qualified for a mortgage, and may accordingly increase the risk of default
with respect to the related Mortgage Loan.
The Mortgage Rates on certain ARM Loans subject to negative amortization
generally adjust monthly and their amortization schedules adjust less
frequently. During a period of rising interest rates as well as immediately
after origination (initial Mortgage Rates are generally lower than the sum
of the applicable index at origination and the related margin over such index
at which interest accrues), the amount of interest accruing on the principal
balance of such Mortgage Loans may exceed the amount of the minimum scheduled
monthly payment thereon. As a result, a portion of the accrued interest on
negatively amortizing Mortgage Loans may be added to the principal balance
thereof and will bear interest at the applicable Mortgage Rate. The addition
of any such deferred interest to the principal balance of any related class
or classes of Securities will lengthen the weighted average life thereof and
may adversely affect yield to holders thereof, depending upon the price at
which such Securities were purchased. In addition, with respect to certain
ARM Loans subject to negative amortization, during a period of declining
interest rates, it might be expected that each minimum scheduled monthly
payment on such a Mortgage Loan would exceed the amount of scheduled
principal and accrued interest on the principal balance thereof, and since
such excess will be applied to reduce the principal balance of the related
class or classes of Securities, the weighted average life of such Securities
will be reduced and may adversely affect yield to holders thereof, depending
upon the price at which such Securities were purchased.
Defaults
The rate of defaults on the Mortgage Loans or Contracts will also affect
the rate, timing and amount of principal payments on the Assets and
thus the yield on the Securities.
In general, defaults on mortgage loans or contracts are
expected to occur with greater frequency in their early years. The rate of
default on Mortgage Loans which are refinance or limited documentation
mortgage loans, and on Mortgage Loans with high Loan-to-Value Ratios, may be
higher than for other types of Mortgage Loans. Furthermore, the rate and
timing of prepayments, defaults and liquidations on the Mortgage Loans and
Contracts will be affected by the general economic condition of the region
of the country in which the related Mortgage Properties or Manufactured Homes
are located. The risk of delinquencies and loss is greater and prepayments
are less likely in regions where a weak or deteriorating economy exists, as
may be evidenced by, among other factors, increasing unemployment or falling
property values.
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Foreclosures
The number of foreclosures or repossessions and the principal amount of
the Mortgage Loans or Contracts comprising or underlying the Assets that are
foreclosed or repossessed in relation to the number and principal amount of
Mortgage Loans or Contracts that are repaid in accordance with their terms
will affect the weighted average life of the Mortgage Loans or Contracts
comprising or underlying the Assets and that of the related series of
Securities.
Refinancing
At the request of a mortgagor, the Master Servicer or a Sub-Servicer may
allow the refinancing of a Mortgage Loan or Contract in any Trust Fund by
accepting prepayments thereon and permitting a new loan secured by a mortgage
on the same property. In the event of such a refinancing, the new loan would
not be included in the related Trust Fund and, therefore, such refinancing
would have the same effect as a prepayment in full of the related Mortgage
Loan or Contract. A Sub-Servicer or the Master Servicer may, from time to
time, implement programs designed to encourage refinancing. Such programs may
include, without limitation, modifications of existing loans, general or
targeted solicitations, the offering of pre-approved applications, reduced
origination fees or closing costs, or other financial incentives. In
addition, Sub-Servicers may encourage the refinancing of Mortgage Loans or
Contracts, including defaulted Mortgage Loans or Contracts, that would permit
creditworthy borrowers to assume the outstanding indebtedness of such
Mortgage Loans or Contracts.
Due-on-Sale Clauses
Acceleration of mortgage payments as a result of certain transfers of
underlying Mortgaged Property is another factor affecting prepayment rates
that may not be reflected in the prepayment standards or models used in the
relevant Prospectus Supplement. A number of the Mortgage Loans comprising or
underlying the Assets may include "due-on-sale" clauses that allow the holder
of the Mortgage Loans to demand payment in full of the remaining principal
balance of the Mortgage Loans upon sale, transfer or conveyance of the
related Mortgaged Property. With respect to any Whole Loans, unless otherwise
provided in the related Prospectus Supplement, the Master Servicer will
generally enforce any due-on-sale clause to the extent it has knowledge of
the conveyance or proposed conveyance of the underlying Mortgaged Property
and it is entitled to do so under applicable law; provided, however, that the
Master Servicer will not take any action in relation to the enforcement of
any due-on-sale provision which would adversely affect or jeopardize coverage
under any applicable insurance policy. See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale Clauses" and "Description of the Agreements--Due-on-Sale
Provisions." Unless otherwise specified in the related Prospectus
Supplement, the Contracts, in general, prohibit the sale or transfer of the
related Manufactured Homes without the consent of the Master Servicer and
permit the acceleration of the maturity of the Contracts by the Master
Servicer upon any such sale or transfer that is not consented to. Unless
otherwise specified in the related Prospectus Supplement, it is expected that
the Master Servicer will permit most transfers of Manufactured Homes and not
accelerate the maturity of the related Contracts. In certain cases, the
transfer may be made by a delinquent obligor in order to avoid a repossession
of the Manufactured Home. In the case of a transfer of a Manufactured Home
after which the Master Servicer desires to accelerate the maturity of the
related Contract, the Master Servicer's ability to do so will depend on the
enforceability under state law of the "due-on-sale" clause. See "Certain
Legal Aspects of the Contracts-Transfers of Manufactured Homes; Due-on-Sale
Clauses".
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THE DEPOSITOR
Merrill Lynch Mortgage Investors, Inc., the Depositor, is a direct
wholly-owned subsidiary of Merrill Lynch Mortgage Capital Inc. and was
incorporated in the State of Delaware on June 13, 1986. The principal
executive offices of the Depositor are located at 250 Vesey Street, World
Financial Center, North Tower, 10th Floor, New York, New York 10218-1310.
Its telephone number is (212) 449-0357.
The Depositor does not have, nor is it expected in the future to have,
any significant assets.
DESCRIPTION OF THE SECURITIES
GENERAL
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in
the Trust Fund created pursuant to the related Agreement. If a series of
Securities includes Notes, such Notes will represent indebtedness of the
related Trust Fund and will be issued and secured pursuant to an indenture
(an "Indenture"). Each series of Securities will consist of one or more
classes of Securities that may (i) provide for the accrual of interest
thereon based on fixed, variable or adjustable rates; (ii) be senior
(collectively, "Senior Securities") or subordinate (collectively,
"Subordinate Securities") to one or more other classes of Securities in
respect of certain distributions on the Securities; (iii) be entitled to
principal distributions, with disproportionately low, nominal or no interest
distributions (collectively, "Stripped Principal Securities"); (iv) be
entitled to interest distributions, with disproportionately low, nominal or
no principal distributions (collectively, "Stripped Interest Securities");
(v) provide for distributions of accrued interest thereon commencing only
following the occurrence of certain events, such as the retirement of one or
more other classes of Securities of such series (collectively, "Accrual
Securities"); (vi) provide for payments of principal as described in the
related Prospectus Supplement, from all or only a portion of the Assets
in such Trust Fund, to the extent of available funds,
in each case as described in the related Prospectus Supplement; and/or (vii)
provide for distributions based on a combination of two or more components
thereof with one or more of the characteristics described in this paragraph
including a Stripped Principal Security component and a Stripped Interest
Security component. If so specified in the related Prospectus Supplement,
distributions on one or more classes of a series of Securities may be limited
to collections from a designated portion of the Whole Loans in the related
Mortgage Pool (each such portion of Whole Loans, a "Mortgage Loan Group") or
a designated portion of Contracts in the related Contract Pool (each such
portion of Contracts, a "Contract Group"). Any such classes may include
classes of Offered Securities.
Each class of Offered Securities of a series will be issued in minimum
denominations corresponding to the Security Balances or, in case of Stripped
Interest Securities, notional amounts or percentage interests specified in
the related Prospectus Supplement. The transfer of any Offered Securities may
be registered and such Securities may be exchanged without the payment of any
service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge.
One or more classes of Securities of a series may be issued in definitive
form ("Definitive Securities") or in book-entry form ("Book-Entry
Securities"), as provided in the related Prospectus Supplement. See "Special
Considerations--Book-Entry Registration" and "Description of the Securities-
Book-Entry Registration and Definitive Securities." Definitive Securities
will be exchangeable for other Securities of the same class and series of a
like aggregate Security Balance, notional amount or percentage interest but
of different authorized denominations. See "Special Considerations--Limited
Liquidity" and "--Limited Assets."
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DISTRIBUTIONS
Distributions on the Securities of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series
and such Distribution Date. Except as otherwise specified in the related
Prospectus Supplement, distributions (other than the final distribution) will
be made to the persons in whose names the Securities are registered at the
close of business on the last business day of the month preceding the month
in which the Distribution Date occurs (the "Record Date"), and the amount of
each distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date").
All distributions with respect to each class of Securities on each
Distribution Date will be allocated pro rata among the outstanding Securities
in such class or by random selection, as described in the related Prospectus
Supplement or otherwise established by the related Trustee. Payments will be
made either by wire transfer in immediately available funds to the account
of a Securityholder at a bank or other entity having appropriate facilities
therefor, if such Securityholder has so notified the Trustee or other person
required to make such payments no later than the date specified in the
related Prospectus Supplement (and, if so provided in the related Prospectus
Supplement, holds Securities in the requisite amount specified therein), or
by check mailed to the address of the person entitled thereto as it appears
on the Security Register; provided, however, that the final distribution in
retirement of the Securities (whether Definitive Securities or Book-Entry
Securities) will be made only upon presentation and surrender of the
Securities at the location specified in the notice to Securityholders of such
final distribution.
AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Securities of each series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement.
Unless provided otherwise in the related Prospectus Supplement, the
"Available Distribution Amount" for each Distribution Date equals the sum of
the following amounts:
(i) the total amount of all cash on deposit in the related Collection
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but
due on a date subsequent to the related Due Period (unless the related
Prospectus Supplement provides otherwise, a "Due Period" with respect to any
Distribution Date will commence on the second day of the month in which the
immediately preceding Distribution Date occurs, or the day after the Cut-off
Date in the case of the first Due Period, and will end on the first day of
the month of the related Distribution Date),
(b) unless the related Prospectus Supplement provides otherwise,
all prepayments, together with related payments of the interest thereon and
related Prepayment Premiums, Liquidation Proceeds, Insurance Proceeds and
other unscheduled recoveries received subsequent to the related Due Period,
and
(c) all amounts in the Collection Account that are due or
reimbursable to the Depositor, the Trustee, an Asset Seller, a Sub-Servicer,
the Master Servicer or any other entity as specified in the related
Prospectus Supplement or that are payable in respect of certain expenses of
the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Collection Account, including
any net amounts paid under any Cash Flow Agreements;
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(iii) all advances made by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer or any other entity as specified in the
related Prospectus Supplement with respect to interest shortfalls resulting
from prepayments during the related Prepayment Period; and
(v) unless the related Prospectus Supplement provides otherwise, to the
extent not on deposit in the related Collection Account as of the
corresponding Determination Date, any amounts collected under, from or in
respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Securities (including any Securities not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE SECURITIES
Each class of Securities (other than classes of Stripped Principal
Securities that have no Pass-Through Rate or interest rate) may have a
different Pass-Through Rate or interest rate, which will be a fixed, variable
or adjustable rate at which interest will accrue on such class or a component
thereof (the "Pass-Through Rate" in the case of Certificates). The related
Prospectus Supplement will specify the Pass-Through Rate or interest rate for
each class or component or, in the case of a variable or adjustable
Pass-Through Rate or interest rate, the method for determining the
Pass-Through Rate or interest rate. Unless otherwise specified in the related
Prospectus Supplement, interest on the Securities will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of the Securities of any class will
be made on each Distribution Date (other than any class of Accrual
Securities, which will be entitled to distributions of accrued interest
commencing only on the Distribution Date, or under the circumstances,
specified in the related Prospectus Supplement, and any class of Stripped
Principal Securities that are not entitled to any distributions of interest)
based on the Accrued Security Interest for such class and such Distribution
Date, subject to the sufficiency of the portion of the Available Distribution
Amount allocable to such class on such Distribution Date. Prior to the time
interest is distributable on any class of Accrual Securities, the amount of
Accrued Security Interest otherwise distributable on such class will be added
to the Security Balance thereof on each Distribution Date. With respect to
each class of Securities and each Distribution Date (other than certain
classes of Stripped Interest Securities), "Accrued Security Interest" will
be equal to interest accrued for a specified period on the outstanding
Security Balance thereof immediately prior to the Distribution Date, at the
applicable Pass-Through Rate or interest rate, reduced as described below.
Unless otherwise provided in the Prospectus Supplement, Accrued Security
Interest on Stripped Interest Securities will be equal to interest accrued
for a specified period on the outstanding notional amount thereof immediately
prior to each Distribution Date, at the applicable Pass-Through Rate or
interest rate, reduced as described below. The method of determining the
notional amount for any class of Stripped Interest Securities will be
described in the related Prospectus Supplement. Reference to notional
amount is solely for convenience in certain calculations and does not
represent the right to receive any distributions of principal. Unless
otherwise provided in the related Prospectus Supplement, the Accrued
Security Interest on a series of Securities will be reduced in the event
of prepayment interest shortfalls, which are shortfalls in collections of
interest for a full accrual period resulting from prepayments prior to the
due date in such accrual period on the Mortgage Loans or Contracts comprising
or underlying the Assets in the Trust Fund for such series. The particular
manner in which such shortfalls are to be allocated among some or all of the
classes of Securities of that series will be specified in the related
Prospectus Supplement. The related Prospectus Supplement will also describe
the extent to which the amount of Accrued Certificate Interest that is
otherwise
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distributable on (or, in the case of Accrual Securities, that may otherwise
be added to the Security Balance of) a class of Offered Securities may be
reduced as a result of any other contingencies, including delinquencies,
losses and deferred interest on or in respect of the Mortgage Loans or
Contracts comprising or underlying the Assets in the related Trust Fund.
Unless otherwise provided in the related Prospectus Supplement, any reduction
in the amount of Accrued Security Interest otherwise distributable on a class
of Securities by reason of the allocation to such class of a portion of any
deferred interest on the Mortgage Loans or Contracts comprising or underlying
the Assets in the related Trust Fund will result in a corresponding increase
in the Security Balance of such class. See "Special Considerations--Average
Life of Securities; Prepayments; Yields" and "Yield Considerations."
DISTRIBUTIONS OF PRINCIPAL OF THE SECURITIES
The Securities of each series, other than certain classes of Stripped
Interest Securities, will have a "Security Balance" which, at any time, will
equal the then maximum amount that the holder will be entitled to receive in
respect of principal out of the future cash flow on the Assets and other
assets included in the related Trust Fund. The outstanding Security Balance
of a Security will be reduced to the extent of distributions of principal
thereon from time to time and, if and to the extent so provided in the
related Prospectus Supplement, by the amount of losses incurred in respect
of the related Assets, may be increased in respect of deferred interest on
the related Mortgage Loans to the extent provided in the related Prospectus
Supplement and, in the case of Accrual Securities prior to the Distribution
Date on which distributions of interest are required to commence, will be
increased by any related Accrued Security Interest. Unless otherwise provided
in the related Prospectus Supplement, the initial aggregate Security Balance
of all classes of Securities of a series will not be greater than the
outstanding aggregate principal balance of the related Assets as of the
applicable Cut-off Date. The initial aggregate Security Balance of a series
and each class thereof will be specified in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
distributions of principal will be made on each Distribution Date to the
class or classes of Securities entitled thereto in accordance with the
provisions described in such Prospectus Supplement until the Security Balance
of such class has been reduced to zero. Stripped Interest Securities with no
Security Balance are not entitled to any distributions of principal.
COMPONENTS
To the extent specified in the related Prospectus Supplement,
distribution on a class of Securities may be based on a combination of two
or more different components as described under "--General" above. To such
extent, the descriptions set forth under "--Distributions of Interests on the
Securities" and "--Distributions of Principal of the Securities" above also
relate to components of such a class of Securities. In such case, reference
in such sections to Security Balance and Pass-Through Rate or interest rate
refer to the principal balance, if any, of any such component and the Pass-
Through Rate or interest rate, if any, on any such component, respectively.
DISTRIBUTIONS ON THE SECURITIES OF PREPAYMENT PREMIUMS
If so provided in the related Prospectus Supplement, Prepayment Premiums
that are collected on the Mortgage Assets in the related Trust Fund will be
distributed on each Distribution Date to the class or classes of Securities
entitled thereto in accordance with the provisions described in such
Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a series of Securities
consisting of one or more classes of Subordinate Securities, on any
Distribution Date in respect of which losses or shortfalls in collections on
the Assets have been incurred, the amount of such losses or shortfalls will
be borne first by a class of Subordinate Securities in the
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priority and manner and subject to the limitations specified in such Prospectus
Supplement. See "Description of Credit Support" for a description of the
types of protection that may be included in a Trust Fund against losses and
shortfalls on Assets comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Securities evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement,
the Master Servicer or another entity described therein will be required as
part of its servicing responsibilities to advance on or before each
Distribution Date its own funds or funds held in the Collection Account that
are not included in the Available Distribution Amount for such Distribution
Date, in an amount equal to the aggregate of payments of principal (other
than any balloon payments) and interest (net of related servicing fees and
Retained Interest) that were due on the Whole Loans or Contracts in such
Trust Fund during the related Due Period and were delinquent on the related
Determination Date, subject to the Master Servicer's (or another entity's)
good faith determination that such advances will be reimbursable from Related
Proceeds (as defined below). In the case of a series of Securities that
includes one or more classes of Subordinate Securities and if so provided in
the related Prospectus Supplement, the Master Servicer's (or another
entity's) advance obligation may be limited only to the portion of such
delinquencies necessary to make the required distributions on one or more
classes of Senior Securities and/or may be subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on
other Assets otherwise distributable on one or more classes of such
Subordinate Securities. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest
and principal payments to holders of the class or classes of Certificates
entitled thereto, rather than to guarantee or insure against losses. Unless
otherwise provided in the related Prospectus Supplement, advances of the
Master Servicer's (or another entity's) funds will be reimbursable only out
of related recoveries on the Mortgage Loans or Contracts (including amounts
received under any form of Credit Support) respecting which such advances
were made (as to any Mortgage Loan or Contract, "Related Proceeds") and, if
so provided in the Prospectus Supplement, out of any amounts otherwise
distributable on one or more classes of Subordinate Securities of such
series; provided, however, that any such advance will be reimbursable from
any amounts in the Collection Account prior to any distributions being made
on the Securities to the extent that the Master Servicer (or such other
entity) shall determine in good faith that such advance (a "Nonrecoverable
Advance") is not ultimately recoverable from Related Proceeds or, if
applicable, from collections on other Assets otherwise distributable on such
Subordinate Securities. If advances have been made by the Master Servicer
from excess funds in the Collection Account, the Master Servicer is required
to replace such funds in the Collection Account on any future Distribution
Date to the extent that funds in the Collection Account on such Distribution
Date are less than payments required to be made to Securityholders on such
date. If so specified in the related Prospectus Supplement, the obligations
of the Master Servicer (or another entity) to make advances may be secured
by a cash advance reserve fund, a surety bond, a letter of credit or another
form of limited guaranty. If applicable, information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement,
the Master Servicer (or another entity) will be entitled to receive interest
at the rate specified therein on its outstanding advances and will be
entitled to pay itself such interest periodically from general collections
on the Assets prior to any payment to Securityholders or as otherwise
provided in the related Agreement and described in such Prospectus
Supplement.
The Prospectus Supplement for any series of Securities evidencing an
interest in a Trust Fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
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REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Securities of a series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement,
will forward or cause to be forwarded to each such holder, to the Depositor
and to such other parties as may be specified in the related Agreement, a
statement setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Securities of such
class applied to reduce the Security Balance thereof;
(ii) the amount of such distribution to holders of Securities of such
class allocable to Accrued Security Interest;
(iii) the amount of such distribution allocable to Prepayment
Premiums;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Sub-Servicer) and such other customary information as any such Master
Servicer or the Trustee deems necessary or desirable, or that a
Securityholder reasonably requests, to enable Securityholders to prepare
their tax returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans or
Contracts in respect of which (a) one scheduled payment is delinquent,
(b) two scheduled payments are delinquent, (c) three or more scheduled
payments are delinquent and (d) foreclosure proceedings have been commenced;
(viii) with respect to any Whole Loan or Contract liquidated during
the related Due Period, (a) the portion of such liquidation proceeds payable
or reimbursable to the Master Servicer (or any other entity) in respect of
such Mortgage Loan and (b) the amount of any loss to Securityholders;
(ix) with respect to each REO Property relating to a Whole Loan or
Contract and included in the Trust Fund as of the end of the related Due
Period, (a) the loan number of the related Mortgage Loan or Contract and
(b) the date of acquisition;
(x) with respect to each REO Property relating to a Whole Loan or
Contract and included in the Trust Fund as of the end of the related Due
Period, (a) the book value, (b) the principal balance of the related Mortgage
Loan or Contract immediately following such Distribution Date (calculated as
if such Mortgage Loan or Contract were still outstanding taking into account
certain limited modifications to the terms thereof specified in the
Agreement), (c) the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and (d) if applicable, the aggregate
amount of interest accrued and payable on related servicing expenses and
related advances;
(xi) with respect to any such REO Property sold during the related Due
Period (a) the aggregate amount of sale proceeds, (b) the portion of such
sales proceeds payable or reimbursable to the Master Servicer in respect of
such
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REO Property or the related Mortgage Loan or Contract and (c) the amount
of any loss to Securityholders in respect of the related Mortgage Loan;
(xii) the aggregate Security Balance or notional amount, as the case
may be, of each class of Securities (including any class of Securities not
offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Security Balance due to the
allocation of any loss and increase in the Security Balance of a class of
Accrual Securities in the event that Accrued Security Interest has been added
to such balance;
(xiii) the aggregate amount of principal prepayments made during the
related Due Period;
(xiv) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xv) the amount remaining in the reserve fund, if any, as of the close
of business on such Distribution Date;
(xvi) the aggregate unpaid Accrued Security Interest, if any, on
each class of Securities at the close of business on such Distribution Date;
(xvii) in the case of Securities with a variable Pass-Through Rate
or interest rate, the Pass-Through Rate or interest rate applicable to such
Distribution Date, and, if available, the immediately succeeding Distribution
Date, as calculated in accordance with the method specified in the related
Prospectus Supplement;
(xviii) in the case of Securities with an adjustable Pass-Through Rate
or interest rate, for statements to be distributed in any month in which an
adjustment date occurs, the adjustable Pass-Through Rate or interest rate
applicable to such Distribution Date, if available, and the immediately
succeeding Distribution Date as calculated in accordance with the method
specified in the related Prospectus Supplement;
(xix) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xx) the aggregate amount of payments by the obligors of (a) default
interest, (b) late charges and (c) assumption and modification fees collected
during the related Due Period.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Securities or for such other specified portion thereof. In
addition, in the case of information furnished pursuant to subclauses (i),
(ii), (xii), (xvi) and (xvii) above, such amounts shall also be provided with
respect to each component, if any, of a class of Securities. The Master
Servicer or the Trustee, as specified in the related Prospectus Supplement,
will forward or cause to be forwarded to each holder, to the Depositor and
to such other parties as may be specified in the Agreement, a copy of any
statements or reports received by the Master Servicer or the Trustee, as
applicable, with respect to any MBS. The Prospectus Supplement for each
series of Offered Securities will describe any additional information to be
included in reports to the holders of such Securities.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Security a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Securityholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable
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information shall be provided by the Master Servicer or the Trustee pursuant
to any requirements of the Code as are from time to time in force. See
"Description of the Securities--Registration and Definitive Securities."
TERMINATION
The obligations created by the related Agreement for each series of
Certificates will terminate upon the payment to Certificateholders of that
series of all amounts held in the Collection Account or by the Master
Servicer, if any, or the Trustee and required to be paid to them pursuant to
such Agreement following the earlier of (i) the final payment or other
liquidation of the last Asset subject thereto or the disposition of all
property acquired upon foreclosure of any Whole Loan or Contract subject
thereto and (ii) the purchase of all of the assets of the Trust Fund by the
party entitled to effect such termination, under the circumstances and in the
manner set forth in the related Prospectus Supplement. In no event, however,
will the trust created by the Agreement continue beyond the date specified
in the related Prospectus Supplement. Written notice of termination of the
Agreement will be given to each Securityholder, and the final distribution
will be made only upon presentation and surrender of the Securities at the
location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Securities may be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by the party specified
therein, under the circumstances and in the manner set forth therein. If so
provided in the related Prospectus Supplement, upon the reduction of the
Security Balance of a specified class or classes of Securities by a specified
percentage or amount, the party specified therein will solicit bids for the
purchase of all assets of the Trust Fund, or of a sufficient portion of such
assets to retire such class or classes or purchase such class or classes at
a price set forth in the related Prospectus Supplement, in each case, under
the circumstances and in the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE SECURITIES
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Securities of any series will be issued as Book-Entry
Securities, and each such class will be represented by one or more single
Securities registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants
include Merrill Lynch, Pierce, Fenner & Smith Incorporated, securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system also
is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Unless otherwise provided in the related Prospectus Supplement,
investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Securities may do so only through Participants and Indirect
Participants. In addition, such investors ("Security Owners") will receive
all distributions on the Book-Entry Securities through DTC and its
Participants. Under a book-entry format, Security Owners will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede & Co., as nominee for DTC ("Cede"), on each
such date, DTC will forward such payments to its Participants which
thereafter will be required to forward them to Indirect Participants or
Security Owners. Unless otherwise provided
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in the related Prospectus Supplement, the only "Securityholder" (as such term
is used in the Agreement) will be Cede, as nominee of DTC, and the Security
Owners will not be recognized by the Trustee as Securityholders under the
Agreement. Security Owners will be permitted to exercise the rights of
Securityholders under the related Agreement, Trust Agreement or Indenture, as
applicable, only indirectly through the Participants who in turn will exercise
their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry
Securities and is required to receive and transmit distributions of principal
of and interest on the Book-Entry Securities. Participants and Indirect
Participants with which Security Owners have accounts with respect to the
Book-Entry Securities similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Security
Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge its interest in the Book-Entry Securities to persons or
entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in the Book-Entry Securities, may be limited due
to the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Securityholder under an Agreement only at the direction of one
or more Participants to whose account with DTC interests in the Book-Entry
Securities are credited.
Unless otherwise specified in the related Prospectus Supplement,
Securities initially issued in book-entry form will be issued in fully
registered, certificated form to Security Owners or their nominees
("Definitive Securities"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or
able to properly discharge its responsibilities as depository with respect
to the Securities and the Depositor is unable to locate a qualified successor
or (ii) the Depositor, at its option, elects to terminate the book-entry
system through DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities for the Security Owners.
Upon surrender by DTC of the certificate or certificates representing the
Book-Entry Securities, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Security Owners identified
in such instructions the Definitive Securities to which they are entitled,
and thereafter the Trustee will recognize the holders of such Definitive
Securities as Securityholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
AGREEMENTS APPLICABLE TO A SERIES
REMIC Certificates, Grantor Trust Certificates. Certificates that are
REMIC Certificates or Grantor Trust Certificates will be issued, and the
related Trust Fund will be created, pursuant to a pooling and servicing
agreement (a "Pooling and Servicing Agreement") among the Depositor, the
Master Servicer and the Trustee. The Assets of such Trust Fund will be
transferred to the Trust Fund and thereafter serviced in accordance with the
terms of the Pooling and Servicing Agreement. In the context of the
conveyance and servicing of the related Assets, the Pooling and Servicing
Agreement may be referred to herein as the "Agreement". Notwithstanding the
foregoing, if the Assets of the Trust Fund for such a series consists only
of Government Securities or MBS, such Assets will be conveyed to the Trust
Fund and
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administered pursuant to a trust agreement between the Depositor and
the Trustee (a "Trust Agreement"), which may also be referred to herein as
the "Agreement".
Certificates That Are Partnership Interests for Tax Purposes and Notes.
Certificates that are partnership interests for tax purposes will be issued,
and the related Trust Fund will be created, pursuant to a Trust Agreement
between the Depositor and the Trustee. The Assets of the related Trust Fund
will be transferred to the Trust Fund and thereafter serviced in accordance
with a servicing agreement (a "Servicing Agreement")
between the Depositor, the Servicer and the Trustee. In the context of the
conveyance and servicing of the related Assets, a Servicing may be
referred to herein as the "Agreement".
A series of Notes issued by a Trust Fund will be issued pursuant to the
indenture (the "Indenture") between the related Trust Fund and an indenture
trustee (the "Indenture Trustee") named in the related Prospectus Supplement.
Notwithstanding the foregoing, if the Assets of a Trust Fund consist
only of MBS or Government Securities, such Assets will be conveyed to the
Trust Fund and administered in accordance with the terms of the Trust
Agreement, which in such context may be referred to herein as the Agreement.
General. Any Master Servicer and the Trustee with respect to any series
of Securities will be named in the related Prospectus Supplement. In any
series of Securities for which there are multiple Master Servicers, there may
also be multiple Mortgage Loan Groups or Contract Groups, each corresponding
to a particular Master Servicer; and, if the related Prospectus Supplement
so specifies, the servicing obligations of each such Master Servicer will be
limited to the Whole Loans in such corresponding Mortgage Loan Group or the
Contracts in the corresponding Contract Group. In lieu of appointing a
Master Servicer, a servicer may be appointed pursuant to the Agreement for
any Trust Fund. Such servicer will service all or a significant number of
Whole Loans or Contracts directly without a Sub-Servicer. Unless otherwise
specified in the related Prospectus Supplement, the obligations of any such
servicer shall be commensurate with those of the Master Servicer described
herein. References in this Prospectus to Master Servicer and its rights and
obligations, unless otherwise specified in the related Prospectus Supplement,
shall be deemed to also be references to any servicer servicing Whole Loans
or Contracts directly. A manager or administrator may be appointed pursuant
to the Trust Agreement for any Trust Fund to administer such Trust Fund. The
provisions of each Agreement will vary depending upon the nature of the
Securities to be issued thereunder and the nature of the related Trust Fund.
Forms of a Pooling and Servicing Agreement, a Sale and Servicing Agreement
and a Trust Agreement have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
The following summaries describe certain provisions that may appear in
each Agreement. The Prospectus Supplement for a series of Securities will
describe any provision of the Agreement relating to such series that
materially differs from the description thereof contained in this Prospectus.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Agreement for each Trust Fund and the description of such provisions in the
related Prospectus Supplement. As used herein with respect to any series, the
term "Security" refers to all of the Securities of that series, whether or
not offered hereby and by the related Prospectus Supplement, unless the
context otherwise requires. The Depositor will provide a copy of the
Agreement (without exhibits) relating to any series of Securities without
charge upon written request of a holder of a Security of such series
addressed to Merrill Lynch Mortgage Investors, Inc., 250 Vesey Street, World
Financial Center, North Tower, 10th Floor, New York, New York 10281-1310.
Attention: Jack Ross.
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ASSIGNMENT OF ASSETS; REPURCHASES
At the time of issuance of any series of Securities, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Assets to be
included in the related Trust Fund, together with all principal and interest
to be received on or with respect to such Assets after the Cut-off Date,
other than principal and interest due on or before the Cut-off Date and other
than any Retained Interest. The Trustee will, concurrently with such
assignment, deliver the Certificates to the Depositor in exchange for the
Assets and the other assets comprising the Trust Fund for such series. Each
Asset will be identified in a schedule appearing as an exhibit to the related
Agreement. Unless otherwise provided in the related Prospectus Supplement,
such schedule will include detailed information (i) in respect of each Whole
Loan included in the related Trust Fund, including without limitation, the
address of the related Mortgaged Property and type of such property, the
Mortgage Rate and, if applicable, the applicable index, margin, adjustment
date and any rate cap information, the original and remaining term to
maturity, the original and outstanding principal balance and balloon payment,
if any, the Value and Loan-to-Value Ratio as of the date indicated and
payment and prepayment provisions, if applicable; (ii) in respect of each
Contract included in the related Trust Fund, including without limitation the
Contract number, the outstanding principal amount and the Contract Rate; and
(iii) in respect of each MBS included in the related Trust Fund, including
without limitation, the MBS Issuer, MBS Servicer and MBS Trustee, the
pass-through or bond rate or formula for determining such rate, the issue
date and original and remaining term to maturity, if applicable, the original
and outstanding principal amount and payment provisions, if applicable.
With respect to each Whole Loan, except as otherwise specified in the
related Prospectus Supplement, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, which unless otherwise specified in the related
Prospectus Supplement will include the original Mortgage Note endorsed,
without recourse, in blank or to the order of the Trustee, the original
Mortgage (or a certified copy thereof) with evidence of recording indicated
thereon and an assignment of the Mortgage to the Trustee in recordable form.
Notwithstanding the foregoing, a Trust Fund may include Mortgage Loans where
the original Mortgage Note is not delivered to the Trustee if the Depositor
delivers to the Trustee or the custodian a copy or a duplicate original of
the Mortgage Note, together with an affidavit certifying that the original
thereof has been lost or destroyed. With respect to such Mortgage Loans, the
Trustee (or its nominee) may not be able to enforce the Mortgage Note against
the related borrower. Unless otherwise specified in the related Prospectus
Supplement, the Asset Seller will be required to agree to repurchase, or
substitute for, each such Mortgage Loan that is subsequently in default if
the enforcement thereof or of the related Mortgage is materially adversely
affected by the absence of the original Mortgage Note. Unless otherwise
provided in the related Prospectus Supplement, the related Agreement will
require the Depositor or another party specified therein to promptly cause
each such assignment of Mortgage to be recorded in the appropriate public
office for real property records, except in the State of California or in
other states where, in the opinion of counsel acceptable to the Trustee, such
recording is not required to protect the Trustee's interest in the related
Whole Loan against the claim of any subsequent transferee or any successor
to or creditor of the Depositor, the Master Servicer, the relevant Asset
Seller or any other prior holder of the Whole Loan.
The Trustee (or a custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or
a custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify
the Master Servicer and the Depositor, and the Master Servicer shall
immediately notify the relevant Asset Seller. If the Asset Seller cannot cure
the omission or defect within a specified number of days after receipt of
such notice, then unless otherwise specified in the related Prospectus
Supplement, the Asset Seller will be obligated, within a specified number of
days of receipt of such notice, to repurchase the related Whole Loan from the
Trustee at the Purchase Price or substitute for such Mortgage Loan. There can
be no assurance that an Asset Seller will fulfill this repurchase or
substitution obligation, and neither the Master
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Servicer nor the Depositor will be obligated to repurchase or substitute for
such Mortgage Loan if the Asset Seller defaults on its obligation. Unless
otherwise specified in the related Prospectus Supplement, this repurchase or
substitution obligation constitutes the sole remedy available to the
Certificateholders or the Trustee for omission of, or a material defect in, a
constituent document. To the extent specified in the related Prospectus
Supplement, in lieu of curing any omission or defect in the Asset or
repurchasing or substituting for such Asset, the Asset Seller may agree to
cover any losses suffered by the Trust Fund as a result of such breach or
defect.
Notwithstanding the preceding two paragraphs, unless otherwise specified
in the related Prospectus Supplement, the documents with respect to Home
Equity Loans, Home Improvement Contracts and Unsecured Home Improvement Loans
will not be delivered to the Trustee (or a custodian), but will be retained
by the Master Servicer, which may also be the Asset Seller. In addition,
assignments of the related Mortgages to the Trustee will not be recorded,
unless otherwise provided in the related Prospectus Supplement.
With respect to each Contract, unless otherwise specified in the related
Prospectus Supplement, the Master Servicer (which may also be the Asset
Seller) will maintain custody of the original Contract and copies of
documents and instruments related to each Contract and the security interest
in the Manufactured Home securing each Contract. In order to give notice of
the right, title and interest of the Trustee in the Contracts, the Depositor
will cause UCC-1 financing statements to be executed by the related Asset
Seller identifying the Depositor as secured party and by the Depositor
identifying the Trustee as the secured party and, in each case, identifying
all Contracts as collateral. Unless otherwise specified in the related
Prospectus Supplement, the Contracts will not be stamped or otherwise marked
to reflect their assignment from the Company to the Trust. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to
take physical possession of the Contracts without notice of such assignment,
the interest of the Trustee in the Contracts could be defeated. See "Certain
Legal Aspects of the Contracts."
While the Contract documents will not be reviewed by the Trustee or the
Master Servicer, if the Master Servicer finds that any such document is
missing or defective in any material respect, the Master Servicer shall
immediately notify the Depositor and the relevant Asset Seller. If the Asset
Seller cannot cure the omission or defect within a specified number of days
after receipt of such notice, then unless otherwise specified in the related
Prospectus Supplement, the Asset Seller will be obligated, within a specified
number of days of receipt of such notice, to repurchase the related Contract
from the Trustee at the Purchase Price or substitute for such Contract.
There can be no assurance that an Asset Seller will fulfill this repurchase
or substitution obligation, and neither the Master Servicer nor the Depositor
will be obligated to repurchase or substitute for such Contract if the asset
Seller defaults on its obligation. Unless otherwise specified in the related
Prospectus Supplement, this repurchase or substitution obligation constitutes
the sole remedy available to the Certificateholders or the Trustee for
omission of, or a material defect in, a constituent document. To the extent
specified in the related Prospectus Supplement, in lieu of curing any
omission or defect in the Asset or repurchasing or substituting for such
Asset, the Asset Seller may agree to cover any losses suffered by the Trust
Fund as a result of such breach or defect.
With respect to each Government Security or MBS in certificated form,
the Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of
the Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the
Trustee for the benefit of the Certificateholders. Unless otherwise provided
in the related Prospectus Supplement, the related Agreement will require that
either the Depositor or the Trustee promptly cause any MBS and Government
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Securities in certificated form not registered in the name of the Trustee to
be re-registered, with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan or Contract, assign certain
representations and warranties, as of a specified date (the person making
such representations and warranties, the "Warranting Party") covering, by way
of example, the following types of matters: (i) the accuracy of the
information set forth for such Whole Loan or Contract on the schedule of
Assets appearing as an exhibit to the related Agreement; (ii) in the case of
a Whole Loan, the existence of title insurance insuring the lien priority of
the Whole Loan and, in the case of a Contract, that the Contract creates a
valid first security interest in or lien on the related Manufactured Home;
(iii) the authority of the Warranting Party to sell the Whole Loan or
Contract; (iv) the payment status of the Whole Loan or Contract; (v) in the
case of a Whole Loan, the existence of customary provisions in the related
Mortgage Note and Mortgage to permit realization against the Mortgaged
Property of the benefit of the security of the Mortgage; and (vi) the
existence of hazard and extended perils insurance coverage on the Mortgaged
Property or Manufactured Home.
Any Warranting Party shall be an Asset Seller or an affiliate thereof
or such other person acceptable to the Depositor and shall be identified in
the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan or
Contract may have been made as of a date prior to the applicable Cut-off
Date. A substantial period of time may have elapsed between such date and the
date of initial issuance of the related series of Certificates evidencing an
interest in such Whole Loan or Contract. Unless otherwise specified in the
related Prospectus Supplement, in the event of a breach of any such
representation or warranty, the Warranting Party will be obligated to
reimburse the Trust Fund for losses caused by any such breach or either cure
such breach or repurchase or replace the affected Whole Loan or Contract as
described below. Since the representations and warranties may not address
events that may occur following the date as of which they were made, the
Warranting Party will have a reimbursement, cure, repurchase or substitution
obligation in connection with a breach of such a representation and warranty
only if the relevant event that causes such breach occurs prior to such date.
Such party would have no such obligations if the relevant event that causes
such breach occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be
required to notify promptly the relevant Warranting Party of any breach of
any representation or warranty made by it in respect of a Whole Loan or
Contract that materially and adversely affects the value of such Whole Loan
or Contract or the interests therein of the Certificateholders. If such
Warranting Party cannot cure such breach within a specified period following
the date on which such party was notified of such breach, then such
Warranting Party will be obligated to repurchase such Whole Loan or Contract
from the Trustee within a specified period from the date on which the
Warranting Party was notified of such breach, at the Purchase Price therefor.
As to any Whole Loan or Contract, unless otherwise specified in the related
Prospectus Supplement, the "Purchase Price" is equal to the sum of the unpaid
principal balance thereof, plus unpaid accrued interest thereon at the
Mortgage Rate or Contract Rate from the date as to which interest was last
paid to the due date in the Due Period in which the relevant purchase is to
occur, plus certain servicing expenses that are reimbursable to the Master
Servicer. If so provided in the Prospectus Supplement for a series, a
Warranting Party, rather than repurchase a Whole Loan or Contract as to which
a breach has occurred, will have the option, within a specified period after
initial issuance of such series of Certificates, to cause the removal of such
Whole Loan or Contract from the Trust Fund and substitute in its place one
or more other Whole Loans or Contracts, as applicable, in accordance with the
standards described in the related Prospectus Supplement. If so provided in
the Prospectus Supplement for a series, a Warranting Party, rather than
repurchase or substitute a Whole
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Loan or Contract as to which a breach has occurred, will have the option to
reimburse the Trust Fund or the Certificateholders for any losses caused by
such breach. Unless otherwise specified in the related Prospectus Supplement,
this reimbursement, repurchase or substitution obligation will constitute the
sole remedy available to holders of Certificates or the Trustee for a breach
of representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or substitute
for a Whole Loan or Contract if a Warranting Party defaults on its obligation
to do so, and no assurance can be given that Warranting Parties will carry
out such obligations with respect to Whole Loans or Contracts.
Unless otherwise provided in the related Prospectus Supplement the
Warranting Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties, as
of a specified date, with respect to such Government Securities or MBS,
covering (i) the accuracy of the information set forth therefor on the
schedule of Assets appearing as an exhibit to the related Agreement and (ii)
the authority of the Warranting Party to sell such Assets. The related
Prospectus Supplement will describe the remedies for a breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation
of the Master Servicer which materially and adversely affects the interests
of the Certificateholders and which continues unremedied for the number of
days specified in the Agreement after the giving of written notice of such
breach to the Master Servicer by the Trustee or the Depositor, or to the
Master Servicer, the Depositor and the Trustee by the holders of Certificates
evidencing not less than 25% of the Voting Rights (unless otherwise specified
in the related Prospectus Supplement), will constitute an Event of Default
under such Pooling and Servicing Agreement. See "Events of Default" and
"Rights Upon Event of Default."
COLLECTION ACCOUNT AND RELATED ACCOUNTS
General
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Collection Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund of the Federal Deposit Insurance
Corporation ("FDIC") (to the limits established by the FDIC) and the
uninsured deposits in which are otherwise secured such that the
Certificateholders have a claim with respect to the funds in the Collection
Account or a perfected first priority security interest against any
collateral securing such funds that is superior to the claims of any other
depositors or general creditors of the institution with which the Collection
Account is maintained or (ii) otherwise maintained with a bank or trust
company, and in a manner, satisfactory to the Rating Agency or Agencies
rating any class of Securities of such series. The collateral eligible to
secure amounts in the Collection Account is limited to United States
government securities and other investment grade obligations specified in the
Agreement ("Permitted Investments"). A Collection Account may be maintained
as an interest bearing or a non-interest bearing account and the funds held
therein may be invested pending each succeeding Distribution Date in certain
short-term Permitted Investments. Unless otherwise provided in the related
Prospectus Supplement, any interest or other income earned on funds in the
Collection Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Collection Account may be maintained
with an institution that is an affiliate of the Master Servicer, if
applicable, provided that such institution meets the standards imposed by the
Rating Agency or Agencies. If permitted by the Rating Agency or Agencies and
so specified in the related Prospectus Supplement, a Collection Account may
contain funds relating to more than one series of mortgage
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pass-through certificates and may contain other funds respecting payments on
mortgage loans belonging to the Master Servicer or serviced or master serviced
by it on behalf of others.
Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited
in the Collection Account for one or more Trust Funds on a daily basis,
unless otherwise provided in the related Agreement, the following payments
and collections received, or advances made, by the Master Servicer or the
Trustee or on its behalf subsequent to the Cut-off Date (other than payments
due on or before the Cut-off Date, and exclusive of any amounts representing
a Retained Interest):
(i) all payments on account of principal, including principal
prepayments, on the Assets;
(ii) all payments on account of interest on the Assets, including any
default interest collected, in each case net of any portion thereof retained
by a Master Servicer or a Sub-Servicer as its servicing compensation and net
of any Retained Interest;
(iii) all proceeds of the hazard insurance policies to be maintained
in respect of each Mortgaged Property securing a Whole Loan in the Trust Fund
(to the extent such proceeds are not applied to the restoration of the
property or released to the mortgagor in accordance with the normal servicing
procedures of a Master Servicer or the related Sub-Servicer, subject to the
terms and conditions of the related Mortgage and Mortgage Note)
(collectively, "Insurance Proceeds") and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans in
the Trust Fund, by foreclosure or otherwise ("Liquidation Proceeds"),
together with the net proceeds on a monthly basis with respect to any
Mortgaged Properties acquired for the benefit of Securityholders by
foreclosure or by deed in lieu of foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Securities as described
under "Description of Credit Support";
(v) any advances made as described under "Description of the
Securities--Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(vii) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person as described under "Assignment of
Assets; Repurchases" and "Representations and Warranties; Repurchases," all
proceeds of any defaulted Mortgage Loan purchased as described under
"Realization Upon Defaulted Whole Loans," and all proceeds of any Asset
purchased as described under "Description of the Securities--Termination"
(also, "Liquidation Proceeds");
(viii) any amounts paid by a Master Servicer to cover certain
interest shortfalls arising out of the prepayment of Whole Loans or Contracts
in the Trust Fund as described under "Description of the Agreements--Retained
Interest; Servicing Compensation and Payment of Expenses";
(ix) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges or Prepayment Premiums
on the Mortgage Assets;
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(x) all payments required to be deposited in the Collection Account
with respect to any deductible clause in any blanket insurance policy
described under "Hazard Insurance Policies";
(xi) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit of
the Master Servicer or the Trustee, as the case may be, of funds held in the
Collection Account; and
(xii) any other amounts required to be deposited in the Collection
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
Withdrawals
A Master Servicer or the Trustee may, from time to time, unless
otherwise specified in the related
Prospectus Supplement or the related Agreement, make withdrawals from the
Collection Account for each Trust Fund for any of the following purposes:
(i) to make distributions to the Securityholders on each Distribution
Date;
(ii) to reimburse a Master Servicer for unreimbursed amounts advanced
as described under "Description of the Securities--Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received which
were identified and applied by the Master Servicer as late collections of
interest (net of related servicing fees and Retained Interest) on and
principal of the particular Whole Loans or Contracts with respect to which
the advances were made or out of amounts drawn under any form of Credit
Support with respect to such Whole Loans or Contracts;
(iii) to reimburse a Master Servicer for unpaid servicing fees
earned and certain unreimbursed servicing expenses incurred with respect to
Whole Loans or Contracts and properties acquired in respect thereof, such
reimbursement to be made out of amounts that represent Liquidation Proceeds
and Insurance Proceeds collected on the particular Whole Loans or Contracts
and properties, and net income collected on the particular properties, with
respect to which such fees were earned or such expenses were incurred or out
of amounts drawn under any form of Credit Support with respect to such Whole
Loans or Contracts and properties;
(iv) to reimburse a Master Servicer for any advances described in clause
(ii) above and any servicing expenses described in clause (iii) above which,
in the Master Servicer's good faith judgment, will not be recoverable from
the amounts described in clauses (ii) and (iii), respectively, such
reimbursement to be made from amounts collected on other Assets or, if and
to the extent so provided by the related Agreement and described in the
related Prospectus Supplement, just from that portion of amounts collected
on other Assets that is otherwise distributable on one or more classes of
Subordinate Securities, if any, remain outstanding, and otherwise any
outstanding class of Securities, of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay a Master Servicer interest accrued on the advances
described in clause (ii) above and the servicing expenses described in clause
(iii) above while such remain outstanding and unreimbursed;
(vi) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be, for
certain expenses, costs and liabilities incurred thereby, as and to the
extent described under "Certain Matters Regarding a Master Servicer and the
Depositor";
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(vii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(viii) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under "Certain
Matters Regarding the Trustee";
(ix) unless otherwise provided in the related Prospectus Supplement, to
pay a Master Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Collection
Account;
(x) to pay the person entitled thereto any amounts deposited in the
Collection Account that were identified and applied by the Master Servicer
as recoveries of Retained Interest;
(xi) to pay for costs reasonably incurred in connection with the proper
management and maintenance of any Mortgaged Property acquired for the benefit
of Securityholders by foreclosure or by deed in lieu of foreclosure or
otherwise, such payments to be made out of income received on such property;
(xii) if one or more elections have been made to treat the Trust
Fund or designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as and
to the extent described under "Certain Federal Income Tax Consequences--
REMICS--Prohibited Transactions Tax and Other Taxes";
(xiii) to pay for the cost of an independent appraiser or other
expert in real estate matters retained to determine a fair sale price for a
defaulted Whole Loan or a property acquired in respect thereof in connection
with the liquidation of such Whole Loan or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of Securityholders;
(xv) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Securityholders, provided that such payment shall not constitute a waiver
with respect to the obligation of the Warranting Party to remedy any breach
of representation or warranty under the Agreement;
(xvi) to pay the person entitled thereto any amounts deposited in
the Collection Account in error, including amounts received on any Asset
after its removal from the Trust Fund whether by reason of purchase or
substitution as contemplated by "Assignment of Assets; Repurchase" and
"Representations and Warranties; Repurchases" or otherwise;
(xvii) to make any other withdrawals permitted by the related
Agreement; and
(xviii) to clear and terminate the Collection Account at the
termination of the Trust Fund.
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Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any series of Securities may provide for the
establishment and maintenance of a separate collection account into which the
Master Servicer or any related Sub-Servicer will deposit on a daily basis the
amounts described under "--Deposits" above for one or more series of
Securities. Any amounts on deposit in any such collection account will be
withdrawn therefrom and deposited into the appropriate Collection Account by
a time specified in the related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement, any amounts which could be
withdrawn from the Collection Account as described under "--Withdrawals"
above, may also be withdrawn from any such collection account. The
Prospectus Supplement will set forth any restrictions with respect to any
such collection account, including investment restrictions and any
restrictions with respect to financial institutions with which any such
collection account may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole
Loans and will follow or cause to be followed such collection procedures as
it would follow with respect to mortgage loans that are comparable to the
Whole Loans or manufactured housing contracts comparable to the Contracts and
held for its own account, provided such procedures are consistent with
(i) the terms of the related Agreement and any related hazard insurance
policy or instrument of Credit Support, if any, included in the related Trust
Fund described herein or under "Description of Credit Support,"
(ii) applicable law and (iii) the general servicing standard specified in the
related Prospectus Supplement or, if no such standard is so specified, its
normal servicing practices (in either case, the "Servicing Standard"). In
connection therewith, the Master Servicer will be permitted in its discretion
to waive any late payment charge or penalty interest in respect of a late
payment on a Whole Loan or Contract.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining hazard
insurance policies as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to a Whole Loan;
processing assumptions or substitutions in those cases where the Master
Servicer has determined not to enforce any applicable due-on-sale clause;
attempting to cure delinquencies; supervising foreclosures or repossessions;
inspecting and managing Mortgaged Properties or Manufactured Homes under
certain circumstances; and maintaining accounting records relating to the
Whole Loans or Contracts. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer will be responsible for filing and
settling claims in respect of particular Whole Loans or Contracts under any
applicable instrument of Credit Support. See "Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan or Contract in a manner consistent with the Servicing Standard so
long as the modification, waiver or amendment will not (i) affect the amount
or timing of any scheduled payments of principal or interest on the Whole
Loan or Contract or (ii) in its judgment, materially impair the security for
the Whole Loan or Contract or reduce the likelihood of timely payment of
amounts due thereon. The Master Servicer also may agree to any modification,
waiver or amendment that would so affect or impair the payments on, or the
security for, a Whole Loan or Contract if, unless otherwise provided in the
related Prospectus Supplement, (i) in its judgment, a material default on the
Whole Loan or Contract has occurred or a payment default is imminent and
(ii) in its judgment, such modification, waiver or amendment is reasonably
likely to produce a greater recovery with respect to the Whole Loan or
Contract on a present value basis than would liquidation. The Master Servicer
is required to notify the Trustee in the event of any modification, waiver
or amendment of any Whole Loan or Contract.
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In the case of Multifamily Loans, a Mortgagor's failure to make required
Mortgage Loan payments may mean that operating income is insufficient to
service the Mortgage Loan debt, or may reflect the diversion of that income
from the servicing of the Mortgage Loan debt. In addition, a Mortgagor under
a Multifamily Loan that is unable to make Mortgage Loan payments may also be
unable to make timely payment of all required taxes and otherwise to maintain
and insure the related Mortgaged Property. In general, the Servicer will be
required to monitor any Multifamily Loan that is in default, evaluate whether
the causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related Mortgaged Property,
initiate corrective action in cooperation with the Mortgagor if cure is
likely, inspect the related Multifamily Property and take such other actions
as are consistent with the related Agreement. A significant period of time
may elapse before the Servicer is able to assess the success of any such
corrective action or the need for additional initiatives. The time within
which the Servicer can make the initial determination of appropriate action,
evaluate the success of corrective action, develop additional initiatives,
institute foreclosure proceedings and actually foreclose may vary
considerably depending on the particular Multifamily Loan, the Multifamily
Property, the Mortgagor, the presence of an acceptable to party to assume the
Multifamily Loan and the laws of the jurisdiction in which the Multifamily
Property is located.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of
the Whole Loans or Contracts to third-party servicers (each, a
"Sub-Servicer"), but such Master Servicer will remain obligated under the
related Agreement. Each sub-servicing agreement between a Master Servicer and
a Sub-Servicer (a "Sub-Servicing Agreement") must be consistent with the
terms of the related Agreement and must provide that, if for any reason the
Master Servicer for the related series of Securities is no longer acting
in such capacity, the Trustee or any successor Master Servicer may assume the
Master Servicer's rights and obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to the related Agreement is sufficient to pay such fees. However,
a Sub- Servicer may be entitled to a Retained Interest in certain Whole Loans
or Contracts. Each Sub-Servicer will be reimbursed by the Master Servicer for
certain expenditures which it makes, generally to the same extent the Master
Servicer would be reimbursed under an Agreement. See "Retained Interest;
Servicing Compensation and Payment of Expenses."
REALIZATION UPON DEFAULTED WHOLE LOANS
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer is required to monitor any Whole Loan or Contract which is
in default, initiate corrective action in cooperation with the mortgagor or
obligor if cure is likely, inspect the Mortgaged Property or Manufactured
Home and take such other actions as are consistent with the Servicing
Standard. A significant period of time may elapse before the Master Servicer
is able to assess the success of such corrective action or the need for
additional initiatives.
Any Agreement relating to a Trust Fund that includes Whole Loans or
Contracts may grant to the Master Servicer and/or the holder or holders of
certain classes of Securities a right of first refusal to purchase from the
Trust Fund at a predetermined purchase price any such Whole Loan or Contract
as to which a specified number of scheduled payments thereunder are
delinquent. Any such right granted to the holder of an Offered Security will
be described in the related Prospectus Supplement. The related Prospectus
Supplement will also describe any such right granted to any person if the
predetermined purchase price is less than the Purchase Price described under
"Representations and Warranties; Repurchases."
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If so specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Whole Loan or Contract described in
the preceding paragraph and not otherwise purchased by any person having a
right of first refusal with respect thereto, if and when the Master Servicer
determines, consistent with the Servicing Standard, that such a sale would
produce a greater recovery on a present value basis than would liquidation
through foreclosure, repossession or similar proceedings. The related
Agreement will provide that any such offering be made in a commercially
reasonable manner for a specified period and that the Master Servicer accept
the highest cash bid received from any person (including itself, an affiliate
of the Master Servicer or any Certificateholder) that constitutes a fair
price for such defaulted Whole Loan or Contract. In the absence of any bid
determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan or
Contract as described below. Any bid in an amount at least equal to the
Purchase Price described under "Representations and Warranties; Repurchases"
will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any
mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title
to a Mortgaged Property securing a Whole Loan by operation of law or
otherwise and may at any time repossess and realize upon any Manufactured
Home, if such action is consistent with the Servicing Standard and a default
on such Whole Loan or Contract has occurred or, in the Master Servicer's
judgment, is imminent.
Unless otherwise provided in the related Prospectus Supplement, if
title to any Mortgaged Property is acquired by a Trust Fund as to which a
REMIC election has been made, the Master Servicer, on behalf of the Trust
Fund, will be required to sell the Mortgaged Property within two years of
acquisition, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the
Trust Fund subsequent to two years after its acquisition will not result in
the imposition of a tax on the Trust Fund or cause the Trust Fund to fail to
qualify as a REMIC under the Code at any time that any Certificate is
outstanding. Subject to the foregoing, the Master Servicer will be required
to (i) solicit bids for any Mortgaged Property so acquired in such a manner
as will be reasonably likely to realize a fair price for such property and
(ii) accept the first (and, if multiple bids are contemporaneously received,
the highest) cash bid received from any person that constitutes a fair price.
The limitations imposed by the related Agreement and the REMIC
provisions of the Code (if a REMIC election has been made with respect to the
related Trust Fund) on the ownership and management of any Mortgaged Property
acquired on behalf of the Trust Fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Certain Legal
Aspects of Mortgage Loans--Foreclosure."
If recovery on a defaulted Whole Loan or Contract under any related
instrument of Credit Support is not available, the Master Servicer
nevertheless will be obligated to follow or cause to be followed such normal
practices and procedures as it deems necessary or advisable to realize upon
the defaulted Whole Loan or Contract. If the proceeds of any liquidation of
the property securing the defaulted Whole Loan or Contract are less than the
outstanding principal balance of the defaulted Whole Loan or Contract plus
interest accrued thereon at the Mortgage Rate or Contract Rate, as
applicable, plus the aggregate amount of expenses incurred by the Master
Servicer in connection with such proceedings and which are reimbursable under
the Agreement, the Trust Fund will realize a loss in the amount of such
difference. The Master Servicer will be entitled to withdraw or cause to be
withdrawn from the Collection Account out of the Liquidation Proceeds
recovered on any defaulted Whole Loan or Contract, prior to the distribution
of such Liquidation Proceeds to Certificateholders, amounts representing its
normal servicing compensation on the Whole Loan or Contract, unreimbursed
servicing expenses incurred with respect to the Whole Loan or Contract and
any unreimbursed advances of delinquent payments made with respect to the
Whole Loan or Contract.
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If any property securing a defaulted Whole Loan or Contract is damaged
the Master Servicer is not required to expend its own funds to restore the
damaged property unless it determines (i) that such restoration will increase
the proceeds to Certificateholders on liquidation of the Whole Loan or
Contract after reimbursement of the Master Servicer for its expenses and
(ii) that such expenses will be recoverable by it from related Insurance
Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans or Contracts, a Master Servicer, on
behalf of itself, the Trustee and the Securityholders, will present claims
to the obligor under each instrument of Credit Support, and will take such
reasonable steps as are necessary to receive payment or to permit recovery
thereunder with respect to defaulted Whole Loans or Contracts.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan or
Contract, the Master Servicer will be entitled to withdraw or cause to be
withdrawn from the Collection Account out of such proceeds, prior to
distribution thereof to Certificateholders, amounts representing its normal
servicing compensation on such Whole Loan or Contract, unreimbursed servicing
expenses incurred with respect to the Whole Loan or Contract and any
unreimbursed advances of delinquent payments made with respect to the Whole
Loan or Contract. See "Hazard Insurance Policies" and "Description of Credit
Support."
HAZARD INSURANCE POLICIES
Whole Loans
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund comprised of Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, such
coverage will be in general in an amount equal to the lesser of the principal
balance owing on such Whole Loan and the amount necessary to fully compensate
for any damage or loss to the improvements on the Mortgaged Property on a
replacement cost basis, but in either case not less than the amount necessary
to avoid the application of any co-insurance clause contained in the hazard
insurance policy. The ability of the Master Servicer to assure that hazard
insurance proceeds are appropriately applied may be dependent upon its being
named as an additional insured under any hazard insurance policy and under
any other insurance policy referred to below, or upon the extent to which
information in this regard is furnished by mortgagors. All amounts collected
by the Master Servicer under any such policy (except for amounts to be
applied to the restoration or repair of the Mortgaged Property or released
to the mortgagor in accordance with the Master Servicer's normal servicing
procedures, subject to the terms and conditions of the related Mortgage and
Mortgage Note) will be deposited in the Collection Account. The Agreement
will provide that the Master Servicer may satisfy its obligation to cause
each mortgagor to maintain such a hazard insurance policy by the Master
Servicer's maintaining a blanket policy insuring against hazard losses on the
Whole Loans. If such blanket policy contains a deductible clause, the Master
Servicer will be required to deposit in the Collection Account all sums that
would have been deposited therein but for such clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements of the property
by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike
and civil commotion, subject to the conditions and exclusions specified in
each policy. Although the policies relating to the Whole Loans will be
underwritten by different insurers under different state laws in accordance
with different applicable state forms, and therefore will not contain
identical terms and conditions, the basic terms thereof are dictated by
respective
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state laws, and most such policies typically do not cover any
physical damage resulting from war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), wet or dry rot, vermin, domestic animals and
certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
improvements on the property in order to recover the full amount of any
partial loss. If the insured's coverage falls below this specified
percentage, such clause generally provides that the insurer's liability in
the event of partial loss does not exceed the lesser of (i) the replacement
cost of the improvements less physical depreciation and (ii) such proportion
of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
Each Agreement for a Trust Fund comprised of Whole Loans will require
the Master Servicer to cause the mortgagor on each Whole Loan to maintain all
such other insurance coverage with respect to the related Mortgaged Property
as is consistent with the terms of the related Mortgage and the Servicing
Standard, which insurance may typically include flood insurance (if the
related Mortgaged Property was located at the time of origination in a
federally designated flood area).
Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan
where the terms of the Mortgage Loan so permit; provided, however, that the
addition of such cost will not be taken into account for purposes of
calculating the distribution to be made to Certificateholders. Such costs may
be recovered by the Master Servicer or Sub-Servicer, as the case may be, from
the Collection Account, with interest thereon, as provided by the Agreement.
Under the terms of the Whole Loans, mortgagors will generally be
required to present claims to insurers under hazard insurance policies
maintained on the related Mortgaged Properties. The Master Servicer, on
behalf of the Trustee and Certificateholders, is obligated to present or
cause to be presented claims under any blanket insurance policy insuring
against hazard losses on Mortgaged Properties securing the Whole Loans.
However, the ability of the Master Servicer to present or cause to be
presented such claims is dependent upon the extent to which information in
this regard is furnished to the Master Servicer by mortgagors.
Contracts
Except as otherwise specified in the related Prospectus Supplement, the
terms of the Agreement for a Trust Fund comprised of Contracts will require
the Master Servicer to cause to be maintained with respect to each Contract
one or more hazard insurance policies which provide, at a minimum, the same
coverage as a standard form fire and extended coverage insurance policy that
is customary for manufactured housing, issued by a company authorized to
issue such policies in the state in which the Manufactured Home is located,
and in an amount which is not less than the maximum insurable value of such
Manufactured Home or the principal balance due from the obligor on the
related Contract, whichever is less; provided, however, that the amount of
coverage provided by each such hazard insurance policy shall be sufficient
to avoid the application of any co-insurance clause contained therein. When
a Manufactured Home's location was, at the time of origination of the related
Contract, within a federally designated special flood hazard area, the Master
Servicer shall cause such flood insurance to be maintained, which coverage
shall be at least equal to the minimum amount specified in the preceding
sentence or such lesser amount as may be available under the federal flood
insurance program. Each hazard insurance policy caused to be maintained by
the Master Servicer shall contain a standard loss payee clause in favor of
the Master Servicer and its successors and assigns. If any obligor is in
default in the payment of premiums on its hazard insurance policy or
policies, the Master Servicer shall pay such premiums out of its own funds,
and may
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add separately such premium to the Obligor's obligation as provided
by the Contract, but may not add such premium to the remaining principal
balance of the Contract.
The Master Servicer may maintain, in lieu of causing individual hazard
insurance policies to be maintained with respect to each Manufactured Home,
and shall maintain, to the extent that the related Contract does not require
the Obligor to maintain a hazard insurance policy with respect to the related
Manufactured Home, one or more blanket insurance policies covering losses on
the obligor's interest in the Contracts resulting from the absence or
insufficiency of individual hazard insurance policies. The Master Servicer
shall pay the premium for such blanket policy on the basis described therein
and shall pay any deductible amount with respect to claims under such policy
relating to the Contracts.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer obtain and maintain in effect
a fidelity bond or similar form of insurance coverage (which may provide
blanket coverage) or any combination thereof insuring against loss occasioned
by fraud, theft or other intentional misconduct of the officers, employees
and agents of the Master Servicer. The related Agreement will allow the
Master Servicer to self-insure against loss occasioned by the errors and
omissions of the officers, employees and agents of the Master Servicer so
long as certain criteria set forth in the Agreement are met.
DUE-ON-SALE PROVISIONS
The Whole Loans may contain clauses requiring the consent of the
mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale, transfer or conveyance of the related Mortgaged
Property. Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will generally enforce any due-on-sale clause to the extent
it has knowledge of the conveyance or proposed conveyance of the underlying
Mortgaged Property and it is entitled to do so under applicable law;
provided, however, that the Master Servicer will not take any action in
relation to the enforcement of any due-on-sale provision which would
adversely affect or jeopardize coverage under any applicable insurance
policy. Unless otherwise specified in the related Prospectus Supplement, any
fee collected by or on behalf of the Master Servicer for entering into an
assumption agreement will be retained by or on behalf of the Master Servicer
as additional servicing compensation. See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance." The Contracts may also contain
such clauses. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will permit such transfer so long as the
transferee satisfies the Master Servicer's then applicable underwriting
standards. The purpose of such transfers is often to avoid a default by the
transferring obligor. See "Certain Legal Aspects of the Contracts--Transfers
of Manufactured Homes; Enforceability of Due-on-Sale Clauses".
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on
a loan-by-loan basis and will be specified on an exhibit to the related
Agreement. A "Retained Interest" in an Asset represents a specified portion
of the interest payable thereon. The Retained Interest will be deducted from
mortgagor payments as received and will not be part of the related Trust
Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer's and a Sub-Servicer's primary servicing compensation with
respect to a series of Certificates will come from the periodic payment to
it of a portion of the interest payment on each Asset. Since any Retained
Interest and a Master Servicer's primary compensation
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are percentages of the principal balance of each Asset, such amounts will
decrease in accordance with the amortization of the Assets. The Prospectus
Supplement with respect to a series of Certificates evidencing interests in a
Trust Fund that includes Whole Loans or Contracts may provide that, as
additional compensation, the Master Servicer or the Sub-Servicers may retain
all or a portion of assumption fees, modification fees, late payment charges
or Prepayment Premiums collected from mortgagors and any interest or other
income which may be earned on funds held in the Collection Account or any
account established by a Sub-Servicer pursuant to the Agreement.
The Master Servicer may, to the extent provided in the related
Prospectus Supplement, pay from its servicing compensation certain expenses
incurred in connection with its servicing and managing of the Assets,
including, without limitation, payment of the fees and disbursements of the
Trustee and independent accountants, payment of expenses incurred in
connection with distributions and reports to Certificateholders, and payment
of any other expenses described in the related Prospectus Supplement. Certain
other expenses, including certain expenses relating to defaults and
liquidations on the Whole Loans or Contracts and, to the extent so provided
in the related Prospectus Supplement, interest thereon at the rate specified
therein may be borne by the Trust Fund.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply a portion of the servicing
compensation otherwise payable to it in respect of any Due Period to certain
interest shortfalls resulting from the voluntary prepayment of any Whole
Loans or Contracts in the related Trust Fund during such period prior to
their respective due dates therein.
EVIDENCE AS TO COMPLIANCE
Each Agreement relating to Assets which include Whole Loans or Contracts
will provide that on or before a specified date in each year, beginning with
the first such date at least six months after the related Cut-off Date, a
firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with either the Uniform Single
Attestation Program for Mortgage Bankers, the Audit Program for Mortgages
serviced for the Federal Home Loan Mortgage Corporation ("FHLMC") or such
other program used by the Master Servicer, the servicing by or on behalf of
the Master Servicer of mortgage loans under agreements
substantially similar to each other (including the related Agreement) was
conducted in compliance with the terms of such agreements or such program
except for any significant exceptions or errors in records that, in the
opinion of the firm, either the Audit Program for Mortgages serviced for
FHLMC, or paragraph 4 of the Uniform Single Attestation Program for Mortgage
Bankers, or such other program, requires it to report. In rendering its
statement such firm may rely, as to matters relating to the direct servicing
of mortgage loans by Sub-Servicers, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC or such other program used by such Sub-Servicer (rendered
within one year of such statement) of firms of independent public accountants
with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on
or before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding
calendar year or other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies
of such annual accountants' statement and such statements of officers will
be obtainable by Certificateholders without charge upon written request to
the Master Servicer at the address set forth in the related Prospectus
Supplement.
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CERTAIN MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR
The Master Servicer, if any, or a servicer for substantially all the
Whole Loans or Contracts under each Agreement will be named in the related
Prospectus Supplement. The entity serving as Master Servicer (or as such
servicer) may be an affiliate of the Depositor and may have other normal
business relationships with the Depositor or the Depositor's affiliates.
Reference herein to the Master Servicer shall be deemed to be to the servicer
of substantially all of the Whole Loans or Contracts, if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement are no longer permissible under applicable law or are in
material conflict by reason of applicable 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 the Agreement. No such resignation will become effective until
the Trustee or a successor servicer has assumed the Master Servicer's
obligations and duties under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the
Depositor nor any director, officer, employee, or agent of a Master Servicer
or the Depositor will be under any liability to the related Trust Fund or
Security holders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be
protected against any breach of a representation, warranty or covenant made
in such Agreement, or against any liability specifically imposed thereby, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of obligations
or duties thereunder or by reason of reckless disregard of obligations and
duties thereunder. Unless otherwise specified in the related Prospectus
Supplement, each Agreement will further provide that any Master Servicer, the
Depositor and any director, officer, employee or agent of a Master Servicer
or the Depositor will be entitled to indemnification by the related Trust
Fund and will be held harmless against any loss, liability or expense
incurred in connection with any legal action relating to the Agreement or the
Securities; provided, however, that such indemnification will not extend to
any loss, liability or expense (i) specifically imposed by such Agreement or
otherwise incidental to the performance of obligations and duties thereunder,
including, in the case of a Master Servicer, the prosecution of an
enforcement action in respect of any specific Whole Loan or Whole Loans or
Contract or Contracts (except as any such loss, liability or expense shall
be otherwise reimbursable pursuant to such Agreement); (ii) incurred in
connection with any breach of a representation, warranty or covenant made in
such Agreement; (iii) incurred by reason of misfeasance, bad faith or gross
negligence in the performance of obligations or duties thereunder, or by
reason of reckless disregard of such obligations or duties; (iv) incurred in
connection with any violation of any state or federal securities law; or (v)
imposed by any taxing authority if such loss, liability or expense is not
specifically reimbursable pursuant to the terms of the related Agreement. In
addition, each Agreement will provide that neither any Master Servicer nor
the Depositor will be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its respective responsibilities
under the Agreement and which in its opinion may involve it in any expense
or liability. Any such Master Servicer or the Depositor may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Agreement and the rights and duties of the parties
thereto and the interests of the Securityholders thereunder. In such event,
the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the Securityholders, and
the Master Servicer or the Depositor, as the case may be, will be entitled
to be reimbursed therefor and to charge the Collection Account.
Any person into which the Master Servicer or the Depositor may be merged
or consolidated, or any person resulting from any merger or consolidation to
which the Master Servicer or the Depositor is a party, or any person
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succeeding to the business of the Master Servicer or the Depositor, will be
the successor of the Master Servicer or the Depositor, as the case may be,
under the related Agreement.
EVENTS OF DEFAULT UNDER THE AGREEMENT
Unless otherwise provided in the related Prospectus Supplement for a
Trust Fund that includes Whole Loans or Contracts, Events of Default under
the related Agreement will include (i) any failure by the Master Servicer to
distribute or cause to be distributed to Certificateholders, or to remit to
the Trustee or Indenture Trustee, as applicable, for distribution to
Securityholders, any required payment that continues after a grace period,
if any; (ii) any failure by the Master Servicer duly to observe or perform
in any material respect any of its other covenants or obligations under the
Agreement which continues unremedied for thirty days after written notice of
such failure has been given to the Master Servicer by the Trustee or the
Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Securities evidencing not less than 25% of the Voting Rights;
(iii) any breach of a representation or warranty made by the Master Servicer
under the Agreement which materially and adversely affects the interests of
Securityholders and which continues unremedied for thirty days after written
notice of such breach has been given to the Master Servicer by the Trustee
or the Depositor, or to the Master Servicer, the Depositor and the Trustee
by the holders of Securities evidencing not less than 25% of the Voting
Rights; and (iv) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain
actions by or on behalf of the Master Servicer indicating its insolvency or
inability to pay its obligations. Material variations to the foregoing Events
of Default (other than to shorten cure periods or eliminate notice
requirements) will be specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, the Trustee shall,
not later than the later of 60 days after the occurrence of any event which
constitutes or, with notice or lapse of time or both, would constitute an
Event of Default and five days after certain officers of the Trustee become
aware of the occurrence of such an event, transmit by mail to the Depositor
and all Securityholders of the applicable series notice of such occurrence,
unless such default shall have been cured or waived.
The manner of determining the "Voting Rights" of a Security or class or
classes of Securities will be specified in the related Prospectus Supplement.
RIGHTS UPON EVENT OF DEFAULT UNDER THE AGREEMENT
So long as an Event of Default under an Agreement remains unremedied,
the Depositor or the Trustee may, and at the direction of holders of
Securities evidencing not less than 51% (or such other percentage specified
in the related Prospectus Supplement) of the Voting Rights, the Trustee
shall, terminate all of the rights and obligations of the Master Servicer
under the Agreement and in and to the Mortgage Loans (other than as a
Securityholder or as the owner of any Retained Interest), whereupon the
Trustee will succeed to all of the responsibilities, duties and liabilities
of the Master Servicer under the Agreement (except that if the Trustee is
prohibited by law from obligating itself to make advances regarding
delinquent Mortgage Loans or Contracts, or if the related Prospectus
Supplement so specifies, then the Trustee will not be obligated to make such
advances) and will be entitled to similar compensation arrangements. Unless
otherwise specified in the related Prospectus Supplement, in the event that
the Trustee is unwilling or unable so to act, it may or, at the written
request of the holders of Securities entitled to at least 51% (or such other
percentage specified in the related Prospectus Supplement) of the Voting
Rights, it shall appoint, or petition a court of competent jurisdiction for
the appointment of, a loan servicing institution acceptable to the Rating
Agency with a net worth at the time of such appointment of at least
$15,000,000 (or such other amount specified in the related Prospectus
Supplement) to act as successor to the Master Servicer under the Agreement.
Pending such appointment, the Trustee is obligated to act in such capacity.
The Trustee and any such successor may agree upon the servicing compensation
to be paid, which in no event may be greater than the compensation payable
to the Master Servicer under the Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Securities representing at least 66 2/3% (or such other percentage
specified in the related Prospectus Supplement) of the Voting Rights
allocated to the respective classes of Securities affected by any Event of
Default will be entitled to waive such Event of Default; provided, however,
that an Event of Default involving a failure to distribute a required payment
to Securityholders described in clause (i) under "Events of Default" may be
waived only by all of the
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Securityholders. Upon any such waiver of an Event of Default, such Event of
Default shall cease to exist and shall be deemed to have been remedied for
every purpose under the Agreement.
No Securityholders will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given
to the Trustee written notice of default and unless the holders of Securities
evidencing not less than 25% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights have made written request
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the
Trustee for sixty days (or such other number of days specified in the related
Prospectus Supplement) has neglected or refused to institute any such
proceeding. The Trustee, however, is under no obligation to exercise any of
the trusts or powers vested in it by any Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Securities covered by such Agreement,
unless such Securityholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
AMENDMENT
Each Agreement may be amended by the parties thereto, without the
consent of any of the holders of Securities covered by the Agreement, (i) to
cure any ambiguity or mistake, (ii) to correct, modify or supplement any
provision therein which may be inconsistent with any other provision therein
or with the related Prospectus Supplement, (iii) to make any other provisions
with respect to matters or questions arising under the Agreement which are
not materially inconsistent with the provisions thereof, or (iv) to comply
with any requirements imposed by the Code; provided that, in the case of
clause (iii), such amendment will not (as evidenced by an opinion of counsel
to such effect) adversely affect in any material respect the interests of any
holder of Securities covered by the Agreement. Unless otherwise specified
in the related Prospectus Supplement, each Agreement may also be amended by
the Depositor, the Master Servicer, if any, and the Trustee, with the consent
of the holders of Securities affected thereby evidencing not less than 51%
(or such other percentage specified in the related Prospectus Supplement)
of the Voting Rights, for any purpose; provided, however, that unless
otherwise specified in the related Prospectus Supplement, no such amendment
may (i) reduce in any manner the amount of or delay the timing of, payments
received or advanced on Mortgage Loans or Contracts which are required to be
distributed on any Security without the consent of the holder of such
Security or (ii) reduce the consent percentages described in this
paragraph without the consent of the holders of all Securities covered by
such Agreement then outstanding. However, with respect to any series of
Certificates as to which a REMIC election is to be made, the Trustee will not
consent to any amendment of the Agreement unless it shall first have received
an opinion of counsel to the effect that such amendment will not result in
the imposition of a tax on the related Trust Fund or cause the related Trust
Fund to fail to qualify as a REMIC at any time that the related Certificates
are outstanding.
THE TRUSTEE
The Trustee under each Agreement or Trust Agreement will be named in the
related Prospectus Supplement. The commercial bank, national banking
association, banking corporation or trust company serving as Trustee may have
a banking relationship with the Depositor and its affiliates and with any
Master Servicer and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of any Agreement or Trust Agreement, the Securities or any Asset
or related document and is not accountable for the use or application by or
on behalf of any Master Servicer of any funds paid to the Master Servicer or
its designee in respect of the Securities or the Assets, or deposited into
or withdrawn from the Collection Account or any other account by or on behalf
of the Master Servicer. If no Event of Default has occurred and is
continuing, the Trustee is required to perform only those duties specifically
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required under the related Agreement or Trust Agreement, as applicable.
However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the Trustee is required to
examine such documents and to determine whether they conform to the
requirements of the Agreement or Trust Agreement, as applicable.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Collection Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in
settlement) incurred in connection with the Trustee's (i) enforcing its
rights and remedies and protecting the interests, of the Securityholders
during the continuance of an Event of Default, (ii) defending or prosecuting
any legal action in respect of the related Agreement or series of Securities
(iii) being the mortgagee of record with respect to the Mortgage Loans in a
Trust Fund and the owner of record with respect to any Mortgaged Property
acquired in respect thereof for the benefit of Securityholders, or
(iv) acting or refraining from acting in good faith at the direction of the
holders of the related series of Securities entitled to not less than 25% (or
such other percentage as is specified in the related Agreement with respect
to any particular matter) of the Voting Rights for such series; provided,
however, that such indemnification will not extend to any loss, liability or
expense that constitutes a specific liability of the Trustee pursuant to the
related Agreement, or to any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or negligence on the part of the Trustee
in the performance of its obligations and duties thereunder, or by reason of
its reckless disregard of such obligations or duties, or as may arise from
a breach of any representation, warranty or covenant of the Trustee made
therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Securityholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor
trustee acceptable to the Master Servicer, if any. If no successor trustee
shall have been so appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a
successor trustee.
If at any time the Trustee shall cease to be eligible to continue as
such under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
if a change in the financial condition of the Trustee has adversely affected
or will adversely affect the rating on any class of the Securities, then the
Depositor may remove the Trustee and appoint a successor trustee acceptable
to the Master Servicer, if any. Holders of the Securities of any series
entitled to at least 51% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for such series may at any time
remove the Trustee without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
CERTAIN TERMS OF THE INDENTURE
Events of Default. Unless otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default for thirty (30) days (or such other number of days
specified in
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such Prospectus Supplement) or more in the payment of any principal of or
interest on any Note of such series; (ii) failure to perform any other
covenant of the Depositor or the Trust Fund in the Indenture which continues
for a period of sixty (60) days (or such other number of days specified in
such Prospectus Supplement) after notice thereof is given in
accordance with the procedures described in the related Prospectus
Supplement; (iii) any representation or warranty made by the Depositor or the
Trust Fund in the Indenture or in any certificate or other writing delivered
pursuant thereto or in connection therewith with respect to or affecting such
series having been incorrect in a material respect as of the time made, and
such breach is not cured within sixty (60) days (or such other number of days
specified in such Prospectus Supplement) after notice thereof is given
in accordance with the procedures described in the related Prospectus
Supplement; (iv) certain events of bankruptcy, insolvency, receivership or
liquidation of the Depositor or the Trust Fund; or (v) any other Event of
Default provided with respect to Notes of that series.
If an Event of Default with respect to the Notes of any series at the
time outstanding occurs and is continuing, either the Indenture Trustee or
the holders of a majority of the then aggregate outstanding amount of the
Notes of such series may declare the principal amount (or, if the Notes of
that series are Accrual Securities, such portion of the principal amount as
may be specified in the terms of that Series, as provided in the related
Prospectus Supplement) of all the Notes of such series to be due and payable
immediately. Such declaration may, under certain circumstances, be rescinded
and annulled by the holders of a majority in aggregate outstanding amount of
the Notes of such series.
If, following an Event of Default with respect to any series of Notes,
the Notes of such series have been declared to be due and payable, the
Indenture Trustee may, in its discretion, notwithstanding such acceleration,
elect to maintain possession of the collateral securing the Notes of such
series and to continue to apply distributions on such collateral as if there
had been no declaration of acceleration if such collateral continues to
provide sufficient funds for the payment of principal of and interest on the
Notes of such series as they would have become due if there had not been such
a declaration. In addition, the Indenture Trustee may not sell or otherwise
liquidate the collateral securing the Notes of a series following an Event
of Default, other than a default in the payment of any principal or interest
on any Note of such series for thirty (30) days or more, unless (a) the
holders of 100% (or such other percentage specified in the related Prospectus
Supplement) of the then aggregate outstanding amount of the Notes of such
series consent to such sale, (b) the proceeds of such sale or liquidation are
sufficient to pay in full the principal of and accrued interest, due and
unpaid, on the outstanding Notes of such series at the date of such sale or
(c) the Indenture Trustee determines that such collateral would not be
sufficient on an ongoing basis to make all payments on such Notes as such
payments would have become due if such Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of the holders of
662/3% (or such other percentage specified in the related Prospectus
Supplement) of the then aggregate outstanding amount of the Notes of
such series.
In the event that the Indenture Trustee liquidates the collateral in
connection with an Event of Default involving a default for thirty (30) days
(or such other number of days specified in the related Prospectus
Supplement) or more in the payment of principal of
or interest on the Notes of a series,
the Indenture provides that the Indenture Trustee will have a prior lien on
the proceeds of any such liquidation for unpaid fees and expenses. As a
result, upon the occurrence of such an Event of Default, the amount available
for distribution to the Noteholders would be less than would otherwise be the
case. However, the Indenture Trustee may not institute a proceeding for the
enforcement of its lien except in connection with a proceeding for the
enforcement of the lien of the Indenture for the benefit of the Noteholders
after the occurrence of such an Event of Default.
Unless otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a series is declared due and payable, as
described above, the holders of any such Notes issued at a discount from par
may be entitled to receive no more than an amount equal to the unpaid
principal amount thereof less the amount of such discount which is
unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, in case an Event of Default shall occur and be continuing
with respect to a series of Notes, the Indenture Trustee shall be under no
obligation
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to exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of Notes of such series, unless such holders
offered to the Indenture Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
complying with such request or direction. Subject to such provisions for
indemnification and certain limitations contained in the Indenture, the
holders of a majority of the then aggregate outstanding amount of the Notes
of such series shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Indenture Trustee or exercising any trust or power conferred on the Indenture
Trustee with respect to the Notes of such series, and the holders of a
majority of the then aggregate outstanding amount of the Notes of such series
may, in certain cases, waive any default with respect thereto, except a
default in the payment of principal or interest or a default in respect of
a covenant or provision of the Indenture that cannot be modified without the
waiver or consent of all the holders of the outstanding Notes of such series
affected thereby.
Discharge Indenture. The Indenture will be discharged with respect to
a series of Notes (except with respect to certain continuing rights specified
in the Indenture) upon the delivery to the Indenture Trustee for cancellation
of all the Notes of such series or, with certain limitations, upon deposit
with the Indenture Trustee of funds sufficient for the payment in full of all
of the Notes of such series.
In addition to such discharge with certain limitations, the Indenture
will provide that, if so specified with respect to the Notes of any series,
the related Trust Fund will be discharged from any and all obligations in
respect of the Notes of such series (except for certain obligations relating
to temporary Notes and exchange of Notes, to register the transfer of or
exchange Notes of such series, to replace stolen, lost or mutilated Notes of
such series, to maintain paying agencies and to hold monies for payment in
trust) upon the deposit with the Indenture Trustee, in trust, of money and/or
direct obligations of or obligations guaranteed by the United States of
America which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of and each installment of interest on the
Notes of such series on the maturity date for such Notes and any installment
of interest on such Notes in accordance with the terms of the Indenture and
the Notes of such series. In the event of any such defeasance and discharge
of Notes of such series, holders of Notes of such series would be able to
look only to such money and/or direct obligations for payment of principal
and interest, if any, on their Notes until maturity.
Indenture Trustee's Annual Report. The Indenture Trustee for each
series of Notes will be required to mail each year to all related Noteholders
a brief report relating to its eligibility and qualification to continue as
Indenture Trustee under the related Indenture, any amounts advanced by it
under the Indenture, the amount, interest rate and maturity date of certain
indebtedness owing by such Trust to the applicable Indenture Trustee in its
individual capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects such Notes
and that has not been previously reported.
The Indenture Trustee. The Indenture Trustee for a series of Notes will
be specified in the related Prospectus Supplement. The Indenture Trustee for
any series may resign at any time, in which event the Depositor will be
obligated to appoint a successor trustee for such series. The Depositor may
also remove any such Indenture Trustee if such Indenture Trustee ceases to
be eligible to continue as such under the related Indenture or if such
Indenture Trustee becomes insolvent. In such circumstances the Depositor
will be obligated to appoint a successor trustee for the applicable series
of Notes. Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee for any series of Notes does not become
effective until acceptance of the appointment by the successor trustee for
such series.
The bank or trust company serving as Indenture Trustee may have a
banking relationship with the Depositor or any of its affiliates or the
Master Servicer or any of its affiliates.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Securities Credit Support may be provided with respect
to one or more classes thereof or the related Assets. Credit Support may be
in the form of the subordination of one or more classes of Securities,
letters of credit, insurance policies, guarantees, the establishment of one
or more reserve funds or another method of Credit Support described in the
related Prospectus Supplement, or any combination of the foregoing. If so
provided in the related Prospectus Supplement, any form of Credit Support may
be structured so as to be drawn upon by more than one series to the extent
described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Securities the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Security
Balance of the Securities and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Securityholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one
series of Securities (each, a "Covered Trust"), holders of Securities
evidencing interests in any of such Covered Trusts will be subject to the
risk that such Credit Support will be exhausted by the claims of other
Covered Trusts prior to such Covered Trust receiving any of its intended
share of such coverage.
If Credit Support is provided with respect to one or more classes of
Securities of a series, or the related Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of
coverage under such Credit Support, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount of coverage under such Credit Support may be reduced and under which
such Credit Support may be terminated or replaced and (d) the material
provisions relating to such Credit Support. Additionally, the related
Prospectus Supplement will set forth certain information with respect to the
obligor under any instrument of Credit Support, including (i) a brief
description of its principal business activities, (ii) its principal place
of business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies that exercise primary jurisdiction over the conduct of
its business and (iv) its total assets, and its stockholders' or
policyholders' surplus, if applicable, as of the date specified in the
Prospectus Supplement. See "Special Considerations--Credit Support
Limitations."
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more
classes of Securities of a series may be Subordinate Securities. To the
extent specified in the related Prospectus Supplement, the rights of the
holders of Subordinate Securities to receive distributions of principal and
interest from the Collection Account on any Distribution Date will be
subordinated to such rights of the holders of Senior Securities. If so
provided in the related Prospectus Supplement, the subordination of a class
may apply only in the event of (or may be limited to) certain types of losses
or shortfalls. The related Prospectus Supplement will set forth information
concerning the amount of subordination of a class or classes of Subordinate
Securities in a series, the circumstances in which such subordination will
be applicable and the manner, if any, in which the amount of subordination
will be effected.
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CROSS-SUPPORT PROVISIONS
If the Assets for a series are divided into separate groups, each
supporting a separate class or classes of Securities of a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Securities evidencing interests in one group
of Mortgage Assets prior to distributions on Subordinate Securities
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such
provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS
If so provided in the Prospectus Supplement for a series of Securities,
the Whole Loans or Contracts in the related Trust Fund will be covered
for various default risks by insurance policies or guarantees.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain
classes thereof will be covered by one or more letters of credit, issued by
a bank or financial institution specified in such Prospectus Supplement (the
"L/C Bank"). Under a letter of credit, the L/C Bank will be obligated to
honor draws thereunder in an aggregate fixed dollar amount, net of
unreimbursed payments thereunder, generally equal to a percentage specified
in the related Prospectus Supplement of the aggregate principal balance of
the Assets on the related Cut-off Date or of the initial aggregate Security
Balance of one or more classes of Securities. If so specified in the related
Prospectus Supplement, the letter of credit may permit draws in the event of
only certain types of losses and shortfalls. The amount available under the
letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder and may otherwise be reduced as described
in the related Prospectus Supplement. The obligations of the L/C Bank under
the letter of credit for each series of Securities will expire at the earlier
of the date specified in the related Prospectus Supplement or the termination
of the Trust Fund.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Securities of the related
series, timely distributions of interest and/or full distributions of
principal on the basis of a schedule of principal distributions set forth in
or determined in the manner specified in the related Prospectus Supplement.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain
classes thereof will be covered by one or more reserve funds in which cash,
a letter of credit, Permitted Investments, a demand note or a combination
thereof will be deposited, in the amounts so specified in such Prospectus
Supplement. The reserve funds for a series may also be funded over time by
depositing therein a specified amount of the distributions received on the
related Assets as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in
the manner, and to the extent specified in the related Prospectus
Supplement. A reserve fund may be provided to increase the likelihood
of timely distributions of principal of and interest on the Certificates.
If so specified in the related Prospectus Supplement, reserve funds
may be established to provide limited protection against
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only certain types of losses and shortfalls. Following each Distribution
Date amounts in a reserve fund in excess of any amount required to be
maintained therein may be released from the reserve fund under the
conditions and to the extent specified in the related Prospectus Supplement
and will not be available for further application to the Securities.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
any reinvestment income or other gain from such investments will be credited
to the related Reserve Fund for such series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may
be payable to any related Master Servicer or another service provider as
additional compensation. The Reserve Fund, if any, for a series will not be
a part of the Trust Fund unless otherwise specified in the related Prospectus
Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purposes for which funds in the Reserve Fund
may be applied to make distributions to Securityholders and use of investment
earnings from the Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Securities,
the MBS in the related Trust Fund and/or the Mortgage Loans underlying such
MBS may be covered by one or more of the types of Credit Support described
herein. The related Prospectus Supplement will specify as to each such form
of Credit Support the information indicated above with respect thereto, to
the extent such information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries, which are general in
nature, of certain legal aspects of loans secured by single-family or multi-
family residential properties. Because such legal aspects are governed
primarily by applicable state law (which laws may differ substantially), the
summaries do not purport to be complete nor to reflect the laws of any
particular state, nor to encompass the laws of all states in which the
security for the Mortgage Loans is situated. The summaries are qualified in
their entirety by reference to the applicable federal and state laws
governing the Mortgage Loans. See "Description of the Trust Funds--Assets."
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which
may be mortgages, deeds of trust, security deeds or deeds to secure debt,
depending upon the prevailing practice and law in the state in which the
Mortgaged Property is located. Mortgages, deeds of trust and deeds to secure
debt are herein collectively referred to as "mortgages." Any of the foregoing
types of mortgages will create a lien upon, or grant a title interest in, the
subject property, the priority of which will depend on the terms of the
particular security instrument, as well as separate, recorded, contractual
arrangements with others holding interests in the mortgaged property, the
knowledge of the parties to such instrument as well as the order of
recordation of the instrument in the appropriate public recording office.
However, recording does not generally establish priority over governmental
claims for real estate taxes and assessments and other charges imposed under
governmental police powers.
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TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties-a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent
of a mortgagor), a trustee to whom the mortgaged property is conveyed, and
a beneficiary (the lender) for whose benefit the conveyance is made. As used
in this Prospectus, unless the context otherwise requires, "mortgagor"
includes the trustor under a deed of trust and a grantor under a security
deed or a deed to secure debt. Under a deed of trust, the mortgagor grants
the property, irrevocably until the debt is paid, in trust, generally with
a power of sale as security for the indebtedness evidenced by the related
note. A deed to secure debt typically has two parties. By executing a deed
to secure debt, the grantor conveys title to, as opposed to merely creating
a lien upon, the subject property to the grantee until such time as the
underlying debt is repaid, generally with a power of sale as security for the
indebtedness evidenced by the related mortgage note. In case the mortgagor
under a mortgage is a land trust, there would be an additional party because
legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the mortgagor. At origination of a mortgage loan
involving a land trust, the mortgagor executes a separate undertaking to make
payments on the mortgage note. The mortgagee's authority under a mortgage,
the trustee's authority under a deed of trust and the grantee's authority
under a deed to secure debt are governed by the express provisions of the
mortgage, the law of the state in which the real property is located, certain
federal laws (including, without limitation, the Soldiers' and Sailors' Civil
Relief Act of 1940) and, in some cases, in deed of trust transactions, the
directions of the beneficiary.
The Mortgages that encumber Multifamily Properties may contain an
assignment of rents and leases, pursuant to which the Mortgagor assigns to
the lender the Mortgagor's right, title and interest as landlord under each
lease and the income derived therefrom, while retaining a revocable license
to collect the rents for so long as there is no default. If the Mortgagor
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect
the rents.
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed
or deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property
such as a tenant's interest in a lease of land or improvements, or both, and
the leasehold estate created by such lease. An instrument covering an
interest in real property other than the fee estate requires special
provisions in the instrument creating such interest or in the mortgage, deed
of trust, security deed or deed to secure debt, to protect the mortgagee
against termination of such interest before the mortgage, deed of trust,
security deed or deed to secure debt is paid. Unless otherwise specified in
the Prospectus Supplement, the Depositor or the Asset Seller will make
certain representations and warranties in the Agreement with respect to any
Mortgage Loans that are secured by an interest in a leasehold estate. Such
representation and warranties, if applicable, will be set forth in the
Prospectus Supplement.
COOPERATIVE LOANS
If specified in the Prospectus Supplement relating to a series of
Offered Securities, the Mortgage Loans may also consist of cooperative
apartment loans ("Cooperative Loans") secured by security interests in
shares issued by a cooperative housing corporation (a "Cooperative")
and in the related proprietary leases or occupancy agreements granting
exclusive rights to occupy specific dwelling units in the cooperatives'
buildings. The security agreement will create a lien upon, or grant a
title interest in, the property which it covers, the priority of which
will depend on the terms of the particular security agreement as well
as the order of recordation of the agreement in the appropriate
recording office.
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Such a lien or title interest is not prior to the lien for real estate
taxes and assessments and other charges imposed under governmental
police powers.
Each cooperative owns in fee or has a leasehold interest in all the
real property and owns in fee or leases the building and all separate
dwelling units therein. The cooperative is directly responsible for property
management and, in most cases, payment of real estate taxes, other
governmental impositions and hazard and liability insurance. If there is a
blanket mortgage or mortgages on the cooperative apartment building or
underlying land, as is generally the case, or an underlying lease of the
land, as is the case in some instances, the cooperative, as property
mortgagor, or lessee, as the case may be, is also responsible for meeting
these mortgage or rental obligations. A blanket mortgage is ordinarily
incurred by the cooperative in connection with either the construction or
purchase of the cooperative's apartment building or obtaining of capital by
the cooperative. The interest of the occupant under proprietary leases or
occupancy agreements as to which that cooperative is the landlord are
generally subordinate to the interest of the holder of a blanket mortgage and
to the interest of the holder of a land lease. If the cooperative is unable
to meet the payment obligations (i) arising under a blanket mortgage, the
mortgagee holding a blanket mortgage could foreclose on that mortgage and
terminate all subordinate proprietary leases and occupancy agreements or (ii)
arising under its land lease, the holder of the landlord's interest under the
land lease could terminate it and all subordinate proprietary leases and
occupancy agreements. Also, a blanket mortgage on a cooperative may provide
financing in the form of a mortgage that does not fully amortize, with a
significant portion of principal being due in one final payment at maturity.
The inability of the cooperative to refinance a mortgage and its consequent
inability to make such final payment could lead to foreclosure by the
mortgagee. Similarly, a land lease has an expiration date and the inability
of the cooperative to extend its term or, in the alternative, to purchase the
land could lead to termination of the cooperatives's interest in the property
and termination of all proprietary leases and occupancy agreement. In either
event, a foreclosure by the holder of a blanket mortgage or the termination
of the underlying lease could eliminate or significantly diminish the value
of any collateral held by the lender that financed the purchase by an
individual tenant stockholder of cooperative shares or, in the case of the
Mortgage Loans, the collateral securing the Cooperative Loans.
The cooperative is owned by tenant-stockholders who, through ownership
of stock or shares in the corporation, receive proprietary lease or occupancy
agreements which confer exclusive rights to occupy specific units.
Generally, a tenant-stockholder of a cooperative must make a monthly payment
to the cooperative representing such tenant-stockholder's pro rata share of
the cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying occupancy rights are financed
through a cooperative share loan evidenced by a promissory note and secured
by an assignment of and a security interest in the occupancy agreement or
proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue
for judgment on the promissory note, dispose of the collateral at a public
or private sale or otherwise proceed against the collateral or tenant-
stockholder as an individual as provided in the security agreement covering
the assignment of the proprietary lease or occupancy agreement and the pledge
of cooperative shares. See "Foreclosure--Cooperatives" below.
FORECLOSURE
General
Foreclosure is a legal procedure that allows the mortgagee to
recover its mortgage debt by enforcing its rights and available
legal remedies under the mortgage. If the mortgagor defaults in
payment or performance of its obligations
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under the note or mortgage, the mortgagee has the right to
institute foreclosure proceedings to sell the mortgaged property at public
auction to satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage
vary from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated
by the service of legal pleadings upon all parties having an interest of
record in the real property. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the
lender's right to foreclose is contested, the legal proceedings can be
time-consuming. Upon successful completion of a judicial foreclosure
proceeding, the court generally issues a judgment of foreclosure and appoints
a referee or other officer to conduct a public sale of the mortgaged
property, the proceeds of which are used to satisfy the judgment. Such sales
are made in accordance with procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court
may alter the specific terms of a loan to the extent it considers necessary
to prevent or remedy an injustice, undue oppression or overreaching, or may
require the lender to undertake affirmative and expensive actions to
determine the cause of the mortgagor's default and the likelihood that the
mortgagor will be able to reinstate the loan. In some cases, courts have
substituted their judgment for the lender's and have required that lenders
reinstate loans or recast payment schedules in order to accommodate
mortgagors who are suffering from a temporary financial disability. In other
cases, courts have limited the right of the lender to foreclose if the
default under the mortgage is not monetary, e.g., the mortgagor failed to
maintain the mortgaged property adequately or the mortgagor executed a junior
mortgage on the mortgaged property. The exercise by the court of its equity
powers will depend on the individual circumstances of each case presented to
it. Finally, some courts have been faced with the issue of whether federal
or state constitutional provisions reflecting due process concerns for
adequate notice require that a mortgagor receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a
public sale under a mortgage providing for a power of sale does not involve
sufficient state action to afford constitutional protections to the
mortgagor.
Non-Judicial Foreclosure/Power of Sale
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed
of trust. A power of sale is typically granted in a deed of trust. It may
also be contained in any other type of mortgage instrument. A power of sale
allows a non-judicial public sale to be conducted generally following a
request from the beneficiary/lender to the trustee to sell the property upon
any default by the mortgagor under the terms of the mortgage note or the
mortgage instrument and after notice of sale is given in accordance with the
terms of the mortgage instrument, as well as applicable state law. In some
states, prior to such sale, the trustee under a deed of trust must record a
notice of default and notice of sale and send a copy to the mortgagor and to
any other party who has recorded a request for a copy of a notice of default
and notice of sale. In addition, in some states the trustee must
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provide notice to any other party having an interest of record in the real
property, including junior lienholders. A notice of sale must be posted
in a public place and, in most states, published for a specified period
of time in one or more newspapers. The mortgagor or junior lienholder may
then have the right, during a reinstatement period required in some states,
to cure the default by paying the entire actual amount in arrears (without
acceleration) plus the expenses incurred in enforcing the obligation. In
other states, the mortgagor or the junior lienholder is not provided a
period to reinstate the loan, but has only the right to pay off the entire
debt to prevent the foreclosure sale. Generally, the procedure for public
sale, the parties entitled to notice, the method of giving notice and the
applicable time periods are governed by state law and vary among the states.
Foreclosure of a deed to secure debt is also generally accomplished by a
non-judicial sale similar to that required by a deed of trust, except that
the lender or its agent, rather than a trustee, is typically empowered to
perform the sale in accordance with the terms of the deed to secure debt
and applicable law.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such
property at the time of sale, due to, among other things, redemption rights
which may exist and the possibility of physical deterioration of the property
during the foreclosure proceedings. For these reasons, it is common for the
lender to purchase the mortgaged property for an amount equal to or less than
the underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs
and expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and
have both the benefits and burdens of ownership of the mortgaged property.
For example, the lender will become obligated to pay taxes, obtain casualty
insurance and to make such repairs at its own expense as are necessary to
render the property suitable for sale. The lender will commonly obtain the
services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions,
the ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Moreover, a lender commonly incurs substantial
legal fees and court costs in acquiring a mortgaged property through
contested foreclosure and/or bankruptcy proceedings. Generally, state law
controls the amount of foreclosure expenses and costs, including attorneys'
fees, that may be recovered by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required
to pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans, if any, that are junior
mortgage loans, if the lender purchases the property the lender's title will
be subject to all senior mortgages, prior liens and certain governmental
liens.
The proceeds received by the referee or trustee from the sale are
applied first to the costs, fees and expenses of sale and then in
satisfaction of the indebtedness secured by the mortgage under which the sale
was conducted. Any proceeds remaining after satisfaction of senior mortgage
debt are generally payable to the holders of junior mortgages and other liens
and claims in order of their priority, whether or not the mortgagor is in
default. Any additional proceeds are generally payable to the mortgagor. The
payment of the proceeds to the holders of junior mortgages may occur in the
foreclosure action of the senior mortgage or a subsequent ancillary
proceeding or may require the institution of separate legal proceedings by
such holders.
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Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have
an interest in the property which is subordinate to the mortgage being
foreclosed, from exercise of their "equity of redemption." The doctrine of
equity of redemption provides that, until the property covered by a mortgage
has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having an interest which is subordinate to that of
the foreclosing mortgagee have an equity of redemption and may redeem the
property by paying the entire debt with interest. In addition, in some
states, when a foreclosure action has been commenced, the redeeming party
must pay certain costs of such action. Those having an equity of redemption
must generally be made parties and joined in the foreclosure proceeding in
order for their equity of redemption to be cut off and terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the
mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale
price. In other states, redemption may be authorized if the former mortgagor
pays only a portion of the sums due. The effect of a statutory right of
redemption is to diminish the ability of the lender to sell the foreclosed
property. The exercise of a right of redemption would defeat the title of any
purchaser from a foreclosure sale or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right
of redemption may exist following a judicial foreclosure, but not following
a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held for more than two years. Unless
otherwise provided in the related Prospectus Supplement, with respect to a
series of Securities for which an election is made to qualify the Trust Fund
or a part thereof as a REMIC, the Agreement will permit foreclosed property
to be held for more than two years if the Internal Revenue Service grants an
extension of time within which to sell such property or independent counsel
renders an opinion to the effect that holding such property for such
additional period is permissible under the REMIC Provisions.
Cooperative Loans
The cooperative shares owned by the tenant-stockholder and pledged to
the lender are, in almost all cases, subject to restrictions on transfer as
set forth in the Cooperative's Certificate of Incorporation and By-laws, as
well as the proprietary lease or occupancy agreement, and may be cancelled
by the cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by such tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by such tenant-
stockholder. The proprietary lease or occupancy agreement generally permit
the Cooperative to terminate such lease or agreement in the event an obligor
fails to make payments or defaults in the performance of covenants required
thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that
the tenant-stockholder has defaulted under the proprietary lease or
occupancy agreement, the Cooperative will take no action to terminate such
lease or agreement until the lender has been provided with an opportunity
to cure the default. The recognition agreement typically provides
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that if the proprietary lease or occupancy agreement is terminated, the
Cooperative will recognize the lender's lien against proceeds from the sale
of the Cooperative apartment, subject, however, to the Cooperative's right
to sums due under such proprietary lease or occupancy agreement. The total
amount owed to the Cooperative by the tenant-stockholder, which the lender
generally cannot restrict and does not monitor, could reduce the value of
the collateral below the outstanding principal balance of the Cooperative
Loan and accrued and unpaid interest thereon.
Recognition agreements also provide that in the event of a foreclosure
on a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender
is not limited in any rights it may have to dispossess the tenant-
stockholders.
In some states, foreclosure on the Cooperative shares is accomplished
by a sale in accordance with the provisions of Article 9 of the UCC and the
security agreement relating to those shares. Article 9 of the UCC requires
that a sale be conducted in a "commercially reasonable" manner. Whether a
foreclosure sale has been conducted in a "commercially reasonable" manner
will depend on the facts in each case. In determining commercial
reasonableness, a court will look to the notice given the debtor and the
method, manner, time, place and terms of the foreclosure. Generally, a sale
conducted according to the usual practice of banks selling similar collateral
will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy
the indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the Cooperatives to receive sums due
under the proprietary lease or occupancy agreement. If there are proceeds
remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the tenant-
stockholder is generally responsible for the deficiency.
In the case of foreclosure on a building which was converted from a
rental building to a building owned by a Cooperative under a non-eviction
plan, some states require that a purchaser at a foreclosure sale take the
property subject to rent control and rent stabilization laws which apply to
certain tenants who elected to remain in the building was so converted.
JUNIOR MORTGAGES
Some of the Mortgage Loans may be secured by junior mortgages or deeds
of trust, which are subordinate to first or other senior mortgages or deeds
of trust held by other lenders. The rights of the Trust Fund as the holder
of a junior deed of trust or a junior mortgage are subordinate in lien and
in payment to those of the holder of the senior mortgage or deed of trust,
including the prior rights of the senior mortgagee or beneficiary to receive
and apply hazard insurance and condemnation proceeds and, upon default of the
mortgagor, to cause a foreclosure on the property. Upon completion of the
foreclosure proceedings by the holder of the senior mortgage or the sale
pursuant to the deed of trust, the junior mortgagee's or junior beneficiary's
lien will be extinguished unless the junior lienholder satisfies the
defaulted senior loan or asserts its subordinate interest in a property in
foreclosure proceedings. See "-Foreclosure" herein.
Furthermore, because the terms of the junior mortgage or deed of trust
are subordinate to the terms of the first mortgage or deed of trust, in
the event of a conflict between the terms of the first mortgage or deed
of trust and the junior mortgage or deed of trust, the terms of the
first mortgage or deed of trust will generally govern. Upon a failure
of the mortgagor or trustor to perform any of its obligations, the
senior mortgagee or beneficiary, subject to the terms of the senior
mortgage or deed of trust, may have the right to perform the obligation
itself. Generally, all sums so expended
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by the mortgagee or beneficiary become part of the indebtedness
secured by the mortgage or deed of trust. To the extent a first mortgagee
expends such sums, such sums will generally have priority over all sums due
under the junior mortgage.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Statutes in some states limit the right of a beneficiary under a deed
of trust or a mortgagee under a mortgage to obtain a deficiency judgment
against the mortgagor following foreclosure or sale under a deed of trust.
A deficiency judgment would be a personal judgment against the former
mortgagor equal to the difference between the net amount realized upon the
public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage
by foreclosure in an attempt to satisfy the full debt before bringing a
personal action against the mortgagor. In certain other states, the lender
has the option of bringing a personal action against the mortgagor on the
debt without first exhausting such security; however, in some of these
states, the lender, following judgment on such personal action, may be deemed
to have elected a remedy and may be precluded from exercising remedies with
respect to the security. In some cases, a lender will be precluded from
exercising any additional rights under the note or mortgage if it has taken
any prior enforcement action. Consequently, the practical effect of the
election requirement, in those states permitting such election, is that
lenders will usually proceed against the security first rather than bringing
a personal action against the mortgagor. Finally, other statutory provisions
limit any deficiency judgment against the former mortgagor following a
judicial sale to the excess of the outstanding debt over the fair market
value of the property at the time of the public sale. The purpose of these
statutes is generally to prevent a lender from obtaining a large deficiency
judgment against the former mortgagor as a result of low or no bids at the
judicial sale.
In addition to laws limiting or prohibiting deficiency judgments,
numerous other federal and state statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere
with or affect the ability of the secured mortgage lender to realize upon
collateral or enforce a deficiency judgment. For example, with respect to
federal bankruptcy law, a court with federal bankruptcy jurisdiction may
permit a debtor through his or her Chapter 11 or Chapter 13 rehabilitative
plan to cure a monetary default in respect of a mortgage loan on a debtor's
residence by paying arrearages within a reasonable time period and
reinstating the original mortgage loan payment schedule even though the
lender accelerated the mortgage loan and final judgment of foreclosure had
been entered in state court (provided no sale of the residence had yet
occurred) prior to the filing of the debtor's petition. Some courts with
federal bankruptcy jurisdiction have approved plans, based on the particular
facts of the reorganization case, that effected the curing of a mortgage loan
default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan secured by property of the debtor may be modified.
These courts have allowed modifications that include reducing the amount of
each monthly payment, changing the rate of interest, altering the repayment
schedule, forgiving all or a portion of the debt and reducing the lender's
security interest to the value of the residence, thus leaving the lender a
general unsecured creditor for the difference between the value of the
residence and the outstanding balance of the loan. Generally, however, the
terms of a mortgage loan secured only by a mortgage on real property that is
the debtor's principal residence may not be modified pursuant to a plan
confirmed pursuant to Chapter 11 or Chapter 13 except with respect to
mortgage payment arrearages, which may be cured within a reasonable time
period.
In the case of income-producing Multifamily Properties, federal
bankruptcy law may also have the effect of interfering with or affecting the
ability of the secured lender to enforce the borrower's assignment of rents
and leases related to the mortgaged property. Under Section 362 of the
Bankruptcy Code, the lender will be stayed from enforcing the assignment, and
the legal proceedings necessary to resolve the issue could be time-consuming,
with resulting delays in the lender's receipt of the rents.
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Certain tax liens arising under the Internal Revenue Code of 1986, as
amended, may in certain circumstances provide priority over the lien of a
mortgage or deed of trust. In addition, substantive requirements are imposed
upon mortgage lenders in connection with the origination and the servicing
of mortgage loans by numerous federal and some state consumer protection
laws. These laws include the federal Truth-in-Lending Act, Real Estate
Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing
Act, Fair Credit Reporting Act and related statutes. These federal laws
impose specific statutory liabilities upon lenders who originate mortgage
loans and who fail to comply with the provisions of the law. In some cases
this liability may affect assignees of the mortgage loans.
Generally, Article 9 of the UCC governs foreclosure on Cooperative
shares and the related proprietary lease or occupancy agreement. Some courts
have interpreted section 9-504 of the UCC to prohibit a deficiency award
unless the creditor establishes that the sale of the collateral (which, in
the case of a Cooperative Loan, would be the shares of the Cooperative and
the related proprietary lease or occupancy agreement) was conducted in a
commercially reasonable manner.
ENVIRONMENTAL LEGISLATION
Certain states impose a statutory lien for associated costs on property
that is the subject of a cleanup action by the state on account of hazardous
wastes or hazardous substances released or disposed of on the property. Such
a lien will generally have priority over all subsequent liens on the property
and, in certain of these states, will have priority over prior recorded liens
including the lien of a mortgage. In addition, under federal environmental
legislation and under state law in a number of states, a secured party that
takes a deed in lieu of foreclosure or acquires a mortgaged property at a
foreclosure sale or becomes involved in the operation or management of a
property so as to be deemed an "owner" or "operator" of the property may be
liable for the costs of cleaning up a contaminated site. Although such costs
could be substantial, it is unclear whether they would be imposed on a lender
(such as a Trust Fund) secured by residential real property. In the event
that title to a Mortgaged Property securing a Mortgage Loan in a Trust Fund
was acquired by the Trust Fund and cleanup costs were incurred in respect of
the Mortgaged Property, the holders of the related series of Certificates
might realize a loss if such costs were required to be paid by the Trust
Fund.
DUE-ON-SALE CLAUSES
Unless the related Prospectus Supplement indicates otherwise, the
Mortgage Loans will contain due-on-sale clauses. These clauses generally
provide that the lender may accelerate the maturity of the loan if the
mortgagor sells, transfers or conveys the related Mortgaged Property. The
enforceability of due-on-sale clauses has been the subject of legislation or
litigation in many states and, in some cases, the enforceability of these
clauses was limited or denied. However, with respect to certain loans the
Garn-St Germain Depository Institutions Act of 1982 preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in
accordance with their terms, subject to certain limited exceptions. Due-on-
sale clauses contained in mortgage loans originated by federal savings and
loan associations of federal savings banks are fully enforceable pursuant to
regulations of the United States Federal Home Loan Bank Board, as succeeded
by the Office of Thrift Supervision, which preempt state law restrictions on
the enforcement of such clauses. Similarly, "due-on-sale" clauses in
mortgage loans made by national banks and federal credit unions are now fully
enforceable pursuant to preemptive regulations of the Comptroller of the
Currency and the National Credit Union Administration, respectively.
The Garn-St Germain Act also sets forth nine specific instances in
which a mortgage lender covered by the act (including federal savings and
loan associations and federal savings banks) may not exercise a "due-on-sale"
clause, notwithstanding the fact that a transfer of the property may have
occurred. These include intra-family transfers, certain transfers by
operation of law, leases of fewer than three years and the creation of a
junior encumbrance. Regulations
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promulgated under the Garn-St Germain Act also prohibit the imposition of
a prepayment penalty upon the acceleration of a loan pursuant to a
due-on-sale clause. The inability to enforce a "due-on-sale" clause may
result in a mortgage that bears an interest rate below the current market
rate being assumed by a new home buyer rather than being paid off, which
may affect the average life of the Mortgage Loans and the number of
Mortgage Loans which may extend to maturity.
PREPAYMENT CHARGES
Under certain state laws, prepayment charges may not be imposed after
a certain period of time following the origination of mortgage loans secured
by liens encumbering owner-occupied residential properties, if such loans are
paid prior to maturity. With respect to Mortgaged Properties that are
owner-occupied, it is anticipated that prepayment charges may not be imposed
with respect to many of the Mortgage Loans. The absence of such a restraint
on prepayment, particularly with respect to fixed rate Mortgage Loans having
higher Mortgage Rates, may increase the likelihood of refinancing or other
early retirement of such loans.
SUBORDINATE FINANCING
Where a mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the
mortgagor may have difficulty servicing and repaying multiple loans. In
addition, if the junior loan permits recourse to the mortgagor (as junior
loans often do) and the senior loan does not, a mortgagor may be more likely
to repay sums due on the junior loan than those on the senior loan. Second,
acts of the senior lender that prejudice the junior lender or impair the
junior lender's security may create a superior equity in favor of the junior
lender. For example, if the mortgagor and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the
senior loan, the senior lender may lose its priority to the extent any
existing junior lender is harmed or the mortgagor is additionally burdened.
Third, if the mortgagor defaults on the senior loan and/or any junior loan
or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with
or delay the taking of action by the senior lender. Moreover, the bankruptcy
of a junior lender may operate to stay foreclosure or similar proceedings by
the senior lender.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. A similar federal
statute was in effect with respect to mortgage loans made during the first
three months of 1980. The Office of Thrift Supervision is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized any state to reimpose
interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal
law. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V. Certain states have taken
action to reimpose interest rate limits and/or to limit discount points or
other charges.
The Depositor believes that a court interpreting
Title V would hold that residential first mortgage loans that are originated
on or after January 1, 1980 are subject to federal preemption. Therefore, in
a state that has not taken the requisite action to reject application of
Title V or to adopt a provision limiting discount points or other charges
prior to origination of such mortgage loans, any such limitation under such
state's usury law would not apply to such mortgage loans.
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In any state in which application of Title V has been expressly rejected
or a provision limiting discount points or other charges is adopted, no
mortgage loan originated after the date of such state action will be eligible
for inclusion in a Trust Fund unless (i) such mortgage loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such mortgage loan provides that the terms thereof shall be construed
in accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given
effect.
Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this
statutory scheme, the mortgagor may cancel the recorded mortgage or deed of
trust upon paying its debt with lawful interest, and the lender may
foreclose, but only for the debt plus lawful interest. A second group of
statutes is more severe. A violation of this type of usury law results in
the invalidation of the transaction, thereby permitting the mortgagor to
cancel the recorded mortgage or deed of trust without any payment or
prohibiting the lender from foreclosing.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans and early ownership mortgage loans, originated by non-federally
chartered lenders have historically been subject to a variety of
restrictions. Such restrictions differed from state to state, resulting in
difficulties in determining whether a particular alternative mortgage
instrument originated by a state-chartered lender was in compliance with
applicable law. These difficulties were alleviated substantially as a result
of the enactment of Title VIII of the Garn-St Germain Act ("Title VIII").
Title VIII provides that, notwithstanding any state law to the contrary,
state-chartered banks may originate alternative mortgage instruments in
accordance with regulations promulgated by the Comptroller of the Currency
with respect to origination of alternative mortgage instruments by national
banks; state-chartered credit unions may originate alternative mortgage
instruments in accordance with regulations promulgated by the National Credit
Union Administration with respect to origination of alternative mortgage
instruments by federal credit unions; and all other non-federally chartered
housing creditors, including state-chartered savings and loan associations,
state-chartered savings banks and mutual savings banks and mortgage banking
companies, may originate alternative mortgage instruments in accordance with
the regulations promulgated by the Federal Home Loan Bank Board, predecessor
to the Office of Thrift Supervision, with respect to origination of
alternative mortgage instruments by federal savings and loan associations.
Title VIII provides that any state may reject applicability of the provisions
of Title VIII by adopting, prior to October 15, 1985, a law or constitutional
provision expressly rejecting the applicability of such provisions. Certain
states have taken such action.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), a mortgagor who enters military service after
the origination of such mortgagor's Mortgage Loan (including a mortgagor who
was in reserve status and is called to active duty after origination of the
Mortgage Loan), may not be charged interest (including fees and charges)
above an annual rate of 6% during the period of such mortgagor's active duty
status, unless a court orders otherwise upon application of the lender. The
Relief Act applies to mortgagors who are members of the Army, Navy, Air
Force, Marines, National Guard, Reserves, Coast Guard and officers of the
U.S. Public Health Service assigned to duty with the military. Because the
Relief Act applies to mortgagors who enter military service (including
reservists who are called to active duty) after origination of the related
Mortgage Loan, no information can be provided as to the number of loans
that may be affected by the Relief Act. Application of the Relief Act
would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on
certain of the Mortgage Loans. Any shortfalls in interest
collections resulting from the application of the Relief Act would
result in a reduction of the amounts distributable to the holders
of the related series of Certificates, and would not be covered by
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advances or, unless otherwise specified in the related Prospectus
Supplement, any form of Credit Support provided in connection with such
Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in
the event that such a Mortgage Loan goes into default, there may be delays
and losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the
"Crime Control Act"), the government may seize the property even before
conviction. The government must publish notice of the forfeiture proceeding
and may give notice to all parties "known to have an alleged interest in the
property," including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before
commission of the crime upon which the forfeiture is based, or (ii) the
lender was, at the time of execution of the mortgage, "reasonably without
cause to believe" that the property was used in, or purchased with the
proceeds of, illegal drug or RICO activities.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries, which are general in
nature, of certain legal matters relating to the Contracts. Because such
legal aspects are governed primarily by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete nor to
reflect the laws of any particular state, nor to encompass the laws of all
states in which the security for the Contracts is situated. The summaries
are qualified in their entirety by reference to the appropriate laws of the
states in which Contracts may be originated.
GENERAL
As a result of the assignment of the Contracts to the Trustee, the
Trustee will succeed collectively to all of the rights (including the right
to receive payment on the Contracts) of the obligee under the Contracts.
Each Contract evidences both (a) the obligation of the obligor to repay the
loan evidenced thereby, and (b) the grant of a security interest in the
Manufactured Home to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
The Contracts generally are "chattel paper" as defined in the Uniform
Commercial Code (the "UCC") in effect in the states in which the Manufactured
Homes initially were registered. Pursuant to the UCC, the sale of chattel
paper is treated in a manner similar to perfection of a security interest in
chattel paper. Under the Agreement, the Master Servicer will transfer
physical possession of the Contracts to the Trustee or its custodian or may
retain possession of the Contracts as custodian for the Trustee. In
addition, the Master Servicer will make an appropriate filing of a UCC-1
financing statement in the appropriate states to give notice of the Trustee's
ownership of the Contracts. Unless otherwise specified in the related
Prospectus Supplement, the Contracts will not be stamped or marked otherwise
to reflect their assignment from the Company to the Trustee. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to
take physical possession of the Contracts without notice of such assignment,
the Trustee's interest in Contracts could be defeated.
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SECURITY INTERESTS IN THE MANUFACTURED HOMES
The Manufactured Homes securing the Contracts may be located in all 50
states. Security interests in manufactured homes may be perfected either by
notation of the secured party's lien on the certificate of title or by
delivery of the required documents and payment of a fee to the state motor
vehicle authority, depending on state law. In some nontitle states,
perfection pursuant to the provisions of the UCC is required. The Asset
Seller may effect such notation or delivery of the required documents and
fees, and obtain possession of the certificate of title, as appropriate under
the laws of the state in which any manufactured home securing a manufactured
housing conditional sales contract is registered. In the event the Asset
Seller fails, due to clerical error, to effect such notation or delivery, or
files the security interest under the wrong law (for example, under a motor
vehicle title statute rather than under the UCC, in a few states), the Asset
Seller may not have a first priority security interest in the Manufactured
Home securing a Contract. As manufactured homes have become larger and often
have been attached to their sites without any apparent intention to move
them, courts in many states have held that manufactured homes, under certain
circumstances, may become subject to real estate title and recording laws.
As a result, a security interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an interest in the
home under applicable state real estate law. In order to perfect a security
interest in a manufactured home under real estate laws, the holder of the
security interest must file either a "fixture filing" under the provisions
of the UCC or a real estate mortgage under the real estate laws of the state
where the home is located. These filings must be made in the real estate
records office of the county where the home is located. Substantially all
of the Contracts contain provisions prohibiting the borrower from permanently
attaching the Manufactured Home to its site. So long as the borrower does
not violate this agreement, a security interest in the Manufactured Home will
be governed by the certificate of title laws or the UCC, and the notation of
the security interest on the certificate of title or the filing of a UCC
financing statement will be effective to maintain the priority of the
security interest in the Manufactured Home. If, however, a Manufactured Home
is permanently attached to its site, other parties could obtain an interest
in the Manufactured Home which is prior to the security interest originally
retained by the Asset Seller and transferred to the Depositor. With respect
to a Series of Certificates and if so described in the related Prospectus
Supplement, the Master Servicer may be required to perfect a security
interest in the Manufactured Home under applicable real estate laws. The
Warranting Party will represent that as of the date of the sale to the
Depositor it has obtained a perfected first priority security interest by
proper notation or delivery of the required documents and fees with respect
to substantially all of the Manufactured Homes securing the Contracts.
The Depositor will cause the security interests in the Manufactured
Homes to be assigned to the Trustee on behalf of the Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, neither the
Depositor nor the Trustee will amend the certificates of title (or file UCC-3
statements) to identify the Trustee as the new secured party, and neither the
Depositor nor the Master Servicer will deliver the certificates of title to
the Trustee or note thereon the interest of the Trustee. Accordingly, the
Asset Seller (or other originator of the Contracts) will continue to be named
as the secured party on the certificates of title relating to the
Manufactured Homes. In some states, such assignment is an effective
conveyance of such security interest without amendment of any lien noted on
the related certificate of title and the new secured party succeeds to Master
Servicer's rights as the secured party. However, in some states, in the
absence of an amendment to the certificate of title (or the filing of a UCC-3
statement), such assignment of the security interest in the Manufactured Home
may not be held effective or such security interests may not be perfected and
in the absence of such notation or delivery to the Trustee, the assignment
of the security interest in the Manufactured Home may not be effective
against creditors of the Asset Seller (or such other originator of the
Contracts) or a trustee in bankruptcy of the Asset Seller (or such other
originator).
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or
administrative error by state recording officials, the notation of the lien
of the Asset Seller (or other originator of the Contracts) on the
certificate of title or delivery of the required documents and fees will be
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sufficient to protect the Certificateholders against the rights of
subsequent purchasers of a Manufactured Home or subsequent lenders who
take a security interest in the Manufactured Home. If there are any
Manufactured Homes as to which the security interest assigned to the
Trustee is not perfected, such security interest would be subordinate
to, among others, subsequent purchasers for value of Manufactured Homes
and holders of perfected security interests. There also exists a risk
in not identifying the Trustee as the new secured party on the
certificate of title that, through fraud or negligence, the security
interest of the Trustee could be released.
In the event that the owner of a Manufactured Home moves it to a state
other than the state in which such Manufactured Home initially is registered,
under the laws of most states the perfected security interest in the
Manufactured Home would continue for four months after such relocation and
thereafter only if and after the owner re-registers the Manufactured Home in
such state. If the owner were to relocate a Manufactured Home to another
state and not re-register the Manufactured Home in such state, and if steps
are not taken to re-perfect the Trustee's security interest in such state,
the security interest in the Manufactured Home would cease to be perfected.
A majority of states generally require surrender of a certificate of title
to re-register a Manufactured Home; accordingly, the Master Servicer must
surrender possession if it holds the certificate of title to such
Manufactured Home or, in the case of Manufactured Homes registered in states
which provide for notation of lien, the Asset Seller (or other originator)
would receive notice of surrender if the security interest in the
Manufactured Home is noted on the certificate of title. Accordingly, the
Trustee would have the opportunity to re-perfect its security interest in the
Manufactured Home in the state of relocation. In states which do not require
a certificate of title for registration of a manufactured home,
re-registration could defeat perfection. In the ordinary course of servicing
the manufactured housing contracts, the Master Servicer takes steps to effect
such re-perfection upon receipt of notice of re-registration or information
from the obligor as to relocation. Similarly, when an obligor under a
manufactured housing contract sells a manufactured home, the Master Servicer
must surrender possession of the certificate of title or, if it is noted as
lienholder on the certificate of title, will receive notice as a result of
its lien noted thereon and accordingly will have an opportunity to require
satisfaction of the related manufactured housing conditional sales contract
before release of the lien. Under the Agreement, the Master Servicer is
obligated to take such steps, at the Master Servicer's expense, as are
necessary to maintain perfection of security interests in the Manufactured
Homes.
Under the laws of most states, liens for repairs performed on a
Manufactured Home and liens for personal property taxes take priority even
over a perfected security interest. The Warranting Party will represent in
the Agreement that it has no knowledge of any such liens with respect to any
Manufactured Home securing payment on any Contract. However, such liens
could arise at any time during the term of a Contract. No notice will be
given to the Trustee or Certificateholders in the event such a lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN MANUFACTURED HOMES
The Master Servicer on behalf of the Trustee, to the extent required by
the related Agreement, may take action to enforce the Trustee's security
interest with respect to Contracts in default by repossession and resale of
the Manufactured Homes securing such Defaulted Contracts. So long as the
Manufactured Home has not become subject to the real estate law, a creditor
can repossess a Manufactured Home securing a Contract by voluntary surrender,
by "self-help" repossession that is "peaceful" (i.e., without breach of the
peace) or, in the absence of voluntary surrender and the ability to
repossess without breach of the peace, by judicial process. The holder
of a Contract must give the debtor a number of days' notice, which
varies from 10 to 30 days depending on the state, prior to
commencement of any repossession. The UCC and consumer protection
laws in most states place restrictions on repossession sales, including
requiring prior notice to the debtor and commercial reasonableness in
effecting such a sale. The law in most states also requires that the
debtor be given notice of any sale prior to resale of the unit so that the
debtor may redeem at or before such resale. In the event of such repossession
and resale of a Manufactured Home, the Trustee would be entitled to be
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paid out of the sale proceeds before such proceeds could be applied to the
payment of the claims of unsecured creditors or the holders of subsequently
perfected security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the manufactured home securing such debtor's loan. However,
some states impose prohibitions or limitations on deficiency judgments, and
in many cases the defaulting borrower would have no assets with which to pay
a judgment.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit
or delay the ability of a lender to repossess and resell collateral or
enforce a deficiency judgment.
Under the terms of the federal Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), an Obligor who enters military
service after the origination of such Obligor's Contract (including an
Obligor who is a member of the National Guard or is in reserve status at the
time of the origination of the Contract and is later called to active duty)
may not be charged interest above an annual rate of 6% during the period of
such Obligor's active duty status, unless a court orders otherwise upon
application of the lender. It is possible that such action could have an
effect, for an indeterminate period of time, on the ability of the Master
Servicer to collect full amounts of interest on certain of the Contracts.
Any shortfall in interest collections resulting from the application of the
Relief Act, to the extent not covered by the subordination of a Class of
Subordinated Certificates, could result in losses to the holders of a Series
of Certificates. In addition, the Relief Act imposes limitations which would
impair the ability of the Master Servicer to foreclose on an affected
Contract during the Obligor's period of active duty status. Thus, in the
event that such a Contract goes into default, there may be delays and losses
occasioned by the inability to realize upon the Manufactured Home in a timely
fashion.
CONSUMER PROTECTION LAWS
The so-called "Holder-in-Due-Course" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the
transaction (and certain related lenders and assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of
this rule is to subject the assignee of such a contract to all claims and
defenses which the debtor could assert against the seller of goods.
Liability under this rule is limited to amounts paid under a Contract;
however, the obligor also may be able to assert the rule to set off remaining
amounts due as a defense against a claim brought by the Trustee against such
obligor. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the
Uniform Consumer Credit Code. In the case of some of these laws, the failure
to comply with their provisions may affect the enforceability of the related
Contract.
TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF "DUE-ON-SALE" CLAUSES
The Contracts, in general, prohibit the sale or transfer of the related
Manufactured Homes without the consent of the Master Servicer and permit the
acceleration of the maturity of the Contracts by the Master Servicer upon any
such sale or transfer that is not consented to. Unless otherwise specified
in the related Prospectus Supplement, the Master Servicer expects that it
will permit most transfers of Manufactured Homes and not accelerate the
maturity of the related Contracts. In certain cases, the transfer may be
made by a delinquent obligor in order to avoid a repossession proceeding with
respect to a Manufactured Home.
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In the case of a transfer of a Manufactured Home after which the Master
Servicer desires to accelerate the maturity of the related Contract, the
Master Servicer's ability to do so will depend on the enforceability under
state law of the "due-on-sale" clause. The Garn-St Germain Depositary
Institutions Act of 1982 preempts, subject to certain exceptions and
conditions, state laws prohibiting enforcement of "due-on-sale" clauses
applicable to the Manufactured Homes. Consequently, in some states the
Master Servicer may be prohibited from enforcing a "due-on-sale" clause in
respect of certain Manufactured Homes.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V"), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan which is
secured by a first lien on certain kinds of manufactured housing. The
Contracts would be covered if they satisfy certain conditions, among other
things, governing the terms of any prepayments, late charges and deferral
fees and requiring a 30-day notice period prior to instituting any action
leading to repossession of or foreclosure with respect to the related unit.
Title V authorized any state to reimpose limitations on interest rates
and finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition,
even where Title V was not so rejected, any state is authorized by the law
to adopt a provision limiting discount points or other charges on loans
covered by Title V. The related Asset Seller will represent that all of the
Contracts comply with applicable usury law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered
Certificates is based on the advice of Brown & Wood LLP, counsel to the
Depositor. This summary is based on laws, regulations, including the REMIC
regulations promulgated by the Treasury Department (the "REMIC Regulations"),
rulings and decisions now in effect or (with respect to regulations)
proposed, all of which are subject to change either prospectively or
retroactively. This summary does not address the federal income tax
consequences of an investment in Securities applicable to all categories of
investors, some of which (for example, banks and insurance companies) may be
subject to special rules. Prospective investors should consult their tax
advisors regarding the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of Securities.
Unless otherwise stated or unless the context otherwise requires, in the
following discussion a reference to the term "Mortgage Loan" or "Mortgage
Asset" will also be deemed to include a reference to a "Contract".
GENERAL
The federal income tax consequences to Securityholders will vary
depending on whether an election is made to treat the Trust Fund relating to
a particular Series of Securities as a REMIC under the Code. The Prospectus
Supplement for each Series of Securities will specify whether a REMIC
election will be made.
GRANTOR TRUST FUNDS
If neither a REMIC election nor a partnership election is made,
Brown & Wood LLP will deliver its opinion
that the Trust Fund will not be classified as an association taxable as a
corporation and that each such Trust Fund will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code. In this case,
owners of Certificates will be treated for federal income tax purposes as
owners of a portion of the Trust Fund's assets as described below.
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A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with one class of
Grantor Trust Certificates. In this case, each Grantor Trust
Certificateholder will be treated as the owner of a pro rata undivided
interest in the interest and principal portions of the Trust Fund represented
by the Grantor Trust Certificates and will be considered the equitable owner
of a pro rata undivided interest in each of the Mortgage Assets in the Pool.
Any amounts received by a Grantor Trust Certificateholder in lieu of amounts
due with respect to any Mortgage Asset because of a default or delinquency
in payment will be treated for federal income tax purposes as having the same
character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Master Servicer. Under Code Sections
162 or 212 each Grantor Trust Certificateholder will be entitled to deduct
its pro rata share of servicing fees, prepayment fees, assumption fees, any
loss recognized upon an assumption and late payment charges retained by the
Master Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust Fund. Grantor Trust Certificateholders that
are individuals, estates or trusts will be entitled to deduct their share of
expenses as itemized deductions only to the extent such expenses plus all
other Code Section 212 expenses exceed two percent of its adjusted gross
income. In addition, the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds
the applicable amount (which amount will be adjusted for inflation) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over
the applicable amount and (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. A Grantor Trust Certificateholder
using the cash method of accounting must take into account its pro rata share
of income and deductions as and when collected by or paid to the Master
Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions
as they become due or are paid to the Master Servicer, whichever is earlier.
If the servicing fees paid to the Master Servicer are deemed to exceed
reasonable servicing compensation, the amount of such excess could be
considered as an ownership interest retained by the Master Servicer (or any
person to whom the Master Servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the Mortgage Assets.
The Mortgage Assets would then be subject to the "coupon stripping" rules of
the Code discussed below.
Unless otherwise specified in the related Prospectus Supplement, as to
each Series of Certificates evidencing an interest in a Trust Fund comprised
of Mortgage Loans (not including Contracts, Unsecured Home Improvement Loans,
SBA Loans or SBA 504 Loans), Brown & Wood LLP will have advised the Depositor
that:
(i) a Grantor Trust Certificate owned by a "domestic building and
loan association" within the meaning of Code Section 7701(a)(19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is
. . . residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by that
Grantor Trust Certificate are of a type described in such Code section;
(ii) a Grantor Trust Certificate owned by a financial institution
described in Code Section 593(a) representing principal and interest payments
on Mortgage Assets will be considered to represent "qualifying real property
loans" within the meaning of Code Section 593(d) and the Treasury regulations
under Code Section 593, to the extent that the Mortgage Assets represented
by that Grantor Trust Certificate are of a type described in such Code
section;
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(iii) a Grantor Trust Certificate owned by a real estate investment
trust representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(5)(A), and interest income on the Mortgage Assets will be considered
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), to the extent that the Mortgage Assets
represented by that Grantor Trust Certificate are of a type described in such
Code section; and
(iv) a Grantor Trust Certificate owned by a REMIC will represent
"obligation(s) ... which (are) principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3).
Under Code Section 7701(a)(19)(C)(v), "loans secured by an interest in
real property" include loans secured by mobile homes not used on a transient
basis. The Treasury regulations under Code Section 593 define "qualifying
real property loan" to include a loan secured by a mobile home unit
"permanently fixed to real property" except during a brief period in which
the unit is transported to its site. The Treasury regulations under Code
Section 856 state that the local law definitions are not controlling in
determining the meaning of the term "real property" for purposes of Code
Section 856, and the Internal Revenue Service ("IRS") has ruled that
obligations secured by permanently installed mobile home units qualify as
"real estate assets" under this provision. Entities affected by the
foregoing Code provisions that are considering the purchase of Certificates
evidencing interests in Trust Fund comprised of Contracts should consult
their tax advisors regarding such provisions.
Stripped Bonds and Coupons. Certain Trust Funds may consist of
Government Securities which constitute "stripped bonds" or "stripped coupons"
as those terms are defined in section 1286 of the Code, and, as a result,
such assets would be subject to the stripped bond provisions of the Code.
Under these rules, such Government Securities are treated as having original
issue discount based on the purchase price and the stated redemption price
at maturity of each Security. As such, Grantor Trust Certificateholders
would be required to include in income their pro rata share of the original
issue discount on each Government Security recognized in any given year on
an economic accrual basis even if the Grantor Trust Certificateholder is a
cash method taxpayer. Accordingly, the sum of the income includible to the
Grantor Trust Certificateholder in any taxable year may exceed amounts
actually received during such year.
Buydown Loans. The assets constituting certain Trust Funds may include
Buydown Loans. The characterization of any investment in Buydown Loans will
depend upon the precise terms of the related buydown agreement, but to the
extent that such Buydown Loans are secured in part by a bank account or other
personal property, they may not be treated in their entirety as assets
described in the foregoing sections of the Code. There are no directly
applicable precedents with respect to the federal income tax treatment or the
characterization of investments in Buydown Loans. Accordingly, Grantor Trust
Certificateholders should consult their own tax advisors with respect to the
characterization of investments in Grantor Trust Certificates representing
an interest in a Trust Fund that includes Buydown Loans.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Mortgage Asset
based on each Mortgage Asset's relative fair market value, so that such
holder's undivided interest in each Mortgage Asset will have its own tax
basis. A Grantor Trust Certificateholder that acquires an interest in
Mortgage Assets at a premium may elect to amortize such premium under a
constant interest method, provided that the underlying mortgage loans with
respect to such Mortgage Assets were originated after September 27, 1985.
Premium allocable to mortgage loans originated on or before September 27,
1985 should be allocated among the principal payments on such mortgage loans
and allowed as an ordinary deduction as principal payments are made.
Amortizable bond premium will be treated as an offset to interest income on
such Grantor Trust Certificate. The basis for such Grantor Trust Certificate
will be reduced to the extent that amortizable premium is applied to offset
interest payments. It is not clear whether a reasonable prepayment
assumption should be used in computing amortization of premium allowable
under Code Section 171. A Certificateholder that makes this election for a
Certificate that is acquired
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at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that
such Certificateholder acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate acquired at
a premium should recognize a loss if a Mortgage Loan (or an underlying
mortgage loan with respect to a Mortgage Asset) prepays in full, equal to the
difference between the portion of the prepaid principal amount of such
Mortgage Loan (or underlying mortgage loan) that is allocable to the
Certificate and the portion of the adjusted basis of the Certificate that is
allocable to such Mortgage Loan (or underlying mortgage loan). If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It
is not clear whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.
Original Issue Discount. The IRS has stated in published rulings that,
in circumstances similar to those described herein, the special rules of the
Code relating to original issue discount ("OID") (currently Code Sections
1271 through 1273 and 1275) and Treasury regulations issued on January 27,
1994, under such Sections (the "OID Regulations"), will be applicable to a
Grantor Trust Certificateholder's interest in those Mortgage Assets meeting
the conditions necessary for these sections to apply. Rules regarding
periodic inclusion of OID income are applicable to mortgages of corporations
originated after May 27, 1969, mortgages of noncorporate mortgagors (other
than individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. Such OID could arise by the financing of
points or other charges by the originator of the mortgages in an amount
greater than a statutory de minimis exception to the extent that the points
are not currently deductible under applicable Code provisions or are not for
services provided by the lender. OID generally must be reported as ordinary
gross income as it accrues under a constant interest method. See "--Multiple
Classes of Grantor Trust Certificates--Accrual of Original Issue Discount"
below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest
in a Mortgage Asset is considered to have been purchased at a "market
discount." Generally, the amount of market discount is equal to the excess
of the portion of the principal amount of such Mortgage Asset allocable to
such holder's undivided interest over such holder's tax basis in such
interest. Market discount with respect to a Grantor Trust Certificate will
be considered to be zero if the amount allocable to the Grantor Trust
Certificate is less than 0.25% of the Grantor Trust Certificate's stated
redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and
the advisability of making any of the elections allowed under Code Sections
1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at
the time of such payment. The amount of accrued market discount for purposes
of determining the tax treatment of subsequent principal payments or
dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described
in the relevant legislative history will apply. Under those rules, the
holder of a market discount bond may elect to accrue market discount either
on the basis of a constant interest rate or according to one of the following
methods. If a Grantor Trust Certificate is issued with OID, the amount
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of market discount that accrues during any accrual period would be equal to
the product of (i) the total remaining market discount and (ii) a fraction,
the numerator of which is the OID accruing during the period and the
denominator of which is the total remaining OID at the beginning of the
accrual period. For Grantor Trust Certificates issued without OID, the
amount of market discount that accrues during a period is equal to the
product of (i) the total remaining market discount and (ii) a fraction,
the numerator of which is the amount of stated interest paid during the
accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period.
For purposes of calculating market discount under any of the above methods
in the case of instruments (such as the Grantor Trust Certificates) that
provide for payments that may be accelerated by reason of prepayments
of other obligations securing such instruments, the same prepayment
assumption applicable to calculating the accrual of OID will apply.
Because the regulations described above have not been issued, it
is impossible to predict what effect those regulations might have on the
tax treatment of a Grantor Trust Certificate purchased at a
discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Grantor Trust Certificate purchased with market
discount. For these purposes, the de minimis rule referred above applies.
Any such deferred interest expense would not exceed the market discount that
accrues during such taxable year and is, in general, allowed as a deduction
not later than the year in which such market discount is includible in
income. If such holder elects to include market discount in income currently
as it accrues on all market discount instruments acquired by such holder in
that taxable year or thereafter, the interest deferral rule described above
will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for Certificates acquired on or after April
4, 1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to
have made an election to include in income currently market discount with
respect to all other debt instruments having market discount that such
Certificateholder acquires during the year of the election or thereafter.
Similarly, a Certificateholder that makes this election for a Certificate
that is acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Certificateholder owns or acquires. See "-- Regular
Certificates--Premium" herein. The election to accrue interest, discount and
premium on a constant yield method with respect to a Certificate is
irrevocable.
B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments
results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest payments. For
purposes of Code Sections 1271 through 1288, Code Section 1286 treats a
stripped bond or a stripped coupon as an obligation issued on the date that
such stripped interest is created. If a Trust Fund is created with two
classes of Grantor Trust Certificates, one class of Grantor Trust
Certificates may represent the right to principal and interest, or principal
only, on all or a portion of the Mortgage Assets (the "Stripped Bond
Certificates"), while the second class of Grantor Trust Certificates may
represent the right to some or all of the interest on such portion (the
"Stripped Coupon Certificates").
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Servicing fees in excess of reasonable servicing fees ("excess
servicing") will be treated under the stripped bond rules. If the excess
servicing fee is less than 100 basis points (i.e., 1% interest on the
Mortgage Asset principal balance) or the Certificates are initially sold with
a de minimis discount (assuming no prepayment assumption is required), any
non-de minimis discount arising from a subsequent transfer of the
Certificates should be treated as market discount. The IRS appears to
require that reasonable servicing fees be calculated on a Mortgage Asset by
Mortgage Asset basis, which could result in some Mortgage Assets being
treated as having more than 100 basis points of interest stripped off. See
"--Non-REMIC Certificates" and "Multiple Classes of Grantor Trust
Certificates--Stripped Bonds and Stripped Coupons" herein.
Although not entirely clear, a Stripped Bond Certificate generally
should be treated as an in interest in Mortgage Assets issued on the day such
Certificate is purchased for purposes of calculating any OID. Generally, if
the discount on a Mortgage Asset is larger than a de minimis amount (as
calculated for purposes of the OID rules) a purchaser of such a Certificate
will be required to accrue the discount under the OID rules of the Code. See
"--Non-REMIC Certificates" and "--Single Class of Grantor Trust Certificates-
- -Original Issue Discount" herein. However, a purchaser of a Stripped Bond
Certificate will be required to account for any discount on the Mortgage
Assets as market discount rather than OID if either (i) the amount of OID
with respect to the Mortgage Assets is treated as zero under the OID de
minimis rule when the Certificate was stripped or (ii) no more than 100 basis
points (including any amount of servicing fees in excess of reasonable
servicing fees) is stripped off of the Trust Fund's Mortgage Assets.
Pursuant to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of
Stripped Bond Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of the IRS to the
change in their accounting method on a statement attached to their first
timely tax return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is
substantially uncertain. The Code could be read literally to require that
OID computations be made for each payment from each Mortgage Asset. However,
based on the recent IRS guidance, it appears that all payments from a
Mortgage Asset underlying a Stripped Coupon Certificate should be treated as
a single installment obligation subject to the OID rules of the Code, in
which case, all payments from such Mortgage Asset would be included in the
Mortgage Asset's stated redemption price at maturity for purposes of
calculating income on such certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of
Mortgage Assets will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into account
in computing yield with respect to such Grantor Trust Certificate, it appears
that no loss will be available as a result of any particular prepayment
unless prepayments occur at a rate faster than the assumed prepayment rate.
However, if such Certificate is treated as an interest in discrete Mortgage
Assets, or if no prepayment assumption is used, then when a Mortgage Asset
is prepaid, the holder of such Certificate should be able to recognize a loss
equal to the portion of the adjusted issue price of such Certificate that is
allocable to such Mortgage Asset.
Holders of Stripped Bond Certificates and Stripped Coupon Certificates
are urged to consult with their own tax advisors regarding the proper
treatment of these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type
that make up the Trust Fund. With respect to these Code sections, no
specific legal authority exists regarding whether the character of the
Grantor Trust Certificates, for federal income tax purposes, will be the same
as that of the underlying Mortgage Assets. While Code Section 1286 treats
a stripped obligation as a separate obligation for purposes of the Code
provisions addressing OID, it is not clear whether such characterization
would apply with regard to these other Code sections. Although the issue is
not free from doubt, based on policy considerations, each
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class of Grantor Trust Certificates, unless otherwise specified in the
related Prospectus Supplement, should be considered to represent "qualifying
real property loans" within the meaning of Code Section 593(d), "real
estate assets" within the meaning of Code Section 856(c)(5)(A) and
"loans . . . secured by, an interest in real property which
is . . . residential real property" within the meaning of Code
Section 7701(a)(19)(C)(v), and interest income attributable to Grantor
Trust Certificates should be considered to represent "interest on
obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), provided that in each case the
underlying Mortgage Assets and interest on such Mortgage Assets qualify for
such treatment. Prospective purchasers to which such characterization of an
investment in Certificates is material should consult their own tax advisors
regarding the characterization of the Grantor Trust Certificates and the
income therefrom. Grantor Trust Certificates will be "obligation(s) ...
which (are) principally secured, directly or indirectly, by an interest in
real property" within the meaning of Code Section 860G(a)(3).
2. Grantor Trust Certificates Representing Interests in Loans Other
Than ARM Loans
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a Certificateholder's interest in those Mortgage Assets
as to which the conditions for the application of those sections are met.
Rules regarding periodic inclusion of original issue discount in income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2,
1984. Under the OID Regulations, such original issue discount could arise
by the charging of points by the originator of the mortgage in an amount
greater than the statutory de minimis exception, including a payment of
points that is currently deductible by the borrower under applicable
Code provisions, or under certain circumstances, by the presence of
"teaser" rates on the Mortgage Assets. OID on each Grantor Trust
Certificate must be included in the owner's ordinary income for
federal income tax purposes as it accrues, in accordance with a
constant interest method that takes into account the compounding
of interest, in advance of receipt of the cash attributable to
such income. The amount of OID required to be included in an
owner's income in any taxable year with respect to a Grantor
Trust Certificate representing an interest in Mortgage Assets
other than Mortgage Assets with interest rates that adjust
periodically ("ARM Loans") likely will be computed as described
below under "--Accrual of Original Issue Discount." The following
discussion is based in part on the OID Regulations and in part on the
provisions of the Tax Reform Act of 1986 (the "1986 Act"). The OID
Regulations generally are effective for debt instruments issued on or
after April 4, 1994, but may be relied upon as authority with respect
to debt instruments, such as the Grantor Trust Certificates, issued after
December 21, 1992. Alternatively, proposed Treasury regulations issued
December 21, 1992 may be treated as authority for debt instruments issued
after December 21, 1992 and prior to April 4, 1994, and proposed Treasury
regulations issued in 1986 and 1991 may be treated as authority for
instruments issued before December 21, 1992. In applying these dates, the
issued date of the Mortgage Assets should be used, or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date
such Certificates are acquired. The holder of a Certificate should be
aware, however, that neither the proposed OID Regulations nor the OID
Regulations adequately address certain issues relevant to prepayable
securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price
of a Mortgage Asset is generally the amount lent to the mortgagee, which may
be adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments
to be made on such Mortgage Asset other than payments that are treated as
qualified stated interest payments. The accrual of this OID, as described
below under "--Accrual of Original Issue Discount," will, unless otherwise
specified in the related Prospectus Supplement, utilize the original yield
to maturity of the Grantor Trust Certificate calculated based on a
reasonable assumed prepayment rate for the mortgage loans underlying
the Grantor Trust Certificates (the "Prepayment Assumption"), and
will take into account events that occur during the calculation period.
The Prepayment Assumption will be determined in the manner prescribed by
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regulations that have not yet been issued. The legislative history of the
1986 Act (the "Legislative History") provides, however, that the regulations
will require that the Prepayment Assumption be the prepayment assumption that
is used in determining the offering price of such Certificate. No
representation is made that any Certificate will prepay at the Prepayment
Assumption or at any other rate. The prepayment assumption contained in the
Code literally only applies to debt instruments collateralized by other
debt instruments that are subject to prepayment rather than direct ownership
interests in such debt instruments, such as the Certificates represent.
However, no other legal authority provides guidance with regard to the
proper method for accruing OID on obligations that are subject to prepayment,
and, until further guidance is issued, the Master Servicer intends to
calculate and report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily
portions," as defined below, of the OID on such Grantor Trust Certificate for
each day on which it owns such Certificate, including the date of purchase
but excluding the date of disposition. In the case of an original owner, the
daily portions of OID with respect to each component generally will be
determined as set forth under the OID Regulations. A calculation will be
made by the Master Servicer or such other entity specified in the related
Prospectus Supplement of the portion of OID that accrues during each
successive monthly accrual period (or shorter period from the date of
original issue) that ends on the day in the calendar year corresponding to
each of the Distribution Dates on the Grantor Trust Certificates (or the day
prior to each such date). This will be done, in the case of each full month
accrual period, by (i) adding (a) the present value at the end of the accrual
period (determined by using as a discount factor the original yield to
maturity of the respective component under the Prepayment Assumption) of all
remaining payments to be received under the Prepayment Assumption on the
respective component and (b) any payments included in the state redemption
price at maturity received during such accrual period, and (ii) subtracting
from that total the "adjusted issue price" of the respective component at the
beginning of such accrual period. The adjusted issue price of a Grantor
Trust Certificate at the beginning of the first accrual period is its issue
price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other
than a payment of qualified stated interest made at the end of or during that
accrual period. The OID accruing during such accrual period will then be
divided by the number of days in the period to determine the daily portion
of OID for each day in the period. With respect to an initial accrual period
shorter than a full monthly accrual period, the daily portions of OID must
be determined according to an appropriate allocation under any reasonable
method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received.
However, the amount of original issue discount includible in the income of
a holder of an obligation is reduced when the obligation is acquired after
its initial issuance at a price greater than the sum of the original issue
price and the previously accrued original issue discount, less prior payments
of principal. Accordingly, if such Mortgage Assets acquired by a
Certificateholder are purchased at a price equal to the then unpaid principal
amount of such Mortgage Asset, no original issue discount attributable to the
difference between the issue price and the original principal amount of such
Mortgage Asset (i.e. points) will be includible by such holder. Other
original issue discount on the Mortgage Assets (e.g., that arising from a
"teaser" rate) would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such
as the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance under the Code's coupon
stripping rules with respect to such instruments. In the absence of any
authority, the Master Servicer will report OID on Grantor Trust Certificates
attributable to ARM Loans ("Stripped ARM Obligations") to holders in a manner
it believes is consistent with the rules described above under the heading
"--Grantor Trust Certificates Representing Interests in Loans Other Than
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ARM Loans" and with the OID Regulations. In general, application of these
rules may require inclusion of income on a Stripped ARM Obligation in
advance of the receipt of cash attributable to such income. Further,
the addition of interest deferred by reason of negative amortization
("Deferred Interest") to the principal balance of an ARM Loan may require
the inclusion of such amount in the income of the Grantor Trust
Certificateholder when such amount accrues. Furthermore, the addition of
Deferred Interest to the Grantor Trust Certificate's principal balance will
result in additional income (including possibly OID income) to the Grantor
Trust Certificateholder over the remaining life of such Grantor Trust
Certificates.
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will
be includible with respect to such Certificates.
C. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity
will result in gain or loss equal to the difference, if any, between the
amount received and the owner's adjusted basis in the Grantor Trust
Certificate. Such adjusted basis generally will equal the seller's purchase
price for the Grantor Trust Certificate, increased by the OID included in the
seller's gross income with respect to the Grantor Trust Certificate, and
reduced by principal payments on the Grantor Trust Certificate previously
received by the seller. Such gain or loss will be capital gain or loss to
an owner for which a Grantor Trust Certificate is a "capital asset" within
the meaning of Code Section 1221, and will be long-term or short-term
depending on whether the Grantor Trust Certificate has been owned for the
long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Code Section 582(c)(1), so that gain or loss recognized from
the sale of a Grantor Trust Certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss.
D. NON-U.S. PERSONS
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July
18, 1984, interest or OID paid by the person required to withhold tax under
Code Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as
defined below) or (ii) a Grantor Trust Certificateholder holding on behalf
of an owner that is not a U.S. Person will be subject to federal income tax,
collected by withholding, at a rate of 30% or such lower rate as may be
provided for interest by an applicable tax treaty. Accrued OID recognized
by the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such
payments would not be subject to withholding to the extent that a Grantor
Trust Certificate evidences ownership in Mortgage Assets issued after July
18, 1984, by natural persons if such Grantor Trust Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the Grantor Trust Certificateholder under penalties of perjury,
certifying that such Grantor Trust Certificateholder is not a U.S. Person and
providing the name and address of such Grantor Trust Certificateholder).
Additional restrictions apply to Mortgage Assets of where the mortgagor is
not a natural person in order to qualify for the exemption from withholding.
As used herein, a "U.S. Person" means a citizen or resident of the
United States, a corporation or a partnership organized in or under the laws
of the United States or any political subdivision thereof or an estate or
trust, the income of which from sources outside the United States is
includible in gross income for federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
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E. INFORMATION REPORTING AND BACKUP WITHHOLDING
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder,
beneficial owner, financial intermediary or other recipient of a payment on
behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that
such person has not reported all interest and dividend income required to be
shown on its federal income tax return, 31% backup withholding may be
required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
REMICS
THE DISCUSSION UNDER THIS HEADING "REMICS" DOES NOT APPLY TO ANY TRUST
FUND CONTAINING UNSECURED HOME IMPROVEMENT LOANS, SBA LOANS OR SBA 504 LOANS.
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance
with certain conditions. Although a REMIC is not generally subject to
federal income tax (see, however "--Taxation of Owners of REMIC Residual
Certificates" and "--Prohibited Transactions" below), if a Trust Fund with
respect to which a REMIC election is made fails to comply with one or more
of the ongoing requirements of the Code for REMIC status during any taxable
year, including the implementation of restrictions on the purchase and
transfer of the residual interests in a REMIC as described below under
"Taxation of Owners of REMIC Residual Certificates," the Code provides that
a Trust Fund will not be treated as a REMIC for such year and thereafter.
In that event, such entity may be taxable as a separate corporation, and the
related Certificates (the "REMIC Certificates") may not be accorded the
status or given the tax treatment described below. While the Code authorizes
the Treasury Department to issue regulations providing relief in the event
of an inadvertent termination of the status of a trust fund as a REMIC, no
such regulations have been issued. Any such relief, moreover, may be
accompanied by sanctions, such as the imposition of a corporate tax on all
or a portion of the REMIC's income for the period in which the requirements
for such status are not satisfied. With respect to each Trust Fund that
elects REMIC status, Brown & Wood LLP will deliver its opinion generally to the
effect that, under then existing law and assuming compliance with all
provisions of the related Pooling and Servicing Agreement, such Trust Fund
will qualify as a REMIC, and the related Certificates will be considered to
be regular interests ("REMIC Regular Certificates") or a sole class of
residual interests ("REMIC Residual Certificates") in the REMIC. The related
Prospectus Supplement for each Series of Certificates will indicate whether
the Trust Fund will make a REMIC election and whether a class of Certificates
will be treated as a regular or residual interest in the REMIC.
In general, with respect to each Series of Certificates for which a
REMIC election is made, (i) Certificates evidencing an interest in a Trust
Fund comprised of Mortgage Loans (not including Contracts or Unsecured Home
Improvement Loans) held by a thrift institution taxed as a "mutual savings
bank" or "domestic building and loan association" will represent interests
in "qualifying real property loans" within the meaning of Code Section
593(d)(1); (ii) such Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C); (iii) such Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of
Code Section 856(c)(5)(A); and (iv) interest on such Certificates held by a
real estate investment trust will be considered "interest on obligations
secured by mortgages on real property" within the meaning of Code Section
856(c)(3)(B). Under Code Section 7701(a)(19)(C)(v), "loans secured by an
interest in real property" include loans secured by mobile homes not used
on a transient basis. The Treasury regulations under Code Section 593
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define "qualifying real property loan" to include a loan secured by a
mobile home unit "permanently fixed to real property" except during
a brief period in which the unit is transported to its site.
The Treasury regulations under Code Section 856 state that the local
law definitions are not controlling in determining the meaning of
the term "real property" for purposes of Section 856, and the IRS
has ruled that obligations secured by permanently installed mobile
home units qualify as "real estate assets" under this provision. Entities
affected by the foregoing Code provisions that are considering the
purchase of Certificates evidencing interests in a Trust Fund comprised of
Contracts should consult their tax advisors regarding such provisions. If
less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be qualifying assets only to
the extent that the REMIC's assets are qualifying assets. In addition,
payments on Mortgage Assets held pending distribution on the REMIC
Certificates will be considered to be qualifying real property loans for
purposes of Code Section 593(d)(1) and real estate assets for purposes of
Code Section 856(c).
In some instances the Mortgage Assets may not be treated entirely as
assets described in the foregoing sections. See, in this regard, the
discussion of Buydown Loans contained in "--Non-REMIC Certificates--Single
Class of Grantor Trust Certificates" above. REMIC Certificates held by a
real estate investment trust will not constitute "Government Securities"
within the meaning of Code Section 856(c)(5)(A), and REMIC Certificates held
by a regulated investment company will not constitute "Government Securities"
within the meaning of Code Section 851(b)(4)(A)(ii). REMIC Certificates held
by certain financial institutions will constitute "evidences of indebtedness"
within the meaning of Code Section 582(c)(1).
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation) that is principally
secured by an interest in real property and that is transferred to the REMIC
within a prescribed time period in exchange for regular or residual interests
in the REMIC. The REMIC Regulations provide that manufactured housing or
mobile homes (not including recreational vehicles, campers or similar
vehicles) that are "single family residences" under Code Section 25(e)(10)
will qualify as real property without regard to state law classifications.
Under Code Section 25(e)(10), a single family residence includes any
manufactured home that has a minimum of 400 square feet of living space and
a minimum width in excess of 102 inches and that is of a kind customarily
used at a fixed location.
Tiered REMIC Structures. For certain Series of Certificates, two
separate elections may be made to treat designated portions of the related
Trust Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master
REMIC") for federal income tax purposes. Upon the issuance of any such
Series of Certificates, Brown & Wood LLP, counsel to the Depositor, will deliver
its opinion generally to the effect that, assuming compliance with all
provisions of the related Agreement, the Master REMIC as well as any
Subsidiary REMIC will each qualify as a REMIC, and the REMIC Certificates
issued by the Master REMIC and the Subsidiary REMIC, respectively, will be
considered to evidence ownership of REMIC Regular Certificates or REMIC
Residual Certificates in the related REMIC within the meaning of the REMIC
provisions.
Only REMIC Certificates, other than the residual interest in the
Subsidiary REMIC, issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC and the Master REMIC will be treated as one REMIC solely for
purposes of determining whether the REMIC Certificates will be (i)
"qualifying real property loans" under Section 593(d) of the Code; (ii) "real
estate assets" within the meaning of Section 856(c)(5)(A) of the Code; (iii)
"loans secured by an interest in real property" under Section 7701(a)(19)(C)
of the Code; and (iv) whether the income on such Certificates is interest
described in Section 856(c)(3)(B) of the Code.
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A. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC
or its assets. Moreover, holders of REMIC Regular Certificates that
otherwise report income under a cash method of accounting will be required
to report income with respect to REMIC Regular Certificates under an accrual
method.
Original Issue Discount and Premium. The REMIC Regular Certificates may
be issued with OID. Generally, such OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular
Certificate and its "issue price." Holders of any class of Certificates
issued with OID will be required to include such OID in gross income for
federal income tax purposes as it accrues, in accordance with a constant
interest method based on the compounding of interest as it accrues rather
than in accordance with receipt of the interest payments. The following
discussion is based in part on the OID Regulations and in part on the
provisions of the Tax Reform Act of 1986 (the "1986 Act"). Holders of REMIC
Regular Certificates (the "REMIC Regular Certificateholders") should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the REMIC Regular
Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated
reinvestment rate, if any, relating to the REMIC Regular Certificates and
prescribe a method for adjusting the amount and rate of accrual of such
discount where the actual prepayment rate differs from the Prepayment
Assumption. Under the Code, the Prepayment Assumption must be determined in
the manner prescribed by regulations, which regulations have not yet been
issued. The Legislative History provides, however, that Congress intended
the regulations to require that the Prepayment Assumption be the prepayment
assumption that is used in determining the initial offering price of such
REMIC Regular Certificates. The Prospectus Supplement for each Series of
REMIC Regular Certificates will specify the Prepayment Assumption to be used
for the purpose of determining the amount and rate of accrual of OID. No
representation is made that the REMIC Regular Certificates will prepay at the
Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of
its "stated redemption price at maturity" over its "issue price." The issue
price of a REMIC Regular Certificate is the first price at which a
substantial amount of REMIC Regular Certificates of that class are first sold
to the public (excluding bond houses, brokers, underwriters or wholesalers).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial
issuance (the "Closing Date"), the issue price for such class will be treated
as the fair market value of such class on the Closing Date. The issue price
of a REMIC Regular Certificate also includes the amount paid by an initial
Certificateholder for accrued interest that relates to a period prior to the
issue date of the REMIC Regular Certificate. The stated redemption price at
maturity of a REMIC Regular Certificate includes the original principal
amount of the REMIC Regular Certificate, but generally will not include
distributions of interest if such distributions constitute "qualified stated
interest." Qualified stated interest generally means interest payable at a
single fixed rate or qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at intervals of one
year or less during the entire term of the REMIC Regular Certificate.
Interest is payable at a single fixed rate only if the rate appropriately
takes into account the length of the interval between payments.
Distributions of interest on REMIC Regular Certificates with respect to which
Deferred Interest will accrue will not constitute qualified stated interest
payments, and the stated redemption price at maturity of such REMIC Regular
Certificates includes all distributions of interest as well as principal
thereon.
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Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is longer than the interval between
subsequent Distribution Dates, the greater of any original issue discount
(disregarding the rate in the first period) and any interest foregone during
the first period is treated as the amount by which the stated redemption
price at maturity of the Certificate exceeds its issue price for purposes of
the de minimis rule described below. The OID Regulations suggest that all
interest on a long first period REMIC Regular Certificate that is issued with
non-de minimis OID, as determined under the foregoing rule, will be treated
as OID. Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is shorter than the interval between
subsequent Distribution Dates, interest due on the first Distribution Date
in excess of the amount that accrued during the first period would be added
to the Certificates stated redemption price at maturity. REMIC Regular
Certificateholders should consult their own tax advisors to determine the
issue price and stated redemption price at maturity of a REMIC Regular
Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by
a fraction, the numerator of which is the amount of each distribution
included in the stated redemption price at maturity of the REMIC Regular
Certificate and the denominator of which is the stated redemption price at
maturity of the REMIC Regular Certificate. Although currently unclear, it
appears that the schedule of such distributions should be determined in
accordance with the Prepayment Assumption. The Prepayment Assumption with
respect to a Series of REMIC Regular Certificates will be set forth in the
related Prospectus Supplement. Holders generally must report de minimis OID
pro rata as principal payments are received, and such income will be capital
gain if the REMIC Regular Certificate is held as a capital asset. However,
accrual method holders may elect to accrue all de minimis OID as well as
market discount under a constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances
(the "Super-Premium Certificates"). The income tax treatment of such REMIC
Regular Certificates is not entirely certain. For information reporting
purposes, the Trust Fund intends to take the position that the stated
redemption price at maturity of such REMIC Regular Certificates is the sum
of all payments to be made on such REMIC Regular Certificates determined
under the Prepayment Assumption, with the result that such REMIC Regular
Certificates would be issued with OID. The calculation of income in this
manner could result in negative original issue discount (which delays future
accruals of OID rather than being immediately deductible) when prepayments
on the Mortgage Assets exceed those estimated under the Prepayment
Assumption. The IRS might contend, however, that certain proposed contingent
payment rules contained in regulations issued on December 15, 1994, with
respect to original issue discount, should apply to such Certificates.
Although such rules are not applicable to instruments governed by Code
Section 1276(a)(6), they represent the only guidance regarding the current
views of the IRS with respect to contingent payment instruments. In the
alternative, the IRS could assert that the stated redemption price at
maturity of such REMIC Regular Certificates should be limited to their
principal amount (subject to the discussion below under "--Accrued Interest
Certificates"), so that such REMIC Regular Certificates would be considered
for federal income tax purposes to be issued at a premium. If such a
position were to prevail, the rules described below under "--Taxation of
Owners of REMIC Regular Certificates--Premium" would apply. It is unclear
when a loss may be claimed for any unrecovered basis for a Super-Premium
Certificate. It is possible that a holder of a Super-Premium Certificate may
only claim a loss when its remaining basis exceeds the maximum amount of
future payments, assuming no further prepayments or when the final payment
is received with respect to such Super-Premium Certificate.
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Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular
Certificate generally should not be treated as a Super-Premium Certificate
and the rules described below under "--REMIC Regular Certificates--Premium"
should apply. However, it is possible that holders of REMIC Regular
Certificates issued at a premium, even if the premium is less than 25% of
such Certificate's actual principal balance, will be required to amortize the
premium under an original issue discount method or contingent interest method
even though no election under Code Section 171 is made to amortize such
premium.
Generally, a REMIC Regular Certificateholder must include in gross
income the "daily portions," as determined below, of the OID that accrues on
a REMIC Regular Certificate for each day a Certificateholder holds the REMIC
Regular Certificate, including the purchase date but excluding the
disposition date. In the case of an original holder of a REMIC Regular
Certificate, a calculation will be made of the portion of the OID that
accrues during each successive period ("an accrual period") that ends on the
day in the calendar year corresponding to a Distribution Date (or if
Distribution Dates are on the first day or first business day of the
immediately preceding month, interest may be treated as payable on the last
day of the immediately preceding month) and begins on the day after the end
of the immediately preceding accrual period (or on the issue date in the case
of the first accrual period). This will be done, in the case of each full
accrual period, by (i) adding (a) the present value at the end of the accrual
period (determined by using as a discount factor the original yield to
maturity of the REMIC Regular Certificates as calculated under the Prepayment
Assumption) of all remaining payments to be received on the REMIC Regular
Certificates under the Prepayment Assumption and (b) any payments included
in the stated redemption price at maturity received during such accrual
period, and (ii) subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual period. The
adjusted issue price of a REMIC Regular Certificate at the beginning of the
first accrual period is its issue price; the adjusted issue price of a REMIC
Regular Certificate at the beginning of a subsequent accrual period is the
adjusted issue price at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period and reduced
by the amount of any payment other than a payment of qualified stated
interest made at the end of or during that accrual period. The OID accrued
during an accrual period will then be divided by the number of days in the
period to determine the daily portion of OID for each day in the accrual
period. The calculation of OID under the method described above will cause
the accrual of OID to either increase or decrease (but never below zero) in
a given accrual period to reflect the fact that prepayments are occurring
faster or slower than under the Prepayment Assumption. With respect to an
initial accrual period shorter than a full accrual period, the daily portions
of OID may be determined according to an appropriate allocation under any
reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID
who purchases the REMIC Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of OID on that REMIC Regular
Certificate. In computing the daily portions of OID for such a purchaser (as
well as an initial purchaser that purchases at a price higher than the
adjusted issue price but less than the stated redemption price at maturity),
however, the daily portion is reduced by the amount that would be the daily
portion for such day (computed in accordance with the rules set forth above)
multiplied by a fraction, the numerator of which is the amount, if any, by
which the price paid by such holder for that REMIC Regular Certificate
exceeds the following amount: (a) the sum of the issue price plus the
aggregate amount of OID that would have been includible in the gross income
of an original REMIC Regular Certificateholder (who purchased the REMIC
Regular Certificate at its issue price), less (b) any prior payments included
in the stated redemption price at maturity, and the denominator of which is
the sum of the daily portions for that REMIC Regular Certificate for all days
beginning on the date after the purchase date and ending on the maturity date
computed under the Prepayment Assumption. A holder who pays an acquisition
premium instead may elect to accrue OID by treating the purchase as a
purchase at original issue.
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Variable Rate REMIC Regular Certificates. REMIC Regular Certificates
may provide for interest based on a variable rate. Interest based on a
variable rate will constitute qualified stated interest and not contingent
interest if, generally, (i) such interest is unconditionally payable at least
annually, (ii) the issue price of the debt instrument does not exceed the
total noncontingent principal payments and (iii) interest is based on a
"qualified floating rate," an "objective rate," a combination of a single
fixed rate and one or more "qualified floating rates," one "qualified inverse
floating rate," or a combination of "qualified floating rates" that do not
operate in a manner that significantly accelerates or defers interest
payments on such REMIC Regular Certificate.
The amount of OID with respect to a REMIC Regular Certificate bearing
a variable rate of interest will accrue in the manner described above under
"--Original Issue Discount and Premium" by assuming generally that the index
used for the variable rate will remain fixed throughout the term of the
Certificate. Appropriate adjustments are made for the actual variable rate.
Although unclear at present, the Depositor intends to treat interest on
a REMIC Regular Certificate that is a weighted average of the net interest
rates on Mortgage Loans as qualified stated interest. In such case, the
weighted average rate used to compute the initial pass-through rate on the
REMIC Regular Certificates will be deemed to be the index in effect through
the life of the REMIC Regular Certificates. It is possible, however, that
the IRS may treat some or all of the interest on REMIC Regular Certificates
with a weighted average rate as taxable under the rules relating to
obligations providing for contingent payments. Such treatment may effect the
timing of income accruals on such REMIC Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in
income currently market discount with respect to all other debt instruments
having market discount that such Certificateholder acquires during the year
of the election or thereafter. Similarly, a Certificateholder that makes
this election for a Certificate that is acquired at a premium will be deemed
to have made an election to amortize bond premium with respect to all debt
instruments having amortizable bond premium that such Certificateholder owns
or acquires. See "-- REMIC Regular Certificates--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Certificate is irrevocable.
Market Discount. A purchaser of a REMIC Regular Certificate may also
be subject to the market discount provisions of Code Sections 1276 through
1278. Under these provisions and the OID Regulations, "market discount"
equals the excess, if any, of (i) the REMIC Regular Certificate's stated
principal amount or, in the case of a REMIC Regular Certificate with OID, the
adjusted issue price (determined for this purpose as if the purchaser had
purchased such REMIC Regular Certificate from an original holder) over (ii)
the price for such REMIC Regular Certificate paid by the purchaser. A
Certificateholder that purchases a REMIC Regular Certificate at a market
discount will recognize income upon receipt of each distribution representing
amounts included in such certificate's stated redemption price at maturity.
In particular, under Section 1276 of the Code such a holder generally will
be required to allocate each such distribution first to accrued market
discount not previously included in income, and to recognize ordinary income
to that extent. A Certificateholder may elect to include market discount in
income currently as it accrues rather than including it on a deferred basis
in accordance with the foregoing. If made, such election will apply to all
market discount bonds acquired by such Certificateholder on or after the
first day of the first taxable year to which such election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificat
e is less than 0.25% of such REMIC Regular Certificate's stated redemption
price at
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maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a
REMIC Regular Certificate is considered to be zero under this rule, the
actual amount of market discount must be allocated to the remaining
principal payments on the REMIC Regular Certificate, and gain equal to such
allocated amount will be recognized when the corresponding principal payment
is made. Treasury regulations implementing the market discount rules have
not yet been issued; therefore, investors should consult their own tax
advisors regarding the application of these rules and the advisability of
making any of the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986, shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at
the time of such payment. The amount of accrued market discount for purposes
of determining the tax treatment of subsequent principal payments or
dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described
in the Legislative History will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis
of a constant interest method rate or according to one of the following
methods. For REMIC Regular Certificates issued with OID, the amount of
market discount that accrues during a period is equal to the product of (i)
the total remaining market discount and (ii) a fraction, the numerator of
which is the OID accruing during the period and the denominator of which is
the total remaining OID at the beginning of the period. For REMIC Regular
Certificates issued without OID, the amount of market discount that accrues
during a period is equal to the product of (a) the total remaining market
discount and (b) a fraction, the numerator of which is the amount of stated
interest paid during the accrual period and the denominator of which is the
total amount of stated interest remaining to be paid at the beginning of the
period. For purposes of calculating market discount under any of the above
methods in the case of instruments (such as the REMIC Regular Certificates)
that provide for payments that may be accelerated by reason of prepayments
of other obligations securing such instruments, the same Prepayment
Assumption applicable to calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during
such taxable year and is, in general, allowed as a deduction not later than
the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues
on all market discount instruments acquired by such holder in that taxable
year or thereafter, the interest deferral rule described above will not
apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will
be considered to have purchased the REMIC Regular Certificate at a premium
and may elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired
at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that
such Certificateholder acquires during the year of the election or
thereafter. It is not clear whether the Prepayment Assumption would be taken
into account in determining the life of the REMIC Regular Certificate for
this purpose. However, the Legislative History states that the same rules
that apply to accrual of market discount (which rules require use of a
Prepayment Assumption in accruing market discount with respect to REMIC
Regular Certificates without regard to whether such Certificates have OID)
will also apply in amortizing bond premium
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under Code Section 171. The Code provides that amortizable bond premium
will be allocated among the interest payments on such REMIC Regular
Certificates and will be applied as an offset against such interest payment.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such
Certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. It is unclear, under the OID Regulations,
whether any of the interest on such Certificates will constitute qualified
stated interest or whether all or a portion of the interest payable on such
Certificates must be included in the stated redemption price at maturity of
the Certificates and accounted for as OID (which could accelerate such
inclusion). Interest on REMIC Regular Certificates must in any event be
accounted for under an accrual method by the holders of such Certificates
and, therefore, applying the latter analysis may result only in a slight
difference in the timing of the inclusion in income of interest on such REMIC
Regular Certificates.
Effects of Defaults and Delinquencies. Certain Series of Certificates
may contain one or more classes of Subordinated Certificates, and in the
event there are defaults or delinquencies on the Mortgage Assets, amounts
that would otherwise be distributed on the Subordinated Certificates may
instead be distributed on the Senior Certificates. Subordinated
Certificateholders nevertheless will be required to report income with
respect to such Certificates under an accrual method without giving effect
to delays and reductions in distributions on such Subordinated Certificates
attributable to defaults and delinquencies on the Mortgage Assets, except to
the extent that it can be established that such amounts are uncollectible.
As a result, the amount of income reported by a Subordinated
Certificateholder in any period could significantly exceed the amount of cash
distributed to such holder in that period. The holder will eventually be
allowed a loss (or will be allowed to report a lesser amount of income) to
the extent that the aggregate amount of distributions on the Subordinated
Certificate is reduced as a result of defaults and delinquencies on the
Mortgage Assets. Timing and characterization of such losses is discussed in
"--REMIC Regular Certificates--Treatment of Realized Losses" below.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal
to the difference between the amount realized on the sale, exchange,
redemption, or retirement and the seller's adjusted basis in the REMIC
Regular Certificate. Such adjusted basis generally will equal the cost of
the REMIC Regular Certificate to the seller, increased by any OID and market
discount included in the seller's gross income with respect to the REMIC
Regular Certificate, and reduced (but not below zero) by payments included
in the stated redemption price at maturity previously received by the seller
and by any amortized premium. Similarly, a holder who receives a payment
that is part of the stated redemption price at maturity of a REMIC Regular
Certificate will recognize gain equal to the excess, if any, of the amount
of the payment over the holder's adjusted basis in the REMIC Regular
Certificate. A REMIC Regular Certificateholder who receives a final payment
that is less than the holder's adjusted basis in the REMIC Regular
Certificate will generally recognize a loss. Except as provided in the
following paragraph and as provided under "--Market Discount" above, any such
gain or loss will be capital gain or loss, provided that the REMIC Regular
Certificate is held as a "capital asset" (generally, property held for
investment) within the meaning of Code Section 1221.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income to
the extent that such gain does not exceed the excess, if any, of (i) the
amount that would have been includible in such holder's income with respect
to the REMIC Regular Certificate had income accrued thereon at a rate equal
to 110% of the AFR as defined in Code Section 1274(d) determined as of the
date of purchase of such REMIC Regular Certificate, over (ii) the amount
actually includible in such holder's income.
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The Certificates will be "evidences of indebtedness" within the meaning
of Code Section 582(c)(1), so that gain or loss recognized from the sale of
a REMIC Regular Certificate by a bank or a thrift institution to which such
section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a
statement of the adjusted issue price of the REMIC Regular Certificate at the
beginning of each accrual period. In addition, the reports will include
information necessary to compute the accrual of any market discount that may
arise upon secondary trading of REMIC Regular Certificates. Because exact
computation of the accrual of market discount on a constant yield method
would require information relating to the holder's purchase price which the
REMIC may not have, it appears that the information reports will only require
information pertaining to the appropriate proportionate method of accruing
market discount.
Accrued Interest Certificates. Certain of the REMIC Regular
Certificates ("Payment Lag Certificates") may provide for payments of
interest based on a period that corresponds to the interval between
Distribution Dates but that ends prior to each such Distribution Date. The
period between the Closing Date for Payment Lag Certificates and their first
Distribution Date may or may not exceed such interval. Purchasers of Payment
Lag Certificates for which the period between the Closing Date and the first
Distribution Date does not exceed such interval could pay upon purchase of
the REMIC Regular Certificates accrued interest in excess of the accrued
interest that would be paid if the interest paid on the Distribution Date
were interest accrued from Distribution Date to Distribution Date. If a
portion of the initial purchase price of a REMIC Regular Certificate is
allocable to interest that has accrued prior to the issue date ("pre-issuance
accrued interest") and the REMIC Regular Certificate provides for a payment
of stated interest on the first payment date (and the first payment date is
within one year of the issue date) that equals or exceeds the amount of the
pre-issuance accrued interest, then the REMIC Regular Certificates' issue
price may be computed by subtracting from the issue price the amount of pre-
issuance accrued interest, rather than as an amount payable on the REMIC
Regular Certificate. However, it is unclear under this method how the OID
Regulations treat interest on Payment Lag Certificates. Therefore, in the
case of a Payment Lag Certificate, the Trust Fund intends to include accrued
interest in the issue price and report interest payments made on the first
Distribution Date as interest to the extent such payments represent interest
for the number of days that the Certificateholder has held such Payment Lag
Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a
portion of the REMIC's servicing, administrative and other non-interest
expenses will be allocated as a separate item to those REMIC Regular
Certificateholders that are "pass-through interest holders."
Certificateholders that are pass-through interest holders should consult
their own tax advisors about the impact of these rules on an investment in
the REMIC Regular Certificates. See "Pass-Through of Non-Interest Expenses
of the REMIC" under "Taxation of Owners of REMIC Residual Certificates"
below.
Treatment of Realized Losses. Although not entirely clear, it appears
that holders of REMIC Regular Certificates that are corporations should in
general be allowed to deduct as an ordinary loss any loss sustained during
the taxable year on account of any such Certificates becoming wholly or
partially worthless, and that, in general, holders of Certificates that are
not corporations should be allowed to deduct as a short-term capital loss any
loss sustained during the taxable year on account of any such Certificates
becoming wholly worthless. Although the matter is not entirely clear, non-
corporate holders of Certificates may be allowed a bad debt deduction at such
time that the principal balance of any such Certificate is reduced to reflect
realized losses resulting from any liquidated Mortgage Assets. The Internal
Revenue Service, however, could take the position that non-corporate holders
will be allowed a bad debt deduction to reflect realized losses only after
all Mortgage Assets remaining in the related Trust Fund have been liquidated
or the Certificates of the related Series have been otherwise retired.
Potential investors and holders of the Certificates are urged to consult
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their own tax advisors regarding the appropriate timing, amount and character
of any loss sustained with respect to such Certificates, including any loss
resulting from the failure to recover previously accrued interest or discount
income. Special loss rules are applicable to banks and thrift institutions,
including rules regarding reserves for bad debts. Such taxpayers are advised
to consult their tax advisors regarding the treatment of losses on
Certificates.
Non-U.S. Persons. Generally, payments of interest (including any
payment with respect to accrued OID) on the REMIC Regular Certificates to a
REMIC Regular Certificateholder who is not a U.S. Person and is not engaged
in a trade or business within the United States will not be subject to
federal withholding tax if (i) such REMIC Regular Certificateholder does not
actually or constructively own 10 percent or more of the combined voting
power of all classes of equity in the Issuer; (ii) such REMIC Regular
Certificateholder is not a controlled foreign corporation (within the meaning
of Code Section 957) related to the Issuer; and (iii) such REMIC Regular
Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the REMIC Regular
Certificateholder under penalties of perjury, certifying that such REMIC
Regular Certificateholder is a foreign person and providing the name and
address of such REMIC Regular Certificateholder). If a REMIC Regular
Certificateholder is not exempt from withholding, distributions of interest
to such holder, including distributions in respect of accrued OID, may be
subject to a 30% withholding tax, subject to reduction under any applicable
tax treaty.
Further, a REMIC Regular Certificate will not be included in the estate
of a non-resident alien individual and will not be subject to United States
estate taxes. However, Certificateholders who are non-resident alien
individuals should consult their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates,
and holders of REMIC Residual Certificates (the "REMIC Residual
Certificateholder") and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates without consulting their
tax advisors as to the possible adverse tax consequences of doing so.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at
any time during such year, such information as may be deemed necessary or
desirable to assist REMIC Regular Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
REMIC Regular Certificates on behalf of beneficial owners. If a holder,
beneficial owner, financial intermediary or other recipient of a payment on
behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that
such person has not reported all interest and dividend income required to be
shown on its federal income tax return, 31% backup withholding may be
required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
B. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except
with respect to income from prohibited transactions and certain other
transactions. See "--Prohibited Transactions and Other Taxes" below.
Instead, each original holder of a REMIC Residual Certificate will report on
its federal income tax return, as ordinary income, its share of the taxable
income of the REMIC for each day during the taxable year on which such holder
owns any REMIC Residual Certificates. The taxable income of the REMIC for
each day will be determined by allocating the taxable income of the REMIC for
each calendar quarter ratably to each day in the quarter. Such a holder's
share of the taxable income of the REMIC for each day will be based on the
portion of the outstanding REMIC Residual Certificates that such holder owns
on that day. The taxable income of the REMIC will be determined under an
accrual method and will be taxable to the holders of REMIC Residual
Certificates without
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regard to the timing or amounts of cash distributions by the REMIC.
Ordinary income derived from REMIC Residual Certificates will be "portfolio
income" for purposes of the taxation of taxpayers subject to the limitations
on the deductibility of "passive losses." As residual interests, the REMIC
Residual Certificates will be subject to tax rules, described below, that
differ from those that would apply if the REMIC Residual Certificates
were treated for federal income tax purposes as direct ownership
interests in the Certificates or as debt instruments issued by the REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such
a mismatching of income and cash distributions (that is, "phantom income").
This mismatching may be caused by the use of certain required tax accounting
methods by the REMIC, variations in the prepayment rate of the underlying
Mortgage Assets and certain other factors. Depending upon the structure of
a particular transaction, the aforementioned factors may significantly reduce
the after-tax yield of a REMIC Residual Certificate to a REMIC Residual
Certificateholder. Investors should consult their own tax advisors
concerning the federal income tax treatment of a REMIC Residual Certificate
and the impact of such tax treatment on the after-tax yield of a REMIC
Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder
owns such REMIC Residual Certificate. Those daily amounts generally would
equal the amounts that would have been reported for the same days by an
original REMIC Residual Certificateholder, as described above. The
Legislative History indicates that certain adjustments may be appropriate to
reduce (or increase) the income of a subsequent holder of a REMIC Residual
Certificate that purchased such REMIC Residual Certificate at a price greater
than (or less than) the adjusted basis such REMIC Residual Certificate would
have in the hands of an original REMIC Residual Certificateholder. See
"--Sale or Exchange of REMIC Residual Certificates" below. It is not clear,
however, whether such adjustments will in fact be permitted or required and,
if so, how they would be made. The REMIC Regulations do not provide for any
such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed
to the REMIC for interest and OID on the REMIC Regular Certificates and,
except as described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. REMIC
taxable income is generally determined in the same manner as the taxable
income of an individual using the accrual method of accounting, except that
(i) the limitations on deductibility of investment interest expense and
expenses for the production of income do not apply, (ii) all bad loans will
be deductible as business bad debts, and (iii) the limitation on the
deductibility of interest and expenses related to tax-exempt income will
apply. The REMIC's gross income includes interest, original issue discount
income, and market discount income, if any, on the Mortgage Loans, reduced
by amortization of any premium on the Mortgage Loans, plus income on
reinvestment of cash flows and reserve assets, plus any cancellation of
indebtedness income upon allocation of realized losses to the REMIC Regular
Certificates. Note that the timing of cancellation of indebtedness income
recognized by REMIC Residual Certificateholders resulting from defaults and
delinquencies on Mortgage Assets may differ from the time of the actual loss
on the Mortgage Asset. The REMIC's deductions include interest and original
issue discount expense on the REMIC Regular Certificates, servicing fees on
the Mortgage Loans, other administrative expenses of the REMIC and realized
losses on the Mortgage Loans. The requirement that REMIC Residual
Certificateholders report their pro rata share of taxable income or net loss
of the REMIC will continue until there are no Certificates of any class of
the related Series outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue
prices of the REMIC Regular Certificates and the REMIC Residual Certificates
(or, if a class of Certificates is not sold initially, its fair market
value). Such aggregate basis will be allocated among the Mortgage
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Assets and other assets of the REMIC in proportion to their respective
fair market value. A Mortgage Asset will be deemed to have been
acquired with discount or premium to the extent that the REMIC's basis
therein is less than or greater than its principal balance, respectively.
Any such discount (whether market discount or OID) will be includible in the
income of the REMIC as it accrues, in advance of receipt of the cash
attributable to such income, under a method similar to the method described
above for accruing OID on the REMIC Regular Certificates. The REMIC
expects to elect under Code Section 171 to amortize any premium on the
Mortgage Assets. Premium on any Mortgage Asset to which such election
applies would be amortized under a constant yield method. It is not clear
whether the yield of a Mortgage Asset would be calculated for this purpose
based on scheduled payments or taking account of the Prepayment Assumption.
Additionally, such an election would not apply to the yield with respect to
any underlying mortgage loan originated on or before September 27, 1985.
Instead, premium with respect to such a mortgage loan would be allocated
among the principal payments thereon and would be deductible by the
REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be
calculated for this purpose in the same manner as described above with
respect to REMIC Regular Certificates except that the 0.25% per annum de
minimis rule and adjustments for subsequent holders described therein will
not apply.
A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the
REMIC's taxable income. However, REMIC taxable income will not include cash
received by the REMIC that represents a recovery of the REMIC's basis in its
assets, and, as described above, the issue price of the REMIC Residual
Certificates will be added to the issue price of the REMIC Regular
Certificates in determining the REMIC's initial basis in its assets. See "--
Sale or Exchange of REMIC Residual Certificates" below. For a discussion of
possible adjustments to income of a subsequent holder of a REMIC Residual
Certificate to reflect any difference between the actual cost of such REMIC
Residual Certificate to such holder and the adjusted basis such REMIC
Residual Certificate would have in the hands of an original REMIC Residual
Certificateholder, see "--Allocation of the Income of the REMIC to the REMIC
Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any
calendar quarter in which its deductions exceed its gross income. Such net
loss would be allocated among the REMIC Residual Certificateholders in the
same manner as the REMIC's taxable income. The net loss allocable to any
REMIC Residual Certificate will not be deductible by the holder to the extent
that such net loss exceeds such holder's adjusted basis in such REMIC
Residual Certificate. Any net loss that is not currently deductible by
reason of this limitation may only be used by such REMIC Residual
Certificateholder to offset its share of the REMIC's taxable income in future
periods (but not otherwise). The ability of REMIC Residual
Certificateholders that are individuals or closely held corporations to
deduct net losses may be subject to additional limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS recently released proposed
regulations (the "Proposed Mark-to-Market Regulations") which provide that
a REMIC Residual Certificate acquired after January 3, 1995 cannot be marked
to market. The Proposed Mark-to-Market Regulations change the temporary
regulations which allowed a Residual Certificate to be marked to market
provided that it was not a "negative value" residual interest and did not
have the same economic effect as a "negative value" residual interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule,
all of the fees and expenses of a REMIC will be taken into account by holders
of the REMIC Residual Certificates. In the case of a single class REMIC,
however, the expenses and a matching amount of additional income will be
allocated, under temporary Treasury regulations, among the REMIC Regular
Certificateholders and the REMIC Residual Certificateholders on a daily basis
in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In general terms, a single
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class REMIC is one that either (i) would qualify, under existing Treasury
regulations, as a grantor trust if it were not a REMIC (treating all
interests as ownership interests, even if they would be classified
as debt for federal income tax purposes) or (ii) is similar to such a
trust and is structured with the principal purpose of avoiding the
single class REMIC rules. Unless otherwise stated in the applicable
Prospectus Supplement, the expenses of the REMIC will be allocated
to holders of the related REMIC Residual Certificates in their entirety
and not to holders of the related REMIC Regular Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest
in a REMIC Regular Certificate or a REMIC Residual Certificate directly or
through a pass-through interest holder that is required to pass miscellaneous
itemized deductions through to its owners or beneficiaries (e.g. a
partnership, an S corporation or a grantor trust), such expenses will be
deductible under Code Section 67 only to the extent that such expenses, plus
other "miscellaneous itemized deductions" of the individual, exceed 2% of
such individual's adjusted gross income. In addition, Code Section 68
provides that the amount of itemized deductions otherwise allowable for an
individual whose adjusted gross income exceeds a certain amount (the
"Applicable Amount") will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over the Applicable Amount or (ii)
80% of the amount of itemized deductions otherwise allowable for the taxable
year. The amount of additional taxable income recognized by REMIC Residual
Certificateholders who are subject to the limitations of either Code Section
67 or Code Section 68 may be substantial. Further, holders (other than
corporations) subject to the alternative minimum tax may not deduct
miscellaneous itemized deductions in determining such holders' alternative
minimum taxable income. The REMIC is required to report to each pass-through
interest holder and to the IRS such holder's allocable share, if any, of the
REMIC's non-interest expenses. The term "pass-through interest holder"
generally refers to individuals, entities taxed as individuals and certain
pass-through entities, but does not include real estate investment trusts.
REMIC Residual Certificateholders that are pass-through interest holders
should consult their own tax advisors about the impact of these rules on an
investment in the REMIC Residual Certificates.
Excess Inclusions. A portion of the income on a REMIC Residual
Certificate (referred to in the Code as an "excess inclusion") for any
calendar quarter will, with an exception discussed below for certain thrift
institutions, be subject to federal income tax in all events. Thus, for
example, an excess inclusion (i) may not, except as described below, be
offset by any unrelated losses, deductions or loss carryovers of a REMIC
Residual Certificateholder; (ii) will be treated as "unrelated business
taxable income" within the meaning of Code Section 512 if the REMIC Residual
Certificateholder is a pension fund or any other organization that is subject
to tax only on its unrelated business taxable income (see "--Tax-Exempt
Investors" below); and (iii) is not eligible for any reduction in the rate
of withholding tax in the case of a REMIC Residual Certificateholder that is a
foreign investor. See "--Non-U.S. Persons" below. The exception for thrift
institutions is available only to the institution holding the REMIC Residual
Certificate and not to any affiliate of the institution, unless the affiliate
is a subsidiary all the stock of which, and substantially all the
indebtedness of which, is held by the institution, and which is organized and
operated exclusively in connection with the organization and operation of one
or more REMICs.
Except as discussed in the following paragraph, with respect to any
REMIC Residual Certificateholder, the excess inclusions for any calendar
quarter is the excess, if any, of (i) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual
Certificate over (ii) the sum of the "daily accruals" (as defined below) for
all days during the calendar quarter on which the REMIC Residual
Certificateholder holds such REMIC Residual Certificate. For this purpose,
the daily accruals with respect to a REMIC Residual Certificate are
determined by allocating to each day in the calendar quarter its ratable
portion of the product of the "adjusted issue price" (as defined below) of
the REMIC Residual Certificate at the beginning of the calendar quarter and
120 percent of the "Federal long-term rate" in effect at the time the REMIC
Residual Certificate is issued. For this purpose, the "adjusted issue price"
of a REMIC Residual Certificate at the beginning of any calendar quarter
equals the issue price of the REMIC Residual Certificate, increased by the
amount of daily accruals for all prior quarters, and decreased (but not below
zero)
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by the aggregate amount of payments made on the REMIC Residual
Certificate before the beginning of such quarter. The "federal long-term
rate" is an average of current yields on Treasury securities with a remaining
term of greater than nine years, computed and published monthly by the IRS.
As an exception to the general rule described above, the Treasury
Department has authority to issue regulations that would treat the entire
amount of income accruing on a REMIC Residual Certificate as excess
inclusions if the REMIC Residual Certificates in the aggregate are considered
not to have "significant value." Under the REMIC Regulations, REMIC Residual
Certificateholders that are thrift institutions described in Code Section 593
can offset excess inclusions with unrelated deductions, losses and loss
carryovers provided the REMIC Residual Certificates have "significant value".
For purposes of applying this rule, thrift institutions that are members of
an affiliated group filing a consolidated return, together with their
subsidiaries formed to issue REMICs, are treated as separate corporations.
REMIC Residual Certificates have "significant value" if: (i) the REMIC
Residual Certificates have an aggregate issue price that is at least equal
to 2% of the aggregate issue price of all REMIC Residual Certificates and
REMIC Regular Certificates with respect to the REMIC and (ii) the anticipated
weighted average life of the REMIC Residual Certificates is at least 20% of
the anticipated weighted average life of the REMIC based on the anticipated
principal payments to be received with respect thereto (using the Prepayment
Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents), except
that all anticipated distributions are to be used to calculate the weighted
average life of REMIC Regular Certificates that are not entitled to any
principal payments or are entitled to a disproportionately small principal
amount relative to interest payments thereon and all anticipated
distributions are to be used to calculate the weighted average life of the
REMIC Residual Certificates. The principal amount will be considered
disproportionately small if the issue price of the REMIC Residual
Certificates exceeds 125% of their initial principal amount. Finally, an
ordering rule under the REMIC Regulations provides that a thrift institution
may only offset its excess inclusion income with deductions after it has
first applied its deductions against income that is not excess inclusion
income.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section
857(b)(2), excluding any net capital gain), will be allocated among the
shareholders of such trust in proportion to the dividends received by such
shareholders from such trust, and any amount so allocated will be treated as
an excess inclusion with respect to a REMIC Residual Certificate as if held
directly by such shareholder. Regulated investment companies, common trust
funds and certain cooperatives are subject to similar rules.
Payments. Any distribution made on a REMIC Residual Certificate to a
REMIC Residual Certificateholder will be treated as a non-taxable return of
capital to the extent it does not exceed the REMIC Residual
Certificateholder's adjusted basis in such REMIC Residual Certificate. To
the extent a distribution exceeds such adjusted basis, it will be treated as
gain from the sale of the REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain
or loss equal to the difference between the amount realized on the sale or
exchange and its adjusted basis in the REMIC Residual Certificate (except
that the recognition of loss may be limited under the "wash sale" rules
described below). A holder's adjusted basis in a REMIC Residual Certificate
generally equals the cost of such REMIC Residual Certificate to such REMIC
Residual Certificateholder, increased by the taxable income of the REMIC that
was included in the income of such REMIC Residual Certificateholder with
respect to such REMIC Residual Certificate, and decreased (but not below
zero) by the net losses that have been allowed as deductions to such REMIC
Residual Certificateholder with respect to such REMIC Residual Certificate
and by the distributions received thereon by such REMIC Residual
Certificateholder. In general, any such gain or loss will be capital gain
or loss provided the REMIC Residual Certificate is held as a capital asset.
However, REMIC Residual Certificates will be "evidences of
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indebtedness" within the meaning of Code Section 582(c)(1), so that gain
or loss recognized from sale of a REMIC Residual Certificate by a bank
or thrift institution to which such section applies would be ordinary
income or loss.
Except as provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires such REMIC Residual
Certificate, or acquires any other REMIC Residual Certificate, any residual
interest in another REMIC or similar interest in a "taxable mortgage pool"
(as defined in Code Section 7701(i)) during the period beginning six months
before, and ending six months after, the date of such sale, such sale will
be subject to the "wash sale" rules of Code Section 1091. In that event, any
loss realized by the REMIC Residual Certificateholder on the sale will not
be deductible, but, instead, will increase such REMIC Residual
Certificateholder's adjusted basis in the newly acquired asset.
c. PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain specified exceptions, a prohibited transaction
means the disposition of a Mortgage Asset, the receipt of income from a
source other than a Mortgage Asset or certain other permitted investments,
the receipt of compensation for services, or gain from the disposition of an
asset purchased with the payments on the Mortgage Assets for temporary
investment pending distribution on the Certificates. It is not anticipated
that the Trust Fund for any Series of Certificates will engage in any
prohibited transactions in which it would recognize a material amount of net
income.
In addition, certain contributions to a Trust Fund as to which an
election has been made to treat such Trust Fund as a REMIC made after the day
on which such Trust Fund issues all of its interests could result in the
imposition of a tax on the Trust Fund equal to 100% of the value of the
contributed property (the "Contributions Tax"). No Trust Fund for any Series
of Certificates will accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to treat
such Trust Fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined
by reference to the rules applicable to real estate investment trusts. "Net
income from foreclosure property" generally means income from foreclosure
property other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax
that may be imposed on a REMIC relating to any Series of Certificates arises
out of or results from (i) a breach of the related Master Servicer's,
Trustee's or Asset Seller's obligations, as the case may be, under the
related Agreement for such Series, such tax will be borne by such Master
Servicer, Trustee or Asset Seller, as the case may be, out of its own funds
or (ii) the Asset Seller's obligation to repurchase a Mortgage Loan, such tax
will be borne by the Asset Seller. In the event that such Master Servicer,
Trustee or Asset Seller, as the case may be, fails to pay or is not required
to pay any such tax as provided above, such tax will be payable out of the
Trust Fund for such Series and will result in a reduction in amounts
available to be distributed to the Certificateholders of such Series.
d. LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating
in the REMIC's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on such date, the REMIC will not be subject to any Prohibited
Transaction Tax, provided that the REMIC credits or distributes in
liquidation all of the sale proceeds plus its cash (other than the amounts
retained to meet claims) to holders of Regular and REMIC Residual
Certificates within the 90-day period.
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The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis
in the REMIC Residual Certificate exceeds the amount of cash distributed to
such REMIC Residual Certificateholder in final liquidation of its interest,
then it would appear that the REMIC Residual Certificateholder would be
entitled to a loss equal to the amount of such excess. It is unclear whether
such a loss, if allowed, will be a capital loss or an ordinary loss.
e. ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will
be furnished quarterly to each REMIC Residual Certificateholder who held a
REMIC Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the
REMIC Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency
resulting from a failure to comply with the consistency requirement without
instituting an administrative proceeding at the REMIC level. The REMIC does
not intend to register as a tax shelter pursuant to Code Section 6111 because
it is not anticipated that the REMIC will have a net loss for any of the
first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to
furnish the REMIC, in a manner to be provided in Treasury regulations, with
the name and address of such person and other information.
f. TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be
subject to such tax on that portion of the distributions received on a REMIC
Residual Certificate that is considered an excess inclusion. See "--Taxation
of Owners of REMIC Residual Certificates--Excess Inclusions" above.
g. RESIDUAL CERTIFICATE PAYMENTS-NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S.
Persons" above) are treated as interest for purposes of the 30% (or lower
treaty rate) United States withholding tax. Amounts distributed to holders
of REMIC Residual Certificates should qualify as "portfolio interest,"
subject to the conditions described in "--Taxation of Owners of REMIC Regular
Certificates" above, but only to the extent that the underlying mortgage
loans were originated after July 18, 1984. Furthermore, the rate of
withholding on any income on a REMIC Residual Certificate that is excess
inclusion income will not be subject to reduction under any applicable tax
treaties. See "--Taxation of Owners of REMIC Residual Certificates--Excess
Inclusions" above. If the portfolio interest exemption is unavailable, such
amount will be subject to United States withholding tax when paid or
otherwise distributed (or when the REMIC Residual Certificate is disposed of)
under rules similar to those for withholding upon disposition of debt
instruments that have OID. The Code, however, grants the Treasury Department
authority to issue regulations requiring that those amounts be taken into
account earlier than otherwise provided where necessary to prevent avoidance
of tax (for example, where the REMIC Residual Certificates do not have
significant value). See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC
Residual Certificateholders that are not U.S. Persons are effectively
connected with their conduct of a trade or business within the United States,
the 30% (or lower treaty rate) withholding will not apply. Instead, the
amounts paid to such non-U.S. Person will be subject to U.S. federal income
taxation at regular graduated
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rates. For special restrictions on the transfer of REMIC Residual
Certificates, see "--Tax-Related Restrictions on Transfers of
REMIC Residual Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their
tax advisors as to the possible adverse tax consequences of such acquisition.
TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests
in such entity are not held by "disqualified organizations" (as defined
below). Further, a tax is imposed on the transfer of a residual interest in
a REMIC to a "disqualified organization." The amount of the tax equals the
product of (A) an amount (as determined under the REMIC Regulations) equal
to the present value of the total anticipated "excess inclusions" with
respect to such interest for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. The tax is
imposed on the transferor unless the transfer is through an agent (including
a broker or other middleman) for a disqualified organization, in which event
the tax is imposed on the agent. The person otherwise liable for the tax
shall be relieved of liability for the tax if the transferee furnished to
such person an affidavit that the transferee is not a disqualified
organization and, at the time of the transfer, such person does not have
actual knowledge that the affidavit is false. A "disqualified organization"
means (A) the United States, any State, possession or political subdivision
thereof, any foreign government, any international organization or any agency
or instrumentality of any of the foregoing (provided that such term does
not include an instrumentality if all its activities are subject to tax and,
except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain
farmers' cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding
a residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of
(A) the amount of excess inclusions for the taxable year allocable to the
interest held by the disqualified organization and (B) the highest marginal
federal income tax rate applicable to corporations. The pass-through entity
otherwise liable for the tax, for any period during which the disqualified
organization is the record holder of an interest in such entity, will be
relieved of liability for the tax if such record holder furnishes to such
entity an affidavit that such record holder is not a disqualified
organization and, for such period, the pass-through entity does not have
actual knowledge that the affidavit is false. For this purpose, a
"pass-through entity" means (i) a regulated investment company, real estate
investment trust or common trust fund, (ii) a partnership, trust or estate
and (iii) certain cooperatives. Except as may be provided in Treasury
regulations not yet issued, any person holding an interest in a pass-through
entity as a nominee for another will, with respect to such interest, be
treated as a pass-through entity. The tax on pass-through entities is
generally effective for periods after March 31, 1988, except that in the case
of regulated investment companies, real estate investment trusts, common
trust funds and publicly-traded partnerships the tax shall apply only to
taxable years of such entities beginning after December 31, 1988. Under
proposed legislation, large partnerships (generally with 250 or more
partners) will be taxable on excess inclusion income as if all partners were
disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may
be purchased, transferred or sold, directly or indirectly, without the
express written consent of the Master Servicer. The Master Servicer will
grant such consent to a proposed transfer only if it receives the
following: (i) an affidavit from the proposed transferee to the
effect that it is not a disqualified organization and is
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not acquiring the REMIC Residual Certificate as a nominee or agent for
a disqualified organization and (ii) a covenant by the proposed transferee
to the effect that the proposed transferee agrees to be bound by and to
abide by the transfer restrictions applicable to the REMIC Residual
Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations
disregard, for federal income tax purposes, any transfer of a Noneconomic
REMIC Residual Certificate to a "U.S. Person," as defined above, unless no
significant purpose of the transfer is to enable the transferor to impede the
assessment or collection of tax. A Noneconomic REMIC Residual Certificate
is any REMIC Residual Certificate (including a REMIC Residual Certificate
with a positive value at issuance) unless, at the time of transfer, taking
into account the Prepayment Assumption and any required or permitted clean
up calls or required liquidation provided for in the REMIC's organizational
documents, (i) the present value of the expected future distributions on the
REMIC Residual Certificate at least equals the product of the present value
of the anticipated excess inclusions and the highest corporate income tax
rate in effect for the year in which the transfer occurs and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes. A
significant purpose to impede the assessment or collection of tax exists if
the transferor, at the time of the transfer, either knew or should have known
that the transferee would be unwilling or unable to pay taxes due on its
share of the taxable income of the REMIC. A transferor is presumed not to
have such knowledge if (i) the transferor conducted a reasonable
investigation of the transferee and (ii) the transferee acknowledges to the
transferor that the residual interest may generate tax liabilities in excess
of the cash flow and the transferee represents that it intends to pay such
taxes associated with the residual interest as they become due. If a
transfer of a Noneconomic REMIC Residual Certificate is disregarded, the
transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion
of the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of
a REMIC Residual Certificate that has a "tax avoidance potential" to a
"foreign person" will be disregarded for federal income tax purposes. This
rule appears to apply to a transferee who is not a U.S. Person unless such
transferee's income in respect of the REMIC Residual Certificate is
effectively connected with the conduct of a United Sates trade or business.
A REMIC Residual Certificate is deemed to have a tax avoidance potential
unless, at the time of transfer, the transferor reasonably expect that the
REMIC will distribute to the transferee amounts that will equal at least 30
percent of each excess inclusion, and that such amounts will be distributed
at or after the time the excess inclusion accrues and not later than the end
of the calendar year following the year of accrual. If the non-U.S. Person
transfers the REMIC Residual Certificate to a U.S. Person, the transfer will
be disregarded, and the foreign transferor will continue to be treated as the
owner, if the transfer has the effect of allowing the transferor to avoid tax
on accrued excess inclusions. The provisions in the REMIC Regulations
regarding transfers of REMIC Residual Certificates that have tax avoidance
potential to foreign persons are effective for all transfers after June 30,
1992. The Agreement will provide that no record or beneficial ownership
interest in a REMIC Residual Certificate may be transferred, directly or
indirectly, to a non-U.S. Person unless such person provides the Trustee with
a duly completed I.R.S. Form 4224 and the Trustee consents to such transfer
in writing.
Any attempted transfer or pledge in violation of the transfer
restrictions shall be absolutely null and void and shall vest no rights in
any purported transferee. Investors in REMIC Residual Certificates are
advised to consult their own tax advisors with respect to transfers of the
REMIC Residual Certificates and, in addition, pass-through entities are
advised to consult their own tax advisors with respect to any tax which may
be imposed on a pass-through entity.
TAX CHARACTERIZATION OF A TRUST FUND AS A PARTNERSHIP
Brown & Wood LLP, special counsel to the Depositor,
will deliver its opinion
that a Trust Fund for which a partnership election is made will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption
that the terms of the Trust Agreement and related
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documents will be complied with, and on counsel's conclusions that (1) the
Trust Fund will not have certain characteristics necessary for a business
trust to be classified as an association taxable as a corporation and
(2) the nature of the income of the Trust Fund will exempt it from the
rule that certain publicly traded partnerships are taxable as corporations
or the issuance of the Certificates has been structured as a private
placement under an IRS safe harbor, so that the Trust Fund will not
be characterized as a publicly traded partnership taxable as a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its
taxable income. The Trust Fund's taxable income would include all its
income, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments
on the Notes and distributions on the Certificates, and Certificateholders
could be liable for any such tax that is unpaid by the Trust Fund.
A. TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and
the Noteholders will agree by their purchase of Notes, to treat the Notes as
debt for federal income tax purposes. Special counsel to the Depositor will,
except as otherwise provided in the related Prospectus Supplement, advise the
Depositor that the Notes will be classified as debt for federal income tax
purposes. The discussion below assumes this characterization of the Notes
is correct.
OID, etc. The discussion below assumes that all payments on the Notes
are denominated in U.S. dollars. Moreover, the discussion assumes that
the interest formula for the Notes meets the requirements for "qualified
stated interest" under the OID regulations, and that any OID on the Notes
(i.e., any excess of the principal amount of the Notes over their issue
price) does not exceed a de minimis amount (i.e., 1/4% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID regulations. If these conditions are not
satisfied with respect to any given series of Notes, additional tax
considerations with respect to such Notes will be disclosed in the applicable
Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except
as discussed in the following paragraph, the Notes will not be considered
issued with OID. The stated interest thereon will be taxable to a Noteholder
as ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder
of a Note issued with a de minimis amount of OID must include such OID in
income, on a pro rata basis, as principal payments are made on the Note. It
is believed that any prepayment premium paid as a result of a mandatory
redemption will be taxable as contingent interest when it becomes fixed and
unconditionally payable. A purchaser who buys a Note for more or less than
its principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one
year from the issue date of such Note (a "Short-Term Note") may be subject
to special rules. An accrual basis holder of a Short-Term Note (and certain
cash method holders, including regulated investment companies, as set forth
in Section 1281 of the Code) generally would be required to report interest
income as interest accrues on a straight-line basis over the term of each
interest period. Other cash basis holders of a Short-Term Note would, in
general, be required to report interest income as interest is paid (or, if
earlier, upon the taxable disposition of the Short-Term Note). However, a
cash basis holder of a Short-Term Note reporting interest income as it is
paid may be required to defer a portion of any interest expense otherwise
deductible on indebtedness incurred to purchase or carry the Short-Term Note
until the taxable disposition of the Short-Term Note. A cash basis taxpayer
may elect under Section 1281 of the Code to accrue interest income on all
nongovernment debt obligations with a term of one year or less, in which case
the taxpayer would include interest on the Short-Term Note in income as it
accrues, but would not be subject to the interest expense deferral rule
referred to in the preceding sentence. Certain special rules apply if a
Short-Term Note is purchased for more or less than its principal amount.
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Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note.
The adjusted tax basis of a Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included by such Noteholder in income with
respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously
received by such Noteholder with respect to such Note. Any such gain or loss
will be capital gain or loss if the Note was held as a capital asset, except
for gain representing accrued interest and accrued market discount not
previously included in income. Capital losses generally may be used only to
offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder
who is a nonresident alien, foreign corporation or other non-United States
person (a "foreign person") generally will be considered "portfolio
interest", and generally will not be subject to United States federal income
tax and withholding tax, if the interest is not effectively connected with
the conduct of a trade or business within the United States by the foreign
person and the foreign person (i) is not actually or constructively a "10
percent shareholder" of the Trust or the Depositor (including a holder of 10%
of the outstanding Certificates) or a "controlled foreign corporation" with
respect to which the Trust Fund or the Asset Seller is a "related person"
within the meaning of the Code and (ii) provides the Owner Trustee or other
person who is otherwise required to withhold U.S. tax with respect to the
Notes with an appropriate statement (on Form W-8 or a similar form), signed
under penalties of perjury, certifying that the beneficial owner of the Note
is a foreign person and providing the foreign person's name and address. If
a Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent; in that case, however,
the signed statement must be accompanied by a Form W-8 or substitute form
provided by the foreign person that owns the Note. If such interest is not
portfolio interest, then it will be subject to United States federal income
and withholding tax at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days
or more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's
name, address, correct federal taxpayer identification number and a statement
that the holder is not subject to backup withholding. Should a nonexempt
Noteholder fail to provide the required certification, the Trust Fund will
be required to withhold 31 percent of the amount otherwise payable to the
holder, and remit the withheld amount to the IRS as a credit against the
holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of special counsel to the Depositor, the IRS successfully asserted
that one or more of the Notes did not represent debt for federal income tax
purposes, the Notes might be treated as equity interests in the Trust Fund.
If so treated, the Trust Fund might be taxable as a corporation with the
adverse consequences described above (and the taxable corporation would not
be able to reduce its taxable income by deductions for interest expense on
Notes recharacterized as equity). Alternatively, and most likely in the view
of special counsel to the Depositor, the Trust Fund might be treated as a
publicly traded partnership that would not be taxable as a corporation
because it would meet certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such a publicly traded
partnership could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities (including pension funds)
would be "unrelated business taxable income", income to foreign holders
generally would be subject to U.S. tax and U.S. tax return filing and
withholding requirements,
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and individual holders might be subject to certain limitations on
their ability to deduct their share of the Trust Fund's expenses.
B. TAX CONSEQUENCES TO HOLDER OF THE CERTIFICATES
Treatment of the Trust Fund as a Partnership. The Depositor will agree,
and the Certificateholders will agree by their purchase
of Certificates, to treat the Trust Fund as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in
whole or in part by income, with the assets of the partnership being the
assets held by the Trust Fund, the partners of the partnership being the
Certificateholders, and the Notes being debt of the partnership. However,
the proper characterization of the arrangement involving the Trust Fund, the
Certificates, the Notes, the Trust Fund and the Master
Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a Series
of Securities includes a single class of Certificates. If these conditions
are not satisfied with respect to any given Series of Certificates,
additional tax considerations with respect to such Certificates will be
disclosed in the applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be
subject to federal income tax. Rather, each Certificateholder will be
required to separately take into account such holder's allocated share of
income, gains, losses, deductions and credits of the Trust Fund. The Trust
Fund's income will consist primarily of interest and finance charges earned
on the Mortgage Loans (including appropriate adjustments for market discount,
OID and bond premium) and any gain upon collection or
disposition of Mortgage Loans.
The Trust Fund's deductions will consist primarily of interest accruing with
respect to the Notes, servicing and other fees, and losses or deductions upon
collection or disposition of Mortgage Loans.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust Fund for each month equal to the sum of (i) the interest
that accrues on the Certificates in accordance with their terms for such
month, including interest accruing at the Pass-Through Rate for such month
and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any Trust Fund income attributable to discount on the
Mortgage Loans that corresponds to any excess of the principal amount of the
Certificates over their initial issue price; (iii) prepayment premium payable
to the Certificateholders for such month; and (iv) any other amounts of
income payable to the Certificateholders for such month. Such allocation
will be reduced by any amortization by the Trust Fund of premium on Mortgage
Loans that corresponds to any excess of the issue price of Certificates over
their principal amount. All remaining taxable income of the Trust Fund will
be allocated to the Company. Based on the economic arrangement of the
parties, this approach for allocating Trust Fund income should be permissible
under applicable treasury regulations, although no assurance can be given
that the IRS would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through
Rate plus the other items described above even though the Trust Fund might
not have sufficient cash to make current cash distributions of such amount.
Thus, cash basis holders will in effect be required to report income from the
Certificates on the accrual basis and Certificateholders may become liable
for taxes on Trust Fund income even if they have not
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received cash from the Trust Fund to pay such taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for
all Certificateholders but Certificateholders may be purchasing Certificates
at different times and at different prices Certificateholders may be
required to report on their tax returns taxable income that is greater
or less than the amount reported to them by the Trust Fund.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Master Servicer but not interest expense) would be miscellaneous
itemized deductions. Such deductions might be disallowed to the individual
in whole or in part and might result in such holder being taxed on an amount
of income that exceeds the amount of cash actually distributed to such holder
over the life of the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income
and allocations to Certificateholders on an aggregate basis. If the IRS were
to require that such calculations be made separately for each Mortgage Loan,
the Trust Fund might be required to incur additional expense but it is
believed that there would not be a material adverse effect on
Certificateholders.
Discount and Premium. It is believed that the Loans were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust Fund for the Mortgage Loans may be greater
or less than the remaining principal balance of the Loans at the time of
purchase. If so, the Loan will have been acquired at a premium or discount,
as the case may be. (As indicated above, the Trust Fund will make this
calculation on an aggregate basis, but might be required to recompute it on
a Mortgage Loan by Mortgage Loan basis.)
If the Trust Fund acquires the Mortgage Loans at a market discount or
premium, the Trust Fund will elect to include any such discount in income
currently as it accrues over the life of the Mortgage Loans or to offset any
such premium against interest income on the Mortgage Loans. As indicated
above, a portion of such market discount income or premium deduction may be
allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust Fund
will be deemed to terminate for federal income tax purposes if 50% or more
of the capital and profits interests in the Trust Fund are sold or exchanged
within a 12-month period. If such a termination occurs, the Trust Fund will
be considered to distribute its assets to the partners, who would then be
treated as recontributing those assets to the Trust Fund as a new
partnership. The Trust Fund will not comply with certain technical
requirements that might apply when such a constructive termination occurs.
As a result, the Trust Fund may be subject to certain tax penalties and may
incur additional expenses if it is required to comply with those
requirements. Furthermore, the Trust Fund might not be able to comply due
to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. A Certificateholder's tax basis in a Certificate will generally equal
the holder's cost increased by the holder's share of Trust Fund income
(includible in income) and decreased by any distributions received with
respect to such Certificate. In addition, both the tax basis in the
Certificates and the amount realized on a sale of a Certificate would include
the holder's share of the Notes and other liabilities of the Trust Fund. A
holder acquiring Certificates at different prices may be required to maintain
a single aggregate adjusted tax basis in such Certificates, and, upon sale
or other disposition of some of the Certificates, allocate a portion of such
aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss
on a sale of that Certificate).
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Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Mortgage Loans would generally
be treated as ordinary income to the holder and would give rise to special
tax reporting requirements. The Trust Fund does not expect to have any other
assets that would give rise to such special reporting requirements. Thus,
to avoid those special reporting requirements, the Trust Fund will elect to
include market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the
Certificateholders in proportion to the principal amount of Certificates
owned by them as of the close of the last day of such month. As a result,
a holder purchasing Certificates may be allocated tax items (which will
affect its tax liability and tax basis) attributable to periods before the
actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the Trust Fund might be reallocated among the Certificateholders.
The Trust Fund's method of allocation between transferors and transferees may
be revised to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have
a higher (lower) basis in the Certificates than the selling Certificateholder
had. The tax basis of the Trust Fund's assets will not be adjusted to
reflect that higher (or lower) basis unless the Trust Fund were to file an
election under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records,
as well as potentially onerous information reporting requirements, the Trust
Fund will not make such election. As a result, Certificateholders might be
allocated a greater or lesser amount of Trust Fund income than would be
appropriate based on their own purchase price for Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Trust Fund. Such books will be maintained
for financial reporting and tax purposes on an accrual basis and the fiscal
year of the Trust will be the calendar year. The Trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the Trust Fund and will report each Certificateholder's allocable
share of items of Trust Fund income and expense to holders and the IRS on
Schedule K-1. The Trust Fund will provide the Schedule K-1 information to
nominees that fail to provide the Trust Fund with the information statement
described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information return filed
by the Trust Fund or be subject to penalties unless the holder notifies the
IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee at any time during a calendar year is required to furnish the Trust
Fund with a statement containing certain information on the nominee, the
beneficial owners and the Certificates so held. Such information includes
(i) the name, address and taxpayer identification number of the nominee and
(ii) as to each beneficial owner (x) the name, address and identification
number of such person, (y) whether such person is a United States person, a
tax-exempt entity or a foreign government, an international organization, or
any wholly owned agency or instrumentality of either of the foregoing, and
(z) certain information on Certificates that were held, bought or sold on
behalf of such person throughout the year. In addition, brokers and
financial institutions that hold Certificates through a nominee are required
to furnish directly to the Trust Fund information as to themselves
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and their ownership of Certificates. A clearing agency registered under
Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust Fund. The information referred to
above for any calendar year must be furnished to the Trust Fund on or
before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust Fund with the information
described above may be subject to penalties.
The Company will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust Fund by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may
be precluded from separately litigating a proposed adjustment to the items
of the Trust Fund. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the
income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust Fund would be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
non-U.S. persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is
not expected that the Trust Fund would be engaged in a trade or business in
the United States for such purposes, the Trust Fund will withhold as if it
were so engaged in order to protect the Trust Fund from possible adverse
consequences of a failure to withhold. The Trust Fund expects to withhold
on the portion of its taxable income that is allocable to foreign
Certificateholders pursuant to Section 1446 of the Code, as if such income
were effectively connected to a U.S. trade or business, at a rate of 35% for
foreign holders that are taxable as corporations and 39.6% for all other
foreign holders. Subsequent adoption of Treasury regulations or the issuance
of other administrative pronouncements may require the Trust Fund to change
its withholding procedures. In determining a holder's withholding status,
the Trust Fund may rely on IRS Form W-8, IRS Form W-9 or the holder's
certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust Fund's income. Each foreign
holder must obtain a taxpayer identification number from the IRS and submit
that number to the Trust Fund on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign holder generally would be
entitled to file with the IRS a claim for refund with respect to taxes
withheld by the Trust Fund taking the position that no taxes were due because
the Trust Fund was not engaged in a U.S. trade or business. However,
interest payments made (or accrued) to a Certificateholder who is a foreign
person generally will be considered guaranteed payments to the extent such
payments are determined without regard to the income of the Trust Fund. If
these interest payments are properly characterized as guaranteed payments,
then the interest will not be considered "portfolio interest." As a result,
Certificateholders will be subject to United States federal income tax and
withholding tax at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable treaty. In such case, a foreign holder would only
be enticed to claim a refund for that portion of the taxes in excess of the
taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale of the Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Certificateholder fails to comply
with certain identification procedures, unless the holder is an exempt
recipient under applicable provisions of the Code.
RECENT LEGISLATION
During 1996, President Clinton signed into law the "Small Business
Job Protection Act of 1996" (the "Act"). The Act creates a new type of
entity for federal income tax purposes called a "financial asset
securitization investment trust" or "FASIT." Beginning in September of
1997, the Act generally enables certain arrangemenets similar to a Trust
Fund that is treated as a partnership to elect to be treated as a FASIT.
Under the Act, a FASIT generally would avoid federal income taxation and
could issue securities substantially similar to the Certificates and
Notes, and those securities would be treated as debt for federal income tax
purposes. If so provided in the related Prospectus Supplement, the
Agreement, the Trust Agreement and/or the Indenture will set forth certain
conditions which, if satisfied, will permit the Depositor to amend such
Agreement, Trust Agreement and/or Indenture in order to enable all or a
portion of the Trust Fund to qualify as a FASIT and to permit a FASIT
election to be made with respect thereto, and to make such modifications
to such Agreement, Trust Agreement and/or Indenture as may be permitted
by reason of the making of such an election. However, the Depositor may,
but is not obligated to, cause a FASIT election and there can be no
assurance that the Depositor will or will not cause any permissible
FASIT election to be made with respect to a Trust Fund or amend the related
Agreement, Trust Agreemenet and/or the Indenture in connection with any
election. Furthermore, any such election will be made only if an opinion
of federal tax counsel or special federal tax counsel is rendered that
such election will not have material adverse federal income
consequences to any holder of a Note or Certificate.
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STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors should consider the
state and local income tax consequences of the acquisition, ownership, and
disposition of the Offered Securities. State and local income tax law may
differ substantially from the corresponding federal law, and this discussion
does not purport to describe any aspect of the income tax laws of any state
or locality. Therefore, potential investors should consult their own tax
advisors with respect to the various state and local tax consequences of an
investment in the Offered Securities.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain restrictions on employee benefit plans subject to
ERISA ("Plans") and on persons who are parties in interest or disqualified
persons ("parties in interest") with respect to such Plans. Certain employee
benefit plans, such as governmental plans and church plans (if no election
has been made under Section 410(d) of the Code), are not subject to the
restrictions of ERISA, and assets of such plans may be invested in the
Securities without regard to the ERISA considerations described below,
subject to other applicable federal and state law. However, any such
governmental or church plan which is qualified under Section 401(a) of the
Code and exempt from taxation under Section 501(a) of the Code is subject to
the prohibited transaction rules set forth in Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
PROHIBITED TRANSACTIONS
General
Section 406 of ERISA prohibits parties in interest with respect to a
Plan from engaging in certain transactions involving a Plan and its assets
unless a statutory or administrative exemption applies to the transaction.
Section 4975 of the Code imposes certain excise taxes (or, in some cases, a
civil penalty may be assessed pursuant to Section 502(i) of ERISA) on parties
in interest which engage in non-exempt prohibited transactions.
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining
what constitutes the assets of a Plan. This regulation provides that, as a
general rule, the underlying assets and properties of corporations,
partnerships, trusts and certain other entities in which a Plan makes an
"equity investment" will be deemed for purposes of ERISA to be assets of the
Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust Fund may be deemed to hold
plan assets by reason of a Plan's investment in a Security; such plan assets
would include an undivided interest in the Mortgage Loans or Contracts and any
other assets held by the Trust Fund. In such an event, the Asset Seller, the
Master Servicer, the Trustee, any insurer of the Assets and other persons, in
providing services with respect to the assets of the Trust Fund, may be
parties in
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interest, subject to the fiduciary responsibility provisions of Title I of
ERISA, including the prohibited transaction provisions of Section 406 of
ERISA (and of Section 4975 of the Code), with respect to transactions
involving such assets unless such transactions are subject to a statutory
or administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts any
entity from plan assets status as long as the aggregate equity investment in
such entity by plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors"
in the aggregate, own at least 25% of the value of any class of equity
---------
interest. "Benefit plan investors" are defined as Plans as well as employee
benefit plans not subject to ERISA (e.g., governmental plans). The 25%
limitation must be met with respect to each class of certificates, regardless
of the portion of total equity value represented by such class, on an ongoing
basis.
One such exception applies if the interest described is treated as
indebtedness under applicable local law and which has no substantial equity
features. Generally, a profits interest in a partnership, an undivided
ownership interest in property and a beneficial ownership interest in a trust
are deemed to be "equity interest" under the final regulation. If Notes of
a particular Series were deemed to be indebtedness under applicable local law
without any substantial equity features, an investing Plan's assets would
include such Notes, but not, by reason of such purchase, the underlying
assets of the Trust Fund.
Availability of Underwriter's Exemption for Certificates
Labor has granted to Merrill Lynch, Pierce, Fenner & Smith Incorporated
Prohibited Transaction Exemption 90-29, Exemption Application No. D-8012, 55
Fed. Reg. 21,450 (1990) (the "Exemption") which exempts from the application
of the prohibited transaction rules transactions relating to: (1) the
acquisition, sale and holding by Plans of certain certificates representing
an undivided interest in certain asset-backed pass-through trusts, with
respect to which Merrill Lynch, Pierce, Fenner & Smith Incorporated or any
of its affiliates is the sole underwriter or the manager or co-manager of the
underwriting syndicate; and (2) the servicing, operation and management of
such asset-backed pass-through trusts, provided that the general conditions
and certain other conditions set forth in the Exemption are satisfied. The
Exemption does not apply to Certificates evidencing an interest in a Trust
Fund containing Unsecured Home Improvement Loans, SBA Loans or SBA 504 Loans.
With respect to a series of Notes, the related Prospectus Supplement will
discuss whether the Exemption may be applicable to such Notes.
General Conditions of the Exemption. Section II of the Exemption sets
forth the following general conditions which must be satisfied before a
transaction involving the acquisition, sale and holding of the Certificates
or a transaction in connection with the servicing, operation and management
of the Trust may be eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms
(including the price for such Certificates) that are at least as favorable
to the investing Plan as they would be in an arm's-length transaction with
an unrelated party;
(2) The rights and interests evidenced by the Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust;
(3) The Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest generic
rating categories from any of Duff & Phelps Inc., Fitch Investors Service,
Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Group.
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(4) The Trustee is not an affiliate of the Underwriter, the Asset
Seller, the Master Servicer, any insurer of the Mortgage Assets, any borrower
whose obligations under one or more Assets constitute more than 5% of the
aggregate unamortized principal balance of the assets in the Trust Fund, or
any of their respective affiliates (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter
in connection with the distribution of the Certificates represents not more
than reasonable compensation for underwriting such Certificates; the sum of
all payments made to and retained by the Asset Seller pursuant to the sale
of the Assets to the Trust Fund represents not more than the fair market
value of such Assets; the sum of all payments made to and retained by the
Master Servicer represent not more than reasonable compensation for the
Master Servicer's services under the Agreement and reimbursement of the
Master Servicer's reasonable expenses in connection therewith; and
(6) The Plan investing in the Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and
Exchange Commission under the Securities Act of 1933 as amended.
Before purchasing a Certificate, a fiduciary of a Plan should itself
confirm (a) that the Certificates constitute "certificates" for purposes of
the Exemption and (b) that the specific and general conditions set forth in
the Exemption and the other requirements set forth in the Exemption would be
satisfied.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any Securities on
behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of
ERISA and the Code to such investment. Among other things, before purchasing
any Securities, a fiduciary of a Plan subject to the fiduciary responsibility
provisions of ERISA or an employee benefit plan subject to the prohibited
transaction provisions of the Code should make its own determination as to
the availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. In
particular, in connection with a contemplated purchase of Securities
representing a beneficial ownership interest in a pool of single family
residential first mortgage loans, such Plan fiduciary should consider the
availability of the Exemption or Prohibited Transaction Class Exemption 83-1
("PTCE 83-1") for certain transactions involving mortgage pool investment
trusts. The Prospectus Supplement with respect to a series of Securities may
contain additional information regarding the application of the Exemption,
PTCE 83-1, or any other exemption, with respect to the Securities offered
thereby. PTCE 83-1 is not applicable to manufactured housing contract pool
investment trusts or multifamily mortgage pool investment trusts.
Purchasers that are insurance companies should consult with their
counsel with respect to the recent United States Supreme Court case
interpreting the fiduciary responsibility rules of ERISA, John Hancock Mutual
Life Insurance Co. v. Harris Trust & Savings Bank (decided December 13,
1993). In John Hancock, the Supreme Court ruled that assets held in an
insurance company's general account may be deemed to be "plan assets" for
ERISA purposes under certain circumstances. Prospective purchasers should
determine whether the decision affects their ability to make purchases of the
Securities. In particular, such an insurance company should consider the
exemptive relief granted by Labor for transactions involving insurance
company general accounts in Prohibited Transactions Exemption 95-60, 60 Fed.
Reg. 35925 (July 12, 1995).
LEGAL INVESTMENT
Each class of Offered Securities will be rated at the date of issuance
in one of the four highest rating categories by at least one Rating Agency.
The related Prospectus Supplement will specify which classes of the
Securities, if any, will constitute "mortgage related securities" ("SMMEA
Securities") for purposes of the Secondary Mortgage Market
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Enhancement Act of 1984 ("SMMEA"). SMMEA Securities will constitute
legal investments for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including, but
not limited to, state chartered savings banks, commercial banks,
savings and loan associations and insurance companies, as well as
trustees and state government employee retirement systems) created
pursuant to or existing under the laws of the United States or of
any state (including the District of Columbia and Puerto Rico) whose
authorized investments are subject to state regulation to the same extent
that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency or instrumentality
thereof constitute legal investments for such entities. Alaska, Arkansas,
Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Kansas,
Maryland, Michigan, Missouri, Nebraska, New Hampshire, New York, North
Carolina, Ohio, South Dakota, Utah, Virginia and West Virginia enacted
legislation before the October 4, 1991 cutoff established by SMMEA for such
enactments, limiting to varying extents the ability of certain entities (in
particular, insurance companies) to invest in mortgage related securities,
in most cases by requiring the affected investors to rely solely upon
existing state law, and not SMMEA. Investors affected by such legislation
will be authorized to invest in SMMEA Certificates only to the extent
provided in such legislation. SMMEA provides, however, that in no event will
the enactment of any such legislation affect the validity of any contractual
commitment to purchase, hold or invest in "mortgage related securities," or
require the sale or other disposition of such securities, so long as such
contractual commitment was made or such securities acquired prior to the
enactment of such legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal with "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. 24 (Seventh), subject in each case to such regulations as
the applicable federal regulatory authority may prescribe. In this
connection, federal credit unions should review the National Credit Union
Administration ("NCUA") Letter to Credit Unions No. 96, as modified by Letter
to Credit Unions No. 108, which includes guidelines to assist federal credit
unions in making investment decisions for mortgage related securities, and
the NCUA's regulation "Investment and Deposit Activities" (12 C.F.R. Part
703), which sets forth certain restrictions on investment by federal credit
unions in mortgage related securities.
Institutions where investment activities are subject to legal investment
laws or regulations or review by certain regulatory authorities may be
subject to restrictions on investment in certain classes of Offered
Securities. Any financial institution which is subject to the jurisdiction
of the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation ("FDIC"), the
Office of Thrift Supervision ("OTS"), the NCUA or other federal or state
agencies with similar authority should review any applicable rules,
guidelines and regulations prior to purchasing any Offered Security. The
Federal Financial Institutions Examination Council, for example, has issued
a Supervisory Policy Statement on Securities Activities effective February
10, 1992 (the "Policy Statement") setting forth guidelines for and
significant restrictions on investments in "high-risk mortgage securities."
The Policy Statement has been adopted by the Comptroller of the Currency, the
Federal Reserve Board, the FDIC, the OTS and the NCUA (with certain
modifications), with respect to the depository institutions that they
regulate. The Policy Statement generally indicates that a mortgage
derivative product will be deemed to be high risk if it exhibits greater
price volatility than a standard fixed rate thirty-year mortgage security.
According to the Policy Statement, prior to purchase, a depository
institution will be required to determine whether a mortgage derivative
product that it is considering acquiring is high-risk, and if so that the
proposed acquisition would reduce the institution's overall interest rate
risk. Reliance on analysis and documentation obtained from a securities
dealer or other outside party without internal analysis by the institution
would be unacceptable. There can be no assurance that any classes of Offered
Securities will not be treated as high-risk under the Policy Statement.
The predecessor to the OTS issued a bulletin, entitled, "Mortgage
Derivative Products and Mortgage Swaps", which is applicable to thrift
institutions regulated by the OTS. The bulletin established guidelines for
the investment by
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savings institutions in certain "high-risk" mortgage derivative securities
and limitations on the use of such securities by insolvent, undercapitalized
or otherwise "troubled" institutions. According to the bulletin, such
"high-risk" mortgage derivative securities include securities having certain
specified characteristics, which may include certain classes of Securities.
In accordance with Section 402 of the Financial Institutions Reform, Recovery
and Enhancement Act of 1989, the foregoing bulletin will remain in effect
unless and until modified, terminated, set aside or superseded by the FDIC.
Similar policy statements have been issued by regulators having jurisdiction
over the types of depository institutions.
In September 1993 the National Association of Insurance Commissioners
released a draft model investment law (the "Model Law") which sets forth
model investment guidelines for the insurance industry. Institutions subject
to insurance regulatory authorities may be subject to restrictions on
investment similar to those set forth in the Model Law and other
restrictions.
If specified in the related Prospectus Supplement, other classes of
Offered Securities offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization
of this Offered Security under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase such
Offered Securities, may be subject to significant interpretive uncertainties.
Except as to the status of SMMEA Securities identified in the Prospectus
Supplement for a series as "mortgage related securities" under SMMEA, the
Depositor will make no representations as to the proper characterization of
the Offered Certificates for legal investment or financial institution
regulatory purposes, or as to the ability of particular investors to purchase
any Offered Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory
characteristics of the Offered Securities) may adversely affect the liquidity
of the Offered Securities.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to, "prudent investor" provisions, percentage-of-assets limits and
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Securities or
to purchase Offered Securities representing more than a specified percentage
of the investor's assets. Accordingly, all investors whose investment
activities are subject to legal investment laws and regulations, regulatory
capital requirements or review by regulatory authorities should consult with
their own legal advisors in determining whether and to what extent the
Offered Securities of any class constitute legal investments or are subject
to investment, capital or other restrictions, and, if applicable, whether
SMMEA has been overridden in any jurisdiction relevant to such investor.
PLAN OF DISTRIBUTION
The Offered Securities offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Securities may
be effected from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices to be determined at the time of sale or at the time of commitment
therefor. If so specified in the related Prospectus Supplement, the Offered
Securities will be distributed in a firm commitment underwriting, subject to
the terms and conditions of the underwriting agreement, by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acting as underwriter
with other underwriters, if any, named therein. In such event, the Prospectus
Supplement may also specify that the underwriters will not be obligated to
pay for any Offered Securities agreed to be purchased by purchasers pursuant
to purchase agreements acceptable to the Depositor.
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In connection with the sale of Offered Certificates, underwriters may receive
compensation from the Depositor or from purchasers of Offered Securities in
the form of discounts, concessions or commissions. The Prospectus Supplement
will describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Securities will be distributed by Merrill Lynch acting as agent or in some
cases as principal with respect to Offered Securities that it has previously
purchased or agreed to purchase. If Merrill Lynch acts as agent in the sale
of Offered Securities, Merrill Lynch will receive a selling commission with
respect to such Offered Securities, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of
such Offered Securities as of the Cut-off Date. The exact percentage for each
series of Securities will be disclosed in the related Prospectus Supplement.
To the extent that Merrill Lynch elects to purchase Offered Securities as
principal, Merrill Lynch may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of Offered
Securities of such series.
The Depositor will indemnify Merrill Lynch and any underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, or will contribute to payments Merrill Lynch and any underwriters may
be required to make in respect thereof.
In the ordinary course of business, Merrill Lynch and the Depositor may
engage in various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's or Asset Seller's
Assets pending the sale of such Assets or interests therein, including the
Securities.
Offered Securities will often be sold primarily
to institutional investors. Purchasers of Offered Securities,
including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 in connection with reoffers
and sales by them of Offered Securities. Securityholders should consult with
their legal advisors in this regard prior to any such reoffer or sale.
As to each series of Securities, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by the Depositor or
Asset Seller, and may be sold by the Depositor or Asset Seller at any time
in private transactions.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter or a request by
such investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, the Depositor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospecuts.
LEGAL MATTERS
Certain legal matters in connection with the Securities, including
certain federal income tax consequences, will be passed upon for the
Depositor by Brown & Wood LLP, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Securities and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Securities. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
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<PAGE> RATING
It is a condition to the issuance of any class of Offered Securities
that they shall have been rated not lower than investment grade, that is, in
one of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying assets and
the credit quality of the guarantor, if any. Ratings on mortgage pass-through
certificates and other asset backed securities do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which such prepayments might differ from those originally
anticipated. As a result, securityholders might suffer a lower than
anticipated yield, and, in addition, holders of stripped interest
certificates in extreme cases might fail to recoup their initial investments.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
PAGE(S) ON WHICH
TERM IS DEFINED
TERMS IN THE PROSPECTUS
Accrual Securities . . . . . . . . . . . . . . . . . . . . . . . . . 11, 35
Accrued Security Interest . . . . . . . . . . . . . . . . . . . . . . . . 37
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARM Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 88
Asset Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 6, 22
Available Distribution Amount . . . . . . . . . . . . . . . . . . . . . . 36
Balloon Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . 18
Book-Entry Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Buydown Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . 33
Buydown Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Cash Flow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 10, 29
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Contract Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 8, 22
Contributions Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Covered Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 65
CPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Credit Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Definitive Securities . . . . . . . . . . . . . . . . . . . . . . . . 35, 43
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 22
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 115
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Government Securities . . . . . . . . . . . . . . . . . . . . . . . .1, 8, 22
Grantor Trust Certificates . . . . . . . . . . . . . . . . . . . . . . . 13
Home Equity Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 24
Home Improvement Contract . . . . . . . . . . . . . . . . . . . . . . . . 24
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
L/C Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Legislative History . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Lock-out Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Lock-out Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
manufactured housing contracts . . . . . . . . . . . . . . . . . . . . . . 20
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6, 22
MBS Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
MBS Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
MBS Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
MBS Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Merrill Lynch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Mortgage Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Mortgage Loan Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 6, 22
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Mortgage Participations . . . . . . . . . . . . . . . . . . . . . . .1, 6, 22
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Mortgage Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 24
Multifamily Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . 23
Multifamily Property . . . . . . . . . . . . . . . . . . . . . . . . . 7, 23
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . . . 39
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6
Offered Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 37
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . .43
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 28
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . .10, 28
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Prepayment Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Refinance Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Related Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
REMIC Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
REMIC Regular Certificates . . . . . . . . . . . . . . . . . . . . . 13, 91
REMIC Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
REMIC Residual Certificates . . . . . . . . . . . . . . . . . . . . . 13, 91
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Retained Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SBA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 27
SBA Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 27
SBA 504 Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 22
SBA 504 Loan Program . . . . . . . . . . . . . . . . . . . . . . . 8, 22, 28
Section 7(a) Program . . . . . . . . . . . . . . . . . . . . . . . . . 8, 27
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6
Security Balance . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 38
Security Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 42
Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 35
Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Servicing Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Single Family Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . 23
Single Family Property . . . . . . . . . . . . . . . . . . . . . . . . 7, 23
123
<PAGE>
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 117
SMMEA Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
SPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Stripped ARM Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 89
Stripped Interest Certificates . . . . . . . . . . . . . . . . . . . 11, 35
Stripped Principal Securities . . . . . . . . . . . . . . . . . . . . 11, 35
Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Sub-Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subordinate Securities . . . . . . . . . . . . . . . . . . . . . . . 11, 35
Subsequent Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 28
Title V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Underlying MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Underlying Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 22
Unsecured Home Improvement Loans. . . . . . . . . . . . . . . . . . .1, 7, 22
Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Warranting Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Whole Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
124
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the offering of the Securities being registered under this Registration
Statement, other than underwriting discounts and commissions:
SEC Registration Fee ............................................. $344,828
Printing and Engraving ........................................... $ 60,000
Legal Fees and Expenses .......................................... $200,000
Trustee Fees and Expenses......................................... $ 20,000
Blue Sky Fees and Expenses........................................ $ 10,000
Rating Agency Fees ............................................... $200,000
Miscellaneous ................................................... $ 5,172
Total............................................................. $840,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's By-Laws provide for indemnification of directors and
officers of the Registrant to the full extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents
in connection with actions, suits or proceedings brought against them by a
third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against
expenses incurred in any such action, suit or proceeding. The Delaware
General Corporation Law also provides that the Registrant may purchase
insurance on behalf of any such director, officer, employee or agent.
ITEM 16. EXHIBITS.
*1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation of Merrill Lynch Mortgage Investors, Inc.
*3.2 By-laws of Merrill Lynch Mortgage Investors, Inc. as currently in
effect.
*4.1 Form of Pooling and Servicing Agreement for Mortgage Loans (including
form of Certificate as an exhibit thereto).
4.2 Form of Pooling and Servicing Agreement for Contracts (including form
of Certificate as an exhibit thereto).
4.3 Form of Trust Agreement (including form of Certificate as an exhibit
thereto).
4.4 Form of Indenture (including form of Note as an exhibit thereto).
*5.1 Opinion of Brown & Wood LLP as to legality of the certain of the
Securities (including consent of such firm).
5.2 Opinion of Richards, Layton and Finger as to legality of certain
Certificates (including consent of such firm).
*8.1 Opinion of Brown & Wood LLP as to certain tax matters (including
consent of such firm).
*23.1 Consent of Brown & Wood LLP (included in exhibits 5.1 and 8.1 hereof).
23.2 Consent of Richards, Layton & Finger (included in exhibit 5.2 hereof).
24.1 Power of Attorney (included as page II-4 to original filing).
*25 Statement of Eligibility under the Trust Indenture Act of 1939 of
The Bank of New York ______ as Indenture Trustee.
99.1 Form of Servicing Agreement.
99.2 Form of Mortgage Loan Purchase Agreement.
ITEM 17. UNDERTAKINGS.
(a) Undertaking pursuant to Rule 415.
The Registrant hereby undertakes:
II-1
<PAGE>
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Undertaking in respect of incorporation of reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Undertaking in respect of indemnification.
The undersigned registrant hereby agrees to provide to the underwriter
at the closing specified in the underwriting agreement, securities in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person, in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on the 9th
day of September, 1996.
Merrill Lynch Mortgage Investors, Inc.
By:/s/ Michael M. McGovern
---------------------------
Name: Michael M. McGovern
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on September 9, 1996.
Signature Title
---------- ------
President and Chairman of the Board
By * Director (Chief Executive Officer)
-----------------------
(Richard M. Fuscone)
Treasurer and Director (Principal
By * Financial Officer and Principal
------------------------ Accounting Officer)
(John C. Qua)
Director
-------------------------
(Donald J. Puglisi)
/s/ Michael M. McGovern) Director
--------------------------
(Michael M. McGovern)
* By /s/ Michael M. McGovern
------------------------
Michael M. McGovern,
Attorney-in-fact
II-3
Exhibit 1.1
MERRILL LYNCH MORTGAGE INVESTORS, INC., DEPOSITOR
Asset Backed Securities
Series 199_-_
UNDERWRITING AGREEMENT
----------------------
__________ __, 1996
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
Merrill Lynch Mortgage Investors, Inc. (the "Company"), a Delaware
corporation, with its principal place of business in New York, New York, is
a wholly-owned limited-purpose finance company of Merrill Lynch Mortgage
Capital Inc. ("MLMC"), a Delaware corporation, which is an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc., a Delaware corporation. The
Company has authorized the issuance and sale of Asset Backed Securities
having aggregate outstanding principal balances of up to ($____________) (the
"Securities"). The Securities may be issued in various series, and, within
each series, in one or more classes, and, within each class, in one or more
sub-classes, in one or more offerings on terms determined at the time of sale
(each such series, a "Series" and each such class, a "Class"). Each Series
of the Securities will be issued under a separate Pooling and Servicing
Agreement (each, a "Pooling and Servicing Agreement") with respect to such
Series among the Company, as depositor, a master servicer to be identified
in the prospectus supplement for each such Series (the "Master Servicer") and
a trustee to be identified in the prospectus supplement for each such Series
(the "Trustee") or a separate Trust Agreement (each a "Trust Agreement")
between the Company, an owner trustee (the "Owner Trustee") to be named in
the related prospectus supplement and another entity to be named in such
prospectus supplement or an Indenture (each an "Indenture") between the trust
created by the related Trust Agreement and an indenture trustee (the
"Indenture Trustee") named in the related prospectus supplement. The
Securities will be described in the related prospectus supplement. The
Securities of each Series will evidence specified interests in, or be
supported by, the assets (the "Assets") described in the related prospectus
supplement, and certain other property held in trust with respect to such
Series (each, a "Trust Fund").
The Securities are more fully described in a Prospectus and Prospectus
Supplement (hereinafter defined) which the Company has furnished to you.
Capitalized terms used but not defined herein shall have the meanings given
to them in the (Pooling and Servicing Agreement) (Trust Agreement)
(Indenture). The term "you" as used herein, unless the context otherwise
requires, shall mean you and such persons, if any, as are named as co-
managers in the applicable Terms Agreement (defined below).
Each offering of Securities pursuant to this Agreement will be made
through you or through an underwriting syndicate managed by you. Whenever
the Company determines to make an offering of Securities it will enter into
an agreement (the "Terms Agreement") providing for the sale of such
Securities to, and the purchase and offering thereof by, you and such other
underwriters, if any, selected by you as have authorized you to enter into
such Terms Agreement on their behalf (the "Underwriters," which term shall
include you whether acting alone in the sale of Securities or as a member of
an underwriting syndicate). The Terms Agreement relating to each offering
of Securities shall specify, among other things, the principal amount or
amounts of Securities to be issued, the price or prices at which the
Securities are to be purchased by the Underwriters from the Company and the
initial public offering price or prices or the method by which the price or
prices at which such Securities are to be sold will be determined. A Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, may
take the form of an exchange of any standard form of written
telecommunication between you and the Company. Each offering of Securities
will be governed by this Agreement, as supplemented by the applicable Terms
Agreement, and this Agreement and such Terms Agreement shall inure to the
benefit of and be binding upon the Underwriters participating in the offering
of such Securities.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-7569)
relating to the Securities, and the offering thereof from time to time in
accordance with Rule 415 under the Securities Act of 1933, as amended (the
"1933 Act"), and has filed, and proposes to file, such amendments thereto as
may have been required to the date hereof and as shall be required prior to
the effective date thereof pursuant to the 1933 Act and the rules of the
Commission thereunder (the "Regulations"). Such registration statement, as
amended at the time when each becomes effective under the 1933 Act and at the
Representation Date defined below, is referred to herein as the "Registration
Statement". The base prospectus relating to the sale of a particular Series
of Securities by the Company is referred to herein as the "Basic Prospectus,"
and a supplement to the Prospectus contemplated by Section 3(a) hereof is
referred to herein as a "Prospectus Supplement". The Basic Prospectus and
the related Prospectus Supplement are collectively referred to as the
"Prospectus".
SECTION 1. Representations and Warranties. (a) The Company
------------------------------
represents and warrants to you as of the date hereof, and to the
Underwriters, if any, named in the applicable Terms Agreement, all as of the
date of such Terms Agreement (in each case, the "Representation Date"), as
follows:
(1) The Registration Statement, at the time the Registration
Statement became effective did, and the Registration Statement,
Prospectus and Prospectus Supplement as of the applicable
Representation Date will, comply in all material respects with the
requirements of the 1933 Act and the Regulations. The Registration
Statement, at the time it became effective did not, and as of the
applicable Representation Date will not, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The Prospectus, as amended or supplemented as of the
applicable Representation Date, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to (i) any statements in, or omissions
from, the Registration Statement or the Prospectus made in reliance upon
and in conformity with information furnished to the Company in writing by
the Underwriters expressly for use in the Registration Statement or the
Prospectus or (ii) information in any "Computational Materials" or
"Structural Term Sheets" (each as hereinafter defined) provided by the
Underwriter to the Company pursuant to Section 4 except to the extent
that the information set forth therein is based on or constitutes "Pool
Information". As used herein, Pool Information means information with
respect to the characteristics of the Assets as provided by, or on
behalf of, the Company or MLCC to the Underwriter in final form and set
forth in the Prospectus Supplement. The conditions to the use by the
Company of a registration statement on Form S-3 under the 1933 Act,
as set forth in the General Instructions to Form S-3, have been satisfied
with respect to the Registration Statement and the Prospectus. There are
no contracts or documents of the Company which are required to be filed
as exhibits to the Registration Statement pursuant to the 1933 Act or the
Regulations which have not been so filed.
(2) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and to
enter into and perform its obligations under this Agreement, the
applicable Pooling and Servicing Agreement, and with respect to a Series
of Securities, the Securities and the applicable Terms Agreement; and
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the
ownership or lease of its properties or the conduct of its business
requires such qualification.
(3) The Company is not in violation of its certificate of
incorporation or by-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may be
bound, which default might result in any material adverse change in the
financial condition, earnings, affairs or business of the Company or which
might materially and adversely affect the properties or assets thereof.
(4) The execution and delivery by the Company of this Agreement,
the applicable Terms Agreement and the applicable Pooling and Servicing
Agreement are within the corporate power of the Company and have been duly
authorized by all necessary corporate action on the part of the Company;
and with respect to a Series of Securities, neither the issuance and sale
of the Securities to the Underwriters, nor the execution and delivery by
the Company of this Agreement and the related Pooling and Servicing
Agreement, nor the consummation by the Company of the transactions
therein contemplated, nor compliance by the Company with the provisions
hereof or thereof, will materially conflict with or result in a material
breach of, or constitute a material default under, any of the provisions
of any law, governmental rule, regulation, judgment, decree or order
binding on the Company or its properties or the restated certificate
of incorporation or by-laws of the Company, or any of the provisions of
any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound or result in the creation or
imposition of any lien, charge or encumbrance upon any of its property
pursuant to the terms of any such indenture, mortgage, contract or other
instrument.
(5) This Agreement has been, and each applicable Terms Agreement
when executed and delivered as contemplated hereby and thereby,
will have been duly authorized, executed and delivered by the Company,
and each constitutes, or will constitute when so executed and delivered,
a legal, valid and binding instrument enforceable against the Company in
accordance with its terms, subject (a) to applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting
creditors' rights generally, (b) as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and (c) as to enforceability with respect
to rights of indemnity thereunder, to limitations of public policy under
applicable securities laws.
(6) Each applicable (Pooling and Servicing Agreement) (Trust
Agreement) when executed and delivered as contemplated hereby and
thereby will have been duly authorized, executed and delivered by the
Company, and will constitute when so executed and delivered, a legal,
valid and binding instrument enforceable against the Company in accordance
with its terms, subject (a) to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and (b) as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(7) As of the Closing Time (as defined in Section 2 below) with
respect to a Series of Securities, the Securities will have been duly and
validly authorized by the Company, and, when executed and authenticated as
specified in the related (Pooling and Servicing Agreement) (Trust
Agreement) (Indenture), will be validly issued and outstanding and will be
entitled to the benefits of the related (Pooling and Servicing Agreement)
(Trust Agreement) (Indenture).
(8) There are no actions, proceedings or investigations now
pending against the Company or, to the knowledge of the Company,
threatened against the Company, before any court, administrative agency
or other tribunal (i) asserting the invalidity of this Agreement, the
applicable (Pooling and Servicing Agreement) (Trust Agreement) (Indenture)
or with respect to a Series of Securities, the Securities, (ii) seeking
to prevent the issuance of such Securities or the consummation of any of
the transactions contemplated by this Agreement or such Pooling and
Servicing Agreement, (iii) which might materially and adversely affect
the performance by the Company of its obligations under, or the validity
or enforceability of, this Agreement or such Securities or (iv) seeking
to adversely affect the federal income tax attributes of such Securities
described in the Prospectus and the related Prospectus Supplement.
(9) Any taxes, fees and other governmental charges that are
assessed and due in connection with the execution, delivery and issuance
of this Agreement, the applicable (Pooling and Servicing Agreement)
(Trust Agreement) (Indenture) and with respect to a Series of Securities,
or the Securities shall have been paid at or prior to the Closing Time
with respect to such Series of Securities.
(10) No filing or registration with, notice to or consent,
approval, authorization or order of any court or governmental authority
or agency is required for the consummation by the Company of the
transactions contemplated by this Agreement, the applicable Pooling and
Servicing Agreement or the applicable Terms Agreement, except such as may
be required under the 1933 Act, the Regulations, or state securities or
Blue Sky laws.
(11) The Company possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct the business
now operated by it and as described in the Prospectus and the Company
has received no notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the conduct of
the business, operations, financial condition or income of the Company.
(12) As of the Closing Time, with respect to a Series of
Securities, each of the Assets will have the characteristics described
in the Prospectus Supplement.
(13) Neither the Company nor the Trust Fund created by the
applicable (Pooling and Servicing Agreement) (Trust Agreement) will be
subject to registration as an "investment company" under the Investment
Company Act of 1940, as amended (the "1940 Act").
(14) At the Closing Time, with respect to a Series of Securities,
the Securities, the applicable (Pooling and Servicing Agreement) (Trust
Agreement) (Indenture), the applicable Terms Agreement and any Credit
Enhancement, if any, will conform in all material respects to the
descriptions thereof contained in the Prospectus.
(15) At the Closing Time, with respect to a Series of Securities,
the Securities shall have received the certificate ratings specified in
the related Terms Agreement.
(b) The Underwriter represents and warrants to, and agrees with, the
Company as of the date hereof and as of the Representation Date that the
Underwriter has complied and will comply with all of its obligations arising
under Section 4 and, with respect to the Computational Materials and
Structural Term Sheets, if any, provided by the Underwriter to the Company
pursuant to Section 4, such Computational Materials and Structural Term
Sheets are accurate in all material respects (taking into account the
assumptions explicitly set forth in such Computational Materials and
Structural Term Sheets, except for any errors therein attributable to errors
or mistakes in the Pool Information). The Computational Materials and
Structural Term Sheets provided by the Underwriter to the Company constitute
a complete set of all Computational Materials and Structural Term Sheets
required to be filed with the Commission pursuant to the No-Action Letters.
Any certificate signed by an officer of the Company, the Guarantor, the
Master Servicer, the Insurer or a provider of Alternate Credit Enhancement
and delivered to you or counsel for the Underwriters in connection with an
offering of Securities shall be deemed, a representation and warranty as to
the matters covered thereby to each person to whom the representations and
warranties in this Section 1 are made.
SECTION 2. Purchase and Sale. The commitment of the Underwriters
-----------------
to purchase Securities pursuant to any Terms Agreement shall be deemed to
have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth.
Payment of the purchase price for, and delivery of, any Securities to
be purchased by the Underwriters shall be made at the office of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center, North
Tower, New York, New York 10281, or at such other place as shall be agreed
upon by you and the Company, at such time or date as shall be agreed upon by
you and the Company in the Terms Agreement (each such time and date being
referred to as a "Closing Time"). Unless otherwise specified in the
applicable Terms Agreement, payment shall be made to the Company, at the
option of the Company, either (a) by certified or official bank check or
checks in New York Clearing House or similar next day funds payable to the
order of the Company, or (b) in immediately available Federal funds wired to
such bank as may be designated by the Company; provided, however, that if
payment is made in immediately available Federal funds, the Company shall
simultaneously reimburse the Underwriters for the cost to the Underwriters
of such funds, based on the Underwriters' cost of borrowing such funds for
one day at their most favorable commercial paper rate at the Closing Time.
Such Securities shall be in such denominations and registered in such names
as you may request in writing at least two business days prior to the
applicable Closing Time. Such Securities, which may be in temporary form,
will be made available for examination and packaging by you no later than
12:00 noon on the first business day prior to the applicable Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with
------------------------
each of you and the Underwriters participating in the applicable offering of
a Series of Securities, as follows with respect to such Series of Securities:
(a) Contemporaneously with the execution of each Terms Agreement,
the Company will prepare a Prospectus Supplement setting forth the
principal amount of Securities covered thereby, the price or prices at
which the Securities are to be purchased by the Underwriters from the
applicable Trust, either the initial public offering price or prices or
the method by which the price or prices by which the Securities are to be
sold will be determined, the selling concession(s) and reallowance(s), if
any, any delayed delivery arrangements, and such other information as you
and the Company deem appropriate in connection with the offering of the
Securities. The Company will promptly transmit copies of the Prospectus
Supplement to the Commission for filing pursuant to Rule 424 under the
1933 Act and will furnish to the Underwriters as many copies of the
Prospectus and such Prospectus Supplement as you shall reasonably request.
(b) If at any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of the Securities by you or the
Underwriters, any event shall occur or condition exists as a result of
which it is necessary, in the opinion of your counsel, counsel for the
Company, or otherwise, to further amend or supplement the Prospectus in
order that the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of circumstances existing at the time
it is delivered to a purchaser, not misleading or if it shall be
necessary, in the opinion of any such counsel or otherwise, at any such
time to amend or supplement the Registration Statement or the Prospectus
in order to comply with the requirements of the 1933 Act or the
Regulations thereunder, the Company will promptly prepare and file with
the Commission such amendment or supplement as may be necessary to correct
such untrue statement or omission or to make the Registration Statement
comply with such requirements, and within two business days will furnish
to the Underwriters as many copies of the Prospectus, as so amended or
supplemented, as you shall reasonably request.
(c) The Company will give you reasonable notice of its intention
to file any amendment to the Registration Statement or any amendment or
supplement to the Prospectus, whether pursuant to the 1933 Act or
otherwise, will furnish you with copies of any such amendment or
supplement or other documents proposed to be filed a reasonable time in
advance of filing, and will not file any such amendment or supplement or
other documents in a form to which you or your counsel shall object.
(d) The Company will notify you immediately, and confirm the
notice in writing, (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the
Commission for filing of any supplement to the Prospectus or any
document, other than quarterly and annual reports to be filed pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 Act"), (iii)
of the receipt of any comments from the Commission with respect to the
Registration Statement, the Prospectus or any Prospectus Supplement,
(iv) of any request by the Commission for any amendment to the
Registration Statement of any amendment or supplement to the Prospectus
or for additional information, and (v) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose. The
Company will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(e) The Company will deliver to you as many signed and as many
conformed copies of the Registration Statement (as originally filed) and
of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated by
reference in the Prospectus) as you may reasonably request.
(f) The Company will endeavor, in cooperation with you, to qualify
the Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions of the United States as you
may designate, and will maintain or cause to be maintained such
qualifications in effect for as long as may be required for the
distribution of the Securities. The Company will file or cause the
filing of such statements and reports as may be required by the laws
of each jurisdiction in which the Securities have been qualified as
above provided.
(g) The Company will file the Computational Materials and
Structural Term Sheets provided to it by the Underwriter under Section 4
with the Commission pursuant to a Current Report on Form 8-K not later
than 10:00 a.m. on the day the Prospectus is delivered to the Underwriter
or, in the case of any Collateral Term Sheet required to be filed
pursuant to the No-Action Letters, not later than the second business day
following the first day on which the Collateral Term Sheet has been sent
to a prospective investor; provided, however, that as a condition to the
filing of the Computational Materials and Structural Term Sheets by the
Company, the Company must receive a letter from a firm of independent
certified public accountants, which letter shall be satisfactory
in form and substance to the Company and its counsel, to the effect that
such accountants have performed certain specified procedures, all of
which have been agreed to by the Company, as a result of which they have
determined the accuracy in all material respects of the numerical and
financial information included in the Computational Materials and
Structural Term Sheets provided by the Underwriter to the Company for
filing with the Commission.
SECTION 4. Computational Materials, Collateral Term Sheets and
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Structural Terms Sheets. It is understood that you may prepare and provide
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to prospective investors certain Computational Materials, Collateral Term
Sheets and Structural Term Sheets in connection with your offering of the
Securities, subject to the following conditions:
(a) The Underwriter shall comply with all applicable laws and
regulations in connection with the use of Computational Materials,
including the No-Action letter of May 20, 1994 issued by the Commission
to Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co.
Incorporated and Kidder Structured Asset Corporation as made applicable
to other issuers and underwriters by the Commission in response to the
request of the Public Securities Association dated May 24, 1994
(collectively, the "Kidder/PSA Letter"), as well as the PSA Letter
referred to below. The Underwriter shall comply with all applicable laws
and regulations in connection with the use of Collateral Terms Sheets and
Structural Term Sheets, including the No-Action Letter of February 17,
1995 issued by the Commission to the Public Securities Association
(the "PSA Letter" and, together with the Kidder/PSA Letter, the "No-Action
Letters").
(b) As used herein, "Computational Materials" shall have the
meaning given such term in the No-Action Letters, but shall include only
those Computational Materials that have been prepared and delivered to
prospective investors by or at the direction of the Underwriter.
As used herein, "Structural Term Sheets" and "Collateral Term Sheets"
shall have the meanings given such terms in the PSA Letter, but shall
include (i) only those Structural Term Sheets that have been prepared
and delivered to prospective investors by or at the direction of the
Underwriter and (ii) only those Collateral Term Sheets that have been
prepared by the Company or the Underwriter and delivered to prospective
investors by or at the direction of the Underwriter.
(c) The Underwriter shall provide to the Company copies (in such
format as is required by the Company) of all Computational Materials and
Structural Term Sheets that are required to be filed with the Commission
pursuant to the No-Action Letters. The Underwriter may provide to the
Company copies of the foregoing in a consolidated or aggregated form,
including all information required to be filed. All Computational
Materials and Structural Term Sheets must be provided to the Company by
the Underwriter not later than 10:00 a.m. on the first business day prior
to the day on which the filing of such materials is to be made with the
Commission.
(d) (i) All Computational Materials and Structural Term Sheets
provided to prospective investors by the Underwriter that are required to
be filed pursuant to the No-Action Letters shall bear a legend on each
page in the following form:
"THE INFORMATION HEREIN HAS BEEN PROVIDED SOLELY BY
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
("MERRILL LYNCH"). NEITHER MERRILL LYNCH, THE ISSUER
OF SECURITIES NOR ANY OF ITS AFFILIATES MAKES ANY
REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF
THE INFORMATION HEREIN. THE INFORMATION HEREIN IS
PRELIMINARY, AND WILL BE SUPERSEDED BY THE APPLICABLE
PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION
SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION."
(ii) In the case of Collateral Term Sheets, such legend
shall also include the following statement:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED
BY THE DESCRIPTION OF THE COLLATERAL POOL CONTAINED
IN THE PROSPECTUS SUPPLEMENT RELATING TO THE SECURITIES
AND SUPERSEDES ALL INFORMATION CONTAINED IN ANY
COLLATERAL TERM SHEETS RELATING TO THE COLLATERAL POOL
PREVIOUSLY PROVIDED BY MERRILL LYNCH."
Notwithstanding the foregoing legends, this subsection (d) shall be
satisfied if all Computational Materials, Structural Term Sheets and
Collateral Term Sheets bear a legend in a form or forms previously
approved in writing by the Company.
(e) The Company shall not be obligated to file any
Computational Materials or Structural Term Sheets that have been
determined to contain any material errors or omissions; provided, however,
that, at the request of the Underwriter, the Company shall file
Computational Materials or Structural Term Sheets containing material
errors or omissions if clearly marked "superseded by materials dated
____________" and accompanied by corrected Computational Materials or
Structural Term Sheets that are marked "these materials supersede and
correct the materials dated ____________."
SECTION 5. Conditions of Underwriters' Obligations. The
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obligations of the Underwriters to purchase Securities pursuant to any
Terms Agreement are subject to the accuracy of the representations and
warranties on the part of the Company herein contained, to the accuracy of
the statements of the Company's officers made pursuant hereto, to the
performance by the Company of all of its obligations hereunder and to the
following further conditions:
(a) At the applicable Closing Time (i) no stop order suspending
the effectiveness of the Registration Statement shall have been issued or
proceedings therefor initiated or threatened by the Commission, (ii) the
Securities shall have received the rating or ratings specified in the
applicable Terms Agreement, and (iii) there shall not have come to your
attention any facts that would cause you to believe that the Prospectus
at the time it was required to be delivered to a purchaser of the
Securities, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at such time, not
misleading.
(b) At the applicable Closing Time, you shall have received:
(1) The favorable opinion, dated as of the applicable
Closing Time, of Brown & Wood LLP, special counsel to the Company,
in form and substance satisfactory to such of you as may be named in
the applicable Terms Agreement, to the effect that:
(i) The Company is validly existing as a corporation
in good standing under the laws of the State of Delaware.
(ii) The Company has the corporate power and corporate
authority to carry on its business as described in the
Prospectus and to own and operate its properties in connection
therewith.
(iii) This Agreement has been duly authorized, executed
and delivered by the Company.
(iv) The [Pooling and Servicing Agreement] [Trust
Agreement] has been duly authorized, executed and delivered by
the Company and is a valid and binding obligation of the
Company, enforceable against the Company in accordance with
its terms, except that (A) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and (B) such enforcement may be limited by
general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).
(v) The execution and delivery by the Company of this
Agreement and the (Pooling and Servicing Agreement) (Trust
Agreement) and the signing of the Registration Statement by
the Company are within the corporate power of the Company and
have been duly authorized by all necessary corporate action on
the part of the Company; and neither the issue and sale of the
Securities, nor the consummation of the transactions
contemplated in this Agreement nor the fulfillment of the terms
of such Underwriting Agreements will result in any violation of
the provisions of the certificate of incorporation or by-laws
of the Company or, to the best of such counsel's knowledge,
any New York or federal law, administrative regulation or
administrative or court decree applicable to the Company.
(vi) The Securities have been duly authorized by the
Company and, when executed and authenticated as specified in
the (Pooling and Servicing Agreement) (Trust Agreement)
(Indenture) and delivered and paid for pursuant to this
Agreement and the Sale Agreement, will be duly issued and
entitled to the benefits of the (Pooling and Servicing
Agreement) (Trust Agreement) (Indenture).
(vii) To the best of such counsel's knowledge, no
filing or registration with or notice to or consent, approval,
authorization or order of any New York or federal court or
governmental authority or agency is required for the
consummation by the Company of the transactions contemplated by
this Agreement, except such as may be required under the 1933
Act, the Regulations, state securities or Blue Sky laws.
(viii) The Registration Statement is effective under the
1933 Act and, to the best of such counsel's knowledge and
information, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission.
(ix) The Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of 1939,
as amended.
(x) To the best of such counsel's knowledge, there
are no contracts or documents of the Company which are
required to be filed as exhibits to the Registration Statement
pursuant to the 1933 Act or the Regulations thereunder which
have not been so filed.
(xi) The statements in the Prospectus under the
heading "Certain Federal Income Tax Consequences," to the
extent that they constitute matters of law or legal conclusions
with respect thereto, have been prepared or reviewed by such
counsel and are correct in all material respects.
(xii) The Trust Fund created by the Pooling and
Servicing Agreement is not required to register as an
"investment company" under the Investment Company Act of 1940,
as amended.
(xiii) The statements in the Prospectus under the
caption "Description of the Securities," insofar as such
statements purport to summarize certain terms of the Securities
and the (Pooling and Servicing Agreement) (Trust Agreement)
(Indenture), constitute a fair summary of such documents in
all material respects.
(xiv) The Registration Statement, as of the date it
becomes effective, and the Prospectus, as of the date thereof
(other than, in each case, the financial statements and other
financial, statistical and numerical information included
therein, as to which no opinion is rendered), complied as to
form in all material respects with the requirements of the
1933 Act and the Regulations thereunder.
((xv) Based solely upon the representations of the
Master Servicer in the Pooling and Servicing Agreement, the
Class A Securities will be mortgage related securities, as
defined in Section 3(a)(41) of the Securities Exchange Act of
1934, as amended, so long as such Securities are rated in one
of the two highest grades by at least one nationally recognized
statistical rating organization.)
((xvi) Based solely upon the representations and
warranties of the Master Servicer in the Pooling and Servicing
Agreement and assuming compliance with the pertinent provisions
of the Pooling and Servicing Agreement, as of the date of such
opinion, under existing law, the Trust Fund will qualify as
a real estate mortgage investment conduit (a "REMIC") under
the Internal Revenue Code of 1986, as amended, the Class
A and the Class B Securities will be treated as "regular
interests" in such REMIC and the Class R Securities will be
treated as the single class of "residual interests" in such
REMIC.)
Such counsel shall deliver to you such additional opinions addressing
the transfer by the Company to the Trustee of its right, title and
interest in and to the Assets and other property included in the Trust
Fund on the Closing Time as may be required by each Rating Agency rating
the Securities.
Such counsel shall state that it has participated in conferences with
officers and other representatives of the Company, your counsel,
representatives of the independent accountants for the Company and you at
which the contents of the Registration Statement and the Prospectus were
discussed and, although such counsel is not passing upon and does not
assume responsibility for, the factual accuracy, completeness or fairness
of the statements contained in the Registration Statement or the Prospectus
(except as stated in paragraphs (xii) and (xiv) above) and has
made no independent check or verification thereof for the purpose of
rendering this opinion, on the basis of the foregoing (relying as to
materiality to a large extent upon the certificates of officers and other
representatives of the Company), nothing has come to their attention that
leads such counsel to believe that either the Registration Statement, at
the time it became effective, or the Prospectus at the time the Prospectus
was delivered to you contained or at the closing time, contains an untrue
statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that such counsel need
express no view with respect to the financial statements, schedules and
other financial and statistical data included in or incorporated by
reference into the Registration Statement or the Prospectus.
Said counsel may state that they are admitted to practice only in the
State of New York, that they are not admitted to the Bar in any other
State and are not experts in the law of any other State and to the extent
that the foregoing opinions concern the laws of any other State such
counsel may rely upon the opinion of counsel satisfactory to the
Underwriters and admitted to practice in such jurisdiction. Any opinions
relied upon by such counsel as aforesaid shall be addressed to the
Underwriters and shall be delivered together with the opinion of such
counsel, which shall state that such counsel believes that their reliance
thereon is justified.
(2) The favorable opinion of counsel to the (Owner)
(Indenture) Trustee, dated as of the applicable Closing Time,
addressed to you and in form and scope satisfactory to your counsel,
to the effect that:
(i) The (Owner) (Indenture) Trustee is a
____________________ with trust powers, duly organized and
validly existing in good standing under the laws of
________________________, and has all requisite power and
authority to enter into the Agreement and perform the
obligations of Trustee.
(ii) The (Pooling and Servicing Agreement) (Trust
Agreement) (Indenture) has been duly authorized, executed, and
delivered by the (Owner) (Indenture) Trustee, and constitutes
the legal, valid, and binding obligation of the (Owner)
(Indenture) Trustee enforceable against the (Owner) (Indenture)
Trustee in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy and insolvency laws
and other similar laws affecting the enforcement of creditors'
rights generally and by general equity principles.
In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent deemed proper and stated therein, on certificates of
responsible officers of the (Owner) (Indenture) Trustee or public
officials.
(3) The favorable opinion of counsel to the Master
Servicer, dated as of the applicable Closing Time, addressed to you
and in form and scope satisfactory to your counsel, to the effect
that:
(i) The Master Servicer has been duly organized and
is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and is duly
qualified to do business, and is in good standing, as a foreign
corporation under the laws of each jurisdiction in which the
performance of its duties under the applicable Pooling and
Servicing Agreement would require such qualification.
(ii) The execution and delivery by the Master Servicer
of the applicable Pooling and Servicing Agreement is within the
corporate power of the Master Servicer and has been duly
authorized by all necessary corporate action on the part of the
Master Servicer; and neither the execution and delivery of such
instrument, nor the consummation of the transactions provided
for therein, nor compliance with the provision thereof,
will conflict with or constitute a breach of, or default under,
any contract, indenture, mortgage, loan agreement, note, lease,
deed of trust, or other instrument to which the Master Servicer
is a party or by which it may be bound, nor will such action
result in any violation of the provisions of the charter or
by-laws of the Master Servicer or any law, administrative
regulation or administrative or court decree.
(iii) The applicable Pooling and Servicing Agreement
has been duly executed and delivered by the Master Servicer
and constitute a valid and binding obligation of the Master
Servicer enforceable against the Master Servicer in accordance
with its terms, except that such enforceability thereof may
be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and subject as to enforceability, to general
principles of equity (regardless whether enforcement is sought
in a proceeding in equity or at law).
(iv) The execution, delivery and performance by the
Master Servicer of the applicable Pooling and Servicing
Agreement do not require the consent or approval of, the giving
of notice to, the registration with, or the taking of any other
action in respect of any federal, state or other
governmental agency or authority which has not previously
been effected.
(v) The description of the Master Servicer in the
Prospectus and the Prospectus Supplement is true and correct
in allmaterial respects.
((4) The favorable opinion of counsel to each provider
of Credit Enhancement, if any, named in a Prospectus Supplement,
dated as of the applicable Closing Time, addressed to you and in
form and scope satisfactory to your counsel, to the effect that:
(i) Such provider of Credit Enhancement has been duly
organized and is validly existing as a corporation under the
laws of the jurisdiction of its incorporation, is duly qualified
to do business in all jurisdictions where the nature of its
operations as contemplated by the Credit Enhancement legally
requires such qualification, and has the power and authority
(corporate and other) to issue, and to take all action required
of it under, the Credit Enhancement.
(ii) The execution, delivery and performance by such
provider of Credit Enhancement of the Credit Enhancement have
been duly authorized by all necessary corporate action on the
part of the provider of Credit Enhancement, and under present
law do not and will not contravene any law or governmental
regulation or order presently binding on such provider of
Credit Enhancement or the charter of the by-laws of such
provider of Credit Enhancement or contravene any provision of
or constitute a default under any indenture, contract or other
instrument to which the provider of Credit Enhancement is a
party or by which such provider of Credit Enhancement is bound.
(iii) The execution, delivery and performance by such
provider of Credit Enhancement of the Credit Enhancement do
not require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action
in respect of any federal, state or other governmental agency
or authority which has not previously been effected.
(iv) The Credit Enhancement has been duly issued by
such provider of Credit Enhancement and constitutes the valid
and binding agreement of such provider of Credit Enhancement,
enforceable against the provider of Credit Enhancement in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and subject as to
enforceability to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(v) The Credit Enhancement conforms in all material
respects to the description thereof in the applicable
Prospectus Supplement under the caption "Credit Enhancement."
To the extent required by applicable legal requirements, the
Credit Enhancement form has been filed with, and approved by,
all governmental authorities having jurisdiction over the
provider of Credit Enhancement in connection with such Credit
Enhancement.)
(5) The favorable opinion or opinions, dated as of
the applicable Closing Time, of counsel for the Underwriters, with
respect to the issue and sale of the Securities, the Registration
Statement, this Agreement, the applicable Terms Agreement, the
Prospectus, the applicable Prospectus Supplement and other related
matters as the Underwriters may require.
(c) At the applicable Closing Time you shall have received a
certificate of an Assistant Vice President (or more senior officer) of
the Company, dated as of such Closing Time, to the effect that the
representations and warranties of the Company contained in Section 1 are
true and correct with the same force and effect as though such Closing
Time were a Representation Date.
(d) You shall have received from independent certified public
accountants acceptable to you, a letter, dated as of the date of the
applicable Terms Agreement and as of the applicable Closing Time,
delivered at such times, in the form heretofore agreed to.
(e) At the applicable Closing Time, with respect to a Series of
Securities, each of the representations and warranties of the Master
Servicer set forth in the related Pooling and Servicing Agreement will be
true and correct.
(f) At the applicable Closing Time, with respect to a Series of
Securities, the Securities shall have received the certificate rating or
ratings specified in the related Terms Agreement.
(g) At the applicable Closing Time, counsel for the
Underwriters shall have been furnished with such documents as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of any
of the representations and warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein
contemplated shall be satisfactory in form and substance to you and
counsel for the Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms
Agreement may be terminated by you by notice to the Company at any time at
or prior to the Applicable Closing Time, and such termination shall be
without liability of any party to any other party except as provided in
Section 6.
SECTION 6. Payment of Expenses. The Company will pay all
-------------------
expenses incident to the performance of its obligations under this
Agreement and any Terms Agreement, including without limitation those
related to (i) the filing of the Registration Statement and all amendments
thereto, (ii) the printing and delivery to the Underwriters, in such
quantities as you may reasonably request, of copies of this Agreement,
each Terms Agreement, any agreements among Underwriters, the Memorandum
and any selling agreements and Underwriters' questionnaires and powers of
attorney, (iii) the preparation, issuance and delivery of the Securities
to the Underwriters, (iv) the fees and disbursements of the Company's
counsel and accountants, (v) the qualification of the Securities under
Securities and Blue Sky laws and the determination of the eligibility of
the Securities for investment in accordance with the provisions of Section
3(f), including filing fees, and the fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the
preparation of any Blue Sky Survey and Legal Investment Survey, (vi) the
printing and delivery to the Underwriters, in such quantities as you may
reasonably request, hereinabove stated, of copies of the Registration
Statement, and Prospectus and all amendments and Supplements thereto, and
of any Blue Sky Survey and Legal Investment Survey, (vii) the printing and
delivery to the Underwriter, in such quantities as you may reasonably
request, of copies of each Pooling and Servicing Agreement, (viii) the
fees charged by investment rating agencies for rating the Securities, (ix)
the fee and expenses, if any, incurred in connection with the listing of
the Securities on any national securities exchange, and (x) the fees and
expenses of the Trustee and its counsel. The cost of the accountant's
comfort letter referred to in Section 3(g) will be an expense of the
Underwriter.
If a Terms Agreement is terminated by you in accordance with the
provisions of Section 5 or Section 10(i), the Company shall reimburse you
for all reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of counsel for the Underwriters.
SECTION 7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the
Underwriters and each person, if any, who controls the Underwriters within
the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading, unless (A) such untrue statement or omission
or alleged untrue statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the
Underwriters expressly for use in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement
thereto) or (B) such untrue statement or omission or alleged untrue
statement or omission relates to information in any Computational
Materials or Structural Term Sheets provided by the Underwriter to the
Company pursuant to Section 4 (except to the extent that any untrue
statements or errors contained therein are based on or constitute Pool
Information);
(ii) against any and all loss, liability, claim,
damage and expense whatsoever to the extent of the aggregate amount paid
in settlement of any litigation, or investigation or proceeding by any
governmental agency, or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever (including
the fees and disbursements of counsel chosen by you) reasonably incurred
in investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have. Insofar as this indemnity may permit
indemnification for liabilities under the 1933 Act of any person who is a
partner of the Underwriter entitled to indemnity hereby or who controls
the Underwriters within the meaning of Section 15 of the 1933 Act and who,
at the date of this Agreement, is a director, officer or controlling
person of the Company, such indemnity agreement is subject to the undertaking
of the Company in the Registration Statement.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of the Company's directors, each of the
Company's officers who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the
1933 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section,
but only with respect to (i) untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information
furnished to the Company by the Underwriters expressly for use in the
Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) or (ii) information in any
Computational Materials or Structural Term Sheets provided by the
Underwriter to the Company pursuant to Section 4 (except to the extent
that any untrue statements or errors contained therein are based on or
constitute Pool Information). This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise have.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it with respect to
which indemnity may be sought hereunder but failure to so notify an
indemnifying party shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of
such action. In no event shall the indemnifying parties be liable for the
fees and expenses of more than one counsel for all indemnified parties in
connection with any one action or separate but similar or related actions
in the same jurisdiction arising out of the same general allegations or
circumstances.
SECTION 8. Contribution. In order to provide for just and
------------
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 7 is for any reason held to be unenforceable by
the indemnified parties although applicable in accordance with its terms,
the Company on the one hand, and the Underwriters, on the other, shall
contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred
by the Company and one or more of the Underwriters in such proportions
that the Underwriters are responsible for that portion represented by the
underwriting compensation earned by them bears to the initial public
offering price or prices and the Company shall be responsible for the
balance; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each
person, if any, who controls the Underwriters within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as
the Underwriters and each director of the Company, such officer of the
Company who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as the Company.
SECTION 9. Representations, Warranties, and Agreements to
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Survive Delivery. All representations, warranties and agreements
- ----------------
contained in this Agreement, or contained in certificates of officers of
the Company submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any termination of this Agreement, or any
investigation made by or on behalf of the Underwriters or controlling
person thereof, or by or on behalf of the Company and shall survive
delivery of any Securities to the Underwriters.
SECTION 10. Termination of Agreement. This Agreement may be
------------------------
terminated for any reason at any time by either the Company or you upon
the giving of thirty days' notice of such termination to the other party
hereto. You, as Representative of the Underwriters named in any Terms
Agreement, may also terminate such Terms Agreement, immediately upon
notice to the Company, at any time at or prior to the applicable Closing
Time (i) if there has been, since the date of such Terms Agreement or
since the respective dates as of which information is given in the Regis-
tration Statement or Prospectus any change, or any development involving a
prospective change, in or affecting the condition, financial or otherwise,
earnings, affairs or business of the Company, whether or not arising in
the ordinary course of business, which in your judgment would materially
impair the market for, or the investment quality of, the Securities to be
purchased pursuant to such Terms Agreement, or (ii) if there has occurred
any outbreak of hostilities or other calamity or crisis the effect of which on
the financial markets of the United States is such as to make it, in your
judgment, impracticable to market such Securities or enforce contracts for
the sale of such Securities, or (iii) if trading generally on either the New
York Stock Exchange or the American Stock Exchange has been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by either Federal or New York authorities. In
the event of any such termination, (A) the covenants set forth in Section 3
with respect to any offering of such Securities shall remain in effect so long
as the Underwriters own any such Securities purchased from the Company pursuant
to the applicable Terms Agreement and (B) the covenant set forth in
Section 3(c), the provisions of Section 6, the indemnity agreement set
forth in Section 7, the contribution provisions set forth in Section 8,
and the provisions of Section 9 and 14 shall remain in effect.
SECTION 11. Default by One or More of the Underwriters. If one
------------------------------------------
or more of the Underwriters participating in an offering of Securities
shall fail at the applicable Closing Time to purchase the Securities which
it or they are obligated to purchase hereunder and under the applicable
Terms Agreement (the "Defaulted Securities"), then such of you as are
named therein shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any
other Underwriters, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, you have not completed such
arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted
Securities does not exceed 10% of the aggregate principal amount of the
Securities to be purchased pursuant to such Terms Agreement, the non-
defaulting Underwriters named in such Terms Agreement shall be obligated
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all such non-defaulting Underwriters, or
(b) if the aggregate principal amount of Defaulted
Securities exceeds 10% of the aggregate principal amount of the
Securities to be purchased pursuant to such Terms Agreement, the
applicable Terms Agreement shall terminate, without any liability on the
part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriters from liability with respect to any default of such
Underwriters under this Agreement and the applicable Terms Agreement.
In the event of a default by any Underwriters as set forth in this
Section, either you or the Company shall have the right to postpone the
applicable Closing Time for a period of time not exceeding seven days in
order that any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements may be effected.
SECTION 12. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given
if mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed to you at the address set
forth on the first page hereof, attention Syndicate Department. Notices
to the Company shall be directed to Merrill Lynch Mortgage Investors,
Inc., 250 Vesey Street, World Financial Center - North Tower, 10th Floor,
New York, New York 10281-1310, attention of the Secretary, with a copy to
the Treasurer.
SECTION 13. Parties. This Agreement shall inure to the benefit
-------
of and be binding upon you and the Company and any Terms Agreement shall
inure to the benefit of and be binding upon the Company and any
Underwriters who become a party to any Terms Agreement, and their
respective successors. Nothing expressed or mentioned in this Agreement
or any Terms Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto or thereto and
their respective successors and the controlling person and officers and
directors referred to in Sections 7 and 8 and their heirs and legal repre-
sentatives any legal or equitable right, remedy or claim under or with
respect to this Agreement or any Terms Agreement or any provision herein
or therein contained. This Agreement and any Terms Agreement and all
conditions and provisions hereof or thereof are intended to be for the
sole and exclusive benefit of the parties and their respective successors
and their heirs and legal representative (to the extent of their rights as
specified herein and therein) and for the benefit of no other person, firm
or corporation. No purchaser of Securities from any Underwriters shall be
deemed to be a successor by reason merely of such purchase.
SECTION 14. Governing Law and Time. This Agreement and each
----------------------
Terms Agreement shall be governed by the laws of the State of New York.
Specified times of day refer to New York City time.
SECTION 15. Counterparts. This Agreement and any Terms
------------
Agreement may be executed in counterparts, each of which shall constitute
an original of any party whose signature appears on it, and all of which
shall together constitute a single instrument.
* * *
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding
agreement between you and the Company in accordance with its terms.
Very truly yours,
MERRILL LYNCH MORTGAGE INVESTORS, INC.
By
-----------------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By____________________________
Name:
Title:
MERRILL LYNCH MORTGAGE INVESTORS, INC.
ASSET BACKED SECURITIES, SERIES 199_____
TERMS AGREEMENT
---------------
Dated: _____________, 199_
To: Merrill Lynch Mortgage Investors, Inc., as Depositor (the
"Depositor") under the Pooling and Servicing Agreement to be dated
as of _____________, 199_ (the "Agreement").
Re: Underwriting Agreement dated ____________, 199_.
Series Designation: Merrill Lynch Mortgage Investors, Inc., Asset Backed
- ------------------
Securities, Series 199_-_.
Terms of the Securities and Underwriting Compensation:
- -----------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class (1) Original Pass-Through Price to
-------- Principal Rate Public
Amount ------------ ---------
$__________* ** ***
</TABLE>
_________________________
(1) The Class __ Securities are the Offered Securities. The Class __
Security is subordinate to the Offered Securities.
* Approximate. Subject to permitted variance of plus or minus 5%.
** Subject to the more precise formulation described in the Prospectus
(as defined below).
*** The Class __ Securities are being offered by the Underwriter from
time to time in negotiated transactions or otherwise at varying prices to
be determined, in each case, at the time of sale.
Moody's Standard &
Security Investors Poor's Ratings
Rating Service Services
- ----------- --------- --------------
(REMIC Election:
--------------
The Depositor intends to cause the Trust Fund (exclusive of the
security interest in the Additional Collateral) to elect to be treated as
a REMIC as described in the Prospectus dated ___________, 199_ and the
Prospectus Supplement relating to the Class __ Securities, dated
____________, 199_ (together, the "Prospectus").)
Trust Fund:
- ----------
As described in the Prospectus.
(Credit Enhancement:
------------------
Payments on the Class __ Securities will be supported by (a limited
purpose surety bond), (a certificate insurance policy), (subordinate
class(es)) and (by overcollateralization), as described in the
Prospectus.)
Cut-off Date:
- ------------
___________, 199_.
Distribution Date:
- -----------------
The __th day of each month or, if such day is not a Business Day, the
first Business Day thereafter, commencing in _____ 199.
Purchase Price:
- --------------
The purchase price payable by the Underwriter for the Class __
Securities is a percentage of the principal amount of such Class, as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Aggregate Original
Principal Percentage
Class Amount of
------ ------------------ Principal
----------
$ % *
</TABLE>
* The Class __ Securities are being offered by the Underwriter from
time to time in negotiated transactions or otherwise at varying prices to be
determined, in each case, at the time of sale.
(The undersigned represents and agrees that (i) it has not offered or
sold and, prior to the expiration of the period of six months from the
Closing Date referred to below, will not offer or sell any Class __
Securities to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances that have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulation 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Class __ Securities in, from or otherwise involving the United Kingdom;
and (iii) it has only issued or passed on and will only issue or pass on
in the United Kingdom any documents received by it in connection with the
issue of the Class __ Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements)(Exemptions) Order 1995, or is a person to whom such
document may otherwise lawfully be issued or passed on.)
* * *
Closing Date and Location:
- -------------------------
_____________, 199_ at the offices of Brown & Wood LLP, One World Trade
Center, New York, New York 10048.
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:_____________________________
Name:
Title:
ACCEPTED:
MERRILL LYNCH MORTGAGE INVESTORS, INC.
By:__________________________
Name:
Title:
Exhibit 3.1
OFFICERS CERTIFICATE RELATING TO
RESTATED CERTIFICATE OF INCORPORATION
OF
MERRILL LYNCH MORTGAGE INVESTORS, INC.
The undersigned, Bowers W. Espy, III, the President, and Steven B.
Theobald, the Secretary of Merrill Lynch Mortgage Investors, Inc., a Delaware
corporation (the "Corporation"), pursuant to Section 245 of the General
Corporation Law of the State of Delaware, do hereby certify and set forth as
follows:
1. The name of the Corporation is Merrill Lynch Mortgage
Investors, Inc.
2. The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on June 13,
1986. The original Certificate of Incorporation was amended and restated as
filed with the Secretary of State of the State of Delaware on April 27, 1987.
3. By unanimous written consent of the Board of Directors, a
resolution was duly adopted setting forth the following amendment and
restatement of the Certificate of Incorporation of the Corporation, declaring
such amendment and restatement to be advisable and directing such statement
to be submitted to the sole stockholder for approval and said amendment and
restatement was adopted by the sole stockholder by its written consent in
accordance with Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware.
4. The Certificate of Incorporation of the Corporation is
restated hereby to read in its entirety as follows:
RESTATED
CERTIFICATE OF INCORPORATION
OF
MERRILL LYNCH MORTGAGE INVESTORS, INC.
FIRST: The name of the Corporation is Merrill Lynch Mortgage Investors,
-----
Inc. (hereinafter referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent
at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is limited to: (a) issuing and
-----
selling one or more series of bonds secured primarily by mortgage collateral
and manufactured housing conditional sales contracts and loan agreements (the
"Contracts"), investing in certain mortgage collateral and Contracts to be
purchased with the proceeds of bonds secured by such mortgage collateral and
Contracts and taking certain other action with respect thereto, (b) selling
interests in mortgage loans, mortgage collateral and Contracts, evidencing
such interests with pass-through certificates, using the proceeds of the sale
of the pass-through certificates to acquire the mortgage loans, mortgage
collateral and Contracts, retaining an interest, including a subordinated
interest, in the mortgage loans, mortgage collateral or Contracts required
and sold and taking certain other action with respect thereto, and (c) acting
as settlor or depositor of trusts formed to issue series of bonds secured by
mortgage obligations, pass-through certificates in mortgage loans or other
mortgage collateral and Contracts and investing in or selling beneficial
interests in the same. The Corporation is not otherwise authorized to trade
or deal in securities or engage in any other activity other than issuing and
selling bonds or pass-through certificates under an indenture, trust
agreement, pooling and servicing agreement or other agreement, acting as
settlor or depositor of a trust formed to issue and sell bonds or
pass-through certificates and investing in or selling beneficial interests
in the same, acquiring, owning, holding and pledging or selling interests in
residential mortgage loans, mortgage collateral and Contracts, investing cash
balances on an interim basis in certain short-term investments and engaging
in activities incidental to and necessary to accomplish the foregoing.
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01).
FIFTH:
-----
(1) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the By-Laws of
the Corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide. At least one director and one executive officer of the
Corporation (who may be the same person) will not be a director, officer or
employee of any direct or ultimate parent of the Corporation.
(4) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
General Corporation Law of the State of Delaware (the "GCL"), this
Certificate of Incorporation and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders
shall invalidate any prior act of the directors which would have been valid
if such By-Laws had not been adopted. The Corporation's board of directors
will duly authorize all of the Corporation's actions.
(5) The Corporation's assets will not be commingled with those of
any direct or ultimate parent of the Corporation.
(6) The Corporation will maintain separate corporate records and
books of account from those of any direct or ultimate parent of the
Corporation.
(7) The Corporation will maintain and conduct its business from
an office separate from that of any direct or ultimate parent, or affiliate,
of the Corporation.
SIXTH: Meetings of stockholders may be held within or without the State
-----
of Delaware, as the By-Laws may provide.
The books of the Corporation may be kept (subject to any provision contained
in the GCL) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the By-Laws of
the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
-------
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of the GCL or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of the
GCL, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
EIGHTH: No director shall be personally liable to the Corporation or any
------
of its stockholders for monetary damages for breach o(Pound Sterling)
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) pursuant to Section 174 of the GCL or
(iv) for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article EIGHTH by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification with respect to acts or omissions occurring prior to
such repeal or modification.
NINTH: The Corporation reserves the right to amend, alter, change or
-----
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
made under the seal of the Corporation and has been signed by the undersigned
President of the Corporation, and attested by the undersigned Secretary
o(Pound Sterling) the Corporation, as of this 22nd day of July, 1987.
______________________________
Bowers W. Espy
President
ATTEST:
______________________________
Steven B. Theobald
Secretary
(Corporate Seal)
OFFICERS CERTIFICATE RELATING TO
RESTATED CERTIFICATE OF INCORPORATION
OF
MERRILL LYNCH MORTGAGE INVESTORS, INC.
The undersigned, Bowers W. Espy, III, the President, and Steven B.
Theobald, the Secretary of Merrill Lynch Mortgage Investors, Inc., a Delaware
corporation (the "Corporation"), pursuant to Section 245 of the General
Corporation Law of the State of Delaware, do hereby certify and set forth as
follows:
1. The name of the Corporation is Merrill Lynch Mortgage
Investors, Inc.
2. The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on June 13,
1986. The original Certificate of Incorporation was amended and restated as
filed with the Secretary of State of the State of Delaware on April 27, 1987.
3. By unanimous written consent of the Board of Directors, a
resolution was duly adopted setting forth the following amendment and
restatement of the Certificate of Incorporation of the Corporation, declaring
such amendment and restatement to be advisable and directing such statement
to be submitted to the sole stockholder for approval and said amendment and
restatement was adopted by the sole stockholder by its written consent in
accordance with Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware.
4. The Certificate of Incorporation of the Corporation is restated
hereby to read in its entirety as follows:
Exhibit 3.2
BY-LAWS
OF
MERRILL LYNCH MORTGAGE INVESTORS, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the
--------- -----------------
Corporation shall be in the City of Wilmington, County of Newcastle, State
of Delaware.
Section 2. Other Offices. The Corporation may also have
--------- -------------
offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for
--------- -----------------
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of
--------- ---------------
Stockholders shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting, at which meetings the stockholders shall elect by a
plurality vote a Board of Directors, and transact such other business as may
properly be brought before the meeting. Written notice of the Annual Meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by
--------- ----------------
law or by the Certificate of Incorporation, Special Meetings of Stockholders,
for any purpose or purposes, may be called by either (i) the Chairman, if
there be one, or (ii) the President, (iii) any Vice President, if there be
one, (iv) the Secretary or (v) any Assistant Secretary, if there be one, and
shall be called by any such officer at the request in writing of a majority
of the Board of Directors or at the request in writing of stockholders owning
a majority of the capital stock of the Corporation issued and outstanding and
entitled to vote. Such
request shall state the purpose or purposes of the proposed meeting. Written
notice of a Special Meeting stating the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called shall be given
not less than ten nor more than sixty days before the date of the meeting to
each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by
--------- ------
the Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the
--------- ------
Certificate of Incorporation or these By-Laws, any question brought before
any meeting of stockholders shall be decided by the vote of the holders of
a majority of the stock represented and entitled to vote thereat. Each
stockholder represented at a meeting of stockholders shall be entitled to
cast one vote for each share of the capital stock entitled to vote thereat
held by such stockholder. Such votes may be cast in person or by proxy but
no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such
meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
--------- ------------------------------------------
otherwise provided in the Certificate of Incorporation, any action required
or permitted to be taken at any Annual or Special Meeting of Stockholders of
the Corporation, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in
writing.
Section 7. List o(Pound Sterling) Stockholders Entitled to
---------
Vote. The officer of the Corporation who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation
--------- ------------
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 7 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The
--------- -----------------------------------------
Board of Directors shall consist of not less than one nor more than fifteen
members, the exact number of which shall initially be fixed by the
Incorporator and thereafter from time to time by the Board of Directors. The
Board of Directors shall at all times include at least one Director who is
not a director, officer or employee of the Corporation's direct or indirect
parent. Except as provided in Section 2 of this Article, directors shall be
elected by a plurality of the votes cast at Annual Meetings of Stockholders,
and each director so elected shall hold office until the next Annual Meeting
and until his successor is duly elected and qualified, or until his earlier
resignation or removal. Any director may resign at any time upon notice to
the Corporation. Directors need not be stockholders. At any time, Directors
may be removed and their successors chosen
by the unanimous written consent of the holders of the outstanding stock of
the Corporation entitled to vote on the election of Directors.
Section 2. Vacancies. Subject to Section 1 of this Article,
--------- ---------
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors
then in office, though less than a quorum, or by a sole remaining director,
and the directors so chosen shall hold office until the next annual election
and until their successors are duly elected and qualified, or until their
earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation
--------- -----------------
shall be managed by or under the direction of the Board of Directors which
may exercise all such powers of the Corporation and do all such lawful acts
and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws directed or required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors of the Corporation
--------- --------
may hold meetings, both regular and special, either within or without the
State of Delaware. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the Chairman, if there be one, the President, or
any two directors. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in
the circumstances.
Section 5. Quorum. Except as may be otherwise specifically
--------- ------
provided by law, the Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors, a majority of the entire Board of
Directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors. If a quorum shall not
be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
--------- ----------------
Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all the members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless
--------- -----------------------------------------
otherwise provided by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting pursuant
to this Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by
--------- ----------
resolution passed by a majority of the entire Board of Directors, designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence
of a designation by the Board of Directors of an alternate member to replace
the absent or disqualified member, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation. Each committee shall keep regular
minutes and report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their
--------- ------------
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction
---------- --------------------
between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such
purpose if (i) the material facts as to his or their relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
--------
Section 1. General. The officers of the Corporation shall be
--------- -------
chosen by the Board of Directors and shall be a President, a Secretary and
a Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice-Presidents or Assistant Vice-Presidents, Assistant Secretaries,
Assistant Treasurers and other officers. The Corporation shall at all times
have at least one executive officer who is not a director, officer or
employee of the direct or indirect parent of the Corporation (such executive
officer may be the same person as the one Director, referred to in Article
III, Section 1, who is not a director, officer or employee of the direct or
indirect parent of the Corporation). Any number of offices may be held by
the same person, unless otherwise prohibited by law, the Certificate of
Incorporation or these By-Laws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the
Chairman of the Board of Directors, need such officers be directors of the
Corporation.
Section 2. Election. The Board of Directors at its first
--------- --------
meeting held after each Annual Meetings of Stockholders shall elect the
officers of the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors are chosen and
qualified, or until their earlier resignation or removal. Any officer
elected by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the Corporation shall be filled by the Board of
Directors. The salaries of all officers of the Corporation shall be fixed
by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers
--------- ------------------------------------------
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed
in the name of and on behalf of the Corporation by the President or any
Vice-President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident
to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman
--------- ----------------------------------
of the Board of Directors, if there be one, shall preside at all meetings of
the stockholders and of the Board of Directors. He shall be the Chief
Executive Officer of the Corporation, and except where by law the signature
of the President is required, the Chairman of the Board of Directors shall
possess the same power as the President to sign all contracts, certificates
and other instruments of the Corporation which may be authorized by the Board
of Directors. During the absence or disability of the President, the
Chairman of the Board of Directors shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 5. President. The President shall, subject to the
--------- ---------
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal, under
the seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these
By-Laws, the Board of Directors or the President. In the absence or
disability of the Chairman of the Board of Directors, or if there be none,
the President shall preside at all meetings of the stockholders and the Board
of Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 6. Vice-Presidents. At the request of the President
--------- ---------------
or in his absence or in the event of his inability or refusal to act (and if
there be no Chairman of the Board of Directors), the Vice-President or the
Vice-Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice-President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice-
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings
--------- ---------
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. If the
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and
if there be no Assistant Secretary, then either the Board of Directors or the
President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary
or any Assistant Secretary, if there be one, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be
attested by the signature of the Secretary or by the signature of any such
Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to
be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of
--------- ---------
the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, the Treasurer
shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
--------- ---------------------
provided in these By-Laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned
to them by the Board of Directors, the President, any Vice-President, if
there be one, or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
---------- --------------------
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the
Board of Directors, the President, any Vice-President, if there be one, or
the Treasurer, and in the absence of the Treasurer or in the event of his
disability or refusal to act, shall perform the duties of the Treasurer, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Treasurer. If required by the Board of Directors, an
Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 11. Other Officers. Such other officers as the Board
---------- --------------
of Directors may choose shall perform such duties and have such powers as
from time to time may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties
and powers.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the
--------- --------------------
Corporation shall be entitled to have a certificate signed, in the name of
the Corporation (i) by the Chairman of the Board of Directors, the President
or a Vice-President and (ii) by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned
--------- ----------
by (i) a transfer agent other than the Corporation or its employee, or (ii)
a registrar other than the Corporation or its employee, any other signature
on the certificate may be a facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may
--------- -----------------
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as the Board
of Directors shall require and/or to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
--------- ---------
transferable in the manner prescribed by law and in these By-Laws. Transfers
of stock shall be made on the books of the Corporation only by the person
named in the certificate or by his attorney lawfully constituted in writing
and upon the surrender of the certificate therefor, which shall be cancelled
before a new certificate shall be issued.
Section 5. Record Date. In order that the Corporation may
--------- -----------
determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to express consent
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more than
sixty days nor less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be
--------- -----------------
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except
as otherwise provided by law.
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by
--------- -------
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at
his address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may
also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required
--------- -----------------
by law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
--------- ---------
Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation,
or for any proper purpose, and the Board of Directors may modify or abolish
any such reserve.
Section 2. Disbursements. All checks or demands for money and
--------- -------------
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
--------- -----------
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
--------- --------------
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. Power to Indemnify in Actions, Suits or Proceedings
------------------------------------------------------------------
other Than Those by or in the Right of the Corporation. Subject to Section
- ------------------------------------------------------
3 of this Article VIII, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
---- ----------
of itself, create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions Suits or Proceedings
--------- ---------------------------------------------------
by or in the Right of the Corporation. Subject to Section 3 of this Article
- -------------------------------------
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance
of his duty to the Corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
--------- --------------------------------
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit
or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the
extent, however, that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination
--------- ------------------
under Section 3 of this Article VIII, a person shall be deemed to have acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe his conduct
was unlawful, if his action is based on the records or books of account of
the Corporation or another enterprise, or on information supplied to him by
the officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified
public accountant or by an appraiser or other expert selected with reasonable
care by the Corporation or another enterprise. The term "another enterprise"
as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to
be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth in
Sections l or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
--------- --------------------------
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director, officer, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections l and 2 of this Article VIII. The basis
of such indemnification by a court shall be a determination by such court
that indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standards of conduct
set forth in Sections l or 2 of this Article VIII, as the case may be.
Notice of any application for indemnification pursuant to this Section 5
shall be given to the Corporation promptly upon the filing of such
application.
Section 6. Expenses Payable in Advance. Expenses incurred in
--------- ---------------------------
defending or investigating a threatened or pending action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 7. Non-exclusivity and Survival of Indemnification.
--------- -----------------------------------------------
The indemnification provided by this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to
the
fullest extent permitted by law. The provisions of this Article VIII shall
not be deemed to preclude the indemnification of any person who is not
specified in Sections 1 or 2 of this Article VIII but whom the Corporation
has the power or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise. The indemnification
provided by this Article VIII shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such person.
Section 8. Insurance. The Corporation may purchase and
--------- ---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would
have the power or the obligation to indemnify him against such liability
under the provisions of this Article VIII.
Section 9. Meaning of "Corporation" for Purposes of Article
---------
VIII. For purposes of this Article VIII, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE IX
AMENDMENTS
----------
Section 1. These By-Laws may be altered, amended or repealed,
---------
in whole or in part, or new By-Laws may be adopted by the stockholders or by
the Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of
such meeting of stockholders or Board of Directors as the case may be. All
such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article
--------- -------------------------
IX and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors that the Corporation would have if there were
no vacancies.
Exhibit 4.1
- ----------------------------------------------------------------
- ----------------------------------------------------------------
MERRILL LYNCH MORTGAGE INVESTORS, INC.
DEPOSITOR,
_______________________________,
MASTER SERVICER,
and
_______________________________,
TRUSTEE
POOLING AND SERVICING AGREEMENT
Dated as of _______, 199_
$_______________
Mortgage Pass-Through Certificates
Series 199_-__
- ----------------------------------------------------------------
- ----------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Interest Calculations . . . . . . . . . . . . . . . . . . 24
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND
Section 2.01. Conveyance of Mortgage Loans . . . . . . . . . . . . . . . 25
Section 2.02. Acceptance by Trustee . . . . . . . . . . . . . . . . . . 29
Section 2.03. Trust Fund; Authentication of Certificates . . . . . . . . 31
Section 2.04. REMIC Election . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.05. REMIC Tax Matters . . . . . . . . . . . . . . . . . . . . 32
Section 2.06. REMIC Certificate Maturity Date . . . . . . . . . . . . . 32
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MASTER
SERVICER; REPURCHASE OF MORTGAGE LOANS;
REPRESENTATION AND WARRANTY OF THE COMPANY
Section 3.01. Representations and Warranties of the Master Servicer . . 33
Section 3.02. Option to Substitute . . . . . . . . . . . . . . . . . . . 46
Section 3.03. Representation and Warranty of the Company . . . . . . . . 47
Section 3.04. Converting Mortgage Loans; Certain Procedures and
Purchases. . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates . . . . . . . . . . . . . . . . . . . . . 49
Section 4.02. Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . . 50
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates . . . . 55
Section 4.04. Persons Deemed Owners . . . . . . . . . . . . . . . . . . 55
Section 4.05. Appointment of Paying Agent . . . . . . . . . . . . . . . 56
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 5.01. Master Servicer to Service Mortgage Loans . . . . . . . . 57
Section 5.02. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers; Enforcement of
Sub-Servicer's Obligations . . . . . . . . . . . . . . . 58
Section 5.03. Successor Sub-Servicers . . . . . . . . . . . . . . . . . 59
Section 5.04. Liability of the Master Servicer . . . . . . . . . . . . . 59
Section 5.05. No Contractual Relationship Between Sub-
Servicer and Trustee, the Certificateholders
or the Certificate Insurer . . . . . . . . . . . . . . . 60
Section 5.06. (Omitted) . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.07. Collection of Mortgage Loan Payments . . . . . . . . . . . 60
Section 5.08. Establishment of Certificate Account; Deposits in
Certificate Account. . . . . . . . . . . . . . . . . . . 61
Section 5.09. Permitted Withdrawals from the Certificate Account . . . . 63
Section 5.10. Establishment of Escrow Account; Deposits
in Escrow Account. . . . . . . . . . . . . . . . . . . . 64
Section 5.11. Permitted Withdrawals from Escrow Account . . . . . . . . 65
Section 5.12. Payment of Taxes, Insurance and Other Charges . . . . . . 65
Section 5.13. Transfer of Accounts . . . . . . . . . . . . . . . . . . . 66
Section 5.14. (Omitted) . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 5.15. (Omitted) . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 5.16. Maintenance of Standard Hazard Policies . . . . . . . . . 66
Section 5.17. (Omitted) . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 5.18. (Omitted) . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 5.19. Fidelity Bond and Errors and Omissions Insurance . . . . . 67
Section 5.20. Collections under Insurance Policies; Enforcement of
Due-on-Sale Clauses; Assumption Agreements . . . . . . . 68
Section 5.21. Income and Realization from Defaulted Mortgage Loans . . . 69
Section 5.22. Trustee to Cooperate; Release of Mortgage Files . . . . . 71
Section 5.23. Servicing and Other Compensation . . . . . . . . . . . . . 72
Section 5.24. File Review Rights of the Certificate Insurer . . . . . . 73
Section 5.25. Annual Statement as to Compliance . . . . . . . . . . . . 73
Section 5.26. Annual Independent Public Accountants' Servicing
Report . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 5.27. Access to Certain Documentation; Rights of the Company
in Respect of the Master Servicer. . . . . . . . . . . . 74
Section 5.28. REMIC-Related Covenants . . . . . . . . . . . . . . . . . 75
Section 5.29. Prohibited Transactions and Other Taxes . . . . . . . . . 76
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01. Distributions . . . . . . . . . . . . . . . . . . . . . . 77
Section 6.02. Statements to the Certificateholders . . . . . . . . . . . 79
Section 6.03. Advances by the Master Servicer . . . . . . . . . . . . . 82
Section 6.04. The Certificate Insurance Policy . . . . . . . . . . . . . 85
ARTICLE VII
REPORTS TO BE PREPARED BY MASTER SERVICER
Section 7.01. Master Servicer Shall Provide Information as
Reasonably Required . . . . . . . . . . . . . . . . . 87
Section 7.02. Federal Information Returns and Reports to
Certificateholders . . . . . . . . . . . . . . . . . . 87
ARTICLE VIII
THE COMPANY AND THE MASTER SERVICER
Section 8.01. Indemnification; Third Party Claims . . . . . . . . . . . 89
Section 8.02. Merger or Consolidation of the Company or the Master
Servicer; Status of Master Servicer. . . . . . . . . . . 90
Section 8.03. Limitation on Liability of the Company, the Master
Servicer, the Trustee and Others . . . . . . . . . . . . 91
Section 8.04. Company and Master Servicer Not to Resign . . . . . . . . 91
Section 8.05. Successor to the Master Servicer . . . . . . . . . . . . . 92
Section 8.06. Maintenance of Ratings . . . . . . . . . . . . . . . . . . 94
ARTICLE IX
DEFAULT
Section 9.01. Events of Default . . . . . . . . . . . . . . . . . . . . 95
Section 9.02. Waiver of Defaults . . . . . . . . . . . . . . . . . . . . 97
Section 9.03. Trustee or Company to Act; Appointment of Successor . . . 97
Section 9.04. Notification to Certificateholders . . . . . . . . . . . . 97
ARTICLE X
CONCERNING THE TRUSTEE
Section 10.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . 98
Section 10.02. Certain Matters Affecting the Trustee . . . . . . . . . . 99
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans . . 100
Section 10.04. Trustee May Own Certificates . . . . . . . . . . . . . . . 100
Section 10.05. Master Servicer to Pay Trustee's Fees and Expenses . . . . 100
Section 10.06. Eligibility Requirements for Trustee . . . . . . . . . . . 101
Section 10.07. Resignation and Removal of the Trustee . . . . . . . . . . 101
Section 10.08. Successor Trustee . . . . . . . . . . . . . . . . . . . . 103
Section 10.09. Merger or Consolidation of Trustee . . . . . . . . . . . . 103
Section 10.10. Appointment of Co-Trustee or Separate Trustee . . . . . . 104
Section 10.11. Appointment of Office or Agency . . . . . . . . . . . . . 105
ARTICLE XI
TERMINATION
Section 11.01. Termination . . . . . . . . . . . . . . . . . . . . . . . 106
Section 11.02. Additional Termination Requirements . . . . . . . . . . . 108
Section 11.03. Termination By Certificate Insurer . . . . . . . . . . . . 108
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Severability of Provisions . . . . . . . . . . . . . . . . 109
Section 12.02. Limitation on Rights of Certificateholders . . . . . . . . 109
Section 12.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 12.04. The Certificate Insurer . . . . . . . . . . . . . . . . . 111
Section 12.05. Recordation of Agreement; Counterparts. . . . . . . . . . 112
Section 12.06. Duration of Agreement . . . . . . . . . . . . . . . . . . 112
Section 12.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . 112
Section 12.08. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 112
EXHIBITS
A. Mortgage Loan Schedule A-1
B. Contents of Mortgage File B-1
C. Form of Class A Certificates C-1
D. Form of Class B Certificates D-1
E. (Reserved) E-1
F. Form of Class R Certificate F-1
G. (Reserved) G-1
H. Certificate Account Certification H-1
I. (Reserved) I-1
J. Distribution Account Certification J-1
K. Distribution Account Letter Agreement K-1
L. Form of Investment Letter L-1
M. Form of Transfer Affidavit M-1
N. ERISA Representation Letter N-1
O. (Reserved) O-1
P. Sale Agreement P-1
Q. Form of Notice for Certificate Insurance Policy Q-1
This Pooling and Servicing Agreement, dated as of _____________, 199_,
is executed among Merrill Lynch Mortgage Investors, Inc., as depositor
(together with its permitted successors and assigns, the "Company"),
_____________________________, as master servicer (together with its
permitted successors and assigns, the "Master Servicer"), and
________________________________, as trustee (together with its permitted
successors and assigns, the "Trustee").
In consideration of the premises and the mutual agreements hereinafter
set forth, the Company, the Master Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions. Whenever used herein, the following words
-----------
and phrases, unless the context otherwise requires, shall have the following
meanings:
ACCRUAL PERIOD: As to the first Distribution Date, the period from and
--------------
including the Closing Date to and including _______, 199_; and as to any
Distribution Date thereafter, the period from and including the ____ day of
the month preceding the month of such Distribution Date to and including the
_____ day of the month of such Distribution Date.
ADVANCE: The aggregate of the advances made by the Master Servicer or
-------
the Trustee with respect to a particular Distribution Date pursuant to
Section 6.03.
ADVANCE DEPOSIT DATE: As to any Distribution Date, the Business Day
--------------------
preceding such Distribution Date.
AGGREGATE NET PRINCIPAL LIQUIDATION LOSSES: With respect to each
------------------------------------------
Distribution Date, the amount, if any, by which (a) the aggregate of the
outstanding principal balances of those Mortgage Loans that became Liquidated
Mortgage Loans during the month ending prior to the month of such
Distribution Date exceeds (b) the aggregate Net Liquidation Proceeds for such
Mortgage Loans that are allocable to principal in accordance with the terms
thereof.
AGREEMENT: This Pooling and Servicing Agreement and all amendments
---------
hereof and supplements hereto.
ALTERNATE CERTIFICATE RATE: As to any Distribution Date, the weighted
--------------------------
average of the Net Mortgage Rates of all Mortgage Loans applicable as of the
Due Date of the month preceding the month of such Distribution Date, weighted
on the basis of their outstanding Principal Balances (after giving effect to
the Monthly Payments due on or before such Due Date and Principal Prepayments
received prior to such Due Date) at such time.
ASSIGNMENT OF MORTGAGE: An assignment of the Mortgage, notice of
----------------------
transfer or equivalent instrument, in recordable form, sufficient under the
laws of the jurisdiction where the related Mortgaged Property is located to
reflect of record the sale and assignment of the Mortgage Loan to the
Trustee, which assignment, notice of transfer or equivalent instrument may,
if permitted by law, be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same
county.
AVAILABLE DISTRIBUTION AMOUNT: With respect to any Distribution Date,
-----------------------------
an amount equal to the amount on deposit in the Certificate Account as of the
close of business on the related Determination Date, plus Advances and other
amounts deposited to the Distribution Account pursuant to Section 6.03,
except:
(a) previously unreimbursed amounts received on
particular Mortgage Loans as late payments or other
recoveries of principal or interest (including Liquidation
Proceeds, Insurance Proceeds and condemnation awards)
that were part of a prior Advance;
(b) amounts representing the reimbursement for
Nonrecoverable Advances and other amounts permitted to
be withdrawn by the Master Servicer from, or not required
to be deposited in, the Certificate Account pursuant
to Section 5.09;
(c) amounts representing all or part of a Monthly
Payment due after the immediately preceding Due Date;
(d) all Repurchase Proceeds, Principal Prepayments,
Liquidation Proceeds, Insurance Proceeds and condemnation
awards with respect to the Mortgage Loans received after
the related Principal Prepayment Period, and all related
payments of interest representing interest for any period
of time after the last day of the related Due Period for
such Mortgage Loans; and
(e) all income from Eligible Investments held in the
Certificate Account for the account of the Master Servicer.
BOOK-ENTRY CERTIFICATE: Any Class A Certificate registered in the name
----------------------
of the Depository or its nominee ownership of which is reflected on the books
of the Depository or on the books of a person maintaining an account with
such Depository (directly or as an indirect participant in accordance with
the rules of such Depository).
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, or (b) a
------------
legal holiday in the State of New York, or (c) a day on which banking or
savings and loan institutions in the State of New York or the State in which
the Corporate Trust Office is located are authorized or obligated by law or
executive order to be closed.
CASH LIQUIDATION: Recovery of all cash proceeds by the Master Servicer
----------------
with respect to the termination of any defaulted Mortgage Loan, including
Insurance Proceeds and other payments or recoveries (whether made at one time
or over a period of time) which the Master Servicer deems to be finally
recoverable, in connection with the sale or assignment of such Mortgage Loan,
trustee's sale, foreclosure sale, deed in lieu of foreclosure or otherwise,
but only if title to the related Mortgaged Property was not acquired by
foreclosure or deed in lieu of foreclosure by the Master Servicer pursuant
to Section 5.21.
CERTIFICATE: Any Class A, Class B or Class R Certificate.
-----------
CERTIFICATE ACCOUNT: The account created and maintained pursuant to
-------------------
Section 5.08.
CERTIFICATEHOLDER or HOLDER: The person in whose name a Certificate is
----------------- ------
registered in the Certificate Register, except that, solely for the purposes
of giving any consent, waiver, request or demand pursuant to this Agreement,
any Certificate registered in the name of the Company, the Master Servicer,
any Sub-Servicer, or any of their respective affiliates shall be deemed not
to be outstanding and the undivided Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount
of Percentage Interests necessary to effect any such consent, waiver, request
or demand has been obtained, unless such Person owns the entire Class of
which such Certificate is a part. The Trustee shall be provided with an
Officer's Certificate by the Company, the Master Servicer or any Sub-Servicer
if any Certificate is owned by any affiliate thereof and shall be entitled
to conclusively rely upon the certificate of the Company or the Master
Servicer or any Sub-Servicer as to the determination of the aggregate
Percentage Interests evidenced by Certificates registered to the Company, the
Master Servicer, any Sub-Servicer or their affiliates.
CERTIFICATE INSURANCE POLICY: The certificate guaranty insurance policy
----------------------------
dated the Closing Date issued by the Certificate Insurer to the Trustee for
the benefit of the Holders of the Class A Certificates.
CERTIFICATE INSURER: ______________________________, or any successor
-------------------
thereto, as issuer of the Certificate Insurance Policy.
CERTIFICATE OWNER: With respect to a Class A Certificate that is a
-----------------
Book-Entry Certificate, the person who is the beneficial owner of a Book-
Entry Certificate.
CERTIFICATE REGISTER: The register maintained pursuant to Section 4.02.
--------------------
CLASS A, CLASS B or CLASS R: Pertaining to Class A, Class B or Class
---------------------------
R Certificates, as the case may be.
CLASS A CERTIFICATE: Any one of the Certificates designated as a Class
-------------------
A Certificate substantially in the form set forth in Exhibit C hereto and
executed by the Company and authenticated by the Trustee.
CLASS A DISTRIBUTION AMOUNT: As to any Distribution Date, the aggregate
---------------------------
amount distributed on the Class A Certificates pursuant to Section 6.01.
CLASS A FORMULA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
---------------------------------------------
Distribution Date, the sum of (i) the Class A Percentage of the Scheduled
Formula Principal Distribution Amount and (ii) the Class A Prepayment
Percentage of the Unscheduled Formula Principal Distribution Amount.
CLASS A INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Distribution
--------------------------------------------
Date, an amount equal to the sum of (a) interest for the related Accrual
Period at the Class A Pass-Through Rate on the Class A Principal Balance as
of such Distribution Date (before giving effect to the distribution on such
Distribution Date), net of Net Interest Shortfall, if any, allocated to the
Class A Certificates pursuant to Section 6.01 in respect of such Distribution
Date, and (b) any Class A Unpaid Interest Shortfall for such Distribution
Date.
CLASS A INTEREST SHORTFALL: As to any Distribution Date, the amount
--------------------------
equal to (a) the Class A Interest Formula Distribution Amount for such
Distribution Date less (b) the amount of interest distributed to the Class
A Certificateholders on such Distribution Date.
CLASS A PASS-THROUGH RATE: As to any Distribution Date, the per annum
-------------------------
rate equal to the lesser of (i) LIBOR plus _______% (or, as to any
Distribution Date occurring at least ____ days after the first Distribution
Date in respect of which the option to purchase the Mortgage Loans in Section
11.01(a) may first be exercised, LIBOR plus _____%) and (ii) the Alternate
Certificate Rate.
CLASS A PERCENTAGE: As to any Distribution Date, the percentage (which
-------------------
shall in no event be greater than 100%) derived from dividing the Class A
Principal Balance (before giving effect to the distributions for such
Distribution Date) by the Pool Principal Balance (before giving effect to the
Formula Principal Distribution Amount for such Distribution Date).
CLASS A PREPAYMENT PERCENTAGE: The Class A Prepayment Percentage for
-----------------------------
a Distribution Date on or before the Distribution Date in ___________ will
be 100%. The Class A Prepayment Percentage for a Distribution Date after the
Distribution Date in ___________ will be as follows: for any Distribution
Date subsequent to ___________ to and including the Distribution Date in
___________, the Class A Percentage for such Distribution Date plus ___% of
the Subordinated Percentage for such Distribution Date; for any Distribution
Date subsequent to __________ to and including the Distribution Date in
___________, the Class A percentage for such Distribution Date plus ___% of
the Subordinated Percentage for such Distribution Date; for any Distribution
Date subsequent to ___________ to and including the Distribution Date in
___________, the Class A Percentage for such Distribution Date plus ___% of
the Subordinated Percentage for such Distribution Date; for any Distribution
Date subsequent to ___________ to and including the Distribution Date in
___________, the Class A Percentage for such Distribution Date plus ___% of
the Subordinated Percentage for such Distribution Date; for any Distribution
Date thereafter, the Class A Percentage for such Distribution Date (unless
on any of the foregoing Distribution Dates the Class A Percentage exceeds the
initial Class A Percentage, in which case the Class A Prepayment Percentage
for such Distribution Date will once again be 100%).
Notwithstanding the foregoing, a decrease in the Class A Prepayment
Percentage provided for in the preceding paragraph will not occur if, as of
the first Distribution Date to which such decrease would apply in accordance
with the preceding paragraph, the following criteria are not satisfied: (a)
cumulative Unrecovered Principal Amounts shall not exceed (1) if such
Distribution Date is in the period after ______________ to and including
____________, ___% of the Original Class B Principal Balance, (2) if such
Distribution Date is in the period after ______________ to and including
______________, ___% of the
Original Class B Principal Balance, (3) if such Distribution Date is in the
period after _______________ to and including _______________, ___% of the
Original Class B Principal Balance and (4) if such Distribution Date is in
the period after _________________ to and including _______________, ___% of
the Original Class B Principal Balance; and (b) over the prior three months,
the average aggregate outstanding Principal Balance of the Mortgage Loans
delinquent ____ days or more (including for this purpose any Mortgage Loans
in foreclosure and Mortgage Loans with respect to which the related Mortgaged
Property has been acquired by the Trust Fund) has not exceeded ______% of the
average aggregate outstanding Principal Balance of all Mortgage Loans for
such period.
Notwithstanding the foregoing, if on any Distribution Date (i) the
Current Subordination Level equals at least twice the Original Subordination
Level, (ii) cumulative Unrecovered Principal Amounts with respect to the
Mortgage Loans have not exceeded (1) if such Distribution Date is on or
before the fifth anniversary of the first Distribution Date, ___% of the
Original Class B Principal Balance, (2) if such Distribution Date is after
the fifth but on or before the sixth anniversary of the first Distribution
Date, ___% of the Original Class B Principal Balance, (3) if such
Distribution Date is after the sixth but on or before the seventh anniversary
date of the first Distribution Date, ___% of the Original Class B Principal
Balance and (4) if such Distribution Date is after the seventh anniversary
date of the first Distribution Date, ___% of the Original Class B Principal
Balance; and (iii) over the prior three months, the average aggregate
outstanding Principal Balance of the Mortgage Loans delinquent ____ days or
more (including for this purpose any Mortgage Loans in foreclosure and
Mortgage Loans with respect to which the related Mortgaged Property has been
acquired by the Trust Fund) has not exceeded _____% of the average aggregate
outstanding Principal Balance of all Mortgage Loans for such period, then the
Class A Prepayment Percentage for such Distribution Date will be as follows:
(A) as to any Distribution Date prior to the third anniversary of the first
Distribution Date, the Class A Percentage for such Distribution Date plus
___% of the Subordinated Percentage for such Distribution Date; and (B) as
to any Distribution Date thereafter, the Class A Percentage for such
Distribution Date.
CLASS A PRINCIPAL BALANCE: At any time, the Original Class A Principal
-------------------------
Balance minus the sum of all amounts previously distributed to the Class A
Certificateholders on account of principal pursuant to Section 6.01.
CLASS A UNPAID INTEREST SHORTFALL: As to any Distribution Date, the
---------------------------------
amount of the Class A Interest Shortfall for the immediately preceding
Distribution Date.
CLASS B CERTIFICATE: Any one of the certificates designated as a Class
-------------------
B Certificate, executed by the Company and authenticated by the Trustee
substantially in the form set forth in Exhibit D hereto.
CLASS B DISTRIBUTION AMOUNT: As to any Distribution Date, the aggregate
---------------------------
amount distributed to Class B Certificateholders on such Distribution Date
pursuant to Section 6.01.
CLASS B FORMULA PRINCIPAL DISTRIBUTION AMOUNT: As to any Distribution
---------------------------------------------
Date, the sum of (i) the Subordinated Percentage of the Scheduled Formula
Principal Amount and (ii) the Subordinated Prepayment Percentage of the
Unscheduled Formula Principal Distribution Amount.
CLASS B INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Distribution
--------------------------------------------
Date, an amount equal to the sum of (a) interest for the related Accrual
Period at the Class B Pass-Through Rate on the Class B Principal Balance as
of such Distribution Date (before giving effect to the distribution on such
Distribution Date), net of Net Interest Shortfall, if any, allocated to the
Class B Certificates pursuant to Section 6.01 in respect of such Distribution
Date, and (b) any Class B Unpaid Interest Shortfall for such Distribution
Date.
CLASS B INTEREST SHORTFALL: As to any Distribution Date, the amount
--------------------------
equal to (a) the Class B Interest Formula Distribution Amount for such
Distribution Date less (b) the amount of interest distributed to the Class
B Certificateholders on such Distribution Date.
CLASS B LOSS AMOUNT: As to any Distribution Date, the lesser of (x),
-------------------
the amount, if any, by which (A) the sum of (i) the Formula Principal
Distribution Amount for such Distribution Date and (ii) the aggregate of the
Unrecovered Principal Amounts for such Distribution Date exceeds (B) the
portion of the Available Distribution Amount distributed on account of
principal on such Distribution Date and (y) the Class B Principal Balance
after giving effect to any amount distributed on account of principal to the
Class B Certificateholders on such Distribution Date.
CLASS B PASS-THROUGH RATE: As to any Distribution Date, LIBOR plus
-------------------------
_____%; provided, however, that in the event that the Alternate Certificate
Rate is less than LIBOR plus _____%, the Class B Pass-Through Rate for such
Distribution Date shall be the Alternate Certificate Rate.
CLASS B PRINCIPAL BALANCE: At any time, the Original Class B Principal
-------------------------
Balance minus (i) the sum of all amounts previously distributed to the Class
B Certificateholders pursuant to Section 6.01 on account of principal and
(ii) the sum of all Class B Loss Amounts, if any, for prior Distribution
Dates; provided that the Class B Principal Balance shall not be less than
zero.
CLASS B UNPAID INTEREST SHORTFALL: As to any Distribution Date, the
---------------------------------
amount of the Class B Interest Shortfall for the immediately preceding
Distribution Date.
CLASS R CERTIFICATE: Any one of the Certificates executed and delivered
-------------------
by the Company and authenticated by the Trustee substantially in the form set
forth in Exhibit F.
CLASS R DISTRIBUTION AMOUNT: As to any Distribution Date, the aggregate
---------------------------
amount distributed to Class R Certificateholders on such Distribution Date
pursuant to Section 6.01.
CLOSING DATE: ___________, 199_.
------------
CODE: The Internal Revenue Code of 1986, as amended.
----
COMPANY: Merrill Lynch Mortgage Investors, Inc., a Delaware
-------
corporation, or its successor in interest or any successor under this
Agreement appointed as herein provided.
CONVERSION PRICE: As to any Converting Mortgage Loan, an amount equal
----------------
to the outstanding principal balance of such Converting Mortgage Loan, plus
accrued and unpaid interest thereon at the applicable Mortgage Rate to the
date of conversion, less any Servicing Fee payable with respect to such
Converting Mortgage Loan.
CONVERTIBLE MORTGAGE LOAN: Any Mortgage Loan as to which the Mortgagor,
-------------------------
at its option in accordance with the terms thereof, may convert its Mortgage
Rate (i) from an adjustable rate to a fixed rate and/or (ii) to a different
Index (and, if the Mortgage Loan so provides, at the Mortgagor's election,
thereafter to a fixed rate).
CONVERTING MORTGAGE LOAN: A Convertible Mortgage Loan as to which the
------------------------
Mortgagor is entitled to give and has properly given notice under the terms
thereof that such Mortgagor is exercising such Mortgagor's option to convert
the related Mortgage Rate to a fixed rate. A Mortgage Loan that converts to
a different Index is not a Converting Mortgage Loan.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which
----------------------
at any particular time its corporate business with respect to this Agreement
shall be administered, which office at the date of execution of this
instrument is located at __________ ____________________________, Telecopy
__________.
CURRENT SUBORDINATION LEVEL: With respect to any Distribution Date, the
---------------------------
percentage derived from the fraction the numerator of which is the Class B
Principal Balance (before giving effect to the distributions and the
allocation of the Unrecovered Principal Amounts for such Distribution Date)
and the denominator of which is the Pool Principal Balance (before giving
effect to the Formula Principal Distribution Amount for such Distribution
Date).
CUSTODIAL AGREEMENT: The Master Custodial Agreement, dated as of
-------------------
________, 199_ among ________________________________.
CUSTODIAN: The custodian under the Custodial Agreement.
---------
CUT-OFF DATE: ___________ 1, 199_.
------------
DEFAULTED MORTGAGE LOAN: Any Mortgage Loan as to which a Monthly
-----------------------
Payment is ___ days or more delinquent.
DEFINITIVE CERTIFICATES: As defined in Section 4.02(l).
-----------------------
DEPOSITORY: The initial Depository shall be The Depository Trust
----------
Company, the nominee of which is CEDE & Co., as the registered Holder of one
or more Class A Certificates evidencing in the aggregate the Original Class
A Principal Balance. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code
of the State of New York.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: The _____ day (or if such _____ day is not a
------------------
Business Day, the Business Day immediately preceding such ________ day) of
the month of the related Distribution Date.
DISQUALIFIED ORGANIZATION: As defined in Section 4.02(i).
-------------------------
DISTRIBUTION ACCOUNT: The account created and maintained pursuant to
--------------------
Section 6.01.
DISTRIBUTION ACCOUNT SHORTFALL: With respect to any Distribution Date,
------------------------------
the sum of (a) the amount, if any, by which (x) the aggregate of the full
amounts that are due to be distributed on the Class A Certificates pursuant
to clauses (i) and (ii) of Section 6.01(a) exceeds (y) the amount of the
funds (other than the Insured Payment made in respect of such Distribution
Date) that will be on deposit in the Distribution Account in respect of such
Distribution Date and then available to be distributed on the Class A
Certificates, after taking into account all deposits required to be made to
the Distribution Account on or prior to such Distribution Date, including
without limitation all Advances and funds to be transferred from the Reserve
Fund, and (b) if such Distribution Date is the ________ Distribution Date
succeeding the month in which there occurs the latest original scheduled
maturity date of any Mortgage Loan that was an Outstanding Mortgage Loan at
any time during such month, the amount, if any, necessary to reduce the Class
A Principal Balance to zero (after giving effect to all other distributions
of principal to be made on such Distribution Date in respect of the Class A
Certificates), without deduction, in the case of either of the foregoing
clauses (a) or (b), of any amounts required to be withheld that are
attributable to the liability of the Trust Fund or the Trustee for
withholding taxes (including, without limitation, interest and penalties in
respect thereof).
DISTRIBUTION DATE: The ____ day of any month, or if such _____ day is
-----------------
not a Business Day, the first Business Day immediately following, beginning
with the First Distribution Date.
DUE DATE: As to any Distribution Date, the first day of the month of
--------
such Distribution Date, which is the day on which each Monthly Payment is due
on a Mortgage Loan, exclusive of any days of grace.
DUE PERIOD: With respect to any Distribution Date, the calendar month
----------
preceding the month of such Distribution Date.
ELIGIBLE ACCOUNT: An account that is (i) maintained with a federal or
----------------
state chartered depository institution the long-term unsecured debt
obligations of which have been rated by each Rating Agency in one of its two
highest rating categories at the time of the deposit therein, or (ii) a trust
account maintained with the corporate trust department of a depository
institution, which institution is acting in its fiduciary capacity, or (iii)
an account or accounts the deposits in which are fully insured by the FDIC,
or (iv) an account or accounts in a depository institution in which such
accounts are insured by the FDIC (to the limits established by the FDIC), the
uninsured deposits in which accounts are otherwise either (a) secured such
that, as evidenced by an Opinion of Counsel delivered to the Trustee and
acceptable to the Rating Agencies, the Certificateholders have a claim with
respect to the funds in such account and a perfected first security interest
against any collateral and the proceeds thereof (which shall be limited to
Eligible Investments) securing such funds that is superior to claims of any
other depositors or creditors of the depository institution with which such
account is maintained or (b) swept at the end of each Business Day into
either (1) Eligible Investments in the name of the Trustee so that the
amount remaining in such account (after giving effect to such sweep) is
fully insured by the FDIC or (2) an account that satisfies clause
(ii) above, or (v) otherwise acceptable to each Rating Agency without
reduction or withdrawal of each rating of the Class A Certificates, as
evidenced by a letter from each Rating Agency.
ELIGIBLE INVESTMENTS: One or more of the following:
--------------------
(a) obligations of, or guaranteed as to 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 for obligations specified in
clause (a) maturing not later than the day prior to the
Distribution Date on which such amounts are to be distributed,
provided that the long-term unsecured obligations of the
party agreeing to repurchase such obligations are at the
time rated by each Rating Agency in one of its two highest
rating categories and the short-term debt obligations of the
party agreeing to repurchase shall be rated P-1 by Moody's and
A-1+ by Standard & Poor's;
(c) certificates of deposit, time deposits, demand 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 long-term unsecured debt obligations of such
depository institution or trust company at the date of acquisition
thereof have been rated by each Rating Agency in one of its
two highest rating categories and the short-term obligations of
such depository institution or trust company shall be rated P-1
by Moody's and A-1+ by Standard & Poor's;
(d) commercial paper (having original maturities of not
more than 365 days) of any corporation incorporated under the
laws of the United States or any state thereof which on the
date of acquisition has been rated by Moody's and Standard
& Poor's in its highest short-term rating (which is P-1 in the
case of Moody's and A-1+ in the case of Standard & Poor's);
provided that such commercial paper shall mature no later
than the day prior to the Distribution Date on which such
amounts are to be distributed;
(e) money market funds with the highest long-term rating
assigned by the Rating Agencies; and
(f) other obligations or securities that are "permitted
investments" within the meaning of Section 860(G)(a)(5) of
the Code, based upon an Opinion of Counsel delivered to
the Trustee and the Certificate Insurer, and acceptable
to each Rating Agency and the Certificate Insurer as an
Eligible Investment hereunder and will not result in a
reduction or withdrawal of the then current rating of
the Class A Certificates, as evidenced by a letter to such
effect from each Rating Agency;
provided that no instrument shall be an Eligible Investment if such
instrument evidences either (a) a right to receive only interest payments
with respect to the obligation underlying such instrument, or (b) a right to
receive both principal and interest payments derived from obligations
underlying such instrument where the interest and principal payments with
respect to such instrument provide a yield to maturity of greater than 120%
of the yield to maturity at par of such underlying obligations.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
-----
ESCROW ACCOUNT: The account or accounts created and maintained pursuant
--------------
to Section 5.10.
ESCROW PAYMENTS: The amounts constituting applicable ground rents,
---------------
taxes, assessments, water rates and other payments required to be escrowed
by the Mortgagor with the mortgagee pursuant to the Mortgage Loan.
EXCESS PROCEEDS: All amounts (net of the related unreimbursed Servicing
---------------
Advances) received on any Mortgage Loan (whether as regular principal
payments, Principal Prepayments, Repurchase Proceeds, Liquidation Proceeds,
insurance proceeds, condemnation awards, or with respect to a disposition of
a Mortgaged Property which has been acquired by foreclosure or deed in lieu
of foreclosure or otherwise) in excess of the Principal Balance at the
Cut-off Date of such Mortgage Loan and accrued interest thereon, plus amounts
to be paid to the Class R Certificateholder pursuant to Section 5.21.
FDIC: The Federal Deposit Insurance Corporation or any successor
----
organization.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
-----
organization.
FIDELITY BOND: A fidelity bond to be maintained by the Master Servicer
-------------
pursuant to Section 5.19.
FIRST DISTRIBUTION DATE: _____________, 199_.
-----------------------
FNMA: The Federal National Mortgage Association or any successor
----
organization.
FORMULA EXCESS INTEREST AMOUNT: With respect to any Distribution Date,
------------------------------
the amount, if any, by which one month's interest at the Alternate
Certificate Rate on the Pool Principal Balance at the beginning of the
related Principal Prepayment Period (giving effect to the Monthly Payment due
on such Due Date and Principal Prepayments prior to such Due Date) is in
excess of one month's interest at the weighted average of the Class A and
Class B Pass-Through Rates for such Distribution Date on the aggregate
principal balances of such Certificates (before giving effect to any
distributions or Class B Loss Amounts for such Distribution Date).
FORMULA PRINCIPAL DISTRIBUTION AMOUNT: As to any Distribution Date, an
-------------------------------------
amount equal to the sum of:
(a) the principal portion of all Monthly Payments, whether or not
received, which were due on the related Due Date on Outstanding Mortgage
Loans as of such Due Date;
(b) with respect to each Mortgage Loan, all Principal Prepayments
made by the Mortgagor during the related Principal Prepayment Period;
(c) with respect to each Mortgage Loan not described in (e) below,
all Insurance Proceeds, condemnation awards and any other cash proceeds from
a source other than the Mortgagor, to the extent required to be deposited in
the Certificate Account pursuant to Section 5.08(iv) and (v), which are
allocable to principal and were received during the related Principal
Prepayment Period, net of related unreimbursed Servicing Advances and net of
any portion thereof which, as to such Mortgage Loan, constitutes Late Collec-
tions;
(d) with respect to each Mortgage Loan that has been repurchased
pursuant to Section 11.01 during the related Principal Prepayment Period, an
amount equal to the Principal Balance of the Mortgage Loan as of the date of
repurchase;
(e) with respect to each Mortgage Loan that became a Liquidated
Mortgage Loan during the related Principal Prepayment Period, the amount
allocable to the principal of such Liquidated Mortgage Loan that was
recovered in respect of such Liquidated Mortgage Loan in such Principal
Prepayment Period; and
(f) with respect to each Mortgage Loan repurchased during the
related Principal Prepayment Period by the Master Servicer or the Mortgage
Loan Seller pursuant to Sections 2.01, 2.02, 3.01, 3.04 and 5.01, an amount
equal to the principal amount of the Purchase Price (exclusive of any portion
thereof included in clause (a) above).
GNMA: The Government National Mortgage Association or any successor
----
organization.
INDEPENDENT: Of or relating to a Person which (i) is in fact
-----------
independent of the Company and the Master Servicer, (ii) does not have any
direct financial interest or any material indirect financial interest in the
Company and the Master Servicer if different from the Company or an affiliate
thereof and (iii) is not connected with the Company or the Master Servicer
as an officer, employee, director or person performing similar functions.
INDEX: As to each Mortgage Loan, the index for the adjustment of the
-----
Mortgage Rate on the related Mortgage Note, which index is the prime rate
(referred to in Section 3.01 as the "Prime Index"), the London interbank
offered rate for one-month U.S. Dollar deposits (referred to in Section 3.01
as the "One-Month LIBOR Index"), the London interbank offered rate for six-
month U.S. dollar deposits (referred to in Section 3.01 as the "Six-Month
LIBOR Index"), or the one-year U.S. treasury yield (referred to in Section
3.01 as the "Treasury Index"), in each case as defined in such Mortgage Note.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as
-------------------
of _____________, 199_, among the Company, the Master Servicer, the
Certificate Insurer and the Trustee.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
------------------
insurance policy covering a Mortgage Loan, net of costs of collecting such
proceeds.
INSURED AMOUNT: With respect to any Distribution Date, the sum of (i)
--------------
the Distribution Account Shortfall for such Distribution Date and (ii) any
Preference Amount that has not been previously paid to the Trustee by the
Certificate Insurer.
INSURED EXPENSES: Expenses covered by any insurance policy.
----------------
INSURED PAYMENT: With respect to any Distribution Date, the Insured
---------------
Amount paid to the Trustee by the Certificate Insurer.
INTEREST ADJUSTMENT DATE: The date specified in a Mortgage Note on
------------------------
which its Mortgage Rate is adjusted.
LATE COLLECTIONS: With respect to any Mortgage Loan, all amounts
----------------
received during any Due Period, whether as late payments of Monthly Payments
or as Liquidation Proceeds, condemnation awards, Insurance Proceeds, or with
respect to a disposition of a Mortgaged Property which has been acquired by
foreclosure or deed in lieu of foreclosure or otherwise, any of which
represent late payments or collections of Monthly Payments that were due but
delinquent for a previous Due Date and not previously recovered and with
respect to which delinquent Monthly Payments an Advance has been made by the
Master Servicer or, under the circumstances set forth in Section 6.03(b), by
the Trustee.
LATE PAYMENT RATE: As defined in the Insurance Agreement.
-----------------
LIBOR: As to any Distribution Date as follows:
-----
(i) The arithmetic mean (rounded, if necessary, to the nearest one
sixteenth of a percent, with a one thirty-second of a percent being rounded
upwards) of the offered rates for United States dollar deposits for one month
which appear on the Reuters Screen LIBO Page (as defined below) as of 11:00
A.M., London time, on the second LIBOR business day prior to the immediately
preceding Distribution Date (but as of _____________, 199_ for the First
Distribution Date); provided that at least two such offered rates appear on
the Reuters Screen LIBO Page on such date. If fewer than two offered rates
appear, LIBOR will be determined on such date as described in (ii) below.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London inter-bank
offered rates of major banks). A "LIBOR business day" is a day which is both
a Business Day and a day on which banks in London are not required or
authorized by law to be closed.
(ii) If on such date fewer than two offered rates appear on the Reuters
Screen LIBO Page as described in (i) above, the Trustee will request the
principal London office of each of the reference banks (which shall be
National Westminster Bank Plc, Bank of Tokyo Trust Co., Barclays Bank Plc and
Bankers Trust Company, so long as such bank, respectively, is engaged in
transactions in the London inter-bank market; to the extent any such bank is
not so engaged, it shall be replaced as a reference bank by a major bank that
is engaged in transactions in the London inter-bank market, selected by the
Master Servicer) ("Reference Banks") to provide the Trustee with its offered
quotation for United States dollar deposits for one month to prime banks in
the London inter-bank market as of 11:00 A.M., London time, on such date.
If at least two Reference Banks provide the Trustee with such offered
quotations, then LIBOR on such date will be the arithmetic mean (rounded, if
necessary, to the nearest one-sixteenth of a percent, with a one thirty-
second of a percent being rounded upwards) of all such quotations. If on
such date fewer than two of the Reference Banks provide the Trustee with such
an offered quotation, LIBOR on such date will be the arithmetic mean
(rounded, if necessary, to the nearest one-sixteenth of a percent, with a one
thirty-second of a percent being rounded upwards) of the offered per annum
rates which one or more leading banks in the City of New York are quoting as
of 11:00 A.M., New York City time, on such date to leading European banks for
United States dollar deposits for one month (which banks shall be Bankers
Trust Company and Citibank, N.A.; to the extent any such bank is not making
such quotes, it shall be replaced by a bank selected by the Trustee (after
consultation with the Master Servicer) that is making such quotes), provided,
however, that if such banks are not quoting as described above, LIBOR will
be the LIBOR applicable to the immediately preceding Distribution Date.
LIQUIDATED MORTGAGE LOAN: Any defaulted Mortgage Loan (a) as to which
------------------------
the Master Servicer has determined that all amounts which it expects to
recover from or on account of such Mortgage Loan or property acquired in
respect thereof have been recovered, (b) as to which a Cash Liquidation has
taken place or (c) with respect to which the related Mortgaged Property has
been acquired by foreclosure or deed in lieu of foreclosure and a disposition
of such Mortgaged Property has occurred.
LIQUIDATION EXPENSES: Expenses which are incurred by the Master
--------------------
Servicer or any Sub-Servicer in connection with the liquidation of any
defaulted Mortgage Loan or property acquired in respect thereof, including,
without limitation, legal fees and expenses, any unreimbursed amount expended
by the Master Servicer pursuant to Sections 5.16 and 5.21 respecting the
related Mortgage Loan and any related and unreimbursed expenditures for
real estate property taxes or for property restoration or preservation.
LIQUIDATION PROCEEDS: Cash (including Insurance Proceeds) received by
--------------------
the Master Servicer in connection with the liquidation of any defaulted
Mortgage Loan or Mortgaged Property acquired in respect thereof, whether
through the sale or assignment of such Mortgage Loan, trustee's sale,
foreclosure sale or otherwise, or the sale of the Mortgaged Property if the
Mortgaged Property is acquired in satisfaction of the Mortgage Loan other
than amounts required to be paid to the Mortgagor pursuant to law or the
terms of the applicable Mortgage Note.
LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the
-------------------
numerator of which is the outstanding principal amount of the related
Mortgage Loan at the time of origination and the denominator of which is the
appraised value of the related Mortgaged Property at such time or, in the
case of a Mortgage Loan financing the acquisition of the Mortgaged Property,
the sales price of the Mortgaged Property, if such sales price is less than
such appraised value.
MARGIN: With respect to each Mortgage Loan, the number of basis points
------
which are added to or subtracted from the Index to establish the Mortgage
Rate on the related Mortgage Note.
MASTER SERVICER: _____________________________, a ________ corporation,
---------------
or its successor in interest or any successor under this Agreement as herein
provided.
MAXIMUM MORTGAGE RATE: With respect to each Mortgage Loan, the maximum
---------------------
rate of interest set forth as such in the related Mortgage Note.
MONTHLY PAYMENT: The minimum required monthly payment of principal and
---------------
interest due on a Mortgage Loan as specified in the Mortgage Note for any
month (before any adjustment to such scheduled amount by reason of any
bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period). Monthly Payments shall be deemed due on an Outstanding Mortgage
Loan until such time as it becomes a Liquidated Mortgage Loan.
MOODY'S: Moody's Investors Service, Inc. or its successor in interest.
-------
MORTGAGE: The mortgage, deed of trust or other instrument creating a
--------
first lien or a first priority ownership interest in an estate in fee simple
in real property (or a leasehold that extends at least five years beyond the
maturity of the related Mortgage Loan) securing a Mortgage Note.
MORTGAGE FILE: The items referred to in Exhibit B annexed hereto
-------------
pertaining to a particular Mortgage Loan.
MORTGAGE LOAN: An individual mortgage loan and all rights with respect
-------------
thereto, evidenced by a Mortgage and a Mortgage Note, sold and assigned by
the Company to the Trustee and which is the subject of this Agreement and
included in the Trust Fund. The Mortgage Loans originally sold and subject
to this Agreement are identified on the Mortgage Loan Schedule.
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached hereto
----------------------
as Exhibit A, setting forth the following information as to each Mortgage
Loan: (i) the Mortgage Loan identifying number; (ii) a code indicating
whether the Mortgaged Property is owner-occupied; (iii) the property type of
the Mortgaged Property; (iv) the original number of months to maturity and
the number of months remaining to maturity from the Cut-off Date; (v) (a) the
appraised value of the Mortgaged Property as set forth in an appraisal which
was delivered at the time of the origination of the Mortgage Loan, or, in the
event the Mortgage Loan was made in connection with the acquisition of the
Mortgaged Property by the Mortgagor, the lesser of such appraised value and
the purchase price of the Mortgaged Property actually paid by the Mortgagor
at the time of the origination of the Mortgage Loan, and (b) the ratio,
expressed as a percentage, of the original principal amount of the Mortgage
Loan to the amount specified in (a) above; (vi) the current Mortgage Rate;
(vii) the current Margin; (viii) the amount of the current Monthly Payment;
(ix) the next Interest Adjustment Date; (x) the original Principal Balance
of the Mortgage Loan; and (xi) the Principal Balance of the Mortgage Loan as
of the close of business on the Cut-off Date.
MORTGAGE LOAN SELLER: _____________________________, a _____________
--------------------
corporation, and its successors and assigns.
MORTGAGE NOTE: The note or other evidence of the indebtedness of a
-------------
Mortgagor secured by a Mortgage.
MORTGAGE POOL: The pool of Mortgage Loans held in the Trust Fund.
-------------
MORTGAGE RATE: With respect to each Mortgage Loan, the per annum rate
-------------
of interest for the applicable period borne by the Mortgage Loan, as
determined pursuant to the Mortgage Note.
MORTGAGED PROPERTY: The real property securing a Mortgage Note.
------------------
MORTGAGOR: The obligor on a Mortgage Note.
---------
NET INTEREST SHORTFALL: With respect to any Distribution Date, the sum
----------------------
of (i) the Net Prepayment Interest Shortfall, if any, for such Distribution
Date and (ii) the Relief Act Reduction, if any, for such Distribution Date
as determined in Section 6.01.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
------------------------
Liquidation Proceeds net of Liquidation Expenses.
NET MORTGAGE RATE: As to any day and Mortgage Loan, its Mortgage Rate
-----------------
less the sum of (i) the Servicing Fee Rate per annum (which shall not be
greater than ____% per annum or less than _____% per annum, as determined
pursuant to the definition of "Servicing Fee Rate") and (ii) ____% per annum.
By way of illustration, if the Servicing Fee Rate is equal to ________%, the
amount in clause (i) of this definition shall be equal to ______% per annum.
NET PREPAYMENT INTEREST SHORTFALL: As to any Distribution Date, the
---------------------------------
aggregate of the Prepayment Interest Shortfalls incurred on the Mortgage
Loans in the preceding Principal Prepayment Period that were not made up by
the application of the Servicing Fees collected by the Master Servicer in
respect of such Principal Prepayment Period pursuant to Section 6.03(c).
NONRECOVERABLE ADVANCE: Any advance previously made or proposed to be
----------------------
made in respect of a Mortgage Loan by the Master Servicer or the Trustee
pursuant to Section 6.03 which, in the good faith judgment of the Master
Servicer or the Trustee, will not be ultimately recoverable by the Master
Servicer or the Trustee from Late Collections, Liquidation Proceeds or
otherwise. The determination by the Master Servicer that it has made, or
would be making, a Nonrecoverable Advance shall be evidenced by a certificate
of a Servicing Officer of the Master Servicer delivered to the Trustee and
the Company and detailing the reasons for such determination.
NON-U.S. PERSON: An individual, corporation, partnership or other
---------------
Person other than a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust
that is subject to U.S. federal income tax regardless of the source of its
income.
OFFICERS' CERTIFICATE: A certificate signed by two of any of the
---------------------
Chairmen of the Board, Vice Chairman of the Board, the President, a Senior
Vice President or a Vice President, an Assistant Vice President, the
Treasurer or the Secretary or one of the Assistant Treasurers
or Assistant Secretaries or any other duly authorized officer of the Company
or the Master Servicer, and delivered to the Trustee.
OPINION OF COUNSEL: A written opinion of counsel, who may be counsel
------------------
for the Company or the Master Servicer and who is reasonably acceptable to
the Trustee and the Certificate Insurer; provided, however that the Trustee
and the Certificate Insurer shall receive an opinion of Independent counsel
with respect to any opinion submitted regarding the qualification of the
Trust Fund as a REMIC or compliance with any of the REMIC Provisions.
ORIGINAL CLASS A PRINCIPAL BALANCE: $____________.
----------------------------------
ORIGINAL CLASS B PRINCIPAL BALANCE: $_____________.
----------------------------------
ORIGINAL POOL PRINCIPAL BALANCE: $_______________.
-------------------------------
ORIGINAL SUBORDINATION LEVEL: The percentage derived from the fraction
----------------------------
the numerator of which is the Original Class B Principal Balance and the
denominator of which is the Original Pool Principal Balance, which percentage
is ______%.
ORIGINATE or ORIGINATION: When used with respect to a Mortgage Loan
--------- -----------
(whether or not used as a capitalized term), the closing and funding of such
Mortgage Loan.
OUTSTANDING MORTGAGE LOAN: As to any Due Date, a Mortgage Loan which
-------------------------
was not the subject of a Principal Prepayment in full prior to such Due Date,
which did not become a Liquidated Mortgage Loan prior to such Due Date and
which was not repurchased under Section 2.01, 2.02, 3.01, 3.04 or 5.01 prior
to such Due Date.
PAYING AGENT: The Person appointed by the Master Servicer as Paying
------------
Agent pursuant to Section 4.05. If the Master Servicer has not appointed a
Paying Agent, the Master Servicer shall be the Paying Agent.
PAYMENT ADJUSTMENT DATE: The date specified in a Mortgage Note on which
-----------------------
the Monthly Payment is adjusted.
PERCENTAGE INTEREST: As to any Class A or Class B Certificate, the
-------------------
percentage interest evidenced thereby in distributions required to be made
hereunder, such percentage interest being equal to the percentage obtained
by dividing the denomination of such Certificate by the aggregate of the
denominations of all the Certificates of such Class; and as to the Class R
Certificates, the Percentage Interest specified on the face thereof.
PERSON: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
POOL PRINCIPAL BALANCE: The Original Pool Principal Balance less the
----------------------
aggregate of all Formula Principal Distribution Amounts and all Unrecovered
Principal Amounts for, unless otherwise specified, the Distribution Date in
the month of the reference thereto and all prior Distribution Dates.
PREFERENCE AMOUNT: As defined in the Certificate Insurance Policy.
-----------------
PREMIUM AMOUNT: With respect to the Certificate Insurance Policy, the
--------------
amount that is payable as a premium under the terms of the Certificate
Insurance Policy.
PREPAYMENT INTEREST SHORTFALL: With respect to any Distribution Date,
-----------------------------
for each Mortgage Loan that was the subject of a partial Principal Prepayment
or a Principal Prepayment in full during the related Principal Prepayment
Period (other than a Principal Prepayment in full resulting from the purchase
of a Mortgage Loan pursuant to Section 2.02, 3.01, 3.04 or 11.01 hereof), the
amount by which interest paid by the Mortgagor in connection with such
Principal Prepayment of such Mortgage Loan is less than ___ days' interest
at the related Mortgage Rate on the amount paid.
PRINCIPAL BALANCE: At the time of any determination, the principal
-----------------
balance of a Mortgage Loan remaining to be paid at the close of business on
the Cut-off Date (after deduction of all principal payments due on or before
the Cut-off Date whether or not paid but without deducting Monthly Payments
due after the Cut-off Date and received on or before the Cut-off Date)
reduced by all amounts distributed to Certificateholders that are allocable
to principal of such Mortgage Loan (including Advances made pursuant to
Section 6.03).
PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on a
--------------------
Mortgage Loan (other than Liquidation Proceeds) made by a Mortgagor which is
received in advance of its scheduled Due Date, and which is not accompanied
by an amount of interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
PRINCIPAL PREPAYMENT PERIOD: With respect to any Distribution Date, the
---------------------------
period beginning on the first day of the month preceding the month in which
such Distribution Date occurs and ending on the last day of the month
preceding the month in which such Distribution Date occurs.
PURCHASE PRICE: With respect to any Mortgage Loan required to be
--------------
purchased on any date pursuant to Section 2.01, Section 2.02, Section 3.01,
Section 3.04 or Section 5.01 an amount equal to the sum of (a) 100% of the
Principal Balance thereof plus any unreimbursed Advances of principal thereof
and (b) unpaid accrued interest at the Mortgage Rate thereon from the Due
Date to which interest was last paid by the Mortgagor through the end of the
related Due Period. With respect to any Mortgage Loan purchased by the
Master Servicer pursuant to Section 11.01, the Purchase Price shall be as
calculated in Section 11.01.
RATING AGENCY: _______________ and ______________. References herein
-------------
to the highest long-term debt rating category of a Rating Agency shall mean
___ in the case of ______________ and ____ in the case of _____________, and
references to the second highest long-term rating category of a Rating Agency
shall mean ___ in the case of ________________ and __________ in the case of
____________.
RECORD DATE: As to each Distribution Date, the last Business Day
-----------
preceding the immediately preceding Distribution Date (or the Closing Date
in the case of the first Distribution Date).
REIMBURSEMENT AMOUNT: As to any Distribution Date, the sum of (x)(i)
--------------------
all Insured Payments in respect of the Class A Certificates previously
received by the Trustee and not previously repaid to the Certificate Insurer
pursuant to Section 6.01 plus (ii) interest accrued on each such Insured
Payment not previously repaid, calculated at the Late Payment Rate from the
date the Trustee received the related Insured Payment and (y)(i) any other
amounts then due and owing to the Certificate Insurer under the Insurance
Agreement plus (ii) interest on such amounts at the Late Payment Rate. The
Certificate Insurer shall notify the Trustee and the Master Servicer of the
amount of any Reimbursement Amount.
RELIEF ACT REDUCTION: With respect to any Distribution Date, the
--------------------
aggregate amount of reductions, if any, in the amount of interest due on the
Mortgage Loans on the related Due Date on account of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended.
REMIC: A "real estate mortgage investment conduit," as such term is
-----
defined in the Code.
REMIC PROVISIONS: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at Section 860A
through 860G of 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.
REPURCHASE PROCEEDS: All proceeds of any Mortgage Loan or property
-------------------
acquired in respect thereof repurchased by the Master Servicer or Mortgage
Loan Seller pursuant to Section 2.01, 2.02, 3.01, 3.04, 5.01 or 11.01.
RESERVE FUND: The reserve fund created and maintained pursuant to
------------
Section 6.03(d).
RESPONSIBLE OFFICER: When used with respect to the Trustee, the
-------------------
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman
or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any Vice President, any Assistant Vice President, the Secretary, any
Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any
Assistant Cashier, any Trust Officer or Assistant Trust Officer, the
Controller and any Assistant Controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and, with respect to a particular matter, to whom
such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
SALE AGREEMENT: The Sale and Seller's Warranties Agreement dated as of
--------------
_____________, 199_ between the Company and the Mortgage Loan Seller attached
hereto as Exhibit O.
SCHEDULED FORMULA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
-----------------------------------------------
Distribution Date, the amount specified in clause (a) of the Formula
Principal Distribution Amount.
SERVICING ADVANCES: All customary, reasonable and necessary "out of
------------------
pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i)
the preservation, restoration and protection of the Mortgaged Property, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage, (iv) taxes and
assessments on the Mortgaged Properties subject to the Mortgage Loans and
(v) compliance with the obligations under Section 5.12.
SERVICING FEE: With respect to each Mortgage Loan, the amount of the
-------------
monthly fee paid for the servicing of such Mortgage Loan, equal to 1/12 of
the Servicing Fee Rate of the Principal Balance of such Mortgage Loan. Such
fee shall be payable only at the time of and with respect to those Mortgage
Loans for which payment is in fact made of the entire amount of the Monthly
Payments. The right to receive the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion of such Monthly
Payments collected by the Master Servicer, or as otherwise provided under
Section 5.09.
SERVICING FEE RATE: _____%; provided that, with respect to any
------------------
Distribution Date, if (i) the weighted average of the Maximum Mortgage Rates
of the Mortgage Loans that are Outstanding Mortgage Loans on the first day
of the month preceding the month of such Distribution Date is equal to the
related Alternate Certificate Rate (using _____% as the Servicing Fee Rate
in calculating the Net Mortgage Rate), (ii) such weighted average Maximum
Mortgage Rate is less than ______% per annum, and (iii) the Class A Pass-
Through Rate (calculated on the basis of the LIBOR formula) for such
Distribution Date is greater than such Alternate Certificate Rate, then the
Servicing Fee Rate for that Distribution Date will be reduced to equal the
greater of (a) _____% and (b) the percentage which, when used in place of
_____% as the Servicing Fee Rate, will result in such Alternate Certificate
Rate being equal to such Class A Pass-Through Rate calculated on the basis
of the LIBOR formula.
SERVICING OFFICER: Any officer of the Master Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished
to the Trustee by the Master Servicer, as such list may from time to time be
amended.
SINGLE CERTIFICATE: A Certificate of any Class (other than a Class R
------------------
Certificate) that evidences a denomination of $________.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of
-----------------
The McGraw-Hill Companies, Inc., or its successor in interest.
STANDARD HAZARD POLICY: Each standard hazard insurance policy or
----------------------
replacement therefor referred to in Section 5.16.
SUBORDINATED PERCENTAGE: As to any Distribution Date, 100% less the
-----------------------
Class A Percentage.
SUBORDINATED PREPAYMENT PERCENTAGE: As to any Distribution Date, 100%
----------------------------------
less the Class A Prepayment Percentage.
SUB-SERVICER: Any Person with whom the Master Servicer enters into a
------------
Sub-Servicing Agreement.
SUB-SERVICING AGREEMENT: Any written contract between the Master
-----------------------
Servicer and any Sub-Servicer, relating to servicing or administration of
certain Mortgage Loans as provided in Section 5.02, in such form as has been
approved by the Master Servicer, the Company, the Trustee or the Certificate
Insurer.
TRANSFER: A direct or indirect transfer or other assignment of record
--------
or beneficial interest in a Class R Certificate.
TRUST FUND: The corpus of the trust created by this Agreement, to the
----------
extent described herein, consisting of (i) the Mortgage Loans, (ii) such
assets as shall from time to time be identified as deposited in the
Certificate Account, (iii) property which secured a Mortgage Loan and which
has been acquired by foreclosure or deed in lieu of foreclosure, (iv)
Standard Hazard Policies and any other insurance policies, and the proceeds
thereof, (v) certain rights of the Company under the Sale Agreement as more
particularly set forth in the last paragraph of Section 2.01 and as described
in Sections 2.02 and 3.01 hereof, (vi) such amounts as shall from time to
time be deposited in the Distribution Account, (vii) the Certificate
Insurance Policy, and (viii) the Reserve Fund.
TRUSTEE: ________________________________, as trustee, or its successor
-------
in interest or any successor or co-trustee under this Agreement appointed as
herein provided.
UNRECOVERED PRINCIPAL AMOUNT: As to any Liquidated Mortgage Loan, the
----------------------------
portion, if any, of the principal of such Liquidated Mortgage Loan that was
not recovered at the time such Liquidated Mortgage Loan became a Liquidated
Mortgage Loan. An Unrecovered Principal Amount in respect of a Distribution
Date is one that was incurred in the immediately preceding Principal
Prepayment Period.
UNSCHEDULED FORMULA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
-------------------------------------------------
Distribution Date, the sum of the amounts specified in clauses (b), (c), (d),
(e) and (f) of the Formula Principal Distribution Amount.
Section 1.02. Interest Calculations. Interest on the Class A and Class
---------------------
B Certificates shall be calculated on the basis of the actual number of days
in the related Accrual Period divided by 360.
(End of Article I)
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND
-----------------------------------------
Section 2.01. Conveyance of Mortgage Loans. The Company, concurrently
----------------------------
with the execution and delivery hereof, does hereby sell, transfer, assign,
set over and convey to the Trustee without recourse all the right, title and
interest of the Company in and to the Mortgage Loans, including all interest
and principal due after the Cut-off Date on or with respect to the Mortgage
Loans (it being understood that payments of principal and interest first due
on the Mortgage Loans on or before the Cut-off Date shall not be conveyed to
the Trustee pursuant hereto).
In connection with such assignment, (within ___ days after the Closing
Date) (on or before the Closing Date), the Master Servicer, on behalf of the
Company, shall deliver to, and deposit with, the Custodian the following
documents or instruments with respect to each Mortgage Loan so assigned (the
requirements for a Mortgage Loan secured by shares in a cooperative
corporation are separately specified in clause (vi)):
(i) Original Mortgage Note endorsed (by facsimile
signature if so authorized by the Mortgage Loan Seller),
"Pay to the order of ________________________________,
as trustee, under that certain Pooling and Servicing
Agreement dated as of _____________, 199_, for Mortgage
Pass-Through Certificates, Series 199_-__ (__________________________,
Depositor) without recourse" and signed in the name of the
Mortgage Loan Seller by an authorized officer;
(ii) Original recorded Mortgage, or if such original has
been delivered to the appropriate recorder's office for
recording, a certified copy thereof certified true and complete
by the Mortgage Loan Seller or the escrow agent acting in
connection with the origination of the Mortgage Loan,
with the original to be delivered within ___ days of the
Closing Date;
(iii) Original Assignment of Mortgage in recordable form to
"________________________________, as trustee, under that certain
Pooling and Servicing Agreement dated as of _____________,
199_, for Mortgage Pass-Through Certificates, Series 199_-__",
executed by an authorized signatory of the Mortgage Loan Seller.
Subject to the foregoing, such assignments may, if permitted by law,
be in the form of blanket assignments for Mortgage Loans covering
Mortgaged Properties situated within the same county. If the
Assignment of Mortgage is in blanket form, a copy of the Assignment
of Mortgage shall be included in the individual Mortgage File;
(iv) Originals of all assumption and modification agreements, if
any;
(v) Original policies of title insurance, or if the original
policy of title insurance is unavailable, a copy of the preliminary
title report, with the original title policy to be delivered within
_____ days of the Closing Date. The policy must affirmatively insure
ingress and egress and insure against encroachments by or upon the
Mortgaged Property or any interest therein; and
(vi) With respect to those Mortgage Loans which are cooperative
loans, the original Mortgage Note, endorsed (by facsimile signature
if so authorized by the Mortgage Loan Seller), "Pay to the order of
________________________________, as trustee, under that certain
Pooling and Servicing Agreement dated as of _____________, 199_,
for Mortgage Pass-Through Certificates, Series 199_-__
(__________________________, Seller) without recourse" and signed
in the name of the Mortgage Loan Seller by an authorized officer;
the original stock certificate and related stock power executed
by the obligor in blank; the original loan security agreement and
the assignment of the note and loan security agreement, if
applicable, assigned to "________________________________ as trustee
under that certain Pooling and Servicing Agreement dated as of
_____________, 199_ for Mortgage Pass-Through Certificates, Series
199_-__"; the original proprietary lease and the assignment of the
proprietary lease, if applicable, executed by the obligor in blank;
and any financing statements relating thereto;
(provided that the Master Servicer shall deliver at least ____% of the
Mortgage Notes on or before the Closing Date).
If in connection with any Mortgage Loan the Master Servicer cannot
deliver the Mortgage with evidence of recording thereon as provided above,
or within the ___ days permitted in (ii) above, solely because of a delay
caused by the public recording office to which such Mortgage has been
delivered for recordation, the Master Servicer shall deliver or cause to be
delivered to the Custodian an Officer's Certificate of the Master Servicer,
stating that such mortgage has been delivered to the appropriate public
recording official for recordation. The Master Servicer shall promptly
deliver or cause to be delivered to the Custodian such Mortgage with evidence
of recording indicated thereon upon receipt thereof from the public recording
official. Notwithstanding the above, the Master Servicer shall use all
reasonable efforts to cause each original Mortgage with evidence of recording
thereon to be delivered to the Custodian within ___ days of the Closing Date.
The _______________ (or the successor Master Servicer in the case of an
Event of Default) shall, within __ days after such occurrence, cause to be
sent for recording to the appropriate public recording office for real
property records each Assignment of Mortgage referred to in this Section 2.01
except for Mortgage Loans on Mortgaged Properties located in states where,
as evidenced by an opinion of independent counsel acceptable to the Trustee,
the Certificate Insurer, the Company and the Rating Agencies, such recording
is not required to protect the interests of the Trustee in the Mortgage Loan,
including the related Mortgage, against the claim of any other transferee or
any successor to or creditor of the Mortgage Loan Seller or the Originator
of such Mortgage Loan. While each Assignment of Mortgage required to be
recorded is being recorded, the Master Servicer shall leave with the
Custodian a photocopy of such Assignment of Mortgage. If any such Assignment
of Mortgage is returned unrecorded to the Master Servicer because of any
defect therein, the Master Servicer shall cause such defect to be cured and
such Assignment of Mortgage to be recorded in accordance with this paragraph.
The Master Servicer shall deliver or cause to be delivered each original
recorded Assignment of Mortgage and intermediate assignment to the Custodian
within ___ days of the occurrence giving rise to the obligation to record or
shall deliver to the Custodian on or before such date an Officer's
Certificate stating that such Assignment of Mortgage has been delivered to
the appropriate public recording office for recordation, but has not been
returned solely because of a delay caused by such recording office.
If the Master Servicer cannot cause any Mortgage or Assignment of
Mortgage or intermediate assignments, subject to the provisions in this
Section 2.01 regarding recording office delays, to be recorded and evidence
of such recording delivered to the Custodian within ___ days of the
occurrence giving rise to the obligation to record, the Mortgage Loan Seller
shall be required to purchase such Mortgage Loan from the Trustee at the
Purchase Price or the Mortgage Loan Seller shall be required to substitute
another Mortgage Loan for such deficient Mortgage Loan in accordance with the
procedures and subject to the limitations set forth in Section 3.02(i)
through (viii), such repurchase or substitution obligation constituting the
sole remedy available to the Trustee, the Certificateholders and the
Certificate Insurer for failure of a Mortgage Loan to be recorded.
The ownership of each Mortgage Note, the Mortgage and the contents of
the related Mortgage File is vested in the Trustee. Mortgage documents
relating to the Mortgage Loan not delivered to the Trustee or the Custodian
under the Custodial Agreement are and shall be held in trust by the Master
Servicer or any Sub-Servicer, for the benefit of the Trustee as the owner
thereof and the Master Servicer's or such Sub-Servicer's possession of the
contents of each Mortgage File so retained is for the sole purpose of
servicing the related Mortgage Loan, and such retention and possession by the
Master Servicer or such Sub-Servicer is in a custodial capacity only. The
Company agrees to take no action inconsistent with the Trustee's ownership
of the Mortgage Loans, to promptly indicate to all inquiring parties that the
Mortgage Loans have been sold and to claim no ownership interest in the
Mortgage Loans.
It is the intention of this Agreement that the conveyance of the
Company's right, title and interest in and to the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan. If the
conveyance of the Mortgage Loans from the Mortgage Loan Seller to the Company
to the Trustee is characterized as a pledge and not a sale, then the Company
shall be deemed to have transferred to the Trustee, in addition to the Trust
Fund, all of the Company's right, title and interest in, to and under the
obligation deemed to be secured by said pledge; and it is the intention of
this Agreement that the Mortgage Loan Seller and the Company shall also be
deemed to have granted to the Trustee a first priority security interest in
all of the Mortgage Loan Seller's and the Company's right, title, and
interest in, to, and under the obligation deemed to be secured by said pledge
and that the Trustee and the Custodian shall be deemed to be an independent
custodian for purposes of perfection of such security interest. If the
conveyance of the Mortgage Loans from the Company to the Trustee is
characterized as a pledge, it is the intention of this Agreement that this
Agreement shall constitute a security agreement under applicable law, and
that the Mortgage Loan Seller and the Company shall be deemed to have granted
to the Trustee a first priority security interest in all of Mortgage Loan
Seller's and the Company's right, title and interest in, to and under the
Mortgage Loans, all payments of principal of or interest on such Mortgage
Loans, all other rights relating to and payments made in respect of the Trust
Fund, and all proceeds of any thereof. If the trust created by this
Agreement terminates prior to the satisfaction of the claims of any Person
in any Certificates, the security interest created hereby shall continue in
full force and effect and the Trustee shall be deemed to be the collateral
agent for the benefit of such Person.
In addition to the conveyance made in the first paragraph of this
Section 2.01, the Company does hereby convey, assign and set over to the
Trustee all of its right, title and interest in that portion of the Trust
Fund described in items (ii) through (vi) of the definition thereof and
further assigns to the Trustee for the benefit of the Certificateholders and
the Certificate Insurer those representations and warranties of the Mortgage
Loan Seller contained in the Sale Agreement and described in Section 3.01
hereof and the benefit of the remedies for the breach thereof.
Section 2.02. Acceptance by Trustee. The Trustee acknowledges the
---------------------
assignment to it of the documents referred to in Section 2.01 above and
declares that upon the Custodian's receipt thereof the Custodian will hold
such documents and any other documents constituting a part of the Mortgage
Files delivered to the Custodian in trust for the use and benefit and of all
present and future Certificateholders and the Certificate Insurer. The
Mortgage Loan Seller shall repurchase at the Purchase Price, or substitute
new Mortgage Loans (in accordance with Section 3.02(i) through (vii)) for,
all Mortgage Loans to which an exception was taken in the Custodian's Interim
Certification (as defined in the Custodial Agreement), within __ days of the
date of delivery of the Mortgage Files (the "Delivery Date") to the
-------------
Custodian, unless such exception is cured to the satisfaction of the Company
and the Certificate Insurer within __ Business Days of the date thereof (or
such other period as is agreed by the Company, the Certificate Insurer and
the Trustee but not more than __ Business Days). Pursuant to the Custodial
Agreement, the Custodian agrees, for the benefit of the Trustee, the
Certificateholders and the Certificate Insurer, to review each Mortgage File
delivered to it within __ days after the Delivery Date to ascertain that all
required documents have been executed and received, and that such documents
relate to the Mortgage Loans identified in Exhibit A, that have been conveyed
to the Trustee. If the Custodian finds any document or documents constitut-
ing a part of a Mortgage File to be missing or defective (that is, mutilated,
damaged, defaced, incomplete, improperly dated, clearly forged or otherwise
physically altered) in any material respect, the Custodian, pursuant to the
Custodial Agreement, shall promptly so notify the Trustee, each Rating
Agency, the Master Servicer, the Certificate Insurer and the Company by
delivering the Interim Certification to them within __ days after the
Delivery Date. The Mortgage Loan Seller shall correct or cure such omission,
defect or other irregularity within __ days from the date the Mortgage Loan
Seller was notified of such omission or defect and, if the Mortgage Loan
Seller does not correct or cure such omission or defect within such period,
then the Mortgage Loan Seller, within __ days from the date the Custodian
notified the Mortgage Loan Seller of such omission or defect, shall either
(i) repurchase such Mortgage Loan from the Trustee at the Purchase
Price of such Mortgage Loan or (ii) substitute a new Mortgage Loan for such
deficient Mortgage Loan in accordance with the provisions of Section 3.02(i)
through (viii). The Purchase Price for the purchased Mortgage Loan shall be
paid to the Master Servicer and deposited by the Master Servicer in the
Certificate Account and, upon receipt by the Trustee and the Custodian of
written notification of such deposit signed by a Servicing Officer, the
Custodian, pursuant to the Custodial Agreement, shall promptly execute and
deliver such instruments of transfer or assignment, without recourse, as
shall be necessary to vest in the Mortgage Loan Seller or its designee, as
the case may be, the interest of the Trustee in any Mortgage Loan released
pursuant hereto, and the Trustee shall have no further responsibility with
regard to such Mortgage Loan. It is understood and agreed that the
obligation of the Mortgage Loan Seller to purchase or substitute for any
Mortgage Loan as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy respecting such defect or
omission available to the Trustee on behalf of Certificateholders or the
Certificate Insurer. Notwithstanding anything herein to the contrary, the
Trustee and the Custodian shall be under no duty or obligation to inspect,
review and examine such documents, instruments, certificates or other papers
to determine that they are genuine, enforceable or appropriate to the
represented purpose, or that they have actually been recorded, or that they
are other than what they purport to be on their face or to determine that all
items described in clause (iv) of Section 2.01 have been delivered or to
determine whether the title policy affirmatively insures against
encroachments as described in clause (v) of Section 2.01.
The Custodian, pursuant to the Custodial Agreement, shall deliver to the
Company, the Trustee, the Certificate Insurer and the Master Servicer the
Interim and Final Certification. If (i) within __ days of the Closing Date,
the Custodian has not received an Officer's Certificate or a certificate of
the Master Servicer stating that the Mortgage has been delivered to the
appropriate public recording official for recordation or (ii) if within ___
days of the Closing Date the Custodian finds that any Mortgage has not been
recorded, the Custodian, pursuant to the Custodial Agreement, shall promptly
notify the Trustee, the Certificate Insurer and the Master Servicer and the
Master Servicer shall be required, within __ days of receipt of such notice,
to repurchase such Mortgage Loan or to substitute a new Mortgage Loan for
such deficient Mortgage Loan in accordance with Section 3.02(i) through
(viii) hereof.
Section 2.03. Trust Fund; Authentication of Certificates. Subject to
------------------------------------------
the provisions of Section 2.01, the Trustee acknowledges and accepts the
assignment to it of the Trust Fund created pursuant to this Agreement in
trust for the use and benefit of all present and future Certificateholders
and the Certificate Insurer. The Trustee acknowledges the assignment to it
of the Mortgage Loans and has caused to be (authenticated) (signed,
countersigned) and delivered to or upon the order of the Company, in exchange
therefor, Certificates duly authenticated by the Trustee in authorized
denominations evidencing owner-ship of the entire Trust Fund.
Section 2.04. REMIC Election. The Company hereby directs the Trustee
--------------
to sign an initial tax return to be provided by the Master Servicer which
shall cause the Trust Fund to elect to be treated as a REMIC on its return
for the Trust Fund's first taxable year. This Agreement shall be construed
so as to carry out the intention of this Agreement that the Trust Fund be
treated as a REMIC at all times prior to the date on which final payment is
made (or made available on demand) to the Holders of any Class A and Class
B Certificates. The Closing Date is hereby designated as the "startup day"
of such REMIC within the meaning of Section 860G(a)(9) of the Code. The
"regular interests" (within the meaning of Section 860G(a)(1) of the Code)
in such REMIC shall consist of the Class A Certificates and the Class B
Certificates. The Class R Certificate shall be designated as the "residual
interest" (within the meaning of Section 860G(a)(2) of the Code) in such
REMIC.
Section 2.05. REMIC Tax Matters. The tax year of the Trust Fund shall
-----------------
be the calendar year, and the Trust Fund shall use the accrual method of
reporting income and loss.
Section 2.06. REMIC Certificate Maturity Date. Solely for purposes
-------------------------------
of satisfying Section 1.860G-1(a)(4)(iii) of the Treasury Regulations, and
based upon certain assumptions, the "latest possible maturity date" of the
Class A and Class B Certificates is the Distribution Date in ______________.
(End of Article II)
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MASTER
--------------------------------------------
SERVICER; REPURCHASE OF MORTGAGE LOANS;
---------------------------------------
REPRESENTATION AND WARRANTY OF THE COMPANY
------------------------------------------
Section 3.01. Representations and Warranties of the Master Servicer.
-----------------------------------------------------
The Master Servicer hereby represents and warrants to the Trustee that on the
Closing Date it has entered into the Sale Agreement with the Company, wherein
in its capacity as the Mortgage Loan Seller, the Master Servicer has made the
following representations and warranties, and in its capacity as Master
Servicer, hereby further represents and warrants to the Trustee, the
Certificate Insurer and the Company as of the Closing Date, as follows:
(a) With respect to the Master Servicer in this
Section 3.01 and Section 3.02, Master Servicer means both
Master Servicer and Mortgage Loan Seller for as long as the
Master Servicer and the Mortgage Loan Seller are the same
Person, and means Mortgage Loan Seller only when the Mortgage
Loan Seller and the Master Servicer are different Persons:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing
under the laws of the State of __________ and is
qualified to transact business in each state in which
any Mortgaged Property is located or is not required
under applicable law from such qualification and no
demand for such qualification has been made upon
the Master Servicer by any such state. The Master
Servicer is or will be in compliance with the laws of
any such state to the extent necessary to ensure
the enforceability of each Mortgage Loan and the
servicing of the Mortgage Loans by it in accordance
with the terms of this Agreement;
(ii) The Master Servicer has the full power and
authority to hold each Mortgage Loan, to sell each
Mortgage Loan and execute, deliver and perform, and
to enter into and consummate all transactions contemplated
by this Agreement and the Sale Agreement and to
conduct its business as presently conducted, has
duly authorized the execution, delivery and
performance of this Agreement and the Sale Agreement,
has duly executed and delivered this Agreement and the
Sale Agreement, and this Agreement, the Sale
Agreement and each Assignment of Mortgage to the Company
constitutes a legal, valid and binding obligation of the
Master Servicer, enforceable against it in accordance
with its terms;
(iii) None of the execution and delivery of this
Agreement or the Sale Agreement, the origination or
acquisition of the Mortgage Loans by the Master Servicer,
the sale of the Mortgage Loans to the Company, the
consummation of the transactions contemplated thereby,
or the fulfillment of or compliance with the terms and
conditions of this Agreement or the Sale Agreement
will materially conflict with or result in a material
breach of any of the terms, conditions or provisions of
the Master Servicer's certificate of incorporation or
bylaws or any material legal restriction or any agreement
or instrument to which the Master Servicer is now a party
or by which it is bound, or constitute a material default
or result in an acceleration under any of the foregoing,
or result in the material violation of any law, rule,
regulation, order, judgment or decree to which the
Master Servicer or its property is subject;
((iv) The Master Servicer is an approved conventional
seller/servicer for FNMA or FHLMC in good standing;)
(v) With respect to each Mortgage Loan, the Master
Servicer is in possession of a complete Mortgage
File in compliance with this Agreement, except for
such documents as have been delivered to the Company
or its assignee and except for the Mortgages submitted
for recordation as set forth in Section 2.01 hereof;
(vi) Immediately prior to the transfer of the Mortgage
Loans to the Company, the Master Servicer had good title to
and is the sole owner of record of each Mortgage and the
indebtedness evidenced by each Mortgage Note;
(vii) There is no litigation pending or, to the Master
Servicer's knowledge, threatened to which the Master Servicer
is a party and which is reasonably likely to adversely
affect the sale of the Mortgage Loans, the execution,
delivery or enforceability of this Agreement or the
Sale Agreement, or the ability of the Master Servicer to
service the Mortgage Loans under this Agreement in accordance
with the terms hereof, or which is reasonably likely to
have a material adverse effect on the financial
condition of the Master Servicer;
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of
or compliance by the Master Servicer with this Agreement or the
Sale Agreement, the sale of the Mortgage Loans or the
consummation of the transactions contemplated by this
Agreement or the Sale Agreement except for consents,
approvals, authorizations and orders which have been obtained;
(ix) The consummation of the transactions contemplated by
this Agreement and the Sale Agreement is in the ordinary course
of business of the Master Servicer, and the transfer, assignment
and conveyance of the Mortgage Notes and the Mortgages by the
Master Servicer pursuant to this Agreement and the Sale
Agreement are not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable
jurisdiction;
(x) The origination, acquisition and collection practices
used by the Master Servicer and, to the best knowledge
of the Master Servicer, by the originator of the Mortgage
Loan, with respect to each Mortgage Note and Mortgage,
have been in all material respects legal and proper and,
with respect to collection practices, customary in the mortgage
origination and servicing business. With respect to escrow
deposits and payments that the Master Servicer collects, to the
extent such payments are in the possession of, or under the
control of, the Master Servicer, there exist no deficiencies
in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits
or other charges or payments due the Master Servicer have
been capitalized under any Mortgage or the related Mortgage
Note;
(xi) The Master Servicer used no selection procedures that
identified the Mortgage Loans as being less desirable or
valuable than other comparable outstanding conventional
mortgage loans in the Master Servicer's portfolio at the
Cut-off Date;
(xii) No statement, report or other document furnished
or to be furnished on or before the Closing Date by the
Master Servicer pursuant to this Agreement or the Sale
Agreement or in connection with the transactions
contemplated hereby or thereby contains any untrue statement
of a material fact or omits to state a material fact
necessary to make the statements contained therein not
misleading;
(xiii) The information supplied to the Company with
respect to the Mortgage Loans, the Master Servicer and
the Master Servicer's loan portfolio, including, but not
limited to, the information contained in the Prospectus
Supplement relating to the offering of the Class A
Certificates relating to the Mortgage Loans and the
Master Servicer, particularly the information under the
caption "The Mortgage Pool", is true and correct in all
material respects and does not omit to state a material
fact necessary to make such information, in light of the
circumstances under which given, not misleading; and
(xiv) The Master Servicer will treat the sale of
the Mortgage Loans to the Company as a sale for
federal income tax (to the extent appropriate),
reporting and accounting purposes.
(b) With respect to each Mortgage Loan as of the Closing Date
(unless another date is specified):
(i) The information set forth in the Mortgage Loan
Schedule is true and correct in all material respects;
(ii) As of the Closing Date, the Mortgage Loan is not
delinquent in payment by one or more Monthly Payments and
the Mortgage Loan has not been dishonored; the Mortgage
Loan has never been delinquent in payment by two or more
Monthly Payments and has not more than once during the
twelve months preceding the Cut-Off Date been delinquent in
payment by more than one Monthly Payment; there are no
material defaults under the terms of the Mortgage Loan;
the Master Servicer has not advanced funds, or induced,
solicited or knowingly received any advance of funds from
a party other than the owner of the Mortgaged Property
subject to the Mortgage, directly or indirectly, for the
payment of any amount required by the Mortgage Loan;
(iii) To the best of the Master Servicer's knowledge,
there are no delinquent taxes or other outstanding
charges affecting the related Mortgaged Property
which would permit a taxing authority to initiate
foreclosure proceedings against the Mortgaged Property;
(iv) The terms of the Mortgage Note and the Mortgage
have not been impaired, waived, altered or modified in any
respect, except by written instruments contained in the
Mortgage File, the substance of which waiver, alteration
or modification is reflected on the Mortgage Loan Schedule.
No Mortgagor has been released, in whole or in part, except
in connection with an assumption agreement which assumption
agreement is part of the Mortgage File and the terms of
which are reflected in the Mortgage Loan Schedule;
(v) The Mortgagor has not asserted that the Mortgage
Note and the Mortgage are subject to any right of rescission,
set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the
Mortgage Note and the Mortgage, or the exercise of any right
thereunder, render the Mortgage unenforceable, in whole
or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense
of usury and to the best of the Master Servicer's knowledge,
no such right of rescission, set-off, counterclaim or defense
has been asserted by any Person other than the obligor with
respect thereto;
(vi) All buildings upon the Mortgaged Property are required
to be insured by a generally acceptable insurer against loss
by fire, hazards of extended coverage and such other hazards as
are customarily included in extended coverage in the area
where the Mortgaged Property is located, pursuant to
Standard Hazard Policies conforming to the requirements of
Section 5.16. To the best knowledge of the Master Servicer,
all such Standard Hazard Policies are in effect. On the date
of origination such Standard Hazard Policies contained a
standard mortgagee clause naming the Master Servicer or
the originator of the Mortgage Loan and their respective
successors in interest as mortgagee and, to the best knowledge
of the Master Servicer, such clause is still in effect and,
to the best of the Master Servicer's knowledge, all premiums
due thereon have been paid. If the Mortgaged Property is
located in an area identified by the Secretary of
Housing and Urban Development as having special flood
hazards under the National Flood Insurance Act of 1968, as
amended, such Mortgaged Property is covered by flood insurance.
The Mortgage obligates the Mortgagor thereunder to maintain all
such insurance at Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of
the Mortgage to maintain such insurance at Mortgagor's cost and
expense and to seek reimbursement therefor from the Mortgagor;
(vii) At the time of origination of such Mortgage Loan and
thereafter, all requirements of any federal, state or local law
including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws
required to be complied with by the Master Servicer as the
originator of the Mortgage Loan and applicable to the Mortgage
Loan have been complied with in all material respects;
(viii) The Mortgage has not been satisfied as of the Cut-off
Date, cancelled or subordinated, in whole, or rescinded, and the
Mortgaged Property has not been released from the lien of the
Mortgage, in whole or in part (except for a release that does not
materially impair the security of the Mortgage Loan or a release
the effect of which is reflected in the Loan-to-Value Ratio
for the Mortgage Loan as set forth in the Mortgage Loan
Schedule), nor to the best of the Master Servicer's
knowledge has any instrument been executed that would effect
any such release, cancellation, subordination or rescission;
(ix) Ownership of the Mortgaged Property is held in fee
simple (except for Mortgage Loans as to which the related
land is held in a leasehold which extends at least five
years beyond the maturity date of the Mortgage Loan).
Except as permitted by the fourth sentence of this
Subsection (ix), the Mortgage is a valid, subsisting and
enforceable first lien on the Mortgaged Property, including
all buildings on the Mortgaged Property and all installations
and mechanical, electrical, plumbing, heating and air conditioning
systems affixed to such buildings, and all additions,
alterations and replacements made at any time with respect
to the foregoing securing the Mortgage Note's original principal
balance. The Mortgage and the Mortgage Note do not contain any
evidence on their face of any security interest or other interest
or right thereto. Such lien is free and clear of all adverse
claims, liens and encumbrances having priority over the first
lien of the Mortgage subject only to (1) the lien of non-
delinquent current real property taxes and assessments not yet
due and payable, (2) covenants, conditions and restrictions,
rights of way, easements and other matters of the public record
as of the date of recording which are acceptable to mortgage
lending institutions generally, or which are specifically referred
to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and either (A) which are referred
to or otherwise considered in the appraisal made for the
originator of the Mortgage Loan, or (B) which do not in the
aggregate adversely affect the appraised value of the Mortgaged
Property as set forth in such appraisal, and (3) other matters
to which like properties are commonly subject which do not
in the aggregate materially interfere with the benefits of
the security intended to be provided by the Mortgage or
the use, enjoyment, value or marketability of the related
Mortgaged Property. Any security agreement, chattel mortgage
or equivalent document related to and delivered in connection
with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority
security interest on the property described therein;
(x) The Mortgage Note is not subject to a third party's
security interest or other rights or interest therein;
(xi) The Mortgage Note and the related Mortgage are genuine
and, to the best of the Master Servicer's knowledge, each is
the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms subject to bankruptcy,
insolvency and other laws of general application affecting
the rights of creditors. To the best of the Master Servicer's
knowledge, all parties to the Mortgage Note and the Mortgage had
the legal capacity to enter into the Mortgage Loan and to execute
and deliver the Mortgage Note and the Mortgage. The Mortgage
Note and the Mortgage have been duly and properly executed
by such parties. The proceeds of the Mortgage Loan have
been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements as
to completion of any on-site or off-site improvements and as
to disbursements of any escrow funds therefor have been complied
with;
(xii) Immediately prior to the transfer and assignment to the
Company, the Mortgage Note and the Mortgage were not subject to
an assignment or pledge, and the Master Servicer had good title
to and was the sole owner thereof and had full right to transfer
and sell the Mortgage Loan to the Company free and clear of
any encumbrance, equity, lien, pledge, charge, claim or security
interest, including, to the best knowledge of the Master Servicer,
any lien, claim or other interest arising by operation of law;
(xiii) Each Mortgage Loan is covered by an ALTA lender's title
insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC, issued by a title insurer
acceptable to FNMA or FHLMC and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring
(subject to the exceptions contained in (ix)(1) and (2) above)
the Master Servicer, its successors and assigns, as to the
first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan. The Master Servicer is the
sole insured of such lender's title insurance policy, such
title insurance policy has been duly and validly endorsed to
the Trustee or the assignment to the Trustee of the Master
Servicer's interest therein does not require the consent of or
notification to the insurer and such lender's title insurance
policy is in full force and effect and will be in full force
and effect upon the consummation of the transactions
contemplated by this Agreement. To the best of the Master
Servicer's knowledge, no claims have been made under such
lender's title insurance policy, and no prior holder of the
related Mortgage has done, by act or omission, anything which
would impair the coverage of such lender's title insurance policy;
(xiv) To the best of the Master Servicer's knowledge, there is
no default, breach, violation or event of acceleration existing
under the Mortgage or the related Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach,
violation or event permitting acceleration, except for any
Mortgage Loan payment which is not late by more than __ days;
and the Master Servicer has not waived any default, breach,
violation or event permitting acceleration;
(xv) To the best of the Master Servicer's knowledge, there are
no mechanics' or similar liens or claims which have been filed
for work, labor or material (and, to the best of the Master
Servicer's knowledge, no rights are outstanding that under law
could give rise to such lien) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage;
(xvi) To the best of the Master Servicer's knowledge, all
improvements subject to the Mortgage lay wholly within the
boundaries and building restriction lines of the Mortgaged
Property (and wholly within the project with respect to a
condominium unit) and no improvements on adjoining properties
encroach upon the Mortgaged Property except those
which are insured against by the title insurance policy referred
to in clause (xiii) above and all improvements on the property
comply with all applicable zoning and subdivision laws and
ordinances;
(xvii) Each Mortgage Loan (except for the Mortgage Loans
referred to in the next sentence) was originated by, or
closed in the name of and funded by, the Master Servicer,
and at the time of each such origination the Master Servicer
was a mortgagee approved by the Secretary of Housing
and Urban Development (the "Secretary") pursuant to Sections
203 and 211 of the National Housing Act. (______ Mortgage
Loans, having an aggregate Cut-off Date Principal
Balance of $____________, were originated in the name of
an originator which was a mortgagee approved by the
Secretary pursuant to Sections 203 and 211 of the
National Housing Act. As more fully described in the
Prospectus Supplement dated ___________, 199_ relating to
the Class A Certificates, each Mortgage Loan was underwritten
in accordance with the Master Servicer's underwriting
guidelines in effect at the time of origination.
Each Mortgage Loan is an adjustable rate conventional mortgage
loan. Each Mortgage Loan bears interest at a rate adjusted
monthly or semiannually on the relevant Interest Adjustment
Date to a rate (rounded to the nearest 1/8th of 1% or
1/16th of 1%) equal to the applicable Margin stated therein
and shown on the Mortgage Loan Schedule plus the Index most
recently published as of the date 25 days (in the case
of a monthly adjustable Mortgage Loan) or 45 days
(in the case of a semiannually adjustable Mortgage Loan)
before the related Interest Adjustment Date, subject to
its Maximum Mortgage Rate. There is no minimum mortgage rate
applicable to a Mortgage Loan. No Mortgage Loan is subject to
a periodic interest rate cap (exclusive of the effect of
usury or similar laws). Each Mortgage Note is payable in
scheduled monthly installments, with interest payable in arrears.
The Monthly Payment on each Mortgage Loan is adjusted monthly
or semiannually on the relevant Payment Adjustment Date so
that the monthly payment is sufficient, during the first
____ years of the term of the Mortgage Loan, to pay
only the interest due thereon and, thereafter, to fully
amortize, without balloon payments, the then outstanding
principal balance over its remaining term to stated
maturity and to pay interest at the related Mortgage Rate
in effect on such Payment Adjustment Date; provided that if
a Convertible Mortgage Loan is converted to a fixed
rate, its Monthly Payment is adjusted to a level payment
that will fully amortize such Mortgage Loan through its
original maturity date. Certain Convertible Mortgage
Loans may be converted to a new Index and Margin in
accordance with the terms of the related Mortgage Note.
The Mortgage contains the usual and customary provision of
the Master Servicer at the time of origination for the
acceleration of the payment of the unpaid Principal Balance
of the Mortgage Loan if the related Mortgaged Property
is sold without the prior consent of the mortgagee
thereunder);
(xviii) The Mortgaged Property at origination or
acquisition was and, to the best of the Master Servicer's
knowledge, currently is free of material damage and waste
and in good repair and at origination there was, and to the
best of the Master Servicer's knowledge there currently is,
no proceeding pending for the total or partial condemnation
thereof;
(xix) The related Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security provided
thereby, including, (1) in the case of a Mortgage designated
as a deed of trust, by trustee's sale or judicial foreclosure,
and (2) otherwise by judicial foreclosure. The Master Servicer
has no knowledge of any homestead or other exemption available
to the Mortgagor which would interfere with the right to sell
the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage;
(xx) If the Mortgage constitutes a deed of trust, a trustee,
duly qualified if required under applicable law to act as
such, has been properly designated and currently so serves and
is named in the Mortgage, and no fees or expenses are or will
become payable by the Trustee to the trustee under the deed of
trust, except in connection with a trustee's sale or attempted
sale after default by the Mortgagor;
(xxi) With respect to each Mortgage Loan, there is an
appraisal on a FNMA-approved form (or a narrative residential
appraisal) of the related Mortgaged Property signed prior
to the approval of such Mortgage Loan application by a
qualified appraiser, appointed by the Master Servicer or the
originator of such Mortgage Loan, as appropriate, who has no
interest, direct or indirect, in the Mortgaged Property or in
any loan made on the security thereof, and whose compensation
is not affected by the approval or disapproval of such
Mortgage Loan;
(xxii) The Master Servicer has no knowledge of any
circumstances or condition with respect to the Mortgage,
the Mortgaged Property, the Mortgagor or the Mortgager's
credit standing that can reasonably be expected to cause
investors to regard the Mortgage Loan as an unacceptable
investment, cause the Mortgage Loan to become delinquent,
or adversely affect the value or marketability of the
Mortgage Loan;
(xxiii) Each Mortgage Loan has a Loan-to-Value Ratio
that is not greater than ____%, and has not been
significantly modified within the meaning of Treasury
Regulation Section 1.860G-2(h);
(xxiv) The Mortgage Loans were originated from ______ 199_
through ______ 199_. At origination, all Mortgage Loans had
a term to stated maturity of ___ years;
(xxv) No Mortgage Loan contains "subsidized buydown" or
"graduated payment" features;
(xxvi) Before giving effect to any exercise of the option
in a Convertible Mortgage Loan to convert to a new Index,
the Margins on the Mortgage Loans ((A) in the case of the Prime
Index Mortgage Loans, generally range from ______% to _______%,
(B) in the case of the Six-Month LIBOR Index Mortgage Loans,
generally range from _____% to _____%, (C) in the case of
One-Month LIBOR Index Mortgage Loans, generally range
from ______% to ______%, and (D) in the case of Treasury
Index Mortgage Loans, generally range from ______% to _______%);
(xxvii) No more than _______% of the Mortgage Loans, by Cut-Off
Date Principal Balances, are, as of the Cut-Off Date, secured
by Mortgaged Properties located in the same zip code area;
(xxviii) The Mortgaged Property is a single-family (one- to
four-unit) dwelling residence erected thereon, or an individual
condominium unit in a condominium, or an individual unit in a
planned unit development or in a de minimis planned unit
development, or the Mortgage Loan is secured by a security
interest in cooperative shares and a lease or other arrangement
in respect of a cooperative apartment. No such residence is a
mobile home or a manufactured dwelling which is not permanently
attached to the land. If the Mortgage Loan was originated in
the Mortgage Loan Seller's construction to permanent
financing program, construction of the related dwelling
residence is complete;
(xxix) Based on representations of the related mortgagors,
approximately ____% of the Mortgage Loans (measured by aggregate
Principal Balance) represent loans for primary residences, _____%
represent loans for secondary vacation residences and ____%
represent loans for investment properties;
(xxx) The Mortgage Rates borne by the Mortgage Loans
as of the Cut-off Date ranged from _____% per annum to _____%
per annum;
(xxxi) The original principal balances of the Mortgage Loans
ranged from $________ to $___________. The maximum outstanding
principal balance of any Mortgage Loan as of the Cut-off Date was
$___________;
(xxxii) Except for ____% of the Mortgage Loans (by Cut-off
Date Principal Balance), no Mortgage Loan was originated or
acquired in accordance with the terms of a limited documentation
program.
The Company, as assignee of the Master Servicer under this Agreement and
the Sale Agreement, hereby assigns to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer all of its right, title and
interest in respect of the Sale Agreement insofar as such Agreements relate
to the representations and warranties set forth in this Section 3.01.
The representations and warranties set forth in this Section 3.01 shall
survive the delivery of the respective Mortgage Files to the Trustee. With
respect to the representations and warranties described in this Section which
are made to the best of the Master Servicer's knowledge, if it is discovered
by any of the Company, the Master Servicer, the Certificate Insurer or the
Trustee that the substance of such representation and warranty is inaccurate,
then notwithstanding the Master Servicer's lack of knowledge with respect to
the substance of such representation and warranty being inaccurate at the
time the representation or warranty was made, such inaccuracy shall be
deemed a breach of the applicable representation or warranty. Upon discovery
by either the Company, the Master Servicer, the Certificate Insurer or the
Trustee of a breach of any of the foregoing representations and warranties
which materially and adversely affects the value of a Mortgage Loan or the
interest of the Certificateholders (or which materially and adversely
affects the interests of the Certificateholders or the Certificate Insurer
in the related Mortgage Loan in the case of a representation and warranty
relating to a particular Mortgage Loan), the party discovering such breach
shall give prompt written notice to the other parties and to the Certificate
Insurer. The Company shall promptly (and in any event within no more
than _____ Business Days) request that the Master Servicer cure such breach.
The Master Servicer shall within __ days from the date the Master Servicer
was notified of or otherwise discovers such breach cure such breach in all
material respects, substitute a Mortgage Loan pursuant to the provisions of
Section 3.02 or purchase such Mortgage Loan from the Trustee at the
Purchase Price. The Company shall send a copy of such notice to the Trustee
and the Certificate Insurer. The Purchase Price for the purchased Mortgage
Loan shall be deposited by the Master Servicer in the Certificate Account
and, upon receipt by the Trustee of written notification of such deposit
in the form of an Officer's Certificate signed by a Servicing Officer,
the Trustee shall promptly authorize the Custodian, upon its receipt of a
request for release of documents from the Master Servicer, to release to the
Master Servicer the related Mortgage File and execute and deliver such
endorsements, instruments of transfer or assignment, without recourse,
as shall be necessary to vest in the Master Servicer or its designee,
any interest of the Trustee in any Mortgage Loan released pursuant hereto,
and the Trustee shall have no further responsibility with regard to such
Mortgage Loan. It is understood and agreed that the obligation of the
Master Servicer to purchase or substitute for any Mortgage Loan as to
which such a breach has occurred and is continuing shall constitute
the sole remedy respecting such breach available to Certificateholders
or the Trustee on behalf of Certificateholders or the Certificate Insurer.
Section 3.02. Option to Substitute. Subject to Section 5.28(b), if the
--------------------
Master Servicer is required to repurchase any Mortgage Loan pursuant to
Section 2.02 or 3.01, then within the period of time specified in each
such Section, the Master Servicer may, at its option, but only during the
applicable specified period, remove such deficient Mortgage Loan from
the terms of this Agreement and substitute another mortgage loan for such
deficient Mortgage Loan, in lieu of repurchasing such deficient Mortgage
Loan. Any substitute Mortgage Loan shall (i) have a Principal Balance
at the time of substitution not in excess of the Principal Balance of
the deficient Mortgage Loan (the amount of any difference being deemed
to be a Principal Prepayment to be credited to or deposited in the
Certificate Account by the Master Servicer), (ii) have a
Mortgage Rate not less than the Mortgage Rate of the deficient Mortgage Loan,
and not more than one percentage point greater than the Mortgage Rate of the
deficient Mortgage Loan, (iii) bear interest based on the same Index, have
a Margin (assuming the Margin is subtracted from the Index to arrive at the
Mortgage Rate) that is not greater than the Margin of the deficient Mortgage
Loan, have a Margin (assuming the Margin is added to the Index) that is not
less than the Margin of the deficient Mortgage Loan and have the same
frequency for adjustment of the Mortgage Rate and Monthly Payment, (iv) have
a remaining maturity not later than, and not more than one year earlier than,
the remaining maturity of the deficient Mortgage Loan, (v) be, in the
reasonable determination of the Master Servicer, of the same type, quality
and character as the deficient Mortgage Loan as if the breach had not
occurred, (vi) have a Loan-to-Value Ratio not more than that of the deficient
Mortgage Loan and (vii) be in compliance with the representations and
warranties contained in Section 3.01 as of the date of substitution
(including the representation and warranties in Section 3.01(b)). If the
Principal Balance of the substitute Mortgage Loan is less than the Principal
Balance of the deficient Mortgage Loan, the Master Servicer shall deposit
such differential amount in the Certificate Account, which amount shall be
deemed to be a Principal Prepayment. Notwithstanding anything in this
Agreement to the contrary, the Master Servicer shall not substitute a
mortgage loan for a deficient Mortgage Loan at any time after ____ years
after the Closing Date.
The Master Servicer shall amend the Mortgage Loan Schedule to reflect
the withdrawal of the deficient Mortgage Loan from this Agreement and the
substitution of such substitute Mortgage Loan therefor. Upon such amendment,
the Master Servicer shall be deemed to have made as to such substitute
Mortgage Loan the representations and warranties set forth in Section 3.01
as of the date of such substitution.
Section 3.03. Representation and Warranty of the Company. The Company
------------------------------------------
represents and warrants that it has transferred each Mortgage Loan free of
any liens, claims, charges or other
encumbrances created by the Company and there has been no other sale or
assignment thereof by the Company.
Section 3.04. Converting Mortgage Loans; Certain Procedures and
-------------------------------------------------
Purchases. (a) The Trustee hereby authorizes and directs the Master Servicer
- ---------
to determine the fixed interest rates into which Mortgagors under Convertible
Mortgage Loans may convert the adjustable interest rates on their Mortgage
Notes in accordance with the terms thereof. The Master Servicer agrees to
make such determinations and otherwise administer the program contemplated
in the Mortgage Notes for the Convertible Mortgage Loans until the later to
occur of (i) the date on which all the Convertible Mortgage Loans have become
fixed rate Mortgage Loans and (ii) the last date on which Mortgagors have the
option to convert the adjustable interest rates on their Mortgage Notes to
fixed interest rates or different Indices. In addition, the Master Servicer
agrees to comply with the provisions of the Mortgage Notes to service the
Convertible Mortgage Loans in accordance with the terms of the related
Mortgage Notes.
(b) Upon receiving notice of the conversion of any Convertible
Mortgage Loan to a fixed interest rate, the Master Servicer will promptly
notify the Trustee (if it holds the related Mortgage File) or the Custodian.
Subject to Section 3.04(f), prior to the day on which a Convertible Mortgage
Loan has become a fixed rate Mortgage Loan, the Master Servicer shall be
obligated to purchase such Converting Mortgage Loan at the Conversion Price.
All amounts paid by the Master Servicer in connection with the purchase of
a Converting Mortgage Loan or Converted Mortgage Loan, as the case may be,
will be deposited in the Certificate Account. The Master Servicer shall not
be obligated under this Section to purchase a Mortgage Loan that converts to
a different Index.
(c) Notwithstanding that a Mortgage Loan becomes a Converting
Mortgage Loan in any month, such Converting Mortgage Loan shall remain in the
Trust Fund and all payments in respect thereof shall remain in the Trust Fund
unless and until, if the Master Servicer is obligated to purchase such
Converting Mortgage Loan, such Converting Mortgage Loan is purchased by the
Master Servicer pursuant to Section 3.04(b).
(d) In the event that any Converting Mortgage Loan is not
purchased as provided in Section 3.04(b), the amount of the conversion fee,
if any, paid by the Mortgagor in connection with the conversion of the
adjustable rate on such Converting Mortgage Loan into a fixed rate or a
different Index shall be deposited by the Master Servicer into the
Certificate Account on the Business Day immediately preceding the
Distribution Date on which the proceeds of the purchase of such Converting
Mortgage Loan were to be distributed to Certificateholders. The obligation
of the Master Servicer to deposit the amounts, if any, required by this
subsection (d) shall not limit or affect any purchase under subsection (b)
above.
(e) Upon any purchase of a Converting Mortgage Loan by the Master
Servicer pursuant to Section 3.04(b) and the deposit in the Certificate
Account of the Conversion Price, the Master Servicer shall give the Trustee
written notice thereof and, based thereon, the Trustee shall release, or
cause any Custodian to release, the related Mortgage File and convey such
Mortgage Loan to the Master Servicer whereupon such purchased Converting
Mortgage Loan shall cease to be part of the Trust Fund.
(f) If a Master Servicer's duties as Master Servicer are
terminated pursuant to Section 9.01, Section 8.04 or the third paragraph of
Section 8.02, then such Master Servicer shall not be obligated to purchase
any Mortgage Loan that becomes a Converting Mortgage Loan after such
termination. A successor Master Servicer (including, without limitation, the
Trustee as a successor Master Servicer ) shall not be obligated to purchase
Convertible Mortgage Loans that become Converting Mortgage Loans pursuant to
Section 3.04(b) unless, upon becoming a successor Master Servicer, such
successor Master Servicer elects in its sole discretion, by giving written
notice of such election to the Trustee at or about the time of its
succession, to be obligated to make such purchases.
(End of Article III)
ARTICLE IV
THE CERTIFICATES
----------------
Section 4.01. The Certificates. The Class A Certificates, Class B
----------------
Certificates and Class R Certificate shall be substantially in the forms
annexed hereto as Exhibits C, D and F, respectively, and shall, on original
issue, be (executed by the Company and authenticated by the Trustee)
(signed and countersigned by the Trustee) upon the assignment to the Trustee
of the documents specified in Section 2.01, and delivered to or upon the
order of the Company. The Class A and Class B Certificates shall be issuable
in the minimum original dollar denominations (and integral multiples of
approximately $________ in excess of such amount, except for one Certificate
for each Class representing the balance of such Class) and aggregate
original dollar denominations per Class as set forth in the following table:
Aggregate
Minimum Approximate Original
Original Denominations of all
Class Denomination Certificates of Class
----- ------------ ---------------------
A $________ $____________
B $________ $____________
So long as the Class A Certificates are Book-Entry Certificates, the
Class A Certificates that are Book-Entry Certificates shall be evidenced by
one or more certificates representing Class A Certificates in denominations
acceptable to the Depository. Beneficial ownership of the Class A Certifi-
cates that are Book-Entry Certificates may be held in minimum dollar
denominations of $_________ and integral multiples of $________ in excess
thereof. The minimum Percentage Interest for a Class R Certificate shall be
___%.
(The Certificates shall be signed by manual or facsimile signature on
behalf of the Company by one of its officers. Certificates bearing the
manual or facsimile signatures of individuals who were at the time of
signature proper officers of the Company shall bind the Company, notwith-
standing that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificate or did
not hold such offices at the date of such Certificates. No Certificate shall
be entitled to any benefit under this Agreement, or be valid for any purpose,
unless there appears on such Certificate a manual authentication by an
authorized officer of the Trustee and such authentication upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.)
The Certificates shall be executed by manual or facsimilie signature on
behalf of the Trust Fund by a Responsible Officer of the Trustee.
Certificates bearing the manual or facsimilie signatures of individuals who
were, at the time when such signatures were affixed, authorized to sign on
behalf of the Trustee shall bind the Trust Fund, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices
at the date of such Certificate. No Certificate shall be entitled to any
benefit under this Agreement, or be valid for any purpose, unless such
Certificate shall have been manually countersigned by the Trustee
substantially in the form provided for herein, and such countersignature upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their countersignature.
The rights of the Certificateholders to receive payments with respect
to the Trust Fund in respect of the Certificates, and all ownership interests
of the Certificateholders in such payments, shall be as set forth in this
Agreement.
Section 4.02. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall cause to be kept at its Corporate Trust Office, or at
the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided.
(b) Subject to Section 4.02(c), upon surrender for registration of
transfer of any Certificate at any office or agency of the Trustee maintained
for such purpose, (the Company shall execute and the Trustee shall
authenticate) (the Trustee shall execute, countersign) and deliver, in the
name of the designated transferee or transferees, a Certificate or
Certificates of a like Class and aggregate denomination and dated the
date of authentication by the Trustee.
(c) No transfer of a Class B or Class R Certificate shall be made
unless such transfer is made pursuant to an effective registration statement
or in accordance with an exemption from the requirements under the Securities
Act of 1933, as amended. If such a transfer is to be made in reliance upon
an exemption from said Act, (i) the Trustee shall, if not otherwise directed
by the Company, require a written Opinion of Counsel acceptable to and in
form and substance satisfactory to the Company that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from said Act or is being made pursuant to said Act, which Opinion
of Counsel shall not be an expense of the Trustee, the Company or the Master
Servicer, and (ii) the Trustee shall require the transferee to execute a cer-
tification, substantially in the form of Exhibit L hereto, acceptable to and
in form and substance satisfactory to the Company and the Trustee setting
forth the facts surrounding such transfer; provided that such Opinion of
Counsel shall not be required in the case of transfers by or to Merrill
Lynch, Pierce, Fenner & Smith Incorporated or an affiliate thereof. Such
Opinion of Counsel and certification shall not be an expense of the Trustee,
the Company or the Master Servicer. The Trustee, the Master Servicer and the
Company may, without the consent of any Certificateholder, add provisions
(which shall include a form of certificate to be attached hereto as an
exhibit that must be delivered by the proposed transferee) to this Section
4.02(c) to permit transfers pursuant to Rule 144A of the Securities and
Exchange Commission, in which case transfers pursuant to such provisions
shall not require an Opinion of Counsel.
(d) No transfer (exclusive of any transfer to a Depository or a
securitization trustee) of a Class B or Class R Certificate shall be made
unless the Trustee shall have received either (i) a representation letter
(substantially in the form attached hereto as Exhibit N) from the transferee
of such Certificate, acceptable to and in form and substance satisfactory to
the Trustee and the Company, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of any such plan or acquiring such
Certificate with funds of such a plan (including without limitation any
insurance company using funds that may constitute "plan assets"), which
representation letter shall not be an expense of the Trustee, the Company or
the Master Servicer, or (ii) in the case of any such Certificate presented
for registration in the name of an employee benefit plan subject to ERISA or
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan, an Opinion of Counsel
satisfactory to the Trustee and the Company to the effect that the purchase
or holding of such Certificate will not result in the assets of the Trust
Fund being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the
Trustee, the Company or the Master Servicer to any obligation in addition to
those undertaken in this Agreement or cause the Trustee, the Company or the
Master Servicer to be a fiduciary of such Plan, which Opinion of Counsel
shall not be an expense of the Trustee, the Company or the Master Servicer.
(e) At the option of the Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of authorized denominations
of a like Class and Percentage Interest, upon surrender of the Certificate
to be exchanged at any office or agency of the Trustee maintained for such
purpose. Whenever a Certificate is so surrendered for exchange, (the Company
shall execute and the Trustee shall authenticate) (the Trustee shall sign,
countersign) and deliver, the Certificate which the Certificateholder making
the exchange is entitled to receive. Every Certificate presented or
surrendered for transfer or exchange shall (if so required by the Trustee)
be duly endorsed by, or be accompanied by a written instrument of transfer
in the form satisfactory to the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing.
(f) No service charge shall be made to the Holder for any transfer or
exchange of the Certificate, but the Trustee may require payment by the
Certificateholders of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of the
Certificate.
(g) All Certificates surrendered for transfer and exchange shall be
cancelled and retained or destroyed by the Trustee in accordance with its
standard procedures.
(h) Notwithstanding anything to the contrary contained herein, unless
and until the Company shall have received an Independent Opinion of Counsel,
satisfactory in form and substance to the Company, to the effect that the
absence of the conditions contained in this Section 4.02(h) would not result
in the imposition of federal income tax upon the Trust Fund or cause the
Trust Fund to fail to qualify as a REMIC, no transfer, sale or other
disposition of the Class R Certificate (including a beneficial interest
therein) may be made without the express written consent to be granted in the
sole discretion of the Master Servicer and the Trustee.
(i) As a condition to the granting of the consent referred to in
Section 4.02(h), prior to the transfer, sale or other disposition of such
Certificates, the Master Servicer shall require that the proposed transferee
deliver to the Master Servicer and the Trustee an affidavit stating that as
of the date of such transfer (i) such transferee is not and has no intention
of becoming either (A) the United States, any state or political subdivision
thereof, any foreign government, any international organization, or any
agency or instrumentality of any of the foregoing (other than an
instrumentality that is a corporation all of whose activities are subject to
tax under the Code and, except in the case of the Federal Home Loan Mortgage
Corporation, a majority of the board of directors of which corporation is not
selected by the United States, any state or political subdivision thereof),
(B) any organization that is exempt from any tax imposed by Chapter 1 of
Subtitle A of the Code, other than (x) a tax-exempt farmers' cooperative
within the meaning of section 521 of the Code or (y) an organization that is
subject to the tax imposed by section 511 of the Code on "unrelated business
income" or (C) a corporation operating on a cooperative basis that is engaged
in furnishing electric energy or providing telephone service to persons in
rural areas (within the meaning of section 1381(a)(2)(C) of the Code) (any
Person described in (A), (B), or (C) being referred to herein as a
"Disqualified Organization"), (ii) such transferee is not acquiring such
Certificates as an agent, broker, nominee, or middleman for a Disqualified
Organization and (iii) such transferee is not a Non-U.S. Person. The Master
Servicer and a Responsible Officer of the Trustee
shall not grant the consent referred to in Section 4.02(h) if either has
actual knowledge that any statement made in the affidavit issued pursuant to
the preceding sentence is not true. Notwithstanding any transfer, sale or
other disposition of such Certificates to a Disqualified Organization or Non-
U.S. Person, such transfer, sale or other disposition shall be deemed to be
of no legal force or effect whatsoever and such Disqualified Organization or
Non-U.S. Person shall not be deemed to be a Holder of such Certificates for
any purpose hereunder, including, but not limited to, the receipt of
distributions on such Certificates. If any purported transfer shall be in
violation of the provisions of Section 4.02(h), then the prior Holder of such
Certificates shall, upon discovery that the transfer of such Certificates was
not in fact permitted in Section 4.02(h), be restored to all rights as a
Holder thereof retroactive to the date of the purported transfer of such
Certificates. The Trustee and the Master Servicer shall be under no
liability to any Person for any registration or transfer of a Class R
Certificate that is not permitted by Section 4.02(h) or for making payments
due on any such Certificate to the purported Holder thereof or taking any
other action with respect to such purported Holder under the provisions of
this Agreement so long as the transfer was registered under the written
certification of the Master Servicer as described in Section 4.02(h). The
prior Holder shall be entitled to recover from any purported Holder of any
such Certificate that was in fact not a permitted transferee under Section
4.02(h) at the time it became a Holder all payments made on such Certificate;
provided that the Master Servicer shall not be responsible for such recovery.
Each such Certificateholder, by the acceptance of a Class R Certificate,
shall be deemed for all purposes to have consented to the provisions of
Section 4.02(h) and to any amendment of this Agreement deemed necessary by
counsel of the Master Servicer, as evidenced by an Opinion of Counsel, to
ensure that either such Certificate is not transferred to a Disqualified
Organization or Non-U.S. Person and that any transfer of such Certificate
will not cause the imposition of a tax upon the Trust Fund or cause the Trust
Fund to fail to qualify as a REMIC. The restrictions on transfer of either
such Certificate will cease to apply and be void upon receipt by the Trustee
of the Opinion of Counsel as described in Section 4.02(h) or shall be
modified as indicated in such Opinion of Counsel. If any Person that is not
permitted to acquire any beneficial interest in a Class R Certificate under
this Section 4.02(i) acquires any beneficial interest in a Class R
Certificate in violation of the restrictions in this Section 4.02(i), then
the Trustee, based on information provided to it by the Master Servicer, will
provide to the Internal Revenue Service, and to the persons specified in
Section 860E(e)(3) and (6) of the Code, information needed to compute the tax
imposed under Section 860E(e)(5) of the Code on transfers of residual
interests to disqualified organizations.
(j) Notice of the transfer of any Class B Certificate shall be given
to the Rating Agency by the Trustee.
(k) Except as provided in paragraph (l) below, the Book-Entry
Certificates shall at all times remain registered in the name of the
Depository or its nominee and at all times: (i) registration of the Class
A Certificates may not be transferred by the Trustee except to another
Depository; (ii) the Depository shall maintain book-entry records with
respect to the Certificate Owners and with respect to ownership and transfers
of such Class A Certificates; (iii) ownership and transfers of registration
of the Class A Certificates on the books of the Depository shall be governed
by applicable rules established by the Depository; (iv) the Depository may
collect its usual and customary fees, charges and expenses from its
Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives
of the Certificate Owners of the Class A Certificates for purposes of
exercising the rights of Holders under this Agreement, and requests and
directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners;
and (vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
(l) If (x)(i) the Depository or the Company advises the Trustee in
writing that the Depository is no longer willing or able to properly
discharge its responsibilities as Depository, and (ii) the Company is unable
to locate a qualified successor, (y) the Company at its option advises the
Trustee in writing that it elects to terminate the book-entry system through
the Depository or (z) after the occurrence of an Event of Default,
Certificate Owners representing at least 50% of the principal balance of the
Class A Certificates and the Certificate Insurer advise the Trustee and the
Depository through the Depository Participants in writing that the
continuation of a book-entry system through the Depository is no longer in
the best interests of such Certificate Owners and the Certificate Insurer,
as applicable, the Trustee shall notify all Certificate Owners of such Class,
through the Depository, of the occurrence of any such event and of the
availability of definitive, fully registered Class A Certificates (the
"Definitive Certificates"), as applicable, to Certificate Owners
------------------------
requesting the same. Upon surrender to the Trustee of the Class A
Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall issue
the Definitive Certificates. Neither the Master Servicer, the Company nor
the Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. The Master Servicer shall provide the Trustee with an adequate
inventory of certificates to facilitate the issuance and transfer of
Definitive Certificates. Upon the issuance of Definitive Certificates all
references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates and the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder. In addition, the Class A Certificates shall
be in the form of Definitive Certificates up to the time the Class A
Certificates are transferred to public investors.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Trustee or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of
any Certificate, and (b) there is delivered to the Trustee such security or
indemnity as may 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 (authenticate) (countersign) and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and Class. Upon the issuance
of any new Certificate under this Section, the Trustee may require of the
Certificateholder the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. Any replacement Certificate of any Class
issued pursuant to this Section shall constitute complete and indefeasible
evidence of ownership of the Percentage Interest in the distributions to
which the Certificateholders of such Class are entitled, as if originally
issued, whether or not the mutilated, destroyed, lost or stolen Certificate
shall be found at any time, and such mutilated, destroyed, lost or stolen
Certificate shall be of no force or effect under this Agreement.
Section 4.04. Persons Deemed Owners. The Company, the Master Servicer,
---------------------
the Certificate Insurer and the Trustee may treat the person in whose name
any Certificate is registered as the owner of such Certificate and the
Percentage Interest in the distributions to the Certificateholders of such
Class are entitled, for the purpose of receiving remittances pursuant to
Section 6.01 and for all other purposes whatsoever, and neither the Company,
the Master Servicer, the Certificate Insurer nor the Trustee shall be
affected by notice to the contrary.
Section 4.05. Appointment of Paying Agent. The Master Servicer may
---------------------------
appoint a Paying Agent hereunder. In the event of any such appointment, no
later than 12:00 noon New York City time, on the Business Day preceding each
Distribution Date, the Master Servicer shall withdraw from the Certificate
Account and transfer to the Paying Agent for deposit in the Distribution
Account a sum which, together with other amounts deposited in the
Distribution Account, will be sufficient to make the payments to
Certificateholders in the amounts and in the manner provided for in Section
6.01. The Master Servicer shall cause the Paying Agent to perform each of
the obligations of the Paying Agent set forth herein and shall be liable to
the Trustee and the Certificateholders for failure of the Paying Agent to
perform such obligations. The Master Servicer designates
________________________________ as the initial Paying Agent. The Master
Servicer shall notify each Rating Agency and the Certificate Insurer of any
appointment of an additional or successor Paying Agent.
The Master Servicer shall cause each Paying Agent other than itself or
the Trustee to execute and deliver to the Master Servicer an instrument in
which such Paying Agent shall agree with the Master Servicer that such Paying
Agent will hold all sums held by it for the payment to Certificateholders in
trust for the benefit of the Trustee on behalf of the Certificate-holders (or
the Certificate Insurer) entitled thereto until such sums shall be paid to
such Certificateholders (or the Certificate Insurer).
(End of Article IV)
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
----------------------------------------------
Section 5.01. Master Servicer to Service Mortgage Loans. The Master
-----------------------------------------
Servicer shall service and administer the Mortgage Loans in accordance with
customary and prudent servicing procedures for residential mortgage loans and
shall have full power and authority, acting alone or through Sub-Servicers
as provided in Section 5.02, to do any and all things which it may deem
necessary or desirable in connection with such servicing and administration.
Without limiting the generality of the foregoing, the Master Servicer in its
own name or in the name of a Sub-Servicer is hereby authorized and empowered
by the Trustee when the Master Servicer or the Sub-Servicer, as the case may
be, believes it appropriate in its best judgment, to execute and deliver, on
behalf of the Certificateholders, the Trustee and the Certificate Insurer or
any of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments,
with respect to the Mortgage Loans and with respect to the Mortgaged
Properties. At the written request of the Master Servicer, the Trustee shall
execute any limited powers of attorney and other documents necessary or
appropriate to enable the Master Servicer to service and administer the
Mortgage Loans and the Trustee shall not be liable for the Master Servicer's
or any Sub-Servicer's application thereof and shall be indemnified by the
Master Servicer for its use of such powers of attorney.
In connection with the servicing and administration of the Mortgage
Loans, the Master Servicer may at the request of a Mortgagor or at its own
initiative agree to modify the Mortgage Note or Mortgage relating to the
Mortgage Loan of such Mortgagor or, subject to the provisions of this
Agreement, waive compliance by the Mortgagor with any provision of such
Mortgage Note or Mortgage, provided, however, that any such modification or
waiver shall not (i) extend the scheduled maturity date of, modify the
Mortgage Rate payable under (except as required by law or as contemplated by
the Mortgage Note), or constitute a cancellation or discharge of the
outstanding principal balance of, such Mortgage Loan, (ii) be inconsistent
with the Master Servicer's then current practice respecting comparable
mortgage loans held in its own portfolio, or (iii) materially and adversely
affect the security afforded by the Mortgaged Property (any modification,
waiver or change of the nature described in Section 5.07 being deemed not to
violate clause (i) or clause (iii) above).
The foregoing clauses (i) and (iii) in the preceding paragraph are
subject to the proviso that the Master Servicer may agree to changes to the
terms of a Mortgage Note or Mortgage
which would otherwise be violative thereof if (i) the Master Servicer has
determined that such changes are necessary to avoid prepayment of the related
Mortgage Loan or to accommodate the request of a Mortgagor to extend the
scheduled maturity date of the related Mortgage Loan beyond the period of the
original term to maturity and such changes are consistent with prudent
business practice as evidenced by a certificate signed by a Servicing Officer
to such effect, (ii) the Master Servicer shall purchase the related Mortgage
Loan for the Purchase Price on the Determination Date immediately following
the Due Period during which such changes were made and deposit such Purchase
Price in the Certificate Account on or prior to such Determination Date and
(iii) such changes and subsequent purchase will not affect the status of the
Trust Fund as a REMIC as evidenced by an Opinion of Counsel (provided at the
expense of the Master Servicer) to such effect delivered to the Trustee(;
provided, however, that the purchase of the related Mortgage Loan pursuant
to the foregoing clause (ii) shall occur on the _________ Business Day
following the date on which such changes were made if the short-term credit
rating of the Merrill Lynch & Co. Inc. (or its successor interest) is
downgraded below A-1/P-1). Any such repurchase shall be accomplished in the
same manner and subject to the same conditions set forth in Section 2.02.
Upon making any such repurchase the Servicer shall be entitled to receive an
instrument of assignment or transfer from the Trustee to the same extent as
set forth in Section 2.02.
Nothing herein shall be deemed to constitute a joint venture or
partnership between the Master Servicer and the Trustee.
All Servicing Advances made by the Master Servicer in effecting the
timely payment of taxes and assessments on the properties subject to the
Mortgage Loans shall not, for the purpose of calculating monthly
distributions to Certificate-holders, be added to the amount owing under the
related Mortgage Loans, notwithstanding that the terms of such Mortgage Loan
so permit, and such Servicing Advances shall be recoverable by the Master
Servicer to the extent permitted by Sections 5.09 and 5.23.
Section 5.02. Sub-Servicing Agreements Between Master Servicer and Sub
--------------------------------------------------------
Servicers; Enforcement of Sub-Servicer's Obligations. (a) The Master
- ----------------------------------------------------
Servicer may enter into Sub-Servicing Agreements with Sub-Servicers for the
servicing and administration of all or part of the Mortgage Loans if the
Master Servicer delivers to the Trustee an Officer's Certificate of the
Company and the Certificate Insurer consenting to the appointment of the
Sub-Servicer and the entering into of the Sub-Servicing Agreement and a
written confirmation from each Rating Agency to the effect that entering into
such Sub-Servicing Agreement would
not result in the reduction or withdrawal of the then current ratings of the
Class A Certificates. The Master Servicer shall deliver a copy of any such
Sub-Servicing Agreement to each Rating Agency. References in this Agreement
to actions taken or to be taken by the Master Servicer in servicing the
Mortgage Loans include actions taken or to be taken by a Sub-Servicer on
behalf of the Master Servicer. Each Sub-Servicing Agreement will be based
upon such terms and conditions as are not inconsistent with this Agreement
and as the Master Servicer and the Sub-Servicer have agreed. The Master
Servicer shall notify the Trustee and the Certificate Insurer in writing
promptly upon the appointment of any Sub-Servicer. For purposes of this
Agreement, the receipt by the Sub-Servicer of any amount with respect to a
Mortgage Loan (other than amounts representing servicing compensation or
reimbursement for an advance) shall be treated as the receipt by the Master
Servicer of such amount.
(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Trustee, the Certificateholders and the Certificate
Insurer, shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement. Such enforcement, including, without limitation,
the legal prosecution of claims, termination of Sub-Servicing Agreements as
appropriate, and the pursuit of other remedies, shall be in such form and
carried out to such an extent and at such time as the Master Servicer, in its
good faith business judgment, would require were it the owner of the related
Mortgage Loans. The Master Servicer shall pay the costs of such enforcement
at its own expense but shall be reimbursed therefor only (i) from a general
recovery resulting from such enforcement only to the extent, if any, that
such recovery exceeds all amounts due in respect of the related Mortgage
Loans or (ii) from a specific recovery of costs, expenses or attorneys' fees
against the party against whom such enforcement is directed.
Section 5.03. Successor Sub-Servicers. The Master Servicer shall be
-----------------------
entitled to terminate any Sub-Servicing Agreement that may exist in
accordance with the terms and conditions of such Sub-Servicing Agreement and
without any limitation by virtue of this Agreement. Each Sub-Servicing
Agreement shall contain provisions that provide that a successor Master
Servicer shall have the option to terminate such agreement without cause or
penalty upon its succession as Master Servicer.
Section 5.04. Liability of the Master Servicer. Notwithstanding any
--------------------------------
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer or a Sub-Servicer or
reference to actions taken through a Sub-Servicer or otherwise, the Master
Servicer shall remain obligated and liable to the Trustee, the Certificate
holders and the Certificate Insurer for the servicing and administration of
the Mortgage Loans in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer or the Mortgage Loan Seller and to the same extent and under
the same terms and conditions as if the Master Servicer alone were servicing
and administering the Mortgage Loans. The Master Servicer shall be entitled
to enter into any agreement with a Sub-Servicer for indemnification of the
Master Servicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
Section 5.05. No Contractual Relationship Between Sub- Servicer and
-----------------------------------------------------
Trustee, the Certificateholders or the Certificate Insurer. Any Sub
- ----------------------------------------------------------
Servicing Agreement that may be entered into and other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer in its
capacity as such and not as an originator shall be deemed to be between the
Sub-Servicer and the Master Servicer alone and the Trustee, the
Certificateholders and the Certificate Insurer shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Sub-Servicer.
Section 5.06. (Omitted)
Section 5.07. Collection of Mortgage Loan Payments. Continuously from
------------------------------------
the date hereof until the principal and interest on all Mortgage Loans are
paid in full, the Master Servicer will proceed diligently to collect all
payments due under each of the Mortgage Loans when the same shall become due
and payable and shall, to the extent such procedures shall be consistent with
this Agreement, follow such collection procedures as it follows with respect
to comparable mortgage loans held in its own portfolio; provided, however,
that the Master Servicer may not waive any increase in the Mortgage Rate
permitted by the terms of any Mortgage Note (unless such increase is not
permitted by applicable law). Consistent with the foregoing, the Master
Servicer may in its discretion (i) waive any assumption fee, late payment
charge or other charge in connection with a Mortgage Loan and (ii) if the
Mortgagor is in default or about to be in default because of the Mortgagor's
financial condition, arrange a schedule, running for no more than ___ days
after the Due Date for the initial delinquent installment on the related
Mortgage Note, for the liquidation of delinquent items. The foregoing clause
(ii) is subject to the proviso that the Master Servicer may in its discretion
arrange with the Mortgagor a schedule for the payment of interest and
principal due and unpaid for a period that exceeds ___ days if such
arrangement is determined by the Master Servicer to be reasonable and
consistent with its then current practices respecting comparable mortgage
loans held in its own portfolio, including but not limited to its practices
regarding mortgage loans secured by mortgage properties located in
federally designated disaster areas. Any such arrangements shall not
diminish or otherwise affect the Master Servicer's obligation to make
Advances pursuant to Section 6.03.
At its sole discretion, the Master Servicer may, but shall not be
obligated to, purchase a Defaulted Mortgage Loan at its Purchase Price. For
purposes of this Agreement, any such Defaulted Mortgage Loan so purchased by
the Master Servicer shall be deemed to be a Liquidated Mortgage Loan that
became liquidated at the time of such purchase, and the Purchase Price paid
by the Master Servicer shall be Liquidation Proceeds. The Master Servicer
shall deposit such Purchase Price in the Certificate Account at the time of
such purchase and shall be entitled to receive an instrument of assignment
or transfer from the Trustee in the same manner as provided in Section 2.02.
Section 5.08. Establishment of Certificate Account; Deposits in
-------------------------------------------------
Certificate Account. With respect to all of the Mortgage Loans, the (Master
- -------------------
Servicer shall establish and maintain a Certificate Account (the "Certificate
-----------
Account") which is an Eligible Account, titled "__________________________, as
- ------- Master Servicer, in trust for _______________________________________,
as Trustee, for the benefit of registered holders of ______________________,
Mortgage Pass-Through Certificates, Series 199_-__"; provided, however, that if
the Certificate Account is opened under a different name, the Master Servicer
shall, within ___ days after the Closing Date, cause the Certificate Account
to be re-titled under the aforementioned name; and provided further, that if
(x) the long-term unsecured debt of Merrill Lynch & Co., Inc. is rated by
Moody's, and is at any time rated by Moody's below A3 or (y) if such debt is
rated by Standard & Poor's, and is at any time rated by Standard & Poor's
below A-, the Certificate Account shall thereafter be maintained by the
Trustee and such account shall at such time be titled
"__________________________, as trustee for the benefit of the holders of
________________________, Mortgage Pass-Through Certificates, Series 199_-
__". Such Certificate Account shall be established with the Trustee or a
commercial bank, a mutual savings bank, or a savings and loan association.)
(Trustee shall establish and maintain a Certificate Account (the "Certificate
-----------
Account") which is an Eligible Account, titled
- -------
"________________________________, as trustee for the benefit of the holders
of __________________________, Mortgage Pass-Through Certificates, Series
199_-__". Such Certificate Account shall be established with a commercial
bank, a mutual savings bank, or a savings and loan association.) The (Master
Servicer) (Trustee) may invest, or cause the institution maintaining the
Certificate Account to invest, moneys in the Certificate Account in Eligible
Investments, which shall mature not later than the Business Day next preceding
the Distribution Date next following the date of such investment and shall
not be sold or disposed of prior to its maturity. The proceeds of the sale or
other disposition of all Eligible Investments shall be deposited in the
Certificate Account. All such Eligible Investments shall be made in the name
of the Trustee. All net income and gain realized from any such investment
shall be for the benefit of the Master Servicer as additional servicing
compensation and shall be subject to its withdrawal or order from time to
time. The Master Servicer shall be entitled to retain any net interest paid
on funds deposited in the Certificate Account other than the interest on any
funds required by applicable law to be paid to a Mortgagor, and, to the extent
required by applicable law, the Master Servicer shall pay, without
reimbursement from the Certificate Account, interest on such funds to the
Mortgagor notwithstanding that the Certificate Account is non-interest
bearing or that interest paid thereon is insufficient for such purposes. The
amount of any losses incurred in respect of any such investments (to the
extent not offset by income from other such investments) shall be deposited
in the Distribution Account by the Master Servicer out of its own funds
immediately as realized, without reimbursement from the Certificate Account;
provided, however, that if the Trustee becomes Master Servicer, the Trustee
shall not be required to deposit the amount of any loss incurred prior to its
becoming Master Servicer. The creation of the Certificate Account shall be
evidenced by a certification in the form of Exhibit H. A copy of such
certification shall be furnished to the Trustee.
The Master Servicer shall deposit or cause to be deposited in the
Certificate Account on a daily basis, no later than the later of the Closing
Date and ______ Business Day after the receipt thereof, and retain therein:
(i) All payments received which were due after the
Cut-off Date on account of principal on the Mortgage Loans,
and all Principal Prepayments collected after the Cut-off Date;
(ii) All payments received on account of interest which are due
after the Cut-off Date on the Mortgage Loans net of the related
Servicing Fee;
(iii) Net Liquidation Proceeds;
(iv) All Insurance Proceeds received by the Master Servicer under
any title, hazard or other insurance policy, including amounts required
to be deposited pursuant to Sections 5.16 and 5.20, other than proceeds
to be held in the Escrow Account or applied to the restoration or repair
of the Mortgaged Property or released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures or otherwise
applied or held as required by applicable law;
(v) All awards or settlements in respect of condemnation
proceedings affecting any Mortgaged Property which are not released
to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures;
(vi) All Repurchase Proceeds;
(vii) All amounts representing revenues under the insurance provided
pursuant to Section 5.19 to the extent of any losses borne by any
Certificateholder;
(viii) All revenues from any Mortgaged Property acquired by the
Master Servicer by foreclosure or deed in lieu of foreclosure net of any
Servicing Advances with respect to such Mortgaged Property; and
(ix) Any other amounts required to be deposited therein pursuant
to this Agreement.
The foregoing requirements for deposit in the Certificate Account shall be
exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment fees, late
payment charges and assumption fees need not be deposited by the Master
Servicer in the Certificate Account and may be retained by the Master
Servicer as additional servicing compensation. The Master Servicer shall
maintain or cause to be maintained accounting records on a loan-by-loan basis
with respect to the Certificate Account.
The Master Servicer shall give notice to the Trustee, the Company, each
Rating Agency and the Certificate Insurer of any change in the Certificate
Account, prior to the use thereof.
Section 5.09. Permitted Withdrawals from the Certificate Account. The
--------------------------------------------------
Master Servicer may, from time to time, withdraw funds from the Certificate
Account for the following purposes:
(i) to make payments to Certificateholders or the Certificate
Insurer in the amounts and in the manner provided for in Section 6.01,
or if applicable, to transfer moneys to the Distribution Account
maintained by the Paying Agent in accordance with Sections 4.05 and
6.01;
(ii) to reimburse itself and the Trustee for Advances made pursuant
to Section 6.03 (including amounts to reimburse the related Sub-Servicer
for advances made pursuant to the applicable Sub-Servicing Agreement),
the Master Servicer's, the Sub-Servicer's and the Trustee's right
to receive reimbursement pursuant to this subclause (ii) being
limited to amounts received on particular Mortgage Loans which
represent Late Collections (net of the Servicing Fee) with respect to
those particular Mortgage Loans;
(iii) to reimburse itself for unpaid Servicing Fees and unreimbursed
Servicing Advances, to pay the related Sub-Servicer any portion of
unpaid Servicing Fees and unreimbursed Servicing Advances, the Master
Servicer's right to reimburse itself or make payments to the Sub-
Servicers pursuant to this subclause (iii) with respect to any
Mortgage Loan being limited to related Liquidation Proceeds, Insurance
Proceeds, and condemnation awards;
(iv) to reimburse itself (or the related Sub-Servicer) or the
Company for expenses incurred by and recoverable by or reimbursable
to it pursuant to Section 5.01, 5.16, 5.21 or 8.03 or to the Company
pursuant to Section 8.03 (provided that reimbursements pursuant to
Section 8.03 shall be made only out of funds that would otherwise be
distributable to the Class R Certificateholders);
(v) to reimburse itself (or the related Sub-Servicer) and the
Trustee for any Nonrecoverable Advances;
(vi) to pay to itself (or the related Sub-Servicer) any net income
earned on the investment of funds deposited in the Certificate Account;
and (vii) to make payments to itself or others pursuant to any provision
of this Agreement, and to clear and terminate the Certificate Account
upon the termination of this Agreement.
Section 5.10. Establishment of Escrow Account; Deposits in Escrow
---------------------------------------------------
Account. With respect to those Mortgage Loans on which the Master Servicer
- -------
or any Sub-Servicer collects Escrow Payments, the Master Servicer shall, and
shall cause any Sub-Servicer to, segregate and hold all funds collected and
received pursuant to each such Mortgage Loan which constitute Escrow Payments
separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Escrow Accounts. Such Escrow Accounts
shall be established with a commercial bank, a mutual savings bank, or a
savings and loan association, the deposits of which are insured by the FDIC,
in a manner which shall provide maximum available insurance thereunder and
which may be drawn on by the Master Servicer. Subject to compliance with
applicable law, one Escrow Account may relate to multiple Mortgage Loans
and other mortgage loans serviced by the Master Servicer. The Master
Servicer shall give notice to the Trustee of the location of any
Escrow Account, and of any change thereof, prior to the use thereof.
The Master Servicer shall deposit, or cause to be deposited, in any
Escrow Account or Accounts on a daily basis, and retain therein, all Escrow
Payments collected on account of any Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of
this Agreement. The Master Servicer shall make withdrawals therefrom only
to effect such payments as are required under this Agreement, and for such
other purposes as are set forth in Section 5.11. The Master Servicer or the
Sub-Servicer shall be entitled to retain any interest paid on funds deposited
in the Escrow Account by the depository institution other than interest on
escrowed funds required by law to be paid to the Mortgagor and, to the extent
required by law, the Master Servicer shall pay interest on escrowed funds to
the Mortgagor notwithstanding that the Escrow Account is non-interest-bearing
or that interest paid thereon is insufficient for such purposes.
Section 5.11. Permitted Withdrawals from Escrow Account. Withdrawals
-----------------------------------------
from any Escrow Account or Accounts may be made by the Master Servicer only
(i) to effect timely payments of ground rents, taxes, assessments, water
rates, or other items constituting Escrow Payments for the related Mortgage,
(ii) to reimburse the Master Servicer for any Servicing Advance made by the
Master Servicer, with respect to an Escrow Payment for a related Mortgage
Loan but only from amounts received on the related Mortgage Loan which
represent late payments or collections of Escrow Payments thereunder, (iii)
to refund to any Mortgagor any funds found to be in excess of the amounts
required under the terms of the related Mortgage Loan, (iv) for transfer to
the Certificate Account in accordance with the terms of the related Mortgage
Loan, (v) for application to restoration or repair of the property subject
to the Mortgage, (vi) to pay to the Master Servicer, or to the Mortgagor to
the extent required by law, any interest paid on the funds deposited in the
Escrow Account, or (vii) to clear and terminate the Escrow Account on the
termination of this Agreement.
Section 5.12. Payment of Taxes, Insurance and Other Charges. With
---------------------------------------------
respect to each Mortgage Loan, the Master Servicer shall maintain, or cause
to be maintained, accurate records reflecting the status of ground rents,
taxes, assessments, water rates and other charges which are or may become
a lien upon the Mortgaged Property and the status of Standard Hazard Policy
premiums and shall obtain, from time to time, all bills for the payment of
such charges (including renewal premiums) and shall effect payment thereof
prior to the applicable penalty or termination date and at a time appropriate
for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Master Servicer or the Sub-Servicer in
amounts sufficient for such purposes, as allowed under the terms of the
Mortgage. To the extent that a Mortgage does not provide for Escrow Payments,
the Master Servicer shall determine that any such payments are made by the
Mortgagor the time they first become due. The Master Servicer assumes full
responsibility for the timely payment of all such bills and shall effect
timely payments of all such bills irrespective of each Mortgagor's faithful
performance in the payment of same or the making of the Escrow Payments
and shall make advances from its own funds to effect such payments.
Section 5.13. Transfer of Accounts. The Master Servicer may transfer
--------------------
the Certificate Account or Escrow Account to a different depository
institution from time to time. Such transfer shall be made by the Master
Servicer only upon obtaining the consent of the Trustee and the Certificate
Insurer, which consent shall not be unreasonably withheld.
Section 5.14. (Omitted)
Section 5.15. (Omitted)
Section 5.16. Maintenance of Standard Hazard Policies.
---------------------------------------
(a) The Master Servicer shall cause to be maintained for each Mortgage Loan
a Standard Hazard Policy with extended coverage as is customary in the area
where the Mortgaged Property is located in an amount which is equal to (A)
the replacement cost of the improvements securing such Mortgage Loan or (B)
the principal balance owing on such Mortgage Loan, whichever is less. If the
Mortgaged Property is in an area identified at the time of origination in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and such flood insurance has been made available) the Master
Servicer will cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal insurance
Administration with a generally acceptable insurance carrier, in an amount
representing coverage not less than the least of (i) the outstanding
principal balance of the Mortgage Loan, (ii) the full insurable value or
(iii) the maximum amount of insurance which is available under the Flood
Disaster Protection Act of 1973. The Master Servicer shall also maintain on
property acquired upon foreclosure, or by deed in lieu of foreclosure, of any
Mortgage Loan, fire and hazard insurance with extended coverage in an amount
which is not less than the lesser of (i) the outstanding principal balance of
the Mortgage Loan or (ii) the maximum insurable value of the improvements
which are a part of such property, liability insurance, and, to the extent
available, flood insurance in an amount as provided above. Any amounts
collected by the Master Servicer under any such policies (other than amounts
to be applied to the restoration or repair of the property subject to the
related Mortgage or property acquired in liquidation of the Mortgage Loan,
or released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) shall be deposited, subject to applicable law, in the
Certificate Account. It is understood and agreed that no earthquake or other
additional insurance need be required by the Master Servicer of any Mortgagor
or maintained on property acquired in respect of a Mortgage Loan, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. All such Standard
Hazard Policies and other policies shall be endorsed with standard mortgagee
clauses with loss payable to the Master Servicer or its designee. Any such
Standard Hazard Policies or any other policies may be in the form of blanket
policies; provided, however, that in the event of any claim arising in
connection with a hazard loss the Master Servicer shall be obligated, in the
case of blanket insurance policies, to deposit in the Certificate Account any
amount not payable under such blanket policy because of a deductible clause
in such policy and not otherwise payable under an individual policy. The
Master Servicer shall not interfere with the Mortgagor's freedom of choice
in selecting either his insurance carrier or agent, provided, however, that
the Master Servicer shall not accept any such insurance policies from
insurance companies unless such companies are acceptable insurers with
respect to the insurance coverage set forth in this Section under the laws
of, and are licensed to do business in, the state wherein the property
subject to the policy is located.
(b) Any cost incurred by the Master Servicer in maintaining any of the
foregoing insurance shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
Mortgage Loan, notwithstanding that the terms of the Mortgage Loan so permit.
Such costs (other than the costs of maintaining a blanket Hazard Insurance
Policy not attributable to a specific Mortgaged Property) shall be
recoverable by the Master Servicer from the Mortgagor or out of Insurance
Proceeds or Liquidation Proceeds or to the extent permitted by Section 5.09.
Section 5.17. (Omitted)
Section 5.18. (Omitted)
Section 5.19. Fidelity Bond and Errors and Omissions Insurance. The
------------------------------------------------
Master Servicer shall maintain, at its own expense, a blanket fidelity bond,
and errors and omissions insurance policy (or, in lieu thereof, a mortgage
interest insurance policy acceptable to FNMA), with broad coverage with
responsible companies on all officers, employees or other persons acting in
any capacity with regard to the Mortgage Loans to handle funds, money,
documents and papers relating to the Mortgage Loans. Any such fidelity bond
and errors and omissions insurance (or, in lieu thereof, a mortgage interest
insurance policy acceptable to FNMA), shall protect and insure the Master
Servicer against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such persons. No provision of
this Section 5.19 requiring such fidelity bond and errors and omissions
insurance (or, in lieu thereof, a mortgage interest insurance policy
acceptable to FNMA) shall diminish or relieve the Master Servicer from its
duties and obligations set forth in this Agreement. The minimum coverage
under any such bond and insurance policy shall be in an amount that will
permit the Master Servicer to continue to be a FNMA-qualified
seller/servicer. Upon request of the Trustee or the Certificate Insurer, the
Master Servicer shall cause to be delivered to the Trustee or the Certificate
Insurer a certified true copy of such fidelity bond and insurance policy.
Promptly upon receipt of any notice from the insurer that such fidelity bond
or insurance policy has been terminated or materially modified, the Master
Servicer shall notify the Trustee, the Certificate Insurer and the Rating
Agencies of any such termination or modification.
Section 5.20. Collections under Insurance Policies; Enforcement of Due
--------------------------------------------------------
on-Sale Clauses; Assumption Agreements. (a) In connection with its
- --------------------------------------
activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to present, on behalf of itself, the Trustee, the
Certificateholders and the Certificate Insurer, claims to the insurer under
any Standard Hazard Policies and, in this regard, to take such reasonable
action as shall be necessary to permit recovery under any insurance policies.
Pursuant to Section 5.08, the Master Servicer shall deposit Insurance
Proceeds in the Certificate Account. In those cases in which a Mortgage Loan
is serviced by a Sub-Servicer, the Sub-Servicer, on behalf of itself, the
Master Servicer, the Trustee, the Certificateholders and the Certificate
Insurer, shall, pursuant to a Sub-Servicing Agreement, be required to present
claims to the insurer under any such Standard Hazard Insurance Policy and
deposit all collections thereunder initially in the Certificate Account to
the extent not required or permitted to be deposited in the Escrow Account
pursuant to Section 5.10.
(b) When any Mortgaged Property is conveyed by the Mortgagor, the
Master Servicer shall exercise or refrain from exercising any due-on-sale
clause contained in any Mortgage Note or Mortgage consistent with its then
current practices and without regard to the fact that such Mortgage Loan is
in the Trust Fund rather than the Master Servicer's portfolio. Subject to
the preceding sentence, the Master Servicer will exercise any such due-on-
sale clause only to the extent permitted by such Mortgage Note or Mortgage,
applicable law and governmental regulations and only to the extent that such
enforcement will not adversely affect or jeopardize coverage under any
insurance policy required by this Agreement. If the Master Servicer elects
not to exercise such due on sale clause in respect of a Mortgage Loan or if
it is prohibited from doing so by applicable law, the Master Servicer is
authorized to take or enter into an assumption or substitution agreement from
or with the Person to whom such property has been or is about to be conveyed.
In connection with such assumption or substitution, the Master Servicer shall
follow such practice and procedures as shall be normal and usual and as it
applies to mortgage loans owned solely by it.
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 and
conveyance by the Mortgagor of the Mortgaged Property or any assumption of
a Mortgage Loan by operation of law which the Master Servicer in good faith
determines it may be restricted by law from preventing, for any reason
whatsoever.
(c) Subject to the Master Servicer's discretion to enforce any
due-on-sale clause as set forth in Section 5.20(b), in any case in which a
Mortgaged Property is to be conveyed to a Person by a Mortgagor, and such
Person is to enter into an assumption agreement or modification agreement or
supplement to the Mortgage Note or Mortgage, the Master Servicer shall so
notify the Trustee by forwarding to the Custodian the original copy of each
assumption or substitution agreement, which copy shall be added by the
Custodian to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. In connection with
any such assumption or substitution agreement, the interest rate of the
related Mortgage Note shall not be changed, and the principal amount of the
Mortgage Note shall not be increased or decreased and the maturity of the
Mortgage Note shall not be accelerated or extended. Any fee collected by the
Master Servicer for entering into an assumption or substitution of liability
agreement with respect to such Mortgage Loan shall be retained by the Master
Servicer as additional servicing compensation.
Section 5.21. Income and Realization from Defaulted Mortgage Loans.
----------------------------------------------------
Subject to Section 5.07, the Master Servicer shall foreclose upon or
otherwise comparably convert the ownership of Mortgaged Properties securing
such of the Mortgage Loans as come into and continue in default and as to
which no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 5.07, shall manage, conserve, protect and
operate such Mortgaged Properties for the purposes of their prompt
disposition and sale, and shall dispose of such Mortgaged Properties on such
terms and conditions as it deems in the best interests of the
Certificateholders; provided that if the Master Servicer has actual knowledge
that a Mortgaged Property is affected by hazardous waste, then the Master
Servicer shall not cause the Trustee to acquire title to such Mortgaged
Property in a foreclosure or similar proceeding unless so instructed by the
Certificate Insurer. For purposes of the proviso in the preceding sentence,
the Master Servicer shall not be deemed to have actual knowledge that a
Mortgaged Property is affected by hazardous waste unless it shall have
received written notice that hazardous waste is present on such property and
such written notice has been made a part of the servicing file with respect
to the related Mortgage Loan. The Master Servicer shall sell such property
within ____ years from such foreclosure or conversion or such longer period
as would not prevent such Mortgaged Property from constituting "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code. In
connection with such activities, the Master Servicer shall take all actions
necessary to ensure that such Mortgaged Property constitutes foreclosure
property (within the meaning of Section 860G(a)(8) of the Code) including,
if necessary, the hiring of independent contractors (within the meaning of
Section 856(d)(3) of the Code) to render any services with respect to the
property. The Master Servicer also shall follow such practices and
procedures as it shall deem necessary or advisable, as shall be normal and
usual in its general mortgage servicing activities, including its management
of foreclosed properties for a temporary period as contemplated herein. The
foregoing is subject to the provision that the Master Servicer shall not be
required to expend its own funds in connection with any management,
foreclosure or towards the restoration of any property unless it shall
determine that such management, restoration or foreclosure will increase the
Liquidation Proceeds of the Mortgage Loan to the Trust Fund after
reimbursement to itself for such expenses (respecting which it shall have
priority for purposes of withdrawals from the Certificate Account pursuant
to Section 5.09). The income earned from the management of such Mortgaged
Properties, net of reimbursement to the Master Servicer for expenses incurred
(including any taxes) in connection with such management, shall be applied
to the payment of principal of and interest on the related defaulted Mortgage
Loans (with interest accruing and principal amortizing as though such
Mortgage Loans were still current) and all such income shall be deemed, for
all purposes in this Agreement, to be payments on account of principal and
interest on the related Mortgage Notes and shall be deposited into the
Certificate Account.
Section 5.22. Trustee to Cooperate; Release of Mortgage Files. (a)
-----------------------------------------------
Upon becoming aware of the payment in full of any Mortgage Loan, the Master
Servicer will immediately notify the Custodian (if the Custodian holds the
related Mortgage File) by a certification in the form of an Officer's
Certificate (which certification shall include a statement to the effect that
all amounts received in connection with such payment which are required to
be deposited in the Certificate Account pursuant to Section 5.08 have been
or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request,
the Custodian, pursuant to the Custodial Agreement, shall promptly release
the related Mortgage File to the Master Servicer and shall execute and
deliver to the Master Servicer the deed of reconveyance or release or
satisfaction of Mortgage or other instruments releasing the lien of the
Mortgage, together with any other documents presented to it by the Master
Servicer for such purposes or to evidence the cancellation of indebtedness,
and the Trustee shall thereafter have no further responsibility with respect
to said Mortgage File. Upon any such payment in full, the Master Servicer
is authorized to procure from the trustee under the deed of trust which
secured the Mortgage Note, if any, a deed of full reconveyance covering the
property encumbered by such deed of trust, or, as the case may be, procure
from the Trustee an instrument of satisfaction or, if the Mortgagor so
requests, an assignment without recourse, which deed of reconveyance, instru-
ment of satisfaction or assignment shall be delivered by the Master Servicer
to the Person or Persons entitled thereto. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall
be chargeable to the Certificate Account.
(b) From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, the Master Servicer shall deliver to the
Custodian a certificate of a Servicing Officer in the form of an Officer's
Certificate (a form of which is attached to the Custodial Agreement)
requesting that possession of all, or any document constituting part of, the
Mortgage File be released to the Master Servicer and certifying as to the
reason for such release and that such release will not invalidate any
insurance coverage provided in respect of the Mortgage Loan under any of the
insurance policies required by this Agreement. With such certificate, the
Master Servicer shall request that the Custodian release the Mortgage File,
and the Custodian, pursuant to the Custodial Agreement, shall deliver the
Mortgage File or any document therein to the Master Servicer. The Master
Servicer shall cause each Mortgage File or any document therein so released
to be returned to the Custodian when the need therefor by the Master Servicer
no longer exists, unless (i) the Mortgage Loan has been liquidated and the
Net Liquidation Proceeds relating to the Mortgage Loan have been deposited in
the Certificate Account or (ii) the Mortgage File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially
or non-judicially, and the Master Servicer maintains in its servicing records
for presentation to the Custodian upon request the name and address of the
Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery.
(c) Upon written request of the Master Servicer, the Trustee shall
execute and deliver to the Master Servicer any court pleadings, requests for
trustee's sale or other documents necessary to the foreclosure or trustee's
sale in respect of a Mortgaged Property or to any legal action brought to
obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or
in equity. Together with such documents or pleadings, the Master Servicer
shall deliver to the Trustee a certificate of a Servicing Officer requesting
that such a pleadings or documents be executed by the Trustee and certifying
as to the reason such documents or pleadings are required and that the
execution and delivery thereof by the Trustee will not invalidate any
insurance coverage under the insurance policies required under this Agreement
or invalidate or otherwise adversely affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
Section 5.23. Servicing and Other Compensation. The Master Servicer,
as compensation for its activities hereunder, shall be entitled to receive---
- ----------------------------- on or prior to each Distribution Date the
amounts provided for as the Servicing Fee and as reimbursement for
Nonrecoverable Advances, Servicing Advances and reimbursement for Advances,
all as specified by Section 5.09. The amount of compensation or
reimbursement provided for shall be accounted on an aggregate basis.
Additional servicing compensation in the form of assumption fees,
prepayment fees, late payment charges or, to the extent not required to be
deposited in the Certificate Account pursuant to Section 5.08, 5.20 or 5.21
or to the extent permitted to be withdrawn pursuant to Section 5.09, other
amounts shall be retained by the Master Servicer. The Master Servicer shall
be required to pay all expenses incurred by it in connection with its
servicing activities hereunder (including the fees and expenses of the
Trustee) and shall not be entitled to reimbursement therefor except as
specifically provided in Sections 5.09 and 5.21.
Section 5.24. File Review Rights of the Certificate Insurer. The
---------------------------------------------
Certificate Insurer shall have the right to review the files of the Trustee
and the Master Servicer relating to the Certificates during ordinary business
hours.
Section 5.25. Annual Statement as to Compliance. The Master Servicer
---------------------------------
will deliver to the Company and the Trustee on or before _________ of each
year, beginning with the first __________ that occurs at least ____ months
after the Cut-off Date, an Officers' Certificate stating, as to each signer
thereof, that (i) a review of the activities of the Master Servicer during
the preceding calendar year and of performance under this Agreement has been
made under such officer's supervision, (ii) to the best of such officer's
knowledge, based on such review the Master Servicer has fulfilled all of its
obligations under this Agreement in all material respects throughout such
year, or, if there has been a default in the fulfillment of any such
obligation in any material respect, specifying each such default known to
such officer and the nature and status thereof and (iii) to the best of such
officer's knowledge, each Sub-Servicer has fulfilled its obligation under its
Sub-Servicing Agreement in all material respects, or if there has been a
material default in the fulfillment of such obligations in any material
respect, specifying such default known to such officers and the nature and
status thereof. Copies of such statement shall be provided to each Rating
Agency and the Certificate Insurer. Copies of such statement shall also be
provided by the Master Servicer to any Certificateholder upon request. If
the Master Servicer shall fail to provide such copies and the Trustee is
aware that the Master Servicer has not so provided copies, the Trustee shall
provide such copies at the Master Servicer's expense if the Trustee has
received such statement.
Section 5.26. Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
On or before ___________ of each year, beginning with the first ____________
that occurs at least _____ months after the Cut-off Date, the Master Servicer
at its expense shall cause a nationally recognized firm of independent public
accountants which is a member of the American Institute of Certified Public
Accountants to furnish a report to the Company and the Trustee to the effect
that all Mortgage Loans serviced by the Master Servicer under this Agreement
were included in the total population that was subject to selection for
testing in such firm's examination of certain documents and records and that
such examination, which has been conducted substantially in compliance with
the Uniform Single Attestation Program for Mortgage Bankers (or such other
audit or review program applicable to the Master Servicer), has disclosed
no items of material noncompliance with the provisions of the Uniform Single
Attestation Program for Mortgage Bankers (or such other program), except for
such items of noncompliance as shall be set forth in such report. Copies of
such report shall be provided to the Rating Agencies, the Certificate
Insurer, and, upon request, to the Certificateholders, by the Master Servicer,
or by the Trustee at the Master Servicer's expense if the Trustee has received
such report and the Master Servicer shall fail to provide such copies and the
Trustee is aware that the Master Servicer has not so provided copies.
Section 5.27. Access to Certain Documentation; Rights of the Company
------------------------------------------------------
in Respect of the Master Servicer. The Master Servicer shall provide access
- ---------------------------------
to the Certificate Insurer, the Trustee, Certificateholders which are savings
and loan associations, banks or insurance companies, the Office of Thrift
Supervision, the FDIC and the Supervisory Agents and examiners of the Office
of Thrift Supervision and the FDIC or examiners of any other federal or state
banking or insurance regulatory authority to the documentation regarding the
Mortgage Loans if so required by applicable regulations of the Office of
Thrift Supervision or other regulatory authority, such access to be afforded
subject to reimbursement for expenses without charge but only upon reasonable
request and during normal business hours at the offices of the Master Ser-
vicer designated by it. The Company may, but is not obligated to, enforce
the obligations of the Master Servicer under this Agreement and may, but is
not obligated to, appoint and cause a designee to perform, any defaulted
obligations of the Master Servicer hereunder or exercise the rights of the
Master Servicer hereunder; provided that the Master Servicer shall not be
relieved of any of its obligations hereunder by virtue of the appointment of
a designee by the Company or its designee. The Company shall not assume any
responsibility or liability for any action or failure to take any action by
the Master Servicer and is not obligated to supervise the performance of the
Master Servicer under this Agreement or otherwise.
Section 5.28. REMIC-Related Covenants. For as long as the Trust Fund
-----------------------
shall exist, the Master Servicer shall act in accordance herewith to assure
continued treatment of the Trust Fund as a REMIC. In particular:
(a) The Master Servicer shall not create, or permit the creation
of, any "interests" in the Trust Fund within the meaning of Section 860G of
the Code other than the interests represented by the Certificates;
(b) As of all times as may be required by the Code, the Master
Servicer will ensure that substantially all of the assets of the Trust Fund
will consist of "qualified mortgages" as defined in Section 860G(a)(3) of the
Code and "permitted investments" as defined in Section 860G(a)(5) of the
Code. The Master Servicer shall maintain records that are sufficient to
indicate the Trust Fund's compliance with applicable requirements of the Code
(or applicable Treasury Regulations) relating to the assets held by the Trust
Fund. Further, the Master Servicer shall not permit and the Trustee shall
not accept the transfer or substitution of any Mortgage Loan ____ years or
more after the Closing Date unless the Master Servicer and the Trustee have
received an Opinion of Counsel, which shall be an expense of the Master
Servicer, that such transfer or substitution would not adversely affect the
REMIC status of the Trust Fund or would not otherwise be prohibited by this
Agreement;
(c) The Master Servicer shall ensure that the Trust Fund does not
receive a fee or other compensation for services and that the Trust Fund does
not receive any income from assets other than "qualified mortgages" within
the meaning of Section 860G(a)(3) of the Code or "permitted investments"
within the meaning of Section 860G(a)(5) of the Code, and shall take whatever
action it deems necessary to avoid any material tax imposed by the Code on
the Trust Fund;
(d) The Trustee shall not sell or permit the sale of all or any
portion of the Mortgage Loans or of any Eligible Investment unless such sale
is as a result of a repurchase of the Mortgage Loans by the Master Servicer
or the Mortgage Loan Seller pursuant to the Agreement or the Trustee has
received an Opinion of Counsel to the effect that such sale (i) is in
accordance with a qualified liquidation as defined in Section 860F(a)(4) of
the Code and as described in Section 11.01 hereof, or (ii) would not be
treated as a prohibited transaction within the meaning of Section 860F(a)(2)
of the Code, which prohibited transaction results in the realization of a
material amount of gain or loss for federal income tax purposes; and
(e) Notwithstanding anything to the contrary in this Agreement,
the Master Servicer and the Trustee, at the direction and at the expense of
the Master Servicer, shall take any other action or may fail to take any
action otherwise required where the Master Servicer deems such action or
inaction reasonably necessary to preserve or ensure the REMIC status of the
Trust Fund or to avoid the imposition of any material tax liability on the
Trust Fund other than the tax imposed pursuant to Section 24872 of the
California Revenue and Taxation Code.
Section 5.29. Prohibited Transactions and Other Taxes. In the event
---------------------------------------
that any tax is imposed on the Trust Fund (including "prohibited
transactions" of the Trust Fund as defined in Section 860F of the Code), such
tax shall be charged first against amounts distributable to the Class R
Certificateholders and then against amounts otherwise distributable to the
Class B Certificateholders on a pro rata basis. The Master Servicer is
hereby authorized to direct the Paying Agent to retain and, upon such
direction, the Paying Agent is hereby authorized to retain from amounts
otherwise distributable to the Class R Certificateholders and the Class B
Certificateholders, as appropriate, sufficient funds to pay or provide for
the payments of, and to actually pay, such tax as is legally owed by the
Trust Fund (but such authorization shall not prevent the Trustee or the
Master Servicer from contesting any such tax in appropriate proceedings, if
either of them elects to so contest such tax or proceeding, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings).
(End of Article V)
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
----------------------------------
Section 6.01. Distributions. (a) On each Distribution Date, the
-------------
Paying Agent shall distribute funds from the Distribution Account in the
following amounts and in the following order of priority (subject to the
requirement that Insured Payments shall only be distributed to the Class A
Certificateholders):
(i) to the Class A Certificateholders, the Class A Interest
Formula Distribution Amount;
(ii) to the Class A Certificateholders, on account of principal,
the Class A Formula Principal Distribution Amount until the Class A Principal
Balance is reduced to zero;
(iii) to the Certificate Insurer, the Premium Amount for the
Certificate Insurance Policy;
(iv) to the Certificate Insurer, any Reimbursement Amount;
(v) to the Reserve Fund, the amount (but not in excess of the
Formula Excess Interest Amount) required to be deposited therein pursuant to
Section 6.03(d);
(vi) to the Class B Certificateholders, the Class B Interest
Formula Distribution Amount;
(vii) to the Class A Certificateholders, on account of principal,
the Unrecovered Principal Amounts, if any, for such Distribution Date and all
prior Distribution Dates that have not previously been distributed pursuant
to this clause until the Class A Principal Balance is reduced to zero;
(viii) to the Class B Certificateholders, on account of principal,
the Class B Formula Principal Distribution Amount until the Class B Principal
Balance is reduced to zero;
(ix) to the Class B Certificateholders, the Class B Loss Amounts
not previously distributed to them pursuant to this clause; and
(x) to the Class R Certificateholders, any remaining balance;
provided, however, that until the Class A Principal Balance is reduced to
zero, distributions on account of principal otherwise
allocable to the Class B Certificateholders in accordance with the above
priorities will instead be made to the Class A Certificateholders (A) to the
extent, if any, that such distribution would, if made to the Class B
Certificateholders, reduce the Class B Principal Balance to less than ______%
of the Original Pool Principal Balance or (B) if the Class B Principal
Balance is less than _____% of the Original Pool Principal Balance; and
provided further that the aggregate amounts distributed on account of
principal to the Class A and Class B Certificateholders (whether out of the
Available Distribution Amount, the Certificate Insurance Policy or the
Reserve Fund) shall not exceed the Original Class A and Class B Principal
Balance, respectively.
As provided in the definitions of "Class A Interest Formula Distribution
Amount" and "Class B Interest Formula Distribution Amount", the interest
entitlement above for the Class A and Class B Certificates with respect to
each Distribution Date shall be reduced by the amount of Net Interest
Shortfall for such Distribution Date allocable to each such Class. Net
Interest Shortfall on any Distribution Date will be allocated pro rata among
the Class A and Class B Certificates based on the amount of interest each
such Class of Certificates would otherwise be entitled to receive on such
Distribution Date.
(b) The Trustee shall calculate LIBOR for each Distribution Date. The
Master Servicer shall make all necessary calculations and provide the Paying
Agent with the information necessary to make the above distribution to each
Class of Certificateholders by the ______ Business Day prior to each
Distribution Date. The Paying Agent shall not be responsible for recom-
puting, recalculating or verifying information provided to it by the Master
Servicer. All distributions made to Certificateholders of any Class on such
Distribution Date will be made to the Certificateholders of the respective
Class of record on the next preceding Record Date, except that on the final
distribution, distributions shall be made as provided in the form of Certifi-
cate. All distributions made to Certificateholders shall be based on the
Percentage Interest represented by their respective Certificates, and shall
be made either by wire transfer in immediately available funds to the account
of such Holder at a bank or other financial or depository institution having
appropriate facilities therefor, if such Holder has so notified the Paying
Agent in writing at least _____ Business Days prior to the Record Date for
the relevant Distribution Date and such Holder's Certificates of such Class
in the aggregate evidence an original denomination of not less than
$_____________ or, if not, by check mailed to the address of the Person
entitled thereto as it appears on the Certificate Register, except that the
final distribution in retirement of the Certificates will be made only
upon presentation and surrender of the Certificates at the Corporate Trust
Office or such other agency of the Trustee specified in the final
distribution notice to Certificateholders. If on any Determination Date, the
Master Servicer determines that there are no Mortgage Loans outstanding and
no other funds or assets in the Trust Fund other than the funds in the
Certificate Account or the Distribution Account, the Master Servicer shall
direct the Trustee promptly to send the final distribution notice to each
Certificateholder specifying the manner in which the final distribution will
be made. Except as otherwise provided in Section 11.01, whenever the Master
Servicer expects that a final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall,
no later than __________ days after the related Determination Date, mail to
each Holder on such date of such Class of Certificates a notice to the effect
that: (i) the Master Servicer expects that the final distribution with
respect to such Class of Certificates will be made on such Distribution Date
but only upon presentation and surrender of such Certificates at the office
of the Trustee or as otherwise specified therein, and (ii) no interest shall
accrue on such Certificates from and after the end of the related Accrual
Period. In the event that Certificateholders do not surrender their
Certificates for final cancellation, the Trustee shall follow procedures
comparable to the arrangements set forth in the final paragraph of Section
11.01.
(c) No later than 12:00 noon, New York City time, on the Business Day
preceding each Distribution Date, the Master Servicer shall transfer from the
Certificate Account to the Distribution Account a sum, which, together with
any Advances deposited in the Distribution Account as of the related Advance
Deposit Date pursuant to Section 6.03, will equal the Available Distribution
Amount for such Distribution Date to enable the Paying Agent to make the
distributions provided for in this Section 6.01. The Distribution Account
shall be established and maintained by and with the Paying Agent, and shall
be an Eligible Account in the form of a non-interest bearing trust account,
titled "________________________________, as Paying Agent and Agent for the
benefit of ________________________________, as Trustee on behalf of the
holders of __________________________ Mortgage Pass-Through Certificates,
Series 199_-__" and the Paying Agent shall deliver to the Trustee, the
Certificate Insurer and the Master Servicer a Distribution Account Letter
Agreement substantially in the form of Exhibit K attached hereto. The Master
Servicer may cause the Paying Agent to invest moneys in the Distribution
Account in Eligible Investments, which shall mature not later than the
Business Day prior to the Distribution Date following the date of such
investment and shall not be sold or disposed of prior to its maturity. All
such Eligible Investments shall be made in the name of the Trustee. The
proceeds of the sale or other disposition of all Eligible Investments shall
be deposited in the Distribution Account. All net income and gain realized
from any such investment shall be for the benefit of the Master Servicer as
additional servicing compensation and shall be paid by the Paying Agent to
the Master Servicer on the Business Day following each Distribution Date.
The amount of any losses incurred in respect of any such investments (to the
extent not offset by income from other such investments) shall be deposited
in the Distribution Account by the Master Servicer out of its own funds
immediately as realized without reimbursement; provided, however, that if the
Trustee becomes Master Servicer, the Trustee shall not be required to deposit
the amount of any loss incurred prior to its becoming Master Servicer.
Section 6.02. Statements to the Certificateholders. Not later than
------------------------------------
12:00 noon ____________ time on the ________ Business Day prior to each
Distribution Date, the Master Servicer shall deliver to the Trustee and the
Paying Agent for mailing by the Trustee to each holder of the related Class
of Certificates, each Rating Agency and the Certificate Insurer a statement
setting forth the following information:
(i) with respect to each Class of Certificates, the amount of such
distribution to Holders of such Class allocable to principal. Such statement
shall separately identify, in the aggregate and not on a Class by Class
basis, the aggregate amount of any Principal Prepayments, Net Liquidation
Proceeds and Repurchase Proceeds included in the distribution to all Classes;
(ii) with respect to each Class of Certificates, the amount of such
distribution to Holders of such Class allocable to interest, identifying
those cases in which the applicable Pass-Through Rate was based on the
Alternate Certificate Rate and, to the extent information is reasonably
available to the Master Servicer on such Determination Date, indicating the
Pass-Through Rate applicable to each Class of Certificates for the next Dis-
tribution Date;
(iii) the amounts (stated separately) of any Class A Interest
Shortfall and Class B Interest Shortfall for such Distribution Date and the
amounts (stated separately) of Class A Unpaid Interest Shortfall and Class
B Unpaid Interest Shortfall;
(iv) the amount, if any, by which the sum of the Formula Principal
Distribution Amount and the Unrecovered Principal Amounts for such Distribu-
tion Date exceeds the amount distributed on account of principal to the
related Certificateholders on such Distribution Date;
(v) the amount of any Advances by the Master Servicer and by the
Trustee pursuant to Section 6.03 and the amount of delinquencies of Mortgage
Loans during the related Due Period;
(vi) the amount to be paid to the Certificate Insurer pursuant to
Section 6.01(a) (the information required by this clause (vi) shall not be
included in the statement to Certificateholders);
(vii) the Pool Principal Balance, after giving effect to the Formula
Principal Distribution Amount and the Unrecovered Principal Amounts for such
Distribution Date;
(viii) the related amount of the Servicing Fees retained or withdrawn
from the Certificate Account by the Master Servicer and the amount of
additional servicing compensation received by the Master Servicer
attributable to penalties, fees and other items;
(ix) the amount of Servicing Advances paid by the Master Servicer
and any Sub-Servicer;
(x) the number and aggregate principal amounts of Mortgage Loans
(A) delinquent (1) one Monthly Payment and (2) two Monthly Payments, (3)
three or more Monthly Payments and (B) in foreclosure;
(xi) the book value (within the meaning of 12 C.F.R. Section 571.13
or comparable provision) of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure;
(xii) the Aggregate Net Principal Liquidation Losses for Mortgage
Loans that became Liquidated Mortgage Loans during the related Principal
Prepayment Period;
(xiii) all Advances recovered during the related Principal Prepayment
Period;
(xiv) the amount, if any, distributed to the holders of Certificates
from the Reserve Fund on such Distribution Date and the amount, if any, in
the Reserve Fund after giving effect to such distribution;
(xv) the Distribution Account Shortfall, if any, for such
Distribution Date;
(xvi) the Class A Principal Balance and the Class B Principal Balance
after giving effect to the distribution on such Distribution Date; and
(xvii) the Class B Loss Amount for such Distribution Date.
Not later than ___ Business Days prior to each Distribution Date, the
Master Servicer shall deliver to the Paying Agent a statement, and on the
following Distribution Date the Paying Agent shall also send to the Class R
Certificateholders, the Company, the Trustee (if other than the Paying
Agent), the Certificate Insurer and the Rating Agency such statement, setting
forth the amount, if any, distributed to such Holders on such Distribution
Date.
The Paying Agent's responsibility for distributing the above information
to the Certificateholders is limited to the availability, timeliness and
accuracy of the statement received from the Master Servicer. If the Paying
Agent fails to distribute such statements as specified in this Section 6.02,
it shall be the responsibility of the Trustee to make the required
distribution of such statements.
Upon reasonable advance notice in writing, if required by federal
regulation, the Master Servicer will provide to each Certificateholder which
is a savings and loan association, bank or insurance company certain reports
and access to information and documentation regarding the Mortgage Loans
sufficient to permit such Certificateholder to comply with applicable
regulations of the Office of Thrift Supervision or other regulatory authori-
ties with respect to investment in the Certificates; provided, that the
Master Servicer shall be entitled to be reimbursed by each such
Certificateholder for the Master Servicer's actual expenses incurred in
providing such reports and access.
Section 6.03. Advances by the Master Servicer. (a) If, on any
-------------------------------
Determination Date, the Master Servicer determines that any Monthly Payments
due on the immediately preceding Due Date have not been received, the Master
Servicer shall, to the extent it determines in good faith that such amounts
will be recoverable from Late Collections, Liquidation Proceeds or otherwise,
make an advance on or before the related Advance Deposit Date in an amount
equal to the amount of such delinquent Monthly Payments, after adjustment of
any delinquent interest payment for the Servicing Fee. For purposes of this
Section 6.03, the delinquent Monthly Payments referred to in the preceding
sentence shall be deemed to include an amount equal to the Monthly Payment
that would have been due on the Mortgage Loans which have been fore
closed or otherwise terminated and, in connection therewith, the Master
Servicer or the Trust Fund acquired and continues to own the Mortgaged Prop-
erties on behalf of the Certificateholders. If the Master Servicer makes an
Advance, it shall on or prior to such Advance Deposit Date deposit in the
Distribution Account an amount equal to the Advance, if any. Any such
Advance shall be included with the distribution to the Certificateholders on
the related Distribution Date. The Master Servicer shall be entitled to be
reimbursed from funds in the Certificate Account for all Advances and Nonre-
coverable Advances as provided in Section 5.09.
The Master Servicer may make an Advance by: (i) depositing its own
funds in the Certificate Account, (ii) applying funds that are not part of
the Available Distribution Amount in respect of which the Advance is being
made or (iii) effecting a combination of clauses (i) and (ii). Any portion
of the funds so used pursuant to clause (ii) shall be replaced by the Master
Servicer by deposit in the Certificate Account on or before 12:00 noon New
York City time on the Business Day preceding any future Distribution Date to
the extent that funds that are available in the Certificate Account on such
date shall be less than the Available Distribution Amount for such
Distribution Date.
(b) If the Master Servicer determines not to make an Advance under the
provisions of this Section, it shall on the related Advance Deposit Date
furnish to the Trustee, the Certificate Insurer and each Rating Agency
written notice of such determination. In the event that the Master Servicer
fails to make an Advance required to be made pursuant to Section 6.03(a) and
such failure continues unremedied on the close of business on the Business
Day prior to the related Distribution Date, the Trustee shall, on or before
the related Distribution Date, deposit in the Distribution Account an amount
equal to the excess of (i) Advances required to be made by the Master
Servicer under Section 6.03(a) over (ii) the amount of Advances made by the
Master Servicer or from the Reserve Fund established under Section 6.03(d)
with respect to such Distribution Date; provided that the Trustee shall not
be required to make such Advances if prohibited by law or regulation, or if
it determines that such Advance would be a Nonrecoverable Advance. In the
event the Trustee and the Paying Agent are not the same Person, the Paying
Agent shall promptly notify the Trustee of all amounts transferred by the
Master Servicer from the Certificate Account to the Distribution Account.
The Trustee shall be entitled to be reimbursed from the Certificate Account
in the manner provided by Section 5.09 for Advances and Nonrecoverable
Advances made by it pursuant to this Section 6.03 in like manner as if it
were the Master Servicer.
(c) (i) In the event that any Mortgage Loan is the subject of a
Prepayment Interest Shortfall, the Master Servicer shall, to the extent of
the Servicing Fee for such Distribution Date, deposit into the Certificate
Account, as a reduction of the Servicing Fee (but not in excess thereof) for
such Distribution Date, no later than the close of business on the __________
Business Day prior to the related Distribution Date, an amount equal to the
Prepayment Interest Shortfall; and in the case of such deposit, the Master
Servicer shall not be entitled to any recovery or reimbursement from the
Company, the Trustee or the Certificateholders. Such deposited amount shall
be part of the Available Distribution Amount for such Distribution Date.
The balance, if any, of the Servicing Fee in respect of a month (after
giving effect to the preceding paragraph) shall be deposited into the
Certificate Account (as a reduction in the Servicing Fee) to the extent of
the amount, if any, by which (i) the interest accrued on the Class A and
Class B Certificates (calculated on the basis that the sum of the Class A
Principal Balance and the Class B Principal Balance shall not be greater than
the Pool Principal Balance at the end of such month) at the weighted average
of the applicable Class A Pass-Through Rate and the Class B Pass-Through Rate
for the related Accrual Period exceeds (ii) the interest due on the Mortgage
Loans on the Due Date during such Accrual Period (calculated on the
assumption that there were no prepayments of the Mortgage Loans during the
month preceding such Due Date). Such deposited amount shall be part of the
Available Distribution Amount for the Distribution Date following such month.
The preceding sentence is intended to apply to the situation where, if the
Class A and Class B Pass-Through Rates for an Accrual Period are equal to the
related Alternate Certificate Rate, the amount in clause (i) could be greater
than the amount in clause (ii) because interest will accrue on the Mortgage
Loans on the basis of a year consisting of twelve 30-day months and interest
on the Class A and Class B Certificates will accrue on the basis of the
actual number of days in the Accrual Period (which could be more than 30)
divided by 360.
(d) The Trustee shall establish the Reserve Fund as an Eligible Account
with itself, titled "________________________________, as trustee for the
benefit of the Holders of Mortgage Pass-Through Certificates, Series 199_-__,
Class A Certificates". Amounts available pursuant to clause (v) of Section
6.01(a) shall be deposited in the Reserve Fund until the amount therein
equals $_________. On each Distribution Date, funds, if any, in the Reserve
Fund will be applied by the Trustee to make any Advance required pursuant to
Section 6.03(a) that has not been made by the Master Servicer. Distributions
of such amounts to holders of the Certificates pursuant to this
Section 6.03(d) shall be deposited into the Distribution Account on such
Distribution Date, shall be distributed pursuant to Section 6.01 on such
Distribution Date and shall be deemed to be part of the applicable Available
Distribution Amount. The Reserve Fund shall be reinstated to $___________
from deposits pursuant to clause (v) of Section 6.01(a) and from Late
Collections attributable to Advances made from the Reserve Fund. If the
Master Servicer or the Trustee is unable to transfer funds from the
Certificate Account to the Distribution Account because of an insolvency of
the Master Servicer, the Trustee shall make an advance to the Distribution
Account to cover such shortfalls and shall be reimbursed for such advances
from funds released from the Certificate Account. On the Distribution Date
on which, after giving effect to the distributions to be made on such date
(exclusive of the distribution of the Reserve Fund), the Class A Principal
Balance will have been reduced to zero, the amount in the Reserve Fund shall
be applied pursuant to Section 6.01(a) along with the related Available
Distribution Amount for such Distribution Date.
The Master Servicer shall direct the Trustee to invest moneys in the
Reserve Fund in Eligible Investments, which shall mature not later than the
Business Day next preceding the Advance Deposit Date next following the date
of such investment and shall not be sold or disposed of prior to its
maturity; provided, however, an Eligible Investment that is a money market
fund administered by the Trustee or an affiliate thereof may mature on the
Advance Deposit Date. The proceeds of the sale or other disposition of all
Eligible Investments shall be deposited in the Reserve Fund. All such
Eligible Investments shall be made in the name of the Trustee. All net
income and gain realized from any such investment shall be applied to
reinstate the Reserve Fund to the applicable limit specified in the preceding
paragraph and then to be paid to the Master Servicer as additional servicing
compensation. The amount of any losses incurred in respect of any such
investments (to the extent not offset by income from other such investments)
shall be deposited in the Reserve Fund by the Master Servicer out of its own
funds immediately as realized; provided, however, that if the Trustee becomes
Master Servicer, the Trustee shall not be required to deposit the amount of
any loss incurred prior to its becoming Master Servicer.
Section 6.04. The Certificate Insurance Policy. (a) If the statement
--------------------------------
delivered to the Trustee pursuant to Section 6.02 indicates that there will
be a Distribution Account Shortfall for the related Distribution Date, the
Trustee shall complete the notice in the form of Exhibit A to the Certificate
Insurance Policy. The Trustee shall submit such notice to the Certificate
Insurer no later than 12:00 noon New York City time on the ________ Business
Day preceding such Distribution Date as a claim for an Insured Amount in an
amount equal to the sum of the Distribution Account Shortfall.
(b) Upon receipt of Insured Payments from the Certificate Insurer on
behalf of Class A Certificateholders, the Trustee shall deposit such Insured
Payments in the Distribution Account and shall distribute such Insured
Payments, or the proceeds thereof, to the Class A Certificateholders in
accordance with Sections 6.01(a).
(c) The Trustee shall (i) receive as attorney-in-fact of each Holder
of any Class A Certificates any Insured Payment from the Certificate Insurer
and (ii) disburse the same to the Holders of such Certificates as set forth
in Section 6.01(b). Insured Payments disbursed by the Trustee from proceeds
of a Certificate Insurance Policy shall be considered payment by the
Certificate Insurer and not by the Trust Fund with respect to such
Certificates, and the Certificate Insurer shall be entitled to receive the
related Reimbursement Amount pursuant to Section 6.01(a)(iv). The Trustee
hereby agrees on behalf of each Class A Certificateholder and the Trust Fund
for the benefit of the Certificate Insurer that it recognizes that to the
extent the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Holders of such
Certificates, the Certificate Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Section 6.01(a)(iv).
(d) Subject only to the priority of payment provisions of this
Agreement, each of the Company and the Trustee acknowledges that, to the
extent of any payment made by the Certificate Insurer pursuant to the
Certificate Insurance Policy, the Certificate Insurer is to be fully
subrogated to the extent of such payment and any additional interest due on
any late payment, to the rights of the Holders of the Class A Certificates
to any moneys paid or payable in respect of the Class A Certificates under
this Agreement or otherwise. Each of the Company and the Trustee agrees to
such subrogation and, further, agrees to execute such instruments and to take
such actions as, in the sole judgment of the Certificate Insurer are
necessary to evidence such subrogation and, subject to the priority of
payment provision of this Agreement, to perfect the rights of the Certificate
Insurer to receive any moneys paid or payable in respect of the Class A
Certificates under this Agreement or otherwise.
(End of Article VI)
ARTICLE VII
REPORTS TO BE PREPARED BY MASTER SERVICER
-----------------------------------------
Section 7.01. Master Servicer Shall Provide Information as Reasonably
-------------------------------------------------------
Required. The Master Servicer shall furnish to the Trustee and the
- --------
Certificate Insurer and during the term of this Agreement, such periodic,
special, or other reports or information, whether or not provided for herein,
as shall be necessary, reasonable, or appropriate in respect to the Trustee,
or the Certificate Insurer, as the case may be, or otherwise in respect to
the purposes of this Agreement, all such reports or information to be as
provided by and in accordance with such applicable instructions and direc-
tions as the Trustee or the Certificate Insurer, as the case may be, may
reasonably require. The Master Servicer shall file, as necessary, financing
statements and continuation statements as required by the Uniform Commercial
Code and any other applicable law sufficient to create and maintain a valid
perfected security interest in the Trust for the benefit of the
Certificateholders.
Section 7.02. Federal Information Returns and Reports to
------------------------------------------
Certificateholders. (a) For federal income tax purposes, the taxable year
- ------------------
of the Trust Fund shall be a calendar year and the Master Servicer shall
maintain or cause the maintenance of books of the Trust Fund on the accrual
method of accounting. The books of the Trust Fund shall reflect all payments
made with respect to the Mortgage Loans, and amounts attributable to the
Class A Certificateholders, the Class B Certificateholders and the Class R
Certificateholders.
(b) The Master Servicer shall prepare and file or cause to be filed
with the Internal Revenue Service at the times and in the manner required by
the Code or applicable Treasury Regulations all Federal tax or information
returns with respect to the Trust Fund and the Certificates, which tax or
information returns contain such information as may be required by the Code
or applicable Treasury Regulations. The Master Servicer also shall furnish
to Holders of Certificates such statements or information at the times and
in the manner as the Code or applicable Treasury Regulations may require such
holders to be furnished, regardless of by whom. For this purpose, the Master
Servicer may, but need not, rely on any proposed regulations of the United
States Department of the Treasury. The Master Servicer shall indicate the
election to treat the Trust Fund as a REMIC in such manner as the Code or
applicable Treasury regulations may prescribe. The Trustee shall sign all
required tax or information returns, and the Master Servicer shall indemnify
the Trustee for executing such tax or information returns to the extent such
returns contain errors or omissions. The initial Class R Certificateholder
is hereby designated as the initial "tax matters person" (within the meaning
of Temp. Treas. Reg. Section 1.860F-4T(d)). In the event that the Code or
applicable Treasury Regulations prohibit the Trustee from signing tax or
information returns or other statements, or the Master Servicer from acting as
tax matters person (as an agent or otherwise), the Master Servicer shall take
whatever action that in its sole good faith judgment is necessary for the
proper filing of such information returns or for the provision of a tax
matters person, including designation of the Class R Certificateholder to sign
such returns. Each Class R Certificateholder shall be bound by this Section
7.02.
(End of Article VII)
ARTICLE VIII
THE COMPANY AND THE MASTER SERVICER
-----------------------------------
Section 8.01. Indemnification; Third Party Claims. (a) The Master
-----------------------------------
Servicer agrees to indemnify the Company, the Certificate Insurer and the
Trustee and hold the Company, the Certificate Insurer and the Trustee
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and
expenses that the Company, the Certificate Insurer or the Trustee may sustain
as a result of the failure of the Master Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement;
provided that no such indemnification shall be required of a successor Master
Servicer with respect to acts of a prior Master Servicer. The Master
Servicer shall immediately notify the Company, the Certificate Insurer and
the Trustee if a claim is made by a third party with respect to this
Agreement or the Mortgage Loans, assume (unless otherwise directed by the
Company, the Certificate Insurer and the Trustee) the defense of any such
claim and pay all expenses in connection therewith, including counsel fees,
and promptly pay, discharge and satisfy any judgment or decree which may be
entered against it, the Company or the Trustee in respect of such claim.
(b) Should any claim or action by a third party arise after the Closing
Date for which the Company, the Certificate Insurer or the Trustee intends
to seek indemnification under the terms of Section 8.01(a), the Company shall
notify the Master Servicer in writing within _________ Business Days, and the
Trustee or the Certificate Insurer shall notify the Master Servicer in
writing promptly, after each such party receives notice of such claim or
action, or notice of a threat that is reasonably likely to result in such
claim or action. The party seeking indemnification shall give the Master
Servicer a reasonable opportunity to participate in any proceedings to settle
or defend any such claim or action. If the Master Servicer wishes to assume
the defense of such claim or action, it shall give written notice to the
party seeking indemnification and the Master Servicer shall thereafter assume
the defense at its own expense. In the event that the Master Servicer
assumes the defense of a claim or action, the party seeking indemnification
will assert or empower the Master Servicer to assert on behalf of the party
seeking indemnification any rights to indemnification that the party seeking
indemnification may have in connection with such claim or action. The Master
Servicer shall have the right to settle any such action provided that the
Master Servicer obtains the consent of the party seeking indemnification,
which consent shall not be unreasonably withheld. The Company, the
Certificate Insurer and the Trustee agree to respond to the Master Servicer's
request for consent as promptly as possible and agree that a failure by the
Company, the Certificate Insurer or the Trustee to respond within
____________ Business Days shall be taken as consent.
Section 8.02. Merger or Consolidation of the Company or the Master
----------------------------------------------------
Servicer; Status of Master Servicer. Subject to the following paragraphs of
- -----------------------------------
this Section 8.02, the Company and the Master Servicer will each keep in full
effect its existence, rights and franchises as a corporation, and will obtain
and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Certificates
or any of the Mortgage Loans and to perform its duties under this Agreement.
The Master Servicer agrees to remain an approved seller/servicer for FNMA or
FHLMC in good standing.
Any person into which the Company or the Master Servicer may be merged
or consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Company or the Master Servicer shall be a party,
or any Person succeeding to the business of the Company or the Master
Servicer, shall be the successor of the Company or the Master Servicer
hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person
to the Master Servicer shall satisfy the requirements of Section 8.05 with
respect to the qualifications of a successor to the Master Servicer.
Notwithstanding anything else in this Section 8.02 and Section 8.04 to
the contrary, the Master Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided that the Person
accepting such assignment or delegation shall be a Person which is qualified
to service mortgage loans on behalf of FNMA or FHLMC, is approved by the
Trustee, the Certificate Insurer and the Company, is willing to service the
Mortgage Loans and executes and delivers to the Company, the Certificate
Insurer and the Trustee an agreement, in form and substance reasonably satis-
factory to the Company, the Certificate Insurer and the Trustee, which
contains an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Master Servicer under this Agreement; provided further that each Rating
Agency's respective ratings of the Classes of Certificates that have been
rated in effect immediately prior to such assignment and delegation will not
be qualified or reduced as a result of such assignment and delegation. The
Master Servicer shall give notice to the Certificate Insurer of any such
assignment and delegation. In the case of any such assignment and
delegation, the Master Servicer shall be released from its obligations as
Master Servicer under this Agreement, except that the Master Servicer shall
remain liable for all liabilities and obligations incurred by it as Master
Servicer hereunder prior to the satisfaction of the conditions to such
assignment and delegation set forth in the second preceding sentence.
Section 8.03. Limitation on Liability of the Company, the Master
--------------------------------------------------
Servicer, the Trustee and Others. Neither the Company, the Master Servicer
- --------------------------------
nor any of the directors, officers, employees or agents of the Company or the
Master Servicer shall be under any liability to the Trustee, the
Certificateholders or the Certificate Insurer 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 Company, the Master Servicer or any such person against
any breach of warranties or representations made herein, or failure to per-
form its obligations in compliance with this Agreement, or any liability
which would otherwise be imposed by reason of any breach of the terms and
conditions of this Agreement. The Company, the Master Servicer, the Trustee
and any director, officer, employee or agent of the Company, the Master
Servicer or the Trustee may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any mat-
ters arising hereunder. Neither the Company nor the Master Servicer shall
be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its respective duties to service the Mortgage
Loans in accordance with this Agreement and which in its opinion may involve
it in any expenses or liability; provided, however, that the Company or the
Master Servicer may in its discretion undertake any such action which it may
deem necessary or desirable in respect to this Agreement and the rights and
duties of the parties hereto. In such event, the legal expenses and costs
of such action and any liability resulting therefrom shall be expenses, costs
and liabilities payable from the Certificate Account and the Company or the
Master Servicer shall be entitled to be reimbursed therefor out of the
Certificate Account as provided by Section 5.09; provided that no such right
of reimbursement shall exist with respect to the Master Servicer when such
claim results from the failure of the Master Servicer to service the Mortgage
Loans in strict compliance with the terms of this Agreement or a breach of
a representation or warranty made by the Master Servicer hereunder or as
Mortgage Loan Seller under the Sale Agreement or the failure of the Master
Servicer to deliver the Mortgage Files to the Custodian in accordance with
this Agreement.
Section 8.04. Company and Master Servicer Not to Resign. Except as
-----------------------------------------
described in Section 8.02, neither the Company nor the Master Servicer shall
assign this Agreement or resign from the obligations and duties hereby
imposed on it except by mutual consent of the Company, the Master Servicer,
the Certificate Insurer, the Trustee and Holders of Certificates of each
Class evidencing, as to such Class, Percentage Interests aggregating at
least 662/3% unless the determination is made that its duties hereunder are
no longer permissible under applicable law and such incapacity cannot be
cured by the Company or the Master Servicer. Any such determination
permitting the resignation of the Company or the Master Servicer shall be
evidenced by an Opinion of independent Counsel to such effect delivered to
the Trustee and the Certificate Insurer which Opinion of Counsel shall be in
form and substance acceptable to the Trustee and the Certificate Insurer.
A copy of all consents and any Opinion of Counsel shall be promptly delivered
to the Rating Agencies. Upon any such assignment or resignation, the
Company, or the Master Servicer, as appropriate, shall send notice to all
Certificateholders and the Certificate Insurer of the effect of such
assignment or resignation upon the then current rating of the class of
Certificates by the Rating Agency whose rating on such class is then in
effect. No such resignation shall become effective until a successor shall
have assumed the Company's or the Master Servicer's responsibilities and
obligations hereunder in the manner provided in Section 8.05. Any purported
assignment or resignation which does not comply with the requirements of this
Section shall be of no effect.
Section 8.05. Successor to the Master Servicer. In connection with the
--------------------------------
termination of the Master Servicer's responsibilities and duties under this
Agreement pursuant to Section 8.04 or 9.01, the Trustee shall (i) succeed to
and assume all of the Master Servicer's responsibilities, rights, duties and
obligations as Master Servicer arising thereafter (but not in any other
capacity) under this Agreement (except that the Trustee shall not be
obligated to make Advances if prohibited by applicable law or regulation and
except that the Trustee makes no representations and warranties of the Master
Servicer pursuant to Section 3.01 or otherwise hereunder) and shall have no
duty or obligation to purchase or repurchase any Mortgage Loans (except that
the Trustee, as successor Master Servicer, may elect pursuant to Section
3.04(f) to be obligated to make such purchases) and shall have the same
indemnities and be entitled to all Servicing Fees and funds to which the
Master Servicer would have been entitled as Master Servicer or (ii) appoint
a successor having a net worth of not less than $______________ and which is
a FNMA or FHLMC approved seller/servicer or FHA approved mortgagee in good
standing and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Master Servicer under this
Agreement prior to the termination of Master Servicer's responsibilities,
duties and liabilities under this Agreement. A successor Master Servicer
other than the Trustee shall make the representations and warranties in
Section 3.01(a) to the extent that such representations and warranties relate
to its corporate existence or its servicing of the Mortgage Loans hereunder.
Neither the Trustee nor any other successor Servicer shall be deemed to be
in default hereunder by reason of any failure to make, or any delay in making
any distribution hereunder or any portion thereof caused by (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. If the Trustee has
become the successor to the Master Servicer in accordance with this Section
or Section 9.03, then notwithstanding the above, the Trustee may, if it shall
be unwilling to so act, or shall, if it is unable to so act, appoint, or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution having a net worth of not less than $____________
and which is a FNMA or FHLMC approved seller/servicer or FHA approved
mortgagee in good standing as the successor to the Master Servicer hereunder
in the assumption of all or any part of the responsibilities, duties or
liabilities of the Master Servicer hereunder. In connection with any such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree or such court shall determine; provided, however,
that no such compensation shall be in excess of that permitted under this
Agreement without the consent of all of the Certificateholders and the
Certificate Insurer. If the Master Servicer's duties, responsibilities
and liabilities under this Agreement should be terminated pursuant to
Section 8.02, 8.04, 9.01 or 11.02, the Master Servicer shall discharge
such duties and responsibilities during the period from the date it acquires
knowledge of such termination until the effective date thereof with the same
degree of diligence and prudence which it is obligated to exercise under this
Agreement, and shall take no action whatsoever that might impair or prejudice
the rights or financial condition of its successor. The resignation or
removal of the Master Servicer pursuant to Section 8.02, 8.04, 9.01 or 11.02
shall not become effective until a successor shall be appointed pursuant to
this Section and shall in no event relieve the Master Servicer of liability
for breach of the representations and warranties made pursuant to Section
3.01.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Master Servicer and to the Trustee an instrument accepting
such appointment, whereupon such successor shall become fully vested with all
the rights, powers, duties, responsibilities, obligations and liabilities of
the Master Servicer, with like effect as if originally named as a party to
this Agreement and the Certificates. Any termination or resignation of the
Master Servicer or this Agreement pursuant to Section 8.02, 8.04, 9.01, or
11.02 shall not affect any claims that the Trustee may have against the
Master Servicer arising prior to any such termination or resignation.
The Master Servicer shall timely deliver to the successor the funds that
were, or were required to be, in the Certificate Account and the Escrow
Account, if any, and all Mortgage Files and related documents and statements
held by it hereunder and the Master Servicer shall account for all funds and
shall execute and deliver such instruments and do such other things as may
reasonably be required to more fully and definitely vest and confirm in the
successor all such rights, powers, duties, responsibilities, obligations and
iabilities of the Master Servicer.
Upon a successor's acceptance of an appointment as such, the Master
Servicer shall notify in writing the Trustee, the Certificateholders, the
Rating Agency and the Certificate Insurer of such appointment.
Section 8.06. Maintenance of Ratings. The Master Servicer shall
----------------------
cooperate with the Company and take any action that may be reasonably
necessary to maintain the current rating or ratings on the Class A
Certificates. To the extent not otherwise provided herein, the Master
Servicer shall provide to each Rating Agency notice with respect to any (i)
insurance claims and recoveries, (ii) monthly Mortgage Loan reports, (iii)
accounting and compliance reports with respect to the Mortgages, (iv)
Mortgage Loan repurchases or substitution, (v) monthly shortfalls as a result
of a failure to make advances, (vi) final payment to Certificateholders,
(vii) transfers of the Class B or Class R Certificates and (viii) the reports
and statements delivered pursuant to Sections 5.25 and 5.26.
(End of Article VIII)
ARTICLE IX
DEFAULT
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Section 9.01. Events of Default. If one or more of the following
-----------------
Events of Default shall occur and be continuing:
(i) any failure by the Master Servicer to remit to the Trustee or
the Paying Agent, or any failure to cause the Paying Agent to make, any
payment or Advance required to be made or distributed under the terms of this
Agreement (including but not limited to an Advance pursuant to Section 6.03);
provided that if the Master Servicer is using its reasonable best efforts to
so remit, or cause the Trustee or Paying Agent to make, any such payment or
Advance, then such failure shall be an Event of Default only if such failure
continues unremedied for a period of ____ days after the date upon which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Trustee, the Certificate Insurer or
the Company or to the Master Servicer, the Trustee, the Certificate Insurer
and the Company by the Holders of Certificates of all Classes evidencing not
less than 25% of the Trust Fund (based on the outstanding principal balances
of the Certificates) or the Certificate Insurer; or
(ii) if the written notice described in paragraph (i) above has
been given twice during any twelve-month period, any subsequent failure
during such twelve-month period to remit to the Trustee or the Paying Agent,
or cause the Paying Agent to make, any payment required to be made or
distributed under the terms of this Agreement other than for reasons outside
of the Master Servicer's control; or
(iii) failure on the part of the Master Servicer duly to observe or
perform in any material respect any other of the covenants or agreements on
the part of the Master Servicer set forth in this Agreement, which continues
unremedied for a period of ___ days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to
the Master Servicer by the Trustee, the Certificate Insurer or the Company
or to the Master Servicer, the Trustee, the Certificate Insurer and the
Company by the Holder of Certificates of Classes evidencing not less than 25%
of the Trust Fund (based on the outstanding principal balances of the
Certificates) or the Certificate Insurer; or
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a trustee, conservator,
receiver, liquidator, assignee, custodian or sequestrator (or other similar
official) for the Master Servicer or any substantial part of its property in
any federal or state bankruptcy, insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force undischarged
or unstayed for a period of ____ days; or
(v) the Master Servicer shall consent to the appointment of a
trustee, conservator, receiver, liquidator, assignee, custodian or
sequestrator (or other similar official) in, or commence a voluntary case
under any federal or state bankruptcy insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating
to the Master Servicer or of or relating to all or substantially all of the
Master Servicer's property; or
(vi) the Master Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations;
then, and in each and every such case, so long as an Event of Default shall
not have been remedied, the Trustee shall notify the Certificateholders, the
Certificate Insurer and each Rating Agency of such Event of Default. The
Trustee may (with the consent of the Certificate Insurer), and at the written
direction of the Certificate Insurer or the Holders of Certificates
evidencing not less than 25% of the Trust Fund (with the consent of the
Certificate Insurer), shall, by notice in writing to the Master Servicer, in
addition to whatever rights the Trustee may have at law or equity to damages,
including injunctive relief and specific performance, terminate all the
rights and obligations of the Master Servicer under this Agreement and in and
to the Mortgage Loans and the proceeds thereof. On or after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer under this Agreement, whether with respect to the Mortgage
Loans or otherwise, shall pass to and be vested in the successor appointed
pursuant to Section 8.05. Upon written request from the Trustee, the Master
Servicer shall prepare, execute and deliver, any and all documents and other
instruments, place in such successor's possession all Mortgage Files and do
or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise, at the Master Servicer's sole expense. The Master Servicer agrees
to cooperate with the Trustee and such successor in effecting the termination
of the Master Servicer's responsibilities and rights hereunder, including,
without limitation, the transfer to such successor for administration by it
of all cash amounts which shall at the time be credited
by the Master Servicer to the Certificate Account or Escrow Account or
thereafter received with respect to the Mortgage Loans.
Section 9.02. Waiver of Defaults. The Trustee may, with the consent
------------------
of the Certificate Insurer, and shall at the direction of the Certificate
Insurer, waive any default by the Master Servicer in the performance of its
obligations hereunder and its consequences, except that a default in the
making of any required distribution on any of the Certificates may only be
waived by the affected Certificateholders and the Certificate Insurer. Upon
any such waiver of a past default, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right contingent thereon except to
the extent expressly so waived.
Section 9.03. Trustee or Company to Act; Appointment of Successor. On
---------------------------------------------------
and after the time the Master Servicer receives a notice of termination
pursuant to Section 9.01, the Trustee or its appointed agent shall be the
successor in all respects to the Master Servicer to the extent provided in
Section 8.05.
Section 9.04. Notification to Certificateholders. (a) Upon any such
----------------------------------
termination pursuant to Section 9.01, the Trustee shall give prompt written
notice thereof to Certificateholders at their respective addresses appearing
in the Certificate Register and to each Rating Agency and the Certificate
Insurer.
(b) Within ____ days after obtaining actual knowledge of the occurrence
of any Event of Default, the Trustee shall transmit by mail to all Holders
of Certificates notice of each such Event of Default hereunder known to the
Trustee, unless such Event of Default has been cured or waived.
(End of Article IX)
ARTICLE X
CONCERNING THE TRUSTEE
----------------------
Section 10.01. Duties of Trustee. The Trustee, prior to the occurrence
-----------------
of an Event of Default and after the curing of all Events of Default which
may have occurred, undertakes to, and is empowered to, perform such duties
and only such duties as are specifically set forth in this Agreement. Any
permissive right of the Trustee as enumerated in this Agreement shall not be
construed as a duty; provided that in case an Event of Default has occurred
(which has not been cured), the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of such man's own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act
or its own intentional misconduct, and, if the Trustee is acting as the
successor Master Servicer pursuant to Section 8.05 or 9.03, its own willful
misconduct with respect to its servicing obligations; provided, however,
that:
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith on the part
of the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Certificateholders of any Class holding
Certificates which evidence at least 25% of the Trust Fund (on the basis of
the outstanding principal balances of the Certificates) with the consent of
the Certificate Insurer as to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Agreement.
Section 10.02. Certain Matters Affecting the Trustee. Except as
-------------------------------------
otherwise provided in Section 10.01:
(i) The Trustee may request and rely upon and shall be protected
in acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond
or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith and
in accordance with such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute, conduct
or defend any litigation hereunder or in relation hereto at the request,
order or direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the obligation, upon
the occurrence of an Event of Default (which has not been cured), to exercise
such of the rights and powers vested in it by this Agreement, and to use the
same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of such man's own
affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(v) Prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the fact 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 Holders of Certificates of
any Class evidencing at least 25% of the Trust Fund (on the basis of the
outstanding principal balances of the Certificates); provided, however, that
if the payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such expense or
liability as a condition to such proceeding. The reasonable expense of every
such examination shall be paid by the Master Servicer, if an Event of Default
shall have occurred and is continuing, and otherwise by the Certificateholder
requesting the investigation; and
(vi) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys.
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans.
-----------------------------------------------------
The recitals contained herein and in the Certificates shall be taken as the
statements of the Company or the Master Servicer, as the case may be, and the
Trustee assumes no responsibility for their correctness. The Trustee makes
no representations or warranties as to the validity or sufficiency of this
Agreement or of the Certificates (except that the Certificates shall be duly
and validly authenticated by it) or of any Mortgage Loan or related document.
The Trustee shall not be accountable for the use or application by the
Company or the Master Servicer of any of the Certificates or of the proceeds
of such Certificates, or for the use or application of any funds paid to the
Company or the Master Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Certificate Account by the Company or the Master
Servicer.
Section 10.04. Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Trustee.
Section 10.05. Master Servicer to Pay Trustee's Fees and Expenses. The
--------------------------------------------------
Master Servicer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation (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 it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Master Servicer will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any 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
in connection with the appointment of an office or agency pursuant to Section
10.11) and indemnify and hold the Trustee harmless from any such loss,
liability or expense except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Trustee and any officer,
director, agent or employee of the Trustee shall be indemnified by the Master
Servicer and held harmless against any loss, liability or expense incurred
in connection with any claim or legal action relating to this Agreement, the
Insurance Agreement or the Certificates, or the performance of any of the
Trustee's duties in accordance with the terms of this Agreement or the
Insurance Agreement, other than any loss, liability or expense that is
incurred by reason of wilful misfeasance, bad faith or negligence of the
Trustee. Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section shall survive the termination of this Agreement.
Section 10.06. Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be a corporation or association having its
principal office in a state and city acceptable to the Company and organized
and doing business under the laws of such state or the United States of
America, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $_____________ and subject
to supervision or examination by federal or state authority. The Trustee
shall not be an affiliate of the Mortgage Loan Seller or the Company. If
such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
In case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Trustee shall resign immediately in the
manner and with the effect specified in Section 10.07.
Section 10.07. Resignation and Removal of the Trustee. The Trustee may
--------------------------------------
at any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Company, the Master Servicer, any Sub-Servicer,
the Certificate Insurer and the Rating Agency. Upon receiving such notice
of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee; provided that such appointment does not result in a reduction or
withdrawal of the rating of the Class A Certificates, and provided further,
that, so long as such consent is not unreasonably withheld, the Certificate
Insurer consents to such appointment. The Company shall make a good faith
effort to appoint a successor within ___ days of its receipt of such notice.
If the Company does not appoint a successor Trustee within such ___ day
period and it is not making a good faith effort to appoint a successor
Trustee, then the Certificate Insurer may appoint a successor Trustee. The
Master Servicer shall indemnify the Trustee for any loss, liability, or
expense incurred as a result of the Company's failure to make a good faith
effort to appoint a successor Trustee. If no successor trustee shall have
been so appointed and have accepted appointment within __ days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
If at any time (i) the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.06, (ii) the Company has delivered to the
Trustee a letter from any Rating Agency to the effect that the rating of the
Class A Certificates has been or is about to be reduced or withdrawn on
account of a reduction in the long-term credit rating of the Trustee or the
parent of the Trustee (if (a) the Trustee proposes to the Company and the
Master Servicer to enter into an agreement with the Trustee, and the Company
and the Master Servicer, each in its sole discretion, elect to enter into
such agreement and (b) such agreement is consented to by the Certificate
Insurer and is satisfactory to the Rating Agencies without resulting in a
reduction in or withdrawal of any rating of the Class A Certificates, then
upon the execution and delivery of such agreement the Company shall not
request such resignation pursuant to this clause (ii)), and the Trustee shall
fail to resign after written request therefor by the Company, or (iii) the
Trustee shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of rehabilitation, conservation
or liquidation, then the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
The Holders of Certificates evidencing in the aggregate more than 50%
of the Trust Fund (on the basis of the outstanding principal balances of the
Certificates) may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Company, one complete set to the Trustee
so removed and one complete set to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided
in Section 10.08.
Section 10.08. Successor Trustee. Any successor trustee appointed as
-----------------
provided in Section 10.07 shall execute, acknowledge and deliver to the
Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Mortgage Files
and related documents and statements held by it hereunder, and the Company,
the Master Servicer and the predecessor trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 10.06 and the Company shall have
received written notice from the Rating Agency that the appointment of the
successor trustee will not result in reduction of the then current rating on
the Class A Certificates.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Company shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register, and to each Rating Agency, the Master Servicer, any
Sub-Servicer and the Certificate Insurer. If the Company fails to mail such
notice within __ days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
Section 10.09. Merger or Consolidation of Trustee. Any corporation or
----------------------------------
national banking association into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation or national
banking association resulting from any merger, conversion or consolidation
to which the Trustee shall be a party, or any corporation or national banking
association succeeding to the business of the Trustee,
shall be the successor of the Trustee hereunder, provided such corporation
or national banking association shall be eligible under the provisions of
Section 10.06, 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 10.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Company and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, of any
part of the Trust Fund, and to vest in such Person or Persons, in such
capacity, such title to the Trust Fund, or any part thereof, and, subject to
the other provisions of this Section 10.10, such powers, duties, obligations,
rights and trusts as the Company and the Trustee may consider necessary or
desirable. If the Company shall not have joined in such appointment within
____ days after the receipt by it of a request so to do, or in case an Event
of Default shall have occurred and be continuing, the Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 10.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall
be required under Section 10.08 hereof. No co-trustee shall be obligated to
make any Advances required pursuant to Section 6.03(b).
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 10.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder
or as successor to the Master Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee or co-trustee at the
direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article X. 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.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of it 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 10.11. Appointment of Office or Agency. The Trustee may
-------------------------------
appoint an office or agency in the City of New York where Certificates may
be surrendered for registration of transfer or exchange. The Trustee will
maintain an office at the address stated in Section 12.07 hereof where
notices and demands to or upon the Trustee in respect of the Certificates may
be served.
(End of Article X)
ARTICLE XI
TERMINATION
-----------
Section 11.01. Termination. (a) The respective obligations and
-----------
responsibilities of the Company, the Master Servicer and the Trustee (except
the duty to pay the Trustee's fees and expenses and indemnification
hereunder) shall terminate (i) upon the later of the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
or the disposition of all property acquired upon foreclosure or deed in lieu
of foreclosure of any Mortgage Loan and the remittance of all funds due
hereunder (including without limitation any Distribution Account Shortfall)
or (ii) at the option of the Master Servicer, on any Distribution Date which
occurs in the month next following a Due Period in which the aggregate unpaid
Principal Balance of all Outstanding Mortgage Loans is less than ___% of the
aggregate unpaid Principal Balance of the Mortgage Loans on the Cut-off Date,
so long as the Master Servicer deposits or causes to be deposited in the
Certificate Account during the Due Period related to such Distribution Date
an amount equal to the greatest of (A) the Purchase Price for each Mortgage
Loan, and, with respect to all property acquired in respect of any Mortgage
Loan remaining in the Trust Fund, an amount equal to the appraised value of
such property (less, if the purchaser is the Master Servicer, any
unreimbursed Advances made by the Master Servicer, which Advances shall
thereupon be deemed reimbursed to the Master Servicer), such appraisal to be
conducted by an appraiser selected by the Master Servicer, (B) the aggregate
fair market value (as determined by the Master Servicer as of the close of
business on the last Business Day of such Due Period) of all of the assets
of the Trust Fund (less, if the purchaser is the Master Servicer, any
unreimbursed Advances made by the Master Servicer, which Advances shall
thereupon be deemed reimbursed to the Master Servicer), plus, in each case,
one month's interest at the applicable Net Mortgage Rate on the Principal
Balance of each Mortgage Loan (including any Mortgage Loan as to which title
to the underlying Mortgaged Property has been acquired) and (C) the sum of
(1) the aggregate of the Class A Principal Balance, together with one month's
interest on the Class A Principal Balance at the Class A Pass-Through Rate,
and any Class A Unpaid Interest Shortfall, (2) the sum of the Class B
Principal Balance, together with one month's interest on the Class B
Principal Balance at the Class B Pass-Through Rate and any Class B Unpaid
Interest Shortfall, and (3) any amounts owed to the Certificate Insurer
hereunder; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James, living on the date hereof.
Notice of any termination, specifying the Distribution Date upon which
all Certificateholders may surrender their Certificates to the Trustee for
payment and cancellation, shall be given promptly by the Trustee (upon
direction by the Company __ days prior to the date such notice is to be
mailed) by letter to Certificateholders, the Certificate Insurer and the
Rating Agency mailed no later than the 25th day of the month preceding the
month of such final distribution specifying (i) the Distribution Date upon
which final payment on the Certificates will be made upon presentation and
surrender of Certificates at the office or agency of the Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates
at the office or agency of the Trustee therein specified. Such notice shall
be accompanied by an Opinion of Counsel provided by the Master Servicer at
its expense that such plan is a "qualified liquidation" under the REMIC
Provisions and shall constitute the adoption by the Trustee on behalf of the
Certificateholders of a plan of complete liquidation within the meaning of
section 860F(a)(4) of the Code. After giving such notice, the Trustee shall
not register the transfer or exchange of any Certificates. If such notice
is given in connection with the Master Servicer's election to repurchase, the
Master Servicer shall cause to be deposited in the Distribution Account
during the applicable Due Period an amount equal to the above-described
purchase price and on the Distribution Date on which such termination is to
occur, Certificateholders will be entitled to the amount of such purchase
price but not amounts in excess thereof, all as provided herein. Upon
presentation and surrender of the Certificates, the Trustee shall notify the
Paying Agent and the Paying Agent shall distribute from the Distribution
Account to Certificateholders an amount equal to (a) the amount otherwise
distributable on such Distribution Date, if not in connection with a
purchase; or (b) if the Master Servicer elected to so purchase, the purchase
price calculated as provided above. Following such final deposit the Trustee
shall promptly release to the Master Servicer the Mortgage Files for the
remaining Mortgage Loans, and the Trustee shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer and
shall have no further responsibility with regard to said Mortgage Files.
If all of the Certificateholders shall not surrender their Certificates
for cancellation within three months after the time specified in the above-
mentioned written notice, the Paying Agent shall on such date cause all funds
in the Distribution Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate escrow account for
the benefit of such Certificateholders, and the Trustee shall give a second
written notice to the remaining Certificateholders
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within three months after the second
notice all the Certificates shall not have been surrendered for
cancellation, the Trustee shall appoint an agent to take appropriate and
reasonable steps to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of
the funds and other assets which remain in the Trust Fund hereunder.
Section 11.02. Additional Termination Requirements. (a) In the event
-----------------------------------
the Master Servicer exercises its repurchase option as provided in Section
11.01, the Trust Fund shall be terminated in accordance with the following
additional requirements, unless the Trustee has received an Opinion of
Independent Counsel to the effect that the failure of the Trust Fund to
comply with the requirements of this Section 11.02 will not (i) result in the
imposition of taxes on "prohibited transactions" of the Trust Fund as defined
in Section 860F of the Code, or (ii) cause the Trust Fund to fail to qualify
as a REMIC at any time that any Certificates are outstanding:
(i) The Master Servicer shall establish a ___-day liquidation
period in a statement attached to the final tax returns of the Trust Fund
pursuant to Treasury Regulation Section 1.860F-1. The Master Servicer shall
satisfy all requirements of a qualified liquidation under Section 860F of the
Code and any regulations thereunder, as evidenced by an Independent Opinion
of Counsel obtained at the expense of the Master Servicer;
(ii) During such ___-day liquidation period, and at or prior to
the Distribution Date for the final distribution, the Trustee shall sell all
of the assets of the Trust Fund to the Master Servicer for cash; and
(iii) At the time of the final payment on the Class A and Class B
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Class R Certificateholders all remaining
available cash (other than cash retained to meet claims) and property in the
Trust Fund, and the Trust Fund shall terminate at that time.
(b) By their acceptance of the Class R Certificates, the Holders
thereof hereby authorize the Master Servicer to specify the 90-day
liquidation period, which authorization shall be binding upon all successor
Holders of the Class R Certificates.
Section 11.03. Termination By Certificate Insurer. In the event the
----------------------------------
Master Servicer does not exercise its option to terminate the Trust Fund
pursuant to this Article, the Certificate Insurer may do so on the same
terms.
(End of Article XI)
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
Section 12.01. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 12.02. Limitation on Rights of Certificateholders. The death
------------------------------------------
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding-up of the Trust Fund, nor
otherwise affect the rights, obligations, and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from
time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision
hereof.
No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, the Certificate
Insurance Policy, unless such Holder previously shall have given to the
Trustee a written notice of default and of the continuance thereof, as
hereinbefore provided, and the Holders of Certificates evidencing in the
aggregate not less than 25% of the Trust Fund (on the basis of the principal
balances of the Certificates) shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to
be incurred therein or thereby, and the Trustee, for ___ days after its
receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each Certificate-
holder with every other Certificateholder and the Trustee, that no one or
more Holders of
Certificates of any Class shall have any right in any manner whatever by
virtue of any provision of this Agreement to affect, disturb or prejudice the
rights of the Holders of any other of such Certificates of such Class or any
other Class, or to obtain or seek to obtain priority over or preference to
any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the common benefit of Certificate-
holders of such Class or all Classes, as the case may be. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 12.03. Amendment. This Agreement may be amended from time to
---------
time by the Company, the Master Servicer and the Trustee, with the consent
of the Certificate Insurer so long as such consent is not unreasonably
withheld and without the consent of any of the Certificateholders, (i) to
cure or correct any ambiguity, mistake or error, (ii) to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein or with the Prospectus Supplement or Prospectus pursuant
to which the Class A Certificates were offered, (iii) to obtain a rating by
a nationally recognized rating agency or to maintain or improve the rating
of the Class A Certificates then given by a rating agency (it being
understood that, after obtaining the rating of the Class A Certificates at
the Closing Date, none of the Trustee, the Company or the Master Servicer is
obligated to obtain, maintain or improve any rating of any Class of
Certificates), or (iv) to make any other provisions with respect to matters
or questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, including without
limitation provisions relating to the issuance of Definitive Certificates to
Certificate Owners if book-entry registration of the Class A Certificates is
no longer permitted; provided that, in the case of clause (iv), such action
shall not, as evidenced by an Opinion of Independent Counsel, adversely
affect in any material respect the interests of any Certificateholder.
This Agreement may also be amended from time to time by the Company, the
Master Servicer and the Trustee, with the consent of the Holders of
Certificates of each Class affected thereby, evidencing, as to each such
Class, Percentage Interests aggregating not less than 66% and the consent of
the Certificate Insurer, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Holders of Certificates of
such Class; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate or (ii) reduce the aforesaid
percentage of Certificates of any class the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all
Certificates of such Class then outstanding.
The Company, the Master Servicer and the Trustee, may from time to time
amend this Agreement without the consent of any of the Certificateholders,
the Certificate Insurer to modify, eliminate or add to any of the provisions
hereof to the extent necessary to maintain the qualification of the Trust
Fund as a REMIC or to avoid the imposition of any material tax liability
thereon at all times that any Certificate is outstanding.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification of the substance of such amendment to each
Certificateholder, the Certificate Insurer and the Rating Agencies (with a
copy of the amendment itself to Standard & Poor's).
It shall not be necessary for the consent of Certificateholders under
this Section 12.03 to approve the particular form of any proposed amendment
but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject
to such reasonable regulations as the Trustee may prescribe.
Notwithstanding any provisions of this Agreement, the Trustee shall not
consent to any amendment to this Agreement unless it shall first receive an
Opinion of Counsel to the effect that such amendment will not result in the
imposition of a tax on the Trust Fund or cause the Trust Fund to fail to
qualify as a REMIC at any time that any Certificates are outstanding. In no
event shall any Opinion of Counsel provided pursuant to this Section 12.03
be an expense of the Trustee.
Section 12.04. The Certificate Insurer. The Certificate Insurer is a
-----------------------
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policy. During any period of suspension the Certi-
ficate Insurer's rights thereunder shall vest in the Holders of the Class A
Certificates and shall be exercisable by the Holders of at least a majority
in Percentage Interest of the Class A Certificates then Outstanding. At such
time as the Class A Certificates are no longer Outstanding hereunder and the
Certificate Insurer has been reimbursed for all Insured Payments to which it
is entitled hereunder and has been paid all Premium Amounts due and owing
under the Insurance Agreement, the Certificate Insurer's rights hereunder
shall terminate.
Section 12.05. Recordation of Agreement; Counterparts. To the extent
--------------------------------------
permitted by applicable law, this Agreement is subject to recordation in all
appropriate public offices for real property records in all the counties or
other comparable jurisdictions in which any or all of the properties subject
to the Mortgages are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Master Servicer
at the Master Servicer's expense on direction of the Trustee accompanied by
an Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary
for the administration or servicing of the Mortgage Loans.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original,
and such counterparts shall constitute but one and the same instrument.
Section 12.06. Duration of Agreement. This Agreement shall continue
---------------------
in existence and effect until terminated as herein provided.
Section 12.07. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 12.08. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given
when delivered to (i) in the case of the Company, __________________________
, Attention: ____________, (ii) in the case of the Master Servicer,
_____________________________, Attention: __________, with a copy at the same
address to the General Counsel of the Master Servicer, (iii) in the case of
the Trustee, at the Corporate Trust Office, Attention:
______________________________, (iv) in the case of (Moody's Investors
Service, Inc., 99 Church Street, New York, New York 10007, Attention:
Structured Finance Surveillance), (v) in the case of (Standard & Poor's, 26
Broadway, 15th Floor, New York, New York, Attention: Mortgage Surveillance
Group), (vi) in the case of the Certificate Insurer,
___________________________, Attention: _____________________, or (vii) in
the case of any of the foregoing persons, such other addresses as may
hereafter be furnished by any such persons to the other parties to this
Agreement. Notice to a Certificateholder shall be sent U.S. mail first class
postage prepaid and shall be deemed given when mailed addressed to the
address shown in the Certificate Register.
(End of Article XII)
IN WITNESS WHEREOF, the Company, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
MERRILL LYNCH MORTGAGE INVESTORS, INC.,
as the Company
By:
----------------------------
Name:
Title:
_____________________________,
as Master Servicer
By:
-----------------------------
Name:
Title:
________________________________
as Trustee
By:
--------------------------------
Name:
Title:
STATE OF ________ )
) ss.:
COUNTY OF ________ )
On the ____ day of ______, 199_, before me, a notary public in and
for said State, personally appeared ______________, known to me to be an
________________________ of __________________________, one of the
corporations that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged
to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
----------------------------
Notary Public
(Notarial Seal)
My Commission expires:
STATE OF ________ )
) ss.:
COUNTY OF ________ )
On the ____ day of _________, 199_, before me, a notary public in and
for said State, personally appeared _______________, known to me or proved
to be a ____________________________________ of _____________________________
that executed the within instrument, and also known or proved to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first written.
----------------------------------
Notary Public
(Notarial Seal)
My Commission expires:
STATE OF __________ )
) ss.:
COUNTY OF _________ )
On the ____ day of ________, 199_, before me, a notary public in and for
said State, personally appeared _________________, known to me to be an
__________________________ of ________________________________, that executed
the within instrument, and also known to me to be the person who executed it
on behalf of said banking association, and acknowledged to me that such
banking association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first written.
-----------------------------
Notary Public
(Notarial Seal)
My Commission expires:
EXHIBIT A
MORTGAGE LOAN SCHEDULE
EXHIBIT B
CONTENTS OF MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include
each of the following items:
1. Original Mortgage Note endorsed (by facsimile signature if so
authorized by the Mortgage Loan Seller), "Pay to the order of
________________________________, as trustee, under that certain Pooling and
Servicing Agreement dated as of _____________, 199_, for Mortgage
Pass-Through Certificates, Series 199_-__ (__________________________,
Seller) without recourse" and signed in the name of the Mortgage Loan Seller
by an authorized officer.
2. Original recorded Mortgage, or if such original has been
delivered to the appropriate recorder's office for recording, a certified
copy thereof certified true and complete by the Mortgage Loan Seller or the
escrow agent acting in connection with the origination of the Mortgage
Loan, with the original to be delivered within ___ days of the Closing Date.
3. Original Assignment of Mortgage in recordable form to
"________________________________, as trustee, under that certain Pooling and
Servicing Agreement dated as of _____________, 199_, for Mortgage Pass-
Through Certificates, Series 199_-__", executed by an authorized signatory of
the Mortgage Loan Seller. Subject to the foregoing, such assignments may, if
permitted by law, be in the form of blanket assignments for Mortgage Loans
covering Mortgaged Properties situated within the
same county. If the Assignment of Mortgage is in blanket form, a copy of the
Assignment of Mortgage shall be included in the individual Mortgage File.
4. Originals of all assumption and modification agreements, if any.
5. Original policies of title insurance, or if the original policy
of title insurance is unavailable, a copy of the preliminary title report,
with the original title policy to be delivered within _____ days of the
Closing Date. The policy must affirmatively insure ingress and egress and
insure against encroachments by or upon the Mortgaged Property or any
interest therein.
6. With respect to those Mortgage Loans which are cooperative
loans, the original Mortgage Note, endorsed
(by facsimile signature if so authorized by the Mortgage Loan
Seller), "Pay to the order of ________________________________, as trustee,
under that certain Pooling and Servicing Agreement dated as of _____________,
199_, for Mortgage Pass-Through Certificates, Series 199_-__
(__________________________, Seller) without recourse" and signed in the name
of the Mortgage Loan Seller by an authorized officer; the original stock
certificate and related stock power executed by the obligor
in blank; the original loan security agreement and the assignment of the note
and loan security agreement, if applicable, assigned to
"________________________________ as trustee under that certain Pooling and
Servicing Agreement dated as of _____________, 199_ for Mortgage Pass-Through
Certificates, Series 199_-__"; the original proprietary lease and the
assignment of the proprietary lease, if applicable, executed by the obligor
in blank; and any financing statements relating thereto.
EXHIBIT C
FORM OF FACE OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
CLASS A
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199_-__
NUMBER: ______________
DATE OF POOLING ORIGINAL DENOMINATION:
AND SERVICING AGREEMENT: $_____________________
_____________, 199_
CUT-OFF DATE:
_____________, 199_
FINAL MATURITY DATE: ORIGINAL CLASS A PRINCIPAL
_____________ BALANCE:
$______________
FIRST DISTRIBUTION DATE: CUSIP__________________
___________, 199_
evidencing a percentage interest in any distribution allocable
to the Class A Certificates with respect to a pool of adjustable rate
conventional one- to four-family mortgage loans formed and sold by
__________________________
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
__________________________, THE MASTER SERVICER OR
THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY
__________________________ OR BY ANY OF ITS AFFILIATES OR BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THE PRINCIPAL BALANCES OF THE MORTGAGE LOANS EVIDENCED BY THIS
CERTIFICATE ("CERTIFICATE BALANCE") WILL BE REDUCED BY A PORTION OF THE
PAYMENTS ON SUCH MORTGAGE LOANS. ACCORDINGLY, FOLLOWING THE INITIAL
ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE BALANCE OF THIS CERTIFICATE
WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE BALANCE
BY INQUIRY OF THE TRUSTEE. ON THE DATE OF THE INITIAL ISSUANCE OF THE
CERTIFICATES, THE TRUSTEE IS ________________________________.
This certifies that CEDE & CO. is the registered owner of a
beneficial interest in certain monthly distributions with respect to a
pool (the "Mortgage Pool") of conventional one- to four-family mortgage
loans (the "Mortgage Loans") formed and sold by __________________________
(hereinafter called the "Company", which term includes any successor
entity under the Agreement referred to below) and certain other property
held in trust for the benefit of Certificateholders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by
_____________________________ (the "Master Servicer"). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as specified
above (the "Agreement") among the Company, the Master Servicer and
________________________________, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To
the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Mortgage Pass-Through Certificates, Series 199_-__, Class A
(the "Class A Certificates") and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and
by which such Holder is bound. Also issued under the Agreement are
Certificates designated as Mortgage Pass-Through Certificates, Series
199_-__, Class B (the "Class B Certificates") and a residual interest
Certificate designated as Mortgage Pass-Through Certificates, Series 199_-__,
Class R (the "Class R Certificate"). The Class B Certificates and the Class
R Certificate are subordinate to the Class A Certificates in right
of payment to the extent described in the Agreement. The Class A
Certificates, the Class B Certificates and the Class R Certificate are
collectively referred to as the "Certificates". The interests of the
Class A Certificateholders in the Trust Fund will vary as described in the
Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute from certain funds in the Distribution Account on the ____ day
of each month or, if such _____ day is not a Business Day, the first
Business Day immediately following (the "Distribution Date"), commencing
on _____________, 199_, to the Person in whose name this Certificate is
registered on the related Record Date, an amount equal to the product of
the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for such Distribution Date.
Distributions on this Certificate will be made by the Paying Agent
either by check mailed to the address of the Person entitled thereto, as
such name and address shall appear on the Certificate Register, or, by
wire transfer in immediately available funds to the account of such Holder
at a bank or other financial or depository institution having appropriate
facilities therefor, if such Holder has so notified the Paying Agent in
writing at least ____ Business Days prior to the Record Date for such
Distribution Date and such Holder's Class A Certificates evidence an
original denomination of not less than $_______________. Notwithstanding
the above, the final distribution on this Certificate will be made after
due notice by the Trustee of the pendency of such distribution and only
upon presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose and specified in such
notice of final distribution.
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company to the Trustee or its agent for
registration of transfer, exchange or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of The Depository Trust Company
and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC, any transfer, pledge or
other use hereof for value or otherwise by or to any person is wrongful
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
Reference is hereby made to the further provisions of this
Certificate set forth hereafter, which further provisions shall for all
purposes have the same effect as if set forth at this place.
(Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled
to any benefit under the Agreement or be valid for any purpose.)
(This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned
by any authorized officer of the Trustee.)
(IN WITNESS WHEREOF, the Company has caused this Certificate to be
duly executed.
Dated:
MERRILL LYNCH
MORTGAGE INVESTORS, INC.
By:
--------------------
Authorized Officer
FORM OF CERTIFICATE OF
AUTHENTICATION
THIS IS ONE OF THE CLASS A CERTIFICATES
REFERRED TO IN THE WITHIN-MENTIONED AGREEMENT
________________________________,
as Trustee
By:___________________________)
Authorized Signatory
(IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
______________________________,not in its
individual capacity but solely as Trustee
By _______________________________________
Authorized Officer
Countersigned:
By: _________________________
Authorized Officer of
______________ not in
its individual capacity
but solely as Trustee)
FORM OF REVERSE OF CLASS A CERTIFICATE
This Class A Certificate is one of a duly authorized issue of
Certificates, designated as Mortgage Pass-Through Certificates, Series
199_-__, issued in one Class of Class A Certificates, one Class of Class B
Certificates and one Class of Class R Certificates, each evidencing an
interest in certain distributions, as specified in the Agreement, with
respect to a pool of adjustable rate conventional one- to four-family
mortgage loans formed and sold by the Company and certain other property
conveyed by the Company to the Trustee. The Class B and Class R
Certificates represent subordinate interests in the Trust Fund (to the
extent provided in the Agreement) to those of the Class A Certificates.
The Class R Certificate represents the residual interest in the Trust
Fund.
The Trustee will cause to be kept at its Corporate Trust Office in
__________________, or at the office of its designated agent, a
Certificate Register in which, subject to such reasonable regulations as
it may prescribe, the Trustee will provide for the registration of
Certificates and of transfers and exchanges of Certificates. Upon
surrender for registration of transfer of any Certificate at any office or
agency of the Trustee maintained for such purpose, the Trustee will,
subject to the limitations set forth in the Agreement, authenticate and
deliver, in the name of the designated transferee or transferees, a
Certificate of a like Class and aggregate Percentage Interest and dated
the date of authentication by the Trustee.
No service charge will be made for any transfer or exchange of the
Certificate, 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 the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Company,
the Master Servicer, the Certificate Insurer and the Trustee may treat the
person in whose name any Certificate is registered as the owner of such
Certificate and the Percentage Interest in the Trust Fund evidenced
thereby for the purpose of receiving distributions pursuant to the
Agreement and for all other purposes whatsoever, and neither the Company,
the Master Servicer, the Certificate Insurer nor the Trustee will be
affected by notice to the contrary.
The Agreement may be amended from time to time by the Company, the
Master Servicer and the Trustee, with the consent of the Certificate
Insurer and without the consent of any of the Certificateholders, (i) to
cure or correct any ambiguity, mistake or error, (ii) to correct or
supplement any provisions therein which may be inconsistent with any other
provisions therein or with the Prospectus Supplement or Prospectus
pursuant to which the Class A Certificates were offered, (iii) to ensure
continuing treatment of the Trust Fund as a REMIC or to avoid the
imposition of certain tax liabilities, (iv) to obtain a rating by a nationally
recognized rating agency or to maintain or improve the ratings of the
Class A Certificates then given by a rating agency (it being understood
that, after obtaining the ratings of the Class A Certificates at the
Closing Date, none of the Trustee, the Company or the Master Servicer is
obligated to obtain, maintain or improve any rating of any Class of
Certificates), and (v) to make any other provisions with respect to
matters or questions arising under the Agreement which are not materially
inconsistent with the provisions of the Agreement, including without
limitation provisions relating to the issuance of Definitive Certificates
to Certificate Owners if book-entry registration of the Class A
Certificates is no longer permitted; provided that, in the case of clause
(v), such action does not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interest of any
Certificateholder.
The Agreement may also be amended from time to time by the Company,
the Master Servicer and the Trustee, with the consent of the Holders of
Certificates of each Class affected thereby evidencing, as to each such
Class, Percentage Interests aggregating not less than 66% and the consent
of the Certificate Insurer, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may
(i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate or (ii)
reduce the aforesaid percentage of Certificates of any Class the Holders
of which are required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding.
The Company intends to cause an election to be made to treat the
Trust Fund as a real estate mortgage investment conduit (the "REMIC").
The Class A Certificates and the Class B Certificates will constitute
"regular interests" in the REMIC. The Class R Certificate will constitute
the "residual interest" in the REMIC.
The respective obligations and responsibilities of the Company, the
Master Servicer and the Trustee under the Agreement will terminate upon:
(i) the later of the final payment or other liquidation (or any advance
with respect thereto) of the last Mortgage Loan or the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan and the remittance of all funds due thereunder; or (ii) at
the option of the Master Servicer or the Certificate Insurer, on any
Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date in accordance with the provisions set forth in
the Agreement; provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador
of the United States to the Court of St. James, living on the date hereof.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
_______________________
_______________________
________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
___________________________________________________________
the within Certificate, and all rights thereunder, and hereby does
irrevocably constitute and appoint
Attorney
- ---------------------------------------------------
to transfer the within Certificate on the books kept for the registration
thereof, with full power of substitution in the premises.
Dated:
(Signature guaranty) ______________________________
NOTICE: The signature to this assignment
must correspond with the name as it appears upon the face of the within
Certificate in every particular, without alteration or enlargement or any
change whatever.
(*This information, which is voluntary, is being requested to ensure that
the assignee will not be subject to backup withholding under Section 3406
of the Code.)
EXHIBIT D
FORM OF FACE OF CLASS B CERTIFICATE
(THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF
APPLYING UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID")
RULES TO THIS CERTIFICATE. FOR PURPOSES OF SUCH RULES, THE ISSUE DATE OF
THIS CERTIFICATE IS _________________. THE INITIAL INTEREST RATE PAYABLE ON
THIS CERTIFICATE IS ____. THIS CERTIFICATE HAS BEEN ISSUED WITH $________ OF
OID PER $1000 OF PRINCIPAL AMOUNT, AND THE YIELD TO MATURITY IS _______. THE
AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL SHORT ACCRUAL PERIOD IS $_____ PER
$1000 OF PRINCIPAL AMOUNT CALCULATED UNDER THE EXACT (APPROXIMATE) METHOD.)
THIS CLASS B CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
EXCHANGE ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT OR
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS TRANSFERRED
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE AGREEMENT REFERRED
TO HEREIN.
THIS CLASS B CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT TO THE
CLASS A CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE.
CLASS B ORIGINAL DENOMINATION:
SUBORDINATE $_____________________
NUMBER: ______________
DATE OF POOLING
AND SERVICING AGREEMENT: ORIGINAL CLASS B
_____________, 199_ PRINCIPAL BALANCE:
$________________
CUT-OFF DATE:
_____________, 199_
FINAL MATURITY DATE:
________________
FIRST DISTRIBUTION DATE:
__________, 199_
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 199_-__
evidencing a percentage interest in any
distribution allocable to the Class B
Certificates with respect to a pool of
adjustable rate conventional one- to four-
family mortgage loans formed and sold by
__________________________
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
__________________________, THE MASTER SERVICER OR THE TRUSTEE REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY
__________________________ OR BY ANY OF THEIR AFFILIATES OR BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THE PRINCIPAL BALANCES OF THE MORTGAGE LOANS EVIDENCED BY THIS
CERTIFICATE ("CERTIFICATE BALANCE") WILL BE REDUCED BY A PORTION OF THE
PAYMENTS ON SUCH MORTGAGE LOANS. ACCORDINGLY, FOLLOWING THE INITIAL
ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE BALANCE OF THIS CERTIFICATE
WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE BALANCE
BY INQUIRY OF THE TRUSTEE. ON THE DATE OF THE INITIAL ISSUANCE OF THE
CERTIFICATES, THE TRUSTEE IS ________________________________.
This certifies that ___________________ is the registered owner of a
beneficial interest in certain distributions with respect to a pool (the
"Mortgage Pool") of conventional one- to four-family mortgage loans (the
"Mortgage Loans") formed and sold by __________________________
(hereinafter called the "Company", which term includes any successor
entity under the Agreement referred to below), and certain other property
held in trust for the benefit of Certificateholders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by
_____________________________ (the "Master Servicer"). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as specified
above (the "Agreement"), among the Company, the Master Servicer and
________________________________, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To
the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Mortgage Pass-Through Certificates, Series 199_-__, Class B
(the "Class B Certificates") and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and
by which such Holder is bound. Also issued under the Agreement
are Certificates designated as Mortgage Pass-Through Certificates Series
199_-__, Class A (the "Class A Certificates"), and a residual interest
certificate designated Mortgage Pass-Through Certificates, Series 199_-__,
Class R (the "Class R Certificate"). The Class A Certificates are senior
to the Class B Certificates in right of payment to the extent described in
the Agreement. The Class A Certificates, the Class B Certificates and the
Class R Certificate are collectively referred to as the "Certificates".
Pursuant to the terms of the Agreement, the Paying Agent will
distribute from funds in the Distribution Account on the ______ day of
each month or, if such ______ day is not a Business Day, the first
Business Day immediately following (the "Distribution Date"), commencing
on ______________, 199_, to the Person in whose name this Certificate is
registered on the related Record Date, an amount equal to the product of
the Percentage Interest evidenced by this Certificate and the Class B
Distribution Amount for such Distribution Date.
The rights of the Class B Certificateholders to receive distributions
in respect of the Class B Certificates on any Distribution Date are
subordinate to the rights of the Class A Certificateholders to receive
distributions in respect of such Class A Certificates to the extent set
forth in the Agreement. Distributions on this Certificate will be made by
the Paying Agent either by check mailed to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, or, by wire transfer in immediately available funds to the
account of such Holder at a bank or other financial or depository
institution having appropriate facilities therefor, if such Holder has so
notified the Paying Agent in writing at least _____ Business Days prior to
the Record Date for such Distribution Date and such Holder's Class B
Certificates evidence an original denomination of not less than
$________________. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose and specified in such notice of final distribution.
The Trustee will cause to be kept at its Corporate Trust Office in
_________________, or at the office of its designated agent, a Certificate
Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee will provide for the registration of Certificates
and of transfers and exchanges of Certificates. Upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose, the Trustee will, subject to the
limitations set forth in the Agreement, authenticate and deliver, in the
name of the designated transferee or transferees,
a Certificate of a like class and aggregate Percentage Interest and dated
the date of authentication by the Trustee.
No service charge will be made for any transfer or exchange of the
Certificate, 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 the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Company,
the Master Servicer, the Certificate Insurer and the Trustee may treat the
person in whose name any Certificate is registered as the owner of such
Certificate and the Percentage Interest in the Trust Fund evidenced
thereby for the purpose of receiving distributions pursuant to the
Agreement and for all other purposes whatsoever, and neither the Company,
the Master Servicer, the Certificate Insurer nor the Trustee will be
affected by notice to the contrary.
The Agreement may be amended from time to time by the Company, the
Master Servicer and the Trustee, with the consent of the Certificate
Insurer and without the consent of any of the Certificateholders, (i) to
cure or correct any ambiguity, mistake or error, (ii) to correct or
supplement any provisions therein which may be inconsistent with any other
provisions therein or with the Prospectus Supplement or Prospectus
pursuant to which the Class A Certificates were offered, (iii) to ensure
continuing treatment of the Trust Fund as a REMIC or to avoid the
imposition of certain tax liabilities, (iv) to obtain a rating by a
nationally recognized rating agency or to maintain or improve the ratings
of the Class A Certificates then given by a rating agency (it being
understood that, after obtaining the ratings of the Class A Certificates
at the Closing Date, none of the Trustee, the Company or the Master
Servicer is obligated to obtain, maintain or improve any rating of any
Class of Certificates), and (v) to make any other provisions with respect
to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, including
without limitation provisions relating to the issuance of Definitive
Certificates to Certificate Owners if book-entry registration of the Class
A Certificates is no longer permitted; provided that, in the case of
clause (v), such action does not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interest of any
Certificateholder.
The Agreement may also be amended from time to time by the Company,
the Master Servicer and the Trustee, with the consent of the Holders of
Certificates of each Class affected thereby evidencing, as to each such
Class, Percentage Interests aggregating not less than 66% and the consent
of the Certificate Insurer, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of the Holders
of Certificates of such Class; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans which are required to be distributed
on any Certificate without the consent of the Holder of such Certificate
or (ii) reduce the aforesaid percentage of Certificates of any Class the
Holders of which are required to consent to any such amendment, without
the consent of the Holders of all Certificates of such Class then
outstanding.
The Company intends to cause an election to be made to treat the
Trust Fund as a real estate mortgage investment conduit (the "REMIC").
The Class A Certificates and the Class B Certificates will constitute
"regular interests" in the REMIC. The Class R Certificate will constitute
the "residual interest" in the REMIC.
No transfer of a Class B Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities
Act of 1933, as amended, and any applicable state securities laws or is
made pursuant to an effective registration statement under said Act or
laws. The Trustee shall, if not otherwise directed by the Company,
require an opinion of counsel acceptable to and in form and substance
satisfactory to the Company that such transfer is exempt (describing the
applicable exemption and the basis therefor) from the registration
requirements of the Securities Act of 1933, as amended, and from any
applicable securities statute of any state, and the transferee shall
execute an investment letter in the form described by the Agreement.
Unless the Opinion of Counsel required by Section 4.02(d)(ii) has been
delivered to the Trustee in connection with this Certificate, the holder
of this Certificate represents, by virtue of its acceptance hereof, that
it is not an employee benefit plan subject to Section 406 of ERISA or
Section 4975 of the Code or a person acting on behalf of such a plan or
using funds of such a plan to acquire this Certificate.
The respective obligations and responsibilities of the Company, the
Master Servicer and the Trustee under the Agreement will terminate upon:
(i) the later of the final payment or other liquidation (or any advance
with respect thereto) of the last Mortgage Loan or the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan and the remittance of all funds due thereunder; or (ii) at
the option of the Master Servicer or the Certificate Insurer, on any
Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date in accordance with the provision set forth in
the Agreement; provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James's, living
on the date hereof.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled
to any benefit under the Agreement or be valid for any purpose.
(This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by
any authorized officer of the Trustee.)
* * *
(IN WITNESS WHEREOF, the Company has caused this Certificate to be
duly executed.
Dated:
MERRILL LYNCH
MORTGAGE INVESTORS, INC.
By:
--------------------
Authorized Officer
FORM OF CERTIFICATE OF
AUTHENTICATION
THIS IS ONE OF THE CLASS B CERTIFICATES
REFERRED TO IN THE WITHIN-MENTIONED AGREEMENT
________________________________,
as Trustee
By:___________________________)
Authorized Signatory
(IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
_____________________________, not in its
individual capacity but solely as Trustee
By_____________________________________
Authorized Officer
Countersigned:
By: ___________________________
Authorized Officer of
________________ not in
its individual capacity
but solely as Trustee)
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
________________________________________________________________
________________________________________________________________
_________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
_________________________________________________________________
the within Certificate, and all rights thereunder, and hereby does
irrevocably constitute and appoint
Attorney
- -------------------------------------------------------
to transfer the within Certificate on the books kept for the registration
thereof, with full power of substitution in the
premises.
Dated:
(Signature guaranty) _________________________________
NOTICE: The signature to this
assignment must correspond with
the name as it appears upon the
face of the within Certificate
in every particular, without
alteration or enlargement or
any change whatever.
(*This information, which is voluntary, is being requested to ensure that
the assignee will not be subject to backup withholding under Section 3406
of the Code.)
EXHIBIT E
(RESERVED)
EXHIBIT F
FORM OF CLASS R CERTIFICATE
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT
OR LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS TRANSFERRED
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE
AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT TO
THE CLASS A CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE.
NEITHER THIS CERTIFICATE NOR ANY BENEFICIAL INTEREST HEREIN MAY
BE, DIRECTLY OR INDIRECTLY, TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE ASSIGNED WITHOUT THE EXPRESS WRITTEN CONSENT OF THE MASTER
SERVICER, ACTING ON BEHALF OF THE TRUST FUND, AND ANY TRANSFER IN VIOLATION
OF THIS RESTRICTION SHALL BE ABSOLUTELY NULL AND VOID AND SHALL VEST NO
RIGHTS IN ANY PURPORTED TRANSFEREE, AND SHALL SUBJECT THE HOLDER HEREOF TO
LIABILITY FOR ANY TAX IMPOSED (AND RELATED EXPENSES, IF ANY)
WITH RESPECT TO SUCH ATTEMPTED TRANSFER.
CLASS R PERCENTAGE
RESIDUAL INTEREST INTEREST: %
------
NUMBER:
----------
DATE OF POOLING
AND SERVICING AGREEMENT:
_____________, 199_
CUT-OFF DATE:
_____________, 199_
FIRST DISTRIBUTION DATE:
___________, 199_
MORTGAGE PASS-THROUGH CERTIFICATE
Series 199_-__
evidencing a percentage interest in any distribution allocable
to the Class R Certificates with respect to a pool of adjustable rate
conventional one- to four-family mortgage loans formed and sold by
__________________________
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
__________________________, THE MASTER SERVICER OR THE TRUSTEE REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY
__________________________ OR BY ANY OF THEIR AFFILIATES OR BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This certifies that ___________________ is the registered owner of a
beneficial interest in certain distributions with respect to a pool (the
"Mortgage Pool") conventional one- to four-family mortgage loans (the
"Mortgage Pool") formed and sold by __________________________
(hereinafter called the "Company", which term includes any successor
entity under the Agreement referred to below), and certain other property
held in trust for the benefit of Certificateholders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by
______________________________ (the "Master Servicer"). The Trust Fund
was created pursuant to a Pooling and Servicing Agreement dated as
specified above the "Agreement"), among the Company, the Master Servicer
and ________________________________, as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings signed in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Mortgage Pass-Through Certificates, Series 199_-__, Class R
(the "Class R Certificate") and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and
by which such Holder is bound. Also issued under the Agreement are
Certificates designated as Class A Certificates and Class B Certificates.
The Class A Certificates, Class B Certificates and Class R Certificate are
collectively referred to as the "Certificates". All payments made under
this Certificate will be made in accordance with the terms of the
Agreement.
The Agreement may be amended from time to time by the Company, the
Master Servicer and the Trustee, with the consent of the Certificate
Insurer and without the consent of any of the Certificateholders, (i) to
cure or correct any ambiguity, mistake or error, (ii) to correct or
supplement any provisions therein which may be inconsistent with any other
provisions therein or with the Prospectus Supplement or Prospectus
pursuant to which the Class A Certificates were offered, (iii) to ensure
continuing treatment of the Trust Fund as a REMIC or to avoid the
imposition of certain tax liabilities, (iv) to obtain a rating by a
nationally recognized rating agency or to maintain or improve the ratings
of the Class A Certificates then given by a rating agency (it being
understood that, after obtaining the ratings of the Class A Certificates
at the Closing Date, none of the Trustee, the Company or the Master
Servicer is obligated to obtain, maintain or improve any rating of any
Class of Certificates), and (v) to make any other provisions with respect
to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, including
without limitation provisions relating to the issuance of Definitive
Certificates to Certificate Owners if book-entry registration of the Class
A Certificates is no longer permitted; provided that, in the case of
clause (v), such action does not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interest of any
Certificateholder.
The Agreement may also be amended from time to time by the Company,
the Master Servicer and the Trustee, with the consent of the Holders of
Certificates of each Class affected thereby evidencing, as to each such
Class, Percentage Interests aggregating not less than 66% and the consent
of the Certificate Insurer, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may
(i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate or (ii)
reduce the aforesaid percentage of Certificates of any Class the Holders
of which are required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding.
The Company intends to cause an election to be made to treat the
Trust Fund as a real estate mortgage investment conduit (the "REMIC").
The Class A Certificates and the Class B Certificates will constitute
"regular interests" in the REMIC. The Class R Certificate will constitute
the "residual interest" in the REMIC.
No transfer of a Class R Certificate will be made unless such
transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities
laws or is made pursuant to an effective registration statement under said
Act or laws. The Company may direct the Trustee to require an opinion of
counsel acceptable to and in form and substance satisfactory to the
Company that such transfer is exempt (describing the applicable exemption
and the basis therefor) from the registration requirements of the
Securities Act of 1933, as amended, and from any applicable securities
statute of any state, and the transferee shall execute an investment
letter in the form described by the Agreement. Unless the Opinion of
Counsel required by Section 4.02(d)(ii) has been delivered to the Trustee
in connection with this Certificate, the holder of this Certificate
represents, by virtue of its acceptance hereof, that it is not an employee
benefit plan subject to Section 406 of ERISA or Section 4975 of the Code
or a person acting on behalf of such a plan or using the funds of such a
plan to acquire this Certificate.
The respective obligations and responsibilities of the Company, the
Master Servicer and the Trustee under the Agreement will terminate upon:
(i) the later of the final payment or other liquidation (or any advance
with respect thereto) of the last Mortgage Loan or the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan and the remittance of all funds due thereunder; or (ii) at
the option of the Master Servicer or the Certificate Insurer, on any
Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date in accordance with the provisions set forth in
the Agreement; provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador
of the United States to the Court of St. James, living on the date hereof.
(Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled
to any benefit under the Agreement or be valid for any purpose.)
(This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned
by any authorized officer of the Trustee.)
(IN WITNESS WHEREOF, the Company has caused this Certificate to be
duly executed.
Dated:
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
By:
---------------------
Authorized Officer
FORM OF CERTIFICATE OF AUTHENTICATION
THIS IS THE CLASS R
CERTIFICATE REFERRED TO
IN THE WITHIN-MENTIONED AGREEMENT
________________________________,
as Trustee
By:
------------------------)
Authorized Signatory
(IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
_____________________________, not in its
individual capacity but solely as Trustee
By _______________________________
Authorized Officer
Countersigned:
By: ____________________________
Authorized Officer of
________________ not in
its individual capacity
but solely as Trustee)
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
- ------------------------
- ------------------------
- -----------------------------------------------------------------
(Please Print or Typewrite Name and Address of Assignee)
- -----------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does
irrevocably constitute and appoint
Attorney to
- -------------------------------------------------------
transfer the within Certificate on the books kept for the registration
thereof, with full power of substitution in the premises.
Dated:
(Signature guaranty)
------------------------------
NOTICE: The signature to this
assignment must correspond with
the name as it appears upon the
face of the within Certificate
in every particular, without
alteration or enlargement or
any change whatever.
(*This information, which is voluntary, is being requested to ensure that
the assignee will not be subject to backup withholding under Section 3406
of the Code.)
EXHIBIT G
(RESERVED)
EXHIBIT H
CERTIFICATE ACCOUNT CERTIFICATION
____________ __, 199_
_____________________________ hereby certifies that it has
established the account described below as a Certificate Account pursuant
to Section 5.08 of the Pooling and Servicing Agreement, dated as of
_____________, 199_.
Title of Account:
"_____________________________, as Master Servicer, in trust for
________________________________, as Trustee, for the benefit of
registered holders of __________________________, Mortgage Pass-Through
Certificates, Series 199_-__"
Account Number: ____________________________
Address of office ____________________________
or branch at which
Account is
maintained:
_____________________________
By:__________________________
Name:
Title:
EXHIBIT I
(RESERVED)
EXHIBIT J
DISTRIBUTION ACCOUNT CERTIFICATION
___________ __, 199_
________________________________ (the "Paying Agent") hereby
certifies that it has established the account described below as a
Distribution Account pursuant to Section 6.01 of the Pooling and Servicing
Agreement dated as of _____________, 199_ by and among
__________________________, _____________________________ as the Master
Servicer and the undersigned as Trustee.
Title of Account: "________________________________, as Paying Agent and
agent for the benefit of ________________________________, as Trustee for the
benefit of the holders of Mortgage Pass-Through Certificates, Series 199_
(__________________________, Seller)."
Account Number: ____________________________
Address of office
or branch of the
Paying Agent at
which Account is
maintained: ________________________________
________________________________
By:__________________________
Name:
Title:
EXHIBIT K
DISTRIBUTION ACCOUNT LETTER AGREEMENT
__________ __, 199_
To:
As "Master Servicer" under the Pooling and Servicing Agreement,
dated as of _____________, 199_ (the "Agreement"), we hereby authorize and
request you to establish an account, as a Distribution Account pursuant to
Section 6.01 of the Agreement, to be designated as
"________________________________, as Paying Agent and agent for the
benefit of ________________________________, as Trustee for the benefit of
the holders of Mortgage Pass-Through Certificates, Series 199_-__, Class
A, Class B and Class R (__________________________, Seller)." All
deposits in the account shall be subject to withdrawal therefrom by order
signed by the Trustee or the Paying Agent. This letter is submitted to
you in duplicate. Please execute and return one original to us.
_____________________________
By:__________________________________
Name:
Title:
The undersigned, as "Depository," hereby certifies that the above
described account has been established under Account Number
___________________, at the office of the depository indicated above, and
agrees to honor withdrawals on such account as provided above.
By:__________________________
Name:
Title:
EXHIBIT L
FORM OF INVESTMENT LETTER FOR HOLDER OF
CLASS B AND CLASS R CERTIFICATES
1. The Purchaser is acquiring the Class B or Class R Certificate
(the "Certificate") as principal for its own account for the purpose of
investment (neither Merrill Lynch nor any of its Affiliates need represent
that it is acquiring for purposes of investment) and not with a view to or
for sale in connection with any distribution thereof, subject nevertheless
to any requirement of law that the disposition of the Purchaser's property
shall at all times be and remain within its control.
2. The Purchaser has knowledge and experience in financial and
business matters and is capable of evaluating the merits and risks of its
investment in the Residual Interest and is able to bear the economic risk
of such investment. The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the rules and regulations of the Securities
and Exchange Commission under the Securities Act of 1933, as amended
(Affiliates of Merrill Lynch need not make this representation). The
Purchaser has been given such information concerning the Certificate, the
underlying Mortgage Loans and the Master Servicer as it has requested.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale by the Purchaser
of the Certificate.
4. The Purchaser understands that the Certificate has not been and
will not be registered under the Securities Act of 1933, as amended, or
any state securities laws and may be resold (which resale is not currently
contemplated) only if an exemption from registration is available, that
neither the Company, the Master Servicer nor the Trustee is required to
register the Certificate and that any transfer must comply with Section
4.02 of the Pooling and Servicing Agreement. In connection with any
resale of the Certificate, the Purchaser shall not make any general
solicitation or advertisement.
5. The Purchaser agrees that it will obtain from any purchaser of
the Certificate from it the same representations, warranties and
agreements contained in the foregoing paragraphs 1 through 4 and in this
paragraph 5.
6. The Purchaser hereby directs the Trustee to register the
Certificate acquired by the Purchaser in the name of its nominee as
follows: ____________.
Very truly yours,
------------------------------
NAME OF PURCHASER
By:
---------------------------
Name:
-------------------------
Title:
------------------------
EXHIBIT M
FORM OF TRANSFER AFFIDAVIT FOR CLASS R CERTIFICATES
STATE OF )
: ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of _____________________ (the
"Transferee"), a corporation duly organized and existing under the laws of
the State of Delaware and on behalf of which the undersigned makes this
affidavit.
2. The Transferee is acquiring a beneficial ownership interest in
Mortgage Pass-Through Certificates, Series 199_-__, Class R (the "Class R
Certificates"), issued pursuant to the Pooling and Servicing Agreement,
dated as of _____________, 199_ (the "Agreement"), by and among
__________________________, as depositor (the "Depositor"),
_____________________________, as Master Servicer, and
________________________________, as Trustee. Capitalized terms used, but
not defined herein, shall have the meanings ascribed to such terms in the
Agreement. The Transferee has authorized the undersigned to make this
affidavit on behalf of the Transferee.
3. The Transferee is not, as of the date hereof, and will not be, as
of the date of the Transfer, a Disqualified Organization. The Transferee
is acquiring the Class R Certificate either (i) for its own account or
(ii) as nominee, trustee or agent for another Person and has attached
hereto an affidavit from such Person in substantially the form as this
affidavit attached hereto. The Transferee has no knowledge that any such
affidavit is false.
4. The Transferee has been advised of, and understands that: (i) a
tax shall be imposed on any Transfer to Persons that are Disqualified
Organizations; (ii) such tax is imposed on the transferor, or, if such
Transfer is through an agent (which includes a broker, nominee or
middleman) for Persons that are Disqualified Organizations, on the agent;
and (iii) the Person otherwise liable for the tax shall be relieved of
liability for the tax if the subsequent transferee furnished to such
Person an affidavit that such subsequent transferee is not a Disqualified
Organization and, at the time of the Transfer, such Person does not have
actual knowledge that the affidavit is false.
5. The Transferee has been advised and understands that a tax shall
be imposed on a "pass-through entity" holding Class R Certificates if at
any time during the taxable year of the pass-through entity a Person that
is a Disqualified Organization is the record holder of an interest in such
entity. The Transferee understands that no tax will be imposed for any
period for which the record holder furnishes to the pass-through entity an
affidavit stating that the record holder is not a Disqualified
Organization and the pass-through entity does not have actual knowledge
that such affidavit is false. (For this purpose, a "pass-through entity"
includes a regulated investment company, a real estate investment trust or
common trust fund, a partnership, trust or estate, and certain
cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as nominees for other
Persons.)
6. The Transferee has reviewed the provisions of Section 4.02 of the
Agreement, which is incorporated herein by reference, and understands the
legal consequences of the acquisition of the Class R Certificates
including, without limitations, the restrictions on subsequent Transfers
and the provisions regarding voiding the Transfer and mandatory sales.
The Transferee expressly agrees to be bound by and to abide by the
provisions of Section 4.02 of the Agreement. The Transferee understands
and agrees that any breach of any of the representations included herein
shall render the Transfer to the Transferee contemplated hereby null and
void.
7. The Transferee does not have the intention to impede the
assessment or collection of any income tax legally required to be paid
with respect to the Class R Certificates and the Transferee hereby
acknowledges that the Class R Certificates may generate tax liabilities in
excess of the cash flow associated with the Class R Certificates and
intends to pay such taxes associated with the Class R Certificates when
they become due.
8. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to make a Transfer and in
connection with any Transfer by a Person for whom the Transferee is acting
as nominee, trustee or agent, and the Transferee will not make a Transfer
or cause any Transfer to any Person that the Transferee knows is a
Disqualified Organization.
9. That the Purchaser (i) is not a Non-U.S. Person or (ii) is a Non-
U.S. Person that holds the Class R Certificate in connection with the
conduct of a trade or business in the United States and has furnished the
transferor and the Trustee with an
effective Internal Revenue Service Form 4224 or successor form at the time
and in the manner required by the Code or (iii) is a Non-U.S. Person that
has delivered to both the transferor and the Trustee an opinion of a
nationally recognized tax counsel to the effect that the transfer of the
Class R Certificates to it is in accordance with the requirements of the
Code and the regulation promulgated thereunder and that such transfer of
the Class R Certificates will not be disregarded for federal income tax
purposes.
10. The following information as to the Transferee is true and
correct:
Address:
Contact for Tax Matters:
Phone Number:
Form of Organization of Transferee:
Transferee's Federal Tax Identification Number:
Percentage of Residual Interest Acquired: __%
Price Paid for Residual Interest:
Date of Acquisition:
If security is being registered in the name of a nominee, please
state such name:
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its _________________, by
its duly authorized officer this _____ day of _____________.
(NAME OF TRANSFEREE)
By: ___________________________
Name:
Title:
STATE OF )
) ss.:
COUNTY OF )
Personally appeared before me the above-named __________,
-----------
known or proved to me to be the same person who executed the foregoing
instrument and to be the of
------------------
_______________________________, and acknowledged that he executed the
same as his free act and deed and the free act and deed of the Transferee.
Subscribed and sworn before me this _______ of ___________.
_____________________________
NOTARY PUBLIC
My commission expires the ___
day of ________________, 19__.
EXHIBIT N
ERISA REPRESENTATION LETTER
(for Transfers of Class B and Class R Certificates)
The Purchaser is not an employee benefit plan (a "Plan") subject to
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code") or a person acting on behalf of such a Plan or
using the assets of such a Plan to acquire a Class R Certificate.
EXHIBIT O
(RESERVED)
EXHIBIT P
Sale Agreement
EXHIBIT Q
Form of Notice for Certificate Insurance Policy
Exhibit 4.2
MERRILL LYNCH MORTGAGE INVESTORS, INC.,
DEPOSITOR,
__________________,
SERVICER,
AND
_________________
TRUSTEE
POOLING AND SERVICING AGREEMENT
Dated as of __________________ 1, 199_
Manufactured Housing Contract
Senior/Subordinate Pass-Through Certificates
Series - 199_-_
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . I-1
ARTICLE II
CONVEYANCE OF CONTRACTS; TRUST FUND;
PERFECTION OF SECURITY INTEREST;
CUSTODY OF CONTRACTS
Section 2.01. Conveyance of Contracts and Other
Rights . . . . . . . . . . . . . . . . . . . . . . II-1
Section 2.02. Filing; Name Change or Relocation . . . . . . . . . II-2
Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . II-4
Section 2.04. Conditions to Closing . . . . . . . . . . . . . . . II-4
Section 2.05. REMIC Election; Designation of Regular
and Residual Interests; Tax Year . . . . . . . . . II-4
Section 2.06. Designation of Startup Day . . . . . . . . . . . . II-4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties
Regarding the Contract Seller . . . . . . . . . . III-1
Section 3.02. Representations and Warranties
Regarding Each Contract . . . . . . . . . . . . . III-2
Section 3.03. Representations and Warranties
Regarding the Contracts in
the Aggregate . . . . . . . . . . . . . . . . . . III-6
Section 3.04. Representations and Warranties
Regarding the Contract Files . . . . . . . . . . . III-7
Section 3.06. Representation and Warranty of the
Depositor . . . . . . . . . . . . . . . . . . . . III-9
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates . . . . . . . . . . . . . . . . . IV-1
Section 4.02. Registration of Transfer and
Exchange of Certificates . . . . . . . . . . . . . IV-2
Section 4.03. Mutilated, Destroyed, Lost or Stolen
Certificate . . . . . . . . . . . . . . . . . . . IV-5
Section 4.04. Persons Deemed Owners . . . . . . . . . . . . . . . IV-5
Section 4.05. Appointment of Paying Agent . . . . . . . . . . . . IV-5
Section 4.06. Access to List of Certificateholders'
Names and Addresses . . . . . . . . . . . . . . . IV-6
Section 4.07. Authenticating Agents . . . . . . . . . . . . . . . IV-6
Section 4.08. Class R Certificate . . . . . . . . . . . . . . . . IV-7
ARTICLE V
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 5.01. Responsibility for Contract
Administration and Servicing . . . . . . . . . . . . V-1
Section 5.02. Standard of Care . . . . . . . . . . . . . . . . . . V-1
Section 5.03. Records . . . . . . . . . . . . . . . . . . . . . . . V-1
Section 5.04. Inspection . . . . . . . . . . . . . . . . . . . . . V-1
Section 5.05. Reserved. . . . . . . . . . . . . . . . . . . . . . . V-2
Section 5.06. Payment of Taxes . . . . . . . . . . . . . . . . . . V-2
Section 5.07. Enforcement . . . . . . . . . . . . . . . . . . . . . V-2
Section 5.08. Reserved. . . . . . . . . . . . . . . . . . . . . . . V-3
Section 5.09. Maintenance of Hazard Insurance
Policies . . . . . . . . . . . . . . . . . . . . . . V-3
Section 5.10. Fidelity Bond and Errors and Omissions
Insurance . . . . . . . . . . . . . . . . . . . . . V-4
Section 5.11. Collections under Hazard Insurance
Policies; Consent to Transfers of
Manufactured Homes; Assumption
Agreements . . . . . . . . . . . . . . . . . . . . . V-5
Section 5.12. Realization upon Defaulted Contracts . . . . . . . . V-5
Section 5.13. Costs and Expenses . . . . . . . . . . . . . . . . . V-6
Section 5.14. Trustee to Cooperate . . . . . . . . . . . . . . . . V-6
Section 5.15. Servicing and Other Compensation . . . . . . . . . . V-6
Section 5.16. Custody of Contracts . . . . . . . . . . . . . . . . V-7
Section 5.17. Reserved . . . . . . . . . . . . . . . . . . . . . . V-8
Section 5.18. REO Disposition . . . . . . . . . . . . . . . . . . . V-8
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS; WITHDRAWALS
FROM CERTIFICATE ACCOUNT
Section 6.01. Monthly Payments . . . . . . . . . . . . . . . . . VI-1
Section 6.02. Permitted Withdrawals from the
Certificate Account . . . . . . . . . . . . . . . VI-2
Section 6.03. Monthly Advances by the Servicer . . . . . . . . . VI-3
Section 6.04. Establishment of and Deposits in
Certificate Accounts . . . . . . . . . . . . . . . VI-4
ARTICLE VII
REPORTS
Section 7.01. Monthly Reports . . . . . . . . . . . . . . . . . . VII-1
Section 7.02. Certificate of Servicing Officer . . . . . . . . . VII-2
Section 7.03. Other Data . . . . . . . . . . . . . . . . . . . . VII-2
Section 7.04. Annual Statement as to Compliance . . . . . . . . . VII-2
Section 7.05. Annual Independent Public Accountants'
Servicing Report . . . . . . . . . . . . . . . . . VII-2
Section 7.06. Statements to Certificateholders . . . . . . . . . VII-3
ARTICLE VIII
INDEMNITIES; THE DEPOSITOR AND THE SERVICER
Section 8.01. Liabilities to Obligors . . . . . . . . . . . . . VIII-1
Section 8.02. Tax Indemnification . . . . . . . . . . . . . . . VIII-1
Section 8.03. Servicer's Indemnities . . . . . . . . . . . . . VIII-1
Section 8.04. Operation of Indemnities . . . . . . . . . . . . VIII-1
Section 8.05. Merger or Consolidation of the
Depositor, the Contract Seller
or the Servicer . . . . . . . . . . . . . . . . VIII-1
Section 8.06. Limitation on Liability of the
Depositor and Others . . . . . . . . . . . . . . VIII-2
Section 8.07. Assignment by Servicer . . . . . . . . . . . . . VIII-2
Section 8.08. Successor to the Servicer . . . . . . . . . . . . VIII-3
ARTICLE IX
DEFAULT
Section 9.01. Events of Default . . . . . . . . . . . . . . . . . IX-1
Section 9.02. Waiver of Defaults . . . . . . . . . . . . . . . . IX-2
Section 9.03. Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . IX-2
Section 9.04. Notification to Certificateholders . . . . . . . . IX-2
Section 9.05. Effect of Transfer . . . . . . . . . . . . . . . . IX-2
ARTICLE X
CONCERNING THE TRUSTEE
Section 10.01. Duties of Trustee . . . . . . . . . . . . . . . . . X-1
Section 10.02. Certain Matters Affecting the Trustee . . . . . . . X-2
Section 10.03. Trustee Not Liable for Certificates
or Contracts . . . . . . . . . . . . . . . . . . . X-3
Section 10.04. Trustee May Own Certificates . . . . . . . . . . . . X-3
Section 10.05. Servicer to Pay Fees and Expenses of
Trustee . . . . . . . . . . . . . . . . . . . . . . X-3
Section 10.06. Eligibility Requirements for Trustee . . . . . . . . X-4
Section 10.07. Resignation and Removal of the Trustee . . . . . . . X-4
Section 10.08. Successor Trustee . . . . . . . . . . . . . . . . . X-5
Section 10.09. Merger or Consolidation of Trustee . . . . . . . . . X-5
Section 10.10. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . X-6
Section 10.11. Appointment of Office or Agency . . . . . . . . . . X-7
Section 10.12. REMIC Compliance . . . . . . . . . . . . . . . . . . X-7
ARTICLE XI
TERMINATION
Section 11.01. Termination . . . . . . . . . . . . . . . . . . . XI-1
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Severability of Provisions . . . . . . . . . . . . XII-1
Section 12.02. Limitation on Rights of
Certificateholders . . . . . . . . . . . . . . . XII-1
Section 12.03. Acts of Certificateholders . . . . . . . . . . . . XII-2
Section 12.04. Calculations . . . . . . . . . . . . . . . . . . . XII-2
Section 12.05. Amendment . . . . . . . . . . . . . . . . . . . . XII-2
Section 12.06. Recordation of Agreement . . . . . . . . . . . . . XII-4
Section 12.07. Contribution of Assets . . . . . . . . . . . . . . XII-4
Section 12.08. Duration of Agreement . . . . . . . . . . . . . . XII-4
Section 12.09. Governing Law . . . . . . . . . . . . . . . . . . XII-5
Section 12.10. Notices . . . . . . . . . . . . . . . . . . . . . XII-5
Section 12.11. Merger and Integration of Documents . . . . . . . XII-5
Section 12.12. Headings . . . . . . . . . . . . . . . . . . . . . XII-5
Section 12.13. Counterparts . . . . . . . . . . . . . . . . . . . XII-5
EXHIBITS
EXHIBIT A-1 CONTRACT SCHEDULE . . . . . . . . . . . . . . . . . A-1-1
EXHIBIT A-2 CONTENTS OF CONTRACT FILE . . . . . . . . . . A-2-1
EXHIBIT B FORM OF FACE OF CLASS A CERTIFICATE . . . . . . . . . B-1
EXHIBIT C FORM OF FACE OF CLASS B CERTIFICATE . . . . . . . . . C-1
EXHIBIT D FORM OF FACE OF CLASS R CERTIFICATE . . . . . . . . . D-1
EXHIBIT E FORM OF REVERSE OF CLASS A AND CLASS B
CERTIFICATES . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F CERTIFICATE REGARDING SUBSTITUTION OF
ELIGIBLE SUBSTITUTE CONTRACT . . . . . . . . . . . . F-1
EXHIBIT G CERTIFICATE OF SERVICING OFFICER . . . . . . . . . . G-1
EXHIBIT H TRANSFER AFFIDAVIT . . . . . . . . . . . . . . . . . H-1
EXHIBIT I FORM OF INVESTMENT LETTER . . . . . . . . . . . . . . I-1
This Pooling and Servicing Agreement, dated as of _______ 1, 199_, is
executed by and among Merrill Lynch Mortgage Investors, Inc., as Depositor
of the Contracts that are referred to herein (together with its permitted
successors and assigns, the "Depositor"), __________________, as Contract
Seller and Servicer (together with its permitted successors and assigns, the
"Servicer"), and _________________, as trustee (together with its permitted
successors and assigns, the "Trustee").
In consideration of the premises and the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions. Whenever used herein, unless the context
-----------
otherwise requires, the following words and phrases shall have the following
meanings:
ACTUARIAL ADVANCE: With respect to any Due Period and any Actuarial
-----------------
Contract, the amount, if any, of the interest portion of the related
scheduled monthly payment that was not timely made.
ACTUARIAL CONTRACT: Any Contract pursuant to which the portion of any
------------------
scheduled monthly payment allocable to interest is calculated on the basis
that each scheduled monthly payment is applied on its Due Date, regardless
of when it is actually made.
AFFILIATE: As to any specified Person, any other Person controlling or
---------
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" or
"controlled" have meanings correlative to the foregoing.
AGGREGATE NET LIQUIDATION LOSSES: With respect to the time of reference
--------------------------------
thereto, the aggregate of the amounts by which (i) the outstanding principal
balance of each Contract that, during such time of reference, had become a
Liquidated Contract plus accrued and unpaid interest thereon (adjusted to the
Net Contract Rate) to the Due Date for such Contract in the Due Period in
which such Contract became a Liquidated Contract exceeds (ii) the Net
Liquidation Proceeds for such Contract.
AGREEMENT: This Pooling and Servicing Agreement and all amendments
---------
hereof and supplements hereto.
AMORTIZATION SCHEDULE: With respect to any Contract, the amortization
---------------------
schedule for such Contract at the time of reference thereto after adjustments
for previous Partial Prepayments but without giving effect to any adjustments
by reason of the bankruptcy of the Obligor or any similar proceeding or
moratorium or any waiver, extension or grace period.
ANNUAL PERCENTAGE RATE OR APR: As to any Contract and any time, the rate
-----------------------------
of interest then being borne by such Contract, as set forth on the face
thereof.
APPLICANTS: Certificateholders who apply in writing to the Trustee for
----------
the names and addresses of other Certificateholders pursuant to Section 4.06.
APPRAISED VALUE: With respect to any Manufactured Home, the value of
---------------
such Manufactured Home as determined by a professional appraiser or an
employee of the Servicer who, as part of such employment, regularly appraises
manufactured housing units.
AUTHENTICATING AGENT: An authenticating agent appointed pursuant to
--------------------
Section 4.07.
AVAILABLE DISTRIBUTION AMOUNT: As to any Distribution Date, (a) the sum
-----------------------------
of (i) the amount on deposit in the Certificate Account as of the end of the
Due Period ending immediately prior to such Distribution Date and (ii) the
Monthly Advance made in respect of such Distribution Date reduced by (b) the
sum of (i) aggregate Repossession Profits and (ii) amounts permitted to be
withdrawn by the Servicer from the Certificate Account pursuant to clauses
(i) through (v), inclusive, of Section 6.02.
BOOK-ENTRY CERTIFICATE: Any Class A Certificate or Class B Certificate
----------------------
registered in the name of the Depository or its nominee ownership of which
is reflected on the books of the Depository or on the books of a person
maintaining an account with such Depository (directly or as an indirect
participant in accordance with the rules of such Depository).
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a day
------------
on which banking institutions in the States of ________, ________ or
___________ are authorized or obligated by law or executive order to be
closed.
CERTIFICATE: A Certificate for Manufactured Housing Contract
-----------
Senior/Subordinate Pass-Through Certificates, Series 199_-_ executed and
delivered by the Trustee substantially in the form of Exhibits B, C or D and
E (reverse of all Certificates).
CERTIFICATE ACCOUNT: The custodial account or accounts created and
-------------------
maintained pursuant to Section 6.04.
CERTIFICATEHOLDER or HOLDER: The Person in whose name a Certificate is
----------------- ------
registered in the Certificate Register, except that, solely for the purposes
of giving any consent, waiver, request or demand pursuant to this Agreement,
any Class A Certificate and any Class B Certificate registered in the name
of the Depositor, the Servicer or any Affiliate of the Servicer and any Class
A Certificate and any Class B Certificate in respect of which the Servicer
or any Affiliate of the Servicer is the Certificate Owner shall be deemed not
to be outstanding and the Percentage Interest and Fractional Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests or Fractional Interests necessary
to effect any such consent, waiver, request or demand has been obtained,
unless, in the case of the Class A Certificates, all the Class A Certificates
are held by such Persons, in the case of the Class B Certificates, all Class
B Certificates are held by such persons, or, all Class A Certificates are
held by such persons, or such Certificates have been fully paid.
CERTIFICATE OWNER: With respect to a Class A Certificate or a Class B
-----------------
Certificate, the person who is the beneficial owner of a Book-Entry
Certificate.
CERTIFICATE REGISTER: The register maintained pursuant to Section 4.02.
--------------------
CERTIFICATE REGISTRAR: The Trustee or the agent appointed pursuant to
---------------------
Section 4.02(a)
CLASS OR CLASS A, Class B or Class R: Pertaining to Class A, Class B
------------------------------------
Certificates and/or Class R Certificate, as the case may be.
CLASS A CERTIFICATES: Any one of the Certificates designated Class A,
--------------------
executed and authenticated as provided herein, substantially in the form set
forth in Exhibits B and E hereto.
CLASS A DISTRIBUTION AMOUNT: As to any Distribution Date, the aggregate
---------------------------
amount distributed to Class A Certificateholders on such Distribution Date
pursuant to Section 6.01.
CLASS A INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Distribution
--------------------------------------------
Date, an amount equal to the sum of (a) one month's interest at the Class A
Pass-Through Rate on the Class A Principal Balance as of such Distribution
Date (before giving effect to the distribution on such Distribution Date) and
(b) any Class A Unpaid Interest Shortfall.
CLASS A INTEREST SHORTFALL: As to any Distribution Date, any amount by
--------------------------
which the amount distributed to Class A Certificateholders on such
Distribution Date is less than the amount computed pursuant to clause (a) of
the definition of "Class A Interest Formula Distribution Amount".
CLASS A PASS-THROUGH RATE: _____% per annum.
-------------------------
CLASS A PRINCIPAL BALANCE: At any time, the Original Class A Principal
-------------------------
Balance minus the sum of all amounts previously distributed to the Class A
Certificateholders since the Closing Date pursuant to clause (ii)(a) of
Section 6.01(a).
CLASS A UNPAID INTEREST SHORTFALL: As to any Distribution Date, the
---------------------------------
amount, if any, by which the aggregate of the Class A Interest Shortfalls for
prior Distribution Dates is in excess of the aggregate of the amounts
distributed to Class A Certificateholders on prior Distribution Dates
described in clause (b) of the definition of "Class A Interest Formula
Distribution Amount", plus accrued interest (to the extent payment thereof
is legally permissible) at the Class A Pass-Through Rate on the amount
thereof from such prior Distribution Date to such current Distribution Date.
For purposes of determining whether amounts distributable pursuant to such
clause (b) were actually distributed to Class A Certificateholders on any
particular Distribution Date, the distribution of interest to Class A
Certificateholders on such Distribution Date shall be allocated first
to the monthly interest requirement calculated pursuant to clause (a)
of the definition of "Class A Interest Formula Distribution Amount" and
then to any Class A Unpaid Interest Shortfall pursuant to such clause (b).
CLASS B CERTIFICATE: Any one of the Certificates designated Class B,
-------------------
executed and authenticated as provided herein, substantially in the form set
forth in Exhibits C and E hereto.
CLASS B DISTRIBUTION AMOUNT: As to any Distribution Date, the aggregate
---------------------------
amount distributed to Class B Certificateholders on such Distribution Date
pursuant to Section 6.01.
CLASS B INTEREST FORMULA DISTRIBUTION AMOUNT: As to any Distribution
--------------------------------------------
Date, an amount equal to the sum of (a) one month's interest at the Class B
Pass-Through Rate on the Class B Principal Balance as of such Distribution
Date (before giving effect to the distribution on such Distribution Date) and
(b) any Class B Unpaid Interest Shortfall.
CLASS B INTEREST SHORTFALL: As to any Distribution Date, any amount by
--------------------------
which the amount distributed from the Certificate Account to Class B
Certificateholders on such Distribution Date is less than the amount computed
pursuant to clause (a) of the definition of "Class B Interest Formula
Distribution Amount".
CLASS B PASS-THROUGH RATE: As to any Distribution Date, the lesser of
-------------------------
(i) ____% per annum and (ii) the Weighted Average Net Contract Rate for such
Distribution Date.
CLASS B PRINCIPAL BALANCE: At any time, the Original Class B Principal
-------------------------
Balance minus the sum of all amounts previously distributed to the Class B
Certificateholders pursuant to clause (iv) of Section 6.01(a).
CLASS B UNPAID INTEREST SHORTFALL: As to any Distribution Date, the
---------------------------------
amount, if any, by which the aggregate of the Class B Interest Shortfalls for
prior Distribution Dates is in excess of the aggregate of the amounts
distributed to the Class B Certificateholders on prior Distribution Dates
described in clause (b) of the definition of "Class B Interest Formula
Distribution Amount", plus accrued interest (to the extent payment thereof
is legally permissible) at the Class B Pass-Through Rate on the amount
thereof from such prior Distribution Date to such current Distribution Date.
For purposes of determining whether amounts distributable pursuant to such
clause (b) were actually distributed to Class B Certificateholders on any
particular Distribution Date, the distribution of interest to Class B
Certificateholders on such Distribution Date shall be allocated first to the
monthly interest requirement calculated pursuant to clause (a) of the
definition of "Class B Interest Formula Distribution Amount" and then to any
Class B Unpaid Interest Shortfall pursuant to such clause (b).
CLASS R CERTIFICATE: The Certificate executed and authenticated as
-------------------
provided herein, substantially in the form set forth in Exhibits D and E
hereto.
CLASS R DISTRIBUTION AMOUNT: As to any Distribution Date, the aggregate
---------------------------
amount distributed to the Class R Certificateholder pursuant to Section 6.01.
CLOSING DATE: _________ __, 199_.
------------
CODE: The Internal Revenue Code of 1986, as amended.
----
COMPUTER TAPE: The computer tape generated by the Contract Seller which
-------------
provides information relating to the Contracts, and includes the master file
and the history file.
CONTRACT FILE: As to each Contract that is not a Land Home Contract, (a)
-------------
the original copy of the Contract, (b) the original title document, or
application for title, for the related Manufactured Home of the type issued
to lienholders, unless the laws of the jurisdiction in which the related
Manufactured Home is located do not provide for the issuance of such title
documents for manufactured housing; (c) evidence of one or more of the
following types of perfection of the security interest in the related
Manufactured Home granted by such Contract, as appropriate: (1) notation of
such security interest on the title document, (2) a financing statement
meeting the requirements of the UCC, with evidence of recording in the
appropriate offices indicated thereon, or (3) such other evidence of
perfection of a security interest in a manufactured housing unit as is
customary in such jurisdiction; (d) the assignment of the Contract from the
originator to _________; and (e) any extension, modification or waiver
agreement(s). As to each Land Home Contract, (a) the original copy of the
Contract, (b) the related Mortgage with evidence of recording thereon and any
title document for the related Manufactured Home, (c) an assignment of the
Mortgage that is in blank (which may be a blanket assignment if permitted in
the applicable jurisdiction), (d) if applicable, the assignment of the
Contract from the originator to _________ and (e) any extensions modification
or waiver agreement(s).
CONTRACT POOL: The pool of Contracts held in the Trust Fund.
-------------
CONTRACT PRINCIPAL BALANCE: As to any Contract and any date of
--------------------------
determination, the unpaid principal balance of such Contract as of such date
of determination, computed on the basis of the simple interest method or the
actuarial method, as the case may be.
CONTRACT SCHEDULE: The list identifying each Contract constituting part
-----------------
of the corpus of the Trust Fund, which list is attached hereto as Exhibit A,
and which (a) identifies each Contract by contract number and name and
address of the Obligor and (b) sets forth as to each Contract (i) the unpaid
principal balance as of the Cut-off Date determined by giving effect to
payments received prior to the Cut-off Date (ii) the amount of each monthly
payment due from the Obligor, (iii) the APR and (iv) the maturity date.
CONTRACT SELLER: _________ in its capacity as original seller of the
---------------
Contracts under the Sale and Purchase Agreement.
CONTRACTS: The manufactured housing installment sale contracts and
---------
installment loan agreements described in the Contract Schedule and
constituting part of the corpus of the Trust Fund, which Contracts are to be
sold and assigned by the Depositor to the Trustee and which are the subject
of this Agreement. The Contracts include, without limitation, all related
security interests and any and all rights to receive payments which are due
pursuant thereto from and after the Cut-off Date, but exclude any rights to
receive payments which are due pursuant thereto prior to the Cut-off Date.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which at
----------------------
any particular time its corporate business shall be administered, which
office at the date of execution of this Agreement is located at
_____________________________________.
CUT-OFF DATE: ____________ 1, 199_.
------------
DEPOSITOR: Merrill Lynch Mortgage Investors, Inc., a Delaware
---------
corporation, or its successor in interest or any successor under this
Agreement appointed as herein provided.
DEPOSITORY: The initial Depository shall be The Depository Trust
----------
Company, the nominee of which is CEDE & CO., as the registered Holder of (i)
one Class A Certificate evidencing $__________________ in initial aggregate
principal balance of the Class A Certificates, and (ii) one Class B
Certificate evidencing $_______________ in initial aggregate principal
balance of the Class B Certificates. The Depository shall at all times be
a "clearing corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the state of New York.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: The ____ Business Day prior to each Distribution
------------------
Date.
DISTRIBUTION DATE: The ____th day of any month, or if such ____th day
-----------------
is not a Business Day, the first Business Day immediately following the 20th
day of the month, commencing with _________ ____, 199_.
DUE DATE: The day of the month on which each scheduled payment of
--------
principal and interest is due on a Contract, exclusive of any days of grace.
DUE PERIOD: With respect to any Distribution Date, the calendar month
----------
preceding the month of the Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the Contract Seller's
-----------------
manufactured housing installment sales contracts and installment loan
agreements clearly identifying each Contract that is part of the corpus of
the Trust Fund.
ELIGIBLE ACCOUNT: An account that is either (i) maintained with a
----------------
depository institution the long-term deposit rating or the long-term
unsecured debt obligations of which (or in the case of the principal bank in
a bank holding company system, the long-term unsecured debt obligations of
such bank holding company) have been rated by each Rating Agency in one of
its two highest rating categories, or maintained with a depository
institution the commercial paper of which (or, in the case of a principal
bank in a bank holding company system, of such bank holding company) is rated
A-1+ by Standard & Poor's and P-1 by Moody's, (ii) a trust account maintained
with the Trustee in its corporate trust department in which the funds are
either uninvested or invested solely in Eligible Investments or (iii)
otherwise acceptable to each Rating Agency, as evidenced by a letter from
each Rating Agency, without a reduction or withdrawal of either of the
ratings of the Certificates.
ELIGIBLE INVESTMENTS: One or more of the following:
--------------------
(a) obligations of, or guaranteed as to principal and interest by,
the United States or 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)
maturing not more than one month from the date of acquisition thereof,
provided that the long-term unsecured obligations of the party agreeing to
repurchase such obligations are at the time rated by each Rating Agency in
one of the two highest rating categories available from such Rating Agency;
and provided further that the short-term debt obligations of the party
agreeing to repurchase shall be rated A-1+ by Standard & Poor's and P-1 by
Moody's;
(c) federal funds, certificates of deposit, time deposits and
bankers' acceptances, each of which shall not have an original maturity of
more than 90 days, of any depository institution or trust company
incorporated under the laws of the United States or any state; provided
--------
that the long-term unsecured debt obligations of such depository institution
or trust company at the date of acquisition thereof have been rated by each
Rating Agency in one of the two highest rating categories available from such
Rating Agency; and provided further that the short-term obligations of such
depository institution or trust company shall be rated A-1+ by Standard &
Poor's and P-1 by Moody's;
(d) commercial paper (having original maturities of not more than
270 days) of any corporation incorporated under the laws of the United States
or any state thereof; provided that such commercial paper shall be rated A-1+
--------
by Standard & Poor's and P-1 by Moody's;
(e) any money market fund rated AAm or AAm-G or higher by Standard
& Poor's and acceptable to Moody's; and
(f) other obligations or securities that are acceptable to each
Rating Agency as an Eligible Investment hereunder and will not result in a
reduction in or withdrawal of either of the then current ratings of the
Certificates, as evidenced by a letter to such effect from each Rating
Agency;
provided, however, that no instrument shall be an Eligible Investment if such
instrument evidences a right to receive only interest payments with respect
to the obligations underlying such instrument.
EVENT OF DEFAULT: Any one of the events described in Section 9.01
----------------
hereof.
EXTENSION FEE: Any extension fee paid by the Obligor on a Contract.
-------------
_________: __________________, a _________ corporation, or its
successors in interest or assigns permitted under this Agreement.
FIDELITY BOND: A fidelity bond to be maintained by the Servicer pursuant
-------------
to Section 5.10.
FIRST DISTRIBUTION DATE: _______________ __, 199_.
-----------------------
FORMULA PRINCIPAL DISTRIBUTION AMOUNT: As to any Distribution Date, an
-------------------------------------
amount equal to the sum of (a) the aggregate of the principal payments made
during the related Due Period on the Contracts that were Outstanding at the
beginning of such Due Period, (b) all Partial Prepayments received during the
immediately preceding Due Period, (c) the Contract Principal Balance of each
Contract for which a Principal Prepayment in Full was received during the
immediately preceding Due Period, (d) the Contract Principal Balance of each
Contract that became a Liquidated Contract during the immediately preceding
Due Period, (e) the Contract Principal Balance of each Contract that was
purchased during the immediately preceding Due Period pursuant to Section
3.05 and (f) any previously undistributed shortfalls in the distribution of
the amounts in clauses (a) through (e) in respect of prior Distribution
Dates.
FRACTIONAL INTEREST: As to any Certificate of any Class, the product of
-------------------
(a) the Percentage Interest evidenced by such Certificate multiplied by (b)
the amount derived from dividing the Principal Balance of such Class by the
sum of the Class A Principal Balance, and the Class B Principal Balance.
GRADUATED PAYMENT CONTRACT: Any Contract bearing interest during an
--------------------------
initial period at a fixed rate that is lower than the fixed rate borne
thereafter.
HAZARD INSURANCE POLICY: With respect to each Contract, the policy of
-----------------------
fire and extended coverage insurance required to be maintained for the
related Manufactured Home, as provided in Section 5.09, and which, as
provided in Section 5.09, may be a blanket insurance policy maintained by the
Servicer in accordance with the terms and conditions of Section 5.09.
INITIAL PRINCIPAL AMOUNT: $______________.
------------------------
LAND HOME CONTRACT: A Contract that is secured, or intended to be
------------------
secured, by the lien of a Mortgage.
LATE PAYMENT FEES: Any late payment fees paid by Obligors on Contracts,
-----------------
determined in accordance with the terms thereof.
LIQUIDATED CONTRACT: Any defaulted Contract as to which the Servicer has
-------------------
determined that all amounts which it expects to recover from or on account
of such Contract have been recovered; provided that any defaulted Contract
--------
in respect of which the related Manufactured Home and, in the case of Land
Home Contracts, Mortgaged Property have been realized upon and disposed of
and the proceeds of such disposition have been received shall be deemed to
be a Liquidated Contract.
LIQUIDATION EXPENSES: All reasonable out-of-pocket expenses (exclusive
--------------------
of overhead expenses) which are incurred by the Servicer in connection with
the liquidation of any defaulted Contract, on or prior to the date on which
the related Manufactured Home and, in the case of Land Home Contracts,
Mortgaged Property are disposed of, including, without limitation, legal fees
and expenses, any unreimbursed amount expended by the Servicer pursuant to
Section 5.06 or 5.09 (to the extent such amount is reimbursable under the
terms of Section 5.06 or 5.09, as the case may be) respecting such Contract
and any unreimbursed expenditures for property taxes or for property
restoration or preservation that are related to such liquidation.
LIQUIDATION PROCEEDS: Cash (including insurance proceeds other than
--------------------
those applied to the restoration of the related Manufactured Home or released
to the related Obligor in accordance with the normal servicing procedures of
the Servicer) received in connection with the liquidation of defaulted
Contracts, whether through repossession or otherwise.
LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the
-------------------
numerator of which is the original principal balance of the related Contract
and the denominator of which is the Original Value of the related
Manufactured Home (including for this purpose the Original Value of any
Mortgaged Property not constituting a part of the Manufactured Home).
MANUFACTURED HOME: A unit of manufactured housing which meets the
-----------------
requirements of Section 25(e)(10) of the Code, including all accessions
thereto, securing the indebtedness of the Obligor under the related Contract.
MONTHLY ADVANCE: With respect to each Distribution Date, the sum of the
---------------
Actuarial Advance and the Simple Interest Advance.
MONTHLY ADVANCE REIMBURSEMENT AMOUNT: Any amount received or deemed to
------------------------------------
be received by the Servicer pursuant to Section 6.03(c) in reimbursement of
a Monthly Advance made out of its own funds.
MONTHLY REPORT: The monthly report described in Section 7.01.
--------------
MONTHLY SERVICING FEE: As of any Distribution Date, an amount equal to
---------------------
one-twelfth of ___% (or, in the case of a successor Servicer engaged at any
time after _________ is no longer the Servicer, the percentage agreed upon
pursuant to Section 8.08) of the Pool Principal Balance for such Distribution
Date.
MOODY'S: Moody's Investors Service, Inc. or its successor in interest.
-------
MORTGAGE: The mortgage creating a first lien on an estate in fee simple
--------
interest in the real property securing a Contract.
MORTGAGED PROPERTY: The property subject to a Mortgage.
------------------
NET CONTRACT RATE: ___% plus the percentage then being used to calculate
-----------------
the Monthly Servicing Fee.
NET LIQUIDATION PROCEEDS: As to any Liquidated Contract, Liquidation
------------------------
Proceeds net of the sum of (i) Liquidation Expenses and (ii) any amount
required to be paid to the Obligor or any other party with an interest in the
Manufactured Home or any related Mortgaged Property that is senior to the
interest of the Trust Fund.
NONRECOVERABLE ADVANCE: Any advance made or proposed to be made
----------------------
pursuant to Section 6.03, which the Servicer believes, in its good faith
judgment, is not, or if made would not be, ultimately recoverable from
Liquidation Proceeds or otherwise from the related Contract. In determining
whether an advance is or will be nonrecoverable, the Servicer need not take
into account that it might receive any amounts in a deficiency judgment. The
determination by the Servicer that any advance is, or if made would
constitute, a Nonrecoverable Advance, shall be evidenced by an Officer's
Certificate of the Servicer delivered to the Trustee and stating the reasons
for such determination.
OBLIGOR: Each person who is indebted under a Contract or who has
-------
acquired a Manufactured Home subject to a Contract.
OFFICER'S CERTIFICATE: A certificate signed by the President, a Vice
---------------------
President, the Treasurer, the Secretary or one of the Assistant Treasurers
or Assistant Secretaries or any other duly authorized officer of the
Depositor or the Servicer, as appropriate, and delivered to the Trustee as
required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may be the counsel
------------------
for the Depositor or the Servicer and who shall be reasonably acceptable to
the Trustee.
ORIGINAL CLASS A PRINCIPAL BALANCE: $____________.
----------------------------------
ORIGINAL CLASS B PRINCIPAL BALANCE: $____________.
----------------------------------
ORIGINAL VALUE: With respect to any Manufactured Home that was new at
--------------
the time the related Contract was originated, the purchase price of such
Manufactured Home (including, for this purpose, any Mortgaged Property not
constituting a part of the Manufactured Home), plus taxes and, to the extent
financed under such Contract, fees, insurance and prepaid finance charges.
With respect to any Manufactured Home that was used at the time the related
Contract was originated, the total delivered sales price of such Manufactured
Home (including, for this purpose, any Mortgaged Property not constituting
a part of the Manufactured Home), plus taxes and, to the extent financed
under such Contract, fees, insurance and prepaid finance charges.
OUTSTANDING: With respect to any Contract as to the time of reference
-----------
thereto, a Contract that has not been fully prepaid, has not become a
Liquidated Contract, and has not been purchased pursuant to Section 3.05
prior to such time of reference.
OUTSTANDING AMOUNT ADVANCED: As to any Distribution Date, the aggregate
---------------------------
of all Monthly Advances remitted by the Servicer out of its own funds
pursuant to Section 6.03 less the aggregate of all Monthly Advance
Reimbursement Amounts actually received prior to such Distribution Date.
OWNERSHIP INTEREST: As defined in Section 4.08(c).
------------------
PARTIAL PREPAYMENT: Any Principal Prepayment other than a Principal
------------------
Prepayment in Full.
PASS-THROUGH RATE: As to each Class of Certificates, the Class A Pass
-----------------
Through Rate or the Class B Pass-Through Rate, as applicable.
PAYING AGENT: Any paying agent appointed pursuant to Section 4.05.
------------
PERCENTAGE INTEREST: As to any Certificate of any Class, the percentage
-------------------
interest evidenced thereby in distributions required to be made on the
Certificates of such Class, such percentage interest being equal to the
percentage obtained by dividing the denomination of such Certificate by the
aggregate of the denominations of all of the outstanding Certificates of such
Class (or, in the case of the Class R Certificate, being equal to the
percentage specified on the face of such Class R Certificate).
PERMITTED TRANSFEREE: As defined in Section 4.08(c).
--------------------
PERSON: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
POOL FACTOR: As of any Distribution Date and as to any Class of
-----------
Certificates, the percentage obtained by dividing the Class A Principal
Balance or the Class B Principal Balance, as the case may be (after giving
effect to the distribution on such Distribution Date), by the Original Class
A or the Original Class B Principal Balance, as the case may be, carried out
to seven decimal places.
POOL PRINCIPAL BALANCE: As to any Distribution Date, the aggregate of
----------------------
the Contract Principal Balances of each Contract which is Outstanding as of
the last day of the Due Period preceding such Distribution Date.
PRINCIPAL BALANCE: The sum of the Class A Principal Balance, or the
-----------------
Class B Principal Balance, as applicable.
(PRINCIPAL PREPAYMENT: (i) Subject to clause (ii) of this definition,
--------------------
with respect to any Due Date for a Contract, any payment or any portion
thereof or other recovery on such Contract (other than a Liquidated Contract
or a Contract repurchased pursuant to Section 3.05) received on or prior to
such Due Date (but after the immediately preceding Due Date) that exceeds the
amount necessary to bring such Contract current as of such Due Date and that
the Obligor has notified or confirmed with the Servicer are to be treated as
a prepayment of principal; (ii) notwithstanding the provisions of the
preceding clause (i), if any payment or any portion thereof or other recovery
on a Contract (other than a Liquidated Contract or a Contract repurchased
pursuant to Section 3.05) is sufficient to pay the outstanding principal
balance of such Contract, all accrued and unpaid interest at the APR to the
payment date and, at the option of the Servicer, all other outstanding
amounts owing on such Contract, the portion of the payments or recoveries on
such Contract during such Due Period that is equal to the Contract Principal
Balance of such Contract; and (iii) any cash deposit made with respect to a
Contract pursuant to Section 3.05.)
PRINCIPAL PREPAYMENT IN FULL: Any Principal Prepayment specified in
----------------------------
clause (ii) of the definition of the term "Principal Prepayment".
RATING AGENCY: Either of Standard & Poor's or Moody's.
-------------
RECORD DATE: The close of business of the last Business Day of the month
-----------
preceding the month of the related Distribution Date.
REMIC: A real estate mortgage investment conduit within the meaning of
-----
Section 860D(a) of the Code.
REMIC PROVISIONS: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at Section 860A
through 860G of 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.
REPLACED CONTRACT: As defined in Section 3.05(a).
-----------------
REPOSSESSION PROFITS: As to any Distribution Date, the excess, if any,
--------------------
of Net Liquidation Proceeds in respect of each Contract that became a
Liquidated Contract during the related Due Period over the sum of the unpaid
principal balance of such Contract plus accrued and unpaid interest at the
related APR on the unpaid principal balance thereof from the Due Date to
which interest was last paid by the Obligor to the Due Date for such Contract
in the month in which such Contract became a Liquidated Contract.
REPURCHASE OBLIGATION: The obligation of the Contract Seller, set forth
---------------------
in Section 3.05, to repurchase the related Contracts as to which there exists
an uncured breach of a representation or warranty contained in Section 3.02
or 3.03.
REPURCHASE PRICE: With respect to any Contract required to be
----------------
repurchased hereunder an amount equal to the remaining principal amount
outstanding on such Contract as of the beginning of the month of repurchase
plus accrued interest from the Due Date with respect to which the Obligor
last made a payment to the Due Date in the Due Period in which such Contract
is repurchased.
RESPONSIBLE OFFICER: When used with respect to the Trustee, the chairman
-------------------
or vice chairman of the board of directors, the chairman or vice chairman of
any executive committee of the board of directors, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller and any
assistant controller or any other officer of the Trustee, as the case may be,
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.
SALE AND PURCHASE AGREEMENT: The agreement for the sale and purchase of
---------------------------
Contracts by and between the Contract Seller and the Depositor, containing
representations and warranties of the Contract Seller in respect of the
Contracts.
SENIOR CERTIFICATES: The Class A Certificates.
-------------------
SENIOR PERCENTAGE: As to any Distribution Date, the percentage derived
-----------------
from the fraction (which shall not be greater than 1), the numerator of which
is the Principal Balance of the Senior Certificates immediately prior to such
Distribution Date and the denominator of which is the Pool Principal Balance
immediately prior to such Distribution Date.
SERVICER: _________ or its successor in interest or any successor under
--------
this Agreement as provided by Section 8.08.
SERVICING FILE: All documents, records, and other items maintained by
--------------
the Servicer with respect to a Contract and not included in the corresponding
Contract File, including the credit application, credit reports and
verifications, appraisals, tax and insurance records, payment records,
insurance claim records, correspondence, and the Computer Tape.
SERVICING OFFICER: Any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may from time to time be amended.
SIMPLE INTEREST ADVANCE: With respect to any Due Period and any Simple
-----------------------
Interest Contract, an amount equal to (A) the product of (i) the Contract
Principal Balance of such Contract on the first day of the related Due Period
and (ii) one-twelfth of its APR minus (B) the amount of interest actually
received on such Simple Interest Contract during such Due Period.
SIMPLE INTEREST CONTRACT: Any Contract with respect to which payments
------------------------
of principal are calculated and applied on the simple interest method.
STANDARD & POOR'S: Standard & Poor's Ratings Group, a Division of The
-----------------
McGraw-Hill Companies, or its successor in interest.
SUBORDINATE CERTIFICATES: The Class B Certificates.
------------------------
SUBORDINATE PERCENTAGE: As to any Distribution Date, 100% minus the
----------------------
Senior Percentage for such Distribution Date.
TRANSFER: As defined in Section 4.08(b).
--------
TRANSFER AFFIDAVIT: As defined in Section 4.08(b).
------------------
TRANSFEREE: As defined in Section 4.08(b).
----------
TRUSTEE: _________________, or its successors or assigns or any
-------
successor under this Agreement.
TRUSTEE'S FEES: The fees, expenses and disbursements of the Trustee set
--------------
forth in Section 10.05.
TRUST FUND: The corpus of the trust created by this Agreement, to the
----------
extent described herein, consisting of the Contracts (including, without
limitation, the security interest created thereby), including all rights to
receive payments on the Contracts due on and after the Cut-off Date, such
assets as shall from time to time be identified as deposited in the
Certificate Account, a Manufactured Home and any related Mortgaged Property
which secured a Contract (which has not been purchased pursuant to Section
3.05) and which have been acquired in realizing upon such Contract, the
Mortgages, the Repurchase Obligation, the proceeds of the Hazard Insurance
Policies, and all rights of the Depositor under the Sale and Purchase
Agreement.
UCC: The Uniform Commercial Code as in effect in the relevant
---
jurisdiction.
UNDERWRITER: Merrill Lynch, Pierce, Fenner & Smith Incorpo- rated.
-----------
WEIGHTED AVERAGE NET CONTRACT RATE: As to any Distribution Date, the
----------------------------------
per annum rate equal to (i) the weighted average of the Annual Percentage
Rates borne by the Contracts and applicable to scheduled payments due in the
Due Period preceding such Distribution Date less (ii) ____________%.
(End of Article I)
ARTICLE II
CONVEYANCE OF CONTRACTS; TRUST FUND;
------------------------------------
PERFECTION OF SECURITY INTEREST;
--------------------------------
CUSTODY OF CONTRACTS
--------------------
Section 2.01. Conveyance of Contracts and Other Rights.
----------------------------------------
The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, sell, assign, set over and otherwise convey to the
Trustee without recourse (i) all of the right, title and interest of the
Depositor in and to the Contracts (including, without limitation, the
security interests created thereby) and any related Mortgages, including all
interest and principal due on or with respect to the Contracts on and after
the Cut-off Date (other than payments of principal and interest first due on
the Contracts before the Cut-off Date), (ii) all of the rights under any
Hazard Insurance Policy relating to a Manufactured Home securing a Contract
for the benefit of the creditor of such Contract, (iii) all documents
contained in the Contract Files, and (iv) all proceeds derived from any of
the foregoing.
The ownership of each Contract and the contents of the related Contract
File and Servicing File are vested in the Trustee. The contents of each
Contract File and Servicing File are and shall be held in trust by the
Servicer for the benefit of the Trustee as the owner thereof and the
Servicer's possession of the contents of each Servicing File so retained is
for the sole purpose of servicing the related Contract, and such retention
and possession by the Servicer is in a custodial capacity only. Neither the
Depositor nor the Servicer claim any ownership interest in the Contracts.
The Servicer shall retain the customer list and have the right to solicit
obligors for products it customarily makes available to obligors in general.
It is the intention of this Agreement that the conveyance of the
Depositor's right, title and interest in and to the Trust Fund pursuant to
this Agreement shall constitute a purchase and sale and not a loan. If the
conveyance of the Contracts from the Contract Seller to the Depositor to the
Trustee is characterized as a pledge and not a sale, then the Depositor shall
be deemed to have transferred to the Trustee, in addition to the Trust Fund,
all of the Depositor's right, title and interest in, to and under the obliga-
tion deemed to be secured by said pledge; and it is the intention of this
Agreement that the Contract Seller, and the Depositor shall also be deemed
to have granted to the Trustee a first priority security interest in all of
the Contract Seller's, and the Depositor's right, title and interest in, to,
and under the obligation deemed to be secured by said pledge and that the
Trustee shall be deemed to be an independent custodian for purposes of
perfection of such security interest.
If the conveyance of the Contracts from the Depositor to the Trustee is
characterized as a pledge, it is the intention of this Agreement that this
Agreement shall constitute a security agreement under applicable law, and
that the Contract Seller, and the Depositor shall be deemed to have granted
to the Trustee a first priority security interest in all of Contract Seller's
and the Depositor's right, title and interest in, to and under the Contracts,
all payments of principal of or interest on such Contracts, all other rights
relating to and payments made in respect of the Trust Fund, and all proceeds
thereof. If the trust created by this Agreement terminates prior to the
satisfaction of the claims of any Person as an Owner of any Certificates, the
security interest created hereby shall continue in full force and effect and
the Trustee shall be deemed to be the collateral agent for the benefit of
such Person.
Section 2.02. Filing; Name Change or Relocation. (a)(i) On or prior
---------------------------------
to the Closing Date, the Servicer shall cause to be filed, in the office of
the Secretary of State of each of the States of _____________ and ________,
UCC-1 financing statements describing the Contracts as collateral and naming
_________ as debtor and the Depositor as secured party. On or prior to the
Closing Date, the Servicer shall cause to be filed, in the office of the
Secretary of State of the State of New York and each of the States of
_____________ and ________, a UCC-1 financing statement describing the
Contracts as collateral and naming the Depositor as debtor and the Trustee
as secured party. The Servicer shall also cause to be filed all necessary
continuation statements for each of the foregoing UCC-1 financing statements.
(ii) Subject to the following sentence, from time to time the Servicer
shall take and cause to be taken such actions and execute such documents as
are necessary to perfect and protect the Certificateholders' interests in the
Contracts and their proceeds and the Manufactured Homes and any related
Mortgaged Property against all other persons, including, without limitation,
the filing of financing statements, amendments thereto and continuation
statements, the execution of transfer instruments and the making of notations
on or taking possession of all records or documents of title. The Contract
Seller, so long as it is the Servicer, shall not be required to cause
notations to be made on any document of title relating to any Manufactured
Home or to execute any transfer instrument (including, without limitation,
any UCC-3 assignments) relating to any Manufactured Home (other than a
notation or a transfer instrument necessary to show the Contract Seller as
the lienholder or legal title holder) or to file documents in real property
records with respect to a Manufactured Home or related Contract or any
related Mortgaged Property, absent notice from the Trustee or the Depositor
or actual knowledge that such Manufactured Home (other than a Manufactured
Home securing a Land Home Contract) has become real property under applicable
state law; provided this sentence shall not have any effect on the
--------
representation and warranty in Section 3.02(j) and the Contract Seller's
obligations in respect thereof in Section 3.05; provided,
--------
further, that the Servicer shall not be required to protect the Trustee from
- -------
any liens, claims, charges or other encumbrances on the Contracts, their
proceeds or the Manufactured Homes created by the Depositor or conveyances
of the Contracts or their proceeds by the Depositor. Nothing in the
preceding sentence shall be construed to limit the indemnification
obligations of the Servicer set forth in Section 10.05 hereof. The Contract
Seller, and the Depositor agree to take whatever action is necessary to
enable the Servicer to file financing statements and otherwise act to perfect
and protect the Certificateholders' interests in the Contracts, the
Manufactured Homes and any related Mortgaged Property as set forth in this
Agreement. Assuming that the Depositor and the Trustee perform such actions
as are required at the direction of the Servicer, the Servicer will maintain
a first priority security interest in each Manufactured Home and any related
Mortgaged Property so long as the related Contract is the property of the
Trust; provided, however, that the Contract Seller, so long as it is the
-------- -------
Servicer, shall not be required to cause notations to be made on any document
of title relating to any Manufactured Home, to execute any transfer instru-
ment (including, without limitation, any UCC-3 assignments) relating to any
Manufactured Home (other than a notation or a transfer instrument necessary
to show the Contract Seller as lienholder or legal title holder) or to file
documents in real property records with respect to a Manufactured Home or
related Contract or any related Mortgaged Property, absent notice from the
Trustee, or the Depositor or actual knowledge that such Manufactured Home
(other than a Manufactured Home securing a Land Home Contract) has become
real property under applicable state law or to protect the Trustee from any
liens, claims, charges or other encumbrances created by the Depositor on any
Manufactured Home.
Notwithstanding anything in the preceding paragraph to the contrary,
with respect to each Land Home Contract if (i) the credit rating of the
long-term unsecured senior debt of ____________, the indirect parent of
_________, from Standard & Poor's is reduced below A- or (ii)
_____________________ does not own, directly or indirectly, a majority of the
common stock of _________, then the Servicer shall, within 20 days after such
reduction or the failure to maintain ownership, the Servicer shall prepare
and deliver to the Trustee an assignment of the related Mortgage to the
Trustee in recordable form (which may be a blanket assignment to the extent
permitted in the applicable jurisdiction).
(b) During the term of this Agreement, neither the Contract Seller nor
the Depositor shall change its name, identity or structure or relocate its
chief executive office without first giving notice to the Trustee. If any
change in the Contract Seller's or the Depositor's name, identity or
structure or the relocation of its chief executive office would make any
financing or continuation statement or notice of lien filed under this
Agreement seriously misleading within the meaning of applicable provisions
of the UCC or any title statute, the Contract Seller or the Depositor, as the
case may be, no later than five days after the effective date of such change,
shall file such amendments as may be required to preserve and protect the
Certificateholders' interests in the Contracts and proceeds thereof and in
the Manufactured Homes.
(c) The Contract Seller hereby represents and warrants that its current
chief executive's office is located in the State of ________. The Depositor
hereby represents and warrants that its chief executive offices are in the
State of New York. During the term of this Agreement the Contract Seller and
the Depositor will each maintain its respective chief executive office in one
of the States of the United States, except Louisiana and Tennessee.
(d) The Servicer agrees to pay all reasonable costs and disbursements
in connection with the perfection and the maintenance of perfection, as
against all third parties, of the Certificateholders' right, title and
interest in and to the Contracts (including, without limitation, the security
interest in the Manufactured Homes granted thereby) and any related
Mortgages.
Section 2.03. Acceptance by Trustee. The Trustee hereby acknowledges
---------------------
conveyance of the Contracts and any related Mortgages to the Trustee and
declares that the Trustee, directly or through a custodian (which shall be
the Servicer pursuant to Section 5.16), holds and will hold such Contract
Files in trust for the use and benefit of all present and future
Certificateholders. The Trustee hereby certifies that it has no notice or
knowledge of (a) any adverse claim, lien or encumbrance with respect to any
Contract, (b) the Contract being overdue or dishonored, (c) any evidence on
the face of the Contract of any security interest therein adverse to the
Trustee's interest, or (d) any defense against or claim against the Contract
by the Obligor or by any other party.
Section 2.04. Conditions to Closing. On the Closing Date, the Trustee
---------------------
shall authenticate and deliver the Certificates only upon receipt of a letter
from Standard & Poor's and Moody's confirming that the Class A Certificates
have been assigned the rating of AAA and Aaa, respectively, and the Class B
Certificates have been assigned a rating of at least__ and __, respectively.
Section 2.05. REMIC Election; Designation of Regular and
------------------------------------------
Residual Interests; Tax Year. The Trustee will cause the Trust Fund to be
- ----------------------------
treated as a REMIC. The Class A Certificates and the Class B Certificates
will constitute "regular interests" in the REMIC. The Class R Certificate
will constitute the sole class of "residual interest" in the REMIC. The
Holder of the Class R Certificate hereby agrees to pay any taxes assessed
against it as holder of the "residual interest" in the REMIC. The tax year
of the Trust Fund shall be the calendar year, and the Trust Fund shall use
the accrual method of accounting.
Section 2.06. Designation of Startup Day. The Closing Date is hereby
--------------------------
designated as the "startup day" of the REMIC within the meaning of Section
860G(a)(9) of the Code.
(End of Article II)
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01. Representations and Warranties Regarding the
--------------------------------------------
Contract Seller. The Contract Seller makes the following representations and
- ---------------
warranties to the Trustee and the Certificateholders (to the extent such
representations and warranties are applicable to the Person making them):
(a) Organization and Good Standing; Licensing. The Contract Seller is
-----------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of its incorporation and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Contract Seller is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the character of the busi-
ness transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or other) of the Contract Seller. The Contract Seller was properly licensed
in each jurisdiction at the time of its purchase of each Contract in such
jurisdiction to the extent required by the laws of such jurisdiction as
applied to the purchase of such Contract and the failure to be so licensed
would have a material adverse effect on the enforceability of the related
Contracts.
(b) Authorization; Binding Obligations. The Contract Seller has the
----------------------------------
power and authority to make, execute, deliver and perform this Agreement and
perform all of the transactions contemplated to be performed by it under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of the Contract Seller enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally and
by the availability of equitable remedies.
(c) No Consent Required. The Contract Seller is not required to obtain
-------------------
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except such as
have been obtained.
(d) No Violations. The execution, delivery and performance of this
-------------
Agreement by the Contract Seller will not violate any provision of any
existing law or regulation or any order or decree of any court applicable
to the Contract Seller or the charter or bylaws of the Contract Seller,
or constitute a material breach of any mortgage, indenture, contract
or other agreement to which the Contract Seller is a party or by
which the Contract Seller may be bound.
(e) Litigation. No litigation or administrative proceeding of or
----------
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Contract Seller threatened, against the Contract Seller
or any of their respective properties or with respect to this Agreement or
the Certificates which, if adversely determined, would in the opinion of the
Contract Seller have a material adverse effect on the transactions
contemplated by this Agreement.
Section 3.02. Representations and Warranties Regarding Each
---------------------------------------------
Contract. The Contracts have been sold by the Contract Seller to the
- --------
Depositor pursuant to the Sale and Purchase Agreement. In connection with
such sale, the Contract Seller made the representations and warranties
contained in Sections 3.02 and 3.03 to the Depositor. As a condition of the
purchase by the Depositor, the Depositor has required that the Contract
Seller make such representations and warranties directly to the Trustee and
the Certificateholders so that the Trustee may recover directly against the
Contract Seller on such representations and warranties rather than indirectly
through claims by the Depositor against the Contract Seller. Consequently,
the Contract Seller represents and warrants to the Trustee and the
Certificateholders as to each Contract as of the Closing Date to the best of
the Contract Seller's knowledge (except as otherwise expressly stated):
(a) Contract Schedule. The information set forth in the Contract
-----------------
Schedule is true and correct in all material respects with respect to each
Contract.
(b) Payments. As of the Cut-off Date, the scheduled payment of
--------
principal and interest due in the second month next preceding the month of
the Cut-off Date has been made by or on behalf of the Obligor and was not
made directly or indirectly by the Contract Seller on behalf of the Obligor.
(c) No Waivers. The terms of the Contract and any related Mortgage
----------
have not been waived, altered or modified in any respect, except by
instruments or documents identified in the Contract File.
(d) Binding Obligation. The Contract and any related Mortgage is the
------------------
legal, valid and binding obligation of the Obligor thereunder and is
enforceable in accordance with its terms, except as such enforceability may
be limited by laws affecting the enforcement of creditors' rights generally
and by general principles of equity.
(e) Insurance. The Manufactured Home securing the Contract is covered
---------
by a Hazard Insurance Policy in the amount required by Section 5.09, except
to the extent that such an insurance policy has been cancelled and the
Contract Seller has not yet received notification thereof. All premiums due
as of the Closing Date on such insurance have been paid in full or, with
respect to insurance placed by the Servicer, will have been paid in full
within 90 days after the Closing Date.
(f) Origination. The Contract was either (i) originated by a
-----------
manufactured housing dealer acting, to the best of the Contract Seller's
knowledge, in the regular course of its business and was purchased by the
Contract Seller in the regular course of its business, (ii) originated by the
Contract Seller in the regular course of its business or (iii) originated by
a third-party originator and purchased in bulk by the Contract Seller.
(g) Lawful Assignment. The Contract and any related Mortgage was not
-----------------
originated in and is not subject to the laws of any jurisdiction whose laws
would make the transfer of the Contract from the Contract Seller to the
Depositor or the transfer or ownership of the Contract under this Agreement
or pursuant to transfers of Certificates unlawful, void or voidable or affect
the enforceability of the Contract.
(h) Compliance with Law. All requirements of any federal, state or
-------------------
local law, including, without limitation, usury, truth-in-lending and equal
credit opportunity laws and lender licensing laws, applicable to the Contract
and any related Mortgage or the servicing of any Contract have been complied
with to the extent any of the foregoing would have a material adverse effect
on the enforceability of the related contract.
(i) Contract in Force. The Contract and any related Mortgage has not
-----------------
been satisfied or subordinated in whole or in part or rescinded, and the
Manufactured Home securing the Contract has not been released from the lien
of the Contract and any related Mortgage in whole or in part.
(j) Valid Security Interest. The Contract, together with any related
-----------------------
Mortgage, creates a valid, subsisting and enforceable first priority security
interest in favor of the Contract Seller in the Manufactured Home covered
thereby and, in the case of a Land Home Contract, a first mortgage lien on
the related Mortgaged Property; such security interest has been assigned by
the Contract Seller to the Depositor and, assuming the due authorization,
execution and delivery by the Depositor of this Agreement, the Sale and
Purchase Agreement and such other instruments relating to the transfer of the
Contracts to the Trustee as the Contract Seller has presented to the
Depositor for execution and delivery, by the Depositor to the Trustee, and,
assuming the Depositor has neither conveyed an interest in the Contracts or
related Mortgaged Property except pursuant to this Agreement nor created any
lien, claim, charge or other encumbrances on the Contracts, their proceeds or
any Manufactured Home or related Mortgaged Property except as contemplated by
this Agreement, the Trustee has a valid and perfected first priority security
interest in such Manufactured Home and, in the case of a Land Home Contract,
a first mortgage lien on the related Mortgaged Property.
(k) Capacity of Parties. The obligor on the Contract and any related
-------------------
Mortgage had capacity to execute the Contract.
(l) Good Title. The Contract Seller purchased the Contract and any
----------
related Mortgage for value and took possession thereof in the ordinary course
of its business, without knowledge that the Contract was subject to any
security interest. To the best of the Contract Seller's knowledge
immediately prior to the transfer of the Contract and any related Mortgage
by the Contract Seller to the Depositor, the Contract Seller had good and
marketable title thereto free and clear of any encumbrance, equity, loan,
pledge, charge, claim or security interest and was the sole owner thereof
with full right to transfer the Contract and any related Mortgage to the
Depositor. The Contract Seller has not sold, assigned or pledged the
Contract or any related Mortgage to any person other than the Depositor and
prior to the transfer of the Contract and any related Mortgage by the
Contract Seller to the Depositor and by the Depositor to the Trust, the
Contract Seller had good and marketable title thereto free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, was
the sole owner thereof with full right to transfer the Contact to the
Depositor and has transferred all right, title and interest in the Contract
to the Depositor, free and clear of any encumbrance, equity, loan, pledge,
charge, claim or security interest.
(m) No Defaults. To the best of the Contract Seller's knowledge as of
-----------
the Cut-off Date, there was no default, breach, violation or event permitting
acceleration existing under the Contract and any related Mortgage and no
event which, with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event permitting
acceleration under such Contract (except payment delinquencies permitted by
clause (b) above). The Contract Seller has not waived any such default,
breach, violation or event permitting acceleration, except by instruments or
documents identified in the Contract Schedule.
(n) No Liens. As of the Closing Date, there are, to the best of the
--------
Contract Seller's knowledge, no liens or claims which have been filed for
work, labor or materials affecting the Manufactured Home securing the
Contract which are or may be liens prior to, or equal or coordinate with,
the lien of the Contract.
(o) Equal Installments. If the Contract is not a Simple Interest
------------------
Contract, the Contract has a fixed APR and provides for level monthly
payments of principal and interest (except that the payment at maturity may
be slightly larger) which fully amortize the loan over its term. Each
Contract other than a Land Home Contract is either a Simple Interest Contract
or an Actuarial Contract. Each Land Home Contract is an Actuarial Contract.
(p) Enforceability. The Contract and any related Mortgage contains
--------------
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
collateral of the benefits of the security.
(q) One Original. There is only one original executed Contract, which
------------
is in the custody of the Contract Seller or otherwise held on behalf of the
Trustee on the Closing Date.
(r) Loan-to-Value Ratio. At the time of its origination, the Contract
-------------------
had a Loan-to-Value Ratio (rounded to the nearest 1% not greater than 95%.
(s) Not Real Estate. The related Manufactured Home (other than a
---------------
Manufactured Home that secures a Land Home Contract) is personal property,
was personal property at the time of the execution and delivery of the
related Contract by the parties thereto, and is not and was not, at such
time, considered or classified as part of the real estate on which it is
located under the laws of the jurisdiction in which it is located. The
related Manufactured Home is, to the best of the Contract Seller's knowledge,
free of damage and in good repair.
(t) Notation of Security Interest. If the related Manufactured Home
-----------------------------
is located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the
title document shows, or if a new or replacement title document with respect
to such Manufactured Home is being applied for such title document will show,
the Contract Seller as the holder of a first priority security interest in
such Manufactured Home. If the related Manufactured Home is located in a
state in which the filing of a financing statement or the making of a fixture
filing under the UCC is required to perfect a security interest in
manufactured housing, such filings or recordings have been duly made and show
the Contract Seller as secured party. If the related Manufactured Home
secures a Land Home Contract and is located in a state that does not permit
separate evidence of liens on the Manufactured Home and the property on which
it is located, such Manufactured Home and, in the case of all Land Home
Contracts, the related land securing such Land Home Contract are subject to
a Mortgage properly filed in the appropriate public recording office and
naming _________ as mortgagee. In either case, assuming the due
authorization, execution and delivery by the Depositor of this Agreement, the
Sale and Purchase Agreement and such other instruments relating to the
transfer of the Contracts to the Trustee as the Contract Seller has presented
to the Depositor for execution and delivery, the Trustee has the same rights
as the secured party of record would have (if such secured party were still
the owner of the Contract) against all Persons claiming an interest in such
Manufactured Home.
(u) Secondary Mortgage Market Enhancement Act. The related
-----------------------------------------
Manufactured Home is a "manufactured home" within the meaning of 42 United
States Code, Section 5402(6), and at the origination of each Contract, the
Contract Seller was approved for insurance by the Secretary of Housing and
Urban Development pursuant to Section 2 of the National Housing Act.
(v) Qualified Mortgage for REMIC. Each Contract is secured by a
----------------------------
"single family residence" within the meaning of Section 25(e)(10) of the
Code.
Section 3.03. Representations and Warranties Regarding the
--------------------------------------------
Contracts in the Aggregate. The Contract Seller represents and warrants
- --------------------------
that:
(a) Amounts. The aggregate principal amounts payable by Obligors under
-------
the Contracts as of the Cut-off Date (including scheduled principal payments
due on or after the Cut-off Date but paid prior to the Cut-off Date) equal
or exceed the Initial Principal Amount, and each Contract has an APR equal
to or greater than the Net Contract Rate (tax point-only a few Contracts can
have an APR below the Net Contract Rate).
(b) Characteristics. The Contracts have the following characteristics
---------------
as of the Cut-off Date: (i) not more than ___% of the Contracts by remaining
principal balance are secured by Manufactured Homes located in any one state,
not more than ___% of the Contracts by remaining principal balance are
secured by Manufactured Homes located in an area with the same zip code, and
not more than 1% of the Contracts by remaining principal balance are secured
by Manufactured Homes located in California in an area with the same zip
code; (ii) no Contract has a remaining maturity of less than ____ months or
more than 300 months; (iii) the final scheduled payment date on the Contract
with the latest maturity is in _____________; (iv) approximately ___% of the
Initial Principal Amount is attributable to loans for purchases of new
Manufactured Homes and approximately ___% is attributable to loans for the
refinancing of used Manufactured Homes; and (v) no Contract was originated
before ____________________ and (vi) no more than ___% of the Contracts by
Cut-Off Date principal balance are Land Home Contracts.
(c) Computer Tape. The Computer Tape made available by the Servicer
-------------
as of the close of business on ________________, 199__ was accurate as of its
date and includes a description of the same Contracts that are described in
the Contract Schedule.
(d) Marking Records. Within one month after the Closing Date, the
---------------
Contract Seller will have caused the portions of the Electronic Ledger
relating to the Contracts constituting part of the Trust Fund to be clearly
and unambiguously marked to indicate that such Contracts constitute part of
the Trust Fund and are owned by the Trust Fund in accordance with the terms
of the trust created hereunder.
(e) No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made in Sections 3.02 and 3.03 and the effect of the
geographical distribution of the Manufactured Homes, no adverse selection
procedures have been employed in selecting the Contracts.
Section 3.04. Representations and Warranties Regarding the
--------------------------------------------
Contract Files. The Contract Seller represents and warrants that:
- --------------
(a) Possession. Immediately prior to the Closing Date, the Servicer
----------
will have possession of each original Contract and the Servicer will have
possession of the remainder of the related Contract File (except for any
certificate of title that has not yet been returned from the appropriate
public recording office). There are and there will be no custodial
agreements in effect materially and adversely affecting the right of the
Contract Seller to make, or to cause to be made, any delivery required
hereunder.
(b) Bulk Transfer Laws. The transfer, assignment and conveyance of the
------------------
Contracts and the Contract Files by the Contract Seller pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
Section 3.05. Repurchases of Contracts for Breach of Repre-
---------------------------------------------
sentations and Warranties. (a) The Contract Seller shall repurchase a
- -------------------------
Contract (such Contract, a "Replaced Contract"), at its Repurchase Price, not
later than one Business Day after the first Determination Date which is more
than 90 days after the Contract Seller becomes aware, or receives written
notice from the Servicer or the Trustee, of a breach of a representation or
warranty of the Contract Seller set forth in Section 3.02 or 3.03 of this
Agreement that materially adversely affects the Trust Fund's interest in such
Contract, unless such breach has been cured; provided, however, that with
-------- -------
respect to any Contract incorrectly described on the Contract Schedule with
respect to unpaid principal balance, which the Contract Seller would
otherwise be required to repurchase pursuant to this Section, the Contract
Seller may, in lieu of repurchasing such Contract, deposit in the Certificate
Account not later than one Business Day after such Determination Date cash in
an amount sufficient to cure such deficiency or discrepancy; and provided,
--------
further, that with respect to a breach of a representation or warranty
- -------
relating to the Contracts in the aggregate and not to each particular
Contract, the Contract Seller may select Contracts to repurchase or
substitute for such Contracts that, had such Contracts not been included
as part of the Contract Pool and after giving effect to such substitution,
if any, there would have been no breach of such representation or warranty.
It is understood and agreed that the obligation of the Contract Seller to
repurchase or substitute for any Contract as to which a breach of a
representation or warranty set forth in Section 3.02 or 3.03 of this
Agreement has occurred and is continuing shall constitute the
sole remedy respecting such breach available to the Certificateholders, the
Depositor or the Trustee; provided, however, that the Contract Seller shall
-------- -------
defend and indemnify the Trustee, the Trust Fund and Certificateholders
against all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel, which may be asserted
against or suffered by any of them as a result of third-party claims arising
out of any breach of a representation or warranty set forth in Section 3.02.
Nothing in the preceding sentence shall be construed to limit the indemnifi-
cation obligations of the Servicer set forth in Section 10.05 hereof.
Notwithstanding any other provision of this Agreement, the obligation of the
Contract Seller under this Section shall not terminate upon an Event of
Default.
Notwithstanding any other provision of this Agreement to the contrary,
any amount received on or recovered with respect to repurchased Contracts or
Replaced Contracts during or after the month of repurchase shall be the
property of the Contract Seller and need not be deposited in the Certificate
Account.
Notwithstanding the foregoing, the Contract Seller shall not deposit
cash into the Certificate Account pursuant to this Section 3.05 after the end
of the three month period beginning on the Closing Date unless it shall first
have obtained an Opinion of Counsel to the effect that such deposit will not
give rise to any tax under Section 860F(a)(1) of the Code or Section 860G(d)
of the Code. Any such deposit shall not be invested. If the Contract Seller
is required to purchase such Contract (or deposit cash in the Certificate
Account), the Contract Seller shall guarantee the payment of any tax under
Section 860F(a)(1) of the Code or under Section 860G(d) of the Code by paying
to the Trustee the amount of such tax not later than five Business Days
before such tax shall be due and payable to the extent that amounts
previously paid over to and then held by the Trustee pursuant to Section
10.12 hereof are insufficient to pay such tax and all other taxes chargeable
under Section 10.12. The Trustee shall hold any amount paid to it pursuant
to the preceding sentence in an account that is not part of the Trust Fund.
The Servicer shall give notice to the Trustee at the time of such repurchase
of the amounts due from the Contract Seller pursuant to such guarantee of
taxes of the Contract Seller and notice as to who should receive such
payment.
The Trustee shall have no obligation to pay any such amounts pursuant
to this Section other than from moneys provided to it by the Contract Seller
or from moneys held in the funds and accounts created under this Agreement.
The Trustee shall be deemed conclusively to have complied with this Section
if it follows the directions of the Servicer.
In the event any tax that is guaranteed by the Contract Seller is
refunded to the Trust Fund or otherwise is determined not to be payable, the
Contract Seller shall be repaid the amount of such refund or that portion of
any guarantee payment made by the Contract Seller that is not applied to the
payment of such tax.
Notwithstanding the above provisions of this Section 3.05(a), the
Contract Seller shall not be required to repurchase for any Contract on
account of a breach of the representation or warranty contained in Section
3.02(k) or (v) solely on the basis of failure by the Contract Seller to cause
notations to be made on any document of title relating to any Manufactured
Home or to execute any transfer instrument relating to any Manufactured Home
(other than a notation or a transfer instrument necessary to show the
Contract Seller as lienholder or legal title holder) or to record an assign-
ment of a Mortgage unless a court of competent jurisdiction has adjudged
that, because of such failure, the Trustee does not have a perfected
first-priority security interest in the related Manufactured Home.
(b) Promptly after the repurchase referred to in Section 3.05(a), the
Trustee shall execute such documents as are presented to it by the Contract
Seller and are reasonably necessary to reconvey the repurchased Contract or
Replaced Contract, as the case may be, to the Contract Seller.
Section 3.06. Representation and Warranty of the Depositor. The
--------------------------------------------
Depositor represents and warrants that, immediately prior to the transfer,
sale, assignment and conveyance of the Contracts to the Trustee and assuming
that the representation and warranty in Section 3.02(m) is correct, the
Depositor had good title to, and was the sole owner of, each Contract and any
related Mortgage free of any liens, claims, charges or other encumbrances
created by the Depositor, there had been no other sale or assignment thereof
by the Depositor and the Depositor has transferred to the Trustee a security
interest (as defined in the Uniform Commercial Code in effect in the State
of New York) in the Contracts and any related Mortgages, which security
interest is a perfected, first priority security interest.
(End of Article III)
ARTICLE IV
THE CERTIFICATES
----------------
Section 4.01. The Certificates. The Class A Certificates and Class B
----------------
Certificates and the Class R Certificates shall be substantially in the forms
annexed hereto as Exhibit B, Exhibit C and Exhibit D, respectively, and
Exhibit E (reverse of all Certificates), with such immaterial changes as the
Depositor deems appropriate, and on original issue, shall be executed by
manual or facsimile signature by (the Depositor by any one of its President,
Vice President or Secretary, authenticated) (signed by manual or facsimile
signature and countersigned by manual signature) by the Trustee and delivered
to or upon the order of the Depositor. The Class A Certificates shall be
evidenced by (i) one certificate representing $_________________ in initial
aggregate principal balance, beneficial ownership of such Class of
Certificates to be held through Book-Entry Certificates in minimum dollar
denominations of $50,000 and integral dollar multiples of $1,000 in excess
thereof. The Class B Certificates shall be evidenced by (i) one certificate
representing $_________________ in initial aggregate principal balance,
beneficial ownership of such Class of Certificates to be held through
Book-Entry Certificates in minimum dollar denominations of $50,000 and any
integral multiple of $1,000 in excess thereof and (ii) a single certificate
representing $_____________ in initial principal balance. The sum of the
denominations of the Class A Certificates shall equal the Original Class A
Principal Balance and the sum of the denominations of the Class B
Certificates shall equal the Original Class B Balance. The Class R Certif-
icate shall not have a principal balance.
(The Certificates shall be executed by manual or facsimile signature on
behalf of the Depositor by one of its authorized officers. The Certificates
shall be authenticated by manual signature on behalf of the Trustee by its
Responsible Officer or its Authenticating Agent pursuant to Section 4.07.
Certificates bearing the signatures of individuals who were at any time the
proper officers of the Depositor shall bind the Depositor, notwithstanding
that such individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Certificate or did not hold such
offices at the date of such Certificates. No Certificate shall be entitled
to any benefit under this Agreement, or be valid for any purpose, unless
there appears on such Certificate a manual authentication by the Trustee or
its Authenticating Agent and such authentication upon any Certificate shall
be conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder. All Certificates shall be dated
the date of their authentication.)
(The Certificates shall be executed by manual or facsimile signature
on behalf of the Trust Fund by a Responsible Officer of the Trustee.
Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures were affixed, authorized to sign on
behalf of the Trustee shall bind the Trust Fund, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such
offices at the date of such Certificate. No Certificate shall be entitled
to any benefit under this Agreement, or be valid for any purpose, unless
such Certificate shall have been manually countersigned by the Trustee
substantially in the form provided for herein, and such countersignature
upon any Certificate shall be conclusive evidence, and the only evidence,
that such Certificate has been duly authenticated and delivered hereunder.
All Certificates shall be dated the date of their countersignature.)
The rights of the Certificateholders to receive payments with respect
to the Trust Fund in respect of the Certificates, and all ownership
interests of the Certificateholders in such payments, shall be as set forth
in this Agreement.
Section 4.02. Registration of Transfer and Exchange of
---------------------------------------- Certificates. (a) The Trustee
shall cause to be kept at its Corporate Trust ------------ Office or, at the
election of the Trustee, at the office of its designated agent in New York
City, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for the
registration of Certificates and of transfer and exchanges of Certificates
as herein provided. The Trustee initially appoints itself as the
Certificate Registrar.
(b) Subject to Section 4.02(c), upon surrender for registration of
transfer of any Certificate at any office or agency of the Trustee
maintained for such purpose, the Trustee shall (authenticate) (sign,
countersign) and deliver, in the name of the designated transferee or
transferees, a Certificate of a like aggregate Percentage Interest and dated
the date of authentication by the Trustee. The Holder and beneficial owner of
any Class B Certificate is deemed to represent that it is not an employee
benefit plan subject to Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code or a
trustee of any such plan or a person acting on behalf of any such plan or
acquiring a Certificate with the assets of any such plan unless it delivers
to the Trustee, the Depositor and the Servicer an Opinion of Counsel
satisfactory to the Trustee, the Depositor and the Servicer, and upon which
each of them is authorized to rely, to the effect that the purchase or holding
of such Certificate by the prospective transferee will not result in the
assets of the Trust Fund being deemed to be "plan assets" and subject to the
prohibited transaction provisions of ERISA and the Code and will not subject
the Trustee, the Depositor or the Servicer to any obligation in addition to
those undertaken in this Agreement, which Opinion of Counsel shall not be an
expense of the Trustee, the Depositor or the Servicer.
No transfer of a Class R Certificate shall be made unless such transfer
is made pursuant to an effective registration statement or in accordance
with an exemption from the requirements under the Securities Act of 1933, as
amended, or any applicable state securities laws. If such a transfer is to
be made in reliance upon an exemption from said Act and laws, prior to the
registration of any such transfer (i) the Trustee or the Depositor may
require a written Opinion of Counsel acceptable to and in form and substance
satisfactory to the Trustee and the Depositor that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee, the
Depositor or the Servicer, and (ii) the Trustee shall require the transferee
to execute a certification, substantially in the form of Exhibit I hereto,
acceptable to and in form and substance satisfactory to the Depositor and
the Trustee setting forth the facts surrounding such transfer; provided that
such Opinion of Counsel shall not be required in the case of --------
transfers by or to (________________). Such Opinions of Counsel shall not
be an expense of the Trustee, the Depositor or the Servicer.
No transfer of a Class R Certificate shall be made unless the Trustee
shall have either (i) a representation letter from the proposed transferee
to the effect that such transferee is not an employee benefit plan subject
to Section 406 of ERISA or Section 4975 of the Code or a trustee of any such
plan or a person acting on behalf of any such plan or acquiring such
Certificate with the assets of any such plan or (ii) an Opinion of Counsel
satisfactory to the Trustee, the Depositor and the Servicer, and upon which
each of them is authorized to rely, to the effect that the purchase or
holding of such Certificate by the prospective transferee will not result in
the assets of the Trust Fund being deemed to be "plan assets" and subject to
the prohibited transaction provisions of ERISA and the Code and will not
subject the Trustee, the Depositor or the Servicer to any obligation in
addition to those undertaken in this Agreement, which Opinion of Counsel
shall not be an expense of the Trustee, the Depositor or the Servicer.
(c) At the option of the Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of the same Class and of
authorized denominations of the same aggregate denomination, upon surrender
of the Certificate to be exchanged at any office or agency of the Trustee
maintained for such purpose. Whenever the Certificate is so surrendered for
exchange, the Depositor shall execute and the Trustee or its Authenticating
Agent shall authenticate and deliver, the Certificate or Certificates which
the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange (if so
required by the Trustee) shall be duly endorsed by, or be accompanied by a
written instrument of transfer in the form satisfactory to the Trustee or
the Certificate Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing.
(d) No service charge shall be made to the Holder for any transfer or
exchange of the Certificate, 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 the Certificate.
(e) All Certificates surrendered for transfer and exchange shall be
held in accordance with the retention policy of the Trustee.
(f) Except as provided in paragraph (i) below, the Book-Entry
Certificates shall at all times remain registered in the name of the
Depository or its nominee and at all times: (i) registration of the Class A
and Class B Certificates may not be transferred by the Trustee except to
another Depository; (ii) the Depository shall maintain book-entry records
with respect to the Certificate Owners and with respect to ownership and
transfers of such Class A and Class B Certificates; (iii) ownership and
transfers of registration of the Class A and Class B Certificates on the
books of the Depository shall be governed by applicable rules established by
the Depository; (iv) the Depository may collect its usual and customary
fees, charges and expenses from its Depository Participants; (v) the Trustee
shall deal with the Depository, Depository Participants and indirect
participating firms as representatives of the Certificate Owners of the
Class A and Class B Certificates for purposes of exercising the rights of
Holders under this Agreement, and requests and directions for and votes of
such representatives shall not be deemed to be inconsistent if they are made
with respect to different Certificate Owners; and (vi) the Trustee may rely
and shall be fully protected in relying upon information furnished by the
Depository with respect to its Depository Participants and furnished by the
Depository Participants with respect to indirect participating firms and
persons shown on the books of such indirect participating firms as direct or
indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
(g) If (x)(i) the Depositor or the Depository advises the Trustee in
writing that the Depository is no longer willing, qualified or able to
properly discharge its responsibilities as Depository, and (ii) the Trustee
or the Depositor is unable to locate a qualified successor, (y) the
Depositor at its option may advise the Trustee in writing that it elects to
terminate the book-entry system through the Depository or (z) after the
occurrence of an Event of Default, Certificate Owners representing
Percentage Interests aggregating not less than 50% of the aggregate
Percentage Interests of the Class A and Class B Certificates together advise
the Trustee and the Depository through the Depository Participants in
writing that the continuation of a book-entry system through the Depository
is no longer in the best interests of the Certificate Owners, the Trustee
shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of definitive, fully
registered Class A and Class B Certificates (the "Definitive Certificates")
to Certificate Owners requesting the same. Upon surrender to the Trustee of
the Class A and Class B Certificates by the Depository, accompanied by
registration instruc- tions from the Depository for registration, the
Trustee shall issue the Definitive Certificates. Neither the Depositor nor
the Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Certificates all references
herein to obligations imposed upon or to be performed by the Depository
shall be deemed to be imposed upon and performed by the Trustee, to the
extent applicable with respect to such Definitive Certificates and the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.
(h) On or prior to the Closing Date, there shall be delivered to the
Depository one Class A and one Class B Certificate in registered form
registered in the name of the Depository's nominee, Cede & Co., the total
face amount of which represents 100% of the Original Class A Principal
Balance and 100% of the Original Class B Principal Balance, respectively,
rounded down to the nearest $1,000. If, however, the aggregate principal
amount of the Class A or Class B Certificates exceeds $200,000,000, one
Class A or Class B Certificate will be issued with respect to each
$200,000,000 of principal amount and an additional Class A or Class B
Certificate will be issued with respect to any remaining principal amount,
rounded down to the nearest $1,000. Each Class A or Class B Certificate so
registered shall bear the following legend:
"Unless this Certificate is presented by an authorized repre-
sentative of The Depository Trust Company to the Trustee or its agent for
registration of transfer, exchange or payment, and any certificate issued
is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company
and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein."
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certif-
--------------------------------------------
icate.
- ----- If (i) any mutilated Certificate is surrendered to the Trustee
or the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Certificate, and (ii) there is delivered to the Trustee and the
Certificate Registrar such security or indemnity as may be required by it to
save each of them harmless, then, in the absence of notice to the Trustee
that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall (authenticate) (sign, countersign) and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of the same Class and of like tenor and denomination. Upon the
issuance of any new Certificate under this Section, the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. Any replacement Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust Fund,
as if originally issued, whether or not the destroyed, lost or stolen
Certificate shall be found at any time.
Section 4.04. Persons Deemed Owners. The Depositor, the Servicer, the
--------------------- Trustee and Paying Agent may treat
the person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving payments pursuant to Section 6.01
and for all other purposes whatsoever, and neither the Depositor, the
Servicer, Paying Agent, Certificate Registrar nor the Trustee shall be
affected by notice to the contrary.
Section 4.05. Appointment of Paying Agent. The Trustee may appoint a
--------------------------- Paying Agent for the purpose
of making distributions to Certificateholders pursuant to Section 6.01 and
payments pursuant to Section 10.12. Any Paying Agent or its parent company
so appointed either shall be a bank or trust company or shall have a rating
acceptable to the Rating Agency. In the event of any such appointment, on
or prior to each Distribution Date, the Trustee shall deposit or cause to be
deposited with the Paying Agent, from amounts in the Certificate Account, a
sum sufficient to make the payments to Certificateholders in the amounts and
in the manner provided for in Section 6.01, such sum to be held in trust for
the benefit of Certificateholders. The Trustee initially appoints itself as
Paying Agent.
The Trustee shall cause each Paying Agent to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the
Trustee that such Paying Agent is at all times acting as agent for the
Trustee and such Paying Agent will hold all sums held by it for the payment
to Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders.
Section 4.06. Access to List of Certificateholders' Names
------------------------------------------- and Addresses. The
Certificate Registrar will furnish to the Trustee (if the -------------
Trustee is not the Certificate Registrar), the Depositor and the Servicer
within five days after receipt by the Certificate Registrar of a request
therefor from the Trustee, the Depositor or the Servicer in writing, a list,
in such form as the Trustee, the Depositor or the Servicer reasonably may
require of the names and addresses of the Certificateholders as of the most
recent Record Date. If Holders of Certificates of any Class evidencing, as
to such Class, aggregate Percentage Interests of 25% or more (the
"Applicants") apply in writing to the Trustee, and such application states
that the Applicants desire to communicate with other Certificateholders of
such Class with respect to their rights under this Agreement or under the
Certificates of such Class and is accompanied by a copy of the communication
which such Applicants proposed to transmit, then the Trustee, within five
Business Days after the receipt of such application, shall afford such
Applicants access during normal business hours to the most recent list of
Certificateholders of such Class held by the Trustee. If such list is as of
a date more than 90 days prior to the date of receipt of such Applicants'
request, the Trustee promptly shall request from the Certificate Registrar a
current list as provided above, and shall afford such Applicants access to
such list promptly upon receipt. Every Certificateholder, by receiving and
holding a Certificate, agrees with the Certificate Registrar and the Trustee
that neither the Servicer, the Certificate Registrar, the Depositor nor the
Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information was derived.
Section 4.07. Authenticating Agents. The Trustee may appoint one or
--------------------- more Authenticating Agents with
power to act on its behalf and subject to its direction in the execution and
delivery of the Certificates. For all purposes of this Agreement, the
execution and delivery of Certificates by the Authenticating Agent pursuant
to this Section shall be deemed to be the execution and delivery of
Certificates "by the Trustee."
Section 4.08. Class R Certificate. (a) The Class R Certificate shall
------------------- not be assigned or transferred
except in accordance with Sections 4.08(b) and (c) and any other applicable
provision of this Agreement.
(b) Each Person who has or acquires any Ownership Interest (as defined
below) in a Class R Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest in such Class R Certificate to have
agreed to be bound by the following provisions and to have irrevocably
appointed the Servicer as its attorney-in-fact to negotiate the terms of any
mandatory sale under clause (vi) below and to execute all instruments of
transfer and to do all other things necessary in connection with any such
sale, and the rights of each Person acquiring any Ownership Interest in a
Class R Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a Permitted Transferee (as defined below) and
shall promptly notify the Servicer of any change or impending change in its
status as a Permitted Transferee.
(ii) Any Ownership Interest in a Class R Certificate may not be
subject to a Transfer (as defined below) without the express written consent
of the Servicer, and the Trustee shall not recognize the Transfer (as
defined below) of such Class R Certificate, and such proposed Transfer shall
not be effective, without such consent with respect thereto. In connection
with any proposed Transfer of any Ownership Interest in a Class R
Certificate, the Servicer shall, as a condition to such consent, require
delivery to it, in form and substance satisfactory to it, and the
proposed Transferee shall deliver to the Servicer and the Trustee, the
following:
(A) an affidavit (a "Transfer Affidavit") of the proposed
Transferee in the form attached as Exhibit H hereto; and
(B) an express agreement by the proposed Transferee to be
bound by and to abide by the provisions of this Section.
The Servicer shall notify the Trustee of any such Transfer to which it
consents.
(iii) Notwithstanding the delivery of a Transfer Affidavit by a
proposed Transferee under clause (ii) above, if the Servicer or a
Responsible Officer of the Trustee has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no Transfer of any Ownership
Interest in a Class R Certificate to such proposed Transferee shall be
effected.
(iv) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall agree (A) to require a Transfer Affidavit from any
other Person to whom such Person attempts to Transfer any Ownership Interest
in such Class R Certificate and (B) not to Transfer any Ownership Interest
in such Class R Certificate or to cause the Transfer of any
Ownership Interest in such Class R Certificate to any other Person if it
has actual knowledge that such Person is not a Permitted Transferee.
(v) Any attempted or purported Transfer of any Ownership Interest
in a Class R Certificate in violation of the provisions of this Section
shall be absolutely null and void and shall vest no rights in the
purported Transferee. If any purported Transferee shall become the holder
of an Ownership Interest in a Class R Certificate in violation of the
provisions of this Section, then, upon discovery by a Responsible Officer of
the Trustee of, or due notification to the Trustee that the recognition of
the Transfer of such Ownership Interest in such Class R Certificate was not
in fact permitted by this Section, the last preceding Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the date
of Transfer of such Ownership Interest in such Class R Certificate. The
Trustee shall promptly notify the Servicer if it discovers or
receives notice of such an impermissible Transfer. The Trustee shall
be under no liability to any Person for permitting the Transfer of an
Ownership Interest in a Class R Certificate that is in fact not permitted
by this Section or for making any payments in respect of a Class R
Certificate to the Holder thereof or taking any other action with respect
to such Holder under the provisions of this Agreement so long as the
Transfer was made with the express prior written consent of the Servicer.
The Trustee shall be entitled but not obligated to recover from any Holder
of a Class R Certificate that was in fact not a Permitted Transferee at
the time it became a Holder or, at such subsequent time as it became other
than a Permitted Transferee, all payments made on such Class R
Certificate at and after such time. Any such payments so recovered by
the Trustee shall be paid and delivered by the Trustee to the last preceding
Permitted Transferee of such Class R Certificate.
(vi) If any purported Transferee shall be a Holder of a Class R
Certificate in violation of the restrictions in this Section, then the
Servicer shall have the right without notice to the Holder or any prior
Holder of such Class R Certificate to sell such Class R Certificate to
a purchaser selected by the Servicer on such terms as the Servicer may
choose. Such purchaser may be the Servicer itself or any Affiliate of the
Servicer. The proceeds of such sale, net of commissions (which may include
commissions payable to the Servicer or its Affiliates), expenses and taxes
due, if any, will be remitted by the Servicer to the last preceding
Permitted Transferee of such Class R Certificate, except that in the
event that the Servicer determines that the Holder or any prior Holder of
such Class R Certificate will be liable for any amount due under this
Section or any other provisions of this Agreement, the Servicer shall so
inform the Trustee, and the Trustee shall withhold a corresponding amount
from such remittance as security for such claim. The terms and
conditions of any sale under this clause (vi) shall be determined in the
sole discretion of the Servicer, and it shall not be liable for the exercise
of such discretion to any Person holding or purporting to hold a Class R
Certificate.
Upon notice to the Servicer that any legal or beneficial interest in
any portion of a Class R Certificate has been transferred, either directly
or indirectly, to any Person that is not a Permitted Transferee or an agent
thereof (including a broker, nominee, or middleman) in contravention of the
foregoing restrictions, or that is a pass-through entity, as defined in
Section 860E(e)(6) of the Code, an interest in which is held of record by a
Person that is not a "Permitted Transferee," the Servicer agrees to furnish
to the Internal Revenue Service and those Persons specified in Section
860E(c)(3) and (b) of the Code such information necessary to the application
of Section 860E(e) of the Code as may be required by the Code, including but
not limited to, the present value of the total anticipated excess inclusions
with respect to such Class R Certificate (or portion thereof) for periods
after such Transfer and the total excess inclusions for any taxable year
allocable to any holder of an interest in such pass-through entity which is
not a Permitted Transferee. At the election of the Servicer, the Servicer
may charge a reasonable fee for computing and furnishing such information to
the transferor or to such agent or to such pass-through entity referred to
above; however, the Servicer shall in no event be excused from furnishing
such information to the Internal Revenue Service. The foregoing
restrictions on transfer contained in this Section 4.08(b) shall cease to
apply to Transfers occurring on or after the date on which there shall have
been delivered to the Trustee, the Depositor and the Servicer, in form and
substance satisfactory to the Servicer, an Opinion of Counsel that
eliminating such restrictions will not cause the Trust Fund to fail to
qualify as a REMIC at any time while the Certificates are outstanding.
"Ownership Interest" means any legal or beneficial, direct or indirect,
ownership or other interest.
"Permitted Transferee" means any Person other than (a) the United
States, a State or any political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing
(other than an instrumentality that is a corporation if all of its
activities are subject to tax and, except for the Federal Home Loan Mortgage
Corporation, a majority of its board of directors is not selected by any
such governmental unit), (b) a foreign government, international
organization or agency or instrumentality of either of the foregoing (other
than an instru- mentality that is a corporation if all of its activities
are subject to tax and a majority of its board of directors is not selected
by any such governmental unit), (c) an organization which is exempt from tax
imposed by Chapter 1 of the Code (including the tax imposed by Code Section
511 on unrelated business taxable income) on any excess inclusions (as
defined in Code Section 860E(c)(1)) with respect to a Class R Certificate
(except certain farmers' cooperatives described in Code Section 521), (d)
rural electric and telephone cooperatives described in Code Section
1381(a)(2), (e) a Non-U.S. Person, and (f) any other Person so designated by
the Servicer based upon an Opinion of Counsel that the Transfer of an
Ownership Interest in a Class R Certificate to such Person may cause the
Trust Fund to fail to qualify as a REMIC at any time that the Certificates
are outstanding. The terms "United States," "State" and "International
Organization" shall have the meanings set forth in Code Section 7701 or
successor provisions. A "Non-U.S. Person" means an individual, corporation,
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof,
or an estate or trust that is subject to U.S. federal income tax regardless
of the source of its income.
"Transfer" means any direct or indirect transfer or sale of any
Ownership Interest in a Class R Certificate.
"Transferee" means any Person who is acquiring by Transfer any
Ownership Interest in a Class R Certificate.
(End of Article IV)
ARTICLE V
ADMINISTRATION AND SERVICING OF CONTRACTS
-----------------------------------------
Section 5.01. Responsibility for Contract Administration
------------------------------------------ and Servicing. The
Servicer shall service and administer the Contracts as ------------- agent
for the Trustee and, subject to the terms of this Agreement, shall have full
power and authority to do any and all things which it may deem necessary or
desirable in connection with such servicing and administration.
Section 5.02. Standard of Care. In managing, administering, servicing
---------------- and making collections on the Contracts
pursuant to this Agreement, the Servicer will exercise the same degree of
skill and care, consistent with the terms of this Agreement, that the
Servicer exercises in managing, servicing, administering and collecting on
similar manufactured housing contracts owned and serviced by the Servicer;
provided, however, that nothing herein shall
- -------- ------- require the Servicer to violate any applicable federal,
state or local common or statutory law, regulation or rule. Without
limiting the generality of the foregoing, the Servicer hereby is authorized
and empowered by the Trustee when the Servicer believes it appropriate in
its best judgment, to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge
and all other comparable instruments, with respect to the Contracts and any
related Mortgages and with respect to the Manufactured Homes and any related
Mortgaged Property. The Trustee shall furnish the Servicer with any powers
of attorney and other documents necessary or appropriate to enable the
Servicer to service and administer the Contracts. For purposes of this
Agreement, the Trustee shall be deemed to have given to the Servicer a power
of attorney for purposes of servicing the Contracts.
Section 5.03. Records. The Servicer, during the period it is servicer
------- hereunder, shall maintain such books of account
and other records as will enable the Trustee (if the Trustee so elects in
its discretion) to determine the status of each Contract. Without limiting
the generality of the preceding sentence, the Servicer shall keep such
records in respect of Liquidation Expenses as will enable the Trustee (if
the Trustee so elects in its discretion) to determine that the correct
amount of Net Liquidation Proceeds in respect of a Liquidated Contract has
been deposited in the Certificate Account.
Section 5.04. Inspection. (a) At all times during the term hereof,
---------- the Servicer shall afford the Trustee and its
authorized agents reasonable access during normal business hours to the
Servicer's records relating to the Contracts and will cause its personnel to
provide reasonable assistance in any examination of such records by the
Trustee or any of its authorized agents. The examination and assistance
referred to in this Section will be conducted in a manner which does not
interfere unreasonably with the Servicer's normal operations or customer or
employee relations. Without otherwise limiting the scope of the examination
the Trustee may make, the Trustee or its authorized agents, using generally
accepted audit procedures, may in their discretion verify the status of each
Contract and review the records relating thereto for conformity to Monthly
Reports prepared pursuant to Article VII and compliance with the standards
represented to exist as to each Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep
available a copy of the Contract Schedule at its principal executive office
for inspection by Certificateholders.
Section 5.05. Reserved.
---------
Section 5.06. Payment of Taxes. If the Servicer becomes aware of the
---------------- nonpayment by an Obligor of a personal
property tax or other tax or tax related charge which may result in a lien
upon a Manufactured Home prior to, or equal to or coordinate with, the lien
of the related Contract, the Servicer, consistent with Section 5.02, shall
take action to avoid the attachment of any such lien. If the Servicer shall
have paid any such personal property tax or other tax or tax related charge
directly on behalf of an Obligor, the Servicer shall seek reimbursement
therefor only from the related Obligor (except as provided in the last
sentence of this Section) and may separately add such amount to the
Obligor's obligation as provided by the Contract, but, for the purposes of
this Agreement, may not add such amount to the remaining principal balance
of the Contract. If the Servicer shall have repossessed a Manufactured Home
on behalf of the Certificateholders and the Trustee, the Servicer shall pay
the amount of any such personal property tax or other tax or tax related
charge arising during the time such Manufactured Home is in the Servicer's
possession, unless the Servicer is contesting in good faith the validity of
such personal property tax or other tax or tax related charge on such
Manufactured Home. If the Obligor does not reimburse the Servicer for
payment of taxes pursuant to this Section and the related Contract is
liquidated after a default, the Servicer shall be reimbursed for its payment
of such taxes out of the related Liquidation Proceeds.
Section 5.07. Enforcement. (a) When the Servicer shall sue to
----------- enforce or collect upon Contracts, then it shall
bring suit in its own name, if possible, or as agent for the Trust Fund. If
the Servicer elects to commence a legal proceeding to enforce a Contract,
the act of commencement shall be deemed to be an automatic assignment of the
Contract to the Servicer for purposes of collection only. If, however, in
any enforcement suit or legal proceeding it is held that the Servicer may
not enforce a Contract on the ground that it is not a real party in interest
or a holder entitled to enforce the Contract, the Trustee on behalf of the
Certificateholders shall, at the Servicer's expense, take such steps as the
Servicer deems necessary to enforce the Contract, including bringing suit in
its name or the names of the Certificateholders. If there has been a
recovery of attorneys' fees in favor of the Servicer or the Trust Fund in an
action involving the enforcement of a Contract, the Servicer shall be
reimbursed out of such recovery for its out-of-pocket attorney's fees and
expenses incurred in such enforcement action.
(b) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with Section
5.02. In exercising recourse rights, the Servicer is authorized on the
Trustee's behalf to reassign the Contract or to resell the related
Manufactured Home to the person against whom recourse exists at the price
set forth in the document creating the recourse.
(c) The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Certificate Account that is required because
of an overpayment in connection with the prepayment in full of the Contract
or otherwise. The Servicer, except as required by the Contract or by law,
will not permit any rescission or cancellation of any Contract.
Section 5.08. Reserved. ---------
Section 5.09. Maintenance of Hazard Insurance Policies. (a) Except
---------------------------------------- as otherwise
provided in subsection (b) of this Section 5.09, the Servicer shall cause to
be maintained with respect to each Contract one or more Hazard Insurance
Policies which provide the same coverage as a standard form fire and
extended coverage insurance policy that is customary in the Servicer's
procedures for manufactured housing, issued by a company authorized to issue
such policies in the state in which the Manufactured Home is located, and in
an amount which is not less than the principal balance due from the Obligor
on the related Contract. Each Hazard Insurance Policy caused to be
maintained by the Servicer shall contain a standard loss payee clause in
favor of the Servicer and its successors and assigns. If any Obligor is in
default in the payment of premiums on its Hazard Insurance Policy or
Policies, the Servicer shall pay such premiums out of its own funds, and may
add separately such premium and any related interest to the Obligor's
obliga- tion as provided by the Contract (open) (and the Servicer may
require all payments with respect to delinquent insurance premiums to be
made by the Obligor before any interest and principal payments are applied
to the Contract), but may not add such premium and interest to the remaining
principal balance of the Contract for purposes of this Agreement. If the
Obligor does not reimburse the Servicer for payment of such premiums and the
related Contract is liquidated after a default, the Servicer shall be
reimbursed for its payment of such premiums out of the related Liquidation
Proceeds.
(b) The Servicer may, in lieu of causing individual Hazard Insurance
Policies to be maintained with respect to each Manufactured Home pursuant to
subsection (a) of this Section 5.09, and shall, to the extent that the
related Contract does not require the Obligor to maintain a Hazard Insurance
Policy with respect to the related Manufactured Home, maintain one or more
blanket insurance policies covering losses in a connection with a hazard as
provided in subsection (a) of this Section resulting from the absence or
insufficiency of individual Hazard Insurance Policies. Any such blanket
policy shall be in the amount sufficient to cover all losses in a connection
with a hazard on the Contracts. The Servicer shall pay, out of its own
funds, the premium for such policy on the basis described therein and shall
deposit in the Certificate Account, on the Business Day next preceding the
Determination Date following the Due Period in which the insurance proceeds
from claims in respect of any Contracts under such blanket policy are or
would have been received, the deductible amount with respect to such claims.
The Servicer shall not, however, be required to deposit any deductible
amount with respect to claims under individual Hazard Insurance Policies
maintained pursuant to subsection (a) of this Section.
(c) If the Servicer shall have repossessed a Manufactured Home on
behalf of the Trustee or foreclosed upon or otherwise acquired any Mortgaged
Property, the Servicer shall either (i) maintain at its expense a Hazard
Insurance Policy with respect to such Manufactured Home or Mortgaged
Property meeting the requirements of subsection (a) or (b), except that the
Servicer shall be responsible for depositing any deductible amount with
respect to all claims under individual Hazard Insurance Policies, or (ii)
indemnify the Trust Fund against any damage to such Manufactured Home prior
to resale or other disposition.
(d) Any cost incurred by the Servicer in maintaining any of the
foregoing insurance, for the purpose of calculating monthly distributions to
Certificateholders, shall not be added to the principal balance of the
Contract, notwithstanding that the terms of the Contract so permit. The
Servicer shall not be entitled to reimbursement from the Depositor, the
Trustee or the Certificateholders for such costs. (open) Such costs (other
than the cost of the blanket policy) shall only be recovered out of late
payments by the Obligor for such premiums or, if the related Contract is
liquidated after a default, out of the related Liquidation Proceeds.
Section 5.10. Fidelity Bond and Errors and Omissions Insur-
--------------------------------------------- ance. The Servicer
shall maintain, at its own expense, a blanket fidelity ---- bond and an
errors and omissions insurance policy, with broad coverage with responsible
companies on all officers, employees or other persons acting in any capacity
with regard to the Contracts to handle funds, money, documents and papers
relating to the Contracts. Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts
of such persons. No provision of this Section 5.10 requiring such fidelity
bond and errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement.
The minimum coverage under any such bond and insurance policy, shall be in
an amount as is customary for servicers that service portfolios of
manufactured housing installment sales contracts of $100 million or more and
that are generally acceptable as servicers to institutional investors. Upon
request of the Trustee, the Servicer shall cause to be delivered to the
Trustee a certified true copy of such fidelity bond and insurance policy and
a statement from the surety and the insurer that such fidelity bond or
insurance policy shall in no event be terminated or materially modified
without 30 days' prior written notice to the Trustee.
Section 5.11. Collections under Hazard Insurance Policies;
-------------------------------------------- Consent to Transfers of
Manufactured Homes; Assumption Agreements.
- ----------------------------------------------------------------- (a) The
Servicer agrees to present, on behalf of itself, the Trustee and
Certificateholders, claims to the insurer under any Hazard Insurance
Policies and, in this regard, to take such reasonable action as shall be
necessary to permit recovery under any Hazard Insurance Policies. Any
amounts collected by the Servicer under any such Hazard Insurance Policies
shall be deposited in the Certificate Account pursuant to Section 6.04,
except to the extent they are applied to the restoration of the related
Manufactured Home or released to the related Obligor in accordance with the
normal servicing procedures of the Servicer.
(b) (The Servicer shall not withhold its consent to any transfer of
ownership of a Manufactured Home in accordance with the related Contract
unless the proposed transferee does not meet the Servicer's then applicable
underwriting standards (exclusive of down payment requirements).) In
addition, the Servicer shall not withhold such consent if such withholding
of consent is not permitted under applicable law and governmental
regulations.
(c) In any case in which a Manufactured Home is to be conveyed to a
Person by an Obligor, and such Person is to enter into an assumption
agreement or modification agreement or supplement to the Contract, upon the
closing of such conveyance, the Servicer shall cause the originals of the
assumption agreement, the release (if any), or the modification or
supplement to the Contract to be deposited with the Contract File for such
Contract. Any fee collected by the Servicer for entering into an assumption
or substitution of liability agreement with respect to such Contract will be
retained by the Servicer as additional servicing compensation. In
connection with any such conveyance through an assumption, modification or
supplement, the rate of interest borne by, and all other material terms of,
the related Contract shall not be changed.
Section 5.12. Realization upon Defaulted Contracts. Subject to
------------------------------------ applicable law, the
Servicer shall repossess, replevin, foreclose upon or otherwise comparably
convert the ownership of Manufactured Homes and any related Mortgaged
Property securing all Contracts that come into default and which the
Servicer believes in its good faith business judgment will not be brought
current; provided that if the Servicer has actual knowledge that a
-------- Mortgaged Property is affected by hazardous waste, then the
Servicer shall not cause the Trust Fund to acquire title to such Mortgaged
Property in a foreclosure or similar proceeding. In connection with such
repossession, foreclosure or other conversion, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be consistent with Section 5.02. Subject to the foregoing proviso, in
the event that title to any Mortgaged Property is acquired in foreclosure or
by deed in lieu of foreclosure, the deed or certificate of sale shall be
issued to the Trustee, as Trustee, or, at its election, to its nominee on
behalf of the Trustee, as Trustee. The Servicer shall manage, conserve and
protect such Manufactured Homes and any related Mortgaged Property for the
purposes of their prompt disposition and sale, and shall dispose of such
Manufactured Homes and any related Mortgaged Property on such terms and
conditions as are consistent with Sections 5.02 and 10.12.
Section 5.13. Costs and Expenses. All costs and expenses incurred by
------------------ the Servicer in carrying out its
duties under this Agreement, including all fees and expenses incurred in
connection with the enforcement of Contracts (including enforcement of
defaulted Contracts and repossessions of Manufactured Homes securing such
Contracts), shall be paid by the Servicer and the Servicer shall not be
entitled to reimbursement hereunder, except to the extent such reimbursement
is specifically provided for in this Agreement. Notwithstanding the
foregoing, the Servicer shall be reimbursed out of the Liquidation Proceeds
of a defaulted Contract for Liquidation Expenses incurred by it in realizing
upon the related Manufactured Home and any related Mortgaged Property,
including, but not limited to: (i) costs of refurbishing and securing such
Manufactured Home; (ii) transportation expenses incurred in moving the
Manufactured Home; (iii) reasonable legal fees and expenses of outside
counsel; (iv) rental expenses (including the payment of rent not paid by the
defaulting Obligor) incurred in maintaining a leasehold interest for the
Manufactured Home; and (v) sales commissions paid to Persons that are not
Affiliates of the Servicer. The Servicer shall not incur the foregoing
Liquidation Expenses unless it determines in its good faith business
judgment that incurring such expenses is in accordance with Section 5.02 and
will increase the Net Liquidation Proceeds from such Manufactured Home.
Section 5.14. Trustee to Cooperate. The Servicer is authorized to
-------------------- execute an instrument in satisfaction
of any Contract paid in full and any related Mortgage and do such other acts
and execute such other documents as the Servicer deems necessary to
discharge the Obligor thereunder and eliminate the security interest in the
Manufactured Home and any related Mortgaged Property related thereto. The
Servicer shall determine when a Contract has been paid in full; to the
extent insufficient payments are received on a Contract mistakenly
determined by the Servicer to be prepaid or paid in full and satisfied, the
shortfall shall be paid by the Servicer out of its own funds by deposit into
the Certificate Account. Upon request of a Servicing Officer, the Trustee
shall perform such other acts as are reasonably requested by the Servicer
(including, without limitation, the execution of documents) and otherwise
cooperate with the Servicer in enforcement of rights and remedies with
respect to Contracts.
Section 5.15. Servicing and Other Compensation. The Servicer, as
-------------------------------- compensation for its
activities hereunder including, without limitation, the payment of fees and
expenses of the Trustee pursuant to Section 10.05, shall be entitled to
receive on each Distribution Date the Monthly Servicing Fee pursuant to
Section 6.02.
Additional servicing compensation in the form of application fees, Late
Payment Fees, Extension Fees, processing fees and any transfer of equity or
assumption fees shall be retained by the Servicer.
The Servicer shall not be reimbursed for its costs and expenses in
servicing the Contracts except as provided pursuant to Section 5.13.
Section 5.16. Custody of Contracts. (a) Subject to the terms and
-------------------- conditions of this Section and Section
3.04(a), the Trustee hereby appoints the Servicer custodian for the benefit
of the Certificateholders and the Trustee, and the Servicer shall maintain
custody of the Contract Files as custodian therefor.
(b) The Servicer agrees to maintain the related Contract Files at its
offices where they are presently maintained, or at such other offices of the
Servicer in the States of Florida, Georgia, Ohio, Oregon and ________ as
shall from time to time be identified to the Trustee by ten days' prior
written notice. The Servicer may temporarily move individual Contract Files
or any portion thereof without notice as necessary to conduct collection and
other servicing activities in accordance with its customary practices and
procedures.
(c) As custodian, the Servicer shall have and perform the following
powers and duties
(i) hold the Contract Files on behalf of the Certificateholders
and the Trustee, maintain accurate records pertaining to each Contract
to enable it to comply with the terms and conditions of this Agreement,
and maintain a current inventory list thereof;
(ii) cause Contract Files to be subject to the same policies and
procedures with respect to persons authorized to have access to the Contract
Files on the Servicer's premises as are contracts owned and serviced by the
Servicer, in accordance with the same standard of care applied by
the Servicer to such contracts; and
(iii) attend to all details in connection with maintaining
custody of the Contract Files on behalf of the Certificateholders and
the Trustee in accordance with the standard of care in Section 5.02.
(d) In acting as custodian of the Contract Files, the Servicer agrees
further not to assert any beneficial ownership interests in the Contracts or
the Contract Files. The Servicer agrees to indemnify the Certificateholders
and the Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred or asserted against the Certificateholders and the Trustee as the
result of any act or omission by the Servicer relating to the maintenance
and custody of the Contract Files; provided, however, that the Servicer will
not -------- ------- be liable for any
portion of any such amount resulting from the negligence or willful
misconduct of any Certificateholder or the Trustee.
(e) The Servicer shall promptly report to the Trustee any failure by
it to hold the Contract Files as herein provided and shall promptly take
appropriate action to remedy any such failure.
Section 5.17. Reserved. --------
Section 5.18. REO Disposition In the event that any Manufactured Home
--------------- is acquired in a repossession or
foreclosure (an "REO Property"), the Servicer shall sell any REO Property
within two years of its acquisition by the Trust Fund, unless, at the
request of the Servicer, the Trustee seeks, and subsequently receives, an
Opinion of Counsel, addressed to the Trustee and the Servicer, to the effect
that the holding by the Trust Fund of such REO Property subsequent to two
years after its acquisition will not result in the imposition of taxes on
"prohibited transactions" of the Trust Fund as defined in Section 860F of
the Code or cause the Trust Fund to fail to qualify as a REMIC at any time
that any Certificates are outstanding. The Servicer shall manage, conserve,
protect and operate each REO Property solely for the purpose of its prompt
disposition and sale in a manner that does not cause any such REO Property
to fail to qualify as "foreclosure property" within the meaning of Section
860G(a)(8) or result in the receipt by the REMIC of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the
Code or any "net income from foreclosure property" which is subject to
taxation under the REMIC Provisions. Pursuant to its efforts to sell such
REO Property, the Servicer shall either itself or through an agent selected
by the Servicer protect and conserve such REO Property in the same manner
and to such extent as is customary in the locality where such REO Property
is located and may, incident to its conservation and protection of the
interests of the Certificateholders, rent the same, or any part thereof, as
the Servicer deems to be in the best interest of the Servicer and the
Certificateholders for the period prior to the sale of such REO Property.
The disposition of REO Property shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general
servicing activities.
The proceeds from the REO disposition, net of any reimbursement to the
Servicer as provided above, shall be deposited in the Certificate Account
in accordance with Section 6.04.
(End of Article V)
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS; WITHDRAWALS
-----------------------------------------------
FROM CERTIFICATE ACCOUNT ------------------------
Section 6.01. Monthly Payments. (a) On each Distribution Date the
---------------- Trustee shall, based upon the information
set forth in the Monthly Report for such Distribution Date, withdraw from
the Certificate Account an amount equal to the Available Distribution Amount
for such Distribution Date and apply such amount as set forth below:
(i) to the Class A Certificates, the related Class A Interest
Formula Distribution Amount on such Distribution Date;
(ii) the Formula Principal Distribution Amount to the Class A
Certificateholders until the Class A Principal Balance is reduced to zero;
(iii) the Class B Interest Formula Distribution Amount on such
Distribution Date to the Class B Certificateholders;
(iv) the remainder of the Formula Principal Distribution Amount,
if any, to the Class B Certificates until the Class B Principal Balance is
reduced to zero; and
(v) any remainder to the holder of the Class R Certificate. Such
distributions to the Class A Certificateholders and the Class B Certif-
icateholders shall be made such that the Trustee shall distribute (x) to
each Class A Certificateholder as of the preceding Record Date an amount
equal to the product of the aggregate Percentage Interest evidenced by such
Certificateholder's Class A Certificates and the Class A Distribution Amount
for such Distribution Date and (y) to each Class B Certificateholder as of
the preceding Record Date an amount equal to the product of the aggregate
Percentage Interest evidenced by such Certificateholder's Class B
Certi- ficates and the Class B Distribution Amount for such Distribution
Date. The Trustee shall pay each Certificateholder of record by check
mailed to such Certificateholder at the address for such Certificateholder
appearing on the Certificate Register; provided that if such
Certificateholder holds -------- Certificates with
original denominations aggregating at least $5 million and has given the
Trustee appropriate written instructions at least 5 Business Days prior to
the related Record Date (which instructions, until revised, shall remain
operative for all Distribution Dates thereafter), the Trustee shall pay such
Certificateholder by wire transfer of funds. If on any Deter- mination Date
the Servicer determines that there are no Contracts outstanding and no other
funds or assets in the Trust Fund other than the funds in the Certificate
Account, the Servicer promptly shall instruct the Trustee to send the final
distribution notice to each Certificateholder and make provision for the
final distribution in accordance with Section 11.01(b). Final payment of any
Certificate shall be made only upon presentation of such Certificate at the
office or agency of the Certificate Registrar.
(b) On each Distribution Date, the Trustee shall withdraw from the
Certificate Account (solely out of the Available Distribution Amount for
such Distribution Date after giving effect to the distributions made to the
Class A Certificateholders and the Class B Certificateholders pursuant to
Section 6.01(a) on such Distribution Date) and distribute to the Holder of
the Class R Certificate the Class R Distribution Amount for such
Distribution Date. Such distribution shall be made by a means that is
mutually acceptable to the Trustee and the Holder of the Class R Certificate.
(c) Each distribution with respect to a Book-Entry Certificate shall
be paid to the Depository, which shall credit the amount of such
distribution to the accounts of its Depository Participants in accordance
with its normal procedures. Each Depository Participant shall be
responsible for disbursing such distribution to the Certificate Owners that
it represents and to each indirect participating brokerage firm (a
"brokerage firm" or "indirect participating firm") for which it acts as
agent. Each brokerage firm shall be responsible for disbursing funds to the
Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository
and the Depository Participants in accordance with the provisions of the
Class A and Class B Certificates. Neither the Trustee, the Certificate
Registrar, the Depositor nor the Servicer shall have any responsibility
therefor except as otherwise provided by applicable law. To the extent
applicable and not contrary to the rules of the Depository, the Trustee
shall comply with the provisions of the form of the Class A Certificates and
Class B Certificates as set forth in Exhibits B and C hereto.
Section 6.02. Permitted Withdrawals from the Certificate
------------------------------------------ Account. The Servicer may
from time to time as provided herein, make ------- withdrawals from the
Certificate Account of amounts deposited therein pursuant to Section 6.04
that are attributable to the Contracts for the following purposes:
(i) to pay to the Contract Seller with respect to each Contract
or property acquired in respect thereof that has been purchased pursuant to
Section 3.05 all amounts received thereon that are specified in such Section
to be property of the Contract Seller;
(ii) to reimburse itself for the payment of taxes out of
Liquidation Proceeds (to the extent not previously retained from such
Liquidation Proceeds prior to their deposit) or out of payments
expressly made by the related Obligor to reimburse the Servicer for such
taxes, as permitted by Section 5.06;
(iii) to pay to itself the Monthly Servicing Fee;
(iv) to reimburse itself or a previous Servicer out of Liquidation
Proceeds (to the extent not previously retained from Liquidation
Proceeds prior to their deposit in the Certificate Account) in
respect of a Manufactured Home and out of payments by the related Obligor
(to the extent of payments expressly made by the Obligor to reimburse
the Servicer for insurance premiums) for expenses incurred by it in
respect of such Manufactured Home that are specified as being
reimbursable to it pursuant to Section 5.07, 5.09, or 5.13 or to a previous
Servicer under Section 8.08;
(v) to reimburse itself for any Nonrecoverable Advance or Monthly
Advances in accordance with Section 6.03(c) and for advances in respect of
Liquidated Contracts in accordance with Section 6.03(c);
(vi) after the Class B Principal Balance has been reduced to zero,
to reimburse the Depositor for expenses incurred and reimbursable to it
pursuant to Section 8.06; and
(vii) to withdraw any amount deposited in the Certificate
Account that was not required to be deposited therein (including any
collections on the Contracts that, pursuant to Section 2.01, are not part of
the Trust Fund).
Since, in connection with withdrawals pursuant to clauses (i), (ii) and
(iv), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Contract, the Servicer shall keep and maintain
separate accounting, on a Contract by Contract basis, for the purpose of
justifying any withdrawal from the Certificate Account pursuant to such
clauses.
Section 6.03. Monthly Advances by the Servicer. (a) By the close of
-------------------------------- business on each
Determination Date the Servicer shall deposit in the Certificate Account,
out of its own funds, the Monthly Advance; provided,
-------- however, that such deposit
out of the Servicer's own funds shall only be made ------- to the extent
necessary to cause the Available Distribution Amount to be large enough to
permit the distribution on the related Distribution Date of the amounts
computed as set forth in clauses (i) through (iv), inclusive, of Section
6.01(a).
(b) On each Distribution Date, the Servicer shall reimburse itself for
the Outstanding Amount Advanced to the extent of actual collections of late
scheduled payments on the related Contracts.
(c) If the Servicer determines that any advance made pursuant to
Section 6.03(a) has become a Nonrecoverable Advance and at the time of such
determination there exists an Outstanding Amount Advanced, then the Servicer
shall reimburse itself out of funds in the Certificate Account for the
amount of such Nonrecoverable Advance, but only to the extent of such
Outstanding Amount Advanced.
Section 6.04. Establishment of and Deposits in Certificate
-------------------------------------------- Accounts. (a) On or
before the Closing Date, the Trustee shall have -------- established, and
thereafter shall maintain, one or more Certificate Accounts which are
Eligible Accounts, in the form of separate custodial accounts, titled
"Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates,
199_-_ (Merrill Lynch Mortgage Investors, Inc., Depositor) in trust for the
Trustee". The Trustee shall cause moneys in the Certificate Account to be
invested in Eligible Investments selected by the Trustee, which shall mature
or, in the case of a money market fund, be redeemed not later than the
Business Day immediately preceding the Distribution Date next following the
date of such investment (except that if such Eligible Investment is an
obligation of the institution that maintains the Certificate Account, then
such Eligible Investments shall mature or, in the case of a money market
fund, be redeemed not later than such Distribution Date) and shall not be
sold or disposed of prior to its maturity. All such Eligible Investments
shall be made in the name of the Trustee. The Trustee shall select such
Eligible Investments, which shall mature as provided above, in such manner
as to achieve the following objectives in the order stated: (1) preservation
of principal values; and (2) maximization of income. If an instrument or
account ceases to meet the requirements of an Eligible Investment or
Eligible Account as specified in the respective definitions thereof, the
Trustee shall cause all moneys in such investment and account to be
withdrawn and deposited in an Eligible Investment or Eligible Account, as
the case may be, within twenty (20) Business Days of the occurrence of such
investment or account ceasing to meet such requirements. All net income and
gain realized from any such investments, to the extent provided by this
Agreement, shall be added to the Certificate Account.
(b) The Servicer shall deposit in the Certificate Account not later
than the close of business of the Business Day immediately preceding each
Distribution Date the following amounts in respect of the preceding Due
Period:
(1) All amounts received from Obligors with respect to principal
of and interest on the Contracts;
(2) All Net Liquidation Proceeds;
(3) All amounts required to be deposited by the Contract Seller
pursuant to Section 3.05(a); and
(4) All Monthly Advances pursuant to Section 6.03.
Section 6.05. Transfer of Certificate Account. The Trustee may
------------------------------- transfer the Certificate
Account to a different depository institution from time to time, so long as
the Certificate Account remains an Eligible Account. The Trustee shall give
notice of any transfer of the Certificate Account to the Rating Agency prior
to such transfer.
(End of Article VI)
ARTICLE VII
REPORTS
-------
Section 7.01. Monthly Reports. Within three Business Days following
--------------- each Determination Date, the Servicer
shall cause the Trustee to receive a "Monthly Report," which report shall
include the following information with respect to the immediately following
Distribution Date:
(a) the Class A Distribution Amount and Class B Distribution
Amount for such Distribution Date;
(b) the amount of principal to be distributed to each of the
Class A and Class B Certificateholders, separately stating the amounts
specified in clauses (a) through (e) of the term "Formula Principal
Distribution Amount";
(c) the amount of interest to be distributed to each of the Class
A and Class B Certificateholders on such Distribution Date (separately
identifying any Class A Unpaid Interest Shortfall and Class B Unpaid
Interest Shortfall included in such distribution) and the Pass-Through Rate
for each such Class of Certificates for such Distribution Date;
(d) the remaining Class A and Class B Principal Balance after
giving effect to the payment of principal to be made on such
Distribution Date (on which interest will be calculated on the next
succeeding Distribution Date);
(e) the total amount of fees payable on such Distribution Date,
separately identifying the Monthly Servicing Fee, any reimbursement to the
Depositor pursuant to Section 8.06, and any Late Payment Fees, Extension
Fees and assumption fees (along with other permitted fees pursuant to
Section 5.15) paid during the prior Due Period;
(f) the number of and aggregate unpaid principal balance of
Contracts with payments delinquent 30 to 59, 60 to 89, and 90 or more days,
respectively;
(g) the number of Contracts that were repurchased by the Contract
Seller in accordance with Section 3.05 during the prior Due Period,
identifying such Contracts and the Repurchase Price of such Contracts;
(h) the Pool Factor for the Class A and Class B Certificates
after giving effect to the payment of principal to be made on such
Distribution Date;
(i) the Class R Distribution Amount, if any, for such
Distribution Date;
(j) the aggregate principal balances of all Contracts that are
not Liquidated Contracts and in respect of which the related Manufactured
Homes have been repossessed or foreclosed upon; and
(k) the Aggregate Net Liquidation Losses through the Due Period
immediately preceding such Distribution Date.
Copies of all Monthly Reports shall be provided to the Rating Agency.
The Trustee shall not be under any duty to recalculate or verify the
information provided to it by the Servicer.
Section 7.02. Certificate of Servicing Officer. Each Monthly Report
-------------------------------- pursuant to Section 7.01
shall be accompanied by a certificate of a Servicing Officer substantially
in the form of Exhibit G, certifying the accuracy of the Monthly Report and
that no Event of Default or event that with notice or lapse of time or both
would become an Event of Default has occurred, or if such event has occurred
and is continuing, specifying the event and its status.
Section 7.03. Other Data. In addition, the Servicer on request of the
---------- Trustee shall furnish the Trustee such
underlying data as may reasonably be requested.
Section 7.04. Annual Statement as to Compliance. The Servicer will
--------------------------------- deliver to the Depositor,
the Trustee and the Rating Agency on or before ______________ 1 of each
year, beginning with the first _____________ 1 that occurs at least three
months after the Cut-off Date, an Officer's Certificate stating, as to each
signer thereof, that (i) a review of the activities of the Servicer during
the preceding calendar year and of performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled in all material
respects all its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation in a
material respect, specifying each such default known to such officer and the
nature and status thereof.
Section 7.05. Annual Independent Public Accountants'
-------------------------------------- Servicing Report. On or before
_________ 1 of each year, beginning with the ---------------- first
____________ 1 that occurs at least three months after the Cut-off Date, the
Servicer, at its expense, shall cause a firm of independent public
accountants which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Depositor, the Trustee and the
Rating Agency to the effect that such firm has examined certain documents
and records relating to the servicing of the Contracts under this Agreement
and that, on the basis of such examination conducted substantially in
compliance (generally accepted auditing standards) (the ______ audit
program), such servicing has been conducted in compliance with (this
Agreement) (such audit program), except for (i) such exceptions as such firm
believes to be immaterial and (ii) such other exceptions that, in the
opinion of such firm, (generally accepted auditing standards) (such audit
program) requires it to report. For purposes of such statement, such firm
may assume conclusively that all pooling and servicing agreements among the
Depositor, the Servicer and the Trustee relating to certificates evidencing
an interest in manufactured housing contracts are substantially similar to
one another except for any such pooling and servicing agreement which
by its terms specifically states otherwise.
Section 7.06. Statements to Certificateholders. (a) Concurrently
with -------------------------------- each distribution
to Certificateholders pursuant to Article VI, the Trustee shall mail, or
cause the Paying Agent to mail, to each Certificateholder at the address
appearing on the Certificate Register a statement as of the related
Distribution Date prepared by the Servicer setting forth:
(1) the Class A, Class B Distribution Amount and Class R
Distri- bution Amount for such Distribution Date;
(2) the amount of principal to be distributed to each of the
Class A and Class B Certificateholders, separately stating the amounts
specified in clauses (a) through (f) of the term "Formula Principal
Distribution Amount";
(3) the amount of interest to be distributed to each of the Class
A and Class B Certificateholders on such Distribution Date (separately
identifying any Class A Unpaid Interest Shortfall and Class B Unpaid
Interest Shortfall included in such distribution) and the Pass-Through Rate
for each such Class of Certificates for such Distribution Date;
(4) the remaining Class A Principal Balance and Class B Principal
Balance after giving effect to the payment of principal to be made on such
Distribution Date (on which interest will be calculated on the next
succeeding Distribution Date);
(5) the total amount of fees payable on such Distribution Date,
separately identifying the Monthly Servicing Fee, any reimbursement to the
Depositor pursuant to Section 8.06, and any Late Payment Fees, Extension
Fees and assumption fees (along with other permitted fees pursuant to
Section 5.15) paid during the prior Due Period;
(6) the number of and aggregate unpaid principal balance of
Contracts with payments delinquent 30 to 59, 60 to 89, and 90 or more days,
respectively;
(7) the number of Contracts that were repurchased by the Contract
Seller in accordance with Section 3.05 during the prior Due Period,
identifying such Contracts and the Repurchase Price of such Contracts;
(8) the Pool Factor for the Class A and Class B Certificates
after giving effect to the payment of principal to be made on such
Distribution Date;
(9) the aggregate principal balances of all Contracts that are
not Liquidated Contracts and in respect of which the related Manufactured
Homes have been repossessed or foreclosed upon;
(10) the Aggregate Net Liquidation Losses through the Due Period
immediately preceding such Distribution Date; and
(11) such other customary factual information as is available to
the Servicer as the Servicer deems necessary and can be obtained reasonably
from its existing data base to enable Certificateholders to prepare their
tax returns.
In the case of information furnished pursuant to clauses (1) through
(4) above, the amounts shall be expressed as a dollar amount per Certificate
with a $1,000 denomination.
Within a reasonable period of time after the end of each calendar year,
subject to the next sentence, but in no event later than 90 days after the
end of such year, the Servicer shall prepare and furnish to the Trustee, and
the Trustee, promptly upon receipt, shall furnish to each Person who at any
time during the calendar year was the Holder of a Certificate, a statement
containing the information set forth in clauses (2) and (3) above, in the
case of Class A Certificateholders, and (6), (7) and (9) above, in the case
of Class B Certificateholders, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.
Such obligation of the Servicer shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by
the Servicer pursuant to any requirements of the Code as from time to time
in force.
On each Distribution Date, if _________ is not the holder of the Class
R Certificate, the Servicer shall forward or cause to be forwarded by mail
to the holder of the Class R Certificate a copy of the report forwarded to
the Holders of Certificates on such Distribution Date. If the Servicer is
not the holder of the Class R Certificate, the Servicer shall also forward
or cause to be forwarded by mail to the holder of the Class R Certificate a
statement setting forth the amount of the distribution to the holder of the
Class R Certificate, together with such other information as the Servicer
deems necessary or appropriate.
Within a reasonable period of time after the end of each calendar year,
the Servicer shall furnish or cause to be furnished to each Person who at
any time during the calendar year was the holder of the Class R Certificate
a statement containing the applicable distribution information provided
pursuant to this Section aggregated for such calendar year or applicable
portion thereof during which such Person was the holder of the Class R
Certificate. Such obligation of the Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Servicer pursuant to any requirements of the Code as from
time to time enforced.
A Certificateholder holding Certificates of a Class representing in the
aggregate at least 5% of the Percentage Interest of such Class shall, upon
written request to the Trustee, be entitled to receive copies of all reports
provided to the Trustee.
(End of Article VII)
ARTICLE VIII
INDEMNITIES; THE DEPOSITOR AND THE SERVICER
-------------------------------------------
Section 8.01. Liabilities to Obligors. No liability to any Obligor
----------------------- under any of the Contracts arising
out of any act or omission to act of the Servicer in servicing the Contracts
prior to the Closing Date is intended to be assumed by the Trustee, or the
Certificateholders under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted and
valid under mandatory provisions of law, the Trustee and the
Certificateholders expressly disclaim such assumption.
Section 8.02. Tax Indemnification. The Contract Seller agrees to pay,
------------------- and to indemnify, defend and hold
harmless the Trust Fund, the Trustee, the Certificate Registrar, the Paying
Agent and the Depositor and the Certificateholders from any taxes which may
at any time be asserted with respect to, and as of the date of, the transfer
of the Contracts from the Contract Seller to the Depositor and from the
Depositor to the Trust Fund, including, without limitation, any sales, gross
receipts, general corporation, personal property, privilege or license taxes
(but not including any income or franchise taxes or federal, state or other
taxes arising out of the creation of the Trust Fund and the issuance of the
Certificates or distributions with respect thereto) and costs, expenses and
reasonable counsel fees in defending against the same.
Section 8.03. Servicer's Indemnities. The Servicer shall defend and
---------------------- indemnify the Trust Fund, the
Trustee, the Certificate Registrar, the Paying Agent and the Depositor and
the Certificateholders against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel
and expenses of litigation, arising from third party claims or actions in
respect of any action taken or failed to be taken by the Servicer with
respect to any Contract or Manufactured Home and any failure by the Servicer
to perform its obligations in compliance with this Agreement. This indemnity
shall survive any Event of Default (but a Servicer's obligations under this
Section 8.03 shall not relate to any actions of any subsequent Servicer
after an Event of Default) and any payment of the amount owing under, or any
repurchase by the Contract Seller of, any such Contract.
Section 8.04. Operation of Indemnities. Indemnification under this
------------------------ Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Contract Seller or the Servicer has made any indemnity
payments to the Trustee pursuant to this Article and the Trustee thereafter
collects any of such amounts from others, the Trustee will repay such
amounts collected to the Contract Seller or the Servicer, as the case may
be, together with any interest collected thereon.
Section 8.05. Merger or Consolidation of the Depositor, the
--------------------------------------------- Contract Seller or
the Servicer. The Contract Seller and the Servicer will
- ------------------------------- each keep in full effect its existence,
rights and franchises as a corporation or association, as the case may be,
and will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Contracts and to perform its duties under this
Agreement.
Any person into which the Depositor, the Contract Seller or the
Servicer may be merged or consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Depositor, the Contract
Seller or the Servicer shall be a party, or any Person succeeding to the
business of the Depositor, the Contract Seller or the Servicer, shall be the
successor of the Depositor, the Contract Seller or the Servicer hereunder,
without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary
notwithstanding; provided,
-------- however, that the successor or surviving Person to
the Servicer shall satisfy ------- the requirements of Section 8.08(ii) with
respect to the qualifications of a successor to the Servicer. Each of the
Contract Seller, the Depositor and the Servicer shall promptly notify the
Rating Agency of any such merger to which it is a party.
Section 8.06. Limitation on Liability of the Depositor and
-------------------------------------------- Others. Neither the
Depositor nor any of the directors, officers, employees ------ or agents of
the Depositor shall be under any liability to the Trustee or the
Certificateholders for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the
-------- ------- Depositor or any such person against any liability
that would otherwise be imposed by reason of its willful misconduct, bad
faith or negligence. The Depositor and any director, officer, employee or
agent of the Depositor may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Depositor shall not be under any obligation
to appear in, prosecute or defend any legal action which arises under this
Agreement and which in its opinion may involve it in any expenses or
liability; provided, however, that the
-------- ------- Depositor may in its discretion undertake any such
action which it may deem necessary or desirable in respect to this Agreement
and the rights and duties of the parties hereto. In such event, the legal
expenses and costs of such action and any liability resulting therefrom
shall be expenses, costs and liabilities payable from the Certificate
Account and the Depositor shall be entitled to be reimbursed therefor out of
the Certificate Account as provided by Section 6.02; provided that such
reimbursement shall be made, from time to -------- time on
one or more Distribution Dates, only out of the Available Distribution
Amount for such Distribution Date that remains after the distributions to
the Class A Certificateholders and the Class B Certificateholders for such
Distribution Date have been made.
Section 8.07. Assignment by Servicer. The Servicer may, with the
prior ---------------------- written consent of the
Depositor, assign its rights and delegate its duties and obligations under
this Agreement; provided that the Person accepting such
-------- assignment or delegation shall be a Person which
is satisfactory to the Trustee, in its sole and reasonable judgment, and the
Depositor, in its sole judgment, is willing to service the Contracts and
executes and delivers to the Depositor and the Trustee an agreement, in form
and substance reasonably satisfactory to the Depositor and the Trustee,
which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Servicer under this Agreement; provided further that the
Rating Agency's rating of the -------- Certificates in effect
immediately prior to such assignment and delegation will not be withdrawn or
reduced as a result of such assignment and delegation, as evidenced by a
letter from the Rating Agency. In the case of any such assignment and
delegation, the Servicer shall be released from its obligations under this
Agreement, except that the Servicer shall remain liable for all liabilities
and obligations incurred by it as Servicer here- under prior to the
satisfaction of the conditions to such assignment and delegation set forth
in the next preceding sentence.
Section 8.08. Successor to the Servicer. In connection with the
------------------------- termination of the Servicer's
responsibilities and duties under this Agreement pursuant to Section 9.01,
the Trustee shall (i) succeed to and assume all of the Servicer's
responsibilities, rights, duties and obligations under this Agreement
(except the duty to pay and indemnify the Trustee pursuant to Section 10.05
hereof), or (ii) appoint a successor acceptable to the Depositor, which
shall have a net worth of not less than $10,000,000 and shall have serviced
for at least one year prior to such appointment a portfolio of not less than
$100,000,000 principal amount of manufactured housing installment sale
contracts or installment loans and which shall succeed to all rights and
assume all of the responsibilities, duties and liabilities of the Servicer
under this Agreement prior to the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement (except that
the duty to pay and indemnify the Trustee pursuant to Section 10.05 hereof
shall be subject to negotiation at the time of such appointment). If the
Trustee has become the successor to the Servicer in accordance with this
Section, the Trustee may, if it shall be unwilling to continue to so act, or
shall, if it is unable to so act, appoint or petition a court of competent
jurisdiction to appoint, a successor satisfying the requirements set out in
clause (ii) above. In connection with any appointment of a successor
Servicer, the Trustee may make such arrangements for the compensation of
such successor out of payments on Contracts as it and such successor shall
agree or such court shall determine; provided, however,
-------- ------- that no such
compensation shall be in excess of a monthly amount equal to 1/12 of the
product of 1.25% and the Pool Principal Balance for the Distribution Date in
respect of which such compensation is being paid without the consent
of all of the Certificateholders and notice to the Rating Agency. If the
Servicer's duties, responsibilities and liabilities under this Agreement
should be terminated pursuant to Section 8.07 or 9.01, the Servicer shall
discharge such duties and responsibilities during the period from the date
it acquires knowledge of such termination until the effective date thereof
with the same degree of diligence and prudence which it is obligated to
exercise under this Agreement, shall cooperate with the Trustee and any
successor Servicer in effecting the termination of the Servicer's
responsibilities and rights hereunder and shall take no action whatsoever
that might impair or prejudice the rights or financial condition of its
successor. The assignment by a Servicer pursuant to Section 8.07 or removal
of Servicer pursuant to Section 9.01 shall not become effective until a
successor shall be appointed pursuant to this Section and shall in no event
relieve the Contract Seller of liability pursuant to Section 3.05 for breach
of the representations and warranties made pursuant to Section 3.02 or 3.03.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Servicer and to the Trustee an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer, with like effect as if originally named as a party to this
Agreement and the Certificates. Any assignment by or termination of the
Servicer pursuant to Section 8.07 or 9.01 or the termination of this
Agree- ment pursuant to Section 11.01 shall not affect any claims that the
Trustee may have against the Servicer arising prior to any such termination
or resignation.
The Servicer shall timely deliver to the successor the funds in the
Certificate Account and all Contract Files and related documents and
statements held by it hereunder and the Servicer shall account for all funds
and shall execute and deliver such instruments and do such other things as
reasonably may be required to more fully and definitely vest and confirm in
the successor all such rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer. Without limitation, the Trustee is
authorized and empowered to execute and deliver on behalf of the Servicer,
as attorney-in-fact or otherwise, any and all documents and other
instruments (including, without limitation, transfer instruments in respect
of certificates of title and financing statements relating to the
Manufactured Homes), and to do any and all acts or things necessary or
appropriate to effect the purposes of such notice of termination.
Upon a successor's acceptance of appointment as such, the Trustee shall
notify in writing the Certificateholders of such appointment.
(End of Article VIII)
ARTICLE IX
DEFAULT
-------
Section 9.01. Events of Default. In case one or more of the following
----------------- Events of Default shall occur and be
continuing, that is to say:
(a) any failure by the Servicer to make any deposit or payment,
or to remit to the Trustee any payment, required to be made under the terms
of this Agreement which continues unremedied for a period of five days after
the date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or
the Depositor or to the Servicer, the Trustee and the Depositor by the
Holders of Certificates evidencing Fractional Interests aggregating not
less than 25%; or
(b) failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements on
the part of the Servicer set forth in this Agreement which continues
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to
the Servicer by the Trustee or the Depositor, or to the Servicer, the
Trustee and the Depositor by the Holders of Certificates evidencing
Fractional Interests aggregating not less than 25%; or
(c) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under
any present or future federal or state bankruptcy, insolvency or similar law
or appointing a trustee, conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or
order shall have remained in force undischarged or unstayed for a period of
90 days; or
(d) the Servicer shall consent to the appointment of a trustee,
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or substantially all
of the Servicer's property; or
(e) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations
or take any corporate action in furtherance of the foregoing;
then, and in each and every such case, so long as such Event of Default
shall not have been remedied, the Trustee may, and at the written direction
of the Holders of Certificates evidencing Fractional Interests aggregating
not less than 51% by notice in writing to the Servicer shall, terminate all
the rights and obligations of the Servicer under this Agreement and in and
to the Contracts and the proceeds thereof. The Trustee shall send a copy of
any such notice to the Rating Agency. On or after the receipt by the
Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Contracts or otherwise,
shall pass to and be vested in the successor appointed pursuant to Section
8.08. Upon the occurrence of an Event of Default which shall not have been
remedied, the Trustee may also pursue whatever rights it may have at law or
in equity to damages, including injunctive relief and specific performance.
The Trustee will have no obligation to take any action or institute, conduct
or defend any litigation under this Agreement at the request, order or
direction of any of the Holders of Certificates unless such
Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which the Trustee may
incur.
Section 9.02. Waiver of Defaults. The Trustee may waive any default
------------------ by the Servicer in the performance of
its obligations hereunder and its consequences, except that a default in the
making of any required remittance to the Trustee for distribution on any of
the Certificates may be waived only by the affected Certificateholders.
Upon any such waiver of a past default, such default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.
Section 9.03. Trustee to Act; Appointment of Successor. On and after
---------------------------------------- the time the
Servicer receives a notice of termination pursuant to Section 9.01, the
Trustee or its appointed agent shall be the successor in all respects to the
Servicer as provided in Section 8.08 hereof.
Section 9.04. Notification to Certificateholders. (a) Upon any such
---------------------------------- termination pursuant
to Section 9.01, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the
Certificate Register and to the Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Holders of Certificates, notice of
each such Event of Default hereunder known to the Trustee, unless such Event
of Default shall have been cured or waived.
Section 9.05. Effect of Transfer. (a) After a transfer of servicing
------------------ duties to a successor Servicer
pursuant to Section 8.05, 8.07, 8.08 or 9.01, the Trustee or new Servicer
may notify Obligors to make payments that are due under the Contracts after
the effective date of the transfer of servicing duties directly to the new
Servicer.
(b) After the transfer of servicing duties to a successor Servicer
pursuant to Section 8.05, 8.07, 8.08 or 9.01, the replaced Servicer shall
have no further obligations with respect to the management, administration,
servicing or collection of the Contracts, but in the case of a transfer
pursuant to Section 8.08 or 9.01 shall remain liable for any liability of
the Servicer hereunder and shall remain entitled to any compensation due the
Servicer that had already accrued prior to such transfer.
(c) A transfer of servicing duties to a successor Servicer shall not
affect the rights and duties of the parties hereunder (including but not
limited to the indemnities of the Servicer pursuant to Article VIII) other
than those relating to the management, administration, servicing or
collection of the Contracts.
(End of Article IX)
ARTICLE X
CONCERNING THE TRUSTEE
----------------------
Section 10.01. Duties of Trustee. The Trustee, prior to the
occurrence ----------------- of an Event of Default and
after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are set forth
specifically in this Agreement. In case an Event of Default has occurred
(which has not been cured), the Trustee shall exercise such of the rights
and powers vested in it by this Agreement and use the same degree of care
and skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are required specifically to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act or its own misconduct; provided, however, that:
-------- -------
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith on the part
of the Trustee, the Trustee may rely conclusively, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Agreement;
(ii) The Trustee shall not be liable personally for an error of
judgment made in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) The Trustee shall not be liable personally with respect
to any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates evidencing
Fractional Interests aggregating not less than 25% as to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement.
Section 10.02. Certain Matters Affecting the Trustee. Except as
------------------------------------- otherwise provided in
Section 10.01:
(a) The Trustee may rely upon and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) The Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith and
in accordance with such Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute, conduct
or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders
pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve the
Trustee of the obligation, upon the occurrence of an Event of Default (which
has not been cured), to exercise such of the rights and powers vested in it
by this Agreement, and to use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs;
(d) The Trustee shall not be liable personally for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(e) Prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing so to do by the Holders
of Certificates evidencing Fractional Interests aggregating not less than
25%; 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 such
proceeding. The reasonable expense of every such examination shall be paid
by the Servicer, if an Event of Default shall have occurred and is
continuing, and otherwise by the Certificateholders requesting the
investigation; 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.
Section 10.03. Trustee Not Liable for Certificates or
-------------------------------------- Contracts. The recitals
contained herein and in the Certificates (other than --------- the
authentication of the Certificates) and in the Sale and Purchase Agreement
shall be taken as the statements of the Depositor, the Contract Seller or
the Servicer, as the case may be, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations or warranties
as to the validity or sufficiency of this Agreement, of the Certificates
(except that the Certificates shall be duly and validly authen- ticated by
it), of the Sale and Purchase Agreement or of any Contract or related
document. The Trustee shall not be accountable for the use or application
by the Depositor, the Contract Seller or the Servicer of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor, the Contract Seller or the
Servicer in respect of the Contracts or deposited in or withdrawn from the
Certificate Account by the Depositor, the Contract Seller or the Servicer.
Section 10.04. Trustee May Own Certificates. The Trustee in its
---------------------------- individual or any other capacity
may become the owner or pledgee of Certificates with the same rights it
would have if it were not Trustee.
Section 10.05. Servicer to Pay Fees and Expenses of
------------------------------------ Trustee. The Servicer covenants and
agrees to pay, from its own funds, to ------- the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation (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 it in the
execution of the trust hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee, and the Servicer will
pay (out of its own funds) or reimburse the Trustee, to the extent requested
by the Trustee, for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of
this Agreement and 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 in connection with the appointment
of an office or agency pursuant to Section 10.11 except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Servicer also covenants and agrees to indemnify (out of its own funds) the
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee arising
out of or in connection with the acceptance or administration of this trust
and its duties hereunder, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The covenants in this
Section 10.05 shall be for the benefit of the Trustee in its capacity as
Trustee, Paying Agent and Certificate Registrar hereunder, and shall survive
the termination of this Agreement.
Section 10.06. Eligibility Requirements for Trustee. There shall at
------------------------------------ all times be a
Trustee hereunder which shall be either (a) _________________
("___________") or any other Person into which First National is merged or
consolidated or to which substantially all of the properties and assets of
First National are transferred as an entirety provided that such other
Person has accepted appointment as Trustee under this Agreement in
accordance with Article X, and provided, further, that such entity is
authorized to exercise -------- ------- corporate trust
powers under the laws of the United States of America, any State thereof or
the District of Columbia and has all necessary trust powers to perform its
obligations hereunder, or (b) a corporation or banking association organized
and doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authority. If the corporation or banking association referred to in clause
(b) of the previous sentence publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation or banking association shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
Section 10.07. Resignation and Removal of the Trustee. The Trustee at
-------------------------------------- any time may
resign and be discharged from the trusts hereby created by giving written
notice thereof to the Depositor, the Servicer and the Rating Agency. Upon
receiving such notice of resignation, the Depositor promptly shall appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.06 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
the Depositor may remove the Trustee and appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
The Holders of Class A Certificates or, if the Class A Principal
Balance is zero, the Class B Certificates evidencing, as to such Class,
Percentage Interests aggregating more than 50% may remove the Trustee at any
time and appoint a successor trustee by written instrument or instruments,
in triplicate, signed by such Certificateholders or their attorneys-in-fact
duly authorized, one complete set of which instruments shall be delivered to
the Depositor, one complete set to the Trustee so removed and one complete
set to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 10.08.
Section 10.08. Successor Trustee. Any successor trustee appointed as
----------------- provided in Section 10.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon
the resignation or removal of the predecessor trustee shall become effective
and such successor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as
trustee herein. The predecessor trustee shall execute and deliver such
instruments and do such other things as reasonably may be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 10.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such
trustee hereunder to all Certificateholders at their addresses as shown in
the Certificate Register, to the Servicer and to the Rating Agency. If the
Depositor 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 Depositor.
Section 10.09. Merger or Consolidation of Trustee. Any corporation
---------------------------------- into which the Trustee
may be merged or converted or with which it may be consolidated or any
corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to the business
of the Trustee, shall be the successor of the Trustee hereunder, provided
such corporation shall be eligible under the provisions of Section 10.06,
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 10.10. Appointment of Co-Trustee or Separate
------------------------------------- Trustee. Notwithstanding any other
provisions hereof, at any time, for the ------- purpose of (i) meeting any
legal requirements of any jurisdiction in which any part of the Trust Fund
or property securing the same may be located at the time or (ii) meeting any
legal requirements with respect to the holding of the Contracts, the
Depositor and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved
by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity, such
title to the Trust Fund, or any part thereof, and, subject to the other
provisions of this Section 10.10, such powers, duties, obligations, rights
and trusts, as the Depositor and the Trustee may consider necessary or
desirable. If the Depositor shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, or in case an
Event of Default shall have occurred and be continuing, the Trustee alone
shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 10.06 hereunder and no notice to
Certificateholders of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 10.08 hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 10.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed or any
regulation applicable to any of the Contracts (whether as Trustee hereunder
or as successor to the Servicer hereunder), the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
Fund or any portion thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee or co-trustee at the direction of the
Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article X. 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 Agreements 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.
Any separate trustee or co-trustee may, at any time, appoint the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Nothing in this Section shall relieve the Trustee of its duties,
obligations or liabilities under this Agreement.
Section 10.11. Appointment of Office or Agency. The Trustee will
------------------------------- appoint an office or agency
in the City of New York where Certificates may be surrendered for
registration of transfer or exchange. The Trustee initially designates
__________, located in the City of New York, for the purpose of keeping the
Certificate Register. The Certificate Register may be kept in an electronic
form capable of printing out a hard copy of the Certificate Register. The
Trustee will maintain an office at the address stated in Section 12.10
hereof where notices and demands to or upon the Trustee in respect of the
Certificates may be served. The Trustee will give prompt written notice to
Certificateholders of any change in the location of the Certificate Register
or any such office or agency.
Section 10.12. REMIC Compliance. The parties intend that the Trust
---------------- Fund formed hereunder shall constitute,
and that the affairs of the Trust Fund shall be conducted so as to qualify
it as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee shall, to the extent permitted by applicable law, act as agent, and
is hereby appointed to act as agent, of the Trust Fund and shall on behalf
of the Trust Fund: (a) prepare, file and present to the Trustee to sign, or
cause to be prepared, filed and presented to the Trustee to be signed, all
required federal tax returns for the Trust Fund, including, but not limited
to, Form 1066 using a calendar year as the taxable year for the Trust Fund
when and as required by the REMIC Provisions and other applicable federal
income tax laws; (b) make an election, on behalf of the Trust Fund, to be
treated as a REMIC on the Form 1066 for its first taxable year, in
accordance with the REMIC Provisions; (c) cause to be prepared and forwarded
to the Certificateholders all information reports as and when required to be
provided to them in accordance with the REMIC Provisions; (d) if the filing
or distribution of any documents of an administrative nature not addressed
in clauses (a) through (c) of this Section is then required by the REMIC
Provisions in order to maintain the status of the Trust Fund as a REMIC,
prepare, file and sign or distribute, or cause to be prepared and filed or
distributed, such documents with or to such persons when and as required by
the REMIC Provisions; (e) conduct the affairs of the Trust Fund at all times
that any Certificates are outstanding so as to maintain the status of the
Trust Fund as a REMIC under the REMIC Provisions; and (f) serve as tax
matters person for the Trust Fund pursuant to Temporary Treasury Regulations
Section 1.860F-4T(d) or serve as attorney-in-fact and agent for any person
that is the tax matters person if the Servicer determines, in its discretion
that it is not permitted under applicable law to serve as the tax matters
person. If the Servicer determines, in its sole discretion, that it is not
permitted by applicable law to perform any of the duties in the preceding
sentence, the Trustee shall carry out such duties pursuant to the
instructions of the Servicer and shall be compensated for such services
pursuant to Section 10.05. The Servicer shall not knowingly or
intentionally take any action (or knowingly or intentionally direct the
Trustee to take or omit to take any action) or knowingly or intentionally
omit to take any action (or knowingly or intentionally omit to direct the
Trustee to take any action) if such action or omission (as the case may be)
would cause the termination of the REMIC status of the Trust Fund. The
Depositor and the Trustee shall cooperate with the Servicer or its agent for
such purpose in supplying any information within their control (other than
any confidential information) that is necessary to enable the Servicer to
perform its duties under this Section. The Holder of the Class R
Certificate, by purchasing such Class R Certificate, (A) shall be deemed to
consent to the appointment of the Servicer as (i) the tax matters person for
the Trust Fund and (ii) the attorney-in-fact and agent for any person that
is the tax matters person if the Servicer is unable to serve as the tax
matters person and (b) agrees to execute any documents required to give
effect to (A) above.
The Holder of the Class R Certificate, by purchasing such Class R
Certificate, agrees to give the Servicer written notice that it is a
"pass- through interest holder" within the meaning of Temporary Treasury
Regulations section 1.67-3T(a)(2)(i)(A) immediately upon becoming the Holder
of the Class R Certificate, if it is, or is holding the Class R Certificate
on behalf of, a "pass-through interest holder."
In the event that any tax, including interest, penalties, additional
amounts or additions to tax (a "Tax"), is imposed on the Trust Fund, such
tax shall be charged against amounts otherwise required to be distributed to
the Holder of the Class R Certificate or against the Person causing the
event to occur which resulted in the imposition of such tax. The Trustee is
hereby authorized to retain, or cause the Paying Agent to retain, from
amounts otherwise required to be distributed to the Holder of the Class R
Certificate sufficient funds to pay or provide for the payment of, and to
actually pay, or cause the Paying Agent to pay, such Tax as is legally owed
by the Trust Fund (but such authorization shall not prevent the Trustee from
contesting any such Tax in appropriate proceedings, and withholding payment
of such Tax, if permitted by law, pending the outcome of such proceedings).
To the extent that sufficient amounts cannot be so retained to pay or
provide for the payment of any tax imposed on gain realized from any
prohibited transaction (as defined in the REMIC Provisions), the Trustee is
hereby authorized to and, upon the receipt of written notice of the
existence of any tax liability, shall segregate, into a separate
non-interest-bearing account, the net income from such prohibited
transactions and pay, or cause the Paying Agent to pay, such Tax. In the
event any (i) amounts initially retained from amounts required to be
distributed to the Holder of the Class R Certificate and (ii) income so
segregated and applied towards the payment of such Tax shall not be
sufficient to pay such Tax in its entirety, the amount of the shortfall
shall be paid from funds in the Certificate Account notwithstanding anything
to the contrary contained herein. To the extent any such segregated income
or funds from the Certificate Account are paid to the Internal Revenue
Service, the Trustee shall retain, or cause to be retained, an amount equal
to the amount of such income or funds so paid from future amounts otherwise
required to be distributed to the Holder of the Class R Certificate and
shall deposit such retained amounts in the Certificate Account for
distribution to the Holders of Certificates other than the Class R
Certificate.
Except as provided in Section 3.05, the Trustee shall not sell any
Contract or any other asset of the Trust Fund unless either (i) it has
received an Opinion of Counsel to the effect that such sale will not result
in the imposition of taxes on "prohibited transactions" on the Trust Fund as
defined in Section 860F of the Code, or (ii) the proceeds of such sale, net
of any related taxes on "prohibited transactions" on the Trust Fund as
defined in Section 860F of the Code, will at least equal the Repurchase
Price of such Contract.
(End of Article X)
ARTICLE XI
TERMINATION
-----------
Section 11.01. Termination. (a) The respective obligations and
----------- responsibilities of the Depositor, the Servicer
(except as to Section 10.05) and the Trustee shall terminate upon: (i) the
later of the final payment or other liquidation (or any advance with respect
thereto) of the last Contract or the disposition of all property acquired
upon repossession of any Contract and the remittance of all funds due
hereunder; or (ii) at the option of the Depositor or the Servicer, on any
Distribution Date after the first Distribution Date on which the Pool
Principal Balance is less than 10% of the Initial Principal Amount, upon the
purchase of the Contracts at a price equal to the greater of (a) the sum of
(x) 100% of the principal balance of each Contract (other than any Contract
as to which the related Manufactured Home has been repossessed and not yet
disposed of and whose fair market value is included pursuant to clause (y)
below) as of the final Distribution Date, and (y) the fair market value of
such acquired property (as determined by the Depositor or the Servicer, as
the case may be, as of the close of business on the third Business Day next
preceding the date upon which notice of any such termination is furnished to
Certificateholders pursuant to this Section), and (b) the aggregate fair
market value (as determined by the Depositor or the Servicer, as the case
may be, as of the close of business on such third Business Day) of all of
the assets of the Trust Fund, plus, in the case of both (a) and (b), any
Class A Unpaid Interest Shortfall, and any Class B Unpaid Interest Shortfall
as well as one month's interest at the applicable Net Contract Rate on the
Contract Principal Balance of each Contract (including any Contract as to
which the related Manufactured Home has been repossessed or foreclosed upon
and not yet disposed of); provided,
-------- however, that in no event shall the trust
created hereby continue beyond the ------- expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the
date hereof. Notwithstanding the foregoing, the option specified in clause
(ii) of this Section 11.01(a) shall not be exercisable if there will not be
distributed to the Class A Certificateholders an amount equal to the Class A
Principal Balance together with the Class A Unpaid Interest Shortfall and
one month's interest on the Class A Principal Balance at the Class A
Pass-Through Rate, and to the Class B Certificateholders an amount equal to
the Class B Principal Balance together with the Class B Unpaid Interest
Shortfall and one month's interest on the Class B Principal Balance at the
Class B Pass-Through Rate. If the Depositor and the Servicer both desire to
exercise the option in clause (ii) of this paragraph on any Distribution
Date after the first Distribution Date on which the Pool Principal Balance
is less than 10% of the Initial Principal Amount, the Servicer shall have
the prior right to exercise such option.
(b) Notice of any termination, specifying the Distribution Date upon
which all Certificateholders may surrender their Certificates to the Trustee
for payment and cancellation, shall be given promptly by the Servicer (if
the Depositor is exercising the option given it in Section 11.01(a), upon
direction by the Depositor given 10 days prior to the date such notice is to
be mailed) by letter to Certificateholders, the Trustee and the Rating
Agency mailed no later than the 15th day of the month preceding the month of
such final distribution specifying (i) the Distribution Date upon which
final payment on the Certificates will be made upon presentation and
surrender of Certificates at the office or agency of the Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified.
After giving such notice, the Trustee shall not register the transfer or
exchange of any Certificates. If such notice is given in connection with
the Depositor's or the Servicer's election to purchase, the Depositor or the
Servicer shall deposit in the Certificate Account on the Business Day prior
to the applicable Distribution Date the amount described in Section
11.01(a)(ii). Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed, from funds in the Certificate
Account, to Certificateholders, in proportion to their respective Percentage
Interests, an amount equal to, as to the Class A Certificates, the Class A
Principal Balance together with the Class A Unpaid Interest Shortfall and
one month's interest at the Class A Pass- Through Rate on the Class A
Principal Balance and, as to Class B Certificates, the Class B Principal
Balance together with the Class B Unpaid Interest Shortfall and one month's
interest at the Class B Pass-Through Rate on the Class B Principal Balance.
Upon such termination, any amounts remaining in the Certificate Account
(other than amounts retained to meet claims) shall be paid to the holder of
the Class R Certificate. Following such final deposit the Trustee shall
execute all assignments, endorsements and other instruments necessary to
effectuate such transfer. The distribu- tion on the final Distribution
Date shall be in lieu of the distribution otherwise required to be made on
such Distribution Date in respect of the Certificates and the Class R
Certificate. Any amounts retained in the Certificate Account that are owed
to Certificateholders which have not surrendered their Certificates as of
the final Distribution Date shall be withdrawn from the Certificate Account
and held in an escrow account with the Trustee pending distribution pursuant
to Section 11.01(c).
(c) If all of the Certificateholders shall not surrender their
Certificates for cancellation within three months after the time specified
in the above-mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with
respect thereto. If within two years after the second notice all the
Certificates shall not have been surrendered for cancellation, the Trustee
shall so notify the Depositor and the Depositor may take appropriate steps,
or may appoint an agent to take appropriate and reasonable steps, to contact
the remaining Certificateholders concerning surrender of their Certificates,
and the cost thereof shall be paid out of, and only to the extent of, the
funds and other assets which remain in trust hereunder.
Upon any termination pursuant to the exercise of the purchase option
contained in Section 11.01(a)(ii) or otherwise, the Trust Fund shall be
terminated in accordance with the following additional requirements, unless
the Trustee has received an Opinion of Counsel to the effect that the
failure of the Trust Fund to comply with the requirements of this Section
will not (i) result in the imposition of taxes on "prohibited transactions"
of the Trust Fund as described in Section 860F of the Code, or (ii) cause
the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date set forth
in the notice given by the Servicer or the Trustee under this Section, the
holder of the Class R Certificate shall adopt a plan of complete liquidation
of the Trust Fund; and
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Servicer as
agent of the Trustee shall sell all of the assets of the Trust Fund to the
Depositor or the Servicer, as the case may be, for cash.
By its acceptance of the Class R Certificate, the holder thereof hereby
agrees to adopt such a plan of complete liquidation upon the written request
of the Servicer or the Depositor and to take such other action in connection
therewith as may be reasonably requested by the Depositor.
(End of Article XI)
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
Section 12.01. Severability of Provisions. If any one or more of the
-------------------------- covenants, agreements,
provisions or terms of this Agreement shall be held invalid for any reason
whatsoever, then such covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or
terms of this Agreement and in no way shall affect the validity or
enforceability of the other provisions of this Agreement.
Section 12.02. Limitation on Rights of Certificateholders. The death
------------------------------------------ or incapacity
of any Certificateholder shall not operate to terminate this Agreement or
the Trust Fund, nor entitle such Certificateholder's legal representatives
or heirs to claim an accounting or to take any action or proceeding in any
court for a partition or winding up of the Trust Fund, nor otherwise affect
the rights, obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from
time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of
any action taken by the parties to this Agreement pursuant to any provision
hereof.
No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
previously shall have given to the Trustee a written notice of default and
of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Class A Certificates or Holders of Class B Certificates
evidencing, as to such Class, Percentage Interests aggregating not less than
25% shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall
have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute
any such action, suit or proceeding; it being understood and intended, and
being covenanted expressly by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of
the Holders of any other of such Certificates, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
Section 12.03. Acts of Certificateholders. (a) Except as otherwise
-------------------------- specifically provided herein,
whenever Certificateholder approval, authorization, direction, notice,
consent, waiver or other action is required hereunder, such approval,
authorization, direction, notice, consent, waiver or other action shall be
deemed to have been given or taken on behalf of, and shall be binding upon,
all Certificateholders if agreed to by Holders of Certificates of the
specified Class or Classes evidencing, as to each such Class, Percentage
Interests aggregating 51% or more.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders
in person or by agent duly appointed in writing; and except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where required,
to the Servicer. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee the Servicer and the
Depositor if made in the manner provided in this Section.
(c) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(d) The ownership of Certificates shall be proved by the Certificate
Registrar.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done by the Trustee or the Servicer in reliance thereon, whether or not
notation of such action is made upon such security.
(f) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
Section 12.04. Calculations. Except as otherwise provided in this
------------ Agreement, all interest rate and basis point
calculations under this Agreement will be made on the basis of a 360-day
year and twelve thirty-day months and will be carried out to at least three
decimal places.
Section 12.05. Amendment. This Agreement may be amended from time to
--------- time by the Depositor, the Servicer, and the
Trustee, but without the consent of any of the Certificateholders, (a) to
cure any ambiguity or to correct or supplement any provisions herein which
may be inconsistent with any other provisions herein, (b) to add to the
duties or obligations of the Servicer hereunder, (c) to obtain a rating by a
nationally recognized rating agency or to maintain or improve the rating of
the Class A Certificates or Class B Certificates then given by a rating
agency (it being understood that, after obtaining the rating of the Class A
Certificates and Class B Certificates at the Closing Date, none of the
Trustee, the Depositor or the Servicer is obligated to obtain, maintain or
improve any rating of the Class A Certificates or Class B Certificates), or
(d) to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be materially inconsistent with
the provisions of this Agreement, including without limitation provisions
relating to the issuance of definitive Certificates to Certificate Owners
provided that book-entry registration of Class A and Class B Certificates is
no longer permitted; provided, however, that, in the case of clause (d),
such action shall not, -------- ------- as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder (including, without limita- tion, the maintenance of the
status of the Trust Fund as a REMIC under the Code).
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Trustee, without consent of the Certificateholders, to
modify, eliminate or add to the provisions of this Agreement to such extent
as shall be necessary to (i) maintain the qualification of the Trust Fund as
a REMIC under the Code or avoid, or minimize the risk of, the imposition of
any tax on the Trust Fund under the Code that would be a claim against the
Trust Fund's assets, provided that (a) there shall have been delivered an
Opinion of Counsel addressed to the Trustee to the effect that such action
is necessary or appropriate to maintain such qualification or avoid any such
tax or minimize the risk of its imposition, and (b) such amendment shall not
adversely affect in any material respect the interests of any
Certificateholder or (ii) prevent the Trust Fund from entering into any
"prohibited transaction" as defined in Section 860F of the Code provided
that (a) there shall have been delivered an Opinion of Counsel addressed to
the Trustee to the effect that such action is necessary or appropriate to
prevent the Trust Fund from entering into such prohibited transaction, and
(b) such amendment shall not adversely affect in any material respect
the interests of any Certificateholder.
This Agreement also may be amended from time to time by the Depositor,
the Servicer and the Trustee, with the consent of the Holders of each Class
of Certificates affected thereby evidencing, as to each such Class,
Percentage Interests aggregating not less than 66%, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
holders of Certificates; provided, however, that no such amendment shall (i)
-------- ------- reduce in any manner the amount
of, or delay the timing of, distributions which are required to be made on
any Certificate without the consent of the Holder of such Certificate; (ii)
reduce the aforesaid percentage of Certificates, the Holders of which are
required to consent to any such amendment, without the consent of the
Holders of all such Certificates then outstanding or (iii) adversely affect
the status of the Trust Fund as a REMIC or cause a tax to be imposed on the
Trust Fund under the REMIC Provisions.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification of the substance of such amendment to each
Certificateholder and the Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 12.05 to approve the particular form of any proposed amendment
but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
Section 12.06. Recordation of Agreement. To the extent permitted by
------------------------ applicable law, this Agreement
is subject to recordation in all appropriate public offices for real
property records in all the counties or other comparable jurisdictions in
which any or all of the properties subject to the Contracts are situated,
and in any other appropriate public recording office or elsewhere, such
recordation to be effected by the Servicer at the Servicer's expense with
the consent of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration
or servicing of the Contracts.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and such counterparts shall constitute
but one and the same instrument.
Section 12.07. Contribution of Assets. Except as provided in Section
---------------------- 3.05(b) and so much of Section
3.05(a) as does not relate to a deposit in lieu of repurchase of a Contract
the principal balance of which is incorrectly set forth on the Contract
Schedule, following the Closing Date, the Trustee shall not accept any
contribution of additional assets to the Trust Fund unless the Depositor has
delivered an Opinion of Counsel addressed to the Trustee to the effect that
(i) the contribution of such assets into the Trust Fund will not cause the
Trust Fund to fail to qualify as a REMIC so long as any Certificate is
outstanding and (ii) such contribution will not cause the imposition of tax
on contributions to the Trust Fund after the "start-up day" (as defined in
Section 860G of the Code) with respect thereto.
Section 12.08. Duration of Agreement. This Agreement shall continue
--------------------- in existence and effect until
terminated as herein provided.
SECTION 12.09. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
------------- ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.10. Notices. All demands, notices and communications
------- hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered at, or telecopied (with
transmission confirmed by telephone) to, or mailed by first class or
registered mail, postage prepaid, to (i) in the case of the Depositor,
Merrill Lynch Mortgage Investors, Inc., 250 Vesey Street, World Financial
Center, New York, New York 10281-1310, Attention: _______________, (ii) in
the case of the Servicer, _____________________, Attention:
_________________, (iii) in the case of the Trustee, _________________,
_________________________, Attention: ___________; (iv) in the case of
Moody's, 99 Church Street, New York, New York 10004, Attention: Asset
Backed Monitoring and (v) in the case of Standard & Poor's, 25 Broadway, New
York, New York 10004, Attention: Consumer Asset Backed Surveillance Group.
Section 12.11. Merger and Integration of Documents. Except as
----------------------------------- specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not
be modified, amended, waived, or supplemented except as provided herein.
Section 12.12. Headings. The headings herein are for purposes of
-------- reference only and shall not otherwise affect the
meaning or interpretation of any provision hereof.
Section 12.13. Counterparts. This Agreement may be executed in two or
------------ more counterparts, each of which shall be
an original, but all of which together shall constitute one and the same
instrument.
(End of Article XII)
IN WITNESS WHEREOF, the Depositor, _________, as Servicer and
Contract Seller and the Trustee have caused their names to be signed hereto
by their respective officers thereunto duly authorized as of the day and
year first above written.
MERRILL LYNCH MORTGAGE INVESTORS, INC.
By: ______________________________
Name: ________________________
Title: _______________________
_____________________________,
as Servicer and Contract Seller
By: ______________________________
Name: ________________________
Title: _______________________
____________________
By: ______________________________
Name: ________________________
Title: _______________________
State of New York )
) ss.:
County of New York )
On the _______ day of ____________, 199_ before me, a notary public in
and for said State, personally appeared ___________________________ , known
to me to be ______________ of Merrill Lynch Mortgage Investors, Inc., one of
the corporations that executed the within instrument, and also known to me
to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
____________________________________________
Notary Public
(Notarial Seal)
State of )
) ss.:
County of )
On the _________ day of _______________, 199_ before me, a notary
public in and for said State, personally appeared, known to me to be a
Senior Vice President of __________________, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________________________________
Notary Public
(Notarial Seal)
State of New York )
) ss.:
County of New York )
On the ______ day of ___________________, 199_ before me, a notary
public in and for said State, personally appeared _________________, known
to me to be a Trust Officer of _________________, the national banking
association that executed the within instrument, and also known to be the
person who executed it on behalf of said national association, and
acknowledged to me that such national association executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________________________________
Notary Public
(Notarial Seal)
EXHIBIT A-1
CONTRACT SCHEDULE
EXHIBIT A-2
CONTENTS OF CONTRACT FILE
With respect to each Contract, the Contract File shall include the
following items:
1. The original Contract.
2. With respect to a Contract that is not a Land Home Contract,
evidence of one or more of the following types of perfection of the security
interest in the related Manufactured Home granted by such Contract,
as appropriate: (a) the title document, with notation of such security
interest on such title document, (b) a financing statement meeting the
requirements of the UCC, with evidence of recording indicated thereon, or
(c) such other evidence of perfection of a security interest in a
manufactured housing unit as is customarily relied upon in the
jurisdiction in which the related Manufactured Home is located. With
respect to a Land Home Contract, the Mortgage with evidence of recording
thereon and, if the Manufactured Home is not part of the real estate
constituting the related Mortgaged Property, the evidence of the perfection
of the security interest in the related Manufactured Home specified in the
preceding sentence and an assignment of the Mortgage in blank.
3. All assignments of the Contracts.
4. Any extension agreement(s).
EXHIBIT B
FORM OF FACE OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Number _____
Date of Pooling and Original Denomination Servicing Agreement
and $___________________ Cut-off Date ____________ 1, 199_
Original Class A Principal
Balance Class A Pass-Through Rate: ___% $
Distribution Date after
Latest Due Date: First Distribution Date
CUSIP ________________
MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
PASS-THROUGH CERTIFICATE
SERIES 199_-_, CLASS A (SENIOR)
evidencing a percentage interest in any distributions
allocable to the Class A Certificates with respect to a pool of fixed rate
conventional manufactured housing contracts formed and sold by
Merrill Lynch Mortgage Investors, Inc.
which manufactured housing contracts either were originated or acquired by
and are initially serviced by __________________ (the "Servicer").
This Certificate does not represent an obligation of or interest in
Merrill Lynch Mortgage Investors, Inc., the Servicer or the Trustee referred
to below or any of their Affiliates.
Neither this Certificate nor the underlying manufactured housing
contracts are guaranteed or insured by Merrill Lynch Mortgage Investors,
Inc., the Servicer or by any governmental agency or instrumentality.
THE PORTION OF THE ORIGINAL CLASS A PRINCIPAL BALANCE EVIDENCED BY THIS
CERTIFICATE ("CERTIFICATE BALANCE") WILL BE REDUCED BY DISTRIBUTIONS ON THIS
CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE
BALANCE BY INQUIRY OF THE TRUSTEE.
This certifies that ___________________ is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool
(the "Contract Pool") of conventional manufactured housing installment sales
contracts and installment loan agreements (collectively, the "Contracts")
formed and sold by Merrill Lynch Mortgage Investors, Inc. (hereinafter
called the "Depositor," which term includes any successor entity under the
Agreement referred to below) and certain other property (collectively, the
"Trust Fund"). The Contracts either were originated or acquired by and are
serviced by __________________ (the "Servicer") and are secured by
Manufactured Homes. The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as specified above (the "Agreement"), by and among
the Depositor, the Servicer, and _________________, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is
set forth here- after. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 199_-_ (the "Certificates") and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
On each Distribution Date, the Trustee will cause to be distributed
from funds in the Certificate Account to each Class A Certificateholder an
amount equal to the product of the Percentage Interest evidenced by such
Class A Certificateholder's Certificate and the Class A Distribution Amount.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register or by wire transfer to Holders of Class A
Certificates with original denominations aggregating at least $5 million who
have given the Trustee written instructions at least 5 business days prior
to the related Record Date. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose and specified ln such notice of final distribution.
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company to the Trustee or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to
Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede &
Co., has an interest herein.
Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have
the same effect as if set forth at this place.
(Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.)
(This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by
anu authorized officer of the Trustee.)
(IN WITNESS WHEREOF; the Depositor has caused this Certificate to be
duly executed.)
Dated:
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
By ______________________________
Authorized Officer
(Form of Certificate of Authentication)
This is one of the Certificates
referred to in the within-
mentioned Agreement.
By By ____________________,
OR
Authenticating Agent Trustee
_________________________ _________________________)
Authorized Signatory Authorized Signatory
(IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
--------------------------
-----------------, not in its individual
capacity but solely as Trustee
By __________________________
Authorized Officer
Countersigned:
By: ____________________
Authorized Officer of
____________________
____________ not in
its individual capacity
but solely as Trustee)
EXHIBIT C
FORM OF FACE OF CLASS B CERTIFICATE
(SOLELY FOR U.S. FEDERAL INCOME TAX
PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE. THE FOLLOWING
INFORMATION IS PROVIDED SOLELY FOR THE
PURPOSE OF APPLYING THE U.S.
FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT
("OID") RULES TO THIS CERTIFICATE. THE ISSUE
DATE OF THIS CERTIFICATE IS ______________
__, 199_. THE INITIAL PER ANNUM RATE OF
INTEREST ON THIS CERTIFICATE IS ___%.
ASSUMING THAT PRINCIPAL PAYMENTS ARE MADE
ON THE CONTRACTS UNDERLYING THE
CERTIFICATES AT A CONSTANT ANNUAL PREPAYMENT
RATE OF __% OF THE PREPAYMENT MODEL, THIS
CERTIFICATE HAS BEEN ISSUED WITH NO MORE
THAN $_________ OF OID PER $1,000 OF INITIAL
PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS
___% AND THE AMOUNT OF OID ATTRIBUTABLE TO
THE INITIAL SHORT ACCRUAL PERIOD IS NO
MORE THAN $_______ PER $1,000 OF INITIAL
PRINCIPAL AMOUNT, CALCULATED UNDER
THE EXACT METHOD. NO REPRESEN- TATION IS
MADE AS TO THE RATE AT WHICH PRINCIPAL
PAYMENTS WILL BE MADE ON THE CONTRACTS.)
THIS CERTIFICATE IS SUBORDINATED IN RIGHT
OF PAYMENT TO THE CLASS A CERTIFICATES AS
DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
Number ______
Date of Pooling and Original Denomination
Servicing Agreement and $____________________
Cut-off Date
_____________ 1, 199 Original Class B
Principal Balance
Class B Pass-Through Rate:____% $____________________
Distribution Date after
Latest Due Date:
First Distribution Date ______________ 15, 201__
____________ 15, 199
MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
PASS-THROUGH CERTIFICATE
Series 199_, CLASS B (SUBORDINATE)
evidencing a percentage interest in
any distributions allocable to the
Class B Certificates with respect to
a pool of fixed rate conventional manufactured
housing contracts formed and sold by
Merrill Lynch Mortgage Investors, Inc.
which manufactured housing contracts either were originated or acquired by
and are initially serviced by __________________ (the "Servicer").
This Certificate does not represent an obligation of or interest in
Merrill Lynch Mortgage Investors, Inc., the Servicer or the Trustee referred
to below or any of their Affiliates. Neither this Certificate nor the
underlying manufactured housing contracts are guaranteed or insured by
Merrill Lynch Mortgage Investors, Inc., the Servicer or by any governmental
agency or instrumentality.
THE PORTION OF THE ORIGINAL CLASS A PRINCIPAL BALANCE EVIDENCED BY THIS
CERTIFICATE ("CERTIFICATE BALANCE") WILL BE REDUCED BY DISTRIBUTIONS ON THIS
CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE
BALANCE BY INQUIRY OF THE TRUSTEE.
This certifies that ______________________________ is the registered
owner of an undivided interest in certain monthly distributions with respect
to a pool (the "Contract Pool") of conventional manufactured housing
installment sales contracts and installment loan agreements (collectively,
the "Contracts") formed and sold by Merrill Lynch Mortgage Investors, Inc.
(hereinafter called the "Depositor," which term includes any successor
entity under the Agreement referred to below) and certain other property
(collectively, the "Trust Fund"). The Contracts either were originated or
acquired by and are serviced by __________________ (the "Servicer") and are
secured by Manufactured Homes. The Trust Fund was created pursuant to a
Pooling and Servicing Agreement dated as specified above (the "Agreement"),
by and among the Depositor, the Servicer, and _________________, as trustee
(the "Trustee"), a summary of certain of the pertinent provisions of which
is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 199_-_ (the "Certificates"), and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
On each Distribution Date, the Trustee will cause to be distributed to
each Class B Certificateholder an amount equal to the product of (i) the
Percentage Interest evidenced by such Class R Certificateholder's
Certificate and, subject to the prior rights of Holders of Class A and Class B
Certificates as specified in the Agreement, the Amount distributable to the
Class R Certificateholders, payable solely from funds in the Certificate
Account.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register or by wire transfer to Holders of Class B
Certificates with original denominations aggregating at least $5 million who
have given the Trustee written instructions at least five business days prior
to the related Record Date. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose and specified in such notice of final distribution.
The Class B Certificateholders will have the benefit of the right
to receive Reserve Fund Draw Amounts from the Reserve Fund, as described
and as limited in the Agreement.
Unless this Certificate is presented by an authorized representative of
The Depositary Trust Company to the Trustee or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered
in the name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to
Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede
& Co., has an interest herein.
Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have
the same effect as if set forth at this place.
(Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.)
(This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by
any authorized officer of the Trustee.)
(IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed.
Dated:
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
By: ______________________________
Authorized Officer
(Form of Certificate of
Authentication)
This is one of the Certificates
referred to in the within-
mentioned Agreement.
By By _______________________,
OR
Authenticating Agent Trustee
_________________________ _________________________
Authorized Signatory Authorized Signatory)
(IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
--------------------------
-----------------, not in its individual
capacity but solely as Trustee
By __________________________
Authorized Officer
Countersigned:
By: ____________________
Authorized Officer of
____________________
____________ not in
its individual capacity
but solely as Trustee)
EXHIBIT D
FORM OF FACE OF CLASS R CERTIFICATE
(SOLELY FOR U.S. FEDERAL INCOME TAX
PURPOSED, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" AS
THOSE TERMS ARE DEFINED, RESPECTIVE-
LY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE.
THIS CERTIFICATE IS SUBORDINATED IN
RIGHT OF PAYMENT TO THE CLASS A AND
CLASS B CERTIFICATES AS DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE RESOLD
OR TRANSFERRED UNLESS IT IS REGISTERED
PURSUANT TO SUCH ACT OR LAWS OR IS SOLD
OR TRANSFERRED IN TRANSACTIONS WHICH ARE
EXEMPT FROM REGISTRATION UNDER SUCH ACT
OR UNDER APPLICABLE STATE LAW AND IS
TRANSFERRED IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 4.02 OF THE
AGREEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY
BENEFICIAL INTEREST HERREIN MAY BE,
DIRECTLY OR INDIRECTLY, TRANSFERRED,
SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE ASSIGNED WITHOUT THE
EXPRESS WRITTEN CONSENT OF THE MASTER
SERVICER, ACTING ON BEHALF OF THE TRUST
FUND, AND ANY TRANSFER IN VIOLATION OF
THIS RESTRICTION SHALL BE ABSOLUTELY NULL
AND VOID AND SHALL VEST NO RIGHTS IN ANY
PURPORTED TRANSFEREE, AND SHALL SUBJECT
THE HOLDER HEREOF TO LIABILITY FOR ANY
TAX IMPOSED (AND RELATED EXPENSES, IF ANY)
WITH RESPECT TO SUCH ATTEMPTED TRANSFER.
Class R Residual Interest Percentage Interest:___%
Number _____
Date of Pooling and
Servicing Agreement and
Cut-off Date
____________ 1, 199
Distribution Date after
Latest Due Date:
First Distribution Date ________________ 15, 201___
____________15, 199
MANUFACTURED HOUSING CONTRACT SENIOR/SUBORDINATE
PASS-THROUGH CERTIFICATE
Series 199_, CLASS R (SUBORDINATE)
evidencing a percentage interest in
any distributions allocable to the
Class B Certificates with respect to
a pool of fixed rate conventional manufactured
housing contracts formed and sold by
Merrill Lynch Mortgage Investors, Inc.
which manufactured housing contracts either were originated or acquired by
and are initially serviced by __________________ (the "Servicer").
This Certificate does not represent an obligation of or interest in
Merrill Lynch Mortgage Investors, Inc., the Servicer or the Trustee referred
to below or any of their Affiliates. Neither this Certificate nor the
underlying manufactured housing contracts are guaranteed or insured by
Merrill Lynch Mortgage Investors, Inc., the Servicer or by any governmental
agency or instrumentality.
This certifies that ______________________________ is the registered
owner of an undivided interest in certain monthly distributions with respect
to a pool (the "Contract Pool") of conventional manufactured housing
installment sales contracts and installment loan agreements (collectively,
the "Contracts") formed and sold by Merrill Lynch Mortgage Investors, Inc.
(hereinafter called the "Depositor," which term includes any successor
entity under the Agreement referred to below) and certain other property
(collectively, the "Trust Fund"). The Contracts either were originated or
acquired by and are serviced by __________________ (the "Servicer") and are
secured by Manufactured Homes. The Trust Fund was created pursuant to a
Pooling and Servicing Agreement dated as specified above (the "Agreement"),
by and among the Depositor, the Servicer, and _________________, as trustee
(the "Trustee"), a summary of certain of the pertinent provisions of which
is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 199_-_ (the "Certificates"), and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
On each Distribution Date, the Trustee will cause to be distributed to
each Class R Certificateholder an amount equal to the product of (i) the
Percentage Interest evidenced by such Class R Certificateholder's
Certificate and, subject to the prior rights of Holders of Class A and Class B
Certificates as specified in the Agreement, the Amount distributable to the
Class R Certificateholders, payable solely from funds in the Certificate
Account.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register or by wire transfer to Holders of Class 5
Certificates. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose
and specified in such notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth hereafter, which further provisions shall for all purposes have
the same effect as if set forth at this place.
(Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.)
(This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by
any authorized officer of the Trustee.)
(IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed.
Dated:
MERRILL LYNCH MORTGAGE
INVESTORS, INC.
By: ______________________________
Authorized Officer
(Form of Certificate of
Authentication)
This is one of the Certificates
referred to in the within-
mentioned Agreement.
By By _______________________,
OR
Authenticating Agent Trustee
_________________________ _________________________
Authorized Signatory Authorized Signatory)
(IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated:
--------------------------
-----------------, not in its individual
capacity but solely as Trustee
By __________________________
Authorized Officer
Countersigned:
By: ____________________
Authorized Officer of
____________________
____________ not in
its individual capacity
but solely as Trustee)
EXHIBIT E
(FORM OF REVERSE OF CLASS A, CLASS B AND CLASS R CERTIFICATES)
As provided in the Agreement, deductions and withdrawals from the
Certificate Account will be made from time to time for purposes other than
distributions to Certificateholders, such purposes including payment of the
Monthly Servicing Fee, reimbursement to the Servicer for certain expenses
incurred by it, and reimbursement to the Servicer for previous advances with
respect to delinquent payments on the Contracts.
The Trustee will cause to be kept at its Corporate Trust Office in
__________________, or at the office of its designated agent, a Certificate
Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee will provide for the registration of Certificates and
of transfers and exchanges of Certificates. Upon surrender for registration
of transfer of any Certificate at any office or agency of the Trustee
maintained for such purpose, the Trustee will, subject to the limitations
set forth in the Agreement, authenticate and deliver, in the name of the
designated transferee or transferees, a Certificate dated the date of
authentication by the Trustee.
No service charge will be made to the Holder for any transfer or
exchange of the Certificate, 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 the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Depositor,
the Servicer and the Trustee may treat the person in whose name any
Certificate is registered as the owner of such Certificate and the
Percentage Interest in the Trust Fund evidenced thereby for the purpose of
receiving distributions pursuant to the Agreement and for all other purposes
whatsoever, and neither the Depositor, the Servicer nor the Trustee will be
affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity or to correct or supplement
any provisions therein which may be inconsistent with any other provisions
therein, (ii) to add to the duties or obligations of the Servicer under the
Agreement, (iii) to obtain a rating by a nationally recognized rating agency
or to maintain or improve the rating of the Class A or Class B Certificates
then given by a rating agency (it being understood that, after obtaining the
rating of the Class A Certificates and Class B Certificates at the Closing
Date, none of the Trustee, the Depositor or the Servicer is,obligated to
obtain, maintain or improve any rating of the Class A or Class B
Certificates), (iv) to make any other provisions with respect to matters or
questions arising under the Agreement which are not materially inconsistent
with the provisions of the Agreement, including without limitation,
provisions relating to the issuance of definitive Certificates to
Certificate Owners provided that book-entry registration of Class A and
Class B Certificates is no longer permitted, provided that, in the case of
clause (iv) such action does not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any
Certificateholder (including, without limitation, the maintenance of the
status of the Trust Fund as a REMIC under the Code). The Agreement may also
be amended from time to time by the Depositor, the Servicer and the Trustee,
without consent of the Certificateholders, to modify, eliminate or add to
the provisions of the Agreement to such extent as shall be necessary to
maintain the qualification of the Trust Fund as a REMIC under the Code or
avoid, or minimize the risk of, the imposition of any tax on the Trust Fund
or to prevent the Trust Fund from entering into certain prohibited
transactions under the Code, provided that such amendment shall not
adversely affect in any material respect the interests of any
Certificateholder and there shall have been delivered to the Trustee an
Opinion of Counsel to the effect that such action is necessary or
appropriate for such purposes.
The Agreement may also be amended from time to time by the Depositor,
the Servicer and the Trustee with the consent of the Holders of Certificates
of each Class affected thereby evidencing, as to each such Class, Percentage
Interests aggregating at least 66%, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment may (i) reduce in
any -------- ------- manner the amount of, or delay the
timing of, distributions which are required to be made on any Certificate
without the consent of the Holder of such Certificate or (ii) reduce the
aforesaid percentage of Certificates of a Class the Holders of which are
required to consent to any such amendment, without the consent of the
Holders of all Certificates of such Class then outstanding or (iii)
adversely affect the status of the Trust Fund as a REMIC or cause a tax to
be imposed on the Trust Fund under the REMIC provisions.
The respective obligations and responsibilities of the Depositor, the
Servicer and the Trustee under the Agreement will terminate upon: (i) the
later of the final payment or other liquidation (or any advance with respect
thereto) of the last Contract or the disposition of all property acquired
upon repossession of any Contract and the remittance of all funds due
thereunder; or (ii) at the option of the Depositor or the Servicer, on any
Distribution Date after the first Distribution Date on which the Pool
Principal Balance was less than 10% of the Principal Balance on the date of
the initial issuance of the Certificates, so long as the Depositor or the
Servicer, as the case may be, deposits in the Certificate Account the
repurchase price specified in the Agreement.
(FORM OF ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE) (*This information, which is voluntary, is being requested to
ensure that the assignee will not be subject to backup withholding under
Section 3406 of the Code.)
____________________ ____________________
__________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
__________________________________________________________________________
the within Certificate, and all rights thereunder, and hereby does
irrevocably constitute and appoint
_____________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) ________________________________________
NOTICE: The signature to this assignment
must correspond with the name as it appears upon the face of the within
Certificate in every particular, without alteration or enlargement or any
change whatever.
EXHIBIT F
(SERVICER)
CERTIFICATE REGARDING SUBSTITUTION OF ELIGIBLE
SUBSTITUTE CONTRACT
The undersigned certify that they are (title) and (title), respectively
of __________________ (the "Contract Seller"), and that as such they are
duly authorized to execute and deliver this certificate on behalf of the
Contract Seller pursuant to Section 3.05(b) of the Pooling and Servicing
Agreement (the "Agreement") dated as of _______________ 1, 199_ between
Merrill Lynch Mortgage Investors, Inc., as Depositor, the Contract Seller,
as Servicer, and _________________, as Trustee (all capitalized terms used
herein without definition having the respective meanings specified in the
Agreement), and further certify that:
1. The Contracts on the attached schedule are to be substituted on
the date hereof pursuant to Section 3.05(b) of the Agreement and each such
Contract is an Eligible Substitute Contract (description, as to each
Contract, as to how it satisfies the definition of "Eligible Substitute
Contract").
2. The Contract File for each such Contract being substituted for a
Replaced Contract is in the custody of the Servicer and each such Contract
has been stamped in accordance with Section 3.02(y) of the Agreement.
3. The UCC-1 financing statement in respect of the Contracts to be
substituted, in the form required by Section 3.05(b)(ii) of the Agreement,
has been filed with the appropriate office in California.
(4. There has been deposited in the Certificate Account the amounts
listed on the schedule attached hereto as the amount by which the Contract
Principal Balance of each Replaced Contract exceeds the Contract Principal
Balance of each Contract being substituted therefor.)
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day
of _____________, 19___.
(SERVICER)
By: __________________________________
(Name)
(Title)
EXHIBIT G
(SERVICER)
CERTIFICATE OF SERVICING OFFICER
The undersigned certifies that he is a (title) of (Servicer), a (
) corporation (the "Servicer") and that as such he is duly
authorized to execute and deliver this certificate on behalf of the Servicer
pursuant to Section 7.02 of the Pooling and Servicing Agreement (the
"Agreement") dated as of ________________ 1, 199_ between Merrill Lynch
Mortgage Investors, Inc., __________________, as Servicer, and
_________________, as trustee (all capitalized terms used herein without
definition having the respective meanings specified in the Agreement), and
further certifies that:
1. The Monthly Report for the period from to attached to this
certificate is complete and accurate in accordance with the requirements of
Sections 7.01 and 7.02 of the Agreement; and
2. As of the date hereof, no Event of Default or event that with
notice or lapse of time or both would become an Event of Default has
occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day
of _____________, 19___.
(SERVICER)
By: __________________________________
(Name)
(Title)
EXHIBIT H
TRANSFER AFFIDAVIT
STATE OF )
: ss:
COUNTY )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of _____________________, a
corporation duly organized and existing under the laws of the State of
California, the proposed transferee (the "Transferee") of the Class R
Certificates from the Manufactured Housing Contract Senior/Subordinate
Pass-Through Certificates, Series 199_-_, issued pursuant to the Pooling and
Servicing Agreement, dated as of _________ 1, 199_ (the "Agreement"), by and
among Merrill Lynch Mortgage Investors, Inc., the Transferee, and
_________________, Capitalized terms used, but not defined herein or in
Exhibit 1 hereto, shall have the meanings ascribed to such terms in the
Agreement. The Transferee has authorized the undersigned to make this
affidavit on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the
date of the Transfer, a Permitted Transferee. The Transferee is acquiring
the Residual Interests either (i) for its own account or (ii) as nominee,
trustee or agent for another Person and has attached hereto an affidavit
from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised and understands that (i) a tax
shall be imposed on Transfers of Class R Certificates to Persons that are not
Permitted Transferees; (ii) such tax is imposed on the transferor, or, if
such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability
for the tax if the subsequent Transferee furnished to such Person an
affidavit that such subsequent Transferee is a Permitted Transferee and, at
the time of Transfer, such Person does not have actual knowledge that the
affidavit is false.
4. The Transferee has been advised of, and understands that a tax
shall be imposed on a "pass-through entity" holding Class R Certificates if at
any time during the taxable year of the pass-through entity a Person that is
not a Permitted Transferee is the record holder of an interest in such
entity. The Transferee understands that no tax will be imposed for any
period for which the record holder furnishes to the pass-through entity an
affidavit stating that the record holder is a Permitted Transferee and the
pass-through entity does not have actual knowledge that such affidavit is
false. (For this purpose, a "pass-through entity" includes a regulated
investment company, a real estate investment trust or common trust fund, a
partnership, trust or estate, and certain cooperatives and, except as may be
provided in Treasury Regulations, persons holding interests in pass-through
entities as a nominee for another Person.)
5. Transferee has reviewed the provisions of Section 4.08 o(Pound
Sterling) the Agreement (attached hereto as Exhibit 1 and incorporated
herein by reference) and understands the legal consequences of the
acquisition of the Class R Certificates including, without limitations, the
restrictions on subsequent Transfers and the provisions regarding voiding
the Transfer and mandatory sales. The Transferee expressly agrees to be
bound by and to abide by the provisions of Section 4.08 of the Agreement.
The Transferee understands and agrees that any breach of any of the
representations included herein shall render the Transfer to the Transferee
contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to Transfer the Class R Certificates
and in connection with any Transfer by a Person for whom the Transferee is
acting as nominee, trustee or agent, and the Transferee will not Transfer
the Class R Certificates or cause any Class R Certificates to be Transferred
to any Person that the Transferee knows is not a Permitted Transferee.
7. The Transferee's taxpayer identification number is
________________________.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by
its duly authorized officer and its corporate seal to be hereunto affixed,
duly attested, this ____ day of ___________________, 199_.
(Name of Transferee)
By: _______________________________________
Name:
Title:
(Corporate Seal)
ATTEST:
_________________________ (Assistant) Secretary
Personally appeared before me the above-named _____________, known or
proved to me to be the same person who executed the foregoing instrument,
and to be the ______________ of the Transferee, and acknowledged that he
executed the same as his free act and deed and the free act and deed of the
Transferee.
Subscribed and sworn before me this ____ day of ___________, 199_.
___________________________________
NOTARY PUBLIC
My commission expires the ___ day of
________, 19___.
EXHIBIT I
FORM OF INVESTMENT LETTER
Representations of Purchaser. ----------------------------
1. The Purchaser is acquiring the Class __ Certificate as principal for
its own account for the purpose of investment (neither the Underwriter nor
any of its Affiliates need represent that it is acquiring for purposes of
investment) and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that
the disposition of the Purchaser's property shall at all times be and remain
within its control.
2. The Purchaser has knowledge and experience in financial and
business matters and is capable of evaluating the merits and risks of its
investment in the Class __ Certificate and is able to bear the economic risk
of such investment. The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the rules and regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The
Purchaser has been given such information concerning the Class __ Certificate,
the underlying Contracts and the Servicer as it has requested.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale by the Purchaser of
the Class __ Certificate.
4. The Purchaser understands that the Class __ Certificate has not been
and will not be registered under the Securities Act of 1933, as amended, or
any state securities laws and may be resold (which resale is not currently
contemplated) only if an exemption from registration is available, that
neither the Depositor, the Servicer nor the Trustee is required to register
the Class __ Certificate and that any transfer must comply with Sections 4.02
and 4.08 of the Pooling and Servicing Agreement. In connection with any
resale of the Class __ Certificate, the Purchaser shall not make any general
solicitation or advertisement.
5. The Purchaser agrees that it will obtain from any purchaser of the
Class __ Certificate from it the same representations, warranties and
agreements contained in the foregoing paragraphs 1 through 4 and in this
paragraph 5.
6. The Purchaser hereby directs the Trustee to register the Class __
Certificate acquired by the Purchaser in the name of its nominee as follows:
___________________________.
Very truly yours,
By: _____________________________
Name: _______________________
Title: ______________________
Exhibit 4.3
TRUST AGREEMENT
among
MERRILL LYNCH MORTGAGE INVESTORS, INC.,
as Depositor,
( )
------------------------------
and
( ),
------------------------------
as Owner Trustee
Dated as of ___________, 199_
Table of Contents
-----------------
Page
----
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . 4
ARTICLE II
Organization; Conveyance of
Mortgage Loans
SECTION 2.01. Name . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.02. Office . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.03. Purposes and Powers . . . . . . . . . . . . . . . . . 5
SECTION 2.04. Appointment of Owner Trustee . . . . . . . . . . . . 6
SECTION 2.05. Initial Capital Contribution of Owner Trust
Estate . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.06. Declaration of Trust . . . . . . . . . . . . . . . . 6
SECTION 2.07. Liability of the Owners . . . . . . . . . . . . . . . 6
SECTION 2.08. Title to Trust Property . . . . . . . . . . . . . . . 7
SECTION 2.09. Situs of Trust . . . . . . . . . . . . . . . . . . . 7
SECTION 2.10. Representations and Warranties of the Depositor and
the Company . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.11. Federal Income Tax Allocations . . . . . . . . . . . 9
SECTION 2.12. Conveyance of Mortgage Loans . . . . . . . . . . . . 10
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership . . . . . . . . . . . . . . . . . . 10
SECTION 3.02. The Trust Certificates . . . . . . . . . . . . . . . 10
SECTION 3.03. Authentication of Trust Certificates . . . . . . . . 10
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
Certificates . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.06. Persons Deemed Owners . . . . . . . . . . . . . . . . 11
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.08. Maintenance of Office or Agency . . . . . . . . . . . 12
SECTION 3.09. Appointment of Paying Agent . . . . . . . . . . . . . 12
SECTION 3.10. Ownership by Company of Trust Certificates . . . . . 13
SECTION 3.11. Book-Entry Trust Certificates . . . . . . . . . . . . 13
SECTION 3.12. Notices to Clearing Agency . . . . . . . . . . . . . 14
SECTION 3.13. Definitive Trust Certificates . . . . . . . . . . . . 14
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.02. Action by Owners with Respect to Certain Matters . . 15
SECTION 4.03. Action by Owners with Respect to Bankruptcy . . . . . 15
SECTION 4.04. Restrictions on Owners' Power . . . . . . . . . . . . 15
SECTION 4.05. Majority Control . . . . . . . . . . . . . . . . . . 16
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account . . . . . . . . . . . 16
SECTION 5.02. Application of Trust Funds . . . . . . . . . . . . . 16
SECTION 5.03. Method of Payment . . . . . . . . . . . . . . . . . . 17
SECTION 5.04. No Segregation of Moneys; No Interest . . . . . . . . 17
SECTION 5.05. Accounting and Reports to the Noteholders, Owners,
the Internal Revenue Service and Others . . . . . . 17
SECTION 5.06. Signature on Returns; Tax Matters Partner . . . . . . 17
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority . . . . . . . . . . . . . . . . . . 18
SECTION 6.02. General Duties . . . . . . . . . . . . . . . . . . . 18
SECTION 6.03. Action upon Instruction . . . . . . . . . . . . . . . 18
SECTION 6.04. No Duties Except as Specified in this Agreement or
in Instructions . . . . . . . . . . . . . . . . . . 19
SECTION 6.05. No Action Except Under Specified Documents or
Instructions . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.06. Restrictions . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties . . . . . . . . . . . 20
SECTION 7.02. Furnishing of Documents . . . . . . . . . . . . . . . 21
SECTION 7.03. Representations and Warranties . . . . . . . . . . . 21
SECTION 7.04. Reliance; Advice of Counsel . . . . . . . . . . . . 21
SECTION 7.05. Not Acting in Individual Capacity . . . . . . . . . . 22
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Mortgage Loans. . . . . . . . . . . . . . . . . . . 22
SECTION 7.07. Owner Trustee May Own Trust Certificates and
Notes . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses . . . . . . . . . . 23
SECTION 8.02. Indemnification . . . . . . . . . . . . . . . . . . . 23
SECTION 8.03. Payments to the Owner Trustee . . . . . . . . . . . . 23
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement . . . . . . . . . . . 23
SECTION 9.02. Dissolution upon Bankruptcy of the Company . . . . . 24
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee . . . 25
SECTION 10.02. Resignation or Removal of Owner Trustee . . . . 25
SECTION 10.03. Successor Owner Trustee . . . . . . . . . . . . 26
SECTION 10.04. Merger or Consolidation of Owner Trustee . . . . 26
SECTION 10.05. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments . . . . . . . . . . . 28
SECTION 11.02. No Legal Title to Owner Trust Estate in
Owners . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.03. Limitations on Rights of Others . . . . . . . . 29
SECTION 11.04. Notices . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.05. Severability . . . . . . . . . . . . . . . . . . 29
SECTION 11.06. Separate Counterparts . . . . . . . . . . . . . 29
SECTION 11.07. Successors and Assigns . . . . . . . . . . . . . 30
SECTION 11.08. Covenants of the Company . . . . . . . . . . . . 30
SECTION 11.09. No Petition . . . . . . . . . . . . . . . . . . 30
SECTION 11.10. No Recourse . . . . . . . . . . . . . . . . . . 30
SECTION 11.11. Headings . . . . . . . . . . . . . . . . . . . . 30
SECTION 11.12. GOVERNING LAW . . . . . . . . . . . . . . . . . 30
SECTION 11.13. Depositor Payment Obligation . . . . . . . . . . 30
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
TRUST AGREEMENT (the "Trust Agreement") dated as of ________, 199_,
among Merrill Lynch Mortgage Investors, Inc., a Delaware corporation, as
depositor (the "Depositor"), (_______________________), a (_______)
corporation (the "Company"), and (____________), a (__________________), as
owner trustee (the "Owner Trustee").
WHEREAS, the Depositor and ___________ have entered into a Mortgage Loan
Purchase Agreement dated as of ________, 199_ (the "Mortgage Loan Purchase
Agreement"), pursuant to which ___________ will assign to the Depositor any
and all of the Company's rights and interests with respect to the Mortgage
Loans;
NOW, THEREFORE, the Depositor, the Company and the Owner Trustee hereby
agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement,
-----------------
the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement dated
------------------------
as of ________, 199_, among the Trust, the Indenture Trustee and
(_________________________), as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
---------
and supplemented from time to time.
"Assignment" shall mean the assignment of right, title and interest of
----------
the Depositor in the Mortgage Loans to the Trust.
"Basic Documents" shall mean the Mortgage Loan Purchase Agreement,
---------------
Servicing Agreement, the Indenture, the Administration Agreement and the
other documents and certificates delivered in connection therewith.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
----------------------------
Trust Certificates, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
----------------------
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
---- ----
from time to time.
"Certificate" shall mean any of the Book-Entry Trust Certificates or
-----------
Definitive Trust Certificates.
"Certificate Distribution Account" shall have the meaning assigned to
--------------------------------
such term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form
--------------------
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
-----------------
Certificate, a Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly
as a Clearing Agency Participant or as an indirect participant, in each case
in accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
-------------------- ---------------------
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
----------------- ------
Trust Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
----------------------
the principal corporate trust office of the Owner Trustee located at
(____________________________), or at such other address as the Owner Trustee
may designate by notice to the Owners, the Depositor and the Company, or the
principal corporate trust office of any successor Owner Trustee at the
address designated by such successor Owner Trustee by notice to the Owners,
the Depositor and the Company.
"Definitive Trust Certificates" shall have the meaning set forth in
-----------------------------
Section 3.11.
"Depositor" shall mean Merrill Lynch Mortgage Investors, Inc. in its
---------
capacity as depositor hereunder.
"Eligible Distribution Account" shall mean an account that is (i)
-----------------------------
maintained with a depository institution whose debt obligations at the time
of any deposit therein have the highest short-term debt rating by the Rating
Agencies, (ii) one or more accounts with a depository institution which
accounts are fully insured by either the Savings Association Insurance Fund
or the Bank Insurance Fund of the Federal Deposit Insurance Corporation
established by such fund, (iii) a segregated trust account maintained with
the Owner Trustee or an affiliate of the Owner Trustee in its fiduciary
capacity or (iv) otherwise acceptable to each Rating Agency as evidenced by
a letter from each Rating Agency to the Owner Trustee, without reduction or
withdrawal of their then currently ratings of the Certificates.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
-----
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
--------
"Indemnified Parties" shall have the meaning assigned to such term in
-------------------
Section 8.02.
"Indenture" shall mean the Indenture dated as of ________, 199_ between
---------
the Trust and (_____________________________), as Indenture Trustee.
"Initial Certificate Balance" shall mean $__________.
---------------------------
"Mortgage Loan Purchase Agreement" shall mean the agreement between
--------------------------------
(_______________), as seller, and Merrill Lynch Mortgage Investors, Inc., as
purchaser, providing for the sale of the Mortgage Loans by the Seller to the
purchaser.
"Mortgage Loans" shall mean a pool of (adjustable) (fixed) rate home
--------------
equity revolving credit line loans made or to be made in the future.
"Owner" shall mean each Holder of a Trust Certificate.
-----
"Owner Trust Estate" shall mean all right, title and interest of the
------------------
Trust in and to the property and rights assigned to the Trust pursuant to the
Assignment, all funds on deposit from time to time in the Trust Accounts and
the Certificate Distribution Account and all other property of the Trust from
time to time, including any rights of the Owner Trustee and the Trust
pursuant to the Servicing Agreement and the Administration Agreement.
"Owner Trustee" shall mean (____________________), a (_________) banking
-------------
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09 and shall initially be (_____________).
"Rating Agency" shall mean any nationally recognized statistical rating
-------------
organization asked by the Depositor or any of its Affiliates to rate the
Certificates.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
close of business on the day prior to such Distribution Date occurs or, if
Definitive Trust Certificates are issued pursuant to Section 3.14, the last
day of the month preceding such Distribution Date.
"Secretary of State" shall mean the Secretary of State of the State of
------------------
Delaware.
"Servicing Agreement" shall mean the Servicing Agreement dated as of
-------------------
________, 199_, among the Trust, as issuer, the Depositor and (________), as
servicer, as the same may be amended or supplemented from time to time.
"Treasury Regulations" shall mean regulations, including proposed or
--------------------
temporary Regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" shall mean the trust established by this Agreement.
-----
"Trust Account" shall mean any account set up by the Owner Trustee
-------------
pursuant to the provisions of Section 5.01.
"Trust Certificate" shall mean a certificate evidencing the beneficial
-----------------
interest of an Owner in the Trust, substantially in the form attached hereto
as Exhibit A.
"Underwriters" shall mean those underwriters named in and parties to the
------------
Certificate Underwriting Agreement dated ________, 199_, with the Depositor,
pursuant to which the Trust Certificates will be offered publicly.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used and not otherwise defined herein have the meanings assigned to them in
the Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined
in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate
or other document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting principles. To
the extent that the definitions of accounting terms in this Agreement or in
any such certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Organization; Conveyance of Mortgage Loans
------------------------------------------
SECTION 2.01. Name. The Trust created hereby shall be known as
----
"_____________ Loan Trust 19 - ," in which name the Owner Trustee may
-- ----
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
------
Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Owners,
the Depositor and the Company.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is
-------------------
to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Mortgage Loans, and to pay the organizational,
start-up and transactional expenses of the Trust and to pay the balance to
the Depositor pursuant to the Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture and to hold, manage and distribute
to the Owners pursuant to the terms of the Servicing Agreement any portion
of the Trust Estate released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation of
the Owner Trust Estate and the making of distributions to the Owners and the
Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Basic Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
----------------------------
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
--------------------------------------------------
Depositor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $(__). The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date
hereof, of the foregoing contribution, which shall constitute the initial
Owner Trust Estate and shall be deposited in the Certificate Distribution
Account. The Depositor shall pay organizational expenses of the Trust as
they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
--------------------
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject
to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust
under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust. It is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being
the Mortgage Loans and other assets held by the Trust, the partners of the
partnership being the Certificateholders, and the Notes being debt of the
partnership. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual
or other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights,
powers and duties set forth herein and in the Business Trust Statute with
respect to accomplishing the purposes of the Trust.
SECTION 2.07. Liability of the Owners. (a) The Company shall be
-----------------------
liable directly to and will indemnify any injured party for all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses,
to the extent not paid out of the Owner Trust Estate) to the extent that the
Company would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Company were a general
partner; provided, however, that the Company shall not be liable for any
losses incurred by a Certificateholder in the capacity of an investor in the
Trust Certificates or a Noteholder in the capacity of an investor in the
Notes. In addition, any third party creditors of the Trust (other than in
connection with the obligations described in the preceding sentence for which
the Company shall not be liable) shall be deemed third party beneficiaries
of this paragraph. The obligations of the Company under this paragraph shall
be evidenced by the Trust Certificates described in Section 3.10, which for
purposes of the Business Trust Statute shall be deemed to be a separate class
of Trust Certificates from all other Trust Certificates issued by the Trust;
provided that the rights and obligations evidenced by all Trust Certificates,
regardless of class, shall, except as provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraph (a),
shall have any personal liability for any liability or obligation of the
Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
-----------------------
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, a co-
trustee and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and
--------------
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware or the State of New York. The Trust shall not have any employees
in any state other than Delaware; provided, however, that nothing herein
shall restrict or prohibit the Owner Trustee from having employees within or
without the State of Delaware. Payments will be received by the Trust only
in Delaware or New York, and payments will be made by the Trust only from
Delaware or New York. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor and the
-------------------------------------------------------
Company. (a) The Depositor hereby represents and warrants to the Owner
- -------
Trustee that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(iii) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has full
power and authority to sell and assign the property to be sold and assigned
to and deposited with the Trust and the Depositor has duly authorized such
sale and assignment and deposit to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement have
been duly authorized by the Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the certificate
of incorporation or bylaws of the Depositor, or any indenture, agreement or
other instrument to which the Depositor is a party or by which it is bound;
nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any law
or, to the best of the Depositor's knowledge, any order, rule or regulation
applicable to the Depositor of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor or its properties.
(v) To the Depositor's best knowledge, there are no proceedings
or investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
((vi) The representations and warranties of the Depositor in
Sections (___________) of the Mortgage Loan Purchase Agreement are true and
correct.)
(b) The Company hereby represents and warrants to the Owner Trustee
that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of (_________),
with the power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(ii) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(iii) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Company has full power
and authority to purchase the Trust Certificates that the Company has agreed
to purchase pursuant to Section 3.10; and the execution, delivery and
performance of this Agreement has been duly authorized by the Company by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the (articles of
incorporation) (certificate of incorporation) or bylaws of the Company, or
any indenture, agreement or other instrument to which the Company is a party
or by which it is bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents);
nor violate any law or, to the best of the Company's knowledge, any order,
rule or regulation applicable to the Company of any court or of any federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending or, to the
Company's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) The representatives and warranties of the Company in Sections
(_______) of the Mortgage Loan Purchase Agreement are true and correct.
SECTION 2.11. Federal Income Tax Allocations. Net income of the Trust
------------------------------
for any month as determined for federal income tax purposes (and each item
of income, gain, loss and deduction entering into the computation thereof)
shall be allocated:
(a) among the Certificate Owners as of the first Record Date following
the end of such month, in proportion to their ownership of principal amount
of Trust Certificates on such date, net income in an amount up to the sum of
(i) the Certificateholders' Monthly Interest Distributable Amount for such
month, (ii) interest on the excess, if any, of the Certificateholders'
Interest Distributable Amount for the preceding Distribution Date over the
amount in respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate from such preceding Distribution
Date through the current Distribution Date, (iii) the portion of the market
discount on the Mortgage Loans accrued during such month that is allocable
to the excess, if any, of the initial aggregate principal amount of the Trust
Certificates over their initial aggregate issue price, (iv) any amount
expected to be distributed to the Certificateholders pursuant to the
Servicing Agreement (to the extent not previously allocated pursuant to this
clause), ((v) any Certificateholders' Prepayment Premium distributable to the
Certificateholders with respect to such month) and (vi) any other amounts of
income payable to the Certificateholders for such month; such sum to be
reduced by any amortization by the Trust of premium on Mortgage Loans that
corresponds to any excess of the issue price of Certificates over their
principal amount; and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first
be allocated to make up such shortfall before being allocated as provided in
the preceding sentence. Net losses of the Trust, if any, for any month as
determined for federal income tax purposes (and each item of income, gain,
loss and deduction entering into the computation thereof) shall be allocated
to the Company to the extent the Company is reasonably expected to bear the
economic burden of such net losses, and any remaining net losses shall be
allocated among the Certificate Owners as of the first Record Date following
the end of such month in proportion to their ownership of principal amount
of Trust Certificates on such Record Date. The Company is authorized to
modify the allocations in this paragraph if necessary or appropriate, in its
sole discretion, for the allocations to fairly reflect the economic income,
gain or loss to the Company or to the Certificate Owners, or as otherwise
required by the Code.
SECTION 2.12. Conveyance of the Mortgage Loans. The Depositor,
--------------------------------
concurrently with the execution and delivery hereof, does hereby transfer,
convey, sell and assign to the Trust, without recourse, all its right, title
and interest in and to (a) the Mortgage Loans, all interest accruing thereon
and all collections in respect thereof received on or after the Cut-Off Date,
(b) property which secured a Mortgage Loan and which has been acquired by
foreclosure or deed in lieu of foreclosure; (c) the interest of the Seller
in any insurance policies in respect of the Mortgage Loans (d) the Mortgage
Loan Purchase Agreement, (including the right to purchase Additional Balances
with respect to the Initial Loans and the Additional Loans and all monies and
proceeds due thereon after the applicable Deposit Date, and the related
Additional Balances in accordance with the terms thereof); and (e) all
proceeds of the foregoing. (Notwithstanding the foregoing, the Depositor has
no interest in and does not convey, and the Trust shall not assume, the
obligation under each related Loan Agreement to fund Draws by the Mortgagor
thereunder.)
The parties hereto intend that the transaction set forth herein be a
sale by the Depositor to the Trust of all of its right, title and interest
in and to the Mortgage Loans and the other property described above. In the
event that the transaction set forth herein is not deemed to be a sale, the
Depositor hereby grants to the Issuer a security interest in all of its
right, title and interest in, to and under the Owner Trust Estate, all
distributions thereon and all proceeds thereof; and this Trust Agreement
shall constitute a security agreement under applicable law.
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by
-----------------
the contribution by the Depositor pursuant to Section 2.05 and until the
issuance of the Trust Certificates, the Depositor shall be the sole
beneficiary of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
----------------------
issued in minimum denominations of $(_______) and in integral multiples of
$1,000 in excess thereof; provided, however, that the Trust Certificates
issued to the Company pursuant to Section 3.10 may be issued in such
denomination as required to include any residual amount. The Trust
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Trust Certificates
bearing the manual or facsimile signatures of individuals who were, at the
time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefit of
this Agreement, notwithstanding that such individuals or any of them shall
have ceased to be so authorized prior to the authentication and delivery of
such Trust Certificates or did not hold such offices at the date of
authentication and delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section
3.04.
SECTION 3.03. Authentication of Trust Certificates. Concurrently with
------------------------------------
the initial sale of the Mortgage Loans to the Trust pursuant to the Servicing
Agreement, the Owner Trustee shall cause the Trust Certificates in an
aggregate principal amount equal to the Initial Certificate Balance to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by its chairman of the board, its
president, any vice president, secretary or any assistant treasurer, without
further corporate action by the Depositor, in authorized denominations. No
Trust Certificate shall entitle its Holder to any benefit under this
Agreement or be valid for any purpose unless there shall appear on such Trust
Certificate a certificate of authentication substantially in the form set
forth in Exhibit A, executed by the Owner Trustee or (____________), as the
Owner Trustee's authenticating agent, by manual signature; such
authentication shall constitute conclusive evidence that such Trust
Certificate shall have been duly authenticated and delivered hereunder. All
Trust Certificates shall be dated the date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
----------------------------------------------
Certificates. The Certificate Registrar shall keep or cause to be kept, at
- ------------
the office or agency maintained pursuant to Section 3.08, a Certificate
Register in which, subject to such reasonable regulations as it may
prescribe, the Owner Trustee shall provide for the registration of Trust
Certificates and of transfers and exchanges of Trust Certificates as herein
provided. (___________) shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause ( ) as its
----
authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days
preceding the due date for any payment with respect to the Trust
Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
-------------------------------------------------------
If (a) any mutilated Trust Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust
Certificate and (b) there shall be delivered to the Certificate Registrar and
the Owner Trustee such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Certificate has been acquired by a bona fide purchaser, the Owner Trustee on
behalf of the Trust shall execute and the Owner Trustee or ( ), as the
----
Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Trust Certificate, a new Trust Certificate of like tenor and denomination.
In connection with the issuance of any new Trust Certificate under this
Section, the Owner Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Trust Certificate
issued pursuant to this Section shall constitute conclusive evidence of
ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name
any Trust Certificate is registered in the Certificate Register as the owner
of such Trust Certificate for the purpose of receiving distributions pursuant
to Section 5.02 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar or any Paying Agent shall be bound by any
notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
- ---------
Servicer and the Depositor, within 15 days after receipt by the Owner Trustee
of a written request therefor from the Servicer or the Depositor, a list, in
such form as the Servicer or the Depositor may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record
Date. If three or more Certificateholders or one or more Holders of Trust
Certificates evidencing not less than 25% of the Certificate Balance apply
in writing to the Owner Trustee, and such application states that the
applicants desire to communicate with other Certificateholders with respect
to their rights under this Agreement or under the Trust Certificates and such
application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Owner Trustee shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Trust
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Company, the Certificate Registrar or the Owner Trustee accountable by
reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic
Documents may be served. The Owner Trustee initially designates
(_______________________________) as its office for such purposes. The Owner
Trustee shall give prompt written notice to the Company and to the
Certificateholders of any change in the location of the Certificate Register
or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
---------------------------
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions
to the Owner Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. The Owner Trustee may revoke
such power and remove the Paying Agent if the Owner Trustee determines in its
sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Paying Agent
initially shall be (___________), and any co-paying agent chosen by
(___________) and acceptable to the Owner Trustee. ( ) shall be
-----
permitted to resign as Paying Agent upon 30 days' written notice to the Owner
Trustee. In the event that (___________) shall no longer be the Paying
Agent, the Owner Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company). The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which
such successor Paying Agent or additional Paying Agent shall agree with the
Owner Trustee that, as Paying Agent, such successor Paying Agent or
additional Paying Agent will hold all sums, if any, held by it for payment
to the Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders.
The Paying Agent shall return all unclaimed funds to the Owner Trustee and
upon removal of a Paying Agent such Paying Agent shall also return all funds
in its possession to the Owner Trustee. The provisions of Sections 7.01,
7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its role as
Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10. Ownership by Company of Trust Certificates. The Company
------------------------------------------
shall on the Closing Date purchase from the Underwriters Trust Certificates
representing at least __% of the Initial Certificate Balance and shall
thereafter retain beneficial and record ownership of Trust Certificates
representing at least __% of the Certificate Balance. Any attempted transfer
of any Trust Certificate that would reduce such interest of the Company below
__% of the Certificate Balance shall be void. The Owner Trustee shall cause
any Trust Certificate issued to the Company to contain a legend stating "THIS
CERTIFICATE IS NON-TRANSFERABLE".
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
-----------------------------
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Trust; provided, however, that one Definitive Trust
Certificate may be issued to the Company pursuant to Section 3.10. Such
Trust Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
Certificate, except as provided in Section 3.13. Unless and until
definitive, fully registered Trust Certificates (the "Definitive Trust
Certificates") have been issued to Certificate Owners pursuant to
Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement
(including the payment of principal of and interest on the Trust Certificates
and the giving of instructions or directions hereunder) as the sole Holder
of the Trust Certificates and shall have no obligation to the Certificate
Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Certificate Depository
Agreement, unless and until Definitive Trust Certificates are issued pursuant
to Section 3.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Trust Certificates to such Clearing Agency
Participants; and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Trust Certificates and
has delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Certificateholders is required under this Agreement,
unless and until Definitive Trust Certificates shall have been issued to
Certificate Owners pursuant to Section 3.13, the Owner Trustee shall give all
such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency, and shall have no obligations to
the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Administrator
------------------------------
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to
the Trust Certificates and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Owner Trustee in
writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default or a
Servicer Default, Certificate Owners representing beneficial interests
aggregating at least a majority of the Certificate Balance advise the
Clearing Agency in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the
Certificate Owners, then the Clearing Agency shall notify all Certificate
Owners and the Owner Trustee of the occurrence of any such event and of the
availability of the Definitive Trust Certificates to Certificate Owners
requesting the same. Upon surrender to the Owner Trustee of the typewritten
Trust Certificate or Trust Certificates representing the Book-Entry Trust
Certificates by the Clearing Agency, accompanied by registration
instructions, the Owner Trustee shall execute and authenticate the Definitive
Trust Certificates in accordance with the instructions of the Clearing
Agency. Neither the Certificate Registrar nor the Owner Trustee shall be
liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Trust Certificates, the Owner Trustee shall recognize
the Holders of the Definitive Trust Certificates as Certificateholders. The
Definitive Trust Certificates shall be printed, lithographed or engraved or
may be produced in any other manner as is reasonably acceptable to the Owner
Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.
------------------------------------------------------
With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Owners shall not have notified the Owner Trustee in writing
prior to the 30th day after such notice is given that such Owners have
withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Mortgage Loans)
and the compromise of any action, claim or lawsuit brought by or against the
Trust (except with respect to the aforementioned claims or lawsuits for
collection of the Mortgage Loans;
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially
adversely affect the interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Registrar, or the consent to the assignment by the
Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar
of its obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
------------------------------------------------
Owner Trustee shall not have the power, except upon the direction of the
Owners, to (a) remove the Administrator under the Administration Agreement
pursuant to Section 8 thereof, (b) appoint a successor Administrator pursuant
to Section 8 of the Administration Agreement, (c) remove the Servicer under
the Servicing Agreement pursuant to Section 7.01 thereof or (d) except as
expressly provided in the Basic Documents, sell the Mortgage Loans after the
termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed
by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
-------------------------------------------
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a
certificate certifying that such Owner reasonably believes that the Trust is
insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
-----------------------------
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the
Owner Trustee under this Agreement or any of the Basic Documents or would be
contrary to Section 2.03, nor shall the Owner Trustee be obligated to follow
any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
----------------
any action that may be taken by the Owners under this Agreement may be taken
by the Holders of Trust Certificates evidencing not less than a majority of
the Certificate Balance. Except as expressly provided herein, any written
notice of the Owners delivered pursuant to this Agreement shall be effective
if signed by Holders of Trust Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such
notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
------------------------------
the benefit of the Certificateholders, shall establish and maintain in the
name of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account
and in all proceeds thereof. Except as otherwise expressly provided herein,
the Certificate Distribution Account shall be under the sole dominion and
control of the Owner Trustee for the benefit of the Certificateholders. If,
at any time, the Certificate Distribution Account ceases to be an Eligible
Deposit Account, the Owner Trustee (or the Depositor on behalf of the Owner
Trustee, if the Certificate Distribution Account is not then held by the
Owner Trustee or an affiliate thereof) shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Certificate Distribution Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such
new Certificate Distribution Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
--------------------------
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee
by the Servicer pursuant to Section 4.01 of the Servicing Agreement with
respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the
amount otherwise distributable to the Owner in accordance with this Section.
The Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not
prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to an Owner shall be treated as cash distributed to such
Owner at the time it is withheld by the Trust and remitted to the appropriate
taxing authority. If there is a possibility that withholding tax is payable
with respect to a distribution (such as a distribution to a non-U.S. Owner),
the Owner Trustee may in its sole discretion withhold such amounts in
accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
-----------------
distributions required to be made to Certificateholders on any Distribution
Date shall be made to each Certificateholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Distribution Date and such Holder's Trust Certificates in
the aggregate evidence a denomination of not less than $(____________), or,
if not, by check mailed to such Certificateholder at the address of such
holder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to
-------------------------------------
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need
not be segregated in any manner except to the extent required by law or the
Servicing Agreement and may be deposited under such general conditions as may
be prescribed by law, and the Owner Trustee shall not be liable for any
interest thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
------------------------------------------------------
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain
- -----------------------------------
(or cause to be maintained) the books of the Trust on a calendar year basis
and the accrual method of accounting, (b) deliver to each Owner, as may be
required by the Code and applicable Treasury Regulations, such information
as may be required (including Schedule K-1) to enable each Owner to prepare
its federal and state income tax returns, (c) file such tax returns relating
to the Trust (including a partnership information return, IRS Form 1065) and
make such elections as from time to time may be required or appropriate under
any applicable state or federal statute or any rule or regulation thereunder
so as to maintain the Trust's characterization as a partnership for federal
income tax purposes, (d) cause such tax returns to be signed in the manner
required by law and (e) collect or cause to be collected any withholding tax
as described in and in accordance with Section 5.02(c) with respect to income
or distributions to Owners. The Owner Trustee shall elect under Section 1278
of the Code to include in income currently any market discount that accrues
with respect to the Mortgage Loans. The Owner Trustee shall not make the
election provided under Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The
-----------------------------------------
Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust,
unless applicable law requires an Owner to sign such documents, in which case
such documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority. The Owner Trustee is authorized and
-----------------
directed to execute and deliver the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to
or contemplated by the Basic Documents to which the Trust is to be a party
and any amendment or other agreement or instrument, in each case, in such
form as the Company shall approve, as evidenced conclusively by the Owner
Trustee's execution thereof. In addition to the foregoing, the Owner Trustee
is authorized, but shall not be obligated, to take all actions required of
the Trust pursuant to the Basic Documents. The Owner Trustee is further
authorized from time to time to take such action as the Administrator
recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner
--------------
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the Owners,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the
Basic Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Basic Document, and the Owner Trustee
shall not be held liable for the default or failure of the Administrator to
carry out its obligations under the Administration Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and
-----------------------
in accordance with the terms of the Basic Documents, the Owners may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or
under any Basic Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or
may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action not inconsistent with this
Agreement or the Basic Documents, as it shall deem to be in the best
interests of the Owners, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts
or refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action
or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this Agreement
or the Basic Documents, as it shall deem to be in the best interests of the
Owners, and shall have no liability to any Person for such action or
inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to
- ------------
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Owner Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as
expressly provided by the terms of this Agreement or in any document or
written instruction received by the Owner Trustee pursuant to Section 6.03;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection
of any security interest or lien granted to it hereunder or to prepare or
file any Securities and Exchange Commission filing for the Trust or to record
this Agreement or any Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may
be necessary to discharge any liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee that are
not related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Owner Trustee shall not manage, control, use, sell,
- ------------
dispose of or otherwise deal with any part of the Owner Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Owner Trustee pursuant to this Agreement, (ii) in accordance with the
Basic Documents and (iii) in accordance with any document or instruction
delivered to the Owner Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any
------------
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for federal income
tax purposes. The Owners shall not direct the Owner Trustee to take action
that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
----------------------------
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
-------------------------------
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or negligence or (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.03
expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor or the Company or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate, or for or
in respect of the validity or sufficiency of the Basic Documents, other than
the certificate of authentication on the Trust Certificates, and the Owner
Trustee shall in no event assume or incur any liability, duty, or obligation
to any Noteholder or to any Owner, other than as expressly provided for
herein or expressly agreed to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Seller or Depositor, the Company, the Indenture
Trustee or the Servicer under any of the Basic Documents or otherwise and the
Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Servicer or the
Seller or Depositor under the Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of
any of the Owners, unless such Owners have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby.
The right of the Owner Trustee to perform any discretionary act enumerated
in this Agreement or in any Basic Document shall not be construed as a duty,
and the Owner Trustee shall not be answerable for other than its negligence
or willful misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
-----------------------
to the Owners promptly upon receipt of a written request therefor, duplicates
or copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
------------------------------
represents and warrants to the Company, for the benefit of the Owners, that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance
by it with any of the terms or provisions hereof will contravene any federal
or Delaware law, governmental rule or regulation governing the banking or
trust powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any
indenture, mortgage, contract, agreement or instrument to which it is a party
or by which any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee
----------------------------
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion,
bond, or other document or paper believed by it to be genuine and believed
by it to be signed by the proper party or parties. The Owner Trustee may
accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full
force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents
or attorneys pursuant to agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by
the Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled Persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written
opinion or advice of any such counsel, accountants or other such Persons and
not contrary to this Agreement or any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided
---------------------------------
in this Article VII, in accepting the trusts hereby created
(_____________________) acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
--------------------------------------------------
Mortgage Loans. The recitals contained herein and in the Certificates (other
- ----------------
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the
Company, and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner
Trustee on the Trust Certificates) or the Notes, or of any Mortgage Loan or
related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage Loan, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments
to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation: the
existence, condition and ownership of any property securing a Mortgage Loan;
the existence and enforceability of any insurance thereon; the validity of
the assignment of any Mortgage Loan to the Trust or of any intervening
assignment; the performance or enforcement of any Mortgage Loan; the
compliance by the Depositor, the Company or the Servicer with any warranty
or representation made under any Basic Document or in any related document
or the accuracy of any such warranty or representation, or any action of the
Administrator, the Indenture Trustee or the Servicer or any subservicer taken
in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
--------------------------------------------------
Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Trust Certificates or Notes and may deal with the Depositor,
the Company, the Administrator, the Indenture Trustee and the Servicer in
banking transactions with the same rights as it would have if it were not
Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee
---------------------------------
shall receive as compensation for its services hereunder such fees as have
been separately agreed upon before the date hereof between the Depositor and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed
by the Depositor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.02. Indemnification. The Depositor shall be liable as
---------------
primary obligor for, and shall indemnify the Owner Trustee and its
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of
any kind and nature whatsoever (collectively, "Expenses") which may at any
time be imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement,
the Basic Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Depositor shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from any of
the matters described in the third sentence of Section 7.01. The indemnities
contained in this Section shall survive the resignation or termination of the
Owner Trustee or the termination of this Agreement. In any event of any
claim, action or proceeding for which indemnity will be sought pursuant to
this Section, the Owner Trustee's choice of legal counsel shall be subject
to the approval of the Depositor, which approval shall not be unreasonably
withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
-----------------------------
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement
------------------------------
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect (i) upon the final distribution by the Owner Trustee of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture, the Servicing Agreement and Article V or
(ii) at the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner, other than the Company as
described in Section 9.02, shall not (x) operate to terminate this Agreement
or the Trust or (y) entitle such Owner's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
or (z) otherwise affect the rights, obligations and liabilities of the
parties hereto.
(b) Except as provided in Section 9.01(a), none of the Depositor, the
Company or any Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates
to the Paying Agent for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificateholders mailed
within five Business Days of receipt of notice of such termination from the
Servicer stating (i) the Distribution Date upon or with respect to which
final payment of the Trust Certificates shall be made upon presentation and
surrender of the Trust Certificates at the office of the Paying Agent therein
designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than
the Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant
to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to the remaining Certificateholders to surrender
their Trust Certificates for cancellation and receive the final distribution
with respect thereto. If within one year after the second notice all the
Trust Certificates shall not have been surrendered for cancellation, the
Owner Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Trust Certificates, and the cost thereof shall be paid out
of the funds and other assets that shall remain subject to this Agreement.
Any funds remaining in the Trust after exhaustion of such remedies shall be
distributed by the Owner Trustee to the Company.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In the event
------------------------------------------
that an Insolvency Event shall occur with respect to the Company, this
Agreement shall be terminated in accordance with Section 9.01 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day
period, the Owner Trustee shall have received written instructions from (a)
Holders of Certificates (other than the Company) representing more than 50%
of the Certificate Balance (not including the Certificate Balance of the
Trust Certificates held by the Company) and (b) Holders of Notes representing
more than 50% of the Outstanding Amount of the Class ( ) Notes, to the
effect that each such party disapproves of the liquidation of the Mortgage
Loans and of the Trust. Promptly after the occurrence of any Insolvency
Event with respect to the Company, (A) the Company shall give the Indenture
Trustee and the Owner Trustee written notice of such Insolvency Event,
(B) the Owner Trustee shall, upon the receipt of such written notice from the
Company, give prompt written notice to the Certificateholders and the
Indenture Trustee, of the occurrence of such event and (C) the Indenture
Trustee shall, upon receipt of written notice of such Insolvency Event from
the Owner Trustee or the Company, give prompt written notice to the
Noteholders of the occurrence of such event; provided, however, that any
failure to give a notice required by this sentence shall not prevent or
delay, in any manner, a termination of the Trust pursuant to the first
sentence of this Section 9.02. Upon a termination pursuant to this Section,
the Owner Trustee shall direct the Indenture Trustee promptly to sell the
assets of the Trust (other than the Trust Accounts and the Certificate
Distribution Account) and, on behalf of the Company, in a commercially
reasonable manner and on commercially reasonable terms. The proceeds of such
a sale of the assets of the Trust shall be treated as collections under the
Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee. The
------------------------------------------
Owner Trustee shall at all times be a corporation satisfying the provisions
of Section 3807(a) of the Business Trust Statute; authorized to exercise
corporate trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities; and having (or having a parent that has) a rating of at least
(____) by (__________). If such corporation shall publish reports of
condition at least annually pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published. In case at any time the Owner Trustee shall cease
to be eligible in accordance with the provisions of this Section, the Owner
Trustee shall resign immediately in the manner and with the effect specified
in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
---------------------------------------
Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Administrator. Upon
receiving such notice of resignation, the Administrator shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Owner Trustee
and one copy to the successor Owner Trustee. If no successor Owner Trustee
shall have been so appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign
after written request therefor by the Administrator, or if at any time the
Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt
or insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Administrator shall
promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee, and
shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.03 and payment of all fees and expenses
owed to the outgoing Owner Trustee. The Administrator shall provide notice
of such resignation or removal of the Owner Trustee to each of the Rating
Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner
-----------------------
Trustee appointed pursuant to Section 10.02 shall execute, acknowledge and
deliver to the Administrator and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become
effective, and such successor Owner Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties
and obligations of its predecessor under this Agreement, with like effect as
if originally named as Owner Trustee. The predecessor Owner Trustee shall
upon payment of its fees and expenses deliver to the successor Owner Trustee
all documents and statements and monies held by it under this Agreement; and
the Administrator and the predecessor Owner Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor Owner Trustee all
such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense
of the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any
----------------------------------------
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, that such corporation shall be eligible pursuant
to Section 10.01 and, provided, further, that the Owner Trustee shall mail
notice of such merger or consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate may at the time be located, the Administrator
and the Owner Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Administrator and Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or separate trustees, of all or any part of
the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust or any part thereof and, subject to the other provisions
of this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If
the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as
a successor Owner Trustee pursuant to Section 10.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant
to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by
the Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed, the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Owner Trust
Estate or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect
of this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be
--------------------------
amended by the Depositor, the Company and the Owner Trustee, with prior
written notice to the Rating Agencies, without the consent of any of the
Noteholders or the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
in this Agreement or of modifying in any manner the rights of the Noteholders
or the Certificateholders; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Company and the Owner Trustee, with prior written notice to the Rating
Agencies, with the consent of the Holders (as defined in the Indenture) of
Notes evidencing not less than a majority of the Principal Balance of the
Notes and the consent of the Holders of Certificates evidencing not less than
a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders
or the Certificateholders; provided, however, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Mortgage Loans or distributions
that shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Principal
Balance of the Notes and the Certificate Balance required to consent to any
such amendment, without the consent of the holders of all the outstanding
Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
----------------------------------------------
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and
IX. No transfer, by operation of law or otherwise, of any right, title or
interest of the Owners to and in their ownership interest in the Owner Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for
-------------------------------
Section 2.07, the provisions of this Agreement are solely for the benefit of
the Owner Trustee, the Depositor, the Company, the Owners, the Administrator
and, to the extent expressly provided herein, the Indenture Trustee and the
Noteholders, and nothing in this Agreement (other than Section 2.07), whether
express or implied, shall be construed to give to any other Person any legal
or equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified
-------
or permitted by the terms hereof, all notices shall be in writing and shall
be deemed given upon receipt by the intended recipient or three Business Days
after mailing if mailed by certified mail, postage prepaid (except that
notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), if to the Owner Trustee, addressed to the Corporate
Trust Office; if to the Depositor, addressed to Merrill Lynch Mortgage
Investors, Inc., Seven World Trade Center, New York, New York 10048,
Attention: (______________); if to the Company, addressed to
(_____________________________), Attention: (____________); or, as to each
party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be
---------------------
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and
----------------------
agreements contained herein shall be binding upon, and inure to the benefit
of, each of the Depositor, the Company, the Owner Trustee and its successors
and each Owner and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of
such Owner.
SECTION 11.08. Covenants of the Company. The Company will not at
------------------------
any time institute against the Trust any bankruptcy proceedings under any
United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Trust Certificates, the Notes, the Trust
Agreement or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into
-----------
this Agreement, each Certificateholder, by accepting a Trust Certificate, and
the Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Company or the Trust, or join in any institution against the
Company or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting
-----------
a Trust Certificate acknowledges that such Certificateholder's Trust
Certificates represent beneficial interests in the Trust only and do not
represent interests in or obligations of the Depositor, the Servicer, the
Company, the Administrator, the Owner Trustee, the Indenture Trustee or any
Affiliate thereof and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated in this
Agreement, the Trust Certificates or the Basic Documents.
SECTION 11.11. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Depositor Payment Obligation. The Depositor shall
----------------------------
be responsible for payment of the Administrator's fees under the
Administration Agreement and shall reimburse the Administrator for all
expenses and liabilities of the Administrator incurred thereunder.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
Merrill Lynch Mortgage Investors, Inc.,
as Depositor,
by:
----------------------------------
Name:
Title:
(______________________________),
by:
----------------------------------
Name:
Title:
(_____________________),
not in its individual capacity but solely as
Owner Trustee,
by:
-------------------------
Name:
Title:
EXHIBIT A
FORM OF TRUST CERTIFICATE
-------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER $_________
R-___________ CUSIP NO. _________
_____________ LOAN TRUST 199__-__
(_____)% HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 199__-__
evidencing a fractional undivided beneficial ownership interest in the Trust,
as defined below, the property of which includes a pool of (fixed-rate)
(adjustable rate) home equity revolving credit line loans caused to be sold
to the Trust by (_______________) pursuant to the Mortgage Loan Purchase
Agreement.
(This Trust Certificate does not represent an interest in or obligation of
MERRILL LYNCH MORTGAGE INVESTORS, INC., _______________________ or any of
their respective affiliates, except to the extent described below.)
THIS CERTIFIES THAT (________________________) is the registered owner
of (____________________) DOLLARS nonassessable, fully paid, fractional
undivided interest in _____________ LOAN TRUST 199__-__ (the "Trust") formed
by MERRILL LYNCH MORTGAGE INVESTORS, INC., a Delaware corporation (the
"Depositor"), and (_______________), a (__________) corporation (the
"Company").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.
(___________________), (___________________),
as Owner Trustee or as Owner Trustee
by: by: ( ),
-------------------------------- ------------------
Authorized Signatory as Authenticating Agent
by:
-----------------------
Authorized Signatory
The Trust was created pursuant to a Trust Agreement, dated as of
, 199__ (the "Trust Agreement"), among the Depositor, the
- ---------------
Company and (____________), as owner trustee (the "Owner Trustee"), a summary
of certain of the pertinent provisions of which is set forth below. To the
extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Trust Agreement or the Servicing
Agreement dated as of ___________, 199__ (as amended and supplemented from
time to time, the "Servicing Agreement"), among the Trust, the Depositor and
(_______________), as servicer (the "Servicer"), as applicable.
This Certificate is one of a duly authorized issue of ____________
Loan Asset-Backed Certificates, Series 199__-__ (herein called the "Trust
Certificates"). Also issued under the Indenture dated as of ___________,
199__ between the Trust and (________________), as indenture trustee, are the
(_______) classes of Notes designated as (_________________________
_____________________________________________________________________________
________ ______________________________________________) (collectively,
the "Notes"). This Trust Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the Holder of this Trust Certificate by virtue of its acceptance
hereof assents and by which such Holder is bound. The property of the Trust
consists of a pool of (adjustable-) (fixed-) rate home equity loan revolving
credit line loans made or to be made int he future (the "Mortgage Loans"),
under certain home equity revolving credit line loan agreements and secured
primarily by second (deeds of trust) (mortgages) on residential properties
that are primarily one- to four-family properties (the "Mortgaged
Properties"); the collections in respect of the Mortgage Loans received after
the Cut-Off Date; property that secured a Mortgage Loan which has been
acquired by foreclosure or deed in lieu of foreclosure; (a surety bond) (a
letter of credit); an assignment of the Depositor's rights under the Mortgage
Loan Purchase Agreement; rights under certain hazard insurance policies
covering the Mortgaged Properties; and certain other property. (The rights
of the Holders of the Trust Certificates are subordinated to the rights of
the Holders of the Notes, as set forth in the Servicing Agreement.)
Under the Trust Agreement, there will be distributed on the
(_______) day of each month or, if such (_______) day is not a Business Day,
the next Business Day (each, a "Distribution Date"), commencing on
___________, 199__, to the Person in whose name this Trust Certificates is
registered at the close of business on the first day of the month or, if
Definitive Certificates are issued, the (_______) day of the prior month (the
"Record Date"), such Certificateholder's fractional undivided interest in the
amount to be distributed to Certificateholders on such Distribution Date.
No distributions of principal will be made on any Certificate until all of
the Notes have been paid in full.
(The Holder of this Trust Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Servicing
Agreement and the Indenture.)
It is the intent of the Depositor, the Company, the Servicer and
the Certificateholders that, for purposes of federal income, state and local
income and single business tax and any other income taxes, the Trust will be
treated as a partnership and the Certificateholders (including the Company)
will be treated as partners in that partnership. The Company and the other
Certificateholders, by acceptance of a Trust Certificate, agree to treat, and
to take no action inconsistent with the treatment of, the Trust Certificates
for such tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of
a Trust Certificate or, in the case of a Certificate Owner, a beneficial
interest in a Trust Certificate, covenants and agrees that such
Certificateholder or Certificate Owner, as the case may be, will not at any
time institute against the Company, or join in any institution against the
Company of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal
or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, the Trust Agreement or any of
the Basic Documents.
Distributions on this Trust Certificate will be made as provided
in the Trust Agreement by the Owner Trustee by wire transfer or check mailed
to the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates registered
on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Trust Certificate
will be made after due notice by the Owner Trustee of the pendency of such
distribution and only upon presentation and surrender of this Trust
Certificate at the office or agency maintained for that purpose by the Owner
Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit
under the Trust Agreement or the Servicing Agreement or be valid for any
purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Trust Certificate to be duly
executed.
_____________ LOAN TRUST 199__-__
by: (_____________________), not in its
individual capacity but solely as Owner Trustee
Dated: by:
----------------------------------------
Authorized Signatory
(REVERSE OF TRUST CERTIFICATE)
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Company, the Owner Trustee or
any affiliates of any of them and no recourse may be had against such parties
or their assets, except as expressly set forth or contemplated herein or in
the Trust Agreement or the Basic Documents. In addition, this Trust
Certificate is not guaranteed by any governmental agency or instrumentality
and is limited in right of payment to certain collections and recoveries with
respect to the Mortgage Loans (and certain other amounts), all as more
specifically set forth herein and in the Servicing Agreement. A copy of each
of the Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any,
designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Company and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor,
the Company and the Owner Trustee with the consent of the Holders of the
Trust Certificates and the Notes, each voting as a class, evidencing not less
than a majority of the Certificate Balance and the outstanding principal
balance of the Notes of each such class. Any such consent by the Holder of
this Trust Certificate shall be conclusive and binding on such Holder and on
all future Holders of this Trust Certificate and of any Trust Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent is made upon this Trust Certificate.
The Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Trust
Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Trust Certificate is
registerable in the Certificate Register upon surrender of this Trust
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate
Registrar duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Trust Certificates of
authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate
Registrar appointed under the Trust Agreement is (_________________), New
York, New York.
Except as provided in the Trust Agreement, the Trust Certificates
are issuable only as registered Trust Certificates without coupons in
denominations of $(__________) and in integral multiples of $(_______) in
excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new
Trust Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but
the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none
of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Servicing Agreement and the disposition of all
property held as part of the Owner Trust Estate. The Servicer of the
Mortgage Loans may at its option purchase the Owner Trust Estate at a price
specified in the Servicing Agreement, and such purchase of the Mortgage Loans
and other property of the Trust will effect early retirement of the Trust
Certificates; however, such right of purchase is exercisable only as of the
last day of any Collection Period as of which the Pool Balance is less than
or equal to (____)% of the Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1)
of the Code or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding this Trust Certificate, the Holder hereof shall be
deemed to have represented and warranted that it is not a Benefit Plan.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of
assignee)
- --------------------------------------------------------------------------
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
___________________________________________*/
-
Signature Guaranteed:
____________________________*/
-
_________________
*/ NOTICE: The signature to this assignment must correspond with the name
- -
as it appears upon the face of the within Trust Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company.
EXHIBIT B
CERTIFICATE OF TRUST OF
_____________ LOAN TRUST 199___
-------------------------------
THIS Certificate of Trust of _____________ LOAN TRUST 199__-__ (the
"Trust"), dated , 199__, is being duly executed and filed by
--------------
(_____________________), a (___________________________), as trustee, to form
a business trust under the Delaware Business Trust Act (12 Del. Code, Section
---------
3801 et seq.).
1. Name. The name of the business trust formed hereby is
----
_____________ LOAN TRUST 199__-__.
2. Delaware Trustee. The name and business address of the trustee
----------------
of the Trust in the State of Delaware is (______________), (______________),
(______________), Delaware (_____),
Attention: (_______________________________).
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
(______________),
not in its individual capacity but solely
as owner trustee under a Trust Agreement
dated , 199
---------------- --
By:
----------------------------------
Name:
Title:
EXHIBIT C
(Form of Certificate Depository Agreement)
EXHIBIT D
MORTGAGE LOAN SCHEDULE
Exhibit 4.4
______________ LOAN TRUST 199_-__,
Issuer
AND
(_________________)
INDENTURE TRUSTEE
_________________________________________
INDENTURE
Dated as of _________, 199_
__________________________________________
ASSET BACKED NOTES
(ASSET BACKED VARIABLE FUNDING NOTES)
SERIES 199__-__
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
Definitions
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Incorporation by Reference of Trust
Indenture Act . . . . . . . . . . . . . . . . . . . . . . . 2
1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Original Issuance of Notes
2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02. Execution, Authentication and Delivery . . . . . . . . . . . 4
ARTICLE III
Covenants
3.01. Collection of Payments on Mortgage Loan
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . 6
3.03. Money for Payments To Be Held in Trust;
Paying Agent; Certificate Paying Agent . . . . . . . . . . . 6
3.04. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.05. Payment of Principal and Interest;
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 8
3.06. Protection of Trust Estate . . . . . . . . . . . . . . . . . 10
3.07. Opinions as to Trust Estate . . . . . . . . . . . . . . . . . 11
3.08. Performance of Obligations; Servicing
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.09. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 14
3.10. Annual Statement as to Compliance . . . . . . . . . . . . . . 14
3.11. Recording of Assignments . . . . . . . . . . . . . . . . . . 15
3.12. Representations and Warranties Concerning
the Mortgage Loans . . . . . . . . . . . . . . . . . . . . . 15
3.13. Indenture Trustee's Review of Related
Documents . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14. Trust Estate; Related Documents . . . . . . . . . . . . . . . 16
3.15. Amendments to Servicing Agreement . . . . . . . . . . . . . . 18
3.16. Master Servicer as Agent and Bailee of
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . 18
3.17. Investment Company Act . . . . . . . . . . . . . . . . . . . 18
3.18. Issuer May Consolidate, etc., Only on
Certain Terms . . . . . . . . . . . . . . . . . . . . . . . 18
3.19. Successor or Transferee . . . . . . . . . . . . . . . . . . . 20
3.20. No Other Business . . . . . . . . . . . . . . . . . . . . . . 21
3.21. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 21
3.22. Guarantees, Loans, Advances and Other
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 21
3.23. Capital Expenditures . . . . . . . . . . . . . . . . . . . . 21
3.24. Restricted Payments . . . . . . . . . . . . . . . . . . . . . 21
3.25. Notice of Events of Default . . . . . . . . . . . . . . . . . 22
3.26. Further Instruments and Acts . . . . . . . . . . . . . . . . 22
3.27. Statements to Noteholders . . . . . . . . . . . . . . . . . . 22
(3.28. Grant of the Additional Loans . . . . . . . . . . . . . . 22)
3.29. Determination of Note Rate. . . . . . . . . . . . . . . . . . 23
(3.30. Payments under the Credit Enhancement
Instrument . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.31. Replacement Credit Enhancement
Instrument . . . . . . . . . . . . . . . . . . . . . . . . 24)
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
4.01. The Notes(; Increase of Maximum Variable
Funding Balance; Additional Variable
Funding Notes) . . . . . . . . . . . . . . . . . . . . . . . 26
4.02. Registration of and Limitations on
Transfer and Exchange of Notes; Appointment
of Certificate Registrar . . . . . . . . . . . . . . . . . . 28
4.03. Mutilated, Destroyed, Lost or Stolen
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.04. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 31
4.05. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 31
4.06. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . 32
4.07. Notices to Depository . . . . . . . . . . . . . . . . . . . . 32
4.08. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . 33
4.09. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 33
4.10. Satisfaction and Discharge of Indenture . . . . . . . . . . . 33
4.11. Application of Trust Money . . . . . . . . . . . . . . . . . 35
(4.12. Subrogation and Cooperation . . . . . . . . . . . . . . . . 35)
4.13. Repayment of Moneys Held by Paying
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V
Remedies
5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 37
5.02. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee . . . . . . . . . . . . . . 38
5.04. Remedies; Priorities . . . . . . . . . . . . . . . . . . . . 40
5.05. Optional Preservation of the Trust
Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.06. Limitation of Suits . . . . . . . . . . . . . . . . . . . . . 43
5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest . . . . . . . . . . . . . . . 44
5.08. Restoration of Rights and Remedies . . . . . . . . . . . . . 44
5.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . 44
5.10. Delay or Omission Not a Waiver . . . . . . . . . . . . . . . 44
5.11. Control by Noteholders . . . . . . . . . . . . . . . . . . . 44
5.12. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 45
5.13. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 46
5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 46
5.15. Sale of Trust Estate . . . . . . . . . . . . . . . . . . . . 46
5.16. Action on Notes . . . . . . . . . . . . . . . . . . . . . . . 48
5.17. Performance and Enforcement of
Certain Obligations . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
The Indenture Trustee
6.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . 50
6.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . 51
6.03. Individual Rights of Indenture Trustee . . . . . . . . . . . 52
6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . . 52
6.05. Notice of Event of Default . . . . . . . . . . . . . . . . . 52
6.06. Reports by Indenture Trustee to Holders . . . . . . . . . . . 52
6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . 52
6.08. Replacement of Indenture Trustee . . . . . . . . . . . . . . 53
6.09. Successor Indenture Trustee by Merger . . . . . . . . . . . . 54
6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee . . . . . . . . . . . . . . . . . 55
6.11. Eligibility; Disqualification . . . . . . . . . . . . . . . . 56
6.12. Preferential Collection of Claims Against
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.13. Representation and Warranty . . . . . . . . . . . . . . . . . 57
6.14. Directions to Indenture Trustee . . . . . . . . . . . . . . . 57
ARTICLE VII
Noteholders' Lists and Reports
7.01. Issuer To Furnish Indenture Trustee Names
and Addresses of Noteholders . . . . . . . . . . . . . . . . 58
7.02. Preservation of Information;
Communications to Noteholders . . . . . . . . . . . . . . . 58
7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . 58
7.04. Reports by Indenture Trustee . . . . . . . . . . . . . . . . 59
ARTICLE VIII
Accounts, Disbursements and Releases
8.01. Collection of Money . . . . . . . . . . . . . . . . . . . . . 60
8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . 60
8.03. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . 61
8.04. Release of Trust Estate . . . . . . . . . . . . . . . . . . . 62
8.05. Surrender of Notes Upon Final Payment . . . . . . . . . . . . 62
ARTICLE IX
Supplemental Indentures
9.01. Supplemental Indentures Without Consent
of Noteholders . . . . . . . . . . . . . . . . . . . . . . . 63
9.02. Supplemental Indentures With Consent of
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . 64
9.03. Execution of Supplemental Indentures . . . . . . . . . . . . 66
9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . . 66
9.05. Conformity with Trust Indenture Act . . . . . . . . . . . . . 67
9.06. Reference in Notes to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE X
Redemption of Notes
10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.02. Form of Redemption Notice . . . . . . . . . . . . . . . . . 68
10.03. Notes Payable on Redemption Date . . . . . . . . . . . . . . 69
ARTICLE XI
Miscellaneous
11.01. Compliance Certificates and Opinions,
etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.02. Form of Documents Delivered to Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.03. Acts of Noteholders . . . . . . . . . . . . . . . . . . . . 73
11.04. Notices, etc., to Indenture Trustee,
Issuer, Credit Enhancer and
Rating Agencies . . . . . . . . . . . . . . . . . . . . . 73
11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . . . 74
11.06. Alternate Payment and Notice
Provisions . . . . . . . . . . . . . . . . . . . . . . . . 75
11.07. Conflict with Trust Indenture Act . . . . . . . . . . . . . 75
11.08. Effect of Headings . . . . . . . . . . . . . . . . . . . . . 76
11.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . 76
11.10. Separability . . . . . . . . . . . . . . . . . . . . . . . . 76
11.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 76
11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 76
11.13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 76
11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 76
11.15. Recording of Indenture . . . . . . . . . . . . . . . . . . . 76
11.16. Issuer Obligation . . . . . . . . . . . . . . . . . . . . . 77
11.17. No Petition . . . . . . . . . . . . . . . . . . . . . . . . 77
11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.19. Authority of the Administrator . . . . . . . . . . . . . . . 78
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Mortgage Loan Schedule
APPENDIX
Appendix A - Definitions
This Indenture, dated as of ______, 199_, between ______________
LOAN TRUST 199_-_, a Delaware business trust, as Issuer (the "Issuer"), and
(________________), as Indenture Trustee (the "Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's
Series 199__-__ Asset Backed Notes (and Asset Backed Variable Funding Notes)
((together) the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing
Date, as Indenture Trustee for the benefit of the Holders of the Notes, all
of the Issuer's right, title and interest in and to whether now existing or
hereafter created (a) the Mortgage Loans and all monies and proceeds due
thereon after the Cut-off Date, (b) the Servicing Agreement and the Mortgage
Loan Purchase Agreement, (c) all funds on deposit in the Funding Account,
including all income from the investment and reinvestment of funds therein,
(d) all funds on deposit from time to time in the Collection Account
allocable to the Mortgage Loans; (e) all funds on deposit from time to time
in the Payment Account and in all proceeds thereof; ((f) the Policy;) and (g)
all present and future claims, demands, causes and chooses in action in
respect of any or all of the foregoing and all payments on or under, and all
proceeds of every kind and nature whatsoever in respect of, any or all of the
foregoing and all payments on or under, and all proceeds of every kind and
nature whatsoever in the conversion thereof, voluntary or involuntary, into
cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, checks, deposit accounts, rights to
payment of any and every kind, and other forms of obligations and
receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of any of the foregoing
(collectively, the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and
to secure compliance with the provisions of this Indenture, all as provided
in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Holders of the Notes, acknowledges such Grant, accepts the trust under this
Indenture in accordance with the provisions hereof and agrees to perform its
duties as Indenture Trustee as required herein.
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Indenture, except
-----------
as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Definitions attached hereto as
Appendix A which is incorporated by reference herein. All other capitalized
terms used herein shall have the meanings specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
Original Issuance of Notes
Section 2.01. Form. The Notes (and the Variable Funding Notes, in each
----
case) together with the Indenture Trustee's certificate of authentication,
shall be in substantially the forms set forth in Exhibit(s) A-1 (and A-2,
respectively,) with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Notes, as evidenced by their execution of the
Notes. Any portion of the text of any Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes,
as evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibits A-1(, A-2) and A-3 are part
of the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall
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be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and deliver
Notes for original issue in an aggregate initial principal amount of
$(______________) (and Variable Funding Notes for original issue in an
aggregate initial principal amount of $(_____________)). (The Security
Balance of the Variable Funding Notes in the aggregate may not exceed the
Maximum Variable Funding Balance.) The aggregate principal amount of Notes
outstanding at any time may not exceed (the sum of) $(_____________) (and the
Security Balance of Additional Variable Funding Notes issued pursuant to the
terms of Section 4.01 hereof), except as provided in Section 4.03.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes and the Notes shall be issuable in the
minimum initial Security Balances of $(________) and in integral multiples
of $(______) in excess thereof.
(Each Variable Funding Note shall be initially issued with a Security
Balance of $(______) or, if applicable, with a Security Balance in the amount
equal to the Additional Balance Differential for the Collection Period
related to the Payment Date following the date of issuance of such Variable
Funding Note pursuant to Section 4.01(c).)
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
ARTICLE III
Covenants
Section 3.01. Collection of Payments on Mortgage Loan Accounts. The
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Indenture Trustee shall establish and maintain with itself a trust account
(the "Payment Account") in which the Indenture Trustee shall, subject to the
terms of this paragraph, deposit, on the same day as it is received from the
Master Servicer, each remittance received by the Indenture Trustee with
respect to the Mortgage Loans. The Indenture Trustee shall make all payments
of principal of and interest on the Notes, subject to Section 3.03, as
provided in Section 3.05 herein from moneys on deposit in the Payment
Account.
Section 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
agency where, subject to satisfaction of conditions set forth herein, Notes
may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. If at any time the
Issuer shall fail to maintain any such office or agency or shall fail to
furnish the Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust Office, and
the Issuer hereby appoints the Indenture Trustee as its agent to receive all
such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent;
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Certificate Paying Agent. (a) As provided in Section 3.01, all payments of
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amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Payment Account pursuant to Section 3.01 shall be
made on behalf of the Issuer by the Indenture Trustee or by the Paying Agent,
and no amounts so withdrawn from the Payment Account for payments of Notes
shall be paid over to the Issuer except as provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge in the making of any payment required
to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Request direct any Paying Agent to pay to the Indenture Trustee all
sums held in trust by such Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held
by such Paying Agent; and upon such payment by any Paying Agent to the Inden-
ture Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment
of any amount due with respect to any Note and remaining unclaimed for two
years after such amount has become due and payable shall be discharged from
such trust and be paid to the Issuer on Issuer Request; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to
the Issuer for payment thereof (but only to the extent of the amounts so paid
to the Issuer), and all liability of the Indenture Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense and direction of
the Issuer cause to be published once, in an Authorized Newspaper published
in the English language, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee
shall also adopt and employ, at the expense and direction of the Issuer, any
other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address
of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is
or becomes, organized under the laws of any other state or of the United
States of America, in which case the Issuer will keep in full effect its
existence, rights and franchises under the laws of such other jurisdiction)
and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect
the validity and enforceability of this Indenture, the Notes, the Mortgage
Loans and each other instrument or agreement included in the Trust Estate.
Section 3.05. Payment of Principal and Interest; Defaulted Interest.
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(a) On each Payment Date from amounts on deposit in the Payment Account
(after making (x) any deposit to the Funding Account pursuant to Section
8.02(b) and (y) any deposits to the Payment Account pursuant to Section
8.02(c)(ii) and Section 8.02(c)(i)(2)), the Indenture Trustee, on behalf of
the Issuer shall pay to the Noteholders and the Indenture Trustee, in its
capacity as agent for the Issuer shall pay to other Persons, the amounts to
which they are entitled as set forth below:
(i) to the Noteholders the sum of (a) one month's interest at
the Note Rate on the Security Balances of Notes immediately prior to such
Payment Date and (b) any previously accrued and unpaid interest for prior
Payment Dates;
(ii) (if such Payment Date is after the Funding Period,) to the
Noteholders as principal on the Notes(and Variable Funding Notes,) the
applicable Security Percentage of the Principal Collection Distribution
Amount (and if such Payment Date is the first Payment Date following the end
of the Funding Period (if ending due to an Amortization Event) or the Payment
Date on which the Funding Period ends, to the Noteholders as principal on the
Notes (and Variable Funding Notes) the applicable Security Percentage of the
amount deposited from the Funding Account in respect of Security Principal
Collections);
(iii) to the Noteholders, as principal on the Notes (and Variable
Funding Notes), pro rata, based on the Security Balances from the amount
remaining on deposit in the Payment Account, up to the applicable Security
Percentage of Liquidation Loss Amounts for the related Collection Period;
(iv) to the Noteholders, as principal on the Notes (and Variable
Funding Notes), pro rata, based on the Security Balances from the amount
remaining on deposit in the Payment Account, up to the applicable Security
Percentage of Carryover Loss Amounts;
( (v) to the Credit Enhancer, in the amount of the premium for the
Credit Enhancement Instrument (and for any Additional Credit Enhancement
Instrument);
(vi) to the Credit Enhancer, to reimburse it for prior draws made
on the Credit Enhancement Instrument (and on any Additional Credit
Enhancement Instrument) (with interest thereon as provided in the Insurance
Agreement);
(vii) to the Noteholders, as principal on the Notes (and Variable
Funding Notes), pro rata, based on the Security Balances from Security
Interest Collections, up to the Accelerated Principal Distribution Amount for
such Payment Date (such amount, if any, paid pursuant to this clause (vii)
being referred to herein as the "Accelerated Principal Payment Amount");
(viii) to the Credit Enhancer, any other amounts owed to the Credit
Enhancer pursuant to the Insurance Agreement;)
(ix) to reimburse the Administrator for expenditures made on
behalf of the Issuer with respect to the performance of its duties under the
Indenture; and
(x) any remaining amounts to the Owner Trustee for distribution
as described in Section 5.01 of the Trust Agreement;
provided, further, that on the Final Scheduled Payment Date or other final
Payment Date, the amount to be paid pursuant to clause (ii) above shall be
equal to the Security Balances of the Notes immediately prior to such Payment
Date.
The amounts paid to Noteholders shall be paid to each Class in
accordance with the Class Percentage as set forth in paragraph (b) below.
Interest will accrue on the Notes during an Interest Period on the basis of
the (actual number of days in such Interest Period and a year assumed to
consist of 360 days.)
Any installment of interest or principal, if any, payable on any Note
or Certificate that is punctually paid or duly provided for by the Issuer on
the applicable Payment Date shall be paid to each Holder of record on the
preceding Record Date, by wire transfer to an account specified in writing
by such Holder reasonably satisfactory to the Indenture Trustee as of the
preceding Record Date or in all other cases or if no such instructions have
been delivered to the Indenture Trustee, by check to such Noteholder mailed
to such Holder's address as it appears in the Note Register the amount
required to be distributed to such Holder on such Payment Date pursuant to
such Holder's Securities; provided, however, that the Indenture Trustee shall
not pay to such Holders any amount required to be withheld from a payment to
such Holder by the Code.
(b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the related form
of Note set forth in Exhibits A-1 (and A-2). All principal payments on each
Class of Notes shall be made to the Noteholders of such Class entitled
thereto in accordance with the Percentage Interests represented by such
Notes. Upon notice to the Indenture Trustee by the Issuer, the Indenture
Trustee shall notify the Person in whose name a Note is registered at the
close of business on the Record Date preceding the Final Scheduled Payment
Date or other final Payment Date. Such notice shall be mailed no later than
____ Business Days prior to such Final Scheduled Payment Date or other final
Payment Date and shall specify that payment of the principal amount and any
interest due with respect to such Note at the Final Scheduled Payment Date
or other final Payment Date will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for such final payment.
Section 3.06. Protection of Trust Estate. (a) The Issuer will from
--------------------------
time to time execute and deliver all such supplements and amendments hereto
and all such financing statements, continuation statements, instruments of
further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate against the
claims of all persons and parties.
(b) Except as otherwise provided in the Servicing Agreement or this
Indenture, the Indenture Trustee shall not remove any portion of the Trust
Estate that consists of money or is evidenced by an instrument, certificate
or other writing from the jurisdiction in which it was held at the date of
the most recent Opinion of Counsel delivered pursuant to Section 3.07 (or
from the jurisdiction in which it was held as described in the Opinion of
Counsel delivered at the Closing Date pursuant to Section 3.07(a), if no
Opinion of Counsel has yet been delivered pursuant to Section 3.07(b) unless
the Trustee shall have first received an Opinion of Counsel to the effect
that the lien and security interest created by this Indenture with respect
to such property will continue to be maintained after giving effect to such
action or actions.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement
or other instrument required to be executed pursuant to this Section 3.06.
Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date,
---------------------------
the Issuer shall furnish to the Indenture Trustee, the Owner Trustee and to
the Administrator an Opinion of Counsel either stating that, in the opinion
of such counsel, such action has been taken with respect to the delivery of
the Mortgage Notes, the recording of the Assignments of Mortgage, the record-
ing and filing of this Indenture, any indentures supplemental hereto, and any
other requisite documents, and with respect to the execution and filing of
any financing statements and continuation statements, as are necessary to
perfect and make effective the lien and security interest of this Indenture
and reciting the details of such action, or stating that, in the opinion of
such counsel, no such action is necessary to make such lien and security
interest effective.
(b) On or before _________ 31 in each calendar year, beginning in 199_,
the Issuer shall furnish to the Indenture Trustee and to the Administrator
an Opinion of Counsel at the expense of the Issuer either stating that, in
the opinion of such counsel, such action has been taken with respect to the
recording of the Assignments of Mortgage, the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any
other requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or
stating that in the opinion of such counsel no such action is necessary to
maintain such lien and security interest. Such Opinion of Counsel shall also
describe the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the lien
and security interest of this Indenture until ________ 31 in the following
calendar year.
Section 3.08. Performance of Obligations; Servicing Agreement. (a)
-----------------------------------------------
The Issuer will punctually perform and observe all of its obligations and
agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document, including without limitation the
Servicing Agreement or any provision thereof without the consent of the
Indenture Trustee or the Holders of at least a majority of the Security
Balances of the Notes, the Master Servicer (and the Credit Enhancer).
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee in an Officer's
Certificate of the Issuer shall be deemed to be action taken by the Issuer.
Initially, the Issuer has contracted with the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the
documents relating to the Mortgage Loans or any such instrument, except such
actions as the Master Servicer is expressly permitted to take in the
Servicing Agreement or as expressly provided in this Indenture or such other
instrument or agreement.
(d) If the Issuer shall have knowledge of the occurrence of an Event
of Servicing Termination, the Issuer shall promptly notify the Indenture
Trustee thereof, and shall specify in such notice the action, if any, the
Issuer is taking in respect of such Event of Servicing Termination. If such
Event of Servicing Termination arises from the failure of the Master Servicer
to perform any of its duties or obligations under the Servicing Agreement
with respect to the Mortgage Loans, the Issuer may remedy such failure,
provided that if such Event of Servicing Termination arises from the failure
by the Master Servicer to comply with requirements imposed upon it under
Section 3.04 of the Servicing Agreement with respect to hazard insurance for
the Mortgaged Properties securing the Mortgage Loans, the Issuer shall
promptly, as the case may be, pay such premiums or obtain substitute
insurance coverage meeting the requirements of said Section 3.04. So long
as any such Event of Servicing Termination shall be continuing, the Indenture
Trustee may exercise its remedies set forth in Section 7.01 of the Servicing
Agreement. (Unless granted or permitted by the Credit Enhancer or the
Holders of Securities to the extent provided above, the Issuer may not waive
any such Event of Servicing Termination or terminate the rights and powers
of the Master Servicer under the Servicing Agreement.)
(e) Upon any termination of the Master Servicer's rights and powers
pursuant to Section 7.01 of the Servicing Agreement, the Issuer shall appoint
a successor servicer (the "Successor Master Servicer"), and such Successor
Master Servicer shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee. In the event that a Successor
Master Servicer has not been appointed and accepted its appointment at the
time when the Servicer ceases to act as Servicer, the Indenture Trustee
without further action shall automatically be appointed the Successor Master
Servicer. The Indenture Trustee may resign as the Master Servicer by giving
written notice of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new servicer enters into a servicing agreement with the
Issuer as provided below. Upon delivery of any such notice to the Issuer,
the Issuer shall obtain a new servicer as the Successor Master Servicer under
the Servicing Agreement. Any Successor Master Servicer other than the
Indenture Trustee shall (i) be an established financial institution having
a net worth of not less than $_____________ and whose regular business
includes the servicing of mortgage loans and (ii) enter into a servicing
agreement with the Issuer having substantially the same provisions as the
provisions of the Servicing Agreement applicable to the Servicer. If, within
30 days after the delivery of the notice referred to above, the Issuer shall
not have obtained such new servicer, the Indenture Trustee may appoint, or
may petition a court of competent jurisdiction to appoint, a successor
servicer (acceptable to the Credit Enhancer) to service the Mortgage Loans.
In connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, and the Issuer shall enter into an agreement with such successor
for the servicing of the Mortgage Loans, such agreement to be substantially
similar to the Servicing Agreement (or otherwise acceptable to the Credit
Enhancer); provided that any such compensation of the successor servicer
unless
otherwise agreed to by the Credit Enhancer, shall not be in excess of the
Servicing Fee payable to the Master Servicer under the Servicing Agreement.
If the Indenture Trustee shall succeed to the Master Servicer's duties as
servicer of the Mortgage Loans as provided herein, it shall do so in its
individual capacity and not in its capacity as Indenture Trustee.
(f) The Issuer shall at all times retain an Administrator (approved by
the Credit Enhancer under the Administration Agreement) and may enter into
contracts with other Persons for the performance of the Issuer's obligations
hereunder, and performance of such obligations by such Persons shall be
deemed to be performance of such obligations by the Issuer.
Section 3.09. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Servicing Agreement, sell, transfer, exchange or otherwise dispose of the
Trust Estate, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Noteholder by reason of the payment of the
taxes levied or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B) permit
any lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien of this Indenture) to be created on or
extend to or otherwise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof or (C) permit the
lien of this Indenture not to constitute a valid first priority security
interest in the Trust Estate.
Section 3.10. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal
year 199_), an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year
and of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in its compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
Section 3.11. Recording of Assignments. The Issuer shall exercise its
------------------------
right under the Mortgage Loan Purchase Agreement with respect to the
obligation of the Seller to submit or cause to be submitted for recording all
Assignments of Mortgages on or prior to _________, 199_ with respect to the
Initial Loans and within (__) days following the related Deposit Date with
respect to any Additional Loans.
Section 3.12. Representations and Warranties Concerning the Mortgage
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Loans. The Issuer has pledged to the Indenture Trustee all of its right
- -----
under the Mortgage Loan Purchase Agreement and the Indenture Trustee has the
benefit of the representations and warranties made by the Seller in
Section (3.___) thereof and Section (4.__) thereof concerning the Mortgage
Loans and the right to enforce any remedy against the Seller provided in such
Section (3.___) or Section (4.___) to the same extent as though such
representations and warranties were made directly to the Indenture Trustee.
(Section 3.13. Indenture Trustee's Review of Related Documents. (a)
-----------------------------------------------
The Indenture Trustee agrees, for the benefit of the holders of the Notes,
to review, or the related Custodian shall review, unless the Indenture
Trustee or such Custodian made such review prior to the Closing Date, on or
prior to ________, 199_ the Related Documents delivered to it on or prior to
the Closing Date and within 90 days of the related Deposit Date, the Related
Documents delivered to it in connection with any Additional Loan, in each
case in connection with the Grant of the Mortgage Loan listed on the Schedule
of Mortgage Loans as security for the Notes. Such review shall be limited
to a determination that all documents referred to in the definition of the
term Related Documents have been executed and are appropriately endorsed in
the manner called for in the Mortgage Loan Purchase Agreement and that the
Related Documents have been delivered with respect to each such Mortgage Loan
(other than the documents related to (i) any Mortgage Loan so
listed which has been subject to a Prepayment in full and termination of
related Mortgage Loan, the proceeds of which have been deposited in the
Collection Account in lieu of delivery of the applicable Related Documents,
(ii) any Mortgage Loan with respect to which the related Mortgaged Property
was foreclosed, repossessed or otherwise converted subsequent to the Cut-Off
Date and prior to the Closing Date or with respect to which foreclosure
proceedings have been commenced and for which the related Related Documents
are required in connection with the prosecution of such foreclosure
proceedings and for which the Issuer has delivered a trust receipt called for
by Section 3.14(c) and (iii) any Mortgage Loan as to which the original
Assignment of Mortgage has been submitted for recording), that all such
documents have been executed, and that all such documents relate to the
Mortgage Loans listed on the Schedule of Mortgage Loans. In performing such
review, the Indenture Trustee may rely upon the purported genuineness and due
execution of any such document and on the purported genuineness of any
signature thereon.
(b) If any Related Document is defective in any material respect which
may materially and adversely affect the value of the related Mortgage Loan,
the interest of the Indenture Trustee or the Noteholders in such Mortgage
Loan, or if any document required to be delivered to the Indenture Trustee
has not been delivered, the Indenture Trustee or the related Custodian on
behalf of the Indenture Trustee shall notify the Issuer, the Seller, the
Credit Enhancer and the Master Servicer immediately after obtaining knowledge
thereof and the Indenture Trustee, as assignee of the Issuer's rights under
the Mortgage Loan Purchase Agreement, shall exercise its remedies in respect
of any such defect against the Seller as provided in the Mortgage Loan
Purchase Agreement.)
Section 3.14. Trust Estate; Related Documents. (a) When required by
-------------------------------
the provisions of this Indenture, the Indenture Trustee shall execute
instruments to release property from the lien of this Indenture, or convey
the Indenture Trustee's interest in the same, in a manner and under
circumstances which are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article III shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) In order to facilitate the servicing of the Mortgage Loans, the
Master Servicer is hereby authorized in the name and on behalf of the
Indenture Trustee and the Issuer, to execute assumption agreements,
substitution agreements, and instruments of satisfaction or cancellation or
of partial or full release or discharge, or any other document contemplated
by the Servicing Agreement and other comparable instruments with respect to
the
Mortgage Loans and with respect to the Mortgaged Properties subject to the
Mortgages (and the Indenture Trustee and the Owner Trustee shall promptly
execute any such documents on request of the Master Servicer), subject to the
obligations of the Master Servicer under the Servicing Agreement. If from
time to time the Master Servicer shall deliver to the Indenture Trustee or
the related Custodian copies of any written assurance, assumption agreement
or substitution agreement or other similar agreement pursuant to Section 3.05
of the Servicing Agreement, the Indenture Trustee or the related Custodian
shall check that each of such documents purports to be an original executed
copy (or a copy of the original executed document if the original executed
copy has been submitted for recording and has not yet been returned) and, if
so, shall file such documents, and upon receipt of the original executed copy
from the applicable recording office or receipt of a copy thereof certified
by the applicable recording office shall file such originals or certified
copies with the Related Documents. If any such documents submitted by the
Master Servicer do not meet the above qualifications, such documents shall
promptly be returned by the Indenture Trustee or the related Custodian to the
Master Servicer, with a direction to the Master Servicer to forward the
correct documentation.
(c) Upon Issuer Request accompanied by an Officers' Certificate of the
Master Servicer pursuant to Section 3.07 of the Servicing Agreement to the
effect that a Mortgage Loan has been the subject of a final payment or a
prepayment in full and the related Mortgage Loan has been terminated or that
substantially all Liquidation Proceeds which have been determined by the
Master Servicer in its reasonable judgment to be finally recoverable have
been recovered, and upon deposit to the Collection Account of such final
monthly payment, prepayment in full together with accrued and unpaid interest
to the date of such payment with respect to such Mortgage Loan or, if
applicable, Liquidation Proceeds, the Indenture Trustee and the Issuer shall
promptly release the Related Documents to the Master Servicer upon the order
of the Issuer, along with such documents as the Master Servicer or the
Mortgagor may request as contemplated by the Servicing Agreement to evidence
satisfaction and discharge of such Mortgage Loan. If from time to time and
as appropriate for the servicing or foreclosure of any Mortgage Loan, the
Master Servicer requests the Indenture Trustee or the related Custodian to
release the Related Documents and delivers to the Indenture Trustee or the
related Custodian a trust receipt reasonably satisfactory to the Indenture
Trustee or the related Custodian and signed by a Responsible Officer of the
Master Servicer, the Issuer and the Indenture Trustee or the related
Custodian shall release the Related Documents to the Master Servicer. If
such Mortgage Loans shall be liquidated and the Indenture Trustee or the
related Custodian receives a certificate from the Master Servicer as provided
above, then, upon request of
the Issuer, the Indenture Trustee or the related Custodian shall release the
trust receipt to the Master Servicer upon the order of the Issuer.
(d) The Indenture Trustee shall, at such time as there are no Notes
Outstanding (and no amounts due to the Credit Enhancer), release all of the
Trust Estate to the Issuer (other than any cash held for the payment of the
Notes pursuant to Section 3.03 or 4.11), subject, however, to the rights of
the Indenture Trustee under Section 6.07.
Section 3.15. Amendments to Servicing Agreement. The Indenture Trustee
---------------------------------
may enter into any amendment or supplement to the Servicing Agreement only
in accordance with Section 8.01 of the Servicing Agreement. The Indenture
Trustee may, in its discretion, decline to enter into or consent to any such
supplement or amendment if its own rights, duties or immunities shall be
adversely affected.
Section 3.16. Master Servicer as Agent and Bailee of Indenture Trustee.
--------------------------------------------------------
Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code or other similar applicable law, rule or regulation of the
state in which such property is held by the Master Servicer, the Indenture
Trustee hereby acknowledges that the Master Servicer is acting as agent and
bailee of the Indenture Trustee in holding amounts on deposit in the
Collection Account pursuant to Section 3.02 of the Servicing Agreement, as
well as its agent and bailee in holding any Related Documents released to the
Master Servicer pursuant to Section 3.14(c), and any other items constituting
a part of the Trust Estate which from time to time come into the possession
of the Master Servicer. It is intended that, by the Master Servicer's
acceptance of such agency pursuant to Section 3.02 of the Servicing Agree-
ment, the Trustee, as a secured party, will be deemed to have possession of
such Related Documents, such moneys and such other items for purposes of
Section 9-305 of the Uniform Commercial Code of the state in which such
property is held by the Master Servicer.
Section 3.17. Investment Company Act. The Issuer shall not become 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 (or
any successor or amendatory statute), and the rules and regulations
thereunder (taking into account not only the general definition of the term
"investment company" but also any available exceptions to such general
definition); provided, however, that the Issuer shall be in compliance with
this Section 3.17 if it shall have obtained an order exempting it from
regulation as an "investment company" so long as it is in compliance with the
conditions imposed in such order.
Section 3.18. Issuer May Consolidate, etc., Only on Certain Terms. (a)
---------------------------------------------------
The Issuer shall not consolidate or merge with or into any other Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing under
the laws of the United States of America or any state or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form reasonably
satisfactory to the Indenture Trustee, the due and punctual payment of the
principal of and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes to be reduced, suspended
or withdrawn or to be considered by either Rating Agency (to be below invest-
ment grade without taking into account the Credit Enhancement Instrument);
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the effect
that such transaction will not have any material adverse federal income tax
or _________ tax consequence to the Issuer or any Noteholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or
transfer of which is hereby restricted shall (A) be a United States
citizen or a Person organized and existing under the laws of the United
States of America or any state, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee, the due and punctual payment of the
principal of and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest so
conveyed or transferred shall be subject and subordinate to the rights of
Holders of the Notes, (D) unless otherwise provided in such supplemental
indenture, expressly agrees to indemnify, defend and hold harmless the Issuer
against and from any loss, liability or expense arising under or related to
this Indenture and the Notes and (E) expressly agrees by means of such
supplemental indenture that such Person (or if a group of Persons, then one
specified Person) shall make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in connection with the
Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates to
be reduced, suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the effect
that such transaction will not have any material adverse federal income tax
or ___________ tax consequence to the Issuer or any Noteholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
Section 3.19. Successor or Transferee. (a) Upon any consolidation or
-----------------------
merger of the Issuer in accordance with Section 3.18(a), the Person formed
by or surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power
of, the Issuer under this Indenture with the same effect as if such Person
had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.18(b), the Issuer will be released from
every covenant and agreement of this Indenture to be observed or performed
on the part of the Issuer with respect to the Notes immediately upon the
delivery of written notice to the Indenture Trustee that the Issuer is to be
so released.
Section 3.20. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning and selling and managing
the Mortgage Loans in the manner contemplated by this Indenture and the Basic
Documents and all activities incidental thereto.
Section 3.21. No Borrowing. The Issuer shall not issue, incur, assume,
------------
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.22. Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by the Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing
or otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or
make any capital contribution to, any other Person.
Section 3.23. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.24. Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made,
(w) distributions to the Owner Trustee and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under
the Trust Agreement, (x) payment to the Master Servicer or others pursuant
to the terms of the Servicing Agreement and (y) payments to the Indenture
Trustee pursuant to Section 1(a)(ii) of the Administration Agreement (and (z)
make distributions to the holders of the Residual Ownership Interest as
contemplated by the Trust Agreement). The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.
Section 3.25. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee(, the Credit Enhancer) and the Rating Agencies prompt
written notice of each Event of Default hereunder and under the Trust
Agreement.
Section 3.26. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.
Section 3.27. Statements to Noteholders. The Indenture Trustee shall
-------------------------
forward by mail to each Noteholder the Statement delivered to it pursuant to
Section 4.01 of the Servicing Agreement.
(Section 3.28. Grant of the Additional Loans. (a) In consideration
-----------------------------
of the delivery on each Deposit Date to or upon the order of the Issuer of
all or a portion of the amount in respect of Security Principal Collections
on deposit in the Funding Account, the Issuer shall, to the extent of the
availability thereof, on such Deposit Date during the Funding Period Grant
to the Indenture Trustee all of its right, title and interest in the
Additional Loans and simultaneously with the Grant of the Additional Loans
the Issuer will deliver the related Related Documents to the Indenture
Trustee or the related Custodian.
(b) The obligation of the Indenture Trustee to accept the Grant of the
Additional Loans and the other property and rights related thereto described
in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to each Deposit Date:
(i) the Indenture Trustee shall not have received written notice
from any Rating Agency (or the Credit Enhancer) to the effect that such
transfer of Additional Loans would
adversely affect the then current rating of the Notes or cause the
rating assigned to the Securities to be below investment grade (without
taking into account the Credit Enhancement Instrument);
(ii) the Indenture Trustee shall have received a revised Mortgage
Loan Schedule, listing the Additional Loans;
(iii) the Master Servicer shall confirm to the Indenture Trustee
that it has deposited in the Collection Account all Principal Collections and
Interest Collections in respect of such Additional Loans on or after the
related Deposit Date for the Additional Loans;
(iv) the Indenture Trustee shall have received a duly completed
and executed Transfer Certificate in the form of Exhibit 1 to the Mortgage
Loan Purchase Agreement;
(v) the Seller at its expense and the Issuer at its expense, as
appropriate, shall have provided the Rating Agencies (and the Credit
Enhancer) with an Opinion of Counsel relating to the sale of the Additional
Loans to the Issuer and the Grant of the Additional Loans to the Indenture
Trustee which opinion shall be in the form of Exhibit __ to the Mortgage Loan
Purchase Agreement; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel confirming the satisfaction
of each condition precedent specified in this paragraph (b).
(c) The obligation of the Indenture Trustee to accept the Grant of an
Additional Loan on the related Deposit Date is subject to each Additional
Loan and the Additional Loans in the aggregate, as the case may be,
satisfying the conditions set forth in the Mortgage Loan Purchase Agreement.)
(Section 3.29. Determination of Note Rate. On the second LIBOR
--------------------------
Business Day immediately preceding (i) the Closing Date in the case of the
first Interest Period and (ii) the first day of each succeeding Interest
Period, the Indenture Trustee shall determine LIBOR and the Note Rate for
such Interest Period and shall inform the Issuer, the Master Servicer and the
Depositor at their respective facsimile numbers given to the Indenture
Trustee in writing thereof.)
(Section 3.30. Payments under the Credit Enhancement Instrument. (a)
------------------------------------------------
On any Payment Date, other than a Dissolution Payment Date, the Indenture
Trustee on behalf of the Noteholders shall make a draw on the Credit
Enhancement Instrument in an amount if any
equal to the sum of (x) the amount by which the interest accrued at the Note
Rate on the Security Balance of the Notes exceeds the amount on deposit in
the Payment Account available to be distributed therefor on such Payment Date
and (y) the Guaranteed Principal Payment Amount (the "Credit Enhancement Draw
Amount").
(b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount is specified in any Statement to Holders prepared by the Master
Servicer pursuant to Section 4.01 of the Servicing Agreement, the Notice for
Payment (as defined in the Credit Enhancement Instrument) in the amount of
the Credit Enhancement Draw Amount to the Credit Enhancer no later than 2:00
P.M., New York City time, on the second Business Day prior to the applicable
Payment Date. Upon receipt of such Credit Enhancement Draw Amount in
accordance with the terms of the Credit Enhancement Instrument, the Indenture
Trustee shall deposit such Credit Enhancement Draw Amount in the Payment
Account for distribution to Holders pursuant to Section 3.05.
In addition, a draw may be made under the Credit Enhancement Instrument
in respect of any Avoided Payment (as defined in and pursuant to the terms
and conditions of the Credit Enhancement Instrument) and the Indenture
Trustee shall submit a Notice for Payment with respect thereto together with
the other documents required to be delivered to the Credit Enhancer pursuant
to the Credit Enhancement Instrument in connection with a draw in respect of
any Avoided Payment.
Section 3.31. Replacement Credit Enhancement Instrument. In the event
-----------------------------------------
of a Credit Enhancer Default or if the claims paying ability rating of the
Credit Enhancer is downgraded and such downgrade results in a downgrading of
the then current rating of the Notes (in each case, a "Replacement Event"),
the Issuer, at its expense, in accordance with and upon satisfaction of the
conditions set forth in the Credit Enhancement Instrument, including, without
limitation, payment in full of all amounts owed to the Credit Enhancer, may,
but shall not be required to, substitute a new surety bond or surety bonds
for the existing Credit Enhancement Instrument or may arrange for any other
form of credit enhancement; provided, however, that in each case the Notes
shall be rated no lower than the rating assigned by each Rating Agency to the
Notes immediately prior to such Replacement Event and the timing and
mechanism for drawing on such new credit enhancement shall be reasonably
acceptable to the Indenture Trustee and provided further that the premiums
under the proposed credit enhancement shall not exceed such premiums under
the existing Credit Enhancement Instrument. It shall be a condition to
substitution of any new credit enhancement that there be delivered to the
Indenture Trustee (i) an Opinion of Counsel, acceptable in form to the
Indenture Trustee, from counsel to the provider of such new credit
enhancement with respect to the enforceability thereof and such other matters
as the Indenture Trustee may require and (ii) an Opinion of Counsel to the
effect that such substitution would not (a) adversely affect in any material
respect the tax status of the Notes and the Certificates or (b) cause the
Issuer to be subject to a tax at the entity level or to be classified as a
taxable mortgage pool within the meaning of Section 7701(i) of the Code.
Upon receipt of the items referred to above and payment of all amounts owing
to the Credit Enhancer and the taking of physical possession of the new
credit enhancement, the Indenture Trustee shall, within five Business Days
following receipt of such items and such taking of physical possession,
deliver the replaced Credit Enhancement Instrument to the Credit Enhancer.
In the event of any such replacement the Issuer shall give written notice
thereof to the Rating Agencies.)
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
Section 4.01. The Notes(; Increase of Maximum Variable Funding Balance;
---------------------------------------------------------
Additional Variable Funding Notes). (a) The Notes shall be registered in
- ----------------------------------
the name of a nominee designated by the Depository. Beneficial Owners will
hold interests in the Notes through the book-entry facilities of the Deposi-
tory in minimum initial Principal Balances of $(________) and integral multi-
ples of $(_________) in excess thereof. (The Capped Funding Notes will be
issuable in minimum initial Principal Balances of $(_______) and integral
multiples of $(________) in excess thereof, together with any additional
amount necessary to cover the aggregate initial Principal Balance of the
Capped Funding Notes surrendered at the time of the initial denominational
exchange thereof (with such initial Principal Balance in each case being
deemed to be the Principal Balance of the Capped Funding Notes at the time
of such initial denominational exchange thereof).)
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights
of Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the
Notes as to which they are the Beneficial Owners. Requests and directions
from, and votes of, the Depository as Holder of the Notes shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners.
The Indenture Trustee may establish a reasonable record date in connection
with solicitations of consents from or voting by Noteholders and give notice
to the Depository of such record date. Without the consent of the Issuer and
the Indenture Trustee, no Note may be transferred by the Depository except
to a successor Depository that agrees to hold such Note for the account of
the Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint
a successor Depository. If no successor Depository has been appointed within
30 days of the effective date of the Depository's resignation or removal,
each Beneficial Owner shall be entitled to certificates representing the
Notes it beneficially owns in the manner prescribed in Section 4.08.
The Notes shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Note Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
((b) So long as no Amortization Event has occurred the Maximum Variable
Funding Balance on the Closing Date may be increased from time to time by an
aggregate amount not to exceed $(______________) and Additional Variable
Funding Notes may be issued upon satisfaction of the following conditions:
(i) the Indenture Trustee shall have received an Additional
Credit Enhancement Instrument pursuant to the terms and conditions of the
Insurance Agreement, including without limitation Section _____ thereof;
(ii) the Indenture Trustee shall have received an Opinion of
Counsel to the Credit Enhancer in the form attached hereto as Exhibit C;
(iii) the Indenture Trustee shall have received an Opinion of
Counsel in the form attached hereto as Exhibit D;
(iv) the Indenture Trustee shall have received the documents
specified in Section 11.01(a) (other than clause (iii) thereof).
The Security Balance of such Additional Variable Funding Notes in the
aggregate will reflect the sum of (i) the related Excess Additional Balance
Differential and (ii) the Additional Balance Differential for each Collection
Period from the Collection Period during which the Additional Variable
Funding Notes are issued until the new Maximum Variable Funding Balance is
reached. Notwithstanding the foregoing, the Security Balance of each
specific Additional Variable Funding Note will be limited to the Maximum
Individual Variable Funding Balance as provided in subsection (c) below.
The Additional Variable Funding Notes issued in connection with the
first increase in the Maximum Variable Funding Balance pursuant to this
subsection will bear the designation "A" (in addition to the numerical
designation pursuant to subsection (c) below) and any subsequent Additional
Variable Funding Notes issued in connection with any subsequent increases in
the Maximum Variable Funding Balance will bear alphabetical designations in
the order of their issuance.
Any Additional Variable Funding Notes shall be in the form of Exhibit
A-2 hereof and for all purposes shall be Notes issued pursuant to this
Indenture and all references to Variable Funding
Notes herein shall include Additional Variable Funding Notes issued pursuant
to this Section 4.01(b).
Upon the issuance of any Additional Variable Funding Notes the Issuer
will deliver written notice thereof to the Rating Agencies.
(c) Subject to the Maximum Variable Funding Balance at such time as the
Security Balance of any Variable Funding Note reaches the Maximum Individual
Variable Funding Balance, no subsequent amounts in respect of the Additional
Balance Differential shall be added to the Security Balance of such Variable
Funding Note and instead a new Variable Funding Note shall be issued and
executed on behalf of the Issuer by the Owner Trustee, not in its individual
capacity but solely as Owner Trustee, authenticated by the Note Registrar and
delivered by the Indenture Trustee to or upon the order of the Issuer. All
subsequent amounts in respect of the Additional Balance Differential shall
be added to the Security Balance of such new Variable Funding Note (subject
to the Maximum Variable Funding Balance) until the Security Balance thereof
reaches the Maximum Individual Variable Funding Balance.
The Variable Funding Note issued on the Closing Date shall bear the
Designation "1" and each new Variable Funding Note will bear sequential
numerical designations in the order of their issuance. On each Payment Date
on or after the Accelerated Amortization Date a new Variable Funding Note
will be issued on each Payment Date in a principal amount equal to the lesser
of (a) the Maximum Individual Variable Funding Balance and (b) the Additional
Balance Differential for such Payment Date, but in no event will the
Principal Balance of the Variable Funding Notes exceed the Maximum Variable
Funding Balance without satisfying the conditions of Section 4.01 hereof.)
Section 4.02. Registration of and Limitations on Transfer and Exchange
--------------------------------------------------------
of Notes; Appointment of Certificate Registrar. The Note Registrar shall
- ----------------------------------------------
cause to be kept at its Corporate Trust Office a Note Register in which,
subject to such reasonable regulations as it may prescribe, the Note
Registrar shall provide for the registration of Notes and of transfers and
exchanges of Notes as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Indenture Trustee shall execute and the Note Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
(No Variable Funding Note, other than any Capped Funding Notes, may be
transferred. Subject to the provisions set forth below Capped Funding Notes
may be transferred, provided that with respect to the initial transfer
thereof by the Seller prior written notification of such transfer shall have
been given to the Rating Agencies and to the Credit Enhancer by the Seller
along with an Opinion of Counsel to the effect that such transfer will not
constitute a fraudulent conveyance under the laws of the relevant
jurisdiction.
No transfer of a Capped Funding Note shall be made unless such transfer
is exempt from the registration requirements of the Securities Act of 1933,
as amended, and any applicable state securities laws or is made in accordance
with said Act and laws. In the event of any such transfer, (i) unless such
transfer is made in reliance upon Rule 144A under the 1933 Act, the Indenture
Trustee or the Issuer may, require a written Opinion of Counsel (which may
be in-house counsel) acceptable to and in form and substance reasonably
satisfactory to the Indenture Trustee and the Issuer that such transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from said Act and laws or is being made pursuant to said Act
and laws, which Opinion of Counsel shall not be an expense of the Indenture
Trustee or the Issuer and (ii) the Indenture Trustee shall require the
transferee to execute an investment letter acceptable to and in form and
substance reasonably satisfactory to the Issuer and the Indenture Trustee
certifying to the Issuer and the Indenture Trustee the facts surrounding such
transfer, which investment letter shall not be an expense of the Indenture
Trustee or the Issuer. The Holder of a Variable Funding Note desiring to
effect such transfer shall, and does hereby agree to, indemnify the Indenture
Trustee the Credit Enhancer and the Issuer against any liability that may
result if the transfer is not so exempt or is not made in accordance with
such federal and state laws. Notwithstanding the foregoing, the restriction
of transfer specified in this paragraph is not applicable to any Capped
Funding Notes that have been registered under the Securities Act of 1933.)
Subject to the foregoing, at the option of the Noteholders, Notes may
be exchanged for other Notes of like tenor or, in each case in authorized
initial Principal Balances evidencing the same aggregate Percentage Interests
upon surrender of the Notes to be exchanged at the Corporate Trust Office of
the Note Registrar. (With respect to any surrender of Capped Funding Notes
for exchange the new Notes delivered in exchange therefor will bear the
designation "Capped" in addition to any other applicable designations.)
Whenever any Notes are so surrendered for exchange, the Indenture Trustee
shall execute and the Note Registrar shall authenticate and deliver the Notes
which the Noteholder making the exchange is entitled to receive. Each Note
presented or surrendered for registration of transfer or exchange shall (if
so required by the Note Registrar) be duly endorsed by, or be accompanied by a
written instrument of transfer in form reasonably satisfactory to the Note
Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing. Notes delivered upon any such transfer or exchange
will evidence the same obligations, and will be entitled to the same rights
and privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
All Notes surrendered for registration of transfer and exchange shall
be cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee such
security or indemnity as may be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by
a bona fide purchaser, and provided that the requirements of Section 8-405
of the UCC are met, the Issuer shall execute, and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a replacement Note of
the same Class; provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven days shall
be due and payable, instead of issuing a replacement Note, the Issuer may pay
such destroyed, lost or stolen Note when so due or payable without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the
Issuer and the Indenture Trustee shall be entitled to recover such replace-
ment Note (or such payment) from the Person to whom it was delivered or any
Person taking such replacement Note from such Person to whom such replacement
Note was delivered or any assignee of such Person, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred
by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses
of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not
the mutilated, destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for
---------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and
any agent of the Issuer or the Indenture Trustee may treat the Person in
whose name any Note is registered (as of the day of determination) as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and neither the Issuer, the Indenture Trustee
nor any agent of the Issuer or the Indenture Trustee shall be affected by
notice to the contrary.
Section 4.05. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture
Trustee and shall be promptly cancelled by the Indenture Trustee. The Issuer
may at any time deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be
promptly cancelled by the Indenture Trustee. No Notes shall be authenticated
in lieu of or in exchange for any Notes cancelled as provided in this Section
4.05, except as expressly permitted by this Indenture. All cancelled Notes
may be held or disposed of by the Indenture Trustee in accordance with its
standard retention or disposal policy as in effect at the time unless the
Issuer shall direct by an Issuer Request that they be destroyed or returned
to it; provided, that such Issuer Request is timely and the Notes have not
been previously disposed of by the Indenture Trustee.
Section 4.06. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial
Depository, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Depository, and no Beneficial Owner will receive a definitive Note
representing such Beneficial Owner's interest in such Note, except as
provided in Section 4.08. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to Beneficial Owners pursuant
to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full force
and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of the
Notes, and shall have no obligation to the Owners of Notes;
(iii) to the extent that the provisions of this Section 4.06
conflict with any other provisions of this Indenture, the provisions of this
Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised only
through the Depository and shall be limited to those established by law and
agreements between such Owners of Notes and the Depository and/or the
Depository Participants pursuant to the Note Depository Agreement. Unless
and until Definitive Notes are issued pursuant to Section 4.08, the initial
Depository will make book-entry transfers among the Depository Participants
and receive and transmit payments of principal of and interest on the Notes
to such Depository Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes evidencing
a specified percentage of the Security Balances of the Notes, the Depository
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Beneficial Owners and/or Depository
Participants owning or representing, respectively, such required percentage
of the beneficial interest in the Notes and has delivered such instructions
to the Indenture Trustee.
Section 4.07. Notices to Depository. Whenever a notice or other
---------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued
to Beneficial Owners pursuant to Section 4.08, the Indenture Trustee shall
give all such notices and communications specified herein to be given to
Holders of the Notes to the Depository, and shall have no obligation to the
Beneficial Owners.
Section 4.08. Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Depository is no longer willing or able
to properly discharge its responsibilities with respect to the Notes and the
Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Depository or (iii)
after the occurrence of an Event of Default, Owners of Notes representing
beneficial interests aggregating at least a majority of the Security Balances
of the Notes advise the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the best interests
of the Beneficial Owners, then the Depository shall notify all Beneficial
Owners and the Indenture Trustee of the occurrence of any such event and of
the availability of Definitive Notes to Beneficial Owners requesting the
same. Upon surrender to the Indenture Trustee of the typewritten Notes
representing the Book-Entry Notes by the Depository, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the Definitive Notes in accordance with the instructions
of the Depository. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the Holders of the Definitive Notes as Noteholders.
Section 4.09. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued, with the intention that, for
federal, state and local income, single business and franchise tax purposes,
the Notes will qualify as indebtedness of the Issuer. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of its
Note (and each Beneficial Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Section 4.10. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon,
(iv) Sections 3.03, 3.04, 3.06, 3.09, 3.18, 3.20 and 3.21, (v) the rights,
obligations and immunities of the Indenture Trustee hereunder (including the
rights of the
Indenture Trustee under Section 6.07 and the obligations of the Indenture
Trustee under Section 4.11) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 4.03 and (ii) Notes for whose payment
money has theretofore been deposited in trust or segregated and held in trust
by the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.03) have been delivered to the Indenture
Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable, or
b. will become due and payable at the Final Scheduled
Payment Date within one year, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of notice
of redemption by the Indenture Trustee in the name, and at the expense, of
the Issuer,
and the Issuer, in the case of a., or b. or c. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture Trustee
cash or direct obligations of or obligations guaranteed by the United States
of America (which will mature prior to the date such amounts are payable),
in trust for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes then outstanding not theretofore delivered
to the Indenture Trustee for cancellation when due on the Final Scheduled
Payment Date or the Redemption Date, as applicable;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder (and under the Insurance Agreement) by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee and the
Credit Enhancer an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01 and,
subject to Section 11.02, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Section 4.11. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as
the Indenture Trustee may determine, to the Holders of those particular Notes
for the payment or redemption of which such moneys have been deposited with
the Indenture Trustee, of all sums due and to become due thereon for
principal and interest; but such moneys need not be segregated from other
funds except to the extent required herein or required by law.
(Section 4.12. Subrogation and Cooperation. (a) The Issuer and the
---------------------------
Indenture Trustee acknowledge that (i) to the extent the Credit Enhancer
makes payments under the Credit Enhancement Instrument on account of
principal of or interest on the Notes or the Certificates, the Credit
Enhancer will be fully subrogated to the rights of such Holders to receive
such principal and interest from the Issuer, and (ii) the Credit Enhancer
shall be paid such principal and interest but only from the sources and in
the manner provided herein and in the Insurance Agreement for the payment of
such principal and interest.
The Indenture Trustee shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce
the Credit Enhancer's rights or interest under this Indenture or the
Insurance Agreement without limiting the rights of the Noteholders as
otherwise set forth in the Indenture, including, without limitation, upon the
occurrence and continuance of a default under the Insurance Agreement, a
request to take any one or more of the following actions:
(i) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture in respect to Notes and all
amounts payable under the Insurance Agreement enforce any judgment obtained
and collect from the Issuer moneys adjudged due;
(ii) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private Sales called and conducted
in any manner permitted by law;
(iii) file or record all Assignments that have not previously been
recorded;
(iv) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce
the rights and remedies of the Credit Enhancer hereunder.)
Section 4.13. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Administrator other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.05 and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
ARTICLE V
Remedies
--------
Section 5.01. Events of Default. "Event of Default," wherever used
-----------------
herein, shall have the meaning provided in Appendix A(; provided, however,
that no Event of Default will occur under clause (i) or clause (ii) of the
definition of "Event of Default" if the Issuer fails to make payments of
principal of and interest on the Notes so long as the Credit Enhancer makes
payments sufficient therefore under the Credit Enhancement Instrument).
The Issuer shall deliver to the Indenture Trustee (and the Credit
Enhancer), within five days after the occurrence thereof, written notice in
the form of an Officer's Certificate of any event which with the giving of
notice and the lapse of time would become an Event of Default under clause
(iii) of the definition of "Event of Default", its status and what action the
Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If
---------------------------------------------------
an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less than
a majority of the Security Balances of all Notes may declare the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Class of Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall become
immediately due and payable. (Unless the prior written consent of the Credit
Enhancer shall have been obtained by the Indenture Trustee, the Payment Date
upon which such accelerated payment is due and payable shall not be a Payment
Date under the Credit Enhancement Instrument and the Indenture Trustee shall
not be authorized under Section 3.32 to make a draw therefor.)
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
the Holders of Notes representing a majority of the Security Balances of all
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee
a sum sufficient to pay:
(A) all payments of principal of and interest on the Notes
and all other amounts that would then be due hereunder or upon the Notes if
the Event of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration, have
been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in
- -----------------
the payment of any interest on any Note when the same becomes due and
payable, and such default continues for a period of five days, or
(ii) default is made in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable, the
Issuer will, upon demand of the Indenture Trustee, pay to it, for the benefit
of the Holders of Notes and of the Credit Enhancer, the whole amount then due
and payable on the Notes for principal and interest, with interest upon the
overdue principal, and in addition thereto such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an
express trust, subject to the provisions of Section 11.17 hereof, may
institute a Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and may enforce
the same against the Issuer or other obligor upon the Notes and collect in
the manner provided by law out of the property of the Issuer or other obligor
the Notes, wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee, subject to the provisions of Section 11.17 hereof, may, as more
particularly provided in Section 5.04, in its discretion, proceed to protect
and enforce its rights and the rights of the Noteholders (and the Credit
Enhancer), by such appropriate Proceedings as the Indenture Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Indenture Trustee by this
Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest
in the Trust Estate, Proceedings under Title 11 of the United States Code or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorgani-
zation, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors
or property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor Indenture Trustee,
and their respective agents, attorneys and counsel, and for reimbursement of
all expenses and liabilities incurred, and all advances made, by the Inden-
ture Trustee and each predecessor Indenture Trustee, except as a result of
negligence or bad faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes
allowed in any judicial proceedings relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders to
make payments to the Indenture Trustee, and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such Noteholders,
to pay to the Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of
negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Note-
holder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without
the possession of any of the Notes or the production thereof in any trial or
other Proceedings relative thereto, and any such action or proceedings
instituted by the Indenture Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes (or
the Variable Funding Notes, as applicable).
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall
be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
--------------------
have occurred and be continuing, the Indenture Trustee subject to the
provisions of Section 11.17 hereof may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes or
under this Indenture with respect thereto, whether by declaration or
otherwise, and all amounts payable under the Insurance Agreement, enforce any
judgment obtained, and collect from the Issuer and any other obligor upon
such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee, the Holders of the Notes (and the Credit
Enhancer); and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and conducted
in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A) the
Holders of 100% of the Security Balances of the Securities (and the Credit
Enhancer) consent thereto, (which consent will not be unreasonably withheld)
(B) the proceeds of such sale or liquidation distributable to Holders are
sufficient to discharge in full all amounts then due and unpaid upon the
Securities for principal and interest (and to reimburse the Credit Enhancer
for any amounts drawn under the Credit Enhancement Instrument and any other
amounts due the Credit Enhancer under the Insurance Agreement) or (C) the
Indenture Trustee determines that the Mortgage Loans will not continue to
provide sufficient funds for the payment of principal of and interest on
either the Notes, as they would have become due if the Notes had not been
declared due and payable, and the Indenture Trustee obtains the consent (of
the Credit Enhancer, which consent will not be unreasonably withheld, and)
of the Holders of not less than 66-2/3% of the Security Balances of the
Notes. In determining such sufficiency or insufficiency with respect to
clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to
the sufficiency of the Trust Estate for such purpose. (Notwithstanding the
foregoing, so long as an Event of Servicer Termination has not occurred, any
Sale of the Trust Estate shall be made subject to the continued Servicing of
the Mortgage Loans by the Master Servicer as provided in the Servicing Agree-
ment.)
(b) If the Indenture Trustee collects any money or property pursuant
to this Article V, it shall pay out the money or property in the following
order:
FIRST: to the Indenture Trustee for amounts due under
Section 6.07;
SECOND: to each Class of Noteholders for amounts due and unpaid
on the related Class of Notes for interest and to each Noteholder of such
Class, in each case ratably, without preference or priority of any kind,
according to the amounts due and payable on such Class of Notes for interest
from amounts available in the Trust Estate for such Noteholders;
THIRD: to Holders of each Class of Notes for amounts due and
unpaid on the related Class of Notes for principal, from amounts available
in the Trust Estate for such Noteholders, and to each Noteholder of such
Class, in each case ratably, without preference or priority of any kind,
according to the amounts due and payable on such Class of Notes for
principal, until the Security Balances of each Class of Notes is reduced to
zero;
FOURTH: to the Issuer for amounts required to be distributed to
the Certificateholders pursuant to the Trust Agreement;
FIFTH: (To the payment of all amounts due and owing to the Credit
Enhancer under the Insurance Agreement);
SIXTH: to the Issuer for amounts due under Article VIII of the
Trust Agreement; and
SEVENTH: to the payment of the remainder, if any to the Issuer or
any other person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days
before such record date, the Issuer shall mail to each Noteholder and the
Indenture Trustee a notice that states the record date, the payment date and
the amount to be paid.
Section 5.05. Optional Preservation of the Trust Estate. If the Notes
-----------------------------------------
have been declared to be due and payable under Section 5.02 following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Trust Estate. It is the desire of the parties
hereto and the Noteholders that there be at all times sufficient funds for
the
payment of principal of and interest on the Notes and other obligations of
the Issuer (including payment to the Credit Enhancer), and the Indenture
Trustee shall take such desire into account when determining whether or not
to maintain possession of the Trust Estate. In determining whether to
maintain possession of the Trust Estate, the Indenture Trustee may, but need
not, obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless and subject to the provisions of Section
11.17 hereof:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Security Balances
of the Notes have made written request to the Indenture Trustee to institute
such Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
a majority of the Security Balances of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of
Holders of Notes, each representing less than a majority of the Security
Balances of the Notes, the Indenture Trustee in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
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Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on
or after the respective due dates thereof expressed in such Note or in this
Indenture and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right
or remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had
been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
------------------------------
the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee or to the Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by the Indenture Trustee or by the
Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
----------------------
Security Balances of Notes shall have the right to direct the time, method
and place of conducting any Proceeding for
any remedy available to the Indenture Trustee with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided
that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be by
Holders of Notes representing not less than 100% of the Security Balances of
Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Security Balances of
Notes to sell or liquidate the Trust Estate shall be of no force and effect;
and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject
to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of
------------------------
the acceleration of the maturity of the Notes as provided in Section 5.02,
the Holders of Notes of not less than a majority of the Security Balances of
the Notes may waive any past Event of Default and its consequences except an
Event of Default (a) with respect to payment of principal of or interest on
any of the Notes or (b) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of the Holder of each Note
(or (c) the waiver of which would materially and adversely affect the
interests of the Credit Enhancer or modify its obligation under the Credit
Enhancement Instrument.) In the case of any such waiver, the Issuer, the
Indenture Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other Event of Default or impair any right conse-
quent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to
any subsequent or other Event of Default or impair any right consequent
thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
----------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.13 shall not apply to (a) any suit
instituted by the Indenture Trustee, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate
more than 10% of the Security Balances of the Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of principal
of or interest on any Note on or after the respective due dates expressed in
such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever, claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15. Sale of Trust Estate. (a) The power to effect any sale
--------------------
or other disposition (a "Sale") of any portion of the Trust Estate pursuant
to Section 5.04 is expressly subject to the provisions of Section 5.05 and
this Section 5.15. The power to effect any such Sale shall not be exhausted
by any one or more Sales as to any portion of the Trust Estate remaining
unsold, but shall continue unimpaired until the entire Trust Estate shall
have been sold or all amounts payable on the Notes and under this Indenture
(and under the Insurance Agreement) shall have been paid. The Indenture
Trustee may from time to time postpone any public Sale by public announcement
made at the time and place of such Sale. The Indenture Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(1) the Holders of all Securities (and the Credit Enhancer)
consent to or direct the Indenture Trustee to make, such Sale, or
(2) the proceeds of such Sale would be not less than the entire
amount which would be payable to the Noteholders under the Notes (and the
Credit Enhancer in respect of amounts drawn under the Credit Enhancement
Instrument and any other amounts due the Credit Enhancer under the Insurance
Agreement,) in full payment thereof in accordance with Section 5.02, on the
Payment Date next succeeding the date of such Sale, or
(3) The Indenture Trustee determines, in its sole discretion, that
the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee
may rely upon an opinion of an Independent investment banking firm obtained
and delivered as provided in Section 5.05, (and the Credit Enhancer consents
to such Sale, which consent will not be unreasonably withheld) and the
Holders representing at least 66-2/3% of the Security Balances of the
Securities consent to such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or other disposition
thereof for purposes of this Section 5.15(b).
(c) Unless the Holders of Notes (and the Credit Enhancer) have other-
wise consented or directed the Indenture Trustee, at any public Sale of all
or any portion of the Trust Estate at which a minimum bid equal to or greater
than the amount described in paragraph (2) of subsection (b) of this Section
5.15 has not been established by the Indenture Trustee and no Person bids an
amount equal to or greater than such amount, the Indenture Trustee shall bid
an amount at least $1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate
(1) any Holder or Holders of Notes may bid for and (with the
consent of the Credit Enhancer) purchase the property offered for sale, and
upon compliance with the terms of sale may hold, retain and possess and
dispose of such property, without further accountability, and may, in paying
the purchase money therefor, deliver any Notes or claims for interest thereon
in lieu of cash up to the amount which shall, upon distribution of the net
proceeds of such sale, be payable thereon, and such Notes, in case the
amounts so payable thereon shall be less than the amount due thereon, shall
be returned to the Holders thereof after being appropriately stamped to show
such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent permitted by, applicable law in connection
therewith, may purchase all or any portion of the Trust Estate in a private
sale, and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of (A) the
amount which would be distributable to the Holders of the Notes (and amounts
owing to the Credit Enhancer) as a result of such Sale in accordance with
Section 5.04(b) on the Payment Date next succeeding the date of such Sale and
(B) the expenses of the Sale and of any Proceedings in connection therewith
which are reimbursable to it, without being required to produce the Notes in
order to complete any such Sale or in order for the net Sale price to be
credited against such Notes, and any property so acquired by the Indenture
Trustee shall be held and dealt with by it in accordance with the provisions
of this Indenture;
(3) the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the
Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest
in any portion of the Trust Estate in connection with a Sale thereof, and to
take all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction
of any conditions precedent or see to the application of any moneys.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under
or with respect to this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion
of the Trust Estate or upon any of the assets of the Issuer. Any money or
property collected by the Indenture Trustee shall be applied in accordance
with Section 5.04(b).
Section 5.17. Performance and Enforcement of Certain Obligations.
---------------------------------------------------
(a) Promptly following a request from the Indenture
Trustee to do so and at the Administrator's expense, the Issuer shall take
all such lawful action as the Indenture Trustee may request to compel or
secure the performance and observance by the Seller and the Master Servicer,
as applicable, of each of their obligations to the Issuer under or in
connection with the Mortgage Loan Purchase Agreement and the Servicing
Agreement, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Mortgage Loan Purchase Agreement and the Servicing Agreement to the extent
and in the manner directed by the Indenture Trustee, including the
transmission of notices of default on the part of the Seller or the Master
Servicer thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Seller or the Master
Servicer of each of their obligations under the Mortgage Loan Purchase
Agreement and the Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee (subject to the rights of the Credit Enhancer under the
Servicing Agreement) may, and at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of the
Holders of 66-2/3% of the Security Balances of the Notes shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the
Seller or the Master Servicer under or in connection with the Mortgage Loan
Purchase Agreement and the Servicing Agreement, including the right or power
to take any action to compel or secure performance or observance by the
Seller or the Master Servicer, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Mortgage Loan
Purchase Agreement and the Servicing Agreement, as the case may be, and any
right of the Issuer to take such action shall not be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default
---------------------------
has occurred and is continuing, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Indenture Trustee and conforming to the requirements of this
Indenture; however, the Indenture Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved that
the Indenture Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it (A) pursuant to Section 5.11 (or (B) from the Credit
Enhancer, which it is entitled to give under any of the Basic Documents).
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section 6.01.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
Section 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee
---------------------------
may rely on any document believed by it to be genuine and to have been signed
or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee
shall not be responsible for any misconduct or negligence on the part of, or
for the supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers; provided, however, that the Indenture Trustee's conduct
does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any
Administrator, Note Registrar, co-registrar or co-paying agent may do the
same with like rights. However, the Indenture Trustee must comply with
Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
Section 6.05. Notice of Event of Default. If an Event of Default
--------------------------
occurs and is continuing and if it is known to a Responsible Officer of the
Indenture Trustee, the Indenture Trustee shall give notice thereof to each
Noteholder (and the Credit Enhancer). The Trustee shall mail to each
Noteholder such notice of the Event of Default within 90 days after it
occurs. Except in the case of an Event of Default in payment of principal
of or interest on any Note, the Indenture Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required
to enable such holder to prepare its federal and state income tax returns.
In addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to perform
its federal and state income tax reporting obligations.
Section 6.07. Compensation and Indemnity. The Issuer shall or shall
--------------------------
cause the Administrator to pay to the Indenture Trustee on each Payment Date
reasonable compensation for its services. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of
an express trust. The Issuer shall or shall cause the Administrator to
reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for
its services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Issuer shall or shall cause the
Administrator to indemnify the Indenture Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Issuer and the
Administrator promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Issuer and the Administrator shall
not relieve the Issuer or the Administrator of its obligations hereunder.
The Issuer shall or shall cause the Administrator to defend any such claim,
and the Indenture Trustee may have separate counsel and the Issuer shall or
shall cause the Administrator to pay the fees and expenses of such counsel.
Neither the Issuer nor the Administrator need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence
or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture
Trustee may resign at any time by so notifying the Issuer and the Credit
Enhancer. The Holders of a majority of Security Balances of the Notes may
remove the Indenture Trustee by so notifying the Indenture Trustee and the
Credit Enhancer and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in
such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The succes-
sor Indenture Trustee shall mail a notice of its succession to Noteholders.
The retiring Indenture Trustee shall promptly transfer all property held by
it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of Security
Balances of the Notes may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture
Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under
Section 6.07 shall continue for the benefit of the retiring Indenture
Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have
been authenticated but not delivered, any such successor to the Indenture
Trustee may adopt the certificate of authentication of any predecessor
trustee, and deliver such Notes so authenticated; and in case at that time
any of the Notes shall not have been authenticated, any successor to the
Indenture Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the Indenture
Trustee; and in all such cases such certificates shall have the full force
which it is anywhere in the Notes or in this Indenture provided that the
certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
- -------
time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Trust Estate may at the time be located, the
Indenture 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 Noteholders, such title to the Trust Estate, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture 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 6.11 and no notice to Noteholders of the appointment of any co-
trustee or separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or co-
trustee is not authorized to act separately without the Indenture Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VI. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Indenture Trustee or separately, as may be provided therein, subject to
all the provisions of this Indenture, specifically including every provision
of this Indenture relating to the conduct of, affecting the liability of, or
affording protection to, the Indenture Trustee. Every such instrument shall
be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any
separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts
shall vest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition and it or its parent shall have a long-term debt rating of (____)
or better by (______). The Indenture Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An
Indenture Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
Section 6.13. Representation and Warranty. The Indenture Trustee
---------------------------
represents and warrants to the Issuer, for the benefit of the Noteholders,
that this Indenture has been executed and delivered by one of its Responsible
Officers who is duly authorized to execute and deliver such document in such
capacity on its behalf.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee
-------------------------------
is hereby directed:
(a) to accept assignment of the Mortgage Loans and hold the assets of
the Trust in trust for the Noteholders;
(b) to issue, execute and deliver the Notes substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the
terms of this Indenture.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
Section 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Issuer will furnish or cause to be furnished to the
- --------------
Indenture Trustee (a) not more than five days after each Record Date, a list,
in such form as the Indenture Trustee may reasonably require, of the names
and addresses of the Holders of Notes as of such Record Date, (b) at such
other times as the Indenture Trustee and the Credit Enhancer may request in
writing, within 30 days after receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 10 days prior to
the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to
be furnished.
Section 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form
- -----------
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of Holders of Notes
received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in such
Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to time
by rules and regulations prescribe) that the Issuer may be required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect
to compliance by the Issuer
with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section 313(c))
such summaries of any information, documents and reports required to be filed
by the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and
by rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA
----------------------------
Section 313(a), within 60 days after each January 1 beginning with
___________, 199_, the Indenture Trustee shall mail to each Noteholder as
required by TIA Section 313(c) (and to the Credit Enhancer) a brief report
dated as of such date that complies with TIA Section 313(a). The Indenture
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
Section 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance
of any fiscal agent or other intermediary, all money and other property
payable to or receivable by the Indenture Trustee pursuant to this Indenture.
The Indenture Trustee shall apply all such money received by it as provided
in this Indenture. Except as otherwise expressly provided in this Indenture,
if any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Estate, the Indenture
Trustee may take such action as may be appropriate to enforce such payment
or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to
claim a Default or Event of Default under this Indenture and any right to
proceed thereafter as provided in Article V.
Section 8.02. Trust Accounts. (a) On or prior to the Closing Date,
--------------
the Issuer shall cause the Indenture Trustee to establish and maintain, in
the name of the Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders (and the Credit Enhancer), the Payment Account as provided
in Section 3.01 of this Indenture.
(b) All moneys deposited from time to time in the Payment Account
pursuant to the Servicing Agreement and all deposits therein pursuant to this
Indenture, including any investments made with such moneys, are for the
benefit of the Noteholders and the Certificateholders (and all income or
other gain from such investments are for the benefit of the Master Servicer
as provided by the Servicing Agreement).
(On each Payment Date during the Funding Period the Indenture Trustee
shall withdraw Net Principal Collections from the Payment Account and deposit
Net Principal Collections to the Funding Account.)
On each Payment Date, the Indenture Trustee shall distribute all amounts
on deposit in the Payment Account (after giving effect to the withdrawal
referred to in the preceding paragraph) to Noteholders in respect of the
Notes in the order of priority set forth in Section 3.05 (except as otherwise
provided in Section 5.04(b)).
The Master Servicer may direct the Indenture Trustee to invest any funds
in the Payment Account in Eligible Investments maturing
no later than the Business Day preceding each Payment Date and shall not be
sold or disposed of prior to the maturity. (Unless otherwise instructed by
the Master Servicer, the Indenture Trustee shall invest all funds in the
Payment Account in its (__________) Short Term Investment Fund so long as it
is an Eligible Investment).
((c) On or before the Closing Date the Issuer shall open, at the
Corporate Trust Office, an account which shall be the "Funding Account". The
Master Servicer may direct the Indenture Trustee to invest any funds in the
Funding Account in Eligible Investments maturing no later than the Business
Day preceding each Payment Date and shall not be sold or disposed of prior
to the maturity. Unless otherwise instructed by the Master Servicer, the
Indenture Trustee shall invest all funds in the Payment Account in its
Corporate Trust Short Term Investment Fund so long as it is an Eligible
Investment. During the Funding Period, any amounts received by the Indenture
Trustee in respect of Net Principal Collections for deposit in the Funding
Account, together with any Eligible Investments in which such moneys are or
will be invested or reinvested during the term of the Notes, shall be held
by the Indenture Trustee in the Funding Account as part of the Trust Estate,
subject to disbursement and withdrawal as herein provided.
(i) Amounts on deposit in the Funding Account in respect of Net
Principal Collections may be withdrawn on each Deposit Date and (1) paid to
the Issuer in payment for Additional Loans by the deposit of such amount to
the Collection Account and (2) at the end of the Funding Period any amounts
remaining in the Funding Account after the withdrawal called for by clause
(1) shall be deposited in the Payment Account to be included in the payment
of principal on the Payment Date that is the last day of the Funding Period.
(ii) Amounts on deposit in the Funding Account in respect of
investment earnings shall be withdrawn on each Payment Date and deposited in
the Payment Account and included in the amounts paid to Noteholders and
Certificateholders.
(d) (i) Any investment in the institution with which the Funding
Account is maintained may mature on such Payment Date and (ii) any other
investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Funding Account in the amount
payable on such investment on such Payment Date, pending receipt thereof to
the extent necessary to make distributions on the Notes and the Certificates)
and shall not be sold or disposed of prior to maturity.)
Section 8.03. Opinion of Counsel. The Indenture Trustee shall receive
at least seven days notice when requested by the
Issuer to take any action pursuant to Section 8.04(a), accompanied by copies
of any instruments to be executed, and the Indenture Trustee shall also
require, as a condition to such action, an Opinion of Counsel, in form and
substance satisfactory to the Indenture Trustee, stating the legal effect of
any such action, outlining the steps required to complete the same, and
concluding that all conditions precedent to the taking of such action have
been complied with and such action will not materially and adversely impair
the security for the Notes or the rights of the Noteholders in contravention
of the provisions of this Indenture; provided, however, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of
the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate
or other instrument delivered to the Indenture Trustee in connection with any
such action.
Section 8.04. Release of Trust Estate. (a) Subject to the payment of
-----------------------
its fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, or convey the Indenture Trustee's interest
in the same, in a manner and under circumstances that are not inconsistent
with the provisions of this Indenture. No party relying upon an instrument
executed by the Indenture Trustee as provided in Article IV hereunder shall
be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent, or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this
Indenture have been paid, (and (iii) all sums due the Credit Enhancer) have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture. The Indenture Trustee shall release
property from the lien of this Indenture pursuant to this Section 8.04 only
upon receipt of an request from the Issuer accompanied by an Officers'
Certificate, an Opinion of Counsel, and (if required by the TIA) Independent
Certificates in accordance with TIA Section 314(c) and 314(d)(1) meeting the
applicable requirements as described herein, (and a letter from the President
or any Vice President or any Secretary of the Credit Enhancer, if any,
stating that the Credit Enhancer has no objection to such request from the
Issuer).
Section 8.05. Surrender of Notes Upon Final Payment. By acceptance of
-------------------------------------
any Note, the Holder thereof agrees to surrender such Note to the Indenture
Trustee promptly, prior to such Noteholder's receipt of the final payment
thereon.
ARTICLE IX
Supplemental Indentures
-----------------------
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with (the consent
of the Credit Enhancer and) prior notice to the Rating Agencies (and the
Credit Enhancer), the Issuer and the Indenture Trustee, when authorized by
an Issuer Request, at any time and from time to time, may enter into one or
more indentures supplemental hereto (which shall conform to the provisions
of the Trust Indenture Act as in force at the date of the execution thereof),
in form satisfactory to the Indenture Trustee, for any of the following
purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and
in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) (A) to cure any ambiguity, to correct any error or to
correct or supplement any provision herein or in any supplemental indenture
that may be defective or inconsistent with any other provision herein or in
any supplemental indenture or with the related Prospectus or Prospectus
Supplement or (B) to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided, that in the case of clause (B), such action shall not adversely
affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the
administration of the trusts hereunder by more than one trustee, pursuant to
the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other provisions as may
be expressly required by the TIA;
provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse
federal income tax or _________ tax consequences to the Noteholders.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with (the consent of the Credit Enhancer and) prior notice to the Rating
Agencies (and the Credit Enhancer), enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, (i) adversely affect in any material respect the
interests of any Noteholder (or (ii) cause the Issuer to be subject to an
entity level tax or be classified as a taxable mortgage pool within the
meaning of Section 7701(i) of the Code).
Section 9.02. Supplemental Indentures With Consent of Noteholders. The
---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies (and, with the written consent
of the Credit Enhancer) and with the consent of the Holders of not less than
a majority of the Security Balances of each Class of Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders
of the Notes under this Indenture; provided, however, that no such supple-
mental indenture shall, without the consent of the Holder of each Note
affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof or the
interest rate thereon, change the provisions of this Indenture relating to
the application of collections on, or the proceeds of the sale of, the Trust
Estate to payment of principal of or interest on the Notes, or change any
place of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the application of
funds available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates thereof;
(ii) reduce the percentage of the Security Balances of the Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver
of compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" or modify or alter the exception in the
definition of the term "Holder";
(iv) reduce the percentage of the Security Balances of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of interest
or principal due on any Note on any Payment Date (including the calculation
of any of the individual components of such calculation); or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate
the lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture; (and provided, further, that such action shall not, as evidenced
by an Opinion of Counsel, cause the Issuer
to be subject to an entity level tax or be classified as a taxable
mortgage pool within the meaning of Section 7701(i) of the Code).
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture
Trustee shall mail to the Holders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.01 and 6.02, shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and
immunities under this Indenture of the Indenture Trustee, the Issuer and the
Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and
all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform,
in the opinion of the Indenture Trustee and the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Indenture Trustee in exchange for
Outstanding Notes.
ARTICLE X
Redemption of Notes
-------------------
Section 10.01. Redemption. (a) The Notes are subject to redemption
----------
in whole, but not in part, at the direction of the Servicer pursuant to
Section _____ of the Servicing Agreement, on any Payment Date on which the
Servicer exercises its option to purchase the Trust Estate pursuant to said
Section ____, for purchase price equal to the Redemption Price; provided,
that the Issuer has available funds sufficient to pay the Redemption Price.
The Servicer or the Issuer shall furnish the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section
10.01(a), the Servicer or the Issuer shall furnish notice of such election
to the Indenture Trustee not later than 20 days prior to the Redemption Date
and the Issuer shall deposit by 10:00 A.M. New York City time on the
Redemption date with the Indenture Trustee in the Note Distribution Account
the Redemption Price of the Notes to be redeemed, whereupon all Notes shall
be due and payable on the Redemption Date upon the furnishing of a notice
complying with Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement, all amounts on deposit in the Payment
Account shall be paid to the Noteholders up to the Security Balance of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid
to Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer
shall, to the extent practicable, furnish notice of such event to the amounts
shall be payable on the Redemption Date.
Section 10.02. Form of Redemption Notice. (a) Notice of redemption
-------------------------
under Section 10.01(a) shall be given by the Indenture Trustee by first-class
mail, postage prepaid, or by facsimile mailed or transmitted not later than
10 days prior to the applicable Redemption Date to each Holder of Notes, as
of the close of business on the Record Date preceding the applicable
Redemption Date, at such Holder's address or facsimile number appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment
of the Redemption Price (which shall be the office or agency of the Issuer
to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in
the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair
or affect the validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10,01(b) is not required
to be given to Noteholders.
Section 10.03. Notes Payable on Redemption Date. The Notes shall,
--------------------------------
following notice of redemption as required by Section 10.02 (in the case of
redemption pursuant to Section 10.01(a)), on the Redemption Date become due
and payable at the Redemption Price and (unless the Issuer shall default in
the payment of the Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which the accrued interest
is calculated for purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
-------------
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon
------------------------------------------
any application or request by the Issuer to the Indenture Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee and to the Credit Enhancer (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA)
an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section 11.01, except that, in
the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with; and
(5) if the Signer of such Certificate or Opinion is required to
be Independent, the Statement required by the definition of the term
"Independent".
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in
addition to any obligation imposed in Section 11.01(a) or elsewhere in this
Indenture, furnish to the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as
to the fair value (within 90 days of such deposit) to the Issuer of the
Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to
the same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such with-
drawal or release since the commencement of the then-current fiscal year of
the Issuer, as set forth in the certificates delivered pursuant to clause (i)
above and this clause (ii), is 10% or more of the Security Balances of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth
in the related Officer's Certificate is less than $25,000 or less than one
percent of the Security Balances of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to
the same matters if the fair value of the property or securities and of all
other property, other than property as contemplated by clause (v) below or
securities released from the lien of this Indenture since the commencement
of the then-current calendar year, as set forth in the certificates required
by clause (iii) above and this clause (iv), equals 10% or more of the
Security Balances of the Notes, but such certificate need not be furnished
in the case of any release of property or securities if the fair value
thereof as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the then Security Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the Issuer
may, without compliance with the requirements of the other provisions of this
Section 11.01, (A) collect, sell or otherwise dispose of Mortgage Loans and
Mortgaged Properties as and to the extent permitted or required by the Basic
Documents or (B) make cash payments out of the Payment Account as and to the
extent permitted or required by the Basic Documents, so long as the Issuer
shall deliver to the Indenture Trustee every six months, commencing
__________, 199_, an Officer's Certificate of the Issuer stating that all the
dispositions of Collateral described in clauses (A) or (B) above that
occurred during the preceding six calendar months were in the ordinary course
of the Issuer's business and that the proceeds thereof were applied in
accordance with the Basic Documents.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered
by an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person,
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized
Officer or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer
or officers of the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Seller, the Issuer or the Administrator, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the
granting of such application, or as evidence of the Issuer's compliance with
any term hereof, it is intended that the truth and accuracy, at the time of
the granting of such application or at the effective date of such certificate
or report (as the case may be), of the facts and opinions stated in such
document shall in such case be conditions precedent to the right of the
Issuer to have such application granted or to the sufficiency of such
certificate or report. The foregoing shall not, however, be construed to
affect the Indenture Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in
Article VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
-------------------
authorization, direction, notice, consent, waiver or other action provided
by this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed
by such Noteholders in person or by agents duly appointed in writing; and
except as herein otherwise expressly provided such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided
in this Section 11.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done
by the Indenture Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, Credit
---------------------------------------------------
Enhancer and Rating Agencies. Any request, demand, authorization, direction,
- -----------------------------
notice, consent, waiver or Act of Noteholders
or other documents provided or permitted by this Indenture shall be in
writing and if such request, demand, authorization, direction, notice,
consent, waiver or act of Noteholders is to be made upon, given or furnished
to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Indenture Trustee at the Corporate Trust
Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer addressed to: ______________ Loan
Trust 199_-__ in care of (_____________), (______________) Attention of
(_________) with a copy to the Administrator at (______________), Attention:
(_____________), or at any other address previously furnished in writing to
the Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee, or
((iii) the Credit Enhancer by the Issuer, the Indenture Trustee or
by any Noteholders shall be sufficient for every purpose hereunder to in
writing and mailed, first-class postage pre-paid, or personally delivered or
telecopied to: (_______________), Attention: (______________), Telephone:
(_____________), Telecopier: (___________)).
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to ((i) in
the case of Duff & Phelps, at the following address: (________________);)
(and) ((ii) in the case of Fitch Investors Service, L.P., at the following
address: (______________);) (and) ((iii) in the case of Moody's, at the
following address: Moody's Investors Service, ABS Monitoring Department, 99
Church Street, New York, New York 10007); (and) ((iv) in the case of Standard
& Poor's, at the following address: Standard & Poor's Corporation, 26
Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department;) or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Noteholders is given by mail, neither
the failure to mail such notice nor any defect in any notice so mailed to any
particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Administrator to such Holder, that is different from the methods provided for
in this Indenture for such payments or notices. The Issuer will furnish to
the Indenture Trustee a copy of each such agreement and the Indenture Trustee
will cause payments to be made and notices to be given in accordance with
such agreements.
Section 11.07. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
The provisions of TIA SectionSection 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of
and govern this Indenture, whether or not physically contained herein.
Section 11.08. Effect of Headings. The Article and Section headings
------------------
herein are for convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture
Trustee in this Indenture shall bind its successors, co-trustees and agents.
Section 11.10. Separability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
Section 11.11. Benefits of Indenture. (The Credit Enhancer and its
---------------------
successors and assigns shall be a third-party beneficiary to the provisions
of this Indenture.) Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.12. Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest
shall accrue for the period from and after any such nominal date.
Section 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.15. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is
to be effected by the Issuer and at its expense
accompanied by an Opinion of Counsel (which may be counsel to the Indenture
Trustee or any other counsel reasonably acceptable to the Indenture Trustee)
to the effect that such recording is necessary either for the protection of
the Noteholders or any other Person secured hereunder or for the enforcement
of any right or remedy granted to the Indenture Trustee under this Indenture.
Section 11.16. Issuer Obligation. No recourse may be taken, directly
-----------------
or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or
the Owner Trustee in its individual capacity, except as any such Person may
have expressly agreed (it being understood that the Indenture Trustee and the
Owner Trustee have no such obligations in their individual capacity) and
except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of
Article VI, VII and VIII of the Trust Agreement.
Section 11.17. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Depositor or the
Issuer, or join in any institution against the Depositor or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Basic Documents.
Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at
such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential treatment
are unavailing) and except to the extent that the Indenture Trustee may
reasonably determine that such disclosure is consistent with its obligations
hereunder.
Section 11.19. Authority of the Administrator. Each of the parties to
------------------------------
this Indenture acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the
Issuer or the Owner Trustee, copies of all notices, requests, demands and
other documents to be delivered to the Issuer or the Owner Trustee pursuant
to the terms hereof shall be delivered to the Administrator. Unless
otherwise instructed by the Issuer or the Owner Trustee, all notices,
requests, demands and other documents to be executed or delivered, and any
action to be taken, by the Issuer or the Owner Trustee pursuant to the terms
hereof may be executed, delivered and/or taken by the Administrator pursuant
to the Administration Agreement.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
______________ LOAN TRUST 199_-__
as Issuer
By: (______________________),
not in its individual capacity
but solely as Owner Trustee
By:___________________________________
Name:
Title:
(________________________________),
as Indenture Trustee
By:____________________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared _________
_____, to me known, who being by me duly sworn, did depose and say, that he
resides at _________________, __________________ _____, that he is the
_____________ of the Owner Trustee, one of the corporations described in and
which executed the above instrument; that he knows the seal of said corpora-
tion; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corpora-
tion; and that he signed his name thereto by like order.
___________________________
Notary Public
(NOTARIAL SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared _________
____________, to me known, who being by me duly sworn, did depose and say,
that he resides at _________________________________________________, that
he is the ______________ of ________________, as Indenture Trustee, one of
the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation; and that he signed his name thereto
by like order.
___________________________
Notary Public
(NOTARIAL SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared ________
____________, to me known, who being by me duly sworn, did depose and say,
that he resides at _________________________________________________, that
he is an ________________ of _______________, as Indenture Trustee, one of
the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation; and that he signed his name thereto
by like order.
___________________________
Notary Public
(NOTARIAL SEAL)
EXHIBIT A
(FORM OF NOTE)
(UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO, OR TO SUCH OTHER ENTITY AS IS REQUIRESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.)
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $______________
No. R-__ CUSIP NO. ______________
____________ LOAN TRUST 199_-__
_______% ASSET BACKED NOTES
____________ Loan Trust 199_-___, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to (Cede & Co.), or
registered assigns, the principal sum of ______________________________
DOLLARS payable on each Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $__________-
__ and the denominator of which is $___________ by (ii) the aggregate amount,
if any, payable from the Payment Account in respect of principal on the
Notes pursuant to Section 3.05 of the Indenture dated as of ______ 1, 199_
(the "Indenture"), between the Issuer and _____________, a ________ banking
corporation, as Indenture Trustee (the "Indenture Trustee"); provided,
however, that the entire unpaid principal amount of this Note shall be due
and payable on the earlier of the _________ 199_ Distribution Date (the
"Final Scheduled Payment Date") and the Redemption Date, if any, pursuant to
Section 10.01(a) of the Indenture.
The Issuer will pay interest on this Note at a rate per annum shown
above on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on
the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date), subject to certain limitations contained
in Section 3.05 of the Indenture. Interest on this Note will accrue for each
Payment Date from the Closing Date (in the case of the first Payment Date)
or from the most recent Payment Date on which interest has been paid to but
excluding such Payment Date. Interest will be computed on the basis of (a
360-day year of twelve 30-day months). Such principal of and interest on
this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: ___________________ LOAN TRUST 199_-__,
by: _____________________________, not in its
individual capacity but solely as Owner Trustee
under the Trust Agreement,
by:
------------------------------
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date: ____________________, not in its individual
capacity but solely as Indenture Trustee,
by:
-----------------------------------
Authorized Signatory
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its __________% Asset Backed Notes (herein called the "Notes"),
all issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Notes are subject to all terms of
the Indenture.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Payment Date in an amount
described on the face hereof. "Payment Date" means the _____ day of each
month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing _________ _, 199).
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Payment Distribution
Date and the Redemption Date, if any, pursuant to Section 10.01(a) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or
the Holders of Notes representing not less than a majority of the Securities
Balance of the Notes have declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. All
principal payments on the Notes shall be made pro rata to the Noteholders
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name
of the nominee of the Clearing Agency (initially, such nominee to be (Cede
& Co.)), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed
to the Person entitled thereto at the address of such Person as it appears
on the Note Register as of the applicable Record Date without requiring that
this Note be submitted for notation of payment. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected
by any payments made on any Payment Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or
in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Registered Holder hereof as of the Record Date
preceding such Payment Date by notice mailed or transmitted by facsimile
prior to such Payment Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note
Register upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements
of the Note Registrar, which requirements include membership or participation
in the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Seller, (the Company) or the
Issuer, or join in any institution against the Seller, (the Company) or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day
of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and none of the Issuer, the Indenture Trustee or any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Securities Balance of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes represent-
ing specified percentages of the Securities Balance of the Notes, on behalf
of the Holders of all the Notes, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder
of this Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee to amend
or waive certain terms and conditions set forth in the Indenture without the
consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and
the Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Note at the times, place and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _______________ in its individual
capacity, _____________ in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the
payment of principal of or interest on this Note or performance of, or
omission to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case
of an Event of Default under the Indenture, the Holder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and
all liabilities, obligations and undertakings contained in the Indenture or
in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- --------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
- --------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably consti-
tutes and appoints
- ---------------------------------------------------------------------------
, attorney, to transfer said Note on
- --------------------------------------
the books kept for registration thereof, with full power of substitution in
the premises.
Dated:
------------------------------
*/
Signature Guaranteed:
---------------------------------------------
*/
- ------
________________________
*/ NOTICE: The signature to this assignment must correspond with the name
-
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may
be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
EXHIBIT B
MORTGAGE LOAN SCHEDULE
APPENDIX A
DEFINITIONS
Accelerated Amortization Date: _______________.
-----------------------------
(Accelerated Principal Distribution Amount: With respect to any Payment
-----------------------------------------
Date, the lesser of (x) the amount remaining in the Payment Account after the
application of funds on deposit therein in accordance with clauses (i)
through (vi) of Section 3.05 of the Indenture and (y) the amount required to
reach the Required Overcollateralization Amount.)
(Additional Balance: With respect to any Mortgage Loan, any future Draw
------------------
made by the related Mortgagor pursuant to the related Loan Agreement after
the Cut-Off Date in the case of an Initial Loan, or after the Deposit Date
in the case of an Additional Loan; provided, however, that if an Amortization
-------- -------
Event occurs, then any Draw after such Amortization Event shall not be
acquired by the Issuer and shall not be an Additional Balance.
Additional Balance Differential: With respect to any Payment Date, (x)
-------------------------------
prior to the Accelerated Amortization Date the amount by which Draws under
the Mortgage Loans during the related Collection Period exceed Principal
Collections during such Collection Period and (y) on and after the
Accelerated Amortization Date the aggregate amount of Additional Balances
conveyed to the Issuer during the related Collection Period.
Additional Credit Enhancement Instrument: The credit enhancement
----------------------------------------
instrument which may be issued by the Credit Enhancer to the Indenture
Trustee to guaranty the Additional Variable Funding Notes for the benefit of
holders of the Additional Variable Funding Notes.
Additional Loans: All home equity line of credit loans sold by the
----------------
Seller to the Issuer after the Closing Date pursuant to Section ___ of the
Mortgage Loan Purchase Agreement.
Additional Variable Funding Notes: The Additional Variable Funding
---------------------------------
Notes issued pursuant to Section 4.01(b) of the Indenture, which shall be in
addition to those Variable Funding Notes that are insured by the Credit
Enhancement Instrument.
Additional Variable Funding Note Issuance Date: The date on which any
----------------------------------------------
Additional Variable Funding Note is issued.)
Administration Agreement: The Administration Agreement dated as of
------------------------
_______________ among the Issuer, the Indenture Trustee and
_______________________________, as Administrator, as it may be amended from
time to time.
Administrator: _______________________________, as administrator under
-------------
the Administration Agreement or any successor Administrator appointed
pursuant to the terms of the Administration Agreement.
Affiliate: With respect to any Person, any other Person controlling,
---------
controlled by or under common control with such Person. For purposes of
this definition, "control" means the power to direct the management and
policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise and "controlling" and
"controlled" shall have meanings correlative to the foregoing.
Aggregate Additional Balance Differential: With respect to any Payment
-----------------------------------------
Date, the sum of Additional Balance Differentials that have been added to the
Principal Balance of the Variable Funding Notes prior to such Payment Date.
(Aggregate Credit Enhancement Instrument Amounts: The sum of (i) with
-----------------------------------------------
respect to the Credit Enhancement Instrument the lesser of the Maximum Credit
Enhancement Instrument Amount and the aggregate of the Security Principal
Balances of the Securities other than any Additional Variable Funding Notes
and (ii) with respect to any Additional Credit Enhancement Instrument the
lesser of the Maximum Additional Credit Enhancement Instrument Amount and the
Security Balance of the Additional Variable Funding Notes.
Aggregate Increased Maximum Credit Enhancement Instrument Amount: The
----------------------------------------------------------------
Aggregate Credit Enhancement Instrument Amounts of the Credit Enhancement
Instrument and of any Additional Credit Enhancement Instruments issued under
the Insurance Agreement not to exceed the Maximum Credit Enhancement
Instrument Amount, plus the Maximum Additional Credit Enhancement Instrument
Amount.)
Aggregate Security Balance: With respect to any Payment Date, the
--------------------------
aggregate of the Principal Balances of all Securities as of such date.
(Amortization Event: Any one of the following events:
------------------
(a) the failure on the part of the Seller (i) to make any payment
or deposit required to be made under the Mortgage Loan Purchase Agreement
within four Business Days after the date such payment or deposit is required
to be made; or (ii) to observe or perform in any material respect any other
covenants or agreements of the Seller set forth in the Mortgage Loan Purchase
Agreement, which failure continues unremedied for a period of 60 days after
written notice and such failure materially and adversely affects the
interests of the Securityholders or the Credit Enhancer;
(b) if any representation or warranty made by the Seller in the
Mortgage Loan Purchase Agreement proves to have been incorrect in any
material respect when made and which continues to be incorrect in any
material respect for a period of 45 days with respect to any representation
or warranty of the Seller made in Section 3 of the Mortgage Loan Purchase
Agreement or 90 days with respect to any representation or warranty made in
Section 4 of the Mortgage Loan Purchase Agreement after written notice and
as a result of which the interests of the Securityholders or the Credit
Enhancer are materially and adversely affected; provided, however, that an
-------- -------
Amortization Event shall not be deemed to occur if the Seller has repurchased
or substituted for the related Mortgage Loans or all Mortgage Loans, if
applicable, during such period (or within an additional 60 days with the
consent of the Indenture Trustee and the Credit Enhancer) in accordance with
the provisions of the Indenture;
(c) The entry against the Seller of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days;
(d) The Seller shall voluntarily go into liquidation, consent to
the appointment of a conservator, receiver, liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Seller or of or relating to all
or substantially all of its property, or a decree or order of a court, agency
or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, liquidator or similar person in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the Seller and such decree or order shall
have remained in force undischarged, unbonded or unstayed for a period of 60
days; or the Seller shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any appli-
cable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations;
(e) the Issuer becomes subject to regulation by the Commission as
an investment company within the meaning of the Investment Company Act of
1940, as amended;
(f) an Event of Servicing Termination relating to the Master
Servicer occurs under the Servicing Agreement and the Master Servicer is the
Seller;
(g) the aggregate of all draws under the Credit Enhancement
Instrument exceed 1% of the sum of (i) the Cut-Off Date Asset Balance and
(ii) the amount by which the Pool Balance as of the latest date that the
Additional Loans have been transferred to the Issuer exceeds the Cut-Off Date
Asset Balance; or
(h) the failure to satisfy the conditions pursuant to Section
4.01(b) of the Indenture and Section 2.02(B) of the Insurance Agreement to
increasing the Maximum Variable Funding Balance at the time that the then
current Maximum Variable Funding Balance has been reached.
In the case of any event described in (a), (b) or (f), an Amortization
Event will be deemed to have occurred only if, after any applicable grace
period described in such clauses, either the Indenture Trustee, the Credit
Enhancer or, with the consent of the Credit Enhancer, Securityholders
evidencing not less than 51% of the Security Balance of each of the Term
Notes and the Certificates by written notice to the Seller, the Master
Servicer, the Depositor and the Owner Trustee (and to the Indenture Trustee,
if given by the Credit Enhancer or the Securityholders) may declare that an
Amortization Event has occurred as of the date of such notice. In the case
of any event described in clauses (c), (d), (e), (g) or (h), an Amortization
Event will be deemed to have occurred without any notice or other action on
the part of the Indenture Trustee, the Securityholders or the Credit Enhancer
immediately upon the occurrence of such event; provided, that any
--------
Amortization Event described in clauses (g) or (h) may be waived and deemed
of no effect with the written consent of the Credit Enhancer and each Rating
Agency, subject to the satisfaction of any conditions to such waiver.)
Appraised Value: With respect to any Mortgaged Property, either (x) the
---------------
value set forth in an appraisal of such Mortgaged Property made to establish
compliance with the underwriting criteria then in effect in connection with
the later of the application for the Mortgage Loan secured by such Mortgaged
Property or any subsequent increase or decrease in the related Credit Limit
or to reduce or eliminate the amount of any primary insurance, or (y) if the
sales price of the Mortgaged Property is considered in accordance with the
underwriting criteria applicable to the Mortgage Loan, the lesser of (i) the
appraised value referred to in (x) above and (ii) the sales price of such
Mortgaged Property.
(Asset Balance: With respect to any Mortgage Loan, other than a Liqui-
-------------
dated Mortgage Loan, and as of any day, the related Cut-Off Date Asset
Balance or Deposit Date Asset Balance, plus (i) any Additional
----
Balances in respect of such Mortgage Loan conveyed to the Issuer,
minus (ii) all collections credited as principal in respect of any such
- -----
Mortgage Loan in accordance with the related Loan Agreement (except for any
such collections that are allocable to the Excluded Amount) and applied in
reduction of the Asset Balance thereof. For purposes of this definition, a
Liquidated Mortgage Loan shall be deemed to have an Asset Balance equal to
the Asset Balance of the related Mortgage Loan immediately prior to the final
recovery of all related Liquidation Proceeds and an Asset Balance of zero
thereafter.)
Assignment of Mortgage: With respect to any Mortgage, an assignment,
----------------------
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property
is located to reflect the conveyance of the Mortgage, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged
Properties located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough
--------------------
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.
Authorized Officer: With respect to the Issuer, any officer of the
------------------
Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter) and, so long as the Administration Agreement is in effect, any
Responsible Officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified
on the list of Authorized Officers delivered by the Administrator to the
Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter).
Basic Documents: The Trust Agreement, the Certificate of Trust, the
---------------
Indenture, the Mortgage Loan Purchase Agreement, (the Insurance Agreement,)
the Administration Agreement, the Servicing Agreement, the Custodial
Agreement and the other documents and certificates delivered in connection
with any of the above.
Beneficial Owner: With respect to any Note, the Person who is the
----------------
beneficial owner of such Note as reflected on the books of the Depository or
on the books of a Person maintaining an account with such Depository
(directly as a Depository Participant or indirectly through a Depository
Participant, in accordance with the rules of such Depository).
(Billing Cycle: With respect to any Mortgage Loan and Due Date, the
-------------
calendar month preceding such Due Date.
Billing Date: With respect to any Due Date and Mortgage Loan, the first
------------
day of the month preceding such Due Date on which date the bill is generated
for the amount due and payable on the related Mortgage Loan on such Due
Date.)
Book-Entry Notes: Beneficial interests in the Notes, ownership and
----------------
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
------------
day on which banking institutions in the State of New York, ________ or
_________ are required or authorized by law to be closed.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code,
----------------------
12 Del. Code SectionSection3801 et seq., as the same may be amended from time
--- -- ----
to time.
(Capped Funding Note: Any Variable Funding Note that has reached its
-------------------
Maximum Individual Variable Funding Balance.)
(Carryover Loss Amount: With respect to any Payment Date, the aggregate
---------------------
of Loss Amounts (other than Loss Amounts arising during the related
Collection Period) with respect to which either (i) payments of principal
have not been previously made on the Notes and the Certificates or (ii) were
not reflected in a reduction (not below zero) of the Overcollateralization
Amount.)
Certificate Distribution Amount: With respect to any Payment Date, the
-------------------------------
sum of (x) the amount accrued during the related Interest Period on the
Principal Balance of the Certificates at the Certificate Rate for such
Interest Period and (y) any Unpaid Certificate Distribution Amount Shortfall.
The amount available for distribution on any Payment Date shall be allocated
first to the amount in clause (x) above, and second to the amount in clause
(y) above.
Certificate Paying Agent: The meaning specified in Section 3.03 of the
------------------------
Indenture.
Certificate Percentage: With respect to any Payment Date, the ratio,
----------------------
expressed as a percentage, of the aggregate of the Principal Balance of the
Certificates immediately prior to such Payment Date to the sum of the
aggregate of the Principal Balance of the Securities immediately prior to
such date.
Certificate Rate: With respect to any Interest Period, the per annum
----------------
rate determined by the Master Servicer equal to the sum of (i) LIBOR and
(ii) .45% provided, however, that in no event shall the Certificate Rate with
-------- -------
respect to any Interest Period exceed the Maximum Rate.
Certificate Register: The register maintained by the Certificate
--------------------
Registrar in which the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Certificate Registrar: Initially, The First National Bank of Chicago,
---------------------
in its capacity as Certificate Registrar, or any successor to the Indenture
Trustee in such capacity.
Certificate of Trust: The Certificate of Trust filed for the Trust
--------------------
pursuant to Section 3810(a) of the Business Trust Statute.
Certificates: The ________________ Asset-Backed Certificates, Series
------------
1995-1, each evidencing undivided beneficial interests in the Issuer and
executed by the Owner Trustee in substantially the form set forth in Exhibit
A to the Trust Agreement.
Certificateholder: The Person in whose name a Certificate is registered
-----------------
in the Certificate Register except that, any Certificate registered in the
name of the Issuer, the Owner Trustee or the Indenture Trustee or any
Affiliate of any of them shall be deemed not to be outstanding and the
registered holder will not be considered a Certificateholder or a holder for
purposes of giving any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or the Trust Agreement provided that,
in determining whether the Indenture Trustee or the Owner Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Certificates that the Indenture Trustee or
the Owner Trustee knows to be so owned shall be so disregarded. Owners of
Certificates that have been pledged in good faith may be regarded as Holders
if the pledgee establishes to the satisfaction of the Indenture Trustee or
the Owner Trustee, as the case may be, the pledgee's right so to act with
respect to such Certificates and that the pledgee is not the Issuer, any
other obligor upon the Certificates or any Affiliate of any of the foregoing
Persons.
Class: The Term Notes (and the Variable Funding Notes, as the case may
-----
be).
Class Percentage: With respect to each Class of Notes and Payment Date,
----------------
the ratio, expressed as a percentage, of the aggregate Principal Balance of
such Class of Notes to the aggregate Principal Balance of the Notes, in each
case immediately prior to such Payment Date.
Closing Date: ________________.
------------
Code: The Internal Revenue Code of 1986, as amended, and the rules and
----
regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of the
----------
Indenture.
Collection Account: The account or accounts created and maintained
------------------
pursuant to Section 3.02(b) of the Servicing Agreement. The Collection
Account shall be an Eligible Account.
Collection Period: With respect to any Mortgage Loan and Payment Date
-----------------
other than the first Payment Date, the calendar month preceding any such
Payment Date.
(Combined Loan-to-Value Ratio: With respect to any Mortgage Loan and
----------------------------
any date, the percentage equivalent of a fraction, the numerator of which is
the sum of (i) the greater of (x) the Credit Limit and (y) the Cut-Off Date
Asset Balance of such Mortgage Loan and (ii) the outstanding principal
balance as of the date of the origination of such Mortgage Loan (or any
subsequent date as of which such outstanding principal balance may be deter-
mined in connection with an increase or decrease in the Credit Limit or to
reduce the amount of primary insurance for such Mortgage Loan) of any
mortgage loan or mortgage loans that are secured by liens on the Mortgaged
Property that are senior or subordinate to the Mortgage and the denominator
of which is the Appraised Value of the related Mortgaged Property.)
Corporate Trust Office: With respect to the Indenture Trustee,
----------------------
Certificate Registrar, Certificate Paying Agent and Paying Agent, the
principal corporate trust office of the Indenture Trustee and Note Registrar
at which at any particular time its corporate trust business shall be admin-
istered, which office at the date of the execution of this instrument is
located at ________________________________________, except that for purposes
of Section 4.02 of the Indenture and Section 3.09 of the Trust Agreement,
such term shall include the Indenture Trustee's office or agency at _________
_______________________________. With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee at which at any
particular time its corporate trust business shall be administered, which
office at the date of the execution of this Trust Agreement is located at ___
_____________________________________, Attention: Corporate Trust
Administration.
(Credit Enhancement Draw Amount: As defined in Section 3.30 of the
------------------------------
Indenture.
Credit Enhancement Instrument: The ________________, dated as of the
-----------------------------
Closing Date, issued by the Credit Enhancer to the Indenture Trustee for the
benefit of the Noteholders.
Credit Enhancer: __________________________________, any successor
---------------
thereto or any replacement credit enhancer substituted pursuant to Section
3.31 of the Indenture.
Credit Enhancer Default: If the Credit Enhancer fails to make a payment
-----------------------
required under the Credit Enhancement Instrument in accordance with its
terms.
Credit Limit: With respect to any Mortgage Loan, the maximum Asset
------------
Balance permitted under the terms of the related Loan Agreement.)
Custodial Agreement: Any Custodial Agreement between the Custodian, the
-------------------
Indenture Trustee, the Issuer and the Master Servicer relating to the custody
of the Mortgage Loans and the Related Documents.
Custodian: _____________________________ and its successors and
---------
assigns.
Cut-Off Date: With respect to the Initial Loans, __________, 199_.
------------
Cut-Off Date Asset Balance: With respect to any Initial Loan, the
--------------------------
unpaid principal balance thereof as of the opening of business on the last
day of the related Billing Cycle immediately prior to the Cut-Off Date.
Default: Any occurrence which is or with notice or the lapse of time
-------
or both would become an Event of Default.
Definitive Notes: The meaning specified in Section 4.06 of the
----------------
Indenture.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced with
---------------------
an Eligible Substitute Mortgage Loan.
(Deposit Date: The applicable date as of which any Additional Loan is
------------
sold to the Issuer pursuant to the Mortgage Loan Purchase Agreement.
Deposit Date Asset Balance: With respect to any Additional Loan, the
--------------------------
Asset Balance thereof as of the Deposit Date.)
Depositor: ____________________________________ its successor in
---------
interest.
Depository or Depository Agency: The Depository Trust Company or a
-------------------------------
successor appointed by the Indenture Trustee with the approval of the
Depositor. Any successor to the Depository shall be an organization regis-
tered as a "clearing agency" pursuant to Section 17A of the Exchange Act and
the regulations of the Securities and Exchange Commission thereunder.
Depository Participant: A Person for whom, from time to time, the
----------------------
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
Determination Date: With respect to any Payment Date, the later of (i)
------------------
the ____ day of the month in which such Payment Date occurs or if such day
is not a Business Day, the next succeeding Business Day and (ii) the _____
Business Day prior to such Payment Date.
Dissolution Payment Date: Following an Event of Default under the
------------------------
Indenture and an acceleration of the Maturity Date of the Notes, a date on
which the proceeds of the sale of the Trust Estate are paid to
Securityholders.
(Draw: With respect to any Mortgage Loan, a borrowing by the Mortgagor
----
under the related Loan Agreement.)
Due Date: The _____ day of the month.
--------
Eligible Account: An account that is any of the following: (i)
----------------
maintained with a depository institution the debt obligations of which have
been rated by each Rating Agency in its highest rating available, or (ii) an
account or accounts in a depository institution in which such accounts are
fully insured to the limits established by the FDIC, provided that any
--------
deposits not so insured shall, to the extent acceptable to each Rating
Agency, as evidenced in writing, be maintained such that (as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee and each Rating Agency)
the Indenture Trustee have a claim with respect to the funds in such account
or a perfected first security interest against any collateral (which shall
be limited to Eligible Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution
with which such account is maintained, or (iii) in the case of the Collection
Account, either (A) a trust account or accounts maintained at the Corporate
Trust Department of the Indenture Trustee or (B) an account or accounts
maintained at the Corporate Trust Department of the Indenture Trustee, as
long as its short term debt obligations are rated P-1 by Moody's and A-1 by
Standard & Poor's or the equivalent) or better by each Rating Agency and its
long term debt obligations are rated A2 by Moody's and A by Standard & Poor's
or the equivalent) or better, by each Rating Agency, or (iv) in the case of
the Collection Account and the Payment Account, a trust account or accounts
maintained in the corporate trust division of the Indenture Trustee, or (v)
an account or accounts of a depository institution acceptable to each Rating
Agency as evidenced in writing by each Rating Agency that use of any such
account as the Collection Account or the Payment Account will not reduce the
rating assigned to any of the Securities by such Rating Agency below
investment grade without taking into account the Credit Enhancement
Instrument.
Eligible Investments: One or more of the following:
--------------------
(i) obligations of or guaranteed as to principal and interest by
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than one month from the date of acquisition thereof,
provided that the unsecured obligations of the party agreeing to repur-
- --------
chase such obligations are at the time rated by each Rating Agency in the
highest short-term rating available;
(iii) federal funds, certificates of deposit, demand deposits, 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 or a remaining
maturity of more than 30 days) denominated in United States dollars of any
U.S. depository institution or trust company incorporated under the laws of
the United States or any state thereof or of any domestic branch of a foreign
depository institution or trust company; provided that the debt obligations
--------
of such depository institution or trust company (or, if the only Rating
Agency is Standard & Poor's, in the case of the principal depository
institution in a depository institution holding company, debt obligations of
the depository institution holding company) at the date of acquisition
thereof have been rated by each Rating Agency in its highest short-term rating
available; and provided further that, if the only Rating Agency is
-------- -------
Standard & Poor's and if the depository or trust company is a principal
subsidiary of a bank holding company and the debt obligations of such
subsidiary are not separately rated, the applicable rating shall be that of
the bank holding company; and, provided further that, if the original
-------- -------
maturity of such short-term obligations of a domestic branch of a foreign
depository institution or trust company shall exceed 30 days, the short-term
rating of such institution shall be A-1+ in the case of Standard & Poor's if
Standard & Poor's is the Rating Agency;
(iv) commercial paper (having original maturities of not more than
270 days) of any corporation incorporated under the laws of the United States
or any state thereof which on the date of acquisition has been rated by each
Rating Agency in their highest short-term rating available; provided that
--------
such commercial paper shall have a remaining maturity of not more than 30
days;
(v) interests in any money market fund or qualified investment
fund which at the date of acquisition of the interests in such fund and
throughout the time the interest is held in such fund has a rating of P-1 or
Aaa by Moody's and either AAAm or AAAm-G by Standard & Poor's or such lower
rating as will not result in the qualification, downgrading or withdrawal of
the then-current rating assigned to the Certificates by each Rating Agency;
(vi) other obligations or securities that are acceptable to each
Rating Agency as an Eligible Investment hereunder and will not reduce the
rating assigned to any Class of Certificates by such Rating Agency below the
lower of the rating then assigned thereto or the rating assigned at the
Closing Date, and which are acceptable to the Credit Enhancer, as evidenced
in writing, provided that if the Master Servicer or any other Person
--------
controlled by the Master Servicer is the issuer or the obligor of any
obligation or security described in this clause (vi) such obligation or
security must have an interest rate or yield that is fixed or is variable
based on an objective index that is not affected by the rate or amount
of losses on the Mortgage Loans;
provided, however, that each such instrument shall be acquired in an arm's
- -------- -------
length transaction and no such instrument shall be a Permitted Investment if
it represents, the right to receive only interest payments with respect to
the underlying debt instrument.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
---------------------------------
Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officers' Certificate delivered to the
Indenture Trustee, (i) have an outstanding principal balance, after deduction
of the principal portion of the monthly payment due in the month of
substitution (or in the case of a substitution of more than one Mortgage Loan
for a Deleted Mortgage Loan, an aggregate outstanding principal balance,
after such deduction), not in excess of the outstanding principal balance of
the Deleted Mortgage Loan (the amount of any shortfall to be deposited by the
Seller in the Collection Account in the month of substitution); (ii) comply
with each representation and warranty set forth in clauses (ii) through
(xxxiv) of Section 4 of the Mortgage Loan Purchase Agreement other than
clauses ____________; (iii) have a (Loan Rate, Net Loan Rate and Gross
Margin) no lower than and not more than 1% per annum higher than the Loan
Rate, Net Loan Rate and Gross Margin, respectively, of the Deleted Mortgage
Loan as of the date of substitution; (iv) have a (Combined) Loan-to-Value
Ratio at the time of substitution no higher than that of the Deleted Mortgage
Loan at the time of substitution; (v) have a remaining term to stated
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan and (vi) not be __ days or more delinquent.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
-----
Event of Default: With respect to the Indenture, any one of the
----------------
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) a default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a period
of five days; or
(ii) a default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable; or
(iii) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs a default in the observance or performance of
any covenant or agreement of the Issuer made in the Indenture, or any
representation or warranty of the Issuer made in the Indenture or in any
certificate or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material respect as of the
time when the same shall have been made (which has a material adverse effect
on Securityholders), and such default shall continue or not be cured, or the
circumstance or condition in respect of which such representation or warranty
was incorrect shall not have been eliminated or otherwise cured, for a period
of ___ days after there shall have been given, by registered or certified
mail, to the Issuer by the Indenture Trustee or to the Issuer and the
Indenture Trustee by the Holders of at least 25% of the Outstanding Amount
of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of default hereunder; or
((iv) a Credit Enhancer Default shall have occurred and be
continuing and there occurs the filing of a decree or order for relief by a
court having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for any
substantial part of the Trust Estate, or ordering the winding-up or
liquidation of the Issuer's affairs, and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(v) a Credit Enhancer Default shall have occurred and be
continuing and there occurs the commencement by the Issuer of a voluntary
case under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law, or
the consent by the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the assets of the Trust
Estate, or the making by the Issuer of any general assignment for the benefit
of creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of any action by the Issuer in furtherance
of any of the foregoing.)
Event of Servicer Termination: With respect to the Servicing Agreement,
-----------------------------
an Event of Default as defined in Section 7.01 of the Servicing Agreement.
(Excess Additional Balance Differential: With respect to any Additional
--------------------------------------
Variable Funding Notes, the amount by which the Additional Balance
Differential for the Collection Period immediately preceding the month in
which the related Additional Variable Funding Notes are issued, would have
caused the Security Balance of the Variable Funding Notes to exceed the
Maximum Variable Funding Balance immediately prior to the issuance of such
Additional Variable Funding Notes.)
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations promulgated thereunder.
(Excluded Amount: For any Payment Date on or after the occurrence of
---------------
an Amortization Event, with respect to all collections whether interest or
principal (other than any amounts received in respect of a Repurchase Price
and pursuant to Section 3.05(c) of the Servicing Agreement) ("Total
Collections") on all Initial Loans and Additional Loans in each case
including all Draws whether or not transferred to the Issuer (collectively,
"Total Balances of Obligors"), an amount equal to the product of (A) Total
Collections during the related Collection Period and (B) a fraction equal to
one (1) minus a fraction the numerator of which is (x) the aggregate Asset
-----
Balances of the end of the last Collection Period and the denominator of
which is (y) the Total Balances of Obligors.)
Expenses: The meaning specified in Section 8.02 of the Trust Agreement.
--------
FDIC: The Federal Deposit Insurance Corporation or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
-----
thereto.
Final Scheduled Payment Date: To the extent not previously paid, the
----------------------------
principal balance of each Class of Notes will be due on the Payment Date in
____________.
FNMA: The Federal National Mortgage Association, or any successor
----
thereto.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
------------------
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Asset Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
Funding Account: The trust account created and maintained with the
---------------
Indenture Trustee pursuant to Section 8.02 of the Indenture and referred to
therein as the Funding Account. Funds deposited in the Funding Account shall
be held in trust for the uses and purposes set forth in Article VIII of the
Indenture.
Funding Period: The period commencing on the Cut-Off Date and ending
--------------
on the earlier of (x) the Payment Date in ______________ and (y) the
occurrence of an Amortization Event.
Grant: Mortgage, pledge, bargain, sell, warrant, alienate, remise,
-----
release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and
confirm pursuant to the Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but
none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of such collateral or
other agreement or instrument and all other moneys payable thereunder, to
give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the
name of the granting party or otherwise, and generally to do and receive
anything that the granting party is or may be entitled to do or receive
thereunder or with respect thereto.
(Gross Margin: With respect to any Mortgage Loan, the percentage set
------------
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule.)
(Guaranteed Principal Payment Amount: With respect to any Payment Date,
-----------------------------------
other than the Dissolution Payment Date, the amount, if any, by which the
Aggregate Security Balance (after giving effect to all amounts allocable and
distributable to principal on the Securities on such Payment Date) exceeds
the sum of (A) the Pool Balance plus (B) all amounts on deposit in the
----
Funding Account on such date (after giving effect to all withdrawals
therefrom and deposits thereto pursuant to Sections 8.02(b) and 8.02(c) of
the Indenture on such Payment Date). With respect to the Payment Date in
____________, if such Payment Date is not a Dissolution Payment Date, the
amount, if any, by which the aggregate of the Security Balances (after giving
effect to all amounts allocable and distributable to principal on the
Securities) exceeds the amount on deposit in the Payment Account available
to be paid as principal on the Securities (after giving effect to all amounts
allocable and distributable as principal on the Securities on such date).)
Holder: Any of the Noteholders or Certificateholders.
------
Indemnified Party: The meaning specified in Section 8.02 of the Trust
-----------------
Agreement.
Indenture: The indenture dated as of _____________ between the Issuer,
---------
as debtor, and the Indenture Trustee, as Indenture Trustee.
Indenture Trustee: _______________________, and its successors and
-----------------
assigns or any successor indenture trustee appointed pursuant to the terms
of the Indenture.
Independent: When used with respect to any specified Person, the Person
-----------
(i) is in fact independent of the Issuer, any other obligor on the Notes, the
Seller, the Depositor and any Affiliate of any of the foregoing Persons, (ii)
does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller, the
Depositor or any Affiliate of any of the foregoing Persons and (iii) is not
connected with the Issuer, any such other obligor, the Seller, the Depositor
or any Affiliate of any of the foregoing Persons as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing
similar functions.
Independent Certificate: A certificate or opinion to be delivered to
-----------------------
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer
has read the definition of "Independent" in this Indenture and that the
signer is Independent within the meaning thereof.
(Index: With respect to any Mortgage Loan, the _________ from time to
-----
time for the adjustment of the Loan Rate set forth as such on the related
Mortgage Note.)
Initial Loans: All home equity lines of credit sold by the Seller to
-------------
the Purchaser on ______________ pursuant to the terms of the Mortgage Loan
Purchase Agreement, as specified in the Mortgage Loan Schedule.
Initial Principal Balance: With respect to the Certificates,
-------------------------
$_________; the Term Notes, $___________; (and the Variable Funding Notes,
zero).
Initial Subservicer: _________________________.
-------------------
Insolvency Event: With respect to a specified Person, (a) the filing
----------------
of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or ordering the winding-
up or liquidation of such Person's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or (b) the
commencement by such Person of a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for
any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due or the admission
by such Person in writing (as to which the Indenture Trustee shall have
notice) of its inability to pay its debts generally, or the adoption by the
Board of Directors or managing member of such Person of a resolution which
authorizes action by such Person in furtherance of any of the foregoing.
(Insurance Agreement: The insurance and reimbursement agreement dated
-------------------
as of _____________ among the Master Servicer, the Seller, the Depositor, the
Issuer and the Credit Enhancer, including any amendments and supplements
thereto.)
Insurance Proceeds: Proceeds paid by any insurer (other than the Credit
------------------
Enhancer) pursuant to any insurance policy covering a Mortgage Loan which are
required to be remitted to the Master Servicer, or amounts required to be
paid by the Master Servicer pursuant to the last sentence of Section 3.04 of
the Servicing Agreement, net of any component thereof (i) covering any
expenses incurred by or on behalf of the Master Servicer in connection with
obtaining such proceeds, (ii) that is applied to the restoration or repair of
the related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures or (iv) required to be
paid to any holder of a mortgage senior to such Mortgage Loan.
Interest Collections: With respect to any Payment Date, the sum of all
--------------------
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation such portion of Insurance Proceeds,
Net Liquidation Proceeds and Repurchase Prices as is allocable to interest
on the applicable Mortgage Loan) as is paid by the Seller or the Master
Servicer or is collected by the Servicer under the Mortgage Loans, reduced
by the Servicing Fees for the related Collection Period and by any fees
(including annual fees) or late charges or similar administrative fees paid
by Mortgagors during the related Collection Period. The terms of the related
Loan Agreement shall determine the portion of each payment in respect of such
Mortgage Loan that constitutes principal or interest.
Interest Period: With respect to any Payment Date other than the first
---------------
Payment Date, the period beginning on the preceding Payment Date and ending
on the day preceding such Payment Date, and in the case of the first Payment
Date, the period beginning on the Closing Date and ending on the day
preceding the first Payment Date.
(Interest Rate Adjustment Date: With respect to each Mortgage Loan, the
-----------------------------
date or dates on which the Loan Rate is adjusted in accordance with the
related Mortgage Note.)
Issuer: ______________________ Loan Trust 199_-_, a Delaware business
------
trust, or its successor in interest.
Issuer Request: A written order or request signed in the name of the
--------------
Issuer by any one of its Authorized Officers and delivered to the Indenture
Trustee.
(LIBOR: For any Interest Period other than the first Interest Period,
-----
the rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. With respect
to the first Interest Period, the rate for United States dollar deposits for
one month which appears on the Telerate Screen Page 3750 as of 11:00 A.M.,
Chicago, Illinois time, two LIBOR Business Days prior to the Closing Date.
If such rate does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as may be reasonably
selected by the Indenture Trustee after consultation with the Master
Servicer), the rate will be the Reference Bank Rate. If no such quotations
can be obtained and no Reference Bank Rate is available, LIBOR will be LIBOR
applicable to the preceding Payment Date.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or
------------------
(ii) a day on which banking institutions in the State of New York, Illinois
or Minnesota, or in the city of London, England are required or authorized
by law to be closed.)
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
----
assignment, participation, deposit arrangement, encumbrance, lien (statutory
or other), preference, priority right or interest or other security agreement
or preferential arrangement of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the UCC (other
than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section 6.02 of the
- -------- -------
Servicing Agreement shall not be deemed to constitute a Lien.
(Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
-----------------
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially
as set forth on Exhibit A to the Servicing Agreement.)
Liquidated Mortgage Loan: With respect to any Payment Date, any Mort-
------------------------
gage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Servicing
Agreement, as of the end of the related Collection Period that substantially
all Liquidation Proceeds which it reasonably expects to recover with respect
to the disposition of the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
--------------------
which are incurred by or on behalf of the Master Servicer in connection with
the liquidation of any Mortgage Loan and not recovered under any insurance
policy, such expenses including, without limitation, legal fees and expenses,
any unreimbursed amount expended (including, without limitation, amounts
advanced to correct defaults on any mortgage loan which is senior to such
Mortgage Loan and amounts advanced to keep current or pay off a mortgage loan
that is senior to such Mortgage Loan) respecting the related Mortgage Loan
and any related and unreimbursed expenditures for real estate property taxes
or for property restoration, preservation or insurance against casualty loss
or damage.
Liquidation Loss Amounts: With respect to any Payment Date and any
------------------------
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Asset Balance
thereof at the end of such Collection Period, after giving effect to the Net
Liquidation Proceeds applied in reduction of the Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
--------------------
including amounts drawn under the Credit Enhancement Instrument) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
(Loan Agreement: With respect to any Mortgage Loan, the credit line
--------------
account agreement executed by the related Mortgagor and any amendment or
modification thereof.)
Loan Rate: With respect to any Mortgage Loan and any day, the per annum
---------
rate of interest applicable under the related Loan Agreement.
(Loan Rate Cap: With respect to each Mortgage Loan, the lesser of (i)
-------------
the Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling,
if any.)
(Loan Year: With respect to any Mortgage Loan, the one year period
---------
commencing on the day succeeding the origination of such Mortgage Loan and
ending on the anniversary date of such Mortgage Loan, and each annual period
thereafter.)
Lost Note Affidavit: With respect to any Mortgage Loan as to which the
-------------------
original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller or the related Underlying Seller
certifying that the original Mortgage Note has been lost, misplaced or
destroyed (together with a copy of the related Mortgage Note).
Master Servicer: ________________________________, and its successors
---------------
and assigns.
Master Servicing Fee: With respect to any Collection Period, the
--------------------
product of (i) the Master Servicing Fee Rate divided by 12 and (ii) the
aggregate Asset Balance of the Mortgage Loans, as of the first day of such
Collection Period.
Master Servicing Fee Rate: With respect to any Mortgage Loan, ____% per
-------------------------
annum.
(Maximum Additional Credit Enhancement Instrument Amount: An amount not
-------------------------------------------------------
to exceed $__________.
Maximum Credit Enhancement Instrument Amount: $___________, comprised
--------------------------------------------
of the Initial Principal Balance of the Term Notes ($___________) (plus the
Maximum Variable Funding Balance as of the Closing Date ($__________), plus
the Initial Principal Balance of the Certificates ($_________)).
(Maximum Individual Variable Funding Balance: As to any Variable
-------------------------------------------
Funding Note and date of determination $_________ reduced by the aggregate
amount of principal previously paid on such Variable Funding Note.)
Maximum Pool Balance: As to any Payment Date the highest Pool Balance
--------------------
at the end of any Collection Period from the Closing Date up to and including
the related Collection Period.
(Maximum Rate: With respect to any Interest Period, the Weighted
------------
Average Net Loan Rate related to the Due Date in the month preceding the
month in which such Interest Period ends (adjusted to an effective rate
reflecting accrued interest calculated on the basis of the actual number of
days in the Collection Period commencing in the month in which such Interest
Period commences and a year assumed to consist of 360 days).)
(Maximum Variable Funding Balance: The maximum Principal Balance of the
--------------------------------
Variable Funding Notes which is as of any day of determination $___________
reduced by the aggregate amount of principal previously paid on the Variable
Funding Notes; provided that the Maximum Variable Funding Balance may be
--------
increased pursuant to Section 4.01 of the Indenture.)
(Minimum Monthly Payment: With respect to any Mortgage Loan and any
-----------------------
month, the minimum amount required to be paid by the related Mortgagor in
that month.)
Moody's: Moody's Investors Service, Inc. or its successor in interest.
-------
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents pertaining to
-------------
a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to the Mortgage Loan Purchase Agreement or the
Servicing Agreement.
(Mortgage Insurance Component: With respect to the Mortgage Loans
----------------------------
listed on Schedule 1 to the Servicing Agreement, the percentage specified
therefor in such Schedule.
Mortgage Loan Group: Any of the Mortgage Loans, ________ Loans or the
-------------------
______ Loans.)
Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase Agreement,
--------------------------------
dated as of the Cut-Off Date, between the Seller, as seller, and the
Depositor, as purchaser, with respect to the Mortgage Loans.
Mortgage Loan Schedule: With respect to any date, the schedule of
----------------------
Mortgage Loans included in the Trust Estate on such date. The initial
schedule of Mortgage Loans as of the Cut-Off Date is the schedule set forth
in Exhibit A of the Servicing Agreement, which schedule sets forth as to each
Mortgage Loan (i) the Cut-Off Date Trust Balance, ((ii) the Credit Limit,
(iii) the Gross Margin,) (iv) the name of the Mortgagor, ((v) the Lifetime
Rate Cap,) if any, (vi) the loan number, (vii) an indication as to the appli-
cable Mortgage Loan Group, and (viii) the lien position of the related Mort-
gage. (The Mortgage Loan Schedule will be amended from time to time by annex
to reflect Additional Loans.)
Mortgage Loans: At any time, collectively, all Initial Loans and
--------------
Additional Loans(, in each case including Additional Balances,) if any, that
have been sold to the Depositor under the Mortgage Loan Purchase Agreement,
in each case together with the Related Documents, and that remain subject to
the terms thereof.
Mortgage Note: With respect to a Mortgage Loan, (the Loan Agreement)
-------------
(note or other evidence of indebtedness) pursuant to which the related
mortgagor agrees to pay the indebtedness evidenced thereby and secured by the
related Mortgage as modified or amended.
Mortgaged Property: The underlying property, including real property
------------------
and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Note.
---------
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
------------------------
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and any day, the
-------------
related Loan Rate less the Servicing Fee Rate.
Net Principal Collections: With respect to any Distribution Date, the
-------------------------
excess, if any, of Security Principal Collections for the related Collection
Period over the amount of Additional Balances created during the related
Collection Period.
Note Owner: The Beneficial Owner of a Note.
----------
(Note Percentage: With respect to any Payment Date, the ratio expressed
---------------
as a percentage of the aggregate of the Principal Balances of all Notes
immediately prior to such Payment Date to the sum of the Pool Balance on the
first day of the related Collection Period and the amount on deposit in the
Funding Account from Net Principal Collections immediately prior to such
Payment Date.)
Note Rate: With respect to any Interest Period, a per annum rate
---------
determined by the Master Servicer equal to (LIBOR as of the second LIBOR
Business Day prior to the first day of such Interest Period and ____%;
provided however, that in no event shall the Note Rate with respect to any
- -------- -------
Interest Period exceed the Maximum Rate for such Interest Period).
Note Register: The register maintained by the Note Registrar in which
-------------
the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
Note Registrar: The Indenture Trustee, in its capacity as Note
--------------
Registrar.
Noteholder: The Person in whose name a Note is registered in the Note
----------
Register, except that, any Note registered in the name of the Depositor, the
Issuer or the Indenture Trustee or any Affiliate of any of them shall be
deemed not to be outstanding and the registered holder will not be considered
a Noteholder or holder for purposes of giving any request, demand,
authorization, direction, notice, consent or waiver under the Indenture or
the Trust Agreement provided that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the
Indenture Trustee or the Owner Trustee knows to be so owned shall be so
disregarded. Owners of Notes that have been pledged in good faith may be
regarded as Holders if the pledgee establishes to the satisfaction of the
Indenture Trustee or the Owner Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any other
obligor upon the Notes or any Affiliate of any of the foregoing Persons.
Notes: Collectively, the (Term) Notes (and the Variable Funding Notes).
-----
Officer's Certificate: With respect to the Master Servicer, a
---------------------
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and
delivered to the Indenture Trustee. With respect to the Issuer, a
certificate signed by any Authorized Officer of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section (11.01) of the Indenture, and delivered to the
Indenture Trustee. Unless otherwise specified, any reference in the
Indenture to an Officer's Certificate shall be to an Officer's Certificate
of any Authorized Officer of the Issuer.
Opinion of Counsel: A written opinion of counsel who may be in-house
------------------
counsel for the Master Servicer if acceptable to the Indenture Trustee, the
Credit Enhancer and the Rating Agencies or counsel for the Depositor, as the
case may be.
Outstanding: With respect to the Notes, as of the date of
-----------
determination, all Notes theretofore executed, authenticated and delivered
under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Indenture Trustee for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have
been executed, authenticated and delivered pursuant to the Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such Notes
are held by a holder in due course;
(provided, however, that for purposes of effectuating the Credit Enhancer's
-------- -------
right of subrogation as set forth in Section 4.12 of the Indenture only, all
Notes that have been paid with funds provided under the Credit Enhancement
Instrument shall be deemed to be Outstanding until the Credit Enhancer has
been reimbursed with respect thereto.)
(Overcollateralization Amount: With respect to any Payment Date, the
----------------------------
amount by which the sum of (x) the Pool Balance as of the last day of the
related Collection Period and (y) the amount on deposit in the Funding
Account in respect of Net Principal Collections, on such Payment Date exceeds
-------
the Aggregate Security Balance on such Payment Date (after giving effect to
all amounts distributed and allocable to principal on the Securities and
deposits to and withdrawals from the Funding Account that are applied to
reduce the Security Balances on such Payment Date).)
Owner Trust Estate: The corpus of the Issuer created by the Trust
------------------
Agreement which consists of the Mortgage Loans, such assets as shall from
time to time be deposited in the Collection Account and/or the Payment
Account allocable to the Mortgage Loans in accordance with the Trust
Agreement, property that secured a Mortgage Loan and that has become REO,
certain hazard insurance policies maintained by the Mortgagors or by or on
behalf of the Master Servicer in respect of the Mortgage Loans, the Credit
Enhancement Instrument, an assignment of the Depositor's rights under the
Mortgage Loan Purchase Agreement and the obligation of the Depositor to pur-
chase Additional Balances under the Mortgage Loan Purchase Agreement and all
proceeds of each of the foregoing.
Owner Trustee: ____________________, and its successors and assigns or
-------------
any successor owner trustee appointed pursuant to the terms of the Trust
Agreement.
Paying Agent: Any paying agent or co-paying agent appointed pursuant
------------
to Section 3.03 of the Indenture, which initially shall be
___________________________.
Payment Account: The account established by the Indenture Trustee
---------------
pursuant to Section 8.02 of the Indenture and Section 5.01 of the Servicing
Agreement. The Payment Account shall be an Eligible Account.
Payment Date: The __th day of each month, or if such day is not a
------------
Business Day, then the next Business Day.
Percentage Interest: With respect to any Note, the percentage obtained
-------------------
by dividing the original Security Balance of such Note by the aggregate of
the original Security Balances of all Notes of the same Class. With respect
to any Certificate, the percentage obtained by dividing the denomination
specified on such Certificate by the Initial Principal Balance of the
Certificates.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool Balance: With respect to any date, the aggregate of the Asset
------------
Balances of all Mortgage Loans as of such date.
Predecessor Note: With respect to any particular Note, every previous
----------------
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 4.03 of the Indenture in lieu of
a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Note.
(Primary Insurance Policy: Each primary policy of mortgage guaranty
------------------------
insurance issued by a Qualified Insurer or any replacement policy therefor.
Prime Rate: The prime rate for corporate loans at U.S. commercial
----------
banks, as published in The Wall Street Journal.)
-----------------------
Principal Balance: With respect to any Payment Date and each Security
-----------------
(other than the Variable Funding Notes), the Initial Principal Balance
thereof, reduced by all distributions of principal thereon prior to such
Payment Date (and, in the case of the Variable Funding Notes, (i) increased
by the Aggregate Additional Balance Differential immediately prior to such
Payment Date and (ii) reduced by all distributions of principal thereon prior
to such Payment Date).
Principal Collection Distribution Amount: For any Payment Date, ((i)
----------------------------------------
so long as an Amortization Event has not occurred and so long as the
Accelerated Amortization Date has not occurred, Net Principal Collections and
(ii) following an Amortization Event or on and after the Accelerated
Amortization Date,) Security Principal Collections(; provided, however, on
-------- -------
any Payment Date with respect to which the Overcollateralization Amount that
would result if determined without regard to this proviso exceeds the
Required Overcollateralization Amount the Principal Collection Distribution
Amount will be reduced by the amount of such excess until the Over-
collateralization Amount equals the Required Overcollateralization Amount.)
Principal Collections: With respect to any Payment Date and any
---------------------
Mortgage Loan, the aggregate of the following amounts:
(i) the total amount of payments made by or on behalf of the
Mortgagor, received and applied as payments of principal on the Mortgage Loan
during the related Collection Period, as reported by the related Subservicer;
(ii) any Net Liquidation Proceeds, allocable as a recovery of
principal, received in connection with the Mortgage Loan during the related
Collection Period;
(iii) if the Mortgage Loan was purchased by the Master Servicer
pursuant to Section 3.14 of the Servicing Agreement, or was repurchased by
the Seller pursuant to the Mortgage Loan Purchase Agreement, during the
related Collection Period, 100% of the Asset Balance of the Mortgage Loan as
of the date of such purchase or repurchase; and
(iv) any other amounts received as payments on or proceeds of the
Mortgage Loan during the Collection Period to the extent applied in reduction
of the principal amount thereof;
(provided that Principal Collections shall not include any Foreclosure
--------
Profits, and shall be reduced by any amounts withdrawn from the Collection
Account pursuant to clauses (iii), (iv), (vii) and (viii) of Section 3.03 of
the Servicing Agreement other than any portion of such amounts that are
attributable to the Excluded Amount in respect of any Mortgage Loan that are
allocable to principal of such Mortgage Loan and not otherwise excluded from
the amounts specified in (i) - (iv) above.)
Proceeding: Any suit in equity, action at law or other judicial or
----------
administrative proceeding.
Program Group: With respect to any ______ Loan, the ______Loans taken
-------------
together.
Program Guide: Together, the Seller's Seller Guide and Servicing Guide,
-------------
as in effect from time to time.
Program Seller: With respect to any Mortgage Loan, the Person that sold
--------------
such Mortgage Loan to the Seller.
Purchase Price: The meaning specified in Section 2.2 of the Mortgage
--------------
Loan Purchase Agreement.
(Purchase Price Holdback: The aggregate of (1) all amounts to be paid
-----------------------
to the Seller, its designee or its permitted assigns, as holder of a ____%
interest in the Residual Ownership Interest over the term of the Trust
Agreement, and (2) all amounts to be paid to the Seller, its designee or its
permitted assigns, by the Purchaser pursuant to Section 2.3(d) over the term
of the Mortgage Loan Purchase Agreement, as adjusted to reflect all payments
pursuant to Section 2.7(d) and (e) over the term of the Mortgage Loan
Purchase Agreement. All of the foregoing amounts, when paid to the Seller,
its designee or its permitted assigns, shall be deemed to have been caused
to be paid by the Purchaser to the Seller as part of the total consideration
for the sale of the Mortgage Loans under the Mortgage Loan Purchase Agreement
(including any Additional Balances) representing the portion of the Purchase
Price not included in the amounts paid as described in clause (b) of Section
2.2 of the Mortgage Loan Purchase Agreement.)
Purchaser: _____________________ and its successors and assigns.
---------
(Qualified Insurer: A mortgage guaranty insurance company duly
-----------------
qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection
with the insurance policy issued by such insurer, duly authorized and
licensed in such states to transact a mortgage guaranty insurance business
in such states and to write the insurance provided by the insurance policy
issued by it, approved as an insurer by the Master Servicer and as a FNMA-
approved mortgage insurer.)
Rating Agency: Any nationally recognized statistical rating
-------------
organization, or its successor, that rated the Securities at the request of
the Depositor at the time of the initial issuance of the Securities.
Initially, (Moody's or Standard & Poor's). If such organization or a
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization, or other comparable Person,
designated by the Depositor, notice of which designation shall be given to
the Indenture Trustee. References herein to the highest short term unsecured
rating category of a Rating Agency shall mean A-1 or better in the case of
Standard & Poor's and P-1 or better in the case of Moody's and in the case
of any other Rating Agency shall mean such equivalent ratings. References
herein to the highest long-term rating category of a Rating Agency shall
mean "AAA" in the case of Standard & Poor's and "Aaa" in the case of Moody's
and in the case of any other Rating Agency, such equivalent rating.
Record Date: With respect to the Term Notes and any Payment Date, the
-----------
Business Day next preceding such Payment Date (and with respect to the
Certificates or the Variable Funding Notes and any Payment Date, the last
Business Day of the month preceding the month of such Payment Date).
(Reference Bank Rate: With respect to any Interest Period, as follows:
-------------------
the arithmetic mean (rounded upwards, if necessary, to the nearest one
sixteenth of a percent) of the offered rates for United States dollar
deposits for one month which are offered by the Reference Banks as of 11:00
A.M., ________ time, on the second LIBOR Business Day prior to the first day
of such Interest Period to prime banks in the London interbank market for a
period of one month in amounts approximately equal to the sum of the Out-
standing Amount of Notes and the Certificate Principal Balance; provided that
--------
at least two such Reference Banks provide such rate. If fewer than two
offered rates appear, the Reference Bank Rate will be the arithmetic mean of
the rates quoted by one or more major banks in New York City, selected by the
Depositor after consultation with the Indenture Trustee, as of 11:00 a.m.,
________ time, on such date for loans in U.S. Dollars to leading European
Banks for a period of one month in amounts approximately equal to the
Aggregate Security Balance. If no such quotations can be obtained, the
Reference Bank Rate shall be the Reference Bank Rate applicable to the
preceding Interest Period.
Reference Banks: ________________________.
---------------
Registered Holder: The Person in whose name a Note is registered in the
-----------------
Note Register on the applicable Record Date.
Related Documents: With respect to each Mortgage Loan, the documents
-----------------
specified in Section 2.1(c) of the Mortgage Loan Purchase Agreement and any
documents required to be added to such documents pursuant to the Mortgage
Loan Purchase Agreement, the Trust Agreement or the Servicing Agreement.
REO: A Mortgaged Property that is acquired by the Issuer in foreclosure
---
or by deed in lieu of foreclosure.
Repurchase Event: With respect to any Mortgage Loan, either (i) a
----------------
discovery that, as of ______________, 199_ with respect to an Initial Loan,
or as of the related Deposit Date with respect to an Additional Loan, as
applicable, the related Mortgage was not a valid lien on the related
Mortgaged Property subject only to (A) the lien of any prior mortgage
indicated on the Mortgage Loan Schedule, (B) the lien of real property taxes
and assessments not yet due and payable, (C) covenants, conditions, and
restrictions, rights of way, easements and other matters of public record as
of the date of recording of such Mortgage and such other permissible title
exceptions as are listed in the Program Guide and (D) other matters to which
like properties are commonly subject which do not materially adversely affect
the value, use, enjoyment or marketability of the related Mortgaged Property
or (ii) with respect to any Mortgage Loan as to which the Seller delivers an
affidavit certifying that the original Mortgage Note has been lost or
destroyed, a subsequent default on such Mortgage Loan if the enforcement
thereof or of the related Mortgage is materially and adversely affected by
the absence of such original Mortgage Note.
Repurchase Price: With respect to any Mortgage Loan required to be
----------------
repurchased on any date pursuant to the Mortgage Loan Purchase Agreement or
purchased by the Master Servicer pursuant to the Servicing Agreement, an
amount equal to the sum of (i) 100% of the Asset Balance thereof (without
reduction for any amounts charged off) and (ii) unpaid accrued interest at
the Loan Rate on the outstanding principal balance thereof from the Due Date
to which interest was last paid by the Mortgagor to the first day of the
month following the month of purchase. No portion of any Repurchase Price
shall be included in the Excluded Amount for any Payment Date.
Required Overcollateralization Percentage: ___%.
-----------------------------------------
Required Overcollateralization Amount: As to any Payment Date, the
-------------------------------------
Required Overcollateralization Percentage of the Pool Balance.
Residual Ownership Interest: Collectively, the beneficial ownership
---------------------------
interests in the Issuer established under the Trust Agreement that are
entitled to receive all amounts to be paid to the Issuer or its designee
pursuant to Section 3.05 of the Indenture, over the term thereof.
Responsible Officer: With respect to the Indenture Trustee, any officer
-------------------
of the Indenture Trustee with direct responsibility for the administration
of the Trust Agreement 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.
(Revolving Period: With respect to each Mortgage Loan, the period
----------------
consisting of either the first five, ten or fifteen years after the date of
origination of such Mortgage Loan, during which the related Mortgage Note
provides for monthly payments of interest only with no payments of principal
(except with respect to certain Mortgage Loans that require non-amortizing
minimum payments of principal) and during which the Mortgagor is permitted
to make Draws.
Schedule Annex: With respect to any Additional Loans, the schedule
--------------
provided by the Seller to the Depositor or its assignee pursuant to the
Mortgage Loan Purchase Agreement, which shall include all items of
information of the type shown on, and shall be deemed to be incorporated in,
the Mortgage Loan Schedule.)
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations promulgated thereunder.
Security: Any of the Certificates or Notes.
--------
Security Balance: The Principal Balance of the Term Notes(, the
----------------
Variable Funding Notes) or the Certificates, as the case may be.
Security Collections: With respect to any Payment Date, the sum of the
--------------------
following amounts:
(i) the aggregate of all Security Interest Collections received
during the related Collection Period;
(ii) so long as an Amortization Event and the Accelerated
Amortization Date has not occurred, Net Principal Collections for such
Payment Date or if such an event or date has occurred, the aggregate of all
Security Principal Collections with respect to such Payment Date; and
(iii) all Substitution Adjustment Amounts to be deposited to the
Payment Account for such Payment Date.
Securityholder or Holder: Any Noteholder or a Certificateholder.
-------------- ------
Security Interest Collections: With respect to any Payment Date,
-----------------------------
Interest Collections during the related Collection Period (excluding the
portion thereof allocable to the Excluded Amount).
Security Percentage: With respect to any Payment Date and Security, the
-------------------
percentage equivalent of a fraction the numerator of which is the Security
Balance of such Security immediately prior to such Payment Date and the
denominator of which is the aggregate of the Security Balances of all
Securities as of such date.
Security Principal Collections: With respect to any Payment Date,
------------------------------
Principal Collections during the related Collection Period (excluding the
portion thereof allocable to the Excluded Amount).
Seller: ______________________ and its successors and assigns.
------
Seller's Agreement: With respect to each Mortgage Loan, the agreement
------------------
between the Seller, as purchaser, and the related Program Seller, as seller.
Servicing Agreement: The Servicing Agreement dated as of
-------------------
________________ between ________________________, as Indenture Trustee, and
the Master Servicer, as master servicer.
Servicing Certificate: A certificate completed and executed by a
---------------------
Servicing Officer on behalf of the Master Servicer in accordance with Section
4.01 of the Servicing Agreement.
Servicing Fee: With respect to any Mortgage Loan, the sum of the
-------------
related Master Servicing Fee and the related Subservicing Fee.
Servicing Fee Rate: With respect to any Mortgage Loan, the sum of the
------------------
related Master Servicing Fee Rate and the related Subservicing Fee Rate.
Servicing Officer: Any officer of the Master Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished
to the Indenture Trustee ((with a copy to the Credit Enhancer)) by the Master
Servicer, as such list may be amended from time to time.
Servicing Standards: The quality of the Master Servicer's (or, in the
-------------------
event that a Subservicer performs servicing operations on behalf of the
Master Servicer, such Subservicer's) performance with respect to compliance
with the terms and conditions of the Servicing Agreement.
Single Certificate: A Certificate in the denomination of $1,000.
------------------
Single Note: A Note in the amount of $1,000.
-----------
Standard & Poor's: Standard & Poor's Ratings Group or its successor in
-----------------
interest.
Subservicer: Any Person with whom the Master Servicer has entered into
-----------
a Subservicing Agreement as a Subservicer by the Master Servicer, including
the Initial Subservicers.
Subservicing Account: An Eligible Account established or maintained by
--------------------
a Subservicer as provided for in Section 3.02(c) of the Servicing Agreement.
Subservicing Agreement: The written contract between the Master
----------------------
Servicer and any Subservicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.01 of the Servicing
Agreement.
Subservicing Fee: With respect to any Mortgage Loan and any Collection
----------------
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced Mortgage Loan, by the Master Servicer) equal to the product
of (i) the Subservicing Fee Rate divided by 12 and (ii) the aggregate Asset
Balance of the Mortgage Loans serviced by such Subservicer as of the first
day of such Collection Period.
Subservicing Fee Rate: With respect to any Mortgage Loan, ____% per
---------------------
annum.
(Telerate Screen Page 3750: The display designated as page 3750 on the
-------------------------
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).
If such rate does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as may be selected by
the Issuer after consultation with the Indenture Trustee), the rate will be
the Reference Bank Rate.)
(Term Notes: The Notes designated as the "Term Notes" in the
----------
Indenture.)
Treasury Regulations: Regulations, including proposed or temporary
--------------------
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust Agreement: The Amended and Restated Trust Agreement dated as of
---------------
______________ between the Owner Trustee, ______________ and the Depositor.
Trust Estate: The meaning specified in the Granting Clause of the
------------
Indenture.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended
--------------------------
from time to time, as in effect on any relevant date.
UCC: The Uniform Commercial Code, as amended from time to time, as in
---
effect in any specified jurisdiction.
(Underlying Seller: ________________).
-----------------
Unpaid Certificate Distribution Amount Shortfall: With respect to any
------------------------------------------------
Payment Date, the aggregate amount, if any, of Certificate Distribution
Amount that was accrued in respect of a prior Payment Date and has not been
distributed to Certificateholders.
(Variable Funding Notes: The Notes designated as the "Variable Funding
----------------------
Notes" in the Indenture including any Capped Funding Notes and Additional
Variable Funding Notes.)
Weighted Average Net Loan Rate: With respect to the Mortgage Loans in
------------------------------
the aggregate, and any Due Date, the average of the Net Loan Rate for each
Mortgage Loan as of the last day of the related Billing Cycle weighted on the
basis of the related Asset Balances outstanding as of the last day of the
related Billing Cycle for each Mortgage Loan as determined by the Master
Servicer in accordance with the Master Servicer's normal servicing
procedures.
Exhibit 5.1
September 9, 1996
Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
World Financial Center
North Tower - 10th Floor
New York, New York 10281
Re: Merrill Lynch Mortgage Investors, Inc.
Registration Statement on Form S-3
(File No. 333-7569)
--------------------------------------
Ladies and Gentlemen:
We have acted as counsel for you in connection with the Registration
Statement on Form S-3 (File No. 333-7569) (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act"), for the registration under the Act of up to
$1,000,000,000 aggregate principal amount of Asset Backed Securities (the
"Securities"). Each series of such Securities will be issued pursuant to (i)
a separate pooling and servicing agreement (the "Pooling and Servicing
Agreement"), among Merrill Lynch Mortgage Investors, Inc. (the "Registrant"),
a trustee to be identified in the prospectus supplement for such series of
Securities and a master servicer to be identified in the prospectus
supplement for such series of Securities (the "Master Servicer"), (ii) a
trust agreement (the "Trust Agreement") among a trustee named in the related
prospectus supplement, the Registrant and another entity named in such
prospectus supplement and/or (iii) an indenture (the "Indenture") between the
trust formed pursuant to the Trust Agreement and the indenture trustee named
in the related prospectus supplement.
We have made such investigation of law as we deemed appropriate and have
examined the proceedings heretofore taken and are familiar with the
procedures proposed to be taken by the Registrant in connection with the
authorization, issuance and sale of the Securities.
Based on the foregoing, we are of the opinion that:
(i) When each Pooling and Servicing Agreement and/or Indenture in
respect of which we have participated as your counsel has been duly
authorized by all necessary corporate action and has been duly executed and
delivered, it will constitute a valid and binding obligation of the
Registrant enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law); and
(ii) When the issuance, execution and delivery of the Securities issued
pursuant to a Pooling and Servicing Agreement or an Indenture in respect of
which we have participated as your counsel have been duly authorized by all
necessary corporate action, and when such Securities have been duly executed
and delivered and sold as described in the Registration Statement, such
Securities will be legally and validly issued and the holders of such
Securities will be entitled to the benefits provided by the Pooling and
Servicing Agreement or the Indenture, as applicable, pursuant to which such
Securities were issued.
In rendering the foregoing opinions, we have assumed the accuracy and
truthfulness of all public records of the Registrant and of all
certifications, documents and other proceedings examined by us that have been
executed or certified by officials of the Registrant acting within the scope
of their official capacities and have not verified the accuracy or
truthfulness thereof. We have also assumed the genuineness of the signatures
appearing upon such public records, certifications, documents and
proceedings. In addition, we have assumed that each such Pooling and
Servicing Agreement and Indenture and the related Certificates and Notes, as
applicable, will be executed and delivered in substantially the form filed
as exhibits to the Registration Statement with such changes acceptable to us,
and that such Securities will be sold as described in the Registration
Statement. We express no opinion as to the laws of any jurisdiction other
than the laws of the State of New York and the federal laws of the United
States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration
Statement, without implying or admitting that we are "experts" within the
meaning of the Act or the rules and regulations of the Securities and
Exchange Commission issued thereunder, with respect to any part of the
Registration Statement, including this exhibit.
Very truly yours,
Brown & Wood LLP
Exhibit 5.2
September 9, 1996
Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
World Financial Center
North Tower - 10th Floor
New York, New York 10281
Re: Merrill Lynch Mortgage Investors, Inc.
Registration Statement on Form S-3 (File No. 333-7569)
------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Merrill Lynch Mortgage
Investors, Inc. (the "Registrant") in connection with the Registration
Statement on Form S-3 (File No. 3337569) (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act"), for the registration under the Act of up to
$1,000,000,000 aggregate principal amount of Asset Backed Securities
(the "Securities"). Each series of such Securities may be issued pursuant
to a trust agreement (the "Trust Agreement") among a trustee named in the
related prospectus supplement, the Registrant and another entity named in
such prospectus supplement. This opinion is being delivered to you at your
request.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The form of Trust Agreement (including the form of Certificate of
Trust
(the "Certificate") attached as Exhibit B thereto); and
(b) The Registration Statement.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed above, and we have assumed that there exists no
provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the fore-
going documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to
be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies
or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement will constitute the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the
creation, operation and termination of the Trust, (ii) the due creation or
due organization or due formation, as the case may be, and valid existence
in good standing of each party to the documents examined by us under the laws
of the jurisdiction governing its creation, organization or formation, (iii)
the legal capacity of natural persons who are parties to the documents
examined by us, and (iv) that each of the parties to the documents examined
by us has the power and authority to execute and deliver, and to perform its
obligations under, such documents. We have not participated in the
preparation of the Registration Statement and assume no responsibility for
its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered
only with respect to Delaware laws and rules, regulations and orders
thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. When each Trust Agreement in respect of which we have participated
as your counsel has been duly authorized by all necessary corporate action
and has been duly executed and delivered, it will constitute a valid and
binding obligation of the Registrant enforceable in accordance with its
terms; and
2. When the issuance, execution and delivery of the Securities in
respect of which we have participated as your counsel have been duly
authorized by all necessary corporate action, and when such Securities have
been duly executed and delivered and sold as described in the Registration
Statement such Securities will be legally and validly issued and the holders
of such Securities will be entitled to the benefits provided by the Trust
Agreement pursuant to which such Securities were issued.
The foregoing opinions regarding enforceability are subject to (i)
applicable bankruptcy, insolvency, moratorium, reorganization, receivership,
fraudulent conveyance and similar laws relating to or affecting the rights
and remedies of creditors generally, (ii) principles of equity (regardless
of whether considered and applied in a proceeding in equity or at law) and
(iii) the effect of applicable public policy on the enforceability of
provisions relating to indemnification or contribution.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration
Statement. In giving the foregoing consents, we do not thereby admit that
we come within the category of Persons whose consent is required under
Section 7 of the Act, or the rules and regulations of the Securities and
Exchange Commission thereunder with respect to any part of the Registration
Statement, including this exhibit. Except as stated above, this opinion may
not be furnished or quoted to, or relied upon by, any other Person for any
purpose.
Very truly yours,
Richards, Layton & Finger
Exhibit 8.1
September 9, 1996
Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
World Financial Center
North Tower - 10th Floor
New York, New York 10281
Re: Merrill Lynch Mortgage Investors, Inc.
Registration Statement on Form S-3
(File No. 333-7569)
--------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Merrill Lynch Mortgage Investors, Inc., a
Delaware corporation (the "Registrant"), in connection with the issuance and
sale of its Asset Backed Securities (the "Securities") that evidence
interests in, or securities backed by, certain pools of loans. Each series
of Securities will be issued pursuant to (i) a Pooling and Servicing
Agreement among the Registrant, a trustee and a master servicer, each to be
specified in the prospectus supplement for such series of Certificates, (ii)
a trust agreement (the "Trust Agreement") among a trustee named in the
related prospectus supplement, the Registrant and another entity named in
such prospectus supplement and/or (iii) an indenture (the "Indenture")
between the trust formed pursuant to the Trust Agreement and the indenture
trustee named in the related prospectus supplement. We have advised the
Registrant with respect to certain federal income tax consequences of the
proposed issuance of the Securities. This advice is summarized under the
headings "Summary of Prospectus -- Tax Status of the Certificates" and "--
Tax Status of the Notes" and "Certain Federal Income Tax Consequences" in the
Prospectus, all as part of the Registration Statement on Form S-3 (File No.
333-7569) (the "Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
as amended on the date hereof for the registration of such Securities under
the Act. Such description does not purport to discuss all possible federal
income tax ramifications of the proposed issuance, but with respect to those
tax consequences which are discussed, in our opinion, the description is
accurate in all material respects.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the heading "Certain Federal Income Tax Consequences" in
the Prospectus forming a part of the Registration Statement, without implying
or admitting that we are "experts" within the meaning of the Act or the rules
and regulations of the Commission issued thereunder, with respect to any part
of the Registration Statement, including this exhibit.
Very truly yours,
Brown & Wood LLP
Exhibit 25
==========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive
offices) (Zip code)
----------------------------------
Each Trust (the name of which is to be determined) that issues notes
registered under registration statement file no. 333-7569 under the
Securities Act of 1933, as amended
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
To be determined
(Address of principal executive
offices) (Zip code)
--------------------------------
Asset Backed Notes
(Title of the indenture securities)
===========================================================================
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO
THE TRUSTEE:
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO,
PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT")
AND RULE 24 OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b
to Form T-1 filed with Registration Statement No. 33-21672 and
Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its supervising
or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility to be signed on
its behalf by the undersigned, thereunto duly authorized, all in The City
of New York, and State of New York, on the 5th day of September, 1996.
THE BANK OF NEW YORK
By: /s/ NANCY B. GILL
---------------------------
Name: NANCY B. GILL
Title: ASSISTANT TREASURER
Exhibit 7
____________________________________________________________________________
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1996, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . . . . . . . . . $ 2,461,550
Interest-bearing balances . . . . . . . . . . . . . . . . . . . 835,563
Securities:
Held-to-maturity securities . . . . . . . . . . . . . . . . . . .802,064
Available-for-sale securities . . . . . . . . . . . . . . . . . 2,051,263
Federal funds sold in domestic of-
fices of the bank:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ......................... 27,820,159
LESS: Allowance for loan and
lease losses ........................509,817
LESS: Allocated transfer risk
reserve................................1,000
Loans and leases, net of unearned
income, allowance, and reserve . . . . . . . . . . . . . . . 27,309,342
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . 837,118
Premises and fixed assets (including
capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . 614,567
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . 51,631
Investments in unconsolidated
subsidiaries and associated
companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,158
Customers' liability to this bank on
acceptances outstanding . . . . . . . . . . . . . . . . . . . . . 800,375
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . 436,668
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,247,908
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . $18,851,327
Noninterest-bearing .................7,102,645
Interest-bearing ...................11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs....10,965,604
Noninterest-bearing ....................37,855
Interest-bearing ..................10,927,749
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased . . . . . . . . . . . . . . . . . . . . 1,224,886
Securities sold under agreements
to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . 29,728
Demand notes issued to the U.S.
Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,870
Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . 673,944
Other borrowed money:
With original maturity of one year
or less . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,713,248
With original maturity of more than
one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,780
Bank's liability on acceptances exe-
cuted and outstanding . . . . . . . . . . . . . . . . . . . . . . 803,292
Subordinated notes and debentures . . . . . . . . . . . . . . . . 1,022,860
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,590,564
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 38,015,103
-----------
EQUITY CAPITAL
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942,284
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,666
Undivided profits and capital
reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,197
Cumulative foreign currency transla-
tion adjustments . . . . . . . . . . . . . . . . . . . . . . . ( 5,765)
-----------
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . 3,543,579
-----------
Total liabilities and equity
capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,558,682
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
J. Carter Bacot ]
Thomas A. Renyi ] Directors
Alan R. Griffith ]
- ------------------------------------------------------------------
Exhibit 99.1
______________________,
as Master Servicer,
______________________ LOAN TRUST 199_-_,
as Issuer,
and
_________________________,
as Indenture Trustee
______________________
SERVICING AGREEMENT
Dated as of _____________, 199_
______________________
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitional Provisions . . . . . . . . . . . . 2
Section 1.03. Interest Calculations . . . . . . . . . . . . . . . . 2
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties Regarding
the Master Servicer . . . . . . . . . . . . . . . . 4
Section 2.02. Representations and Warranties of the
Indenture Trustee . . . . . . . . . . . . . . . . . 5
Section 2.03 Enforcement of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer . . . . . . . . . . . . . . . . . 8
Section 3.02. Collection of Certain Mortgage Loan
Payments . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.03. Withdrawals from the Collection Account . . . . . . . 13
Section 3.04. Maintenance of Hazard Insurance;
Property Protection Expenses . . . . . . . . . . . . 14
Section 3.05. Assumption and Modification Agreements;
Certain Assignments . . . . . . . . . . . . . . . . 15
Section 3.06. Realization Upon Defaulted Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.07. Issuer and Indenture Trustee to
Cooperate . . . . . . . . . . . . . . . . . . . . . 18
Section 3.08. Servicing Compensation; Payment of
Certain Expenses by Master Servicer . . . . . . . . 20
Section 3.09. Annual Statement as to Compliance . . . . . . . . . . 20
Section 3.10. Annual Servicing Report . . . . . . . . . . . . . . . 21
Section 3.11. Access to Certain Documentation and
Information Regarding the Mortgage Loans . . . . . . 21
Section 3.12. Maintenance of Certain Servicing
Insurance Policies . . . . . . . . . . . . . . . . . 22
Section 3.13. Information Required by the Internal
Revenue Service Generally and Reports
of Foreclosures and Abandonments of
Mortgaged Property . . . . . . . . . . . . . . . . . 22
(Section 3.14. Optional Repurchase of Defaulted
Mortgage Loans . . . . . . . . . . . . . . . . . . 22)
ARTICLE IV
Servicing Certificate
Section 4.01. Statements to Holders . . . . . . . . . . . . . . . . 23
ARTICLE V
Payment Account
Section 5.01. Payment Account . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI
The Master Servicer
Section 6.01. Liability of the Master Servicer . . . . . . . . . . 27
Section 6.02. Merger or Consolidation of, or
Assumption of the Obligations of, the
Master Servicer . . . . . . . . . . . . . . . . . . 27
Section 6.03. Limitation on Liability of the Master
Servicer and Others . . . . . . . . . . . . . . . . 27
Section 6.04. Master Servicer Not to Resign . . . . . . . . . . . . 28
Section 6.05. Delegation of Duties . . . . . . . . . . . . . . . . 29
Section 6.06. Master Servicer to Pay Indenture
Trustee's and Owner Trustee's Fees and
Expenses; Indemnification . . . . . . . . . . . . . 29
ARTICLE VII
Default
Section 7.01. Events of Default . . . . . . . . . . . . . . . . . . 31
Section 7.02. Indenture Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . . 34
Section 7.03. Notification to Holders . . . . . . . . . . . . . . . 36
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. Amendment . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.02. Governing Law . . . . . . . . . . . . . . . . . . . . 37
Section 8.03. Notices . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.04. Severability of Provisions . . . . . . . . . . . . . 37
Section 8.05. Third-Party Beneficiaries . . . . . . . . . . . . . . 38
Section 8.06. Counterparts . . . . . . . . . . . . . . . . . . . . 38
Section 8.07. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.08. Termination Upon Purchase by the Master
Servicer or Liquidation of All Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.09. Certain Matters Affecting the Indenture
Trustee. . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.10. Limitation of Liability of Owner
Trustee . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.11. Authority of the Administrator . . . . . . . . . . . 40
EXHIBIT A - MORTGAGE LOAN SCHEDULE . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE . . . . . . . . . . . . . . . . . B-1
EXHIBIT C - CERTIFICATE PURSUANT TO SECTION 3.05(c) . . . . . . . . . . . C-1
EXHIBIT D - POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . D-1
This Servicing Agreement, dated as of _____________, 199_, among
______________________, as Master Servicer (the "Master Servicer"),
______________________ Loan Trust 199_-_ (the "Issuer") and
_________________________, as Indenture Trustee (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
----------------------------
WHEREAS, the Issuer has been formed pursuant to an Amended and
Restated Trust Agreement dated as of __________ 1, 199_ (the "Trust Agree-
ment") between ______________________, as depositor (the "Depositor"),
________________________, and ______________________, as owner trustee (the
"Owner Trustee");
WHEREAS, the Issuer will acquire the Initial Loans and the Retained
Balances (and will acquire Additional Loans and Additional Balances);
WHEREAS, pursuant to the terms of an Indenture dated as of
_____________, 199_ (the "Indenture"), between the Issuer, as debtor, and
_________________________, as indenture trustee (the "Indenture Trustee"),
the Issuer will issue the Home Equity Loan Asset-Backed Notes, Series 199_-_
(the "Notes"), consisting of the (Term) Notes (and the Variable Funding
Notes) and secured by the Mortgage Loans;
WHEREAS, the Issuer will also issue the Home Equity Loan Asset-
Backed Certificates, Series 199_-_ (the "Certificates") representing
undivided interests in the assets of the Issuer subject to the lien of the
Indenture; and
WHEREAS, pursuant to the terms of this Servicing Agreement, the
Master Servicer will service the Mortgage Loans directly or through one or
more Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Servicing
-----------
Agreement, except as otherwise expressly provided herein or unless the
context otherwise requires, capitalized terms not otherwise defined herein
shall have the meanings assigned to such terms in the Definitions attached
to the Indenture as Appendix A, which is incorporated by reference herein.
All other capitalized terms used herein shall have the meanings specified
herein.
Section 1.02. Other Definitional Provisions. (a) All terms defined
-----------------------------
in this Servicing Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or
in any such certificate or other document, to the extent not defined, shall
have the respective meanings given to them under generally accepted
accounting principles. To the extent that the definitions of accounting
terms in this Servicing Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Servicing
Agreement or in any such certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing
Agreement are references to Sections and Exhibits in or to this Servicing
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to
the masculine as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
Section 1.03. Interest Calculations. All calculations of interest
---------------------
hereunder that are made in respect of the Asset Balance of a Mortgage Loan
shall be made on (a daily basis using a 365-day year). All calculations of
interest on the Securities shall be made on the basis of (the actual number
of days in an Interest Period and a year assumed to consist of 360 days).
The calculation of the Servicing Fee shall be made on the basis of (a 360-day
year consisting of twelve 30-day months). All dollar amounts calculated
hereunder shall be rounded to the nearest penny with one-half of one penny
being rounded down.
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties Regarding the Master
---------------------------------------------------
Servicer. The Master Servicer represents and warrants to the Issuer and the
- --------
Indenture Trustee and for the benefit of the Securityholders, as of the Cut-
Off Date, _____________, 199_, the Closing Date (and any Deposit Date), that:
(i) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
(Delaware) and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Master Servicer is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure to so qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to
make, execute, deliver and perform this Servicing Agreement and all of
the transactions contemplated under this Servicing Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered, this
Servicing Agreement will constitute the legal, valid and binding obligation
of the Master Servicer enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(iii) The Master Servicer is not required to obtain the consent of
any other Person or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Servicing Agreement, except for such consent, license,
approval or authorization, or registration or declaration, as shall have been
obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement and the
performance of the transactions contemplated hereby by the Master Servicer
will not violate any provision of any existing law or regulation or any order
or decree of any court applicable to the Master Servicer or any provision of
the Certificate of Incorporation or Bylaws of the Master Servicer, or
constitute a material breach of any mortgage, indenture, contract or other
agreement to which the Master Servicer is a party or by which the Master
Servicer may be bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Master Servicer threatened, against the Master Servicer or
any of its properties or with respect to this Servicing Agreement or the
Notes or the Certificates which in the opinion of the Master Servicer has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Servicing Agreement; and
(vi) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand or any
federal, state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its properties
or might have consequences that would materially adversely affect its
performance hereunder.
The foregoing representations and warranties shall survive any
termination of the Master Servicer hereunder.
Section 2.02. Representations and Warranties of the Indenture Trustee.
-------------------------------------------------------
The Indenture Trustee hereby represents and warrants to the Master Servicer
and the Issuer for the benefit of the Securityholders, as of the Cut-Off
Date, _____________, 199_, the Closing Date (and any Deposit Date), that:
(i) The Indenture Trustee is a ________________ in good standing
under the laws of ______________________;
(ii) The Indenture Trustee has full power, authority and legal
right to execute and deliver this Servicing Agreement and to perform its
obligations under this Servicing Agreement, and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Servicing Agreement; and
(iii) The execution and delivery by the Indenture Trustee of this
Servicing Agreement and the performance by the Indenture Trustee of its
obligations under this Servicing Agreement will not violate any provision of
any law or regulation governing the Indenture Trustee or any order, writ,
judgment or decree of any court, arbitrator or governmental authority or
agency applicable to the Indenture Trustee or any of its assets. Such execu-
tion, delivery, authentication and performance will not require the authori-
zation, consent or approval of, the giving of notice to, the filing or regis-
tration with, or the taking of any other action with respect to, any govern-
mental authority or agency regulating the activities of national banking
associations. Such execution, delivery, authentication and performance will
not conflict with, or result in a breach or violation of, any material
indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Indenture Trustee is bound.
Section 2.03 Enforcement of Representations and Warranties. The Master
---------------------------------------------
Servicer, on behalf of and subject to the direction of the Indenture Trustee
(or the Credit Enhancer), shall enforce the representations and warranties
of the Seller pursuant to the Mortgage Loan Purchase Agreement. Upon the
discovery by the Seller, the Master Servicer, the Indenture Trustee, (the
Credit Enhancer), the Issuer or any Custodian of a breach of any of the
representations and warranties made in the Mortgage Loan Purchase Agreement,
in respect of any Mortgage Loan which materially and adversely affects the
interests of the Holders (or the Credit Enhancer), the party discovering such
breach shall give prompt written notice to the other parties (any Custodian
being so obligated under a Custodial Agreement). The Master Servicer shall
promptly notify the Seller of such breach and request that, pursuant to the
terms of the Mortgage Loan Purchase Agreement, the Seller either (i) cure
such breach in all material respects within __ days from the date the Seller
was notified of such breach or (ii) purchase such Mortgage Loan from the
Issuer at the price and in the manner set forth in Section 4 of the Mortgage
Loan Purchase Agreement; provided that the Seller shall, subject to the
--------
conditions set forth in the Mortgage Loan Purchase Agreement, have the option
to substitute an Eligible Substitute Mortgage Loan or Loans for such Mortgage
Loan. In the event that the Seller elects to substitute one or more Eligible
Substitute Mortgage Loans pursuant to Section 4 of the Mortgage Loan Purchase
Agreement, the Seller shall deliver to the Indenture Trustee for the benefit
of the Issuer and the Holders with respect to such Eligible Substitute
Mortgage Loans, the original Mortgage Note, the Mortgage, and such other
documents and agreements as are required by the Mortgage Loan Purchase
Agreement. No substitution will be made in any calendar month after the
Determination Date for such month. Payments due with respect to Eligible
Substitute Mortgage Loans in the month of substitution shall not be
transferred to the Issuer and will be retained by the Master Servicer and
remitted by the Master Servicer to the Seller on the next succeeding Payment
Date provided a payment has been received by the Issuer for such month in
respect of the Mortgage Loan to be removed. The Master Servicer shall amend
or cause to be amended the Mortgage Loan Schedule to reflect the removal of
such Mortgage Loan and the substitution of the Eligible Substitute Mortgage
Loans and the Master Servicer shall promptly deliver the amended Mortgage
Loan Schedule to the Owner Trustee and Indenture Trustee.
It is understood and agreed that the obligation of the Seller to cure
such breach or purchase or substitute for such Mortgage Loan as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Issuer and Indenture Trustee against
the Seller. In connection with the purchase of or substitution for any such
Mortgage Loan by the Seller, the Issuer and the Indenture Trustee shall
assign to the Seller all of the right, title and interest in respect of the
Mortgage Loan Purchase Agreement applicable to such Mortgage Loan. Upon
receipt of the Repurchase Price, or upon completion of such substitution, the
applicable Custodian shall deliver the Mortgage Files to the Master Servicer,
together with all relevant endorsements and assignments.
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer. (a) The Master Servicer shall
-------------------
service and administer the Mortgage Loans in accordance with customary and
prudent servicing procedures for residential mortgage loans and shall have
full power and authority, acting alone or through a subservicer, to do any
and all things in connection with such servicing and administration which it
may deem necessary or desirable, it being understood, however, that the
Master Servicer shall at all times remain responsible to the Issuer, the
Indenture Trustee and the Holders for the performance of its duties and
obligations hereunder in accordance with the terms hereof. Without limiting
the generality of the foregoing, the Master Servicer shall continue, and is
hereby authorized and empowered by the Issuer and the Indenture Trustee, to
execute and deliver, on behalf of itself, the Issuer, the Holders and the
Indenture Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments with respect to the Mortgage Loans and with respect
to the Mortgaged Properties. The Issuer, the Owner Trustee, the Indenture
Trustee and the Custodian, as applicable, shall furnish the Master Servicer
with any powers of attorney and other documents necessary or appropriate to
enable the Master Servicer to carry out its servicing and administrative
duties hereunder. On the Closing Date, the Issuer shall deliver to the
Master Servicer a power of attorney substantially in the form of Exhibit D
hereto. The Master Servicer shall use its best reasonable efforts to avoid
any delays in performance of its obligations as a result of the recordation
of the assignments of the Mortgages in favor of both the Indenture Trustee
and the Owner Trustee (as opposed to a single assignee); however, it is
understood that the Master Servicer will not be in breach of its obligations
solely as a result of such delays and solely in connection with the
recordation of assignments, releases or other instruments required to be
recorded or the obtaining of any necessary signatures from the Issuer or the
Indenture Trustee.
(If the Mortgage relating to a Mortgage Loan did not have a lien senior
on the related Mortgaged Property as of the Cut-Off Date, then the Master
Servicer, in such capacity, may not consent to the placing of a lien senior
to that of the Mortgage on the related Mortgaged Property. If the Mortgage
relating to a Mortgage Loan had a lien senior to the Mortgage Loan on the
related Mortgaged Property as of the Cut-Off Date, then the Master Servicer,
in such capacity, may consent to the refinancing of such senior lien;
provided that (i) the resulting Combined Loan-to-Value Ratio of such Mortgage
- --------
Loan is no higher than the Combined Loan-to-Value Ratio prior to such
refinancing and (ii) the interest rate for the loan evidencing the refinanced
senior lien on the date of such refinancing is no higher than the interest
rate on the loan evidencing the existing senior lien immediately prior to the
date of such refinancing.
In connection with servicing the Mortgage Loans, the Master Servicer may
take reasonable actions to encourage or effect the termination of Loan
Agreements that have become dormant.)
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Servicing Agreement) to the Issuer and
the Indenture Trustee under this Servicing Agreement is intended by the
parties to be that of an independent contractor and not that of a joint
venturer, partner or agent.
((b) The Master Servicer has entered into Subservicing Agreements with
the Initial Subservicers for the servicing and administration of the Mortgage
Loans and may enter into additional Subservicing Agreements with Subservicers
for the servicing and administration of certain of the Mortgage Loans.
References in this Servicing Agreement to actions taken or to be taken by the
Master Servicer in servicing the Mortgage Loans include actions taken or to
be taken by a Subservicer on behalf of the Master Servicer and any amount
received by such Subservicer in respect of a Mortgage Loan shall be deemed
to have been received by the Master Servicer whether or not actually received
by the Master Servicer. Each Subservicing Agreement will be upon such terms
and conditions as are not inconsistent with this Servicing Agreement and as
the Master Servicer and the Subservicer have agreed. With the approval of
the Master Servicer, a Subservicer may delegate its servicing obligations to
third-party servicers, but such Subservicers will remain obligated under the
related Subservicing Agreement. The Master Servicer and the Subservicer may
enter into amendments to the related Subservicing Agreements; provided,
--------
however, that any such amendments shall be consistent with and not violate
- -------
the provisions of this Servicing Agreement. The Master Servicer shall be
entitled to terminate any Subservicing Agreement in accordance with the terms
and conditions thereof and without any limitation by virtue of this Servicing
Agreement; provided, however, that in the event of termination of any Sub
-------- -------
servicing Agreement by the Master Servicer or the Subservicer, the Master
Servicer shall either act as servicer of the related Mortgage Loan or enter
into a Subservicing Agreement with a successor Subservicer which will be
bound by the terms of the related Subservicing Agreement. The Master
Servicer shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Master Servicer and nothing contained in this
Servicing Agreement shall be deemed to limit or modify such indemnification.
In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in
its sole discretion may, to the extent permitted by applicable law, terminate
the existing Subservicing Agreement with any Subservicer in accordance with
the terms of the applicable Subservicing Agreement or assume the terminated
Master Servicer's rights and obligations under such subservicing arrangements
which termination or assumption will not violate the terms of such
arrangements.
As part of its servicing activities hereunder, the Master Servicer, for
the benefit of the Issuer and Indenture Trustee, shall use its best
reasonable efforts to enforce the obligations of each Subservicer under the
related Subservicing Agreement, to the extent that the non-performance of any
such obligation would have material and adverse effect on a Mortgage Loan.
Such enforcement, including, without limitation, the legal prosecution of
claims, termination of Subservicing Agreements and the pursuit of other
appropriate remedies, shall be in such form and carried out to such an extent
and at such time as the Master Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Master
Servicer shall pay the costs of such enforcement at its own expense, and
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement to the extent, if any, that such recovery exceeds all
amounts due in respect of the related Mortgage Loan or (ii) from a specific
recovery of costs, expenses or attorneys fees against the party against whom
such enforcement is directed.)
Section 3.02. Collection of Certain Mortgage Loan Payments. (a) The
--------------------------------------------
Master Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and shall, to the
extent such procedures shall be consistent with this Servicing Agreement (and
generally consistent with the Program Guide), follow such collection
procedures as shall be customary and prudent for residential mortgage loans.
Consistent with the foregoing, and without limiting the generality of the
foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge, penalty interest or any assumption fees or other fees which
may be collected in the ordinary course of servicing such Mortgage Loan and
(ii) arrange with a Mortgagor a schedule for the payment of principal and
interest due and unpaid; provided such arrangement is consistent with the
--------
Master Servicer's policies with respect to residential mortgage loans;
provided, further, that notwithstanding such arrangement such Mortgage Loans
- -------- -------
will be included in the information regarding delinquent Mortgage Loans set
forth in the Servicing Certificate. The Master Servicer may also extend the
Due Date for payment due on a Mortgage Loan in accordance with the Program
Guide, provided, however, that the Master Servicer shall first determine that
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any such waiver or extension will not adversely affect the lien of the
related Mortgage. Consistent with the terms of this Servicing Agreement, the
Master Servicer may also waive, modify or vary any term of any Mortgage Loan
or consent to the postponement of strict compliance with any such term or in
any manner grant indulgence to any Mortgagor if in the Master Servicer's
determination such waiver, modification, postponement or indulgence is not
adverse to the interest of the Holders or the Credit Enhancer, provided,
however, that the Master Servicer may not modify or
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permit any Subservicer to modify any Mortgage Loan (including without
limitation any modification that would change the Loan Rate, forgive the
payment of any principal or interest (unless in connection with the
liquidation of the related Mortgage Loan) or extend the final maturity date
of such Mortgage Loan) unless such Mortgage Loan is in default or, in the
judgment of the Master Servicer, such default is reasonably foreseeable.
(b) The Master Servicer shall establish an account (the "Collection
Account") in which the Master Servicer shall deposit or cause to be deposited
any amounts representing payments on and any collections in respect of the
Mortgage Loans received by it subsequent to the Cut-Off Date as to any
Initial Loan (or the related Deposit Date as to any Additional Loan) (other
than in respect of the payments referred to in the following paragraph)
within one Business Day following receipt thereof (or otherwise on or prior
to the Closing Date), including the following payments and collections
received or made by it (without duplication):
(i) all payments of principal of or interest on the Mortgage Loans
received by the Master Servicer from the respective Subservicer, net of any
portion of the interest thereof retained by the Subservicer as Subservicing
Fees;
(ii) the aggregate Repurchase Price of the Mortgage Loans purchased
by the Master Servicer pursuant to Section 3.14;
(iii) Net Liquidation Proceeds net of any related Foreclosure
Profit;
(iv) all proceeds of any Mortgage Loans repurchased by the Seller
pursuant to the Mortgage Loan Purchase Agreement;
(v) insurance proceeds, other than Net Liquidation Proceeds,
resulting from any insurance policy maintained on a Mortgaged Property; and
(vi) amounts required to be paid by the Master Servicer pursuant
to Section 8.08.
provided, however, that with respect to each Collection Period, the Master
- -------- -------
Servicer shall be permitted to retain from payments in respect of interest
on the Mortgage Loans, the Master Servicing Fee for such Collection Period.
The foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, the Master Servicer need not deposit in the Collection Account
amounts representing Foreclosure Profits, fees (including annual fees) or
late charge penalties or assumption fees, payable by Mortgagors, or amounts
received by the Master Servicer for the accounts of Mortgagors for
application towards the payment of taxes, insurance premiums, assessments and
similar items. In the event any amount not required to be deposited in the
Collection Account is so deposited, the Master Servicer may at any time
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding. The Collection Account may contain funds that
belong to one or more trust funds created for the notes or certificates of
other series and may contain other funds respecting payments on mortgage
loans belonging to the Master Servicer or serviced or master serviced by it
on behalf of others. Notwithstanding such commingling of funds, the Master
Servicer shall keep records that accurately reflect the funds on deposit in
the Collection Account that have been identified by it as being attributable
to the Mortgage Loans and shall hold all collections in the Collection
Account to the extent they represent collections on the Mortgage Loans for
the benefit of the Issuer, the Indenture Trustee (and the Credit Enhancer),
as their interests may appear. (The Master Servicer shall remit all Foreclo-
sure Profits to itself as additional servicing compensation.)
The Master Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Master Servicer or any of its Affiliates, if
such obligations otherwise qualify as Eligible Investments), which shall
mature not later than the Business Day next preceding the Payment Date and
shall not be sold or disposed of prior to its maturity. Except as provided
above, all income and gain realized from any such investment shall be for the
benefit of the Master Servicer and shall be subject to its withdrawal or
order from time to time. The amount of any losses incurred in respect of the
principal amount of any such investments shall be deposited in the Collection
Account by the Master Servicer out of its own funds immediately as realized.
(c) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof
to the Master Servicer, in one or more accounts meeting the requirements of
an Eligible Account, and invested in Eligible Investments, unless, all such
collections are remitted on a daily basis to the Master Servicer for deposit
into the Collection Account.
Section 3.03. Withdrawals from the Collection Account. The Master
---------------------------------------
Servicer shall, from time to time as provided herein, make withdrawals from
the Collection Account of amounts on deposit therein pursuant to Section 3.02
that are attributable to the Mortgage Loans for the following purposes:
(i) to deposit in the Payment Account, on the Business Day prior
to each Payment Date, an amount equal to the Security Collections required
to be distributed on such Payment Date;
((ii) prior to either an Amortization Event or the Collection Period
preceding the Accelerated Amortization Date, to pay to the Seller, the amount
of any Additional Balances as and when created during the related Collection
Period, provided, that the aggregate amount so paid to the Seller in respect
of Additional Balances at any time during any Collection Period shall not
exceed the amount of Principal Collections theretofore received for such
Collection Period;)
(iii) to the extent deposited to the Collection Account, to
reimburse itself or the related Subservicer for previously unreimbursed
expenses incurred in maintaining individual insurance policies pursuant to
Section 3.04, or Liquidation Expenses, paid pursuant to Section 3.06 or
otherwise reimbursable pursuant to the terms of this Servicing Agreement (to
the extent not payable pursuant to Section 3.08), such withdrawal right being
limited to amounts received on particular Mortgage Loans (other than any
Repurchase Price in respect thereof) which represent late recoveries of the
payments for which such advances were made, or from related Liquidation
Proceeds or the proceeds of the purchase of such Mortgage Loan;
(iv) to pay to itself out of each payment received on account of
interest on a Mortgage Loan as contemplated by Section 3.08, an amount equal
to the related Master Servicing Fee (to the extent not retained pursuant to
Section 3.02), and to pay to any Subservicer any Subservicing Fees not
previously withheld by the Subservicer;
(v) to the extent deposited in the Collection Account to pay to
itself as additional servicing compensation any interest or investment income
earned on funds deposited in the Collection Account and Payment Account that
it is entitled to withdraw pursuant to Sections 3.02(b) and 5.01;
(vi) to the extent deposited in the Collection Account, to pay to
itself as additional servicing compensation any Foreclosure Profits;
(vii) to pay to itself or the Seller, with respect to any Mortgage
Loan or property acquired in respect thereof that has been purchased or
otherwise transferred to the Seller, the Master Servicer or other entity, all
amounts received thereon and not required to be distributed to Holders as of
the date on which the related Purchase Price or Repurchase Price is
determined;
(viii) to withdraw any other amount deposited in the Collection
Account that was not required to be deposited therein pursuant to Section
3.02;
((ix) to pay to the Seller the amount, if any, deposited in the
Collection Account by the Indenture Trustee upon release thereof from the
Funding Account representing payments for Additional Loans; and
(x) after the occurrence of an Amortization Event, to pay to the
Seller, the Excluded Amount.)
Since, in connection with withdrawals pursuant to clauses (iii), (iv), (vi)
and (vii), the Master Servicer's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, the Master
Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Collection Account pursuant to such clauses. Notwithstanding any other
provision of this Servicing Agreement, the Master Servicer shall be entitled
to reimburse itself for any previously unreimbursed expenses incurred
pursuant to Section 3.06 or otherwise reimbursable pursuant to the terms of
this Servicing Agreement that the Master Servicer determines to be otherwise
nonrecoverable (except with respect to any Mortgage Loan as to which the
Repurchase Price has been paid), by withdrawal from the Collection Account
of amounts on deposit therein attributable to the Mortgage Loans on any Busi-
ness Day prior to the Payment Date succeeding the date of such determination.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
----------------------------------------------------
Expenses. The Master Servicer shall cause to be maintained for each Mortgage
- --------
Loan hazard insurance naming the Master Servicer or related Subservicer as
loss payee thereunder providing extended coverage in an amount which is at
least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan from time to time or (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan from time to time. The Master Servicer shall
also cause to be maintained on property acquired upon foreclosure, or deed
in lieu of foreclosure, of any Mortgage Loan, fire insurance with extended
coverage in an amount which is at least equal to the amount necessary to
avoid the application of any co-insurance clause contained in the related
hazard insurance policy. Amounts collected by the Master Servicer under any
such policies (other than amounts to be applied to the restoration or repair
of the related Mortgaged Property or property thus acquired or amounts
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) shall be deposited in the Collection Account to the
extent called for by Section 3.02. In cases in which any Mortgaged Property
is located at the time of origination of the Mortgage Loan in a federally
designated flood area, the hazard insurance to be maintained for the related
Mortgage Loan shall include flood insurance (to the extent available). All
such flood insurance shall be in amounts equal to the lesser of (i) the
amount required to compensate for any loss or damage to the Mortgaged
Property on a replacement cost basis and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national
flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program). The Master Servicer
shall be under no obligation to require that any Mortgagor maintain earth-
quake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of
a Mortgage Loan, other than pursuant to such applicable laws and regulations
as shall at any time be in force and as shall require such additional
insurance. If the Master Servicer shall obtain and maintain a blanket policy
consistent with prudent industry standards insuring against hazard losses on
all of the Mortgage Loans, it shall conclusively be deemed to have satisfied
its obligations as set forth in the first sentence of this Section 3.04, it
being understood and agreed that such 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 the first sentence of this Section 3.04 and there shall have been a loss
which would have been covered by such policy, deposit in the Collection
Account the amount not otherwise payable under the blanket policy because of
such deductible clause. Any such deposit by the Master Servicer shall be
made on the last Business Day of the Collection Period in the month in which
payments under any such policy would have been deposited in the Collection
Account. In connection with its activities as administrator and servicer of
the Mortgage Loans, the Master Servicer agrees to present, on behalf of
itself, the Issuer and the Holders, claims under any such blanket policy.
Section 3.05. Assumption and Modification Agreements; Certain
-----------------------------------------------
Assignments. (a) In any case in which a Mortgaged Property has been or is
- -----------
about to be conveyed by the Mortgagor, the Master Servicer shall exercise or
refrain from exercising its right to accelerate the maturity of such Mortgage
Loan consistent with the then current practice of the Master Servicer and
without regard to the inclusion of such Mortgage Loan in the Trust. If it
elects not to enforce its right to accelerate or if it is prevented from
doing so by applicable law or regulation, the Master Servicer (so long as
such action conforms with the Master Servicer's underwriting standards at the
time for new originations) is authorized to take or enter into an assumption
and modification agreement from or 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 Loan Agreement. An assumption under this Section
3.05 shall be permitted only if the assuming borrower is of similar credit
quality to the borrower being released as of the date the related Mortgage
Loan is originated. The Master Servicer shall forward to the Indenture
Trustee or the relevant Custodian the original or a true and correct copy of
such assumption and modification agreement. Any such assumption and modifi-
cation agreement shall, for all purposes, be considered a part of the related
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. No change in the terms of the related Loan
Agreement may be made by the Master Servicer in connection with any such
assumption to the extent that such change would not be permitted to be made
in respect of the original Loan Agreement pursuant to Section 3.01(a). Any
fee collected by the Master Servicer for entering into any such agreement
will be retained by the Master Servicer or Subservicer as additional
servicing compensation.
(b) The Master Servicer or the related Subservicer, as the case may be,
shall be entitled to approve a request from a Mortgagor for a partial release
of the related Mortgaged Property, the granting of an easement thereon in
favor of another Person, any alteration or demolition of the related
Mortgaged Property or other similar matters if it has determined, exercising
its good faith business judgment in the same manner as it would if it were
the owner of the related Mortgage Loan, that the security for, and the timely
and full collectability of, such Mortgage Loan would not be adversely
affected thereby. A partial release pursuant to this Section 3.05 shall be
permitted only if the Combined Loan-to-Value Ratio for such Mortgage Loan
after such partial release does not exceed the Combined Loan-to-Value Ratio
for such Mortgage Loan as of the Cut-Off Date. Any fee collected by the
Master Servicer or the related Subservicer for processing such request will
be retained by the Master Servicer or such Subservicer as additional
servicing compensation.
(c) Subject to any other applicable terms and conditions of this
Servicing Agreement, the Indenture Trustee, the Master Servicer and the
Credit Enhancer shall be entitled to approve an assignment in lieu of
satisfaction with respect to any Mortgage Loan. Upon approval of an
assignment in lieu of satisfaction with respect to any Mortgage Loan, the
Master Servicer shall receive cash from or on behalf of the purchase of the
related Mortgaged Property, in an amount equal to the unpaid Asset Balance
of and accrued interest on such Mortgage Loan and the Master Servicer shall
treat such amounts in respect of the Asset Balance as a Principal Collection
and in respect of accrued interest thereon as an interest collection with
respect to such Mortgage Loan (and no portion of such amounts shall be
included in the Excluded Amount for any Payment Date.)
Section 3.06. Realization Upon Defaulted Mortgage Loans. The Master
-----------------------------------------
Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default when, in the opinion of the Master Servicer based upon
the practices and procedures referred to in the following sentence, no satis-
factory arrangements can be made for collection of delinquent payments pur-
suant to Section 3.02; provided that if the Master Servicer has actual knowl
--------
edge that any Mortgaged Property is affected by hazardous or toxic wastes or
substances and that the acquisition of such Mortgaged Property would not be
commercially reasonable, then the Master Servicer will not cause the Issuer
to acquire title to such Mortgaged Property in a foreclosure or similar pro-
ceeding. In connection with such foreclosure or other conversion, the Master
Servicer shall follow such practices (including, in the case of any default
on a related senior mortgage loan, the advancing of funds to correct such
default) and procedures as it shall deem necessary or advisable and as shall
be customary and prudent for residential mortgage loans; provided that the
--------
Master Servicer shall not be liable in any respect hereunder if the Master
Servicer is acting in connection with any such foreclosure or attempted
foreclosure which is not completed or other conversion in a manner that is
consistent with the provisions of this Servicing Agreement. The foregoing
is subject to the proviso that the Master Servicer shall not be required to
expend its own funds in connection with any foreclosure or attempted
foreclosure which is not completed or towards the correction of any default
on a related senior mortgage loan or restoration of any property unless it
shall determine that such expenditure will increase Net Liquidation Proceeds.
In the event of a determination by the Master Servicer that any such
expenditure previously made pursuant to this Section 3.06 will not be
reimbursable from Net Liquidation Proceeds, the Master Servicer shall be
entitled to reimbursement of its funds so expended pursuant to Section 3.03.
Notwithstanding any provision of this Servicing Agreement, a Mortgage
Loan may be deemed to be finally liquidated if substantially all amounts
expected by the Master Servicer to be received in connection with the related
defaulted Mortgage Loan have been received; provided, however, any subsequent
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collections with respect to any such Mortgage Loan shall be deposited to the
Collection Account. For purposes of determining the amount of any Liquida-
tion Proceeds or Insurance Proceeds, or other unscheduled collections, the
Master Servicer may take into account minimal amounts of additional receipts
expected to be received or any estimated additional liquidation expenses
expected to be incurred in connection with the related defaulted Mortgage
Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be issued to the Issuer and the Indenture Trustee as their
interests may appear, or to their respective nominee on behalf of Holders.
Notwithstanding any such acquisition of title and cancellation of the related
Mortgage Loan, such Mortgaged Property shall (except as otherwise expressly
provided herein) be considered to be an outstanding Mortgage Loan held as an
asset of the Issuer until such time as such property shall be sold. Consis-
tent with the foregoing for purposes of all calculations hereunder, so long
as such Mortgaged Property shall be considered to be an outstanding Mortgage
Loan it shall be assumed that, notwithstanding that the indebtedness
evidenced by the related Mortgage Note shall have been discharged, such
Mortgage Note in effect at the time of any such acquisition of title before
any adjustment thereto by reason of any bankruptcy or similar proceeding or
any moratorium or similar waiver or grace period will remain in effect.
Any proceeds from foreclosure proceedings or the purchase or repurchase
of any Mortgage Loan pursuant to the terms of this Servicing Agreement, as
well as any recovery resulting from a collection of Liquidation Proceeds or
Insurance Proceeds, will be applied in the following order of priority:
first, to reimburse the Master Servicer or the related Subservicer in
accordance with Section 3.06; second, to all Servicing Fees payable
therefrom; third, to the extent of accrued and unpaid interest on the related
Mortgage Loan, at the Net Loan Rate to the Due Date prior to the Payment Date
on which such amounts are to be deposited in the Payment Account; fourth, as
a recovery of principal on the Mortgage Loan; and fifth, to Foreclosure
Profits.
Section 3.07. Issuer and Indenture Trustee to Cooperate. On or before
-----------------------------------------
each Payment Date, the Master Servicer will notify the Indenture Trustee or
the relevant Custodian, with a copy to the Issuer, of the termination of or
the payment in full and the termination of any Mortgage Loan during the
preceding Collection Period, which notification shall be by a certification
in substantially the form attached hereto as Exhibit B (which certification
shall include a statement to the effect that all amounts received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.02 have been so deposited or
credited) of a Servicing Officer. Upon receipt of payment in full, the
Master Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.01, if the assignments of Mortgage have been recorded
as required under the Mortgage Loan Purchase Agreement, an instrument of
satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Master Servicer if required by applicable law and
be delivered to the Person entitled thereto. It is understood and agreed
that any expenses incurred in connection with such instrument of satis-
faction or transfer shall be reimbursed from amounts deposited in the
Collection Account. From time to time and as appropriate for the servicing
or foreclosure of any Mortgage Loan, the Indenture Trustee or the relevant
Custodian shall, upon request of the Master Servicer and delivery to the
Indenture Trustee or relevant Custodian, with a copy to the Issuer, of a
Request for Release, in the form annexed hereto as Exhibit B, signed by a
Servicing Officer, release or cause to be released the related Mortgage File
to the Master Servicer and the Issuer and Indenture Trustee shall promptly
execute such documents, in the forms provided by the Master Servicer, as
shall be necessary for the prosecution of any such proceedings or the taking
of other servicing actions. Such trust receipt shall obligate the Master
Servicer to return the Mortgage File to the Indenture Trustee or the related
Custodian (as specified in such receipt) when the need therefor by the Master
Servicer no longer exists unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released to the Master
Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions of the Mortgage Loan Purchase
Agreement, the Issuer and the Indenture Trustee shall, if so requested in
writing by the Master Servicer, promptly execute an appropriate assignment
in the form provided by the Master Servicer to assign such Mortgage Loan for
the purpose of collection to the Master Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only), and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms
of the Mortgage Loan and deposit or credit the Net Liquidation Proceeds,
exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account. In the event that all delinquent payments due under any
such Mortgage Loan are paid by the Mortgagor and any other defaults are cured
then the assignee for collection shall promptly reassign such Mortgage Loan
to the Indenture Trustee and return all Related Documents to the place where
the related Mortgage File was being maintained.
In connection with the Issuer's obligation to cooperate as provided in
this Section 3.07 and all other provisions of this Servicing Agreement
requiring the Issuer to authorize or permit any actions to be taken with
respect to the Mortgage Loans, the Owner Trustee expressly agrees, on behalf
of the Issuer, to take all such actions on behalf of the Issuer and to
promptly execute and return all instruments reasonably required by the Master
Servicer in connection therewith; provided that if the Master Servicer shall
--------
request a signature of the Owner Trustee, on behalf of the Issuer, the Master
Servicer will deliver to the Owner Trustee an Officer's Certificate stating
that such signature is necessary or appropriate to enable the Master Servicer
to carry out its servicing and administrative duties under this Servicing
Agreement.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
------------------------------------------------------
Master Servicer. The Master Servicer shall be entitled to receive the Master
- ---------------
Servicing Fee in accordance with Section 3.03 as compensation for its
services in connection with servicing the Mortgage Loans. Moreover,
additional servicing compensation in the form of late payment charges and
certain other receipts not required to be deposited in the Collection Account
as specified in Section 3.02 shall be retained by the Master Servicer. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all other fees
and expenses not expressly stated hereunder to be for the account of the Ho-
lders, including, without limitation, the fees and expenses of the
Administrator, Owner Trustee, Indenture Trustee and any Custodian) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.09. Annual Statement as to Compliance. (a) The Master
---------------------------------
Servicer will deliver to the Indenture Trustee, with a copy to the Credit
Enhancer, on or before March 31 of each year, beginning March 31, 199_, an
Officer's Certificate stating that (i) a review of the activities of the
Master Servicer during the preceding fiscal year and of its performance under
this Servicing Agreement has been made under such officer's supervision, (ii)
to the best of such officer's knowledge, based on such review, the Master
Servicer has fulfilled all its material obligations under this Servicing
Agreement in all material respects throughout such fiscal year, or, if there
has been a material default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof (and (iii) to the best of such officer's knowledge, based on
consultation with counsel, any continuation Uniform Commercial Code financing
statement or other Uniform Commercial Code financing statement during the
preceding fiscal year which the Master Servicer determined was necessary to
be filed was filed in order to continue protection of the interest of the
Indenture Trustee in the Mortgage Loans and the Issuer's interest in the
Owner Trust Estate). In addition, the Master Servicer shall deliver or cause
each Subservicer to deliver to the Indenture Trustee, the Depositor (and the
Credit Enhancer) a copy of each certification, accountant's report or other
document upon which the foregoing Officer's Certificate is based with respect
to such Subservicer's performance.
(b) The Master Servicer shall deliver to the Indenture Trustee(, with
a copy to the Credit Enhancer,) promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time or both, would become an Event of
Default.
Section 3.10. Annual Servicing Report. On or before March 31 of each
-----------------------
year, beginning March 31, 199_, the Master Servicer at its expense shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Master Servicer) to furnish a report to the
Indenture Trustee, the Depositor, (the Credit Enhancer) and each Rating
Agency to the effect that such firm has examined certain documents and
records relating to the servicing of mortgage loans (in which population of
mortgage loans the Mortgage Loans were included) by the Master Servicer
during the most recent calendar year then ended and that such examination,
which has been conducted substantially in compliance with the __ audit or
attestation program, has disclosed no items of noncompliance with the
provisions of this (Servicing Agreement)(such audit or attestation program)
which, in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report. In rendering such
statement, such firm may rely, as to matters relating to direct servicing of
mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in the manner described above (rendered within one
year of such statement) of independent public accountants with respect to the
related Subservicer.
Section 3.11. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
the Mortgage Loans. The Master Servicer shall provide to (the Credit
- ------------------
Enhancer, or) Holder upon reasonable request (or a regulator for a Holder)
or the Indenture Trustee, reasonable access to the documentation regarding
the Mortgage Loans such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Master Servicer. Nothing in this Section 3.11 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 3.11 as a
result of such obligation shall not constitute a breach of this Section 3.11.
Section 3.12. Maintenance of Certain Servicing Insurance Policies. The
---------------------------------------------------
Master Servicer shall during the term of its service as servicer maintain in
force (i) a policy or policies of insurance covering errors and omissions in
the performance of its obligations as master servicer hereunder and (ii) a
fidelity bond in respect of its officers, employees or agents. Each such
policy or policies and bond shall be at least equal to the coverage that
would be required by FNMA or FHLMC, whichever is greater, for Persons
performing servicing for mortgage loans purchased by such entity.
Section 3.13. Information Required by the Internal Revenue Service
-----------------------------------------------------
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
- ----------------------------------------------------------------------------
The Master Servicer shall prepare and deliver all federal and state
information reports when and as required by all applicable state and federal
income tax laws. In particular, with respect to the requirement under
Section 6050J of the Code to the effect that the Master Servicer or
Subservicer shall make reports of foreclosures and abandonments of any
mortgaged property for each year beginning in 1995, the Master Servicer or
Subservicer shall file reports relating to each instance occurring during the
previous calendar year in which the Master Servicer (i) on behalf of the
Indenture Trustee and the Issuer, acquires an interest in any Mortgaged
Property through foreclosure or other comparable conversion in full or
partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to know
that any Mortgaged Property has been abandoned. The reports from the Master
Servicer or Subservicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Section 6050J and Section 6050H (reports
relating to mortgage interest received) of the Code.
Section 3.14. Optional Repurchase of Defaulted Mortgage Loans.
-----------------------------------------------
Notwithstanding any provision in Section 3.06 to the contrary, the Master
Servicer may repurchase any Mortgage Loan delinquent in payment for a period
of 60 days or longer for a price equal to the Repurchase Price.
ARTICLE IV
Servicing Certificate
Section 4.01. Statements to Holders. (a) With respect to each Payment
---------------------
Date, the Master Servicer shall forward to the Indenture Trustee and the
Indenture Trustee shall forward by mail to each Certificateholder,
Noteholder, (holder of the Residual Ownership Interest, the Credit Enhancer),
the Depositor, the Owner Trustee, the Certificate Paying Agent and each
Rating Agency, a statement setting forth the following information as to (the
Variable Funding Notes, Term) Notes, (the Residual Ownership Interest) and
Certificates, to the extent applicable:
(i) the aggregate amount of (a) Security Interest Collections,
(b) aggregate Security Principal Collections and (c) Security Collections for
the related Collection Period;
(ii) the amount of such distribution to the Holders of (the
Variable Funding Notes, the Term) Notes and the Certificates applied to
reduce the principal balance thereof (and separately stating the portion
thereof in respect of the Accelerated Principal Distribution Amount and the
amount to be deposited in the Funding Account on such Payment Date);
(iii) the amount of such distribution to the Holders of (the
Variable Funding Notes, the Term) Notes and the Certificates allocable to
interest and separately stating the portion thereof in respect of overdue
accrued interest;
((iv) the Credit Enhancement Draw Amount, if any, for such Payment
Date and the aggregate amount of prior draws thereunder not yet reimbursed;)
(v) the aggregate Asset Balance of the Mortgage Loans as of the
end of the preceding Collection Period;
(vi) the number and aggregate Asset Balances of Mortgage Loans (a)
as to which the (Minimum) Monthly Payment is delinquent for 30-59 days, 60-89
days, 90-179 days and 180 or more days, respectively and (b) that have become
REO, in each case as of the end of the preceding Collection Period; provided,
--------
however, that such information will not be provided on the statements
- -------
relating to the first Payment Date;
(vii) the Weighted Average Net Loan Rate for the related Collection
Period;
((viii) the Overcollateralization Amount and the Required
Overcollateralization Amount, in each case as the end of the related
Collection Period;
(ix) the aggregate amount of Additional Balances created during the
previous Collection Period conveyed to the Issuer;
(x) the aggregate amount of Additional Loans acquired during the
previous Collection Period with amounts in respect of Net Principal
Collections from the Funding Account;)
(xi) the aggregate Liquidation Loss Amounts with respect to the
related Collection Period, the amount of any remaining Carryover Loss Amount
with respect to the (Term) Notes, Certificates and (Variable Funding Notes),
respectively, and the aggregate of the Liquidation Loss Amounts from all
Collection Periods to date expressed as a percentage of the sum of (a) the
Cut-Off Date Pool Balance (and (b) the amount by which the Pool Balance as
of the latest date that the Additional Loans have been transferred to the
Issuer exceeds the Cut-Off Date Pool Balance);
(xii) any unpaid interest on the (Term) Notes, Certificates (and
Variable Funding Notes), respectively, after such Distribution Date;
(xiii) the aggregate Principal Balance of each Class of Notes and of
the Certificates after giving effect to the distribution of principal on such
Payment Date;
(xiv) the respective Security Percentage applicable to the (Term)
Notes, Certificates (and Variable Funding Notes), after application of
payments made on such Payment Date; and
(xv) the amount distributed pursuant to Section 3.05(a)(x) of the
Indenture on such Payment Date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as an aggregate dollar amount per
(Variable Funding Note, Term) Note or Certificate with a $1,000 denomination.
Prior to the close of business on the Business Day next succeeding each
Determination Date, the Master Servicer shall furnish a written statement to
the Owner Trustee, the Depositor, the Certificate Paying Agent and the
Indenture Trustee setting forth (i) all the foregoing information, (ii) the
aggregate amounts required to be withdrawn from the Collection Account and
deposited into the Payment Account on the Business Day preceding the Payment
Date pursuant to Section 3.03 and (iii) the amounts (A) withdrawn from the
Payment Account and deposited to the Funding Account pursuant to Section
8.02(b) of the Indenture and (B) withdrawn from the Funding Account and
deposited to the Collection Account pursuant to Section 8.02(c)(i) of the
Indenture. The determination by the Master Servicer of such amounts shall,
in the absence of obvious error, be presumptively deemed to be correct for
all purposes hereunder and the Owner Trustee and Indenture Trustee shall be
protected in relying upon the same without any independent check or
verification. In addition, upon the Issuer's written request, the Master
Servicer shall promptly furnish information reasonably requested by the
Issuer that is reasonably available to the Master Servicer to enable the
Issuer to perform its federal and state income tax reporting obligations.
ARTICLE V
Payment Account
Section 5.01. Payment Account. The Indenture Trustee shall establish
---------------
and maintain a separate trust account (the "Payment Account") titled
"_________________________, as Indenture Trustee, for the benefit of the
Noteholders, the Certificateholders (and the Credit Enhancer) pursuant to the
Indenture, dated as of _____________, 199_, between ______________________
Loan Trust 199_-_ and _________________________". The Payment Account shall
be an Eligible Account. On each Payment Date, amounts on deposit in the
Payment Account will be distributed by the Indenture Trustee in accordance
with Section 3.05 of the Indenture. The Indenture Trustee shall, upon
written request from the Master Servicer, invest or cause the institution
maintaining the Payment Account to invest the funds in the Payment Account
in Eligible Investments designated in the name of the Indenture Trustee,
which shall mature not later than the Business Day next preceding the Payment
Date next following the date of such investment (except that (i) any
investment in the institution with which the Payment Account is maintained
may mature on such Payment Date and (ii) any other investment may mature on
such Payment Date if the Indenture Trustee shall advance funds on such
Payment Date to the Payment Account in the amount payable on such investment
on such Payment Date, pending receipt thereof to the extent necessary to make
distributions on the Securities) and shall not be sold or disposed of prior
to maturity. All income and gain realized from any such investment shall be
for the benefit of the Master Servicer and shall be subject to its withdrawal
or order from time to time. The amount of any losses incurred in respect of
any such investments shall be deposited in the Payment Account by the Master
Servicer out of its own funds immediately as realized.
ARTICLE VI
The Master Servicer
Section 6.01. Liability of the Master Servicer. The Master Servicer
--------------------------------
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Master Servicer herein.
Section 6.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Master Servicer. Any corporation into which the Master
- -----------------------------------
Servicer may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which the Master Servicer shall be a party, or any corporation succeeding to
the business of the Master Servicer, shall be the successor of the Master
Servicer, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; provided that the Person
--------
accepting such assignment or delegation shall be a Person which is qualified
to service mortgage loans on behalf of FNMA or FHLMC, is reasonably
satisfactory to the Indenture Trustee, the Issuer (and the Credit Enhancer),
is willing to service the Mortgage Loans and executes and delivers to the
Indenture Trustee and the Issuer an agreement, in form and substance reason-
ably satisfactory to (the Credit Enhancer), the Indenture Trustee and the
Issuer, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Master Servicer under this Servicing Agreement; provided
--------
further that each Rating Agency's rating of the Securities in effect
immediately prior to such assignment and delegation will not be qualified,
reduced, or withdrawn as a result of such assignment and delegation (as
evidenced by a letter to such effect from each Rating Agency) or considered
to be below investment grade (without taking into account the Credit
Enhancement Instrument).
Section 6.03. Limitation on Liability of the Master Servicer and
--------------------------------------------------
Others. Neither the Master Servicer nor any of the directors or officers or
- ------
employees or agents of the Master Servicer shall be under any liability to
the Issuer, the Owner Trustee, the Indenture Trustee or the Holders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Servicing Agreement, provided, however, that this provision
-------- -------
shall not protect the Master Servicer or any such Person against any
liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder or by reason of its reckless disregard of its obligations and
duties hereunder. The Master Servicer and any director or officer or
employee or agent of the Master Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any
----- -----
Person respecting any matters arising hereunder. The Master Servicer and any
director or officer or employee or agent of the Master Servicer shall be
indemnified by the Issuer and held harmless against any loss, liability or
expense incurred in connection with any legal action relating to this Servi-
cing Agreement or the Securities, including any amount paid to the Owner
Trustee or the Indenture Trustee pursuant to Section 6.06(b), other than any
loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Servicing Agreement) and any loss, liability
or expense incurred by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. The Master
Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the
Mortgage Loans in accordance with this Servicing Agreement, and which in its
opinion may involve it in any expense or liability; provided, however, that
-------- -------
the Master Servicer may in its sole discretion undertake any such action
which it may deem necessary or desirable in respect of this Servicing
Agreement, and the rights and duties of the parties hereto and the interests
of the Holders hereunder. In such event, the reasonable legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Issuer and the Master Servicer shall be entitled
to be reimbursed therefor. The Master Servicer's right to indemnity or
reimbursement pursuant to this Section 6.03 shall survive any resignation or
termination of the Master Servicer pursuant to Section 6.04 or 7.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to
such resignation or termination).
Section 6.04. Master Servicer Not to Resign. Subject to the provisions
-----------------------------
of Section 6.02, the Master Servicer shall not resign from the obligations
and duties hereby imposed on it except (i) upon determination that the
performance of its obligations or duties hereunder are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it or its subsidiaries or Affiliates,
the other activities of the Master Servicer so causing such a conflict being
of a type and nature carried on by the Master Servicer or its subsidiaries
or Affiliates at the date of this Servicing Agreement or (ii) upon
satisfaction of the following conditions: (a) the Master Servicer has
proposed a successor servicer to the Administrator and the Indenture Trustee
in writing and such proposed successor servicer is reasonably acceptable to
the Administrator, the Indenture Trustee (and the Credit Enhancer); (b) each
Rating Agency shall have delivered a letter to the Issuer, (the Credit
Enhancer) and the Indenture Trustee prior to the appointment of the successor
servicer stating that the proposed appointment of such successor servicer as
Master Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of the Securities; (and (c) such proposed successor
servicer is reasonably acceptable to the Credit Enhancer, as evidenced by a
letter to the Issuer and the Indenture Trustee); provided, however, that no
--------- -------
such resignation by the Master Servicer shall become effective until such
successor servicer or, in the case of (i) above, the Indenture Trustee shall
have assumed the Master Servicer's responsibilities and obligations hereunder
or the Indenture Trustee shall have designated a successor servicer in
accordance with Section 7.02. Any such resignation shall not relieve the
Master Servicer of responsibility for any of the obligations specified in
Sections 7.01 and 7.02 as obligations that survive the resignation or
termination of the Master Servicer. The Master Servicer shall have no claim
(whether by subrogation or otherwise) or other action against any Holder (or
the Credit Enhancer) for any amounts paid by the Master Servicer pursuant to
any provision of this Servicing Agreement. Any such determination permitting
the resignation of the Master Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Indenture Trustee (and the Credit
Enhancer).
Section 6.05. Delegation of Duties. In the ordinary course of
--------------------
business, the Master Servicer at any time may delegate any of its duties
hereunder to any Person, including any of its Affiliates, who agrees to
conduct such duties in accordance with standards comparable to those with
which the Master Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the Master Servicer of its liabilities and responsibilities
with respect to such duties and shall not constitute a resignation within the
meaning of Section 6.04.
Section 6.06. Master Servicer to Pay Indenture Trustee's and Owner
----------------------------------------------------
Trustee's Fees and Expenses; Indemnification. (a) The Master Servicer
- --------------------------------------------
covenants and agrees to pay to the Owner Trustee, the Indenture Trustee and
any co-trustee of either the Owner Trustee or Indenture Trustee from time to
time, and the Owner Trustee, the Indenture Trustee and any such co-trustee
shall be entitled to, reasonable compensation (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 created under the Trust Agreement and the Indenture and in the
exercise and performance of any of the powers and duties under the Trust
Agreement or the Indenture, as the case may be, of the Owner Trustee, the
Indenture Trustee and any co-trustee, and the Master Servicer will pay or
reimburse the Indenture Trustee and any co-trustee upon request for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee or any co-trustee in accordance with any of the provisions
of this Servicing Agreement except any such expense, disbursement or advance
as may arise from its negligence or bad faith.
(b) The Master Servicer agrees to indemnify the Owner Trustee and the
Indenture Trustee for, and to hold the Owner Trustee and the Indenture
Trustee, as the case may be, harmless against, any loss, liability or expense
incurred without negligence or willful misconduct on its part, arising out
of, or in connection with, the acceptance and administration of the Issuer
and the assets thereof, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against any claim in
connection with the exercise or performance of any of its powers or duties
under any Basic Document, provided that:
(i) with respect to any such claim, the Indenture Trustee or Owner
Trustee, as the case may be, shall have given the Master Servicer written
notice thereof promptly after the Indenture Trustee or Owner Trustee, as the
case may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the Indenture
Trustee or Owner Trustee, as the case may be, shall cooperate and consult
fully with the Master Servicer in preparing such defense; and
(iii) notwithstanding anything in this Servicing Agreement to the
contrary, the Master Servicer shall not be liable for settlement of any claim
by the Indenture Trustee or the Owner Trustee, as the case may be, entered
into without the prior consent of the Master Servicer, which consent shall
not be unreasonably withheld.
No termination of this Servicing Agreement shall affect the obligations
created by this Section 6.06 of the Master Servicer to indemnify the
Indenture Trustee and the Owner Trustee under the conditions and to the
extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the
Master Servicer in this Section 6.06(b) shall not pertain to any loss,
liability or expense of the Indenture Trustee or the Owner Trustee, including
the costs and expenses of defending itself against any claim, incurred in
connection with any actions taken by the Indenture Trustee or the Owner
Trustee at the direction of the Noteholders or Certificateholders, as the
case may be, pursuant to the terms of this Servicing Agreement.
ARTICLE VII
Default
Section 7.01. Events of Default. If any one of the following events
-----------------
("Events of Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in the
Collection Account, the Funding Account or Payment Account any deposit
required to be made under the terms of this Servicing Agreement which
continues unremedied for a period of _______ Business Days after the date
upon which written notice of such failure shall have been given to the Master
Servicer by the Issuer or the Indenture Trustee (or to the Master Servicer,
the Issuer and the Indenture Trustee by the Credit Enhancer); or
(ii) Failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Master Servicer set forth in the Securities or in this Servicing Agreement,
which failure, in each case, materially and adversely affects the interests
of Holders (or the Credit Enhancer) and which continues unremedied for a
period of __ days after the date on which written notice of such failure,
requiring the same to be remedied, and stating that such notice is a "Notice
of Default" hereunder, shall have been given to the Master Servicer by the
Issuer (or the Indenture Trustee or to the Master Servicer, the Issuer and
the Indenture Trustee by the Credit Enhancer); or
(iii) The entry against the Master Servicer of a decree or order by
a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or for
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days;
or
(iv) The Master Servicer shall voluntarily go into liquidation,
consent to the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Master Servicer or
of or relating to all or substantially all of its property, or a decree or
order of a court, agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or
similar person in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or liquidation
of its affairs, shall have been entered against the Master Servicer and such
decree or order shall have remained in force undischarged, unbonded or
unstayed for a period of 60 days; or the Master Servicer shall admit in
writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations; or
((v) Any failure by the Seller (so long as the Seller is the
Master Servicer) or the Master Servicer, as the case may be, to pay when due
any amount payable by it under the terms of the Insurance Agreement which
continues unremedied for a period of three (3) Business Days after the date
upon which written notice of such failure shall have been given to the Seller
(so long as the Seller is the Master Servicer) or the Master Servicer, as the
case may be; or)
((vi) Failure on the part of the Master Servicer to perform under
the Servicing Agreement, in the reasonable opinion of the Credit Enhancer,
in conformity with the Servicing Standards, and such failure has (in the
reasonable opinion of the Credit Enhancer) a materially adverse effect on the
Mortgage Loans or the interest of the Credit Enhancer and either (a) the
Credit Enhancer, after consultation with the Master Servicer, reasonably
determines that such substandard performance is not capable of cure within
30 days of notice thereof from the Credit Enhancer to the Master Servicer or
(b) the Credit Enhancer, after consultation with the Master Servicer,
determines that such substandard performance is capable of cure within 30
days of notice of such substandard performance from the Credit Enhancer to
the Master Servicer, and the failure on the part of the Master Servicer to
implement such cure to the reasonable satisfaction of the Credit Enhancer
within such 30 day period; or)
((vii) Failure on the part of the Seller or the Master Servicer to
duly perform in any material respect any covenant or agreement set forth in
the Insurance Agreement, which failure in each case materially and adversely
affects the interests of the Credit Enhancer and continues unremedied for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Depositor,
the Indenture Trustee, the Seller or the Master Servicer, as the case may be,
by the Credit Enhancer; or)
(viii) The Master Servicer shall dissolve or liquidate, in whole
or in part, in any material respect; or
((ix) The Master Servicer shall merge, consolidate, or combine
with another entity and the surviving entity thereof or corporate successor
is not rated at least investment grade by the Rating Agencies.)
then, and in every such case, other than that set forth in (vi) hereof, so
long as an Event of Default shall not have been remedied by the Master
Servicer, either the Indenture Trustee (with the consent of the Credit
Enhancer, or the Credit Enhancer,) by notice then given in writing to the
Master Servicer ((and to the Indenture Trustee if given by the Credit
Enhancer) and in the case of the event set forth in (vi) hereof, the Credit
Enhancer with the consent of Holders at least 51% of the aggregate Principal
Balance of the Notes and the Certificates) may terminate all of the rights
and obligations of the Master Servicer as servicer under this Servicing
Agreement other than its right to receive servicing compensation and expenses
for servicing the Mortgage Loans hereunder during any period prior to the
date of such termination and the Indenture Trustee (with the consent of the
Credit Enhancer, or the Credit Enhancer) may exercise any and all other
remedies available at law or equity. Any such notice to the Master Servicer
shall also be given to each Rating Agency, (the Credit Enhancer) and the
Indenture Trustee. On or after the receipt by the Master Servicer of such
written notice, all authority and power of the Master Servicer under this
Servicing Agreement, whether with respect to the Securities or the Mortgage
Loans or otherwise, shall pass to and be vested in (the Successor Master
Servicer)(the Indenture Trustee) pursuant to and under this Section 7.01;
and, without limitation, the Indenture Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement of each Mortgage Loan and related documents, or
otherwise. The Master Servicer agrees to cooperate with (the Successor
Master Servicer)(the Indenture Trustee) in effecting the termination of the
responsibilities and rights of the Master Servicer hereunder, including,
without limitation, the transfer to (the Successor Master Servicer) (the
Indenture Trustee) for the administration by it of all cash amounts relating
to the Mortgage Loans that shall at the time be held by the Master Servicer
and to be deposited by it in the Collection Account, or that have been
deposited by the Master Servicer in the Collection Account or thereafter
received by the Master Servicer with respect to the Mortgage Loans. All
reasonable costs and expenses (including, but not limited to, attorneys'
fees) incurred in connection with amending this Servicing Agreement to
reflect such succession as Master Servicer pursuant to this Section 7.01
shall be paid by the predecessor Master Servicer (or if the predecessor
Master Servicer is the Indenture Trustee, the initial Master Servicer) upon
presentation of reasonable documentation of such costs and expenses.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a payment on a Mortgage Loan which was due prior to the notice
terminating the Master Servicer's rights and obligations hereunder and
received after such notice, that portion to which the Master Servicer would
have been entitled pursuant to Sections 3.03 and 3.08 as well as its Master
Servicing Fee in respect thereof, and any other amounts payable to the Master
Servicer hereunder the entitlement to which arose prior to the termination
of its activities hereunder.
(Notwithstanding the foregoing, a delay in or failure of performance
under Section 7.01(i) or under Section 7.01(ii) after the applicable grace
periods specified in such Sections, shall not constitute an Event of Default
if such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an
act of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence
shall not relieve the Master Servicer from using its best reasonable efforts
to perform its respective obligations in a timely manner in accordance with
the terms of this Servicing Agreement and the Master Servicer shall provide
the Indenture Trustee(, the Credit Enhancer) and the Holders with notice of
such failure or delay by it, together with a description of its efforts to
so perform its obligations. The Master Servicer shall immediately notify the
Indenture Trustee(, the Credit Enhancer) and the Owner Trustee in writing of
any Events of Default.)
Section 7.02. Indenture Trustee to Act; Appointment of Successor. (a)
--------------------------------------------------
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.01 or sends a notice pursuant to Section 6.04, the
Indenture Trustee shall be the successor in all respects to the Master
Servicer in its capacity as servicer under this Servicing Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Master Servicer by the terms and provisions hereof. Nothing in this
Servicing Agreement or in the Trust Agreement shall be construed to permit
or require the Indenture Trustee to (i) succeed to the responsibilities,
duties and liabilities of the initial Master Servicer in its capacity as
Seller under the Mortgage Loan Purchase Agreement, (ii) be responsible or
accountable for any act or omission of the Master Servicer prior to the issu-
ance of a notice of termination hereunder, (iii) require or obligate the
Indenture Trustee, in its capacity as successor Master Servicer, to purchase,
repurchase or substitute any Mortgage Loan, ((iv) fund any Additional
Balances with respect to any Mortgage Loan, (v) fund any losses on any
Eligible Investment directed by any other Master Servicer,) or (vi) be
responsible for the representations and warranties of the Master Servicer.
As compensation therefor, the Indenture Trustee shall be entitled to such
compensation as the Master Servicer would have been entitled to hereunder if
no such notice of termination had been given. Notwithstanding the above, (i)
if the Indenture Trustee is unwilling to act as successor Master Servicer,
or (ii) if the Indenture Trustee is legally unable so to act, the Indenture
Trustee may (in the situation described in clause (i)) or shall (in the
situation described in clause (ii)) appoint or petition a court of competent
jurisdiction to appoint any established housing and home finance institution,
bank or other mortgage loan or home equity loan servicer having a net worth
of not less than $25,000,000 as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder; provided that (any
--------
such successor Master Servicer shall be acceptable to the Credit Enhancer,
as evidenced by the Credit Enhancer's prior written consent which consent
shall not be unreasonably withheld and provided further that) the appointment
of any such successor Master Servicer will not result in the qualification,
reduction or withdrawal of the ratings assigned to the Securities by the
Rating Agencies. Pending appointment of a successor to the Master Servicer
hereunder, unless the Indenture Trustee is prohibited by law from so acting,
the Indenture Trustee shall act in such capacity as hereinabove provided.
In connection with such appointment and assumption, the successor shall be
entitled to receive compensation out of payments on Mortgage Loans in an
amount equal to the compensation which the Master Servicer would otherwise
have received pursuant to Section 3.08 (or such lesser compensation as the
Indenture Trustee and such successor shall agree). The appointment of a
successor Master Servicer shall not affect any liability of the predecessor
Master Servicer which may have arisen under this Servicing Agreement prior
to its termination as Master Servicer (including, without limitation, the
obligation to purchase Mortgage Loans pursuant to Section 3.01, to pay any
deductible under an insurance policy pursuant to Section 3.04 or to indemnify
the Indenture Trustee pursuant to Section 6.06), nor shall any successor
Master Servicer be liable for any acts or omissions of the predecessor Master
Servicer or for any breach by such Master Servicer of any of its
representations or warranties contained herein or in any related document or
agreement. The Indenture Trustee and such successor shall take such action,
consistent with this Servicing Agreement, as shall be necessary to effectuate
any such succession.
(b) Any successor, including the Indenture Trustee, to the Master
Servicer as servicer shall during the term of its service as servicer (i)
continue to service and administer the Mortgage Loans for the benefit of the
Holders, (ii) maintain in force a policy or policies of insurance covering
errors and omissions in the performance of its obligations as Master Servicer
hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.12.
(c) Any successor Master Servicer, including the Indenture Trustee,
shall not be deemed in default or to have breached its duties hereunder if
the predecessor Master Servicer shall fail to deliver any required deposit
to the Collection Account or otherwise cooperate with any required servicing
transfer or succession hereunder.
Section 7.03. Notification to Holders. Upon any termination or
-----------------------
appointment of a successor to the Master Servicer pursuant to this Article
VII or Section 6.04, the Indenture Trustee shall give prompt written notice
thereof to the Holders, (the Credit Enhancer,) the Issuer and each Rating
Agency.
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. Amendment. This Servicing Agreement may be amended from
---------
time to time by the parties hereto, provided that any amendment be
accompanied by a letter from the Rating Agencies that the amendment will not
result in the downgrading or withdrawal of the rating then assigned to the
Securities (and the consent of the Credit Enhancer) and the Indenture
Trustee.
Section 8.02. Governing Law. THIS SERVICING AGREEMENT SHALL BE CON
-------------
STRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
Section 8.03. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt
requested, to (a) in the case of the Master Servicer,
____________________________, Attention: Managing Director - Mortgage
Finance, ((b) in the case of the Credit Enhancer, _________________________,
Attention: Managing Director, Consumer Structured Finance, (c) in the case
of Moody's, Home Mortgage Loan Monitoring Group, 4th Floor, 99 Church Street,
New York, New York 10007, (d) in the case of Standard & Poor's, 26 Broadway,
15th Floor, New York, New York 10004, Attention: Residential Mortgage
Surveillance Group, (e) in the case of the Owner Trustee, the Corporate Trust
Office, and (f) in the case of the Issuer, to ______________________ Loan
Trust 199_-_, c/o ______________________, Attention: Corporate Trust
Department, with a copy to the Administrator at ________________________,
Attention: Managing Director - Mortgage Finance or, as to each party, at such
other address as shall be designated by such party in a written notice to
each other party. (Any notice required or permitted to be mailed to a
Holder shall be given by first class mail, postage prepaid, at the address
of such Holder as shown in the Register. Any notice so mailed within the
time prescribed in this Servicing Agreement shall be conclusively presumed
to have been duly given, whether or not the Holder receives such notice. Any
notice or other document required to be delivered or mailed by the Indenture
Trustee to any Rating Agency shall be given on a reasonable efforts basis and
only as a matter of courtesy and accommodation and the Indenture Trustee
shall have no liability for failure to delivery such notice or document to
any Rating Agency.)
Section 8.04. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Servicing Agreement shall
be for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no
way affect the validity or enforceability of the other provisions of this
Servicing Agreement or of the Securities or the rights of the Holders
thereof.
Section 8.05. Third-Party Beneficiaries. This Servicing Agreement will
-------------------------
inure to the benefit of and be binding upon the parties hereto, the Holders,
(the Credit Enhancer,) the Owner Trustee and their respective successors and
permitted assigns. Except as otherwise provided in this Servicing Agreement,
no other Person will have any right or obligation hereunder. In the event
the Indenture is terminated and the Mortgage Loans are held by the Issuer,
the Owner Trustee agrees, on behalf of the Issuer, to exercise all the rights
and fulfill the obligations of the Indenture Trustee hereunder with the same
effect as if the Owner Trustee were named wherever the term "Indenture
Trustee" appears herein other than the obligations of the Indenture Trustee
to act as successor Master Servicer pursuant to Section 7.02.
Section 8.06. Counterparts. This instrument may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 8.07. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience
only and shall not affect the construction hereof.
Section 8.08. Termination Upon Purchase by the Master Servicer or
---------------------------------------------------
Liquidation of All Mortgage Loans. The respective obligations and
- ----------------------------------
responsibilities of the Master Servicer, the Issuer and the Indenture Trustee
created hereby shall terminate upon the last action required to be taken by
the Issuer pursuant to the Trust Agreement and by the Indenture Trustee
pursuant to the Indenture following the earlier of:
(i) the date on or before which the Indenture or Trust Agreement
is terminated, or
(ii) the purchase by the Master Servicer from the Issuer of all
Mortgage Loans and all property acquired in respect of any Mortgage Loan at
a price equal to the greater of (a) 100% of the unpaid Asset Balance of each
Mortgage Loan, plus accrued and unpaid interest thereon at the Weighted
Average Net Loan Rate up to the day preceding the Payment Date on which such
amounts are to be distributed to Securityholders, (plus any amounts due and
owing to the Credit Enhancer under the Insurance Agreement) and (b) the fair
market value of the Mortgage Loans as determined by two bids from competitive
participants in the residential loan market.
The right of the Master Servicer to purchase the assets of the Issuer
pursuant to clause (ii) above is conditioned upon the Pool Balance as of the
Final Scheduled Payment Date being less than ten percent of the aggregate of
the Cut-Off Date Asset Balances of the Mortgage Loans. If such right is
exercised by the Master Servicer, the Master Servicer shall deposit the
amount calculated pursuant to clause (ii) above with the Indenture Trustee
pursuant to Section 4.10 of the Indenture and, upon the receipt of such
deposit, the Indenture Trustee or relevant Custodian shall release to the
Master Servicer, the files pertaining to the Mortgage Loans being purchased.
The Master Servicer, at its expense, shall prepare and deliver to the
Indenture Trustee and the Owner Trustee for execution, at the time the
Mortgage Loans are to be released to the Master Servicer, appropriate
documents assigning each such Mortgage Loan from the Indenture Trustee to the
Master Servicer or the appropriate party.
Section 8.09. Certain Matters Affecting the Indenture Trustee. For all
-----------------------------------------------
purposes of this Servicing Agreement, in the performance of any of its duties
or in the exercise of any of its powers hereunder, the Indenture Trustee
shall be subject to and entitled to the benefits of Article VI of the
Indenture.
Section 8.10. Limitation of Liability of Owner Trustee. Notwith
----------------------------------------
standing anything contained herein to the contrary, this Agreement has been
executed by ______________________ not in its individual capacity but solely
in its capacity as Owner Trustee of the Issuer and in no event shall
______________________ in its individual capacity, or except as expressly
provided in the Trust Agreement, as Owner Trustee of the Issuer, have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Owner Trustee or the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer; provided,
--------
that this provision shall not diminish the Owner Trustee's obligations to
take actions that it is expressly required to perform hereunder, provided,
further that the Owner Trustee will remain liable for its own willful
misconduct, negligence or bad faith. For all purposes of this Servicing
Agreement, in the performance of its duties or obligations hereunder or in
the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Article VII of the Trust Agreement.
Section 8.11. Authority of the Administrator. Each of the parties to
------------------------------
this Agreement acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the
Issuer or the Owner Trustee, copies of all notices, requests, demands and
other documents to be delivered to the Issuer or the Owner Trustee pursuant
to the terms hereof shall be delivered to the Administrator. Unless
otherwise instructed by the Issuer or the Owner Trustee, all notices,
requests, demands and other documents to be executed or delivered, and any
action to be taken, by the Issuer or the Owner Trustee pursuant to the terms
hereof may be executed, delivered and/or taken by the Administrator pursuant
to the Administration Agreement.
IN WITNESS WHEREOF, the Master Servicer, the Issuer and the Indenture
Trustee have caused this Servicing Agreement to be duly executed by their
respective officers all as of the day and year first above written.
______________________,
as Master Servicer
By
---------------------------------
Title:
______________________ LOAN TRUST 199_-_,
as Issuer
By: ______________________,
not in its individual capacity
but solely as Owner Trustee
By
------------------------------------------
Title:
_________________________,
as Indenture Trustee
By_________________________________
Title:
EXHIBIT A
MORTGAGE LOAN SCHEDULE
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with the administration of the pool of Mortgage Loans held by
you for the referenced pool, we request the release of the Mortgage File
described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan
Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be
so deposited as provided in the Servicing Agreement."
_____________________________________
______________________
Authorized Signature
******************************************************************
TO CUSTODIAN/INDENTURE TRUSTEE: Please acknowledge this request, and check
off documents being enclosed with a copy of this form. You should retain
this form for your files in accordance with the terms of the Servicing
Agreement.
Enclosed Documents: ( ) Promissory Note
( ) Primary Insurance Policy
( ) Mortgage or Deed of Trust
( ) Assignment(s) of Mortgage or
Deed of Trust
( ) Title Insurance Policy
( ) Other: ___________________________
- --------------------------------
Name
- --------------------------------
Title
- --------------------------------
Date
EXHIBIT C
FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF MORTGAGE LOAN
__________________, 19____
______________________
___________________
Attention: ______________________ Loan Trust 199_-_
Re: ______________________ Loan Trust 199_-_
----------------------------------------
Ladies and Gentlemen:
This letter is delivered to you in connection with the assignment by
_________________ (the "Indenture Trustee") to ________________ (the
"Lender") of _______________ (the "Mortgage Loan") pursuant to Section
3.05(c) of the Servicing Agreement (the "Servicing Agreement"), dated as of
_____________, 199_ between ______________________, as depositor (the
"Depositor"), ______________________ Loan Trust 199_-_, as issuer, and the
Indenture Trustee. All terms used herein and not otherwise defined shall
have the meanings set forth in the Servicing Agreement. The Lender hereby
certifies, represents and warrants to, and covenants with, the Master
Servicer, ___________________ and the Indenture Trustee that:
(i) the Mortgage Loan is secured by a Mortgaged Property located
in a jurisdiction in which an assignment in lieu of satisfaction is required
to preserve lien priority, minimize or avoid mortgage recording taxes or
otherwise comply with, or facilitate a refinancing under, the laws of such
jurisdiction;
(ii) the substance of the assignment is, and is intended to be, a
refinancing of such Mortgage Loan and the form of the transaction is solely
to comply with, or facilitate the transaction under, such local laws;
(iii) the Mortgage Loan following the proposed assignment will be
modified to have a rate of interest no more than 0.25 percent below or above
the rate of interest on such Mortgage Loan prior to such proposed assignment;
and
(iv) such assignment is at the request of the borrower under the
related Mortgage Loan.
Very truly yours,
-------------------------
(Lender)
By:
----------------------
Name:
--------------------
Title:
-------------------
Exhibit 99.2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(____________________)
Seller of the Mortgage Loans,
and
MERRILL LYNCH MORTGAGE INVESTORS, INC.
Purchaser of the Mortgage Loans
-----------------------------------
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of ___________, 199_
-----------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MORTGAGE LOAN PURCHASE AGREEMENT
Mortgage Loan Purchase Agreement (the "Agreement") dated as of
__________, 199_ between (__________________) (the "Seller") and Merrill
Lynch Mortgage Investors, Inc. (the "Purchaser").
BACKGROUND
----------
The following statements are the mutual representations of the parties
with respect to certain factual matters forming the basis for this Agreement
and are an integral part of this Agreement.
A. MORTGAGE LOANS. The Seller possesses (i) the notes or other
--------------
evidence of indebtedness (the "Mortgage Notes") (under the home equity lines
of credit) so indicated on Schedule I hereto referred to below (the "Mortgage
Loans"), (ii) the mortgages (the "Mortgages") on the properties (the
"Mortgaged Properties") securing such Mortgage Loans, including rights to (a)
any property acquired by foreclosure or deed in lieu of foreclosure or other-
wise, and (b) the proceeds of any insurance policies covering the Mortgage
Loans or the Mortgaged Properties or the obligors on the Mortgage Loans.
B. SALE OF MORTGAGE LOANS. The parties desire that the Seller sell
----------------------
the Mortgage Loans (((inclusive)(exclusive) of the obligation to fund future
advances under each Loan Agreement after the Closing Date)) to the Purchaser
pursuant to the terms of this Agreement. Pursuant to the terms of a
(__________) Agreement dated as of ________, 199_ (the "(_________)
Agreement") among the Purchaser, as depositor, (________), as servicer, and
(__________), as trustee (the "Trustee"), the Purchaser will convey the
Mortgage Loans ((inclusive)(exclusive) of the obligation to fund future
advances under each Loan Agreement after the Closing Date) to
_____________________ (the "Trust").
C. DEFINITIONS. Capitalized terms not specifically defined in this
-----------
Agreement which are defined in the (_____________ _____) Agreement shall
have the same meaning when used herein as when used in the
(____________________).
STATEMENT OF AGREEMENT
----------------------
The parties, each in consideration of the promises of the other and
for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, hereby agree as follows:
SECTION 1. SALE OF MORTGAGE LOANS. (a) The Seller, concurrently
----------------------
with the execution and delivery of this Agreement, does hereby sell, assign,
set over, and otherwise convey to the Purchaser, without recourse, all of its
right, title and interest in, to and under the following, whether now
existing or hereafter acquired and wherever located: (i) the Mortgage
Loans(, including the Asset Balance (including all Additional Balances)) and
all collections of interest and principal in respect thereof received on or
after the Cut-off Date (except collections in respect of interest for the
period from (_____________) to (_____________)); (ii) property which secured
a Mortgage Loan and which has been acquired by foreclosure or deed in lieu of
foreclosure; (iii) the interest of the Seller in any insurance policies in
respect of the Mortgage Loans; (iv) the Seller's rights under the (_________
_________); and (v) all proceeds of the foregoing(; provided, however, that
the Purchaser does not assume the obligation under each Loan Agreement
(including, without limitation, such obligation under the Loan Agreement for
each Mortgage Loan after the Closing Date) to fund future advances to the
Mortgagor thereunder, and the Purchaser shall not be obligated to fund any
such future advances). (Future advances made to a Mortgagor under a Loan
Agreement (each an "Additional Balance") shall be part of the related Asset
Balance. The Seller shall give the Purchaser monthly notice of such advances
on or prior to each Determination Date.)
In connection with such conveyance, the Seller further agrees, at its
own expense, on or prior to the date of this Agreement (a) to indicate in its
books and records that the Mortgage Loans have been sold to the Purchaser
pursuant to this Agreement and (b) to deliver to the Purchaser a computer
file or microfiche list containing a true and complete list of all such
Mortgage Loans specifying for each such Mortgage Loan, as of the Cut-off
Date, (i) its account number, (ii) its delinquency status, and (iii) the
aggregate amount outstanding under the Mortgage Loan as of the Cut-off Date.
Such file, which forms a part of Exhibit __ to the (_________) Agreement,
shall also be marked as Schedule I to this Agreement and is hereby
incorporated into and made a part of this Agreement.
In connection with such sale and assignment by the Seller to the
Purchaser, the Seller on or prior to the Closing Date shall deliver to the
Purchaser the following documents or instruments with respect to each
Mortgage Loan so transferred and assigned:
(i) The original Mortgage Note endorsed without recourse to
(____________________);
(ii) the original recorded Assignment of Mortgage from
(____________________) in recordable form(, which, in the
case of any Mortgage Loan secured by Mortgaged Property located in the
State of New York, shall state that such Assignment of Mortgage is not
subject to the requirements of Section 275 of the Real Property Law
because it is an assignment within the secondary mortgage market);
(iii) the original recorded Mortgage with an evidence of a recording
indicated thereon or, if, in connection with any Mortgage Loan, the
Seller cannot deliver the original Mortgage with evidence of recording
thereon on or prior to the Closing Date because such original Mortgage
has been lost, the Seller shall deliver or cause to be delivered to the
Purchaser a true and correct copy of such Mortgage, together with a
certificate by the appropriate county recording office where such
Mortgage is recorded;
(iv) the title search, and either a full appraisal or a drive-by
inspection, obtained by the originator at the time the Mortgagor applied
for the Mortgage Loan;
(v) with respect to each Mortgage Loan listed on Schedule II, a
title policy;
(vi) the original of any guaranty executed in connection with the
Mortgage Note;
(vii) the original of each assumption, modification, consolidation
or substitution agreement, if any, relating to the Mortgage Loan; and
(viii) any security agreement, chattel mortgage or equivalent
instrument executed in connection with the Mortgage.
The Seller further hereby confirms to the Purchaser that it has caused
the portions of the Electronic Ledger relating to the Mortgage Loans
maintained by the Servicer to be clearly and unambiguously marked to indicate
that the Mortgage Loans have been sold to the Purchaser.
The Purchaser hereby acknowledges its acceptance of all right, title and
interest to the property, now existing and hereafter created, conveyed to it
pursuant to this Section 1.
The parties hereto intend that the transaction set forth herein be a
sale by the Seller to the Purchaser of all the Seller's right, title and
interest in and to the Mortgage Loans and other property described above. In
the event the transaction set forth herein is deemed not to be a sale, the
Seller hereby grants to the Purchaser a security interest in all of the
Seller's right, title and interest in, to and under the Mortgage
Loans whether now existing or hereafter created, all monies due or to become
due on the Mortgage Loans and all proceeds of any thereof; and this Agreement
shall constitute a security agreement under applicable law.
(In connection with such sale, assignment, and conveyance, the Seller
has filed, in the appropriate office in the State of (______), a UCC-1
financing statement executed by the Seller as seller, naming the Purchaser as
purchaser and listing the Mortgage Loans and the other property described
above as collateral. In connection with such filing, the Seller agrees that
it shall cause to be filed all necessary continuation statements thereof and
to take or cause to be taken such actions and execute such documents as are
necessary to perfect and protect the Purchaser's interest in the Mortgage
Loans and the other property described above.)
(b) (No assignment from the Seller of any Mortgage Loan shall be
required to be recorded in any public real property or other records so long
as no Assignment Event shall have occurred. Upon the occurrence of an
Assignment Event, at the request of the Purchaser, the Seller shall as
promptly as practicable, (a) endorse, or cause to be endorsed, each Mortgage
Note without recourse to the order of the Trustee, on behalf of the
Certificateholders, and (b) prepare and execute, or cause to be prepared and
executed, an assignment to the Trustee in recordable form for each Mortgage
Loan sold by the Seller hereunder and deliver such endorsed Mortgage Notes
and assignments to the Purchaser.)
SECTION 2. PAYMENT OF PURCHASE PRICE FOR CUT-OFF DATE ASSET BALANCES
---------------------------------------------------------
(AND ADDITIONAL BALANCES).
- -------------------------
(a) (The purchase price ("Purchase Price") for each Mortgage Loan, and
for each Additional Balance, shall be the Cut-off Date Asset Balance thereof
((or the principal amount of the draw under the Credit Line Agreement, in the
case of an Additional Balance)) on the due date for payment for such Mortgage
Loan, in the case of a Mortgage Loan, (or the date of the creation of the
Additional Balance, in the case of an Additional Balance). In consideration
of the sale of the Mortgage Loans ((including Additional Balances)) from the
Seller to the Purchaser on the Closing Date, the Purchaser agrees to pay to
the Seller on the date of this Agreement, by book-entry transfer or otherwise
on the books and records of the Purchaser and the Seller, an amount equal to
$(_____________). (The remainder of the Purchase Price of the Mortgage Loans
sold to the Purchaser as of the Closing Date shall be contributed as capital
by the Seller to the Purchaser.)
(b) The Purchase Price for Mortgage Loans (and Additional Balances)
shall be paid or provided for on the Closing Date and each subsequent date on
which Additional Balances are drawn on the Credit Line Agreements in either
of the following ways: ((i) by payment in cash of immediately available
funds; or (ii) in the event that the total Purchase Price is not paid in full
in cash by the Purchaser on the date of purchase, the Seller shall convey the
amount of such cash shortfall as a capital contribution to the Purchaser.)
The monthly notice delivered by the Seller to the Purchaser pursuant to
Section 1 of this Agreement shall indicate the amount of the Purchase Price
for Additional Balances paid by the Purchaser during the prior month in cash
and the amount of capital contributions by the Seller to the Purchaser.)
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
--------------------------------------------
hereby makes to and for the benefit of the Purchaser each of the following
representations and warranties:
(i) The Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of (______________) and
has the power to own its property and to conduct its business as it is
presently owned and as such business is presently conducted;
(ii) The Seller is neither required to qualify nor to register as a
foreign corporation in any state in order to conduct its business, and
is not required under federal or state law to obtain any licenses or
approvals with respect to such business except such as have been
obtained prior to the Closing Date;
(iii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and all of the
transactions contemplated under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement;
(iv) The Seller is not required to obtain the consent of any other
party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement, except such as have been obtained
or filed, as the case may be, prior to the Closing Date;
(v) The execution, delivery and performance of this Agreement by
the Seller will not violate or conflict with any provision of any
existing law or regulation or any order or decree of any court
applicable to the Seller or any provision of the (Certificate of
Incorporation) (Articles of Incorporation) (Articles of Association)
or By-laws of the Seller, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Seller
is a party or by which the Seller may be bound;
(vi) There are no proceedings or investigations pending or, to the
best knowledge of the Seller, threatened, before any court, regulatory
body, administrative agency, arbitrator or other tribunal or
governmental instrumentality (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that, in the reasonable judgment of the Seller,
would materially and adversely affect the transactions contemplated by
this Agreement or the performance by the Seller of its obligations under
this Agreement, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement, (v) seeking to affect adversely the Federal income tax
attributes of the Trust, or (vi) seeking to impose any tax upon the
Seller as a result of the sale of the Mortgage Loans pursuant to this
Agreement; and
(vii) The Seller is not insolvent and will not be insolvent
following the consummation on the Closing Date of the transactions
contemplated by this Agreement and has not entered into such
transactions, including the transfer by the Seller to the Purchaser of
the property specified in Section 1, in contemplation of insolvency or
with a view to hindering its creditors.
The representations and warranties set forth in this Section 3 shall
survive the sale of the Mortgage Loans to the Purchaser and the transfer of
the Mortgage Loans by the Purchaser to the Trust and the delivery of the
Mortgage Files to the Trustee. Upon discovery by the Seller or the Purchaser
of a breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice thereof to the other
party.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING
------------------------------------------------------
THIS AGREEMENT AND THE MORTGAGE LOANS: REPURCHASE OF CERTAIN MORTGAGE
- ---------------------------------------------------------------------
LOANS. (a) The Seller represents and warrants to the Purchaser as of the
- -----
Transfer Date with respect to each Mortgage Loan sold to the Purchaser
(except as otherwise expressly stated) that, as to each Mortgage Loan or its
related Asset Balance:
(i) this Agreement constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in
accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity);
(ii) this Agreement constitutes a valid sale and assignment to the
Purchaser of all right, title and interest of the Seller in and to the
Mortgage Loans, all monies due or to become due with respect thereto,
and all proceeds of such Mortgage Loans;
(iii) the information set forth with respect to each Mortgage Loan
on Schedule I hereto was true and correct in all material respects as of
the date or dates respecting which such information is furnished;
(iv) immediately prior to the sale of the Mortgage Loans to the
Purchaser, the Seller was the sole owner and holder of the Mortgage
Loans, free and clear of any and all liens, pledges, participations,
charges or security interests of any nature whatsoever, and had full
right and authority, subject to no interest or participation of, or
agreement with, any other party, to sell and assign the same;
(v) each Mortgage evidences a valid, subsisting and enforceable
first or second lien on the Mortgaged Property therein described, which
lien secures the indebtedness outstanding under the Mortgage Loan as of
the Cut-off Date and the indebtedness thereafter incurred as a result of
any Additional Balances created under such Mortgage Loan subsequent to
the Cut-off Date; such Mortgaged Property is free and clear of all
encumbrances and liens having priority over the lien of the related
Mortgage except for (A) if such lien is a second lien, the first lien on
such Mortgaged Property and (B) such other encumbrances and liens to
which like properties are commonly subject and that are commonly
acceptable to home equity mortgage lenders in the jurisdiction where the
related Mortgaged Property is located that do not individually or in the
aggregate materially affect the benefits of the security intended to be
provided by the Mortgage; and the terms of the Mortgage, and any
security agreement, chattel mortgage or equivalent document relating to
such Mortgage, may be enforced by the Purchaser and its successors and
assigns;
(vi) the Seller has not impaired, waived, altered or modified the
related Mortgage or Mortgage Note in any material respect, except by a
written instrument that has been recorded, or satisfied, canceled or
subordinated such Mortgage in whole or in part, released the Mortgaged
Property in whole or in part from the lien of such Mortgage, or executed
any instrument of release, cancellation, modification or satisfaction
with respect to such Mortgage;
(vii) there are no defaults in complying with the terms of any
Mortgage, and all taxes, governmental assessments, insurance premiums,
and water, sewer and municipal charges, if applicable, that previously
became due and owing have been paid; the Seller has 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;
(viii) there is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property; each Mortgaged Property
is undamaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty, so as to have a material adverse
effect on the value of the related Mortgaged Property as security for
the related Mortgage Loan or the use for which the premises were
intended; and no Mortgaged Property is located on a hazardous or toxic
waste site;
(ix) each Mortgaged Property is free and clear of all mechanics'
and materialmen's liens, or other similar liens, that are prior to or
equal to the lien of the related Mortgage; and there are no rights
outstanding that could result in any such prior or equal mechanics' or
materialmen's lien or similar lien being imposed on a Mortgaged
Property;
(x) each Mortgaged Property consists of a fee simple estate in
real property; all of the improvements that are included for the purpose
of determining the Appraised Value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property
(and, if the related Mortgaged Property is a condominium unit, such
improvements lie wholly within the project); and, (based upon a
"drive-by" inspection, with respect to Credit Limits of up to and
including $___, or an appraisal, with respect to Credit Limits of over
$___, made in connection with the application for the related Mortgage
Loan,) no improvements on adjoining property that encroach on the
Mortgaged Property have been revealed by such "drive-by" inspection or
appraisal, unless Federal Housing Administration or Veterans'
Administration regulations, or FNMA or FHLMC guidelines, permit such an
encroachment;
(xi) each Mortgage Loan meets, or is exempt from, applicable state
or federal laws, regulations or other requirements pertaining to usury,
and no Mortgage Loan is usurious;
(xii) no improvement located on or being part of a Mortgaged
Property is in violation of any applicable zoning law or regulation; all
inspections licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with
respect to the use and occupancy of the same including, but not limited
to, certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities;
(xiii) the Seller and every other holder of each Mortgage, if any,
were authorized to transact business in the jurisdiction in which the
related Mortgaged Property is located at all times when such party held
such Mortgage;
(xiv) no payment required to be made on any Mortgage Loan under the
terms of the related Mortgage Note is more than __ days delinquent;
(xv) each Mortgage Note and the related Mortgage are genuine and
each is the valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law); all parties to each
Mortgage Note and the related Mortgage had legal capacity to execute
such Mortgage Note and such Mortgage, and each Mortgage Note and
Mortgage has been duly and properly executed by the Mortgagor;
(xvi) any and all requirements of any federal, state or local law,
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws, applicable to the Mortgage Loan have
been complied with;
(xvii) all improvements securing each Mortgage Loan are insured, by a
generally acceptable insurance company licensed to do business in the
jurisdiction where the Mortgaged Property is located, against loss by
fire and such hazards as are customarily covered under a standard
extended coverage endorsement in the area where the related Mortgaged
Property is located, in an amount that is not less than the
amount required pursuant to the (____________________) Agreement. If
the Mortgaged Property is a condominium unit, it is included under the
coverage afforded by a blanket policy for the project to the extent not
covered by an individual unit insurance policy consistent with the
immediately preceding sentence. (If, upon origination of the Mortgage
Loan, the Mortgaged Property was in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special
flood hazards (and such flood insurance has been made available), a
flood insurance policy meeting the requirements of the guidelines of the
Federal Insurance Administration is in effect with a generally
acceptable insurance carrier, in an amount that is not less than the
amount required pursuant to the (_________ _________) Agreement.) Each
Mortgage obligates the Mortgagor thereunder to maintain all such
insurance at the Mortgagor's cost and expense; and each of the foregoing
insurance policies contains a standard mortgagee clause that names the
originator and its successors and assigns as first or second mortgagee,
as the case may be. Each of the hazard insurance policies is the valid
and binding obligation of the related insurer, is in full force and
effect, and will be in full force and effect and insure to the benefit
of the Purchaser upon the consummation of the transactions contemplated
by this Agreement. The Seller has not engaged in, and has no knowledge
of the Mortgagor's having engaged in, any act or omission that would
impair the coverage of any such policy, the benefits of the endorsement
provided for herein, or the validity and binding effect of either;
(xviii) except to the extent permitted in clause (iv) there is no
default, breach, violation or event of acceleration existing under any
Mortgage or the related Mortgage Note and no event that, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration; and the Seller has not waived any default, breach,
violation or event of acceleration.
(xix) no Mortgage Note is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Mortgage Note, or the
exercise of any right thereunder, render such Mortgage Note
unenforceable, in whole or in part, or subject it to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, setoff, counterclaim or defense
has been asserted with respect thereto;
(xx) each Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement, chattel
mortgage or equivalent document referred to in subparagraph (v)
above;
(xxi) each Mortgage contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of
the security provided thereby, including, without limitation, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale and
(ii) otherwise by judicial foreclosure; and there is no exemption
available to the Mortgagor that would interfere with such right to
foreclose or sell the Mortgaged Property at a trustee's sale;
(xxii) no Mortgagor is a debtor in any state or federal bankruptcy or
insolvency proceeding;
(xxiii) the Mortgaged Properties are located in the States of
(____________________); each Mortgaged Property consists of (a single
parcel of real property with a one-to-four-family residence erected
thereon, a townhouse, an individual condominium unit, or an individual
unit in a planned unit development, provided, however, that any such
condominium unit or planned unit development is either (i) located in a
project that has been approved by, or would otherwise be acceptable to,
FNMA or FHLMC or (ii) the Combined Loan-to-Value Ratio of the Mortgage
Loan secured by such condominium unit or unit in a planned unit
development is (____)% or less as of the Cut-off Date; and no such
parcel has erected thereon a mobile home or manufactured dwelling);
((xxiv) as of the Closing Date, each Mortgage Loan meets the
requirements set by the OTS for investment by a federal savings and loan
association, subject to such association's charter and bylaws and
applicable governmental regulation regarding percentage of assets
limitations;)
((xxv) the Seller maintains either a blanket hazard insurance policy
or a mortgage impairment insurance policy providing coverage for, among
other things, fire and the extended coverage hazards, with respect to
the Mortgage Loans and, as of the Closing Date, any such policy is in
full force and effect;)
((xxvi) each Mortgaged Property is either an owner-occupied primary
residence, a second home or a residential investor property;)
(xxvii) with respect to each Mortgage Loan, the Loan Rate as of the
Cut-off Date, net of the premium payable on any related credit life
insurance policy, was either (____)%, (____)%, or (____)% per annum and
the weighted average of the Loan Rates as of the Cut-off Date was
(____)% per annum;
(xxviii) each Mortgage Loan contains a "due-on-sale" clause permitting
the mortgagee to accelerate the payment of the indebtedness evidenced
thereby upon the sale of the related Mortgaged Property;
(xxix) no Mortgage Loan had a Combined Loan-to-Value Ratio in excess
of (___)%;
(xxx) upon the Seller's transfer of the Mortgage Loans to the
Purchaser in accordance with the terms hereof, the Purchaser became the
sole owner of all the right, title and interest in, to and under the
Mortgage Loans, including all principal amounts thereof outstanding as
of the Cut-off Date (and all principal amounts that may hereafter be
outstanding thereunder as a result of future Draws or the capitalization
of interest due and unpaid thereon, free and clear of all liens,
pledges, charges and encumbrances whatsoever;)
((xxxi) no Mortgage Note has been prepared on a form other than the
forms of Mortgage Notes attached hereto as Exhibit A, no Mortgage has
been prepared on a form other than the forms of Mortgages attached
hereto as Exhibit B and no riders were appended to any Mortgage at the
time of execution thereof;)
((xxxii) each Mortgage Loan was originated by a savings and loan
association, savings bank, commercial bank, credit union, insurance
company, or similar institution which is supervised and examined by a
federal or state authority, or by a mortgagee approved by the Secretary
of Housing and Urban Development pursuant to sections 203 and 211 of the
National Housing Act;)
(xxxiii) the Mortgage Note for each Mortgage Loan provides that the
Loan Rate is (fixed)(adjusted monthly on each Interest Rate Adjustment
Date to equal the sum of the Index and the Gross Margin, subject to any
Rate Cap); (the Mortgage Note is payable monthly on each Due Date in
amounts calculated in the manner set forth therein, with interest
calculated and payable in arrears; no Mortgage Note contains provisions
permitting negative amortization (other than the provision for
Capitalized Interest); and the average Cut-off Date Asset Balance was
approximately $(_______________);)
(xxxiv) the Mortgaged Property is lawfully occupied under applicable
law; and all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities;
(xxxv) in the event the Mortgage constitutes a deed for trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated, currently so serves and is named in the Mortgage,
and no fees or expenses are or will become payable by the Purchaser to
the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor; and
(xxxvi) the Mortgage Note, the Mortgage, and any other documents
required to be delivered under the Servicing Agreement with respect to
the Mortgage Loans have been delivered to the Trustee or the Custodian;
and the Trustee or the Custodian is in possession of a complete, true
and accurate Mortgage File.
The representations and warranties set forth in this Section 4 shall
survive the sale of the Mortgage Loans to the Purchaser and the transfer of
the Mortgage Loans by the Purchaser to the Trust and the delivery of the
Mortgage Files to the Trustee. Upon discovery by the Seller or the Purchaser
of a breach of any of the representations and warranties set forth in this
Section 4, the party discovering such breach shall give prompt written notice
thereof to the other party. Within __ days of its discovery or its receipt
of notice of breach, the Seller shall use all reasonable efforts to cure such
breach in all material respects or shall, not later than the Business Day
immediately preceding the Distribution Date in the month following the
Collection Period in which any such cure period expired, repurchase such
Mortgage Loan from the Purchaser in the same manner and subject to the same
conditions as set forth in Section 5, other than with respect to breaches
solely related to the representations and warranties set forth in clause (i)
or (ii) of this Section 4. Upon making such repurchase and sending any
required payment to the Purchaser, the Seller shall be entitled to receive an
instrument of assignment or transfer, without recourse, representation or
warranty, from the Purchaser to the same extent as set forth in Section 5
with respect to the repurchase of the Mortgage Loans under that Section. It
is understood and agreed that the obligation of the Seller to repurchase a
Mortgage Loan as to which a breach has occurred and is continuing and to make
any required payment to the Purchaser shall constitute the sole remedy
respecting such breach available to the Purchaser against the Seller;
provided, however, that the Seller
- -------- -------
shall defend and indemnify the Purchaser against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel, which may be asserted against or incurred by the Purchaser as a
result of any breach of any such representation or warranty. Notwithstanding
the foregoing, with regard to any breach of the representation and warranty
set forth in clause (iv) of this Section 4, the sale and assignment of the
affected Mortgage Loans shall be deemed void and the Seller shall pay to the
Purchaser the sum of (i) the amount of the related Principal Balances and
(ii) the amount of any losses suffered with respect to the affected Mortgage
Loans.
(In the event of a breach of any of the representations and warranties
in clause (i) or clause (ii) of this Section 4 that materially and adversely
affects the interests of the Purchaser, the Purchaser by written notice to
the Seller, may direct the Seller to repurchase all of the Mortgage Loans
within __ days of such notice. The Seller shall repurchase such Mortgage
Loans on the Distribution Date immediately succeeding the expiration of such
applicable period; provided that such repurchase will not be required to be
made if on the Business Day prior to such Distribution Date, such
representation and warranty shall then be true and correct in all material
respects or the breach of such representations and warranties no longer
materially and adversely affects the interests of the Purchaser. The Seller
shall pay to the Purchaser an amount equal to the aggregate Principal
Balances of the Mortgage Loans on the Distribution Date on which the
repurchase is scheduled to be made plus an amount equal to all interest
accrued but unpaid on such Mortgage Loans through the end of the related
Collection Period. If the Purchaser gives a notice as provided above, the
obligation of the Seller to make any such deposit will constitute the sole
remedy respecting a breach of the representations and warranties available to
the Purchaser against the Seller.)
SECTION 5. ACCEPTANCE BY THE PURCHASER: REPURCHASE OF MORTGAGE LOANS.
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The Purchaser hereby acknowledges its acceptance of the sale and
assignment of the Mortgage Notes and the Mortgages, and its receipt of the
Mortgage Files delivered pursuant to Section 1. If the time to cure any
defect in respect of any Mortgage Loan of which the Purchaser has notified
the Seller following the Purchaser's review of the Mortgage Files has expired
or if at any time any loss is suffered by the Purchaser in respect of any
Mortgage Loan as a result of (i) a defect in any document constituting a part
of its Mortgage File, (ii) an assignment of the related Mortgage not having
been recorded as required by Section 1(a), or (iii) the failure by the Seller
to satisfy its obligation under Section 1(b), then on the next succeeding
Business Day, the Seller shall be obligated to repurchase all right, title
and interest of the Purchaser in and to such Mortgage Loan, without recourse,
representation or warranty, on such Business Day; provided, however, that
-------- -------
interest accrued on the Principal Balance of such Mortgage Loan to the end
of the Collection Period during which the date of repurchase occurs shall be
the property of the Purchaser. Within two Business Days after the Business
Day on which such repurchase arises the Seller shall pay to the Purchaser an
amount in immediately available funds equal to the Asset Balance of such
Mortgage Loan (the "Repurchase Price"). Upon receipt of the Repurchase
Price for such Mortgage Loan, the Purchaser shall execute such documents
and instruments of transfer presented by the Seller, and take such other
actions as shall reasonably be requested by the Seller to effect the
repurchase by the Seller of such Mortgage Loan pursuant to this Section.
It is understood and agreed that the obligation of the Seller to repurchase
such a Mortgage Loan shall constitute the sole remedy respecting such
defect available to the Purchaser against the Seller.
SECTION 6. COVENANTS OF THE SELLER. The Seller hereby covenants
-----------------------
that:
(a) SECURITY INTERESTS. Except for the conveyances hereunder and
------------------
the (____________________) Agreement, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on any Mortgage Loan or the related Mortgaged
Property, whether now existing or hereafter created, or any interest therein;
and the Seller will defend the right, title and interest of the Purchaser in,
to and under the Mortgage Loans and the related Mortgaged Property, whether
now existing or hereafter created, against all claims of third parties
claiming through or under the Seller; provided, however, that nothing
-------- -------
in this Section 6(a) shall prevent or be deemed to prohibit the Seller
from suffering to exist upon any Mortgage Loans or the related Mortgaged
Property any Liens for municipal or other local taxes and other governmental
charges if such taxes or governmental charges shall not at the time be due
and payable or if the Seller shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
(b) NOTICE OF LIENS. The Seller shall notify the Purchaser promptly
---------------
after becoming aware of the existence of any Lien on any Mortgage Loans or
the related Mortgaged Property other than the conveyances hereunder and the
(____________________) Agreement.
(c) DELIVERY OF COLLECTIONS. In the event that the Seller receives
-----------------------
payments or other proceeds with respect to the Mortgage Loans conveyed
hereunder, the Seller agrees to remit to the Purchaser or its designee all
such payments or other proceeds as soon as practicable after receipt thereof
by the Transferor, but in no event later than (__) Business Days after the
receipt by the Seller thereof.
SECTION 7. TERMINATION. The respective obligations and
-----------
responsibilities of the Seller and the Purchaser created hereby shall
terminate, except for the Seller's indemnity obligations as provided herein,
upon the termination of the Trust as provided in Article (__) of the
(____________________) Agreement.
SECTION 8. AMENDMENT. This Agreement may be amended from time to
---------
time by the Purchaser and the Seller by a writing signed by each of them.
SECTION 9. ASSIGNMENT. Notwithstanding anything to the contrary
----------
contained herein, this Agreement may not be assigned by the Purchaser or
the Seller except as contemplated by this Section 9; provided, however,
-------- -------
that simultaneously with the execution and delivery of this Agreement, the
Purchaser shall assign all of its right, title and interest herein to the
Trustee for the benefit of the Certificateholders as provided in the
(____________________) Agreement, to which the Seller hereby expressly
consents. The Seller agrees to perform its obligations hereunder for the
benefit of the Trust and that the Trustee may enforce the provisions of this
Agreement, exercise the rights of the Purchaser and enforce the obligations
of the Seller hereunder without the consent of the Purchaser and to the same
effect as if the Trustee was a party hereto.
SECTION 10. THIRD-PARTY BENEFICIARIES. This Agreement will inure to
-------------------------
the benefit of and be binding upon the parties hereto, the Trustee, and the
Certificateholders, which shall be considered to be third-party beneficiaries
hereof. Except as otherwise provided in this Agreement, no other person will
have any right or obligation hereunder.
SECTION 11. SELLER INDEMNIFICATION. The Seller shall pay, indemnify
----------------------
and hold harmless the Purchaser, the Trust, the Trustee and each Investor
Certificateholder from and against any loss, liability, expense, damage or
injury (except, in the case of indemnification of any Certificateholder, to
the extent that they arise from any action by such Investor Certificateholder)
suffered or sustained pursuant to this Agreement, including, but not limited
to, any judgment, award, settlement, reasonable attorneys' fees and other
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided, however, that the Seller
-------- -------
shall not indemnify the Purchaser, the Trust, the Trustee or the Investor
Certificateholders if such loss, liability, expense, damage or injury is due
to the gross negligence or willful misconduct of the Purchaser or the Trustee
and provided further that the Seller shall not indemnify the Trust or the
Investor Certificateholders for any liabilities, costs or expenses of the
Trust or the Investor Certificateholders arising under any tax law,
including, without limitation, Federal, State or local or franchise taxes.
The provisions of this indemnity shall run directly to and be enforceable
by an injured party subject to the limitations hereof.
SECTION 12. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
------------------------------------------------
OBLIGATIONS OF, THE SELLER. (a) The Seller shall not consolidate with or
- --------------------------
merge into any other corporation or convey or transfer its properties and
assets substantially as an entirety to any Person, unless:
(i) The corporation formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Seller substantially as an entirety
shall be organized and existing under the laws of the United States of
America or any State or the District of Columbia, and, if the Seller is
not the surviving entity, shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Purchaser and the
Trustee, in form satisfactory to the Purchaser and the Trustee, the
performance of every covenant and obligation of the Seller, as
applicable hereunder and shall benefit from all the rights granted to
the Seller, as applicable hereunder; and
(ii) The Seller shall have delivered to the Purchaser and the
Trustee an Officer's Certificate signed by a Vice President (or any more
senior officer) of the Seller and an Opinion of Counsel each stating
that such consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 12 and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
(b) The obligations of the Seller hereunder shall not be assignable nor
shall any Person succeed to the obligations of the Seller hereunder except in
each case in accordance with the provisions of the foregoing paragraph and of
Section 9.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION 14. ENTIRE AGREEMENT. This Agreement contains the entire
----------------
agreement and amends, restates and supersedes any prior agreement between the
parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the
date first set forth above.
( )
____________________________
Name:
Title:
MERRILL LYNCH MORTGAGE INVESTORS, INC.
____________________________
Name:
Title:
SCHEDULE I
Mortgage Loan Information
SCHEDULE II
Exhibit A
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Forms of Mortgage Note
Exhibit B
---------
Forms of Mortgage
