<PAGE>
As filed with the Securities and Exchange Commission on October 20, 1999
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CHASE FUNDING, INC.
(Seller)
CHASE MANHATTAN ACCEPTANCE CORPORATION
(Seller)
(Exact names of the registrants as specified in their respective charters)
--------------
<TABLE>
<CAPTION>
<S> <C> <C>
New York 343 Thornall Street 13-3840732
(State or other jurisdiction of Edison, New Jersey 08837 (I.R.S. Employer
incorporation or organization) (732) 205-0600 Identification Number)
(Address, including zip code, and telephone number, including area code,
of registrant Chase Funding, Inc.'s principal executive offices)
Delaware 343 Thornall Street 13-3456395
(State or other jurisdiction of Edison, New Jersey 08837 (I.R.S. Employer
incorporation or organization) (732) 205-0600 Identification Number)
(Address, including zip code, and telephone number, including area code,
of registrant Chase Manhattan Acceptance Corporation's principal executive offices)
--------------
PAUL E. MULLINGS
c/o Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, New Jersey 08837
(732) 205-0600
(Name, address, including zip code, and telephone number, including area code, of agent for service)
--------------
Copy to:
STEVEN J. MOLITOR, ESQ.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
--------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box.|_|
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered
only in connection withdividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act of 1933, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. |_| __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act
of 1933, 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>
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Maximum Proposed
Title of Each Class of Securities to be Amount to be Offering Price Per Maximum Aggregate Amount of
Registered Registered Certificate* Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Pass-Through Certificates... $1,000,0000 100% $1,000,000 $278.00
====================================================================================================================================
* Estimated for the purpose of calculating the registration fee.
</TABLE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any state of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED OCTOBER 20, 1999
Prospectus Supplement
(to Prospectus dated [DATE])
[LOGO] $_______(Approximate)
Chase Funding
Mortgage Loan Asset-Backed Certificates, Series [________]
[Chase Manhattan Funding Logo]
Chase Funding Trust, Series [_______]
Issuer
Chase Funding, Inc.
Depositor
[Advanta Mortgage Corp. USA]
Subservicer
Chase Manhattan Mortgage Corporation
Seller and Master Servicer
- --------------------------------------------------------------------------------
Investing in these certificates involves risks. You should not purchase these
certificates unless you fully understand their risks and structure. See "Risk
Factors" beginning on page S-__ of this prospectus supplement and page __ of the
attached prospectus
These certificates will be beneficial interests in a trust fund, and will be
backed only by the assets of the trust. Neither these certificates nor the
assets of the trust will be obligations of Chase Funding, Inc., [Advanta
Mortgage Corp. USA], Chase Manhattan Mortgage Corporation or any of their
affiliates. These certificates will not be insured or guaranteed by any
governmental agency.
- --------------------------------------------------------------------------------
Chase Funding Trust, Series [______] will issue [thirteen] classes of
certificates, [twelve] of which are offered by this prospectus supplement and
the attached prospectus. The table on page S-3 identifies the various classes
and specifies certain characteristics of each class, including each class's
initial certificate principal balance, interest rate and rating.
The trust fund will consist primarily of sub-prime mortgage loans secured by
first liens on real properties which were originated or acquired by Chase
Manhattan Mortgage Corporation and cash on deposit in an account used to
purchase additional sub-prime mortgage loans originated or acquired by Chase
Manhattan Mortgage Corporation.
Underwriting Proceeds to
Price to Public(1) Discount(1) Depositor(2)
- ------------------ ------------ ------------
$ $ $
------------ ---------- ----------
% %
----- -----
- ----------
(1) The price to public and underwriting discount shown are for all classes of
offered certificates in the aggregate. This information is shown for each
individual class on page S-3. See "Underwriting."
(2) Less expenses (estimated at $_______) and plus accrued interest. See
"Underwriting."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of this prospectus supplement and the attached prospectus.
Any representation to the contrary is a criminal offense.
[UNDERWRITER]
The date of this Prospectus Supplement is [DATE]
<PAGE>
Where to Find Information in this Prospectus Supplement
and the Attached Prospectus
Information about the offered certificates is contained in (a) the
attached prospectus, which provides general information, some of which may not
apply to the certificates; and (b) this prospectus supplement, which describes
the specific terms of the certificates.
This prospectus supplement and the attached prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
attached prospectus identify the pages where those sections are located. In
addition, an index of defined terms can be found beginning on page S-__ of this
prospectus supplement.
In this prospectus supplement, the terms "Depositor," "we," "us" and
"our" refer to Chase Funding, Inc.
- --------------------------------------------------------------------------------
To understand the structure of these certificates, you must read carefully both
the attached prospectus and this prospectus supplement in their entirety.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
THE SERIES [______] CERTIFICATES..................S-_ Overcollateralization Provisions..............................S-__
SUMMARY INFORMATION...............................S-_ Prepayment Considerations and Risks...........................S-__
Principal Parties..............................S-_ Risk of Higher Delinquencies Associated with
Cut-off Date...................................S-_ Underwriting Guidelines.................................S-__
Closing Date...................................S-_ Effect of Mortgage Loan Yield on the Group II
Distribution Date..............................S-_ Certificates Pass-Through Rate; Basis Risk..............S-__
The Trust Fund.................................S-_ Pass-Through Rates With Respect to the Class IA-1,
The Series [______] Certificates...............S-_ Class IA-4, Class IA-5, Class IM-1, Class IM-2
Interest Distributions.........................S-_ and Class IB Certificates...............................S-__
Principal Distributions........................S-_ Subordination--Limited Protection Afforded to
Denominations..................................S-_ Offered Certificates....................................S-__
Book-Entry Registration........................S-_ Subordination--Allocation of Losses to the Class M
Mandatory Prepayments..........................S-_ and Class B Certificates................................S-__
Credit Enhancement.............................S-_ Cash Flow Considerations and Risks............................S-__
Optional Termination...........................S-_ Certificate Rating on the Certificates........................S-__
Legal Investment...............................S-_ Bankruptcy and Insolvency Risks...............................S-__
Federal Income Tax Consequences................S-_ Certificates May Not Be Appropriate For Individual
ERISA Considerations...........................S-_ Investors...............................................S-__
Ratings........................................S-_ Geographic Concentration......................................S-__
Pre-Funding Account............................S-_ Risk of Higher Default Rates for Mortgage Loans
The Mortgage Loans.............................S-_ with Balloon Payments...................................S-__
RISK FACTORS.....................................S-__ Delinquent Mortgage Loans.....................................S-__
Forward-Looking Statements....................S-__ The Subsequent Mortgage Loans.................................S-__
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Mandatory Prepayment.......................................S-__ Overcollateralization and Crosscollateralization
Optional Termination Could Reduce Benefits Provisions............................................S-__
of Crosscollateralization...............................S-__ Calculation of One-Month LIBOR...........................S-__
Limited Liquidity; Lack of SMMEA Eligibility...............S-__ Mandatory Prepayments on the Certificates................S-__
Risks Associated with Year 2000 Compliance.................S-__ Capitalized Interest Account.............................S-__
THE MORTGAGE POOL.............................................S-__ Reports to Certificateholders............................S-__
General.......................................................S-__ Amendment................................................S-__
Mortgage Loans.............................................S-__ Optional Termination.....................................S-__
Assignment of the Mortgage Loans...........................S-__ Optional Purchase of Defaulted Loans.....................S-__
Representations and Warranties.............................S-__ Events of Default........................................S-__
Conveyance of Subsequent Mortgage Loans and Rights upon Event of Default.............................S-__
the Pre-Funding Account.................................S-__ The Trustee..............................................S-__
CHASE MANHATTAN MORTGAGE CORPORATION..........................S-__ YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS...............S-__
Underwriting Standards.....................................S-__ General..................................................S-__
SERVICING OF THE MORTGAGE LOANS...............................S-__ Prepayments and Yields for Offered Certificates..........S-__
General....................................................S-__ Additional Information..................................S-___
The Subservicer............................................S-__ FEDERAL INCOME TAX CONSEQUENCES............................S-___
Servicing Compensation and Payment of Original Issue Discount.................................S-___
Expenses................................................S-__ Special Tax Attributes of the Offered Certificates......S-___
Adjustment to Servicing Fee in Connection Prohibited Transactions Tax and Other Taxes.............S-___
with Certain Prepaid Mortgage Loans.....................S-__ STATE TAXES................................................S-___
Advances...................................................S-__ ERISA CONSIDERATIONS.......................................S-___
Master Servicer............................................S-__ LEGAL INVESTMENT MATTERS...................................S-___
DESCRIPTION OF THE CERTIFICATES...............................S-__ USE OF PROCEEDS............................................S-___
General....................................................S-__ METHOD OF DISTRIBUTION.....................................S-___
Book-Entry Certificates....................................S-__ LEGAL MATTERS..............................................S-___
Payments on Mortgage Loans; Collection Account; RATINGS....................................................S-___
Certificate Account; Distribution Account..............S-__ INDEX OF DEFINED TERMS.....................................A-___
Distributions..............................................S-__ ANNEX I......................................................A-_
</TABLE>
S-3
<PAGE>
THE SERIES [_______] CERTIFICATES
<TABLE>
<CAPTION>
Class IA-1 Class IA-2 Class IA-3 Class IA-4 Class IA-5 Class IM-1 Class IM-2
Adjustable Fixed Fixed Fixed Fixed Fixed Fixed
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C>
Loan Group:
Initial Certificate Principal
Balance(1): $_________ $__________ $__________ $_________ $_________ $__________ $________
Pass Through Rate: (4) ____% ______% ______(2) _______% _______% ______%
ERISA Eligible: Yes Yes Yes Yes Yes No No
Prepayment Assumption(5): __% HEP __% HEP __% HEP __% HEP __% HEP __% HEP __% HEP
First Principal Payment Date(6): ____ ____ ____ ____ ____ ____ ____
Weighted Avg. Life At Issuance:
to call (yrs.)(6): ___ ___ ___ ___ ___ ___ ___
to maturity (yrs.)(6): ___ ___ ___ ___ ___ ___ ___
Expected Maturity (to call)(6): ___ ___ ___ ___ ___ ___ ___
Expected Maturity (to maturity)(6): ___ ___ ___ ___ ___ ___ ___
Last Scheduled Distribution Date: ___ ___ ___ ___ ___ ___ ___
Interest Accrual Method: actual/360 30/360 30/360 30/360 30/360 30/360 30/360
Interest Rate Index Reset Date: (7) N/A N/A N/A N/A N/A N/A
Payment Delay: 0 days 24 days 24 days 24 days 24 days 24 days 24 days
Anticipated Ratings [Ratings
Agency]: Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aa2/AA A2/A
</TABLE>
[RESTUBBED]
<TABLE>
<CAPTION>
Class IB Class IIA-1 Class IIM-1 Class IIM-2 Class IIB
Fixed Adjustable Adjustable Adjustable Adjustable
-------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Loan Group:
Initial Certificate Principal
Balance(1): $_________ $__________ $__________ $__________ $_________
Pass Through Rate: ______%(3) (4) (4) (4) (4)
ERISA Eligible: No Yes No No No
Prepayment Assumption(5): __% HEP __% CPR __% CPR __% CPR __% CPR
First Principal Payment Date(6): ____ ____ ____ ____ ____
Weighted Avg. Life At Issuance:
to call (yrs.)(6): ___ ___ ___ ___ ___
to maturity (yrs.)(6): ___ ___ ___ ___ ___
Expected Maturity (to call)(6): ___ ___ ___ ___ ___
Expected Maturity (to maturity)(6): ___ ___ ___ ___ ___
Last Scheduled Distribution Date: ___ ___ ___ ___ ___
Interest Accrual Method: 30/360 actual/360 actual/360 actual/360 actual/360
Interest Rate Index Reset Date: N/A (7) (7) (7) (7)
Payment Delay: 24 days 0 days 0 days 0 days 0 days
Anticipated Ratings [Ratings
Agency]: Baa2/BBB Aaa/AAA Aa2/AA A2/A Baa2/BBB
</TABLE>
Agency]:
<PAGE>
- ---------------
(1) Subject to a permitted variance of plus or minus 10%.
(2) After the optional termination date described herein, the pass-through rate
for the Class IA-4, Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB
Certificates will increase to [____]%.
(3) Subject to adjustment. Under certain circumstances, your pass-through rate
may be lower. See "Description of the Certificates--Distributions--
Distributions of Interest."
(4) One-month LIBOR plus the applicable pass through margin. Subject to
adjustment. Under certain circumstances your pass-through rate may be lower.
See "Description of the Certificates--Distributions--Distributions of
Interest."
(5) See "Yield, Prepayment and Maturity Considerations" for a description of HEP
and CPR.
(6) Based on the modeling assumptions described on page S-__ and [__]% HEP or
[__]% CPR, as applicable.
(7) Two business days prior to the start of each interest accrual period.
Credit Enhancement:
<TABLE>
<CAPTION>
Group I Group II
<S> <C>
Excess Interest Excess Interest
Overcollateralization Overcollateralization
Crosscollateralization Crosscollateralization
Subordination Subordination
Overcollateralization Requirements:
Group I Group II
Initial Percentage: [__] Initial Percentage: [__]%
Stepdown Percentage: [__]% of current balance Stepdown Percentage: [__]% of current balance
Targeted Percentage: [__]% of original balance Targeted Percentage: [__]% of original balance
Minimum Required Percentage: [__]% of original Minimum Required Percentage: [__]% of original balance
Earliest Possible Stepdown Date: Earliest Possible Stepdown Date:
</TABLE>
S-4
<PAGE>
SUMMARY INFORMATION
This section briefly summarizes certain major characteristics of the
certificates and the mortgage loans. It does not contain all of the information
that you need to consider in making your investment decision. To fully
understand the terms of the certificates, you should read both this prospectus
supplement and the attached prospectus in their entirety.
Principal Parties
Issuer: Chase Funding Trust, Series [_______].
Depositor: Chase Funding, Inc., a New York
corporation. The Depositor's address is 343
Thornall Street, Edison, NJ 08837 and its
telephone number is (732) 205-0600.
Seller and Master Servicer: Chase Manhattan
Mortgage Corporation, a New Jersey corporation
whose address is 343 Thornall Street, Edison, NJ
08837 and whose telephone number is (732) 205-0600.
See "Chase Manhattan Mortgage Corporation."
Subservicer: [Advanta Mortgage Corp. USA], a
Delaware corporation whose address is [10790 Rancho Bernardo Road, San
Diego, CA 92127 and whose telephone number is (619) 674-1800.] See
"Servicing of the Mortgage Loans--The Subservicer."
Trustee: [TRUSTEE]. The corporate trust office
of the Trustee is [ADDRESS] and its telephone
number is [______________].
Cut-off Date
The cut-off date will be [DATE].
Closing Date
The closing date will be on or about [DATE].
Distribution Date
The 25th day of each month, beginning in [DATE]. If the 25th day is not a
business day, then the distribution date will be the next business day.
<PAGE>
The Trust Fund
The name of the trust fund is Chase Funding Trust, Series [_______]. We are
forming the trust to own a pool of sub-prime mortgage loans secured by first
liens on real properties and $[______ _]on deposit in an account used to
purchase additional sub-prime mortgage loans. The mortgage pool is divided into
two loan groups: a group of the fixed rate mortgage loans (group I), and a group
of the adjustable rate mortgage loans (group II). Each class of certificates
represents an interest in one of these loan groups. However, due to the
crosscollateralization features of the trust fund, certificates of one group may
receive credit support payments from mortgage loans in the other group.
The Series [_______] Certificates
The certificates represent beneficial ownership interests in the underlying
trust fund assets. The certificates will have the original certificate principal
balance, pass-through rate and other features set forth in the table on page
S-3. The trust fund will issue the certificates under a Pooling and Servicing
Agreement dated as of [DATE] among Chase Funding, Inc., as depositor, [Advanta
Mortgage Corp. USA], as subservicer, Chase Manhattan Mortgage Corporation, as
master servicer and Citibank, N.A., as trustee. When we refer to the group I
certificates or the group II certificates, we mean the certificates representing
interests in the fixed rate mortgage loans or the adjustable rate mortgage
loans, respectively (and their respective interests in the cash on deposit in
the account used to purchase additional mortgage loans). Any collections on the
mortgage loans will be used to pay a servicing fee to [Advanta Morgage Corp.
USA] and Chase Manhattan Mortgage Corporation and to make interest or principal
payments. All principal collections will be paid to one or more classes of the
certificates offered through this prospectus supplement or to the residual
certificates, based on the outstanding certificate balances and the remaining
principal amount in each loan group. Any interest collections in excess of the
amount paid to certificateholders--either as interest or principal--or the
servicers will be paid to the owner of the residual certificates. See
"Description of the Certificates-- Distributions."
S-5
<PAGE>
Interest Distributions
Interest will accrue on each class of certificates at the pass-through rate for
that class. Interest will accrue on each class of certificates (other than the
Class IA-1 Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates)
during the calendar month preceding each distribution date. Interest will accrue
on the Class IA-1, Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB
Certificates from the prior distribution date (or the closing date, in the case
of the first distribution date) to the day prior to the current distribution
date.
The pass-through rates on the Class IA-1, Class IA-4, Class IA-5, Class IM-1,
Class IM-2 and Class IB Certificates will be subject to a cap based on the
weighted average net mortgage rate of the fixed rate mortgage loans and such
Certificates will not carry over or be reimbursed for interest shortfalls
resulting from the imposition of that interest rate cap. The pass-through rates
on the Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates will be
subject to an available amount interest rate cap. If the amount of interest due
on the mortgage loans in group II, less certain amounts, is insufficient to pay
the interest accrued on the group II certificates, the interest payment on the
Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates, as applicable,
on the related distribution date will be reduced by the amount of such interest
shortfall for such loan group. In the case of the group II certificates,
interest shortfall will be carried over on a subordinated basis with accrued
interest at the then applicable pass-through rate and paid from excess cash flow
in a later distribution, if available. The pass-through rates on the Class
IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates will also be subject
to a maximum interest rate cap based on the weighted average of the net maximum
lifetime rate on the adjustable rate mortgage loans. Any interest shortfall due
to the maximum amount cap will not be reimbursed. See "Description of the
Certificates-- Distributions--Distributions of Interest."
<PAGE>
Principal Distributions
Principal payments to the group I certificates and the group II certificates
will generally reflect principal collections on the loans in the related loan
group. Principal payments will also include a portion of interest collections to
the extent necessary to reach or maintain the required overcollateralization
percentage, as described below and may include distributions from the
pre-funding account.
Denominations
The trust fund will issue the offered certificates in minimum denominations of
[$25,000] in original principal amount and integral multiples of $1,000 in
excess thereof.
Book-Entry Registration
The trust fund will initially issue the certificates in book-entry form. You may
elect to hold your interest in the certificates through The Depository Trust
Company in the United States, or Cedelbank, societe anonyme or the Euroclear
System in Europe, or indirectly through participants in such systems.
You will not be entitled to receive a definitive certificate representing your
interest except under limited circumstances. See "Description of the
Certificates--Book-Entry Certificates" in this prospectus supplement and
"Description of the Certificates" in the attached prospectus.
Mandatory Prepayments
The group I certificates and the group II certificates will be prepaid in part
on the distribution date in [MONTH/YEAR] to the extent any cash allocable to the
related loan group remains on deposit in the account used for the purpose of
purchasing additional mortgage loans. See "Description of the
Certificates--Mandatory Prepayments on the Certificates" in this prospectus
supplement.
Credit Enhancement
Credit enhancement is intended to reduce the harm caused to holders of the
certificates as a result of shortfalls in payments received and losses realized
on the mortgage loans. The credit enhancement for the group I certificates and
the group II certificates will consist of the overcollateralization,
crosscollateralization and subordination features described in this prospectus
supplement.
S-6
<PAGE>
Overcollateralization. Generally, because more interest is required to be
paid by the mortgagors than is necessary to pay the interest accrued on the
certificates and the expenses of the trust fund, there is expected to be excess
interest each month. The trust fund will apply some or all of such excess
interest as principal payments on the senior certificates in the related loan
group until certain overcollateralization targets are reached, resulting in a
limited acceleration of principal of the certificates relative to the mortgage
loans in the related loan group. This acceleration feature creates
overcollateralization, which equals the excess of the outstanding principal
balance of the mortgage loans in a loan group over the outstanding principal
balance of the related certificates. Once the required level of
overcollateralization is reached, the acceleration feature will cease, unless it
becomes necessary again to maintain the required level of overcollateralization.
The actual level of overcollateralization may increase or decrease over time
based upon whether the stepdown criteria of the trust have been met or, in the
case of the group II certificates, whether a step-up trigger exists. This could
result in a temporarily faster or slower amortization of one or both groups of
the certificates. See "Description of the Certificates-- Overcollateralization
and Crosscollateralization Provisions."
Crosscollateralization. The trust fund provides for crosscollateralization
through the application of excess interest generated by one loan group to fund
shortfalls in available funds and the required level of overcollateralization in
the other loan group. See "Description of the Certificates--
Overcollateralization and Crosscollateralization Provisions."
Subordination. The rights of the holders of the more junior classes of
certificates relating to each loan group to receive distributions will be
subordinated to the rights of the holders of the more senior classes of
certificates relating to such loan group to receive distributions. See
"Description of the Certificates--Distributions."
<PAGE>
In general, the protection afforded the holders of more senior classes of
certificates by means of this subordination will be effected in two ways:
Priority of Distributions. By the preferential right of the holders of
such classes to receive, prior to any distribution being made on any
distribution date to the holders of the more junior classes of certificates, the
amount of interest and principal due on the more senior classes of certificates
and, if necessary, by the right of such more senior holders to receive future
distributions on the mortgage loans that would otherwise have been allocated to
the holders of the more junior classes of certificates; and
Allocation of Losses. By the allocation to the more junior classes of
certificates (in inverse order of seniority) of losses resulting from the
liquidation of defaulted mortgage loans or the bankruptcy of mortgagors prior to
the allocation of such losses to the more senior classes of certificates until
their respective certificate principal balances have been reduced to zero.
The chart below summarizes the relative seniority of the various classes of
certificates and indicates the initial level of credit support provided to the
various classes of certificates:
Initial
Credit
Credit Support Support
-------------- -------
IA Class IM-1, [_____]%
Class IM-2
and Class IB
IM-1 Class IM-2 [_____]%
and Class IB
IM-2 Class IB [_____]%
S-7
<PAGE>
Group II Credit Initial Credit
Class(es) Support Support
--------- ------- --------------
IIA Class IIM-1, [____]%
Class IIM-2
and Class IIB
IIM-1 Class IIM-2 [____]%
and Class IIB
IIM-1 Class IIB [____]%
Optional Termination
Subject to certain restrictions, Chase Manhattan Mortgage Corporation will have
the option (but not the obligation) to purchase all of the mortgage loans in a
loan group after the aggregate unpaid principal balance of such mortgage loans
is reduced to less than [10%] of the aggregate principal balance of the
certificates in such loan group as of [DATE]. See "Description of the
Certificates--Optional Termination."
Legal Investment
As of the closing date, the Class IA, Class IIA, Class IM-1 and Class IIM-1
Certificates will constitute "mortgage related securities" under the Secondary
Mortgage Market Enhancement Act of 1984, as amended. The Class IM-2, Class IB,
Class IIM-2 and Class IIB Certificates will not constitute "mortgage related
securities." You should consult your own counsel as to whether you have the
legal authority to invest in securities such as the offered certificates. See
"Risk Factors--Limited Liquidity; Lack of SMMEA Eligibility" and "Legal
Investment Matters" in this prospectus supplement and "Legal Investment Matters"
in the attached prospectus.
Federal Income Tax Consequences
For federal income tax purposes, the trust fund will elect to be treated as two
Real Estate Mortgage Investment Conduits. The certificates will represent
ownership of regular interests in the trust fund and will generally be treated
as debt instruments of the trust fund for federal income tax purposes. You will
be required to include in income all interest and original issue discount, if
any, on your certificates in accordance with the accrual method of accounting
regardless of your usual method of accounting. See "Federal Income Tax
Consequences" in this prospectus supplement and in the attached prospectus.
<PAGE>
ERISA Considerations
In general, the certificates (except for the Class IM-1, Class IM-2, Class IB,
Class IIM-1, Class IIM-2 and Class IIB Certificates) will be eligible for
purchase by retirement or other employee benefit plans subject to the Employee
Retirement Income Security Act of 1986, as amended. You should consult with your
counsel with respect to the legal consequences of an ERISA plan's acquisition
and ownership of the Certificates. See "ERISA Considerations" in this prospectus
supplement and in the attached prospectus.
Ratings
The certificates are required to receive the ratings indicated under the heading
"Anticipated Ratings" in the chart shown on page S-3 of this prospectus
supplement.
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 any rating agency. The
ratings on the certificates address the likelihood of the receipt by holders of
the certificates of all distributions on the underlying mortgage loans to which
they are entitled. They do not represent any assessment of the likelihood or
rate of principal prepayments or the likelihood that any interest carry forward
amount will be paid. See "Ratings."
Pre-Funding Account
Subject to certain conditions described herein, the trust fund will be obligated
to purchase from Chase Manhattan Mortgage Corporation on or before [DATE],
additional fixed rate mortgage loans having an aggregate outstanding principal
balance of up to $[________], and additional adjustable rate mortgage loans
having an aggregate outstanding principal balance of up to $[________]. On
[DATE], Chase Funding, Inc. will pay to the trustee approximately $[_______], to
provide the trust fund with sufficient cash to purchase the additional mortgage
loans. See "The Mortgage Pool--Conveyance of Subsequent Mortgage Loans and the
Pre-Funding Account" in this prospectus supplement.
S-8
<PAGE>
The Mortgage Loans
We will divide the mortgage loans into two separate groups based on whether the
interest rate for the related mortgage loan is fixed or adjustable. The
following tables summarize certain approximate characteristics of each mortgage
group as of [DATE]. When we refer to percentages of mortgage loans in the
following tables, we are describing the percentage of the aggregate principal
balance of the mortgage loans in the related mortgage group as of [DATE]. The
mortgage pool as of the closing date will include approximately $[___________]in
aggregate principal balance of mortgage loans (approximately $[__________]of
fixed rate mortgage loans and approximately $[__________]of adjustable rate
mortgage loans) that are not included in the statistical information in this
prospectus supplement; furthermore, approximately $[__________]in aggregate
principal balance of mortgage loans (approximately $[_________]of fixed rate
mortgage loans and $[_________]of adjustable rate mortgage loans) that are
included in the statistical information in this prospectus supplement will be
deleted from the final mortgage pool. Other than increasing the aggregate
principal balance of the mortgage loans, we do not expect the inclusion or
deletion of these mortgage loans to change the material characteristics of
either mortgage loan group. In addition, as described in this prospectus
supplement under "The Mortgage Pool--Conveyance of Subsequent Mortgage Loans and
the Pre-Funding Account" up to $[_________]in aggregate outstanding principal
balance of fixed rate mortgage loans and up to $[________]in aggregate
outstanding principal balance of adjustable rate mortgage loans will be added to
the mortgage pool after the closing date, but before [DATE]. Within fifteen days
of the closing date and within fifteen days of the end of the funding period, we
will file a Form 8-K with the Securities and Exchange Commission which will
include the statistical characteristics of the mortgage pool. For additional
information on the mortgage loans, see "The Mortgage Loans."
S-9
<PAGE>
Initial Fixed Rate Mortgage Loan Group
Number of loans ______
Aggregate outstanding principal balance $[___________]
Number of loans with prepayment penalties _____
Average or
Weighted Average Range
Outstanding principal balance $[______] $[_____] - $[_______]
Original principal balance $[______] $[______] - $[_______]
Mortgage rate [_____]% [_____]% - [______]%
Loan-to-value ratio [_____]% [_____]% - [______]%
Stated remaining term to maturity [___] [___] - [___]
[Bar Graph showing Mortgage Rates for the Initial Fixed Rate Loan Group]
S-10
<PAGE>
[Bar Graph showing Original Principal Balances the Initial
Fixed Rate Loan Group]
[Pie Graph showing Product Types for the Initial Fixed Rate Loan Group]
S-11
<PAGE>
[Pie Graph showing Credit Grades for the Initial Fixed Rate Loan Group]
[Bar Graph showing Loan-to-Value Ratios for the Initial Fixed Rate Loan Group]
S-12
<PAGE>
Initial Adjustable Rate Loan Group
Number of loans _____
Aggregate outstanding principal balance $[___________]
Number of loans with prepayment penalties ____
Average or
Weighted Average Range
Outstanding principal balance $[_______] $[______]- $[_______]
Original principal balance $[_______] $[______]- $[_______]
Current mortgage rates [_____]% [_____]%- [______]%
Maximum mortgage rates [______]% [______]%- [______]%
Minimum mortgage rates [_____]% [_____]%- [______]%
Loan-to-value ratio [_____]% [_____]%- [_____]%
Stated remaining term to maturity [___] [___]- [___]
Gross Margin [_____]% [_____]%- [_____]%
Initial Rate Cap [_____]% [_____]%- [_____]%
Periodic Rate Cap [_____]% [_____]%- [_____]%
[Bar Graph showing Mortgage Rates for the Initial Adjustable Rate Loan Group]
S-13
<PAGE>
[Bar Graph showing Original Principal Balances the Initial
Adjustable Rate Loan Group]
[Pie Graph showing Product Types for the Initial Adjustable Rate Loan Group]
S-14
<PAGE>
[Pie Graph showing Credit Grades for the Initial Adjustable Rate Loan Group]
[Bar Graph showing Loan-to-Value Ratios for the Initial
Adjustable Rate Loan Group]
S-15
<PAGE>
RISK FACTORS
Forward-Looking Statements
In this prospectus supplement and the attached prospectus, we use
certain forward-looking statements. Such forward-looking statements are found in
the material, including each of the tables, set forth under "Risk Factors" and
"Yield, Prepayment and Maturity Considerations." Forward-looking statements are
also found elsewhere in this prospectus supplement and prospectus and include
words like "expects," "intends," "anticipates," "estimates" and other similar
words. Such statements are inherently subject to a variety of risks and
uncertainties. Actual results differ materially from those we anticipate due to
changes in, among other things:
o economic conditions and industry competition; political, social and economic
conditions;
o the law and government regulatory initiatives; and
o interest rate fluctuations.
We will not update or revise any forward-looking statements to reflect
changes in our expectations or changes in the conditions or circumstances on
which such statements were originally based.
Overcollateralization Provisions
The overcollateralization provisions of the trust will affect the
weighted average life of the certificates of each certificate group and
consequently the yield to maturity of such certificates. Unless and until the
required amount of overcollateralization for such certificate group is reached,
net excess cashflow for the related loan group and, due to the
cross-collateralization feature, in some cases the other mortgage loan group,
will be applied as distributions of principal of the Class A certificates of
such certificate group, thereby reducing the weighted average lives of the
certificates in the related certificate group. The actual required amount of
overcollateralization for a certificate group may change from distribution date
to distribution date, producing uneven distributions of accelerated payments in
respect of principal for such certificate group. We cannot predict when or
whether the required amount of overcollateralization for a certificate group
will be reached.
"Net excess cashflow" for a particular loan group generally is the
excess of interest collected or advanced on the mortgage loans in such loan
group over the interest required to pay interest on the certificates in the
related certificate group and certain trust fund expenses allocable to such
certificate group. Mortgage loans with higher interest rates will contribute
more interest to the net excess cashflow. Mortgage loans with higher interest
rates may prepay faster than mortgage loans with relatively lower interest rates
in response to a given change in market interest rates. Any such
disproportionate prepayments of mortgage loans in a loan group that have higher
interest rates may adversely affect the amount of net excess cashflow for such
loan group.
As a result of the interaction of the foregoing factors, the effect of
the overcollateralization provisions on the weighted average life of the offered
certificates may vary significantly over time. See "Yield,
S-16
<PAGE>
Prepayment and Maturity Considerations" in this prospectus supplement and
"Yield, Maturity and Weighted Average Life Considerations" in the attached
Prospectus.
Prepayment Considerations and Risks
Each loan group's prepayment experience may be affected by many factors,
including general economic conditions, interest rates and the availability of
alternative financing, homeowner mobility and the solicitation of mortgagors to
refinance their mortgage loans. In addition, substantially all of the mortgage
loans contain due-on-sale provisions. The subservicer intends to enforce such
provisions unless (i) such enforcement is not permitted by applicable law or
(ii) the subservicer, in a manner consistent with accepted servicing practices,
permits the purchaser of the related mortgaged property to assume the mortgage
loan. To the extent permitted by applicable law, such assumption will not
release the original borrower from its obligation under any such mortgage loan.
See "Yield, Prepayment and Maturity Considerations" in this prospectus
supplement and "Material Legal Aspects of the Mortgage Loans-Enforceability of
Due-on-Sale Clauses" in the attached Prospectus for a description of certain
provisions of the mortgage loans that may affect the prepayment experience
thereof. The yield to maturity and weighted average life of the offered
certificates in each certificate group will be affected primarily by the rate
and timing of principal payments (including prepayments, liquidations,
repurchases and defaults) of, and losses on, the mortgage loans in the related
loan group.
The yield to investors on the group II certificates and the Class IA-1
Certificates will also be sensitive to the level of one-month LIBOR, the level
of the mortgage index and the additional limitations on the pass-through rate
for such class described in this prospectus supplement. In addition, the yield
to maturity of the offered certificates purchased at a discount or premium will
be more sensitive to the rate and timing of payments thereon. You should
consider, in the case of the offered certificates purchased at a discount, the
risk that a slower than anticipated rate of principal payments could result in
an actual yield that is lower than the anticipated yield and, in the case of the
offered certificates purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield that is
lower than the anticipated yield. Because approximately [____]% of the initial
fixed rate mortgage loans and approximately [____]% of the initial adjustable
rate mortgage loans contain prepayment penalties, the rate of principal
prepayments may be less than the rate of principal prepayments for mortgage
loans which do not contain prepayment penalties. See "Material Legal Aspects of
the Mortgage Loans--Late Charges, Default Interest and Limitations on
Prepayment" in the attached Prospectus. We cannot make any representation as to
the anticipated rate of prepayments on the mortgage loans, the amount and timing
of losses on the loans, the level of one-month LIBOR or the mortgage index or
the resulting yield to maturity of any offered certificates. Any reinvestment
risks resulting from a faster or slower incidence of prepayments on the mortgage
loans will be borne entirely by the offered certificateholders as described in
this prospectus supplement. See "Yield, Prepayment and Maturity Considerations"
in this prospectus supplement and "Yield, Maturity and Weighted Average Life
Considerations" in the attached Prospectus.
S-17
<PAGE>
Risk of Higher Delinquencies Associated with Underwriting Guidelines
The B&C Underwriting Guidelines (as described under "Chase Manhattan
Mortgage Corporation--Underwriting Standards--B&C Quality Loans") consider the
credit quality of a mortgagor and the value of the mortgaged property. The
originators provide loans primarily to mortgagors who do not qualify for loans
conforming to FNMA or FHLMC guidelines. Furthermore, the B&C Underwriting
Guidelines do not prohibit a borrower from obtaining secondary financing on the
mortgaged property. Secondary financing would reduce the borrower's equity in
the related mortgaged property.
As a result of the B&C Underwriting Guidelines, the mortgage loans are
likely to experience rates of delinquency, foreclosure and bankruptcy that are
higher, and that may be substantially higher, than those experienced by mortgage
loans underwritten to FNMA and FHLMC conforming guidelines. Furthermore, changes
in the values of mortgaged properties may have a greater effect on the
delinquency, foreclosure, bankruptcy and loss experience of the mortgage loans
than on mortgage loans originated in a more traditional manner. Similarly, an
overall general decline in residential real estate values could cause a
particularly severe decline in the value of the mortgaged properties relating to
mortgage loans in the trust fund. We cannot provide any assurance that the
mortgaged properties will not experience an overall decline in value.
Effect of Mortgage Loan Yield on the Group II Certificates Pass-Through Rate;
Basis Risk
The calculation of the pass-through rates on the group II certificates
is based upon the value of an index (one-month LIBOR) which is different from
the value of the index applicable to substantially all of the adjustable rate
mortgage loans (six-month LIBOR) as described under "The Mortgage Pool--General"
and is subject to an available amount interest rate cap and a maximum rate cap.
The available amount interest rate cap effectively limits the amount of
interest accrued on each class of group II certificates to the amount of
interest accruing on the adjustable rate mortgage loans. Various factors may
cause the interest rate cap described above to limit the amount of interest that
would otherwise accrue on the group II certificates. First, this can result if
one-month LIBOR increases more rapidly than six month LIBOR. In addition, the
pass-through rates on the group II certificates adjust monthly, while the
interest rates of the adjustable rate mortgage loans adjust less frequently,
with the result that the operation of the interest rate cap described above may
cause the pass-through rates to be reduced for extended periods in a rising
interest rate environment. The adjustable rate mortgage loans are also subject
to periodic (i.e., semi-annual) adjustment caps and maximum rate caps, and the
weighted average margin is subject to change based upon prepayment experience,
which also may result in the interest rate cap described above limiting
increases in the pass-through rates for the group II Certificates. Finally, the
adjustable rate mortgage loans accrue interest on the basis of a 360-day year
assumed to consist of twelve 30-day months, while calculations of interest on
the group II Certificates will be made on the basis of the actual number of days
elapsed and a year of 360 days. This may result in the interest rate cap
described above limiting the pass-through rates for the group II certificates in
certain periods. Consequently, the interest which becomes due on the adjustable
rate mortgage loans (net of the sum of the servicing fee and the master servicer
fee) with respect to any distribution date may not equal the amount of interest
that would accrue at one-month LIBOR plus the applicable margin on the group II
Certificates during the related period. Furthermore, if the interest rate cap
described above determines the pass-through rates for the group II Certificates
for a distribution date, the market value of such class of certificates may be
temporarily or permanently reduced.
S-18
<PAGE>
In addition, the pass-through rate on each class of group II certificates, is
subject to a maximum rate cap, which limits such pass-through rates based on the
maximum lifetime interest rates on the adjustable rate mortgage loans less the
servicing fee rate and the master servicing fee rate. This maximum rate cap may
limit increases in the pass-through rates on such classes of the group II Class
A Certificates. This can occur even if there is sufficient interest collected on
the adjustable rate mortgage loans, net of trust fund expenses, to pay interest
on the Group II Certificates without giving effect to such maximum rate cap.
Pass-Through Rates With Respect to the Class IA-1, Class IA-4, Class IA-5, Class
IM-1, Class IM-2 and Class IB Certificates
On any distribution date, the pass-through rate for the Class IA-1
Certificates will equal the lesser of (i) one month LIBOR plus [____]% and (ii)
the weighted average net mortgage rate on the fixed rate mortgage loans.
Therefore, to the extent that the weighted average net mortgage rate on the
fixed rate mortgage loans is ever reduced to less than one month LIBOR plus
[____]%, investors in the Class IA-1 Certificates may experience a lower than
anticipated yield. In addition, on any distribution date, the pass-through rates
for the Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates
will equal the lesser of (A) the rate set forth for such class in the table on
page S-3 and (B) the weighted average net mortgage rate on the fixed rate
mortgage loans. Therefore, to the extent that the weighted average net mortgage
rate on the fixed rate mortgage loans is ever reduced to less than the
applicable rate described in clause (A), investors in the Class IA-4, Class
IA-5, Class IM-1, Class IM-2 or Class IB Certificates may experience a lower
than anticipated yield.
This limitation on the payment of interest on such group I Certificates
can occur even if there is sufficient interest collected on the fixed rate
mortgage loans, net of trust fund expenses, to pay interest on the Class IA-1,
Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates without
giving effect to such weighted average net interest rate caps.
Subordination--Limited Protection Afforded to Offered Certificates
The rights of the Class M-1 Certificates of each certificate group to
receive distributions with respect to the mortgage loans of the related loan
group will be subordinate to the rights of the Class A Certificates of such
certificate group to receive such distributions; the rights of the Class M-2
Certificates of each certificate group to receive distributions with respect to
the mortgage loans of the related loan group will be subordinate to the rights
of the Class A and the Class M-1 Certificates of such certificate group to
receive such distributions; and the rights of the Class B Certificates of each
certificate group to receive distributions with respect to the mortgage loans of
the related loan group will be subordinate to the rights of the Class A, Class
M-1 and Class M-2 Certificates of such certificate group to receive such
distributions. This subordination is intended to enhance the likelihood of
regular receipt by higher-ranking classes of certificates of the full amount of
the monthly distributions allocable to them, and to afford protection against
losses.
S-19
<PAGE>
Subordination--Allocation of Losses to the Class M and Class B Certificates
If realized losses are incurred with respect to the mortgage loans in a
loan group to the extent that the aggregate principal balance of the
certificates of the related certificate group exceeds the stated principal
balances of the mortgage loans in such loan group, the principal balances of the
Class M and Class B Certificates of the related certificate group will be
reduced in reverse order of seniority (first Class B, second Class M-2 and third
Class M-1) by the amount of the excess. Consequently, the yields to maturity on
the Class M Certificates and Class B Certificates of each certificate group will
be sensitive, in varying degrees, to defaults on the mortgage loans in such loan
group (and the timing thereof). Investors should fully consider the risks
associated with an investment in the Class M or Class B Certificates, including
the possibility that such investors may not fully recover their initial
investment as a result of realized losses.
Cash Flow Considerations and Risks
Even assuming that the mortgaged properties provide adequate security
for the mortgage loans, there could be substantial delays in connection with the
liquidation of mortgage loans that are delinquent and resulting shortfalls in
distributions to you could occur. Further, liquidation expenses (such as legal
fees, real estate taxes and maintenance and preservation expenses) will reduce
the security for such mortgage loans and thereby reduce the proceeds payable to
you. If any of the mortgaged properties fail to provide adequate security for
the related mortgage loans, you could experience a loss (particularly if you are
a holder of one of the most subordinate classes).
Certificate Rating on the Certificates
The rating of each class of certificates will depend primarily on an
assessment by the rating agencies of the mortgage loans as well as the structure
of the transaction. The rating by the rating agencies of any class of
certificates is not a recommendation to purchase, hold or sell any such
certificates, inasmuch as such rating does not comment as to the market price or
suitability for a particular investor. There is no assurance that the ratings
will remain in place for any given period of time or that the ratings will not
be qualified, lowered or withdrawn by the rating agencies. In general, the
ratings address credit risk and do not address the likelihood of prepayments or
the likelihood that any interest carryforward amounts will be paid.
See "Ratings."
Bankruptcy and Insolvency Risks
The initial sale of the mortgage loans from Chase Manhattan Mortgage
Corporation to Chase Funding, Inc. And any subsequent sales between those
entities using the funds in the pre-funding account, will be treated as a sale
of the mortgage loans. However, in the event of an insolvency of Chase Manhattan
Mortgage Corporation, the trustee in bankruptcy of Chase Manhattan Mortgage
Corporation may attempt to recharacterize such mortgage loan sales as a
borrowing by such company, secured by a pledge of the applicable mortgage loans.
If the trustee in bankruptcy decided to challenge such transfers, delays in
payments of the certificates and reductions in the amounts thereof could occur.
S-20
<PAGE>
In the event of a bankruptcy or insolvency of [Advanta Mortgage Corp.
USA], as subservicer, the bankruptcy trustee or receiver may have the power to
prevent Citibank, N.A., as trustee or the certificateholders from appointing a
successor subservicer. Regardless of whether a successor subservicer is
appointed, any termination of [Advanta Mortgage Corp. USA] as subservicer
(whether due to bankruptcy or insolvency or otherwise) could adversely affect
the servicing of the mortgage loans, including the delinquency experience of the
mortgage loans.
Certificates May Not Be Appropriate For Individual Investors
The certificates may not be an appropriate investment for individual
investors who do not have sufficient resources or expertise to evaluate the
particular characteristics of the applicable class of certificates. This may be
the case because, among other things:
o The yield to maturity of offered certificates purchased at a
price other than par will be sensitive to the uncertain rate
and timing of principal prepayments on the mortgage loans;
o The rate of principal distributions on, and the weighted
average life of, the offered certificates will be sensitive to
the uncertain rate and timing of principal prepayments on the
mortgage loans and the priority of principal distributions
among the classes of certificates, and as such the certificates
may be inappropriate investments for you if you require a
distribution of a particular amount of principal on a specific
date or an otherwise predictable stream of distributions;
o You may not be able to reinvest amounts distributed in respect
of principal on a certificate (which, in general, are expected
to be greater during periods of relatively low interest rates)
at a rate at least as high as the pass-through rates on the
certificates; or
o It is possible that a secondary market for the certificates
will not develop or that your investment may not be liquid.
Lack of liquidity could result in a substantial decrease in the
market value of your certificates.
You should also carefully consider the further risks and other special
considerations discussed above and under the heading "Yield, Prepayment and
Maturity Considerations" in this prospectus supplement and in the attached
prospectus under the heading "Risk Factors."
Geographic Concentration
As of the cut-off date, approximately [___]% of the mortgaged properties
of the initial fixed rate mortgage loan group and approximately [___]% of the
mortgaged properties of the initial adjustable rate mortgage loan group were
located in [STATE]. Approximately [___]% of the mortgaged properties of the
initial fixed rate mortgage loan group were located in [STATE] and approximately
[___]% of the initial adjustable rate mortgage loan group were located in
[STATE]. An overall decline in the [STATE], [STATE] or [STATE] residential real
estate market could adversely affect the values of the mortgaged properties
securing such mortgage loans. As the residential real estate market is
influenced by many factors, including the general condition of the economy and
interest rates, we cannot assure you that the [STATE], [STATE] or [STATE]
residential real estate market will not weaken. If the Florida, New York or
California residential real estate market should experience an overall decline
in property values, the rates of losses on such mortgage loans would be expected
to increase, and could increase substantially.
S-21
<PAGE>
Risk of Higher Default Rates for Mortgage Loans with Balloon Payments
Approximately [___]% of the aggregate principal balance of the initial
mortgage loans as of the cut-off date are "balloon loans" that provide for the
payment of the unamortized principle balance of such initial mortgage loan in a
single payment at maturity. The balloon loans provide for equal monthly
payments, consisting of principal and interest, generally based on a 30-year
amortization schedule, and a single payment of the remaining balance of the
balloon loan generally up to 15 years after origination. Amortization of a
balloon loan based on a scheduled period that is longer than the term of the
loan results in a remaining principal balance at maturity that is substantially
larger than the regular scheduled payments. We do not have any information
regarding the default history or prepayment history of payments on balloon
loans. Because borrowers of balloon loans are required to make substantial
single payments upon maturity, it is possible that the default risk associated
with the balloon loans is greater than that associated with fully-amortizing
loans.
Delinquent Mortgage Loans
The trust fund may include mortgage loans which are 59 or fewer days
delinquent as of the cut-off date. It is expected that not more than
approximately [___]% of the mortgage loans (by cut-off date principal balance or
subsequent cut-off date principal balance, as the case may be) will be between
30 days and 59 days delinquent. If there are not sufficient funds from amounts
collected on the mortgage loans, the aggregate amount of principal returned to
any class of offered certificateholders may be less than the certificate
principal balance thereof on the day that such class of offered certificates
were issued.
The Subsequent Mortgage Loans
The subsequent mortgage loans may have characteristics different from
those of the initial mortgage loans and such differing characteristics may
effect the weighted average life and yield of the certificates. However, each
subsequent mortgage loan must satisfy the eligibility criteria referred to
herein under "The Mortgage Pool--Conveyance of Subsequent Mortgage Loans and the
Pre-Funding Account" at the time of its conveyance to the trust fund and be
underwritten in accordance with the criteria set forth under "Chase Manhattan
Mortgage Corporation--Underwriting Standards" in this prospectus supplement.
Mandatory Prepayment
To the extent that the $[_________]]on deposit in the pre-funding
account (of which $[__________]]is allocable to group I and $[__________] is
allocable to group II) has not been fully applied to the purchase of subsequent
mortgage loans by [DTATE], the holders of the group I certificates and the group
II certificates will receive on the distribution date immediately following such
date, as a distribution of principal, any cash in the account allocable to the
related loan group after giving effect to any purchase of subsequent mortgage
loans.
S-22
<PAGE>
Optional Termination Could Reduce Benefits of Crosscollateralization
As described in this prospectus supplement under "Description of the
Certificates--Optional Termination," Chase Manhattan Mortgage Corporation will
have the option to repurchase all of the remaining mortgage loans in either
mortgage group when the principal balance of those mortgage loans is reduced to
less than or equal to 10% of the aggregate principal balance of the certificates
of such loan group as of [DATE]. To the extent that such mortgage loans were
providing credit enhancement in the form of crosscollateralization to the
certificates related to the mortgage loans in the other mortgage group, the
exercise by Chase Manhattan Mortgage Corporation of its repurchase option will
reduce the amount of credit enhancement then available to the remaining classes
of certificates.
Limited Liquidity; Lack of SMMEA Eligibility
The underwriters intend to make a secondary market in the offered
certificates, but will have no obligation to do so. We cannot assure you that a
secondary market for any class of offered certificates will develop, or if one
does develop, that it will continue or provide sufficient liquidity of
investment or that it will remain for the term of the related class of offered
certificates. The Class IM-2, Class IB, Class IIM-2 and Class IIB certificates
will not constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984, as amended. Accordingly, many
institutions with legal authority to invest in SMMEA securities will not be able
to invest in such certificates, thereby limiting the market for such
certificates. In light of the foregoing, you should consult your own counsel as
to whether you have the legal authority to invest in non-SMMEA securities such
as the Class IM-2, Class IB, Class IIM-2 and Class IIB certificates. See "Legal
Investment Matters" in this prospectus supplement and in the attached
Prospectus.
Risks Associated with Year 2000 Compliance
We are aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "year 2000 problem"
is pervasive and complex; virtually every computer operation will be affected in
some way by the rollover of the two digit year value to 00. The issue is whether
computer systems will properly recognize date-sensitive information when the
year changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail.
We have been advised by each of Chase Manhattan Mortgage Corporation,
[Advanta Mortgage Corp. USA] and Citibank, N.A. that they each are committed to
either (i) implementing modifications to their respective existing systems to
the extent required to cause them to be year 2000 compliant or (ii) acquiring
computer systems that are year 2000 compliant, in each case prior to January 1,
2000. However, neither we nor any of our affiliates have made any independent
investigation of the computer systems of [Advanta Mortgage Corp. USA] or
Citibank, N.A. In the event that computer problems arise out of a failure of
such efforts to be completed on time, or in the event that the computer systems
of Chase Manhattan Mortgage Corporation, [Advanta Mortgage Corp. USA] or
Citibank, N.A. are not fully year 2000 compliant, the resulting disruptions in
the collection or distribution of receipts on the mortgage loans could
materially adversely affect the holders of the offered certificates.
With respect to the year 2000 problem, The Depository Trust Company has
informed members of the financial community that it has developed and is
implementing a program so that its systems, as they relate to the timely payment
of distributions, including principal and interest payments, to security
holders, book-entry deliveries, and settlement of trades within The Depository
Trust Company, continue to function appropriately on and after January 1, 2000.
This program includes a technical assessment and a remediation plan, each of
which is complete. Additionally, The Depository Trust Company's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, The Depository Trust Company's ability to perform properly its
services is also dependent upon other parties, including but not limited to, its
participating organizations, through which you will hold your Certificates, as
well as the computer systems of third party service providers. The Depository
Trust Company has informed the financial community that it is contacting and
will continue to contact third party vendors from whom The Depository Trust
Company acquires services to:
S-23
<PAGE>
o impress upon them the importance of such services being year 2000
compliant; and
o determine the extent of their efforts for year 2000 remediation,
and, as appropriate, testing, of their services.
In addition, The Depository Trust Company has stated that it is in the process
of developing such contingency plans as it deems appropriate.
If problems associated with the year 2000 problem were to occur with
respect to The Depository Trust Company and the services described above,
payments to you could be delayed or otherwise adversely affected.
For a discussion of additional risks pertaining to the offered
certificates, see "Risk Factors" in the attached Prospectus.
S-24
<PAGE>
THE MORTGAGE POOL
General
The mortgage pool with respect to the Certificates (the "Mortgage Pool")
consisted as of [DATE] (the "Cut-off Date") of approximately [_____]
conventional mortgage loans evidenced by promissory notes (each, a "Mortgage
Note") having an aggregate principal balance of approximately $[___________]
(the "Statistical Mortgage Pool"). The Mortgage Loans will be divided into two
groups (each, a "Loan Group") based on whether the interest rate for the related
Mortgage Loan is fixed (each, a "Fixed Rate Mortgage Loan") or adjustable (each,
an "Adjustable Rate Mortgage Loan"). The Mortgage Pool as of
[_____________]](the "Closing Date") will include approximately $[___________]in
aggregate principal balance of Mortgage Loans (approximately $[__________]]of
Fixed Rate Mortgage Loans and approximately $[__________ ]f Adjustable Rate
Mortgage Loans) that are not included in the Statistical Mortgage Pool;
furthermore, approximately $[__________]in aggregate principal balance of
Mortgage Loans (approximately $[_________]of Fixed Rate Mortgage Loans and
$[_________]of Adjustable Rate Mortgage Loans) that are included in the
Statistical Mortgage Pool will be deleted from the Statistical Mortgage Pool.
Updated statistical information on the final composition of the Initial Mortgage
Loans (defined below) (giving effect to such additions and deletions) and
statistical information on the Subsequent Mortgage Loans will be attached as an
exhibit to the Current Report on Form 8-K of the Depositor that will be
available to purchasers of the Certificates at, and will be filed with the
Securities and Exchange Commission within fifteen days of, the initial delivery
of the Certificates in the case of the Initial Mortgage Loans and within 15 days
of the end of the Funding Period (defined herein) in the case of the Subsequent
Mortgage Loans).
The Mortgage Pool ultimately will consist of (i) the Mortgage Loans
included in the Trust Fund (defined herein) as of the Closing Date (the "Initial
Mortgage Loans"), which Mortgage Loans will in turn consist of the Mortgage
Loans in the Statistical Mortgage Pool plus any Mortgage Loans added to the
Mortgage Pool [and minus any Mortgage Loans deleted from the Mortgage Pool, in
each case] on or before the Closing Date and (ii) the Mortgage Loans purchased
by the Trust Fund after the Closing Date as described herein under "--Conveyance
of Subsequent Mortgage Loans and the Pre-Funding Account" (the "Subsequent
Mortgage Loans"). The Initial Mortgage Loans and the Subsequent Mortgage Loans
are collectively referred to herein as the "Mortgage Loans". The statistical
information presented in this Prospectus Supplement describes only the
Statistical Mortgage Pool and does not include statistical information with
respect to either the final composition of the Initial Mortgage Loans (giving
effect to additions to and deletions from the Statistical Mortgage Pool) or the
Subsequent Mortgage Loans. References herein to percentages of Mortgage Loans
refer in each case to the percentage of the aggregate principal balance of the
Mortgage Loans in the Statistical Mortgage Pool or, as the case may be, the
Mortgage Loans in the Statistical Mortgage Pool in the applicable Loan Group, as
of the Cut-off Date, based on the outstanding principal balances of such
Mortgage Loans as of the Cut-off Date, after giving effect to Scheduled Payments
(defined herein) due on or prior to the Cut-off Date, whether or not received.
References to percentages of Mortgaged Properties (defined herein) refer, in
each case, to the percentages of aggregate principal balances of the related
Mortgage Loans in the Statistical Mortgage Pool (determined as described in the
preceding sentence). The Mortgage Notes are secured by mortgages or deeds of
trust or other similar security instruments creating first liens on real
properties (the "Mortgaged Properties"), including single-family residences,
two- to-four family dwelling units, attached planned unit developments,
condominiums, detached planned unit developments, manufactured housing and small
mixed use properties. The Trust Fund includes, in addition to the Mortgage Pool,
(i) certain amounts held from time to time in one or more accounts including the
Pre-Funding Account (defined herein) and the Capitalized Interest Account
(defined herein)
S-25
<PAGE>
(collectively, the "Accounts") maintained in the name of the Trustee pursuant to
the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") to
be dated as of [DATE] by and among Chase Funding, Inc., as depositor (the
"Depositor"), [Advanta Mortgage Corp. USA], as subservicer ("Advanta" or the
"Subservicer"), Chase Manhattan Mortgage Corporation, as master servicer (the
"Master Servicer") and Citibank, N.A., as trustee (the "Trustee"), (ii) any
property which initially secured a Mortgage Loan and which is acquired by
foreclosure or deed-in-lieu of foreclosure, (iii) all insurance policies and the
proceeds thereof described below and (iv) certain rights to require repurchase
of the Mortgage Loans by the Seller for breach of representation or warranty.
Subsequent Mortgage Loans are intended to be purchased by the Trust Fund
from the Seller from time to time on or before [DATE] from funds on deposit in
the Pre-Funding Account. The Subsequent Mortgage Loans, if available, will be
purchased by the Depositor and sold by the Depositor to the Trust Fund for
deposit in the Mortgage Pool. The Subsequent Mortgage Loans will become part of
either the fixed rate Loan Group (in such case a "Subsequent Fixed Rate Mortgage
Loan" and together with the Fixed Rate Mortgage Loans, the "Fixed Rate Mortgage
Loans") or the adjustable rate Loan Group (in such case a "Subsequent Adjustable
Rate Mortgage Loan" and together with the Adjustable Rate Mortgage Loans, the
"Adjustable Rate Mortgage Loans"). The Pooling and Servicing Agreement will
provide that each Mortgage Loan must conform to certain specified
characteristics and, following the conveyance of the Subsequent Mortgage Loans,
the Mortgage Pool must conform to certain specified characteristics, as
described below under "--Conveyance of Subsequent Mortgage Loans and the
Pre-Funding Account."
The Mortgage Loans to be included in the Trust Fund will have been
originated or purchased by Chase Manhattan Mortgage Corporation (the "Seller")
and will have been originated substantially in accordance with the Seller's
underwriting criteria for sub-prime ("B&C") quality mortgage loans described
herein under "Chase Manhattan Mortgage Corporation--Underwriting Standards--B&C
Quality Mortgage Loans." Sub-prime mortgage loans are generally mortgage loans
made to borrowers who do not qualify for financing under conventional
underwriting criteria due to prior credit difficulties, the inability to satisfy
conventional documentation standards and/or conventional debt to income ratios.
Approximately [____]% of the Mortgage Loans in the Statistical Mortgage
Pool were purchased by the Seller under its small lender program (the "Small
Lender Program"). All loans purchased under this program were originated by
third parties and subsequently purchased by the Seller on an individual loan
basis or included in a small bulk acquisition of generally less than $5,000,000.
Each Mortgage Loan purchased through the Small Lender Program was
re-underwritten substantially in accordance with the B&C Underwriting
Guidelines, as described herein under "Chase Mortgage Corporation--Underwriting
Standards--B&C Quality Mortgage Loans."
Scheduled monthly payments made by the obligors (the "Mortgagors") on
the Mortgage Loans ("Scheduled Payments") either earlier or later than the
scheduled due dates thereof will not affect the amortization schedule or the
relative application of such payments to principal and interest. Substantially
all of the Mortgage Notes will provide for a fifteen (15) day grace period for
monthly payments. Any Mortgage Loan may be prepaid in full or in part at any
time; however, approximately [____]% of the Fixed Rate Mortgage Loans in the
Statistical Mortgage Pool and approximately [____]% of the Adjustable Rate
Mortgage Loans in the Statistical Mortgage Pool provide for the payment by the
borrower of a prepayment charge in limited circumstances on full or partial
prepayments made during the prepayment penalty term. The weighted average
prepayment penalty term is approximately 40 months with respect to the Fixed
Rate Mortgage Loans in the Statistical Mortgage Pool which have prepayment
penalties and approximately 31 months with respect
S-26
<PAGE>
to the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool which
have prepayment penalties. In general, the related Mortgage Note will provide
that a prepayment charge will apply if, during the prepayment penalty term, the
borrower prepays such Mortgage Loan in full or in part. The amount of the
prepayment charge will generally be equal to six months' interest calculated on
the basis of the rate in effect at the time of such prepayment on the amount
prepaid in excess of 20% of the original balance of such Mortgage Loan. The
enforceability of prepayment penalties is unclear under the laws of many states.
Prepayment penalties will be paid to the Master Servicer as additional servicing
compensation. See "Material Legal Aspects of the Mortgage Loans--Late Charges,
Default Interest and Limitations on Prepayment" in the attached Prospectus.
Approximately [__]% of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool as of the Cut-off Date (the "Six Month LIBOR Loans")
will have a Mortgage Rate which is generally subject to semi-annual adjustment
on the first day of the months specified in the related Mortgage Note (each such
date, an "Adjustment Date") to equal the sum, rounded to the nearest 0.125%, of
(i) the average of the London interbank offered rates for six-month U.S. dollar
deposits in the London market, as set forth in The Wall Street Journal, or, if
such rate ceases to be published in The Wall Street Journal or becomes
unavailable for any reason, then based upon a new index selected by the Trustee,
as holder of the related Mortgage Note, based on comparable information, in each
case as most recently announced as of a date 45 days prior to such Adjustment
Date (the "Mortgage Index"), and (ii) a fixed percentage amount specified in the
related Mortgage Note (the "Gross Margin"); provided, however, that the Mortgage
Rate on substantially all the Six Month LIBOR Loans will not increase or
decrease by more than [___]% on any Adjustment Date (the "Periodic Rate Cap")
and, provided further, that it will not be higher than the Maximum Mortgage Rate
or lower than the Minimum Mortgage Rate (each as defined below). Substantially
all of the Six Month LIBOR Loans were originated with Mortgage Rates less than
the sum of the then applicable Mortgage Index and the related Gross Margin.
Substantially all of the Six Month LIBOR Loans will provide that the related
Mortgage Rate will never exceed the initial Mortgage Rate plus [____]% (such
sum, the "Maximum Mortgage Rate"). Substantially all of the Six Month LIBOR
Loans provide that the related Mortgage Rate will never be less than the initial
Mortgage Rate (such rate, the "Minimum Mortgage Rate"). Effective with the first
payment due on an Adjustable Rate Mortgage Loan after each related Adjustment
Date, the monthly payment will be adjusted to an amount which will fully
amortize the outstanding principal balance of the Mortgage Loan over its
remaining term.
[Approximately [___]% of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool as of the Cut-off Date (the "1/29 Loans"), bear
interest at a fixed rate for a period of one year after origination and
thereafter have semiannual interest rate and payment adjustments in
substantially the same manner as the Six-Month LIBOR Loans. Substantially all of
the 1/29 Loans are subject to a [____]% Periodic Rate Cap with respect to the
first Adjustment Date and a [____]% Periodic Rate Cap with respect to each
Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial
Mortgage Rate plus [____]% and have a Minimum Mortgage Rate equal to the initial
Mortgage Rate.
Approximately[___]% of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool as of the Cut-off Date (the "2/28 Loans"), bear
interest at a fixed rate of interest for a period of two years after origination
and thereafter have semiannual interest rate and payment adjustments in
substantially the same manner as the Six-Month LIBOR Loans. Substantially all of
the 2/28 Loans are subject to a[____]% Periodic Rate Cap with respect to the
first Adjustment Date and a [____]% Periodic Rate Cap with respect to each
Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial
Mortgage Rate plus [____]% and have a Minimum Mortgage Rate equal to the initial
Mortgage Rate.
S-27
<PAGE>
Approximately [____]% of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool as of the Cut-off Date (the "3/27 Loans"), bear
interest at a fixed rate of interest for a period of three years after
origination and thereafter have semiannual interest rate and payment adjustments
in substantially the same manner as the Six-Month LIBOR Loans. Substantially all
of the 3/27 Loans are subject to a [____]% Periodic Rate Cap with respect to the
first Adjustment Date and a [____]% Periodic Rate Cap with respect to each
Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial
Mortgage Rate plus [____]% and have a Minimum Mortgage Rate equal to the initial
Mortgage Rate.
Approximately [___]% of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool as of the Cut-off Date (the "5/25 Loans"), bear
interest at a fixed rate for a period of five years after origination and
thereafter substantially all have semiannual interest rate and payment
adjustments in substantially the same manner as the Six-Month LIBOR Loans.
Substantially all of the 5/25 Loans are subject to a [___]% Periodic Rate Cap
with respect to the first Adjustment Date and a [___]% Periodic Rate Cap with
respect to each Adjustment Date thereafter, have a Maximum Mortgage Rate equal
to the initial Mortgage Rate plus [___]% and have a Minimum Mortgage Rate equal
to the initial Mortgage Rate.
Fixed Rate Mortgage Loan Group. As of the Cut-off Date, the aggregate
principal balance of the Fixed Rate Mortgage Loans in the Statistical Mortgage
Pool was approximately $[___________]. As of the Cut-off Date, the average
outstanding principal balance of the Fixed Rate Mortgage Loans in the
Statistical Mortgage Pool was approximately $[______], the minimum outstanding
principal balance was approximately $[_____], the maximum outstanding principal
balance was approximately $[_____], the lowest Mortgage Rate and the highest
Mortgage Rate were [____]% and [____]% per annum, respectively, and the weighted
average Mortgage Rate was approximately [_____]% per annum. Approximately [___%]
of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool (each, a
"Balloon Loan") have original terms to stated maturity of approximately 15 years
and provide for level monthly payments based on a 30-year amortization schedule
with a balloon payment of the remaining outstanding principal balance (a
"Balloon Amount") due on each such Mortgage Loan at its stated maturity.
Adjustable Rate Mortgage Loan Group. As of the Cut-off Date, the
aggregate principal balance of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool was approximately $[___________]. As of the Cut-off
Date the average outstanding principal balance of the Adjustable Rate Mortgage
Loans in the Statistical Mortgage Pool was approximately $[________], the
minimum outstanding principal balance was approximately $[_______], the maximum
outstanding principal balance was approximately $[________], the lowest current
Mortgage Rate and the highest current Mortgage Rate were approximately [_____]%
and [______]% per annum, respectively, and the weighted average Mortgage Rate
was approximately [____]% per annum.
The "Loan-to-Value Ratio" of a Mortgage Loan is equal to (i) the
principal balance of such Mortgage Loan at the date of origination, divided by
(ii) the Collateral Value of the related Mortgaged Property. With respect to a
Mortgage Loan the proceeds of which were used to purchase the related Mortgage
Property, the "Collateral Value" of a Mortgaged Property is the lesser of (x)
the appraised value based on an appraisal made for the Seller by an independent
fee appraiser at the time of the origination of the related Mortgage Loan, and
(y) the sales price of such Mortgaged Property at such time of origination. With
respect to a Mortgage Loan the proceeds of which were used to refinance an
existing mortgage loan, the "Collateral Value" is the appraised value of the
Mortgaged Property based upon the appraisal obtained at the time of refinancing.
The weighted average Loan-to-Value Ratio as of the Cutoff Date for the Fixed
Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [____]%
and the weighted average Loan-to-Value Ratio as of the Cut-off Date for the
Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was
approximately [____]%.
Mortgage Loans
The following tables describe the Mortgage Loans in the Statistical
Mortgage Pool and the related Mortgaged Properties as of the close of business
on the Cut-off Date. The sum of the columns below may not equal the total
indicated due to rounding.
S-28
<PAGE>
INITIAL FIXED RATE LOAN GROUP
STATISTICAL MORTGAGE POOL
<TABLE>
<CAPTION>
Mortgage Rates for the Initial Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Mortgage Rate Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C> <C> <C>
-------------- ------------------- ----------
Totals............. %
============== =================== ==========
</TABLE>
- -----------
(1) As of the Cut-off Date, the interest rates (the "Mortgage Rates") borne
by the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool ranged
from [______]% per annum to [_______]% per annum and the weighted
average Mortgage Rate of the Initial Fixed Rate Mortgage Loans in the
Statistical Mortgage Pool was approximately [_______]% per annum.
S-29
<PAGE>
<TABLE>
<CAPTION>
Remaining Months to Stated Maturity for the Initial Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Remaining Rate Mortgage Loans Balance Outstanding Loan Group
- -------------- -------------- ------------------- ----------
<S> <C> <C> <C>
-------------- ------------------- ----------
Totals............. 100.0%
============== =================== ==========
</TABLE>
- -----------
(1) As of the Cut-off Date, the remaining terms to stated maturity of the
Fixed Rate Mortgage Loans in the Statistical Mortgage Pool ranged from
[___]months to [___]months and the weighted average remaining term to
stated maturity of the Fixed Rate Mortgage Loans in the Statistical
Mortgage Pool was approximately [___]months.
<TABLE>
<CAPTION>
Original Mortgage Loan Principal Balances for the Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Range of Original Mortgage Loan Principal Balances Mortgage Loans Balance Outstanding Loan Group
- -------------------------------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
-------------- ------------------- ----------
Totals............. 100.0%
============== =================== ==========
</TABLE>
- -----------
(1) As of the Cut-off Date, the outstanding principal balances of the Fixed
Rate Mortgage Loans in the Statistical Mortgage Pool ranged from
approximately $[_______]to approximately $[_______]and the
average outstanding principal balance of the Fixed Rate Mortgage Loans
in the Statistical Mortgage Pool was approximately $[______].
S-30
<PAGE>
<TABLE>
<CAPTION>
Product Type for the Fixed Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Loan Type Mortgage Loans Balance Outstanding Loan Group
- --------- -------------- ------------------- ----------
<S> <C>
10 year Fixed.......................................
15 year Fixed.......................................
20 year Fixed.......................................
25 year Fixed.......................................
30 year Fixed.......................................
Balloon Loan........................................
-------------- ------------------- ----------
Totals.................................... 100.0%
============== =================== ==========
</TABLE>
S-31
<PAGE>
<TABLE>
<CAPTION>
State Distributions of Initial Fixed Rate Mortgaged Properties(1)
Number of Aggregate Principal Percent of
State Mortgage Loans Balance Outstanding Loan Group
- ----- -------------- ------------------- ----------
<S> <C>
Alaska......................................
Arizona.....................................
Arkansas....................................
California..................................
Colorado....................................
Connecticut.................................
Delaware....................................
District of Columbia........................
Florida.....................................
Georgia.....................................
Idaho.......................................
Illinois....................................
Indiana.....................................
Iowa........................................
Kansas......................................
Kentucky....................................
Louisiana...................................
Maine.......................................
Maryland....................................
Massachusetts...............................
Michigan....................................
Minnesota...................................
Mississippi.................................
Missouri....................................
Montana.....................................
Nebraska....................................
Nevada......................................
New Hampshire...............................
New Jersey..................................
New Mexico..................................
New York....................................
North Carolina..............................
Ohio........................................
Oklahoma....................................
Oregon......................................
Pennsylvania................................
Rhode Island................................
South Carolina..............................
South Dakota................................
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
State Mortgage Loans Balance Outstanding Loan Group
- ----- -------------- ------------------- ----------
<S> <C>
Tennessee...................................
Texas.......................................
Utah........................................
Vermont.....................................
Virginia....................................
Washington..................................
West Virginia...............................
Wisconsin...................................
-------------- ------------------- ----------
Totals............................ 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) No more than approximately [___]% of the Fixed Rate Mortgage Loans in the
Statistical Mortgage Pool will be secured by Mortgaged Properties located
in any one zip code area.
<TABLE>
<CAPTION>
Loan-to-Value Ratios for the Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Range of Loan-to-Value Ratio Mortgage Loans Balance Outstanding Loan Group
- ---------------------------- -------------- ------------------- ----------
<S> <C>
% or less.................................. %
%..........................................
%..........................................
%..........................................
%..........................................
%..........................................
%..........................................
%..........................................
%..........................................
%..........................................
-------------- ------------------- ----------
Totals........................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) As of the Cut-off Date, the Loan-to-Value Ratios of the Fixed Rate
Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% to
[____]% and the weighted average Loan-to-Value Ratio of the Fixed Rate
Mortgage Loans in the Statistical Mortgage Pool was approximately [____]%.
S-33
<PAGE>
<TABLE>
<CAPTION>
Loan Purpose for the Initial Fixed Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Loan Purpose Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C>
Refinance--Rate/Term.........................
Purchase.....................................
Refinance--Cashout...........................
-------------- ------------------- ----------
Totals............................. 100.0%
============== =================== ==========
Type of Mortgaged Properties for the Fixed Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Property Type Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
Planned Unit Development.................... %
Condominium.................................
Detached Planned Unit Development...........
Manufactured Housing........................
Single-family Detached......................
Small Mixed Use.............................
Two- to Four-Family Dwelling Unit...........
-------------- ------------------- ----------
Totals............................ 100.0%
============== =================== ==========
Documentation Summary for the Fixed Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Documentation Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
24 Month Bank Statement........................
Full Documentation.............................
Reduced Documentation..........................
Stated Documentation...........................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
Occupancy Types for the Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Occupancy Mortgage Loans Balance Outstanding Loan Group
- --------- -------------- ------------------- ----------
<S> <C>
Investment....................................
Owner-occupied................................
Second Home...................................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) Based upon representations of the related Mortgagor at the time of
origination.
<TABLE>
<CAPTION>
Mortgage Loan Age Summary for the Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Mortgage Loan Age (Months) Mortgage Loans Balance Outstanding Loan Group
- -------------------------- -------------- ------------------- ----------
<S> <C>
0.............................................
1 ............................................
2.............................................
3.............................................
4.............................................
5.............................................
6.............................................
7.............................................
8.............................................
9.............................................
10............................................
11............................................
12............................................
13............................................
14............................................
15............................................
16............................................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) The weighted average age of the Fixed Rate Mortgage Loans in the
Statistical Mortgage Pool is approximately [__]months.
S-35
<PAGE>
<TABLE>
<CAPTION>
Credit Grade Summary for the Fixed Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Credit Grade Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C>
AO............................................
A-............................................
B.............................................
B-............................................
C.............................................
C-............................................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
Year of Origination for the Fixed Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Year of Origination Mortgage Loans Balance Outstanding Loan Group
- ------------------- -------------- ------------------- ----------
<S> <C>
[YEAR]........................................
[YEAR]........................................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
S-36
<PAGE>
<TABLE>
<CAPTION>
Prepayment Penalties for the Fixed Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Prepayment Penalty Term Mortgage Loans Balance Outstanding Loan Group
- ----------------------- -------------- ------------------- ----------
<S> <C>
None ......................................
12 months.....................................
18 months.....................................
24 months.....................................
36 months.....................................
60 months.....................................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) The weighted average prepayment penalty term with respect to the Fixed
Rate Mortgage Loans in the Statistical Mortgage Pool having prepayment
penalties is approximately [__]months. With respect to those Fixed Rate
Mortgage Loans in the Statistical Mortgage Pool which have prepayment
penalties, [___]% of such Mortgage Loans are subject to a prepayment
penalty which will equal six months interest calculated on the basis of
the rate in effect at the time of such prepayment on the amount prepaid in
excess of 20% of the original principal balance of such mortgage loan.
S-37
<PAGE>
ADJUSTABLE RATE LOAN GROUP
STATISTICAL MORTGAGE POOL
<TABLE>
<CAPTION>
Current Mortgage Rates for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Mortgage Rate Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C>
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- -----------
(1) As of the Cut-off Date, the current Mortgage Rates borne by the Initial
Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged
from [____]% per annum to [_____]% per annum and the weighted average
Mortgage Rate borne by the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool was approximately [____]% per annum.
S-38
<PAGE>
<TABLE>
<CAPTION>
Remaining Months to Stated Maturity for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Remaining Term Mortgage Loans Balance Outstanding Loan Group
- -------------- -------------- ------------------- ----------
<S> <C>
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- -----------
(1) As of the Cut-off Date, the remaining terms to stated maturity of the
Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged
from [___]months to [___]months and the weighted average remaining term to
stated maturity of the Adjustable Rate Mortgage Loans in the Statistical
Mortgage Pool was approximately [___]months.
<TABLE>
<CAPTION>
Original Mortgage Loan Principal Balances for the Adjustable Rate Mortgage(1)
Range of Original Mortgage Loan Principal Number of Aggregate Principal Percent of
Balances Mortgage Loans Balance Outstanding Loan Group
- ----------------------------------------- -------------- ------------------- ----------
<S> <C>
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- -----------
(1) As of the Cut-off Date, the outstanding principal balances of the
Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged
from approximately $[_____]to approximately $[_______]and the average
outstanding principal balance of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool was approximately $[______].
S-39
<PAGE>
<TABLE>
<CAPTION>
State Distributions of Adjustable Rate Mortgaged Properties(1)
Number of Aggregate Principal Percent of
State Mortgage Loans Balance Outstanding Loan Group
- ----- -------------- ------------------- ----------
<S> <C>
Arizona.....................................
Arkansas....................................
California..................................
Colorado....................................
Connecticut.................................
Delaware....................................
District of Columbia........................
Florida.....................................
Georgia.....................................
Hawaii......................................
Idaho.......................................
Illinois....................................
Indiana.....................................
Iowa........................................
Kansas......................................
Kentucky....................................
Louisiana...................................
Maine.......................................
Maryland....................................
Massachusetts...............................
Michigan....................................
Minnesota...................................
Mississippi.................................
Missouri....................................
Nevada......................................
New Hampshire...............................
</TABLE>
S-40
<PAGE>
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
State Mortgage Loans Balance Outstanding Loan Group
- ----- -------------- ------------------- ----------
<S> <C>
New Jersey..................................
New Mexico..................................
New York....................................
North Carolina..............................
North Dakota................................
Ohio........................................
Oklahoma....................................
Oregon......................................
Pennsylvania................................
Rhode Island................................
South Carolina..............................
South Dakota................................
Tennessee...................................
Texas.......................................
Utah........................................
Vermont.....................................
Virginia....................................
Washington..................................
West Virginia...............................
Wisconsin...................................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) No more than approximately [___]% of the Adjustable Rate Mortgage Loans in
the Statistical Mortgage Pool will be secured by Mortgaged Properties
located in any one zip code area.
<TABLE>
<CAPTION>
Loan-to-Value Ratios for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Range of Loan-to-Value Ratio Mortgage Loans Balance Outstanding Loan Group
- ---------------------------- -------------- ------------------- ----------
<S> <C>
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) As of the Cut-off Date, the Loan-to-Value Ratios of the Adjustable Rate
Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% to
[____]% and the weighted average Loan-to-Value Ratio of the Adjustable
Rate Mortgage Loans in the Statistical Mortgage Pool was approximately
[_____]%.
S-41
<PAGE>
<TABLE>
<CAPTION>
Loan Purpose for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Loan Purpose Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C>
Purchase....................................
Refinance--Rate/Term.........................
Refinance--Cashout...........................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
Type of Mortgaged Properties for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Property Type Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C>
Single-family Detached......................
Two- to Four-Family Dwelling Unit...........
Detached Planned Unit Development...........
Condominium.................................
Planned Unit Development....................
Manufactured Housing........................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
</TABLE>
S-42
<PAGE>
<TABLE>
<CAPTION>
Documentation Summary for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Documentation Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C>
Full Documentation.............................
24 Month Bank Statement........................
Reduced Documentation..........................
Stated Documentation...........................
-------------- ------------------- ----------
Totals............................... 100.0%
============== =================== ==========
Occupancy Types for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Occupancy Mortgage Loans Balance Outstanding Loan Group
- --------- -------------- ------------------- ----------
Owner-occupied................................
Second Home...................................
Investment....................................
-------------- ------------------- ----------
Totals.............................. 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) Based upon representations of the related Mortgagor at the time of
origination.
<TABLE>
<CAPTION>
Mortgage Loan Age Summary for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Mortgage Loan Age (Months) Mortgage Loans Balance Outstanding Loan Group
- -------------------------- -------------- ------------------- ----------
<S> <C>
0.............................................
1.............................................
2.............................................
3.............................................
4.............................................
5.............................................
6.............................................
7.............................................
8.............................................
9.............................................
10............................................
11............................................
12............................................
13............................................
14............................................
15............................................
24 ...........................................
-------------- ------------------- ----------
Totals.............................. 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) The weighted average age of the Adjustable Rate Mortgage Loans in the
Statistical Mortgage Pool is approximately [__]months.
S-43
<PAGE>
<TABLE>
<CAPTION>
Credit Grade Summary for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Credit Grade Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C>
AO............................................
A-............................................
B.............................................
B-............................................
C.............................................
C- ...........................................
-------------- ------------------- ----------
Totals.............................. 100.0%
============== =================== ==========
Year of Origination for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Year of Origination Mortgage Loans Balance Outstanding Loan Group
- ------------------- -------------- ------------------- ----------
[YEAR]........................................
[YEAR]........................................
[YEAR]........................................
-------------- ------------------- ----------
Totals.............................. 100.0%
============== =================== ==========
</TABLE>
S-44
<PAGE>
<TABLE>
<CAPTION>
Maximum Mortgage Rates for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Range of Maximum Mortgage Rates Mortgage Loans Balance Outstanding Loan Group
- ------------------------------- -------------- ------------------- ----------
<S> <C>
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
%- %................
-------------- ------------------- ----------
Totals....................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) As of the Cut-off Date, the Maximum Mortgage Rates for the Adjustable Rate
Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% per
annum to [____]% per annum and the weighted average Maximum Mortgage Rate
for the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool
was [____]% per annum.
S-45
<PAGE>
<TABLE>
<CAPTION>
Prepayment Penalties for the Adjustable Rate Mortgage Loan Group(1)
Number of Aggregate Principal Percent of
Prepayment Penalty Term Mortgage Loans Balance Outstanding Loan Group
- ----------------------- -------------- ------------------- ----------
<S> <C>
None ......................................
12 months.....................................
24 months.....................................
36 months.....................................
60 months.....................................
-------------- ------------------- ----------
Totals................................... 100.0%
============== =================== ==========
</TABLE>
- ---------------
(1) The weighted average prepayment penalty term with respect to the
Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool having
prepayment penalties is approximately [__]months. With respect to those
Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool which have
prepayment penalties, approximately [___]% of such Mortgage Loans are
subject to a prepayment penalty which will equal six months interest
calculated on the basis of the rate in effect at the time of such
prepayment on the amount prepaid in excess of 20% of the original
principal balance of such mortgage loan.
<TABLE>
<CAPTION>
Product Type for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Loan Type Mortgage Loans Balance Outstanding Loan Group
- --------- -------------- ------------------- ----------
<S> <C>
Six Month LIBOR Loan..........................
1/29 Loan ................................
2/28 Loan.....................................
3/27 Loan.....................................
5/25 Loan.....................................
Other.........................................
-------------- ------------------- ----------
Totals................................... 100.0%
============== =================== ==========
</TABLE>
S-46
<PAGE>
<TABLE>
<CAPTION>
Next Adjustment Date for the Adjustable Rate Mortgage Loan Group
Number of Aggregate Principal Percent of
Next Adjustment Date Mortgage Loans Balance Outstanding Loan Group
- -------------------- -------------- ------------------- ----------
<S> <C>
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
[MONTH/YEAR]...............................
-------------- ------------------- ----------
Totals................................ 100.0%
============== =================== ==========
</TABLE>
S-47
<PAGE>
Assignment of the Mortgage Loans
On the Closing Date (or any Subsequent Transfer Date with respect to
the Subsequent Mortgage Loans), the Depositor will cause the Initial Mortgage
Loans (or the Subsequent Mortgage Loans, as the case may be) to be assigned to
the Trustee, together with the rights to all principal and interest due on or
with respect to the related Mortgage Loans after the Cut-off Date (or Subsequent
Cut-off Date (defined herein), as applicable) other than interest accrued on
such Mortgage Loans prior to the Cut-off Date (or Subsequent Cut-off Date, as
applicable). The Chase Manhattan Bank, as authenticating agent, will,
concurrently with the assignment of the Initial Mortgage Loans, authenticate and
deliver the Certificates. Each Initial Mortgage Loan will be identified in a
schedule appearing as an exhibit to the Pooling and Servicing Agreement (the
"Mortgage Loan Schedule"). The Mortgage Loan Schedule will specify, among other
things, with respect to each Initial Mortgage Loan as of the close of business
on the Cut-off Date, the original principal balance and the unpaid principal
balance; the Monthly Payment; the months remaining to stated maturity of the
Mortgage Note; and the Mortgage Rate. At the conclusion of the Funding Period
(defined herein), the Depositor will deliver to the Trustee and the Servicer a
revised Mortgage Loan Schedule which will reflect the addition of the Subsequent
Mortgage Loans to the Mortgage Pool.
In addition, the Depositor will, as to each Mortgage Loan, deliver or
cause to be delivered to the Trustee the Mortgage Note (together with all
amendments and modifications thereto) endorsed without recourse to the Trustee
or its designee, the original or a certified copy of the mortgage (together with
all amendments and modifications thereto) with evidence of recording indicated
thereon and an original or certified copy of an assignment of the Mortgage in
recordable form. The Depositor will cause the assignments to be recorded in the
appropriate public records.
Representations and Warranties
The Depositor will make certain representations and warranties for the
benefit of the Trustee with respect to the Mortgage Loans as described in the
Prospectus under "The Pooling and Servicing Agreement--Assignment of Mortgage
Loans; Warranties" and will be obligated to repurchase any
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<PAGE>
Mortgage Loan as to which there is a material breach of any such representation
or warranty. Such repurchase will constitute the sole remedy available to
Certificate Owners for a breach of such representations or warranties. The
Trustee will enforce the repurchase obligations of the Depositor. In lieu of
such repurchase obligation, the Depositor may, within two years after the date
of initial delivery of the Certificates, substitute for the affected Mortgage
Loans substitute mortgage loans, as described under "The Pooling and Servicing
Agreement--Assignment of Mortgage Loans; Warranties" in the Prospectus.
Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account
Under and to the extent provided in the Pooling and Servicing
Agreement, following the initial issuance of the Certificates, the Trust Fund
will be obligated to purchase from the Depositor during the Funding Period,
subject to the availability thereof, the Subsequent Mortgage Loans. Each
Subsequent Mortgage Loan shall have been underwritten in accordance with the
criteria set forth under "Chase Manhattan Mortgage Corporation--Underwriting
Standards" herein. The Subsequent Mortgage Loans will be transferred to the
Trust Fund pursuant to subsequent transfer instruments (the "Subsequent Transfer
Instruments") between the Depositor and the Trust Fund. In connection with the
purchase of Subsequent Mortgage Loans on such dates of transfer (the "Subsequent
Transfer Dates"), the Trust Fund will be required to pay to the Depositor from
amounts on deposit in the Pre-Funding Account (defined herein) a cash purchase
price of 100% of the principal balance thereof as of the related Subsequent
Cut-off Date (defined below). The Depositor will designate the first day of the
month in which the related Subsequent Transfer Date occurs as the cut-off date
with respect to the related Subsequent Mortgage Loans (the "Subsequent Cut-off
Date"). The amount paid from the Pre-Funding Account on each Subsequent Transfer
Date will not include accrued interest on the related Subsequent Mortgage Loans.
Following each Subsequent Transfer Date, the aggregate principal balance of the
Mortgage Loans in the related Loan Group will increase by an amount equal to the
aggregate principal balance of the related Subsequent Mortgage Loans so
purchased for such Loan Group and the amount in the Pre-Funding Account will
decrease accordingly.
An account (the "Pre-Funding Account") will be established by, or on
behalf of the Trustee and funded on the Closing Date by the Depositor with
approximately $[_________](the "Original Pre-Funded Amount"), subject to a
permitted variance equal to plus or minus five percent, to provide the Trust
Fund with sufficient funds to purchase Subsequent Mortgage Loans, provided that
the Original Pre-Funded Amount will not exceed 25% of the aggregate initial
Certificate Principal Balance of the Certificates. The Original Pre-Funded
Amount will be comprised of the "Group I Original Pre-Funded Amount," which will
equal approximately $[_________]on the Closing Date, and the "Group II Original
Pre-Funded Amount," which will equal approximately $[__________]on the Closing
Date. The Group I Original Pre-Funded Amount will be reduced during the Funding
Period by the amount used to purchase Subsequent Fixed Rate Mortgage Loans in
accordance with the Pooling and Servicing Agreement and the Group II Original
Pre-Funded Amount will be reduced during the Funding Period by the amount used
to purchase Subsequent Adjustable Rate Mortgage Loans in
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<PAGE>
accordance with the Pooling and Servicing Agreement. During the period (the
"Funding Period") from the Closing Date until the earlier of (i) the date on
which the amount on deposit in the Pre-Funding Account is reduced to zero or
(ii) [DATE], such Original Pre-Funded Amount, reduced as described herein, will
be maintained in the Pre-Funding Account.
Any conveyance of Subsequent Mortgage Loans on a Subsequent Transfer
Date is subject to certain conditions including, but not limited to: (a) each
such Subsequent Mortgage Loan must satisfy the representations and warranties
specified in the related Subsequent Transfer Instrument and the Pooling and
Servicing Agreement; (b) the Depositor will not select such Subsequent Mortgage
Loans in a manner that it believes to be adverse to the interests of the
Certificateholders; (c) the Depositor will deliver certain opinions of counsel
with respect to the validity of the conveyance of such Subsequent Mortgage
Loans; and (d) as of the applicable Subsequent Cut-off Date each Subsequent
Mortgage Loan will satisfy the following criteria: [(i) the Subsequent Mortgage
Loan may not be 30 or more days delinquent as of the related Subsequent Cut-off
Date (except with respect to approximately [___]% of the Subsequent Mortgage
Loans, by aggregate principal balance as of the related Subsequent Cut-off Date,
which may be 30 or more days delinquent but less than 60 days delinquent as of
the related Subsequent Cut-off Date); (ii) the term to stated maturity of the
Subsequent Mortgage Loan will not be less than 120 months and will not exceed
360 months; (iii) the Subsequent Mortgage Loan may not provide for negative
amortization; (iv) the Subsequent Mortgage Loan will not have a loan-to-value
ratio greater than 95%; (v) the Subsequent Mortgage Loans will have, as of the
Subsequent Cut-off Date, a weighted average term since origination not in excess
of 6 months; (vi) the Subsequent Mortgage Loan must have a first payment date
occurring on or before [DATE]; and (vii) the Subsequent Mortgage Loan shall have
been underwritten in accordance with the criteria set forth under "Chase
Manhattan Mortgage Corporation--Underwriting Standards" herein.
In addition, following the purchase of any Subsequent Mortgage Loan by
the Trust Fund, the Mortgage Loans (including the Subsequent Mortgage Loans)
will as of the Subsequent Cut-off Date not be materially inconsistent with the
Statistical Mortgage Pool. Notwithstanding the foregoing, any Subsequent
Mortgage Loan may be rejected by either Moody's or Fitch if the inclusion of
such Subsequent Mortgage Loan would adversely affect the rating on any Class of
Certificates.
CHASE MANHATTAN MORTGAGE CORPORATION
Chase Manhattan Mortgage Corporation ("Chase Manhattan Mortgage") is a
New Jersey corporation, formed in 1920. It is a wholly-owned indirect subsidiary
of Chase Manhattan Bank USA, National Association. Chase Manhattan Mortgage is
engaged in the mortgage origination and servicing businesses. Chase Manhattan
Mortgage is a HUD-approved mortgagee. Chase Manhattan Mortgage is subject to
supervision, examination and regulation by the Office of the Comptroller of the
Currency and various state regulatory bodies. The address of Chase Manhattan
Mortgage is 343 Thornall Street, Edison, New Jersey 08837 and its telephone
number is (732) 205-0600. Chase Manhattan Mortgage makes loans in all 50 states
and the District of Columbia primarily for the purpose of enabling
S-50
<PAGE>
borrowers to purchase or refinance residential real property, secured by first
liens on such property. Chase Manhattan Mortgage's real estate loans primarily
are made to homeowners based on the security of one- to four-family residences.
Underwriting Standards
B&C Quality Mortgage Loans. The following is a description of the
underwriting procedures customarily employed by Chase Manhattan Mortgage with
respect to B&C quality mortgage loans (the "B&C Underwriting Guidelines"). Prior
to the funding or acquiring of any B&C quality mortgage loan, Chase Manhattan
Mortgage underwrites the related mortgage loan in accordance with the
then-current underwriting standards established by Chase Manhattan Mortgage.
The B&C Underwriting Guidelines consider the value and adequacy of the
mortgaged property as collateral for the proposed mortgage loan but also take
into consideration the borrower's credit standing and repayment ability. On a
case by case basis, Chase Manhattan Mortgage may determine that, based upon
compensating factors, a prospective borrower not strictly qualifying under the
underwriting risk category guidelines described below warrants an underwriting
exception. Compensating factors may include, without limitation, relatively low
loan-to-value ratio, relatively low debt-to-income ratio, stable employment and
time in the same residence. It is expected that a significant number of the
Mortgage Loans underwritten in accordance with the B&C Underwriting Guidelines
will have been originated based on such underwriting exceptions.
The B&C Underwriting Guidelines permit loans with loan-to-value ratios
at origination of up to 95%, depending on among other things, the program, the
type and use of the property, the creditworthiness of the borrower and the
debt-to-income ratio.
Chase Manhattan Mortgage requires title insurance on all B&C quality
mortgage loans secured by liens on real property. Chase Manhattan Mortgage also
requires that fire and hazard insurance coverage be maintained on the mortgaged
property in an amount at least equal to the principal balance of the mortgage
loan or the replacement cost of the mortgaged property, whichever is less. Flood
insurance is also required for any mortgage loan if the related mortgaged
property is located in either flood zone "A" or "V" as determined by the Federal
Emergency Management Agency.
The B&C Underwriting Guidelines are less stringent than the standards
generally acceptable to FNMA and FHLMC with regard to the borrower's credit
standing and repayment ability. Borrowers under the B&C Underwriting Guidelines
who qualify generally would not satisfy FNMA and FHLMC underwriting guidelines
for any number of reasons, including, without limitation, original principal
balance, unsatisfactory payment histories or debt-to-income ratios, or a record
of major derogatory credit items such as outstanding judgments or prior
bankruptcies.
S-51
<PAGE>
Chase Manhattan Mortgage offers four types of income documentation
programs under the B&C Underwriting Guidelines: Full Documentation, 24 Month
Bank Statement, Reduced Documentation and Stated Income. In general, for
mortgage loans underwritten pursuant to the Full Documentation program, Chase
Manhattan Mortgage verifies income and assets through alternate documentation or
written third party verifications. The 24 Month Bank Statement program utilizes
the last 24 months of bank statements to support income. In general, this
documentation type is available to AO, A-, B and B- credit grades. In general,
the Reduced Documentation program is available for AO through D credit grades in
the case of self-employed borrowers and AO, A- and B credit grades in the case
of salaried borrowers. Under the Reduced Documentation program the loan-to-value
ratio for non-self employed borrowers is 70%, and asset verification for source
of down payment is required if the loan-to-value ratio is 70% or greater. In
general, the Stated Income program is a no income/no asset verification (except
that asset verification is required if the loan-to-value ratio is 70% or
greater) program for credit grades AO through C, in the case of self-employed
borrowers, and for credit grades AO, A- and B, for all others. The maximum
loan-to-value ratio for non-self employed borrowers is 70%. Income from the
application as stated by the borrower is used to qualify.
The B&C Underwriting Guidelines utilize various credit grade categories
to grade the likelihood that the mortgagor will satisfy the repayment conditions
of the mortgage loan. These credit grade categories establish the maximum
permitted loan-to-value ratio, debt-to-income ratio and loan amount, given the
borrower's credit history considered in a manner generally consistent with
subprime mortgage industry practice, the occupancy status of the mortgaged
property, the type of mortgaged property and documentation type. A summary of
such categories is set forth below.
Credit Grade Category: "AO"
Debt-to-Income Ratio: Maximum of 45%
Mortgage History: No delinquencies of 30 days or more during the
previous 12 months; no more than one such delinquency during the
previous 24 months.
Consumer/Revolving Credit History: No more than one delinquency (in the
case of "major" credit) or two delinquencies (in the case of "minor"
credit) during the previous 12 months; provided that no such
delinquencies may have exceeded 59 days; no more than two ("major"
credit) or three ("minor" credit) such delinquencies during the
previous 24 months ("major" credit being defined as installment debt
with monthly payments over $100 and revolving accounts with credit
limits over $2,500).
Collections/Chargeoffs: All in previous 36 months must be satisfied.
S-52
<PAGE>
Bankruptcy/Foreclosure: Must be discharged over three years from the
date of application; substantial re-establishment of credit required.
Credit Grade Category: "A-"
Debt-to-Income Ratio: Maximum of 45%
Mortgage History: No more than two delinquencies of 30 days or more
during the previous 12 months; provided that no such delinquencies may
have exceeded 59 days.
Consumer/Revolving Credit History: No delinquencies of 60 days or more
during the previous 12 months (during the case of "major" credit) or no
delinquencies of 90 days or more during the previous 12 months (in the
case of "minor" credit).
Collections/Chargeoffs: All except for up to $1,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over two years from the date
of application (or three years, if the loan-to-value ratio exceeds
85%); substantial re-establishment of credit required.
Credit Grade Category: "B"
Debt-to-Income Ratio: Maximum of 50%
Mortgage History: No more than three delinquencies of 30 days or more
during the previous 12 months; provided that no such delinquencies may
have exceeded 59 days.
Consumer/Revolving Credit History: No delinquencies of 90 days or more
during the previous 12 months (in the case of "major" credit) and no
delinquencies of 120 days or more during the previous 12 months (in the
case of "minor" credit).
Collections/Chargeoffs: All except for up to $2,500 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over eighteen months from
the date of application; substantial re-establishment of credit
required.
S-53
<PAGE>
Credit Grade Category: "B-"
Debt-to-Income Ratio: Maximum of 50%
Mortgage History: No more than four delinquencies of 30 days or more
during the previous 12 months, provided that no such delinquency may
have exceeded 59 days; and no more than one delinquency of 60 days or
more during the previous 12 months, provided that no such delinquency
may have exceeded 89 days.
Consumer/Revolving Credit History: No delinquencies of 90 days or more
during the previous 12 months (in the case of "major" credit) and no
delinquencies of 120 days or more during the previous 12 months (in the
case of "minor" credit).
Collections/Chargeoffs: All except for up to $2,500 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over eighteen months from
the date of application; substantial re-establishment of credit
required.
Credit Grade Category: "C"
Debt-to-Income Ratio: Maximum of 55%
Mortgage History: No more than five delinquencies of 30 days or more
during the previous 12 months, provided that no such delinquency may
have exceeded 59 days; and no more than two delinquencies of 60 days or
more during the previous 12 months, provided that no such delinquency
may have exceeded 89 days; and no more than one delinquency of 90 days
or more during the previous 12 months, provided that; such delinquency
may not have exceeded 119 days.
Consumer/Revolving Credit History: No delinquencies of 120 days or more
on any "major" credit during the previous 12 months.
Collections/Chargeoffs: All except for up to $5,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over one year from date of
application; substantial re-establishment of credit required.
Credit Grade Category: "C-"
Debt-to-Income Ratio: Maximum of 55%
Mortgage History: Borrower cannot be more than four months delinquent
at time of loan closing.
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<PAGE>
Consumer/Revolving Credit History: Borrower exhibits significant past
or present credit problems.
Collections/Chargeoffs: All except for up to $5,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Chapter 13 and foreclosures must be discharged
or consummated prior to loan application. Chapter 7 must be discharged
or consummated over one year from date of application.
Credit Grade Category: "D"
Debt-to-Income Ratio: Maximum of 60%
Mortgage History: History disregarded; default action allowable.
Consumer/Revolving Credit History: "Major" and "minor" credit
disregarded.
Collections/Chargeoffs: All except for up to $5,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Current Chapter 13 bankruptcy and foreclosures
paid through loan. Chapter 7 bankruptcy must be discharged prior to
loan application.
SERVICING OF THE MORTGAGE LOANS
General
The Subservicer will service the Mortgage Loans in accordance with the
terms set forth in the Pooling and Servicing Agreement. The Subservicer may
perform any of its obligations under the Pooling and Servicing Agreement through
one or more subservicers, which may be affiliates of the Subservicer.
Notwithstanding any such subservicing arrangement, the Subservicer will remain
liable for its servicing duties and obligations under the Pooling and Servicing
Agreement as if the Subservicer alone were servicing the Mortgage Loans.
The Subservicer
The information set forth below concerning the Subservicer has been
provided to the Depositor by the Subservicer. Neither the Depositor, the Seller,
the Trustee, the Underwriters nor any of their respective affiliates have made
any independent investigation of such information.
S-55
<PAGE>
[Advanta
[Advanta Mortgage Corp. USA] ("Advanta") will act as the Subservicer of
the Mortgage Loans pursuant to the Pooling and Servicing Agreement. Advanta is
an indirect subsidiary of Advanta Corp., a Delaware corporation ("Advanta
Parent"), a publicly traded company based in Springhouse, Pennsylvania with
assets as of June 30, 1999 in excess of $3.7 billion.
Advanta Parent, through its subsidiaries (including Advanta) had
managed assets (including mortgage loans) in excess of $12.3 billion as of June
30, 1999.
As of June 30, 1999, Advanta and its subsidiaries were servicing
approximately 112,000 closed-end fixed rate and adjustable rate mortgage loans
in the Owned and Managed Servicing Portfolio (defined below) representing an
aggregate outstanding principal balance of approximately $7.6 billion, and
approximately 144,000 mortgage loans in the Third-Party Servicing Portfolio
(defined below) representing an aggregate outstanding principal balance of
approximately $9.4 billion.
Recent Developments related to Advanta Parent
On January 22, 1999, Fleet Financial Group, Inc. and certain of its
affiliates ("Fleet") filed a complaint (the "Complaint") against Advanta Parent
and certain other affiliates (but not including Advanta) relating to the
transaction with Fleet which closed on February 20, 1998 in which Advanta Parent
contributed substantially all of its consumer credit card business to a limited
liability company owned by Fleet (the "Fleet Transaction"). The Complaint
centers around post-closing adjustments and other matters relating to the Fleet
Transaction.
Advanta Parent has filed an answer to the Complaint denying the
material allegations of the Complaint. Advanta Parent has also filed a
countersuit against Fleet seeking damages from Fleet. Advanta Parent does not
expect this suit to have any material adverse effect on the financial position
or future operating results of Advanta Parent.
This Prospectus Supplement contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. The most significant among these risks
and uncertainties is the uncertainty of the legal process. Additional risks that
may affect Advanta Parent's performance are detailed in Advanta Parent's filings
with the Securities and Exchange Commission, including its most recent Annual
Report on Form 10-K and its Quarterly Reports on Form 10-Q.
The ability of Advanta Parent's subsidiaries to honor their financial
and other obligations is to some extent influenced by the financial conditions
of Advanta Parent. Such obligations of Advanta, insofar as they relate to the
Trust with respect to the Mortgage Loans, primarily consist of Advanta's
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<PAGE>
limited advancing obligation and its obligation to service the Mortgage Loans.
To the extent that Advanta's ability to perform such obligations is adversely
affected, the Mortgage Loans may experience an increased level of delinquencies
and losses.
The Certificates will not represent an interest in or obligation of,
nor are the Mortgage Loans guaranteed by, Advanta or the Advanta Parent.
Additional information with respect to Advanta and Advanta Parent is available
in the various reports filed by Advanta and Advanta Parent with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended.
Owned and Managed Servicing Portfolio.
The following tables set forth information relating to the delinquency,
foreclosure and loan loss experience of Advanta for its servicing portfolio,
excluding certain loans serviced by Advanta that were not originated or
purchased and re-underwritten by affiliates of Advanta (the "Owned and Managed
Servicing Portfolio"), of closed-end fixed and adjustable rate mortgage loans as
of June 30, 1999, and for each of the three prior year ends. The Owned and
Managed Servicing Portfolio includes, but is not limited to, the mortgage loans
originated or purchased on or prior to June 30, 1999. In addition to the Owned
and Managed Servicing Portfolio, Advanta serviced as of June 30, 1999,
approximately 144,000 mortgage loans with an aggregate principal balance as of
such date of approximately $9.4 billion; such loans were not originated by
Advanta or affiliates of Advanta but are being serviced for third parties on a
contract servicing basis (the "Third Party Servicing Portfolio"). No loans in
the Third Party Servicing Portfolio are included in the tables set forth below.
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<PAGE>
DELINQUENCY AND FORECLOSURE EXPERIENCE OF
ADVANTA'S OWNED AND MANAGED SERVICING PORTFOLIO
OF CLOSED-END MORTGAGE LOANS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six
Months
Ended
June 30,
------------------------------------------------------------------------------------
1996 1997 1998 1999
------------------------------------------------------------------------------------
By By By By
Dollar Dollar Dollar Dollar
By No. Amount By No. Amount By No. Amount By No. Amount
of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio 43,303 $2,595,981 74,525 $4,888,936 111,707 $7,664,919 112,132 $7,660,254
Delinquency percentage(1) 6
30-59 days 3.07% 2.90% 3.13% 2.99% 3.05% 2.76% 3.18% 2.89%
60-89 days 0.85 0.90 0.98 0.98 1.10 1.08 1.10 1.01
90 days or more 1.45 1.26 1.39 1.28 1.45 1.22 1.94 1.73
- -- ---- ---- ---- ---- ---- ---- ---- ----
Total 5.37% 5.06% 5.50% 5.25% 5.60% 5.06% 6.22% 5.63%
Foreclosure rate(2) 1.62% 1.92% 2.10% 2.32% 2.85% 2.98% 3.46% 3.54%
REO properties(3) 0.42% -- 0.40% -- 0.78% -- 1.00% --
</TABLE>
- ------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due. The delinquency statistics for the period exclude
loans in foreclosure.
(2) "Foreclosure Rate" is the number of mortgage loans or the dollar amount of
mortgage loans in foreclosure as a percentage of the total number of
mortgage loans or the dollar amount of mortgage loans, as the cases may be,
as of the date indicated.
(3) REO Properties (i.e., "real estate owned" properties -- properties relating
to foreclosed mortgages or for which deeds in lieu of foreclosure have been
accepted, and held by Advanta pending disposition) percentages are
calculated using the number of loans, not the dollar amount.
LOAN LOSS EXPERIENCE
OF ADVANTA'S OWNED AND MANAGED SERVICING PORTFOLIO
OF CLOSED-END MORTGAGE LOANS
<TABLE>
<CAPTION>
Six
Months
Ended
June 30,
--------------------------------------------------------------------
1996 1997 1998 1999
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average amount outstanding(1) $2,102,643 $3,677,342 $6,233,870 $7,728,766
Net losses(2) $15,067 $18,435 $35,640 $23,374
Net losses as a percentage of
average amount outstand ing(s) 0.72% 0.50% 0.57% 0.60%(3)
</TABLE>
- ------------------
(1) "Average Amount Outstanding" during the period is the arithmetic average of
the principal balances of the mortgage loans outstanding on the last
business day of each month during the period.
(2) "Net Losses" are amounts relating to mortgage loans which have been
determined by Advanta to be uncollectible less amounts received by Advanta
as recoveries from liquidation proceeds and deficiency judgments.
(3) This represents an annualized number.
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<PAGE>
There can be no assurance that the delinquency, foreclosure and loan
loss experience on the Mortgage Loans will correspond to the delinquency,
foreclosure and loan loss experience set forth in the foregoing tables, in part
because the mortgage loans reflected in the foregoing tables may have been
underwritten pursuant to different underwriting guidelines and may represent
mortgage loans of a different character and mix than the Mortgage Loans, which
may impact the delinquency, foreclosure and loan loss experience of such
mortgage loans and how such mortgage loans are serviced. In addition, while the
Mortgage Loans will be serviced in accordance with accepted servicing practices,
Advanta may from time to time service each portfolio or group of mortgage loans
(whether the Owned and Managed Portfolio or Third Party Servicing Portfolio)
differently based in part on the seasoning, character and mix of the mortgage
loans. Therefore, the delinquency, foreclosure and loan loss experience set
forth in the foregoing tables may not necessarily be material to your decision
to invest.
In general, during periods in which the residential real estate market
is experiencing an overall decline in property values such that the principal
balances of the Mortgage Loans and any secondary financing on the related
Mortgaged Properties become equal to or greater than the value of the related
Mortgaged Properties, rates of delinquencies, foreclosure and losses could be
significantly higher than might otherwise be the case. In addition, adverse
economic conditions (which may affect real property values) may affect the
timely payment by Mortgagors of Monthly Payments, and accordingly, the actual
rates of delinquencies, foreclosures and losses with respect to the Mortgage
Pool.
Collection Procedures. Advanta employs a variety of collection
techniques during the various stages of delinquency. The primary purpose of all
collection efforts performed by Advanta is to bring a delinquent mortgage loan
current in as short a time as possible. Phone calls are used as the principal
form of contacting a mortgagor. Advanta utilizes a predictive dialing system for
the management of collection calling activity. Prior to initiating foreclosure
proceedings, Advanta makes every reasonable effort to determine the reason for
the default; whether the delinquency is a temporary or permanent condition; and
the mortgagor's attitude toward the obligation. Advanta will take action to
foreclose a mortgage only once every reasonable effort to cure the default has
been made and a projection of the ultimate gain or loss on REO sale is
determined. Pursuant to accepted servicing practices, foreclosures are processed
within individual state guidelines and in accordance with the provisions of the
mortgage and applicable state law.]
Servicing Compensation and Payment of Expenses
The Subservicer will be paid a monthly fee from interest collected with
respect to each Mortgage Loan (as well as from any liquidation proceeds from a
liquidated Mortgage Loan that are applied to accrued and unpaid interest)
generally equal to the unpaid principal balance thereof (after giving effect to
any Advances (defined herein) made with respect thereto) (the "Stated Principal
Balance") multiplied by one-twelfth of the Servicing Fee Rate (such product, the
"Servicing Fee"). The "Servicing Fee Rate" for each Mortgage Loan will equal
0.50% per annum. The amount of the
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<PAGE>
monthly Servicing Fee is subject to adjustment with respect to prepaid Mortgage
Loans, as described below under "--Adjustment to Servicing Fee in Connection
with Certain Prepaid Mortgage Loans." The Subservicer is also entitled to
receive, as additional servicing compensation, all assumption fees and other
similar charges and all investment income earned on amounts on deposit in the
Collection Account. The Subservicer is obligated to pay certain ongoing expenses
associated with the Mortgage Loans in connection with its responsibilities under
the Pooling and Servicing Agreement.
Adjustment to Servicing Fee in Connection with Certain Prepaid Mortgage Loans
When a Mortgagor prepays all or a portion of a Mortgage Loan between
scheduled monthly payment dates ("Due Dates"), the Mortgagor pays interest on
the amount prepaid only to the date of such prepayment. Prepayments received
during the prior Prepayment Period (defined herein) are included in the
distribution to Certificateholders on the related Distribution Date thereby
causing a shortfall in interest. In order to mitigate the effect of any such
shortfall in interest distributions to Certificateholders on any Distribution
Date, the amount of the Servicing Fee otherwise payable to the Subservicer for
such month shall, to the extent of such shortfall, be deposited by the
Subservicer in the Collection Account for distribution to the Certificateholders
on such Distribution Date (the amount of such deposit, "Compensating Interest").
However, any such reduction in the Servicing Fee otherwise payable with respect
to such Distribution Date will be limited to the product of (i) one-twelfth of
0.35% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans with
respect to the related Distribution Date. Any such deposit by the related
Subservicer will be reflected in the distributions to the Certificateholders
made on the Distribution Date to which such Due Period relates. Any such
shortfall in excess of Compensating Interest (such excess, the "Prepayment
Interest Shortfall") will be allocated on such Distribution Date pro rata among
the outstanding Classes of Certificates based upon the amount of interest each
such Class would otherwise be paid on such Distribution Date.
Advances
Subject to the following limitations described below, on each Servicer
Remittance Date, the Subservicer will be required to advance its own funds, or
funds in the Collection Account that are not required to be distributed on the
related Distribution Date, in an amount equal to the aggregate of payments of
principal and interest on the Mortgage Loans (adjusted to the applicable Net
Mortgage Rate) that were due on the related Due Date and delinquent on the
related Servicer Remittance Date, together with an amount equivalent to interest
(adjusted to the applicable Net Mortgage Rate) deemed due on each Mortgage Loan
as to which the related Mortgaged Property has been acquired by the Subservicer
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan ("REO Property"), such latter amount to be calculated
after taking into account any rental income from such Mortgaged Property (any
such advance, an "Advance", and the date of any such Advance, as described
herein, a "Servicer Advance Date").
Advances are intended to maintain a regular flow of scheduled interest
and principal payments on the Offered Certificates rather than to guarantee or
insure against losses. The Subservicer is obligated to make Advances with
respect to delinquent payments of principal of or interest on each Mortgage Loan
(with such payments of interest adjusted to the related Net Mortgage Rate) to
the
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<PAGE>
extent that such Advances are, in its judgment, reasonably recoverable from
future payments and collections or insurance payments or proceeds of liquidation
of the related Mortgage Loan; provided, however, that the Subservicer need not
make Advances with respect to the principal portion of any Balloon Amount but
the Subservicer will be required to Advance monthly interest on a Balloon Loan
until the principal balance thereof is reduced to zero subject to the Servicer's
determination of nonrecoverability. In the event the Subservicer previously made
Advances which later are determined to be nonrecoverable, the Subservicer will
be entitled to reimbursement of such Advances prior to distributions to
Certificateholders. If the Subservicer determines on any Servicer Remittance
Date to make an Advance, such Advance will be included with the distribution to
holders of the Offered Certificates on the related Distribution Date. Any
failure by the Subservicer to make an Advance as required under the Pooling and
Servicing Agreement will constitute an event of default thereunder, in which
case the Trustee, as successor servicer, or such other entity as may be
appointed as successor servicer, will be obligated to make any such Advance in
accordance with the terms of the Pooling and Servicing Agreement.
Master Servicer
Chase Manhattan Mortgage will act as "Master Servicer." The Master
Servicer will (a) provide certain administrative services and file certain
reports with regard to the Certificates, (b) provide certain reports to the
Trustee regarding the Mortgage Loans and the Certificates and (c) receive
payments with respect to the Mortgage Loans from the Subservicer and, in its
capacity as paying agent for the Certificates, remit such payments to the
Certificateholders as described herein. The Master Servicer will pay certain
administrative expenses of the Trust including the fees of the Trustee. The
Master Servicer will be entitled to a monthly "Master Servicer Fee" with respect
to each Mortgage Loan, payable with respect to each Distribution Date, in an
amount equal to the sum of (i) one-twelfth of the Master Servicer Fee Rate
multiplied by the principal balance of such Mortgage Loan and (ii) all late
payment fees and prepayment penalties and all investment income earned on funds
in the Certificate Account and the Distribution Account. The "Master Servicer
Fee Rate" is [______]% per annum.
S-61
<PAGE>
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will represent the entire beneficial ownership
interest in a trust fund (the "Trust Fund") to be created pursuant to the
Pooling and Servicing Agreement. A copy of the Pooling and Servicing Agreement
will be attached as an exhibit to the Current Report on Form 8-K of the
Depositor that will be available to purchasers of the Certificates at, and will
be filed with, the Securities and Exchange Commission within 15 days of the
initial delivery of the Certificates. Reference is made to the attached
prospectus (the "Prospectus") for additional information regarding the terms and
conditions of the Pooling and Servicing Agreement.
The following summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Pooling and Servicing Agreement. When particular provisions or terms used in the
Pooling and Servicing Agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference.
The Chase Funding Mortgage Loan Asset-Backed Certificates, Series
[_________](the "Certificates") will consist of: (a) the Class IA-1, Class IA-2,
Class IA-3, Class IA-4 and Class IA- 5 Certificates (collectively, the "Class A
Group I Certificates"), the Class IM-1 Certificates (the "Class IM-1
Certificates") and Class IM-2 Certificates (the "Class IM-2 Certificates" and
together with the Class IM-1 Certificates, the "Mezzanine Group I Certificates")
and the Class IB Certificates (the "Class IB Certificates" and together with the
Mezzanine Group I Certificates, the "Subordinated Group I Certificates" and the
Subordinated Group I Certificates together with the Class A Group I
Certificates, the "Group I Certificates"); (b) the Class IIA-1 Certificates (the
"Class A Group II Certificates," and together with the Class A Group I
Certificates, the "Class A Certificates"), the Class IIM-1 Certificates (the
"Class IIM-1 Certificates" and together with the Class IM-1 Certificates, the
"Class M-1 Certificates") and Class IIM-2 Certificates (the "Class IIM-2
Certificates" and together with the Class IIM-1 Certificates, the "Mezzanine
Group II Certificates," and together with the Class IM-2 Certificates, the
"Class M-2 Certificates") and the Class IIB Certificates (the "Class IIB
Certificates," and together with the Mezzanine Group II Certificates, the
"Subordinated Group II Certificates," and together with the Class IB
Certificates, the "Class B Certificates", and the Subordinated Group II
Certificates together with the Class A Group II Certificates, the "Group II
Certificates"); and (c) the Class R Certificates (the "Residual Certificates").
The Mezzanine Group I Certificates and the Mezzanine Group II Certificates are
referred to collectively as the "Mezzanine Certificates". The Subordinated Group
I Certificates and the Subordinated Group II Certificates are referred to
collectively as the "Subordinated Certificates." The Group I Certificates and
the Group II Certificates are referred to as the "Offered Certificates". As used
herein, a "Certificate Group" is either the Group I Certificates or the Group II
Certificates, as the context requires.
The Offered Certificates will be issued in book-entry form as described
below. The Offered Certificates will be issued in minimum dollar denominations
of [$25,000] and integral multiples of $1,000 in excess thereof.
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<PAGE>
Book-Entry Certificates
The Offered Certificates will be book-entry Certificates (the
"Book-Entry Certificates"). Persons acquiring beneficial ownership interests in
the Offered Certificates ("Certificate Owners") may elect to hold their Offered
Certificates through The Depository Trust Company ("DTC") in the United States,
or Cedelbank, societe anonyme ("CEDEL") or the Euroclear System ("Euroclear") in
Europe, if they are participants of such systems, or indirectly through
organizations which are participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates which equal the
aggregate principal balance of the Offered Certificates and will initially be
registered in the name of Cede & Co. ("Cede"), the nominee of DTC. CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and Euroclear's names on the books of
their respective depositaries which in turn will hold such positions in
customers' securities accounts in the depositaries' names on the books of DTC.
Citibank, N.A. will act as depositary for CEDEL and Chase will act as depositary
for Euroclear (in such capacities, individually the "Relevant Depositary" and
collectively the "European Depositaries"). Investors may hold such beneficial
interests in the Book-Entry Certificates in minimum denominations representing
principal balances ("Certificate Principal Balances") of [$25,000] and integral
multiples of $1,000 in excess thereof. Except as described below, no person
acquiring a Book-Entry Certificate (each, a "beneficial owner") will be entitled
to receive a physical certificate representing such Offered Certificate (a
"Definitive Certificate"). Unless and until Definitive Certificates are issued,
it is anticipated that the only Certificateholder of the Offered Certificates
will be Cede & Co., as nominee of DTC. Certificate Owners will not be
Certificateholders as that term is used in the Pooling and Servicing Agreement.
Certificate Owners are only permitted to exercise their rights indirectly
through the participating organizations that utilize the services of DTC,
including securities brokers and dealers, banks and trust companies and clearing
corporations and certain other organizations ("Participants") and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant and on
the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Offered Certificates from the Trustee through DTC and DTC
participants. While the Offered Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Offered Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Participants and organizations which have indirect access to the DTC system,
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"), with whom Certificate Owners have accounts
with respect to Offered Certificates are similarly required to make book-entry
transfers
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<PAGE>
and receive and transmit such distributions on behalf of their respective
Certificate Owners. Accordingly, although Certificate Owners will not possess
certificates, the Rules provide a mechanism by which Certificate Owners will
receive distributions and will be able to transfer their interest.
Certificate Owners will not receive or be entitled to receive
certificates representing their respective interests in the Offered
Certificates, except under the limited circumstances described below. Unless and
until Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Offered Certificates only through
Participants and Indirect Participants by instructing such Participants and
Indirect Participants to transfer Offered Certificates, by book-entry transfer,
through DTC for the account of the purchasers of such Offered Certificates,
which account is maintained with their respective Participants. Under the Rules
and in accordance with DTC's normal procedures, transfers of ownership of
Offered Certificates will be executed through DTC and the accounts of the
respective Participants at DTC will be debited and credited. Similarly, the
Participants and Indirect Participants will make debits or credits, as the case
may be, on their records on behalf of the selling and purchasing Certificate
Owners.
Because of time zone differences, credits of securities received in
CEDEL, or Euroclear as a result of a transaction with a Participant will be made
during, subsequent securities settlement processing and dated the business day
(as defined in the Pooling and Servicing Agreement, a "Business Day") following,
the DTC settlement date. Such credits or any transactions in such securities,
settled during such processing will be reported to the relevant Euroclear or
CEDEL Participants on such Business Day. Cash received in CEDEL or Euroclear, as
a result of sales of securities by or through a CEDEL Participant (as defined,
below) or Euroclear Participant (as defined below) to a DTC Participant, will be
received with value on the DTC settlement date but will be available in the
relevant CEDEL or Euroclear cash account only as of the Business Day following
settlement in DTC. For information with respect to tax documentation procedures,
relating to the Offered Certificates, see "Federal Income Tax
Consequences---Foreign Investors" in the Prospectus and "Global, Clearance,
Settlement And Tax Documentation Procedures--Certain U.S. Federal Income Tax
Documentation Requirements" in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterpart in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the European Depositaries.
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<PAGE>
DTC, which is a New York-chartered limited purpose trust company,
performs services for its participants, some of which (and/or their
representatives) own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each DTC participant in the Book-Entry
Certificates, whether held for its own account or as a nominee for another
person. In general, beneficial ownership of Book-Entry Certificates will be
subject to the rules, regulations and procedures governing DTC and DTC
participants as in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
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<PAGE>
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable DTC participants
in accordance with DTC's normal procedures. Each DTC participant will be
responsible for disbursing such payments to the beneficial owners of the
Book-Entry Certificates that it represents and to each Financial Intermediary
for which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the Book-Entry Certificates
that it represents.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede. Distributions with respect to
Offered Certificates held through CEDEL or Euroclear will be credited to the
cash accounts of CEDEL Participants or Euroclear Participants in accordance with
the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Federal
Income Tax Consequences--Foreign Investors" and "--Backup Withholding" in the
Prospectus. Because DTC can only act on behalf of Financial Intermediaries, the
ability of a beneficial owner to pledge Book-Entry Certificates to persons or
entities that do not participate in the depository system, or otherwise take
actions in respect of such Book-Entry Certificates, may be limited due to the
lack of physical certificates for such Book-Entry Certificates. In addition,
issuance of the Book-Entry Certificates in book-entry form may reduce the
liquidity of such Offered Certificates in the secondary market since certain
potential investors may be unwilling to purchase Offered Certificates for which
they cannot obtain physical certificates.
Monthly and annual reports on the Trust Fund provided by the
Subservicer to Cede, as nominee of DTC, may be made available to beneficial
owners upon request, in accordance with the rules, regulations and procedures
creating and affecting DTC or the Relevant Depositary, and to the Financial
Intermediaries to whose DTC accounts the Book-Entry Certificates of such
beneficial owners are credited.
DTC has advised the Depositor and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Certificates under the Pooling and
Servicing Agreement only at the direction of one or more Financial
Intermediaries to whose DTC accounts the Book-Entry Certificates are credited,
to the extent that such actions are taken on behalf of Financial Intermediaries
whose holdings include such Book-Entry Certificates. CEDEL or the Euroclear
Operator, as the case may be, will take any other action
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permitted to be taken by a Holder of an Offered Certificate under the Pooling
and Servicing Agreement on behalf of a CEDEL Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to the ability of the Relevant Depositary to effect such actions on its
behalf through DTC. DTC may take actions, at the direction of the related
Participants, with respect to some Offered Certificates which conflict with
actions taken with respect to other Offered Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC
or the Depositor advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depositary with respect to the Book-Entry Certificates and the Depositor or the
Trustee is unable to locate a qualified successor, (b) the Depositor at its sole
option, elects to terminate a book-entry system through DTC or (c) after the
occurrence of an Event of Default (as defined herein), beneficial owners having
not less than 51% of the voting rights evidenced by the Offered Certificates
advise the Trustee and DTC through the Financial Intermediaries and the DTC
participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interests of beneficial owners
of such Class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
holders of the Offered Certificates under the Pooling and Servicing Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
Payments on Mortgage Loans; Collection Account; Certificate Account;
Distribution Account
The Pooling and Servicing Agreement provides that the Subservicer for
the benefit of the Certificateholders shall establish and maintain a Collection
Account (the "Collection Account"), into which the Subservicer is generally
required to deposit or cause to be deposited, promptly upon receipt and in any
event within two Business Days, the payments and collections described in "The
Pooling and Servicing Agreement--Payments on Mortgage Loans; Collection Account"
in the Prospectus, except that the Subservicer may deduct its Servicing Fee and
any expenses of liquidating defaulted Mortgage Loans or property acquired in
respect thereof. The Pooling and Servicing Agreement permits the Master Servicer
to direct any depository institution maintaining the Collection Account to
invest the funds in the Collection Account in one or more investments acceptable
to Moody's and Fitch (as provided in the Pooling and Servicing Agreement), that
mature, unless payable on demand, no later than the Business Day preceding the
18th day of each month, or, if such day is not a Business Day, the preceding
Business Day (the "Servicer Remittance Date"). The Subservicer will be entitled
to all income and gain realized from any such investment, and such income and
gain will be subject to withdrawal by the Subservicer from time to time. The
Subservicer will be required to deposit the
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amount of any losses incurred in respect to any such investments out of its own
funds as such losses are realized.
The Master Servicer will be obligated to establish an account (the
"Certificate Account"), into which the Subservicer will deposit or cause to be
deposited not later than 12:00 noon Pacific Time on the Servicer Remittance Date
from amounts on deposit in the Collection Account, the Interest Funds (other
than amounts withdrawn from the Capitalized Interest Account) and Principal
Funds (other than amounts withdrawn from the Pre-Funding Account) for each Loan
Group and the Master Servicer Fee with respect to such Distribution Date.
Subject to the restrictions set forth in the Pooling and Servicing Agreement,
the Master Servicer is permitted to direct that the funds in the Certificate
Account be invested so long as such investments mature, unless maintained with
the institution holding such account, no later than the Business Day prior to
the Distribution Date. All income and gain realized from any such investment
will belong to the Master Servicer and is subject to its withdrawal or order
from the Certificate Account. The Master Servicer will be required to deposit in
the Certificate Account out of its own funds the amount of any losses incurred
in respect of any such investment, as such losses are realized.
The Master Servicer, as initial paying agent, is obligated under the
Pooling and Servicing Agreement to establish and maintain a separate trust
account (the "Distribution Account"), into which the Master Servicer is
obligated to deposit on the Business Day preceding each Distribution Date, an
amount equal to the Interest Funds and Principal Funds for each Loan Group with
respect to such Distribution Date. Subject to the restrictions set forth in the
Pooling and Servicing Agreement, the Master Servicer is permitted to direct that
the funds in the Distribution Account be invested so long as such investments
mature, unless maintained with the institution holding such account, no later
than the related Distribution Date. All income and gain realized from any such
investment will belong to the Master Servicer and is subject to its withdrawal
or order from the Distribution Account. The Master Servicer will be required to
deposit in the Distribution Account out of its own funds the amount of any
losses incurred in respect of any such investment, as such losses are realized.
The "Interest Funds" with respect to each Loan Group are equal to the
sum, without duplication, of (i) all scheduled interest due during the related
Due Period less the Servicing Fee and Master Servicer Fee, (ii) all Advances
relating to interest, (iii) all Compensating Interest, (iv) Liquidation Proceeds
(to the extent such Liquidation Proceeds relate to interest) less all
non-recoverable Advances relating to interest and certain expenses reimbursed
during the related Due Period, and (v) the portion of any amounts removed from
the Capitalized Interest Account (defined herein) applicable to such Loan Group.
The "Principal Funds" with respect to each Loan Group are equal to the
sum, without duplication, of (i) the scheduled principal due during the related
Due Period and received before the related Servicer Remittance Date or advanced
on or before the related Servicer Remittance Date, (ii) prepayments collected in
the related Prepayment Period, (iii) the Stated Principal Balance of each
Mortgage Loan that was repurchased by the Depositor, (iv) the amount, if any, by
which the aggregate unpaid principal balance of any replacement Mortgage Loans
is less than the aggregate unpaid principal balance of any Mortgage Loans
delivered by the Seller in connection with a substitution of a Mortgage Loan,
(v) all Liquidation Proceeds collected during the related Due Period (to the
extent such
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Liquidation Proceeds related to principal) less all non-recoverable Advances
relating to principal and all non-recoverable servicing advances reimbursed
during the related Due Period, and (vi) with respect to the Distribution Date
immediately following the end of the Funding Period, the portion, if any, of the
Original Pre-Funded Amount relating to such Loan Group remaining in the
Pre-Funding Account after giving effect to the purchase of the Subsequent
Mortgage Loans.
The "Due Period" with respect to any Distribution Date is the period
beginning on the second day of the calendar month preceding the calendar month
in which such Distribution Date occurs (or, in the case of the first
Distribution Date, on the Cut-off Date) and ending on the Due Date in the month
in which such Distribution Date occurs. The "Prepayment Period" with respect to
any Distribution Date is the calendar month preceding the month in which such
Distribution Date occurs.
Distributions
General. Distributions on the Certificates will be made by The Chase
Manhattan Bank, as paying agent on the 25th day of each month, or if such day is
not a Business Day, on the first Business Day thereafter, commencing in [DATE]
(each, a "Distribution Date"), to the persons in whose names such Certificates
are registered at the close of business on the last Business Day of the month
preceding the month of such Distribution Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed to
the address of the person entitled thereto as it appears on the Certificate
Register or, in the case of any Certificateholder that holds 100% of a Class of
Certificates or who holds a Class of Certificates with an aggregate initial
Certificate Principal Balance of $1,000,000 or more and that has so notified the
Master Servicer in writing in accordance with the Pooling and Servicing
Agreement, by wire transfer in immediately available funds to the account of
such Certificateholder at a bank or other depository institution having
appropriate wire transfer facilities; provided, however, that the final
distribution in retirement of the Certificates will be made only upon
presentation and surrender of such Certificates at the Corporate Trust Office of
the Master Servicer. On each Distribution Date, a Holder of a Certificate will
receive such Holder's Percentage Interest of the amounts required to be
distributed with respect to the applicable Class of Certificates. The
"Percentage Interest" evidenced by a Certificate will equal the percentage
derived by dividing the denomination of such Certificate by the aggregate
denominations of all Certificates of the applicable Class.
Distributions of Interest. On each Distribution Date, the interest
distributable with respect to the Group I Certificates (other than the Class
IA-1 Certificates) is the interest which has accrued thereon at the related
Pass-Through Rate during the calendar month immediately preceding the calendar
month in which such Distribution Date occurs less Prepayment Interest
Shortfalls, if any, and the interest distributable with respect to the Group II
Certificates and the Class IA-1 Certificates is the interest which has accrued
thereon at the then applicable related Pass-Through Rate from and including the
preceding Distribution Date (or from the Closing Date in the case of the first
Distribution Date) to and including the day prior to the current Distribution
Date less Prepayment Interest Shortfalls, if any. Each period referred to in the
prior sentence relating to the accrual of interest is the "Accrual Period" for
the related Class of Offered Certificates.
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All calculations of interest of the Group I Certificates (other than
the Class IA-1 Certificates) will be made on the basis of a 360-day year assumed
to consist of twelve 30-day months. All calculations of interest on the Group II
Certificates and the Class IA-1 Certificates will be made on the basis of a
360-day year and the actual number of days elapsed in the applicable Accrual
Period.
On each Distribution Date, the Interest Funds for such Distribution
Date with respect to each Loan Group are required to be distributed in the
following order of priority, until such Interest Funds have been fully
distributed:
(i) to each Class of the Class A Certificates of the Certificate Group
related to such Loan Group, the Current Interest and any Interest Carry Forward
Amount with respect to each such Class; provided, however, that if the Interest
Funds for the Group I Certificates are insufficient to make a full distribution
of the aggregate Current Interest and the aggregate Interest Carry Forward
Amount to the Class A Group I Certificates, the Interest Funds for such
Certificate Group will be distributed pro rata among each Class of the Class A
Group I Certificates based upon the ratio of (x) the Current Interest and
Interest Carry Forward Amount for each Class of the Class A Certificates of such
Certificate Group to (y) the total amount of Current Interest and any Interest
Carry Forward Amount for the Class A Certificates of such Certificate Group;
(ii) to the Class M-1 Certificates of such Certificate Group, the
Current Interest for such Class and any Interest Carry Forward Amount with
respect to such Class;
(iii) to the Class M-2 Certificates of such Certificate Group, the
Current Interest for such Class and any Interest Carry Forward Amount with
respect to such Class;
(iv) to the Class B Certificates of such Certificate Group, the Current
Interest for such Class and any Interest Carry Forward Amount with respect to
such Class; and
(v) any remainder to be distributed as described below under
"--Overcollateralization and Crosscollateralization Provisions".
"Current Interest", with respect to each Class of the Offered
Certificates and each Distribution Date, is the interest accrued at the
applicable Pass-Through Rate for the applicable Accrual Period on the
Certificate Principal Balance of such Class as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus any amount previously distributed with
respect to interest for such Class that is recovered as a voidable preference by
a trustee in bankruptcy less any Prepayment Interest Shortfalls allocated to
such Class on such Distribution Date. For purposes of calculating interest on
the Group I Certificates (other than the Class IA-1 Certificates), principal
distributions on a Distribution Date will be deemed to have been made on the
first day of the Accrual Period in which such Distribution Date occurs.
"Interest Carry Forward Amount", with respect to each Class of the
Offered Certificates and each Distribution Date, is the sum of (i) the excess of
(A) Current Interest for such Class with respect to prior Distribution Dates
(excluding any Adjustable Rate Certificate Carryover, if applicable) over (B)
the amount actually distributed to such Class with respect to interest on such
prior Distribution
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Dates and (ii) interest on such excess (to the extent permitted by applicable
law) at the applicable Pass-Through Rate.
The "Pass-Through Rate" with respect to the Class IA-2 Certificates and
Class IA-3 Certificates is the per annum rate set forth for each such Class in
the table on page S-3; the "Pass-Through Rate" for the Class IA-4, Class IA-5,
Class IM-1, Class IM-2 and Class IB Certificates on any Distribution Date will
equal the lesser of (i) the per annum rate for such Class set forth in the table
on page S-3 and (ii) the weighted average Net Mortgage Rates on the Fixed Rate
Mortgage Loans and the "Pass-Through Rate" for the Class IA-1 Certificates will
equal the lesser of (i) One-Month LIBOR (defined below) plus the Pass-Through
Margin (defined below) for such Class and (ii) the weighted average Net Mortgage
Rates on the Fixed Rate Mortgage Loans; provided, further, that the Pass-Through
Rate for the Class IA-4 Certificates on any Distribution Date after the Optional
Termination Date will equal [______]%. The "Pass Through Rate" with respect to
each Class of Group II Certificates will be determined as described below.
The "Pass-Through Rate" for the Group II Certificates will be equal to
the least of (i) the London interbank offered rate for one month United States
dollar deposits, calculated as described below under "--Calculation of One-Month
LIBOR" ("One-Month LIBOR"), plus the Pass-Through Margin for such Class, (ii)
the "Group II Maximum Rate Cap," which is defined as the weighted average of the
maximum lifetime Mortgage Rates on the Adjustable Rate Mortgage Loans less the
Servicing Fee Rate and the Master Servicer Fee Rate and (iii) the "Group II
Available Funds Cap" for the Group II Certificates, which is defined as a per
annum rate equal to 12 times the quotient of (x) the sum of (A) the total
scheduled interest on the Adjustable Rate Mortgage Loans in the Adjustable Rate
Mortgage Loan Group based on the Net Mortgage Rates in effect on the related Due
Date and (B)(I) with respect to the Distribution Date in [DATE], 50% of the
amount in the Capitalized Interest Account as of such Distribution Date
allocable to Loan Group II immediately prior to such Distribution Date, (II)
with respect to the Distribution Date in [DATE], 100% of the amount in the
Capitalized Interest Account allocable to Loan Group II immediately prior to
such Distribution Date and (III) with respect to the Distribution Date in [DATE]
and thereafter, 0% of the amount in the Capitalized Interest Account allocable
to Loan Group II immediately prior to such Distribution Date divided by (y) the
aggregate principal balance of the Group II Certificates as of the first day of
the applicable Accrual Period.
With respect to any Mortgage Loan, the "Net Mortgage Rate" is the
Mortgage Rate with respect to such Mortgage Loan less the sum of (i) the
Servicing Fee Rate and (ii) the Master Servicer Fee Rate.
The "Pass-Through Margin" for each Class of Group II Certificates is as
follows: for any Distribution Date on or before the applicable Optional
Termination Date: Class IIA-1, [____]%; Class IIM-1, [____]%; Class IIM-2,
[____]%; Class IIB, [____]% and Class IA-1, [____]%; and for any Distribution
Date after the applicable Optional Termination Date: Class IIA-1, [____]%; Class
IIM-1, [____]%; Class IIM-2, [____]%; Class IIB, [_____]%; and Class IA-1,
[____]%. The "Pass-Through Margin" for the Class IA-1 Certificates is [____]%.
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If on any Distribution Date, the Pass-Through Rate for a Class of Group
II Certificates is based upon its Group II Available Funds Cap, the excess of
(i) the amount of interest that such Class would have been entitled to receive
on such Distribution Date had the Pass-Through Rate for that Class not been
calculated based on the Group II Available Funds Cap, up to but not exceeding
the Group II Maximum Rate Cap over (ii) the amount of interest such Class
received on such Distribution Date based on the Group II Available Funds Cap, up
to but not exceeding the Group II Maximum Rate Cap, together with the unpaid
portion of any such excess from prior Distribution Dates (and interest accrued
thereon at the then applicable Pass-Through Rate, without giving effect to the
Group II Available Funds Cap) is the "Adjustable Rate Certificate Carryover" for
such Class. Any Adjustable Rate Certificate Carryover will be paid on future
Distribution Dates from and to the extent of funds available therefor as
described herein. The ratings of the Group II Certificates do not address the
likelihood of the payment of any Adjustable Rate Certificate Carryover.
Distributions of Principal. On each Distribution Date, the Principal
Distribution Amount (as defined below) with respect to each Certificate Group
for such Distribution Date is required to be distributed as follows until such
Principal Distribution Amount has been fully distributed:
[Describe principal payment methodology]
The "Principal Distribution Amount", with respect to each Distribution
Date and a Certificate Group, is the sum of (i) the Principal Funds for such
Distribution Date for such Certificate Group and (ii) any Extra Principal
Distribution Amount (defined below) for such Distribution Date for the related
Certificate Group.
The "Class A Principal Distribution Amount", for a Certificate Group is
(i) with respect to any Distribution Date prior to the related Stepdown Date
(defined below) or as to which a Trigger Event (defined below) exists, 100% of
the Principal Distribution Amount for such Certificate Group for such
Distribution Date and (ii) with respect to any Distribution Date on or after the
Stepdown Date and as to which a Trigger Event does not exist, the excess of (A)
the Certificate Principal Balance of the Class A Certificates for such
Certificate Group immediately prior to such Distribution Date over (B) the
lesser of (i) approximately [_____]% for the Fixed Rate Mortgage Loan Group and
approximately [_____]% (or approximately [_____]%, if a Stepup Trigger Event
(defined below) has occurred) for the Adjustable Rate Mortgage Loan Group, of
the Stated Principal Balances of the Mortgage Loans in such Loan Group on the
preceding Due Date, and (iii) the Stated Principal Balances of the Mortgage
Loans in such Loan Group on the preceding Due Date less approximately $1,000,000
for the Fixed Rate Mortgage Loan Group and approximately $[_________]for the
Adjustable Rate Mortgage Loan Group.
The "Class IA-5 Distribution Amount", for any Distribution Date prior
to the Distribution Date in [DATE], is the product of (i) a fraction, the
numerator of which is the Certificate Principal Balance of the Class IA-5
Certificates and the denominator of which is the aggregate Certificate Principal
Balance of all Class A Group I Certificates, in each case immediately prior to
such Distribution Date, (ii) the Class A Principal Distribution Amount with
respect to the Fixed Rate Mortgage Loan Group for such Distribution Date and
(iii) the applicable percentage for such Distribution Date set forth in the
following table:
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Distribution Date Occurring In Percentage
[MONTH/DATE] through [MONTH/DATE]............... 0%
[MONTH/DATE] through [MONTH/DATE]............... 45%
[MONTH/DATE] through [MONTH/DATE]............... 80%
[MONTH/DATE] through [MONTH/DATE]............... 100%
[MONTH/DATE] through [MONTH/DATE]............... 300%
With respect to the Distribution Date occurring in [MONTH/DATE] and each
Distribution Date thereafter until the Certificate Principal Balance of the
Class IA-5 Certificates has been reduced to zero, the Class IA-5 Principal
Distribution Amount will equal the Class A Principal Distribution Amount with
respect to the Fixed Rate Mortgage Loan Group for such Distribution Date.
The "Class M-1 Principal Distribution Amount", for a Certificate Group
and with respect to any Distribution Date on or after the related Stepdown Date
is 100% of the Principal Distribution Amount for the related Certificate Group
if the Certificate Principal Balance of each Class of Class A Certificates for
such Certificate Group has been reduced to zero and a Trigger Event exists, or,
if any Class A Certificates for such Certificate Group are still outstanding,
and as long as a Trigger Event does not exist for such Certificate Group, is the
excess of (i) the sum for such Certificate Group of (A) the Certificate
Principal Balance of the related Class A Certificates (after taking into account
distributions of the Class A Principal Distribution Amount to such Class A
Certificates for such Distribution Date) and (B) the Certificate Principal
Balance of the related Class M-1 Certificates immediately prior to such
Distribution Date over (ii) the lesser of (A) approximately [_____]% for the
Fixed Rate Mortgage Loan Group and approximately [_____]% (or approximately
[_____]%, if a Stepup Trigger Event has occurred) for the Adjustable Rate
Mortgage Loan Group of the Stated Principal Balances of the Mortgage Loans in
such Loan Group on the preceding Due Date, and (B) the Stated Principal Balances
of the Mortgage Loans in such Loan Group on the preceding Due Date less
approximately $1,000,000 for the Fixed Rate Mortgage Loan Group and
approximately $[________]for the Adjustable Rate Mortgage Loan Group.
Notwithstanding the foregoing, on any Distribution Date prior to the Stepdown
Date on which the Certificate Principal Balance of each Class of Class A
Certificates for a Certificate Group has been reduced to zero, the Class M-1
Principal Distribution Amount for such Certificate Group will equal the lesser
of (A) the outstanding Certificate Principal Balance of the related Class M-1
Certificates and (B) 100% of the Principal Distribution Amount for such
Certificate Group remaining after any distributions on such Class A
Certificates.
The "Class M-2 Principal Distribution Amount", for a Certificate Group
and with respect to any Distribution Date on or after the related Stepdown Date,
is 100% of the Principal Distribution Amount for the related Certificate Group
if the Certificate Principal Balance of each Class of Class A and Class M-1
Certificates for such Certificate Group has been reduced to zero and a Trigger
Event exists, or, if the Class A and Class M-1 Certificates for such Certificate
Group are still outstanding and as long as a Trigger Event does not exist for
such Certificate Group, is the excess of (i) of the sum for such Certificate
Group of (A) the Certificate Principal Balance of the Class A Certificates
(after taking into account distributions of the Class A Principal Distribution
Amount to such Class A Certificates for such Distribution Date), (B) the
Certificate Principal Balance of the related Class M-1 Certificates
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(after taking into account distribution of the Class M-1 Principal
Distribution Amount to such Class M- 1 Certificates for such Distribution Date)
and (C) the Certificate Principal Balance of the related Class M-2 Certificates
immediately prior to such Distribution Date over (ii) the lesser of (A)
approximately [_____]% for the Fixed Rate Mortgage Loan Group and approximately
[_____]% (or approximately [_____]%, if a Stepup Trigger Event has occurred) for
the Adjustable Rate Mortgage Loan Group, of the aggregate Stated Principal
Balances of the Mortgage Loans in such Loan Group on the preceding Due Date, and
(B) the Stated Principal Balances of the Mortgage Loans in such Loan Group on
the preceding Due Date less approximately $1,900,000 for the Adjustable Rate
Mortgage Loan Group. Notwithstanding the foregoing, on any Distribution Date
prior to the Stepdown Date on which the aggregate Certificate Principal Balance
of each class of Class A Certificates and the Class M-1 Certificates for a
Certificate Group has been reduced to zero, the Class M-2 Principal Distribution
Amount for such Certificate Group will equal the lesser of (A) the outstanding
Certificate Principal Balance of the related Class M-2 Certificates and (B) 100%
of the Principal Distribution Amount for such Certificate Group remaining after
any distributions on such Class A and Class M-1 Certificates.
The "Class B Principal Distribution Amount", for a Certificate Group
and with respect to any Distribution Date on or after the related Stepdown Date
and as long as a Trigger Event does not exist for such Certificate Group, is the
excess of (i) of the sum for such Certificate Group of (A) the Certificate
Principal Balance of the related Class A Certificates (after taking into account
distributions of the Class A Principal Distribution Amount for such Distribution
Date), (B) the Certificate Principal Balance of the Class M-1 Certificates
(after taking into account distribution of the Class M-1 Principal Distribution
Amount to such Class M-1 Certificates for such Distribution Date), (C) the
Certificate Principal Balance of the related Class M-2 Certificates (after
taking into account distributions of the Class M-2 Principal Distribution Amount
to such Class M-2 Certificates for such Distribution Date) and (D) the
Certificate Principal Balance of the related Class B Certificates immediately
prior to such Distribution Date over (ii) the lesser of (A) approximately
[_____]% for the Fixed Rate Mortgage Loan Group and approximately [_____]% (or
approximately [_____]%, if a Stepup Trigger Event has occurred) for the
Adjustable Rate Mortgage Loan Group, of the Stated Principal Balances of the
Mortgage Loans in such Loan Group on the preceding Due Date, and (B) the Stated
Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due
Date less approximately $1,000,000 for the Fixed Rate Mortgage Loan Group and
approximately $[________]for the Adjustable Rate Mortgage Loan Group, provided,
however, that after the Certificate Principal Balances of the Class A, Class M-1
and Class M-2 Certificates for such Certificate Group are reduced to zero, the
Class B Principal Distribution Amount for such Distribution Date will equal 100%
of the Principal Distribution Amount for the related Loan Group remaining after
any distributions on such Class A, Class M-1 and Class M-2 Certificates.
The "Extra Principal Distribution Amount", for a Mortgage Loan Group
and with respect to any Distribution Date, is (i) prior to the Stepdown Date,
the excess of (A) the sum of (i) the aggregate Certificate Principal Balances of
the Certificates of the related Certificate Group and (ii) approximately
$[_______]for the Fixed Rate Mortgage Loan Group and approximately
$[_________](or $[_________], if a Stepup Trigger Event has occurred) for the
Adjustable Rate Mortgage Loan Group over (B) the Stated Principal Balances of
the Mortgage Loans in such Loan Group, and (ii) on and after the Stepdown Date,
the excess of (A) the sum of (i) the aggregate Certificate Principal Balances of
the Certificates of such Certificate Group and (ii) the greater of (x) [___]%
for the Fixed Rate Mortgage Loan Group and [___]% (or [___]%, if a Stepup
Trigger Event has
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occurred) for the Adjustable Rate Mortgage Loan Group of the Stated Principal
Balances of the Mortgage Loans in the related Loan Group, and (y) approximately
$[_______]for the Fixed Rate Mortgage Loan Group and approximately
$[_________]for the Adjustable Rate Mortgage Loan Group over (B) the Stated
Principal Balances of the Mortgage Loans in the related Loan Group; provided,
however, that if on any Distribution Date, a Trigger Event is in effect, the
Extra Principal Distribution Amount for the related Loan Group will not be
reduced to the applicable percentage of the then-current Stated Principal
Balance of such Loan Group (and will remain fixed at the applicable percentage
of the Stated Principal Balance of the Mortgage Loans in the related Loan Group
as of the Due Date immediately prior to the occurrence of the Trigger Event)
until the next Distribution Date on which the Trigger Event is not in effect.
The "Stepdown Date", with respect to each Certificate Group, is the
later to occur of (i) the Distribution Date in [DATE] or (ii) the first
Distribution Date on which (A) the Certificate Principal Balance of the Class A
Certificates in such Certificate Group is less than or equal to (B) [_____]%,
for the Fixed Rate Mortgage Loan Group, and [_____]% (or [_____]%, if a Stepup
Trigger Event has occurred and is continuing), for the Adjustable Rate Mortgage
Loan Group, of the Stated Principal Balances of the Mortgage Loans in the
related Loan Group, plus the amount on deposit in the Pre-Funding Account on the
preceding Due Date allocable to such Loan Group.
A "Trigger Event", with respect to each Certificate Group and a
Distribution Date after the Stepdown Date, exists if the product of (i) [___],
for the Fixed Rate Mortgage Loan Group, and [___], for the Adjustable Rate
Mortgage Loan Group and (ii) the quotient of (A) the aggregate Stated Principal
Balance of all Mortgage Loans 60 or more days delinquent for each Loan Group
(including Mortgage Loans in foreclosure and REO Properties) and (B) the Stated
Principal Balance of that Loan Group as of the preceding Servicer Advance Date
equals or exceeds the Required Percentage. The "Required Percentage," with
respect to each Certificate Group and a Distribution Date after the Stepdown
Date is equal to the quotient of (x) the excess of (i) the Stated Principal
Balances of the Mortgage Loans in such Loan Group, over (ii) the Certificate
Principal Balance of the most senior Class of Certificates of such Certificate
Group outstanding as of the preceding Servicer Advance Date and (y) the Stated
Principal Balances of the Mortgage Loans in such Loan Group. As used herein, the
Certificate Principal Balance of the most senior Class of Certificates of the
Group I Certificates will equal the aggregate Certificate Principal Balance of
the Class A Group I Certificates for such date of calculation.
In addition, a "Trigger Event" exists with respect to each Certificate
Group and a Distribution Date after the Stepdown Date, if Realized Losses with
respect to the Fixed Rate Mortgage Loans or the Adjustable Rate Mortgage Loans,
as applicable, as of such Distribution Date equal or exceed the following levels
(expressed as a percentage of aggregate principal balance of the related
Mortgage Loans, plus the amount on deposit in the Pre-Funding Account on the
preceding Due Date allocable to such Loan Group, as of the Cut-off Date):
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Distribution Date Occurring In Percentage
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] and thereafter............................. %
With respect to the Adjustable Rate Mortgage Loan Group, a "Stepup
Trigger Event" exists with respect to a Distribution Date (and thereafter will
exist with respect to each subsequent Distribution Date) if either
(A) Realized Losses with respect to the Adjustable Rate
Mortgage Loans as of such Distribution Date equal or exceed the
following levels (expressed as a percentage of aggregate principal
balance of the Adjustable Rate Mortgage Loans, plus the amount on
deposit in the Pre-Funding Account on the preceding Due Date allocable
to such Loan Group, as of the Cutoff Date)
Distribution Date Occurring In Percentage
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] through [MONTH/YEAR]....................... %
[MONTH/YEAR] and thereafter............................. %
or (B) the three month rolling average of Adjustable Rate
Mortgage Loans that are 60 days or more delinquent (calculated as set
forth in the Pooling and Servicing Agreement) as of such Distribution
Date equals or exceeds the following levels (expressed as a percentage
of the aggregate principal balance of the Adjustable Rate Mortgage
Loans, plus the amount on deposit in the Pre-Funding Account on the
preceding Due Date allocable to such Loan Group, as of such
Distribution Date):
Distribution Date Occurring In Percentage
[MONTH/YEAR] through [MONTH/YEAR]..................... %
[MONTH/YEAR] through [MONTH/YEAR]..................... %
[MONTH/YEAR] through [MONTH/YEAR]..................... %
[MONTH/YEAR] through [MONTH/YEAR]..................... %
[MONTH/YEAR] and thereafter........................... %
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Overcollateralization and Crosscollateralization Provisions
As set forth below, Interest Funds and Principal Funds with respect to
a Certificate Group not otherwise required to be distributed with respect to
principal of and interest on the Certificates of such Certificate Group ("Net
Excess Cashflow") will be required to be applied as an Extra Principal
Distribution Amount with respect to the other Mortgage Loan Group whenever the
Stated Principal Balances of the Mortgage Loans in such Loan Group, plus the
amount on deposit in the Pre-Funding Account allocable to such Loan Group as of
such Distribution Date, do not exceed, by the required amount, the aggregate
Certificate Principal Balances of the related Certificates. If on any
Distribution Date, after giving effect to any Extra Principal Distribution
Amount, the aggregate Certificate Principal Balances of the Offered Certificates
with respect to a Mortgage Loan Group exceed the sum of (i) the Stated Principal
Balances of the Mortgage Loans in the related Loan Group and (ii) the amount on
deposit in the Pre-Funding Account allocable to such Loan Group as if such
Distribution Date, the Certificate Principal Balances of the Subordinated
Certificates of such Group will be reduced, in inverse order of seniority
(beginning with the Class B Certificates) by an amount equal to such excess.
If the Certificate Principal Balance of a Class of Subordinated
Certificates is reduced, that Class thereafter will be entitled to distributions
of interest and principal only with respect to the Certificate Principal Balance
as so reduced. On subsequent Distribution Dates, however, as described below,
Interest Funds and Principal Funds with respect to each Certificate Group not
otherwise required to be distributed with respect to principal of and interest
on the Certificates of such Certificate Group will be applied to reduce Unpaid
Realized Loss Amounts previously allocated to such Certificates in order of
seniority.
On each Distribution Date, Interest Funds and Principal Funds with
respect to each Loan Group not otherwise required to be distributed with respect
to principal of and interest on the Certificates in the related Certificate
Group as described above will be required to be distributed in respect of the
following amounts until fully distributed:
(i) the Extra Principal Distribution Amount for such Loan
Group;
(ii) to the Class M-1 Certificates of such Certificate Group,
any Unpaid Realized Loss Amount for such Class;
(iii) to the Class M-2 Certificates of such Certificate Group,
any Unpaid Realized Loss Amount for such Class;
(iv) to the Class B Certificates of such Certificate Group,
the Unpaid Realized Loss Amount for such Class;
(v) except in the case of Optional Termination Amounts
(defined herein), for distribution to the Certificates in the other
Certificate Group to the extent that any of the following amounts with
respect to the other Certificate Group have not otherwise been funded
in full for such Distribution Date in accordance with the priorities
set forth herein;
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(A) to each Class of the Class A Certificates of such
other Loan Group, the Current Interest and any Interest Carry Forward
Amount for such Class;
(B) the Extra Principal Distribution Amount for such
other Loan Group;
(C) to the Class M-1 Certificates of such other
Certificate Group, the Current Interest and any Interest Carry Forward
Amount for such Class;
(D) to the Class M-1 Certificates of such other
Certificate Group any Unpaid Realized Loss Amount for such Class;
(E) to the Class M-2 Certificates of such other
Certificate Group, the Current Interest and any Interest Carry Forward
Amount for such Class;
(F) to the Class M-2 Certificates of such other
Certificate Group any Unpaid Realized Loss Amount for such Class;
(G) to the Class B Certificates of such other
Certificate Group, the Current Interest and any Interest Carry Forward
Amount for such Class;
(H) to the Class B Certificates of such other
Certificate Group any Unpaid Realized Loss Amount for such Class;
(vi) in the case of the Adjustable Rate Mortgage Loan Group,
to the Group II Certificates, on a pro rata basis, the Adjustable Rate
Certificate Carryover; and
(vii) to the Residual Certificates, the remaining amount.
"Unpaid Realized Loss Amount", with respect to any Class of the
Subordinated Certificates and as to any Distribution Date, is the excess of (i)
Applied Realized Loss Amounts with respect to such Class over (ii) the sum of
all distributions in reduction of the Applied Realized Loss Amounts on all
previous Distribution Dates. Any amounts distributed to a Class of Subordinated
Certificates in respect of any Unpaid Realized Loss Amount will not be applied
to reduce the Certificate Principal Balance of such Class.
"Applied Realized Loss Amount", with respect to any Class of the
Subordinated Certificates and as to any Distribution Date, means the sum of the
Realized Losses with respect to Mortgage Loans which have been applied in
reduction of the Certificate Principal Balance of such Class.
"Realized Loss" is the excess of the Stated Principal Balance of a
defaulted Mortgage Loan plus accrued interest over the net liquidation proceeds
with respect thereto that are allocated to principal.
"Optional Termination Amount" with respect to either Loan Group, is the
Repurchase Price (defined herein) paid by the Master Servicer in connection with
any repurchase of all of the Mortgage Loans in such Loan Group.
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Calculation of One-Month LIBOR
On the second LIBOR Business Day (as defined below) preceding the
commencement of each Accrual Period for the Group II Certificates and the Class
IA-1 Certificates (each such date, an "Interest Determination Date"), the Master
Servicer will determine the London interbank offered rate for one-month United
States dollar deposits ("One-Month LIBOR") for such Accrual Period on the basis
of the (i) offered rates for one-month United States dollar deposits, as such
rates appear on Telerate page 3750, as of 11:00 a.m. (London time) on such
Interest Determination Date or (ii) if such rate does not appear on Telerate
Page 3750 as of 11:00 a.m., (London time), the Master Servicer will determine
such rate on the basis of the offered rates of the Reference Banks for one-month
United States dollar deposits, as such rates appear on the Reuters Screen LIBO
Page, as of 11:00 a.m. (London time) on such Interest Determination Date. As
used in this section, "LIBOR Business Day" means a day on which banks are open
for dealing in foreign currency and exchange in London and New York City;
"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 interbank offered
rates of major banks); and "Reference Banks" means leading banks selected by the
Master Servicer and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) whose quotations appear on the Reuters Screen LIBO Page on the
Interest Determination Date in question, (iii) which have been designated as
such by the Master Servicer and (iv) not controlling, controlled by, or under
common control with, the Depositor, the Master Servicer, the Seller or any
successor Subservicer.
If One-Month LIBOR is determined pursuant to clause (ii) above, on each
Interest Determination Date, One-Month LIBOR for the related Accrual Period for
the Group II Certificates and the Class IA-1 Certificates, will be established
by the Master Servicer as follows:
(a) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, One-Month LIBOR for
the related Accrual Period for the Group II Certificates and the Class
IA-1 Certificates shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple
of 0.03125%).
(b) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for
the related Accrual Period shall be the higher of (x) One-Month LIBOR
as determined on the previous Interest Determination Date and (y) the
Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate
per annum that the Master Servicer determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 0.03125%) of the one-month United States dollar lending
rates which New York City banks selected by the Master Servicer are
quoting on the relevant Interest Determination Date to the principal
London offices of leading banks in the London interbank market or, in
the event that the Master Servicer can determine no such arithmetic
mean, (ii) the lowest one-month United States dollar lending rate which
New York City banks selected by the Master Servicer are quoting on such
Interest Determination Date to leading European banks.
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The establishment of One-Month LIBOR on each Interest Determination
Date by the Master Servicer and the Master Servicer's calculation of the rate of
interest applicable to the Group II Certificates and the Class IA-1
Certificates, for the related Accrual Period for such Group II Certificates and
Class IA-1 Certificates shall (in the absence of manifest error) be final and
binding.
Mandatory Prepayments on the Certificates
The Group I Certificates and the Group II Certificates will be prepaid
in part on the Distribution Date immediately following the end of the Funding
Period to the extent of any amounts remaining on deposit in the Pre-Funding
Account on such Distribution Date. Although no assurance can be given, it is
anticipated by the Depositor that the principal amount of Subsequent Mortgage
Loans sold to the Trust Fund will require the application of substantially all
of the Original Pre-Funded Amount and that there will be no material amount of
principal prepaid to the holders of the Group I or Group II Certificates from
the Pre-Funding Account. It is unlikely, however, that the Depositor will be
able to deliver Subsequent Mortgage Loans with an aggregate principal balance
identical to the related Original Pre-Funded Amount. Accordingly, a small amount
of principal is likely to be prepaid on the Group I and Group II Certificates on
the Distribution Date immediately following the end of the Funding Period.
Capitalized Interest Account
The Depositor will establish for the benefit of the holders of the
Certificates a trust account (the "Capitalized Interest Account"). On the
Closing Date, the Depositor will deposit in the Capitalized Interest Account a
cash amount as specified in the Pooling and Servicing Agreement. On each
Distribution Date during the Funding Period and on the Distribution Date
immediately following the end of the Funding Period, funds on deposit in the
Capitalized Interest Account will be applied to cover shortfalls in the amount
of interest accrued on the Certificates in the Trust Fund attributable to the
pre-funding feature. Such shortfall will exist during the Funding Period because
the interest accruing on the aggregate principal balance of the Mortgage Loans
in each Loan Group during such period will be less than the amount of interest
which would have accrued on the Mortgage Loans in each Loan Group if the related
Subsequent Mortgage Loans were included in the Trust Fund as of the Closing
Date. On the first Distribution Date following the termination of the Funding
Period (after the distribution on the Certificates to be made on such
Distribution Date), funds on deposit in the Capitalized Interest Account will be
released by the Trustee to the Depositor or its designee.
Reports to Certificateholders
On each Distribution Date, the Master Servicer will forward to each
Certificateholder, the Subservicer, the Trustee and the Depositor a statement
generally setting forth with respect to each Loan Group or Certificate Group,
where applicable, among other information:
(i) the amount of the related distribution to holders of each
Class of Certificates allocable to principal, separately identifying
(A) the aggregate amount of any principal prepayments included therein,
(B) the aggregate amount of all scheduled payments of principal
included therein and (C) any Extra Principal Distribution Amount;
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(ii) the amount of such distribution to holders of each Class
of Certificates allocable to interest;
(iii) the Interest Carry-Forward Amount for each Class of
Certificates;
(iv) the Certificate Principal Balance of each Class of
Certificates after giving effect to the distribution of principal on
such Distribution Date;
(v) the aggregate outstanding principal balance of each Class
of Certificates for the following Distribution Date;
(vi) the amount of the Servicing Fee paid to or retained by
the Subservicer for the related Due Period;
(vii) the Pass-Through Rate for each Class of Certificates for
such Distribution Date;
(viii) the amount of Advances included in the distribution on
such Distribution Date;
(ix) the number and aggregate principal amounts of Mortgage
Loans in each Loan Group (A) delinquent (exclusive of Mortgage Loans in
foreclosure) (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 or more
days, and (B) in foreclosure and delinquent (1) 31 to 60 days, (2) 61
to 90 days and (3) 91 or more days, in each case as of the close of
business on the last day of the calendar month preceding such
Distribution Date;
(x) with respect to any Mortgage Loan that became an REO
Property in each Loan Group during the preceding calendar month, the
loan number and Stated Principal Balance of such Mortgage Loan as of
the close of business on the fifteenth day of the month of such
Distribution Date (or, if not a Business Day, the immediately preceding
Business Day) (the "Determination Date") and the date of acquisition
thereof;
(xi) with respect to each Loan Group, whether a Trigger Event
or, if applicable, a Stepup Trigger Event has occurred;
(xii) the total number and principal balance of any REO
Properties in each Loan Group as of the close of business on the
related Determination Date;
(xiii) any Adjustable Rate Certificate Carryover paid and all
remaining Adjustable Rate Certificate Carryover remaining on each Class
of the Adjustable Rate Certificate on such Distribution Date;
(xiv) the number and aggregate principal balance of all
Subsequent Mortgage Loans added during the preceding Due Period;
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(xv) the amount on deposit in the Pre-Funding Account and the
Capitalized Interest Account (both in the aggregate and with respect to
each Loan Group); and
(xvi) for the Distribution Date immediately following the end
of the Funding Period, the current balance on deposit in the
Pre-Funding Account, if any, that has not been used to purchase
Subsequent Mortgage Loans and that is being distributed to
Certificateholders as a mandatory prepayment of principal on such
Distribution Date.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer will prepare and deliver to each
Certificateholder of record during the previous calendar year a statement
containing information necessary to enable Certificateholders to prepare their
tax returns. Such statements will not have been examined and reported upon by an
independent public accountant.
Amendment
The Pooling and Servicing Agreement may be amended by the Depositor,
the Subservicer, the Master Servicer and the Trustee, without the consent of
Certificateholders, for any of the purposes set forth under "The Pooling and
Servicing Agreement-Amendment" in the Prospectus. In addition, the Pooling and
Servicing Agreement may be amended by the Depositor, the Subservicer, the Master
Servicer and the Trustee and the holders of a Majority in Interest of each Class
of Certificates affected thereby for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling and
Servicing Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment may (i) reduce in
any manner the amount of, or delay the timing of, payments required to be
distributed on any Certificate without the consent of the Holder of such
Certificate; (ii) adversely affect in any material respect the interests of the
holders of any Class of Certificates in a manner other than as described in
clause (i) above, without the consent of the holders of Certificates of such
Class evidencing, as to such Class, Percentage Interests aggregating 66%; or
(iii) reduce the aforesaid percentage of aggregate outstanding principal amounts
of Certificates of each 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.
Optional Termination
The Master Servicer will have the right (but not the obligation) to
repurchase all remaining Mortgage Loans and REO Properties in either Loan Group
and thereby effect early retirement of all the Certificates of the related
Certificate Group, subject to the Stated Principal Balance of the Mortgage Loans
and REO Properties in such Loan Group at the time of repurchase being less than
or equal to 10% of the aggregate principal balance of the Certificates in such
Loan Group as of the Closing Date (an "Optional Termination Date"). In the event
such option is exercised by the Master Servicer, the repurchase will be made at
a price (the "Repurchase Price") equal to the sum of (i) 100% of the Stated
Principal Balance of each Mortgage Loan in the related Loan Group (other than in
respect of REO Property) plus accrued interest thereon at the applicable
Mortgage Rate, (ii) the appraised value of any REO Property (up to the Stated
Principal Balance of the related Mortgage Loan), and (iii) any unreimbursed
out-of-pocket costs and expenses and the principal portion of any unreimbursed
Advances, in each case previously incurred by the Subservicer in the performance
of its servicing
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obligations with respect to such Mortgage Loans. Proceeds from such repurchase
will be distributed to the Certificateholders in the related Certificate Group
in the priority described above. The proceeds from any such distribution may not
be sufficient to distribute the full amount to which each Class of Certificates
is entitled if the purchase price is based in part on the appraised value of any
REO Property and such appraised value is less than the Stated Principal Balance
of the related Mortgage Loan. Any repurchase of the Mortgage Loans and REO
Properties will result in an early retirement of the Certificates in the related
Certificate Group.
Optional Purchase of Defaulted Loans
As to any Mortgage Loan which is delinquent in payment by 91 days or
more, the Master Servicer may, at its option, purchase such Mortgage Loan at a
price equal to 100% of the Stated Principal Balance thereof plus accrued
interest thereon at the applicable Mortgage Rate, from the date through which
interest was last paid by the related mortgagor or advanced to the first day of
the month in which such amount is to be distributed.
Events of Default
Events of Default will consist of: (i) any failure by the Subservicer
to deposit in the Collection Account or the Certificate Account the required
amounts or remit to the Trustee any payment (including an Advance required to be
made under the terms of the Pooling and Servicing Agreement) which continues
unremedied for five Business Days after written notice of such failure shall
have been given to the Subservicer and the Depositor by the Trustee or the
Depositor, or to the Subservicer, the Depositor and the Trustee by the holders
of Certificates evidencing not less than 25% of the Voting Rights evidenced by
the Certificates; (ii) any failure by the Subservicer to observe or perform in
any material respect any other of its covenants or agreements, or any breach of
a representation or warranty made by the Subservicer in the Pooling and
Servicing Agreement, which continues unremedied for 60 days after the giving of
written notice of such failure to the Subservicer by the Trustee, the Master
Servicer or the Depositor, or to the Subservicer, the Depositor, the Master
Servicer and the Trustee by the holders of Certificates evidencing not less than
25% of the Voting Rights evidenced by the Certificates or (iii) insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, and certain actions by or on behalf of the Subservicer indicating
its insolvency or inability to pay its obligations. As of any date of
determination, (i) holders of the Offered Certificates will be allocated 95% of
all Voting Rights, allocated among the Offered Certificates in proportion to
their respective outstanding Certificate Principal Balances and (ii) holders of
the Residual Certificates will be allocated all of the remaining Voting Rights.
Voting Rights will be allocated among the Certificates of each such Class in
accordance with their respective Percentage Interests.
Rights upon Event of Default
So long as an Event of Default under the Pooling and Servicing
Agreement remains unremedied, the Trustee may, or upon the receipt of
instructions from the holders of Certificates having not less than 25% of the
Voting Rights evidenced by the Certificates, shall, terminate all of the rights
and obligations of the Subservicer under the Pooling and Servicing Agreement and
in and to the Mortgage Loans, whereupon the Trustee will succeed to all of the
responsibilities and duties of the
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Subservicer under the Pooling and Servicing Agreement, including the obligation
to make Advances. No assurance can be given that termination of the rights and
obligations of the Subservicer under the Pooling and Servicing Agreement would
not adversely affect the servicing of the Mortgage Loans, including the
delinquency experience of the Mortgage Loans.
No Certificateholder, solely by virtue of such Holder's status as a
Certificateholder, will have any right under the Pooling and Servicing Agreement
to institute any proceeding with respect thereto, unless such Holder previously
has given to the Trustee written notice of the continuation of an Event of
Default and unless the holders of Certificates having not less than 25% of the
Voting Rights evidenced by the Certificates have made written request to the
Trustee to institute such proceeding in its own name as Trustee thereunder and
have offered to the Trustee reasonable indemnity and the Trustee for 60 days has
neglected or refused to institute any such proceeding.
The Trustee
Citibank, N.A. will be the Trustee under the Pooling and Servicing
Agreement. The Depositor, the Master Servicer and the Subservicer may maintain
other banking relationships in the ordinary course of business with the Trustee.
The Corporate Trust Office of the Trustee is located at 111 Wall Street, New
York, New York 10043, or at such other addresses as the Trustee may designate
from time to time.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
General
The weighted average life of, and the yield to maturity on each Class
of the Offered Certificates will be directly related to the rate of payment of
principal (including prepayments) of the Mortgage Loans in the related Loan
Group. The actual rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, tax, geographic, demographic, social, legal
and other factors and has fluctuated considerably in recent years. In addition,
the rate of principal prepayments may differ among pools of mortgage loans at
any time because of specific factors relating to the mortgage loans in the
particular pool, including, among other things, the age of the mortgage loans,
the geographic locations of the properties securing the loans, the extent of the
mortgagor's equity in such properties, and changes in the mortgagors' housing
needs, job transfers and employment status, as well as whether the related
mortgage loan is subject to a prepayment penalty. In addition, the Seller may
solicit mortgagors to refinance their Mortgage Loans for a variety of reasons.
Any such refinancings will affect the rate of principal prepayments on the
Mortgage Pool.
The timing of changes in the rate of prepayments may significantly
affect the actual yield to investors who purchase the Offered Certificates at
prices other than par, even if the average rate of principal prepayments is
consistent with the expectations of investors. In general, the earlier the
payment of principal of the Mortgage Loans the greater the effect on an
investor's yield to maturity. As a result, the effect on an investor's yield of
principal prepayments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the issuance
of the Offered Certificates may not be offset by a subsequent like reduction (or
increase) in the rate of
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principal prepayments. Investors must make their own decisions as to the
appropriate prepayment assumptions to be used in deciding whether to purchase
any of the Offered Certificates. The Depositor does not make any representations
or warranties as to the rate of prepayment or the factors to be considered in
connection with such determinations.
The weighted average life and yield to maturity of each Class of
Offered Certificates will also be influenced by the amount of Net Excess
Cashflow generated by the Mortgage Loans and applied in reduction of the
Certificate Principal Balances of such Certificates. The level of Net Excess
Cashflow available on any Distribution Date to be applied in reduction of the
Certificate Principal Balances of the Class A Certificates will be influenced
by, among other factors, (i) the overcollateralization level of the assets in
the related Loan Group at such time (i.e., the extent to which interest on the
related Mortgage Loans is accruing on a higher Stated Principal Balance than the
Certificate Principal Balance of the related Class A Certificates), (ii) the
delinquency and default experience of the related Mortgage Loans, (iii) the
level of One-Month LIBOR, (iv) the Mortgage Index for the Adjustable Rate
Mortgage Loans and (v) the provisions of the Pooling and Servicing Agreement
that permit Net Excess Cashflow to be distributed to the Residual Certificates
when required overcollateralization levels have been met. To the extent that
greater (or lesser) amounts of Net Excess Cashflow are distributed in reduction
of the Certificate Principal Balances of a Class of Offered Certificates, the
weighted average life thereof can be expected to shorten (or lengthen). No
assurance, however, can be given as to the amount of Net Excess Cashflow
distributed at any time or in the aggregate. See "Description of the
Certificates--Overcollateralization and Crosscollateralization Provisions."
[The Class IA-5 Certificates are not expected to receive distributions
of principal until the Distribution Date in [DATE] (except as otherwise
described herein). Thereafter, the relative entitlement of the Class IA-5
Certificates to payments in respect of principal is subject to increase in
accordance with the calculation of the Class IA-5 Distribution Amount. See
"Description of the Certificates--Distributions."]
To the extent that the Original Pre-Funded Amount has not been fully
applied to the purchase of Subsequent Mortgage Loans by the end of the Funding
Period, the holders of the Group I and Group II Certificates will receive on the
Distribution Date immediately following the end of the Funding Period a
prepayment of principal in an amount equal to the lesser of (i) any amounts
remaining in the Pre-Funding Account allocable to such Loan Group and (ii) the
outstanding Certificate Principal Balance of the Group I and Group II
Certificates. Although no assurance can be given, it is anticipated by the
Depositor that the principal amount of Subsequent Mortgage Loans sold to the
Trust Fund will require the application of substantially all amounts on deposit
in the Pre-Funding Account and that there will be no material amount of
principal prepaid to the holders of the Group I and Group II Certificates.
However, it is unlikely that the Depositor will be able to deliver Subsequent
Mortgage Loans with an aggregate principal balance identical to the Pre-Funded
Amount. Accordingly, a small amount of principal is likely to be prepaid on the
Group I and Group II Certificates on the Distribution Date immediately following
the end of the Funding Period.
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Prepayments and Yields for Offered Certificates
Generally, if purchased at other than par, the yield to maturity on the
Offered Certificates will be affected by the rate of the payment of principal of
the Mortgage Loans in the related Loan Group. If the actual rate of payments on
the Mortgage Loans in a Loan Group is slower than the rate anticipated by an
investor who purchases related Offered Certificates at a discount, the actual
yield to such investor will be lower than such investor's anticipated yield. If
the actual rate of payments on the Mortgage Loans in a Loan Group is faster than
the rate anticipated by an investor who purchases related Offered Certificates
at a premium, the actual yield to such investor will be lower than such
investor's anticipated yield.
All the Mortgage Loans in the Fixed Rate Mortgage Loan Group are fixed
rate mortgage loans. In general, if prevailing interest rates fall significantly
below the interest rates on fixed rate mortgage loans, such mortgage loans are
likely to be subject to higher prepayment rates than if prevailing rates remain
at or above the interest rates on such mortgage loans. Conversely, if prevailing
interest rates rise appreciably above the interest rates on fixed rate mortgage
loans, such mortgage loans are likely to experience a lower prepayment rate than
if prevailing rates remain at or below the interest rates on such mortgage
loans.
All the Mortgage Loans in the Adjustable Rate Mortgage Loan Group are
adjustable rate Mortgage Loans. As is the case with conventional fixed rate
mortgage loans, adjustable rate mortgage loans may be subject to a greater rate
of principal prepayments in a declining interest rate environment. For example,
if prevailing interest rates fall significantly, adjustable rate mortgage loans
could be subject to higher prepayment rates than if prevailing interest rates
remain constant because the availability of fixed rate mortgage loans at lower
interest rates may encourage mortgagors to refinance their adjustable rate
mortgage loans to a lower fixed interest rate. In addition, depending on
prevailing interest rates, adjustable rate mortgage loans could experience
higher prepayment rates at or near the time of any interest rate adjustment.
Nevertheless, no assurance can be given as to the level of prepayment that the
Mortgage Loans will experience.
Although the Mortgage Rates on the Mortgage Loans in the Adjustable
Rate Mortgage Loan Group are subject to adjustment, the Mortgage Rates adjust
less frequently than the Pass-Through Rate on the Group II Certificates and
adjust by reference to the Mortgage Index. Changes in One-Month LIBOR may not
correlate with changes in the Mortgage Index and also may not correlate with
prevailing interest rates. It is possible that an increased level of One-Month
LIBOR could occur simultaneously with a lower level of prevailing interest rates
which would be expected to result in faster prepayments, thereby reducing the
weighted average life of the Group II Certificates. The Mortgage Rate applicable
to the Mortgage Loans in the Adjustable Rate Mortgage Loan Group and any
Adjustment Date will be based on the Mortgage Index value most recently
announced generally as of a date 45 days prior to such Adjustment Date. Thus, if
the Mortgage Index value with respect to a Mortgage Loan in the Adjustable Rate
Mortgage Loan Group rises, the lag in time before the corresponding Mortgage
Rate increases will, all other things being equal, slow the upward adjustment of
the Group II Available Funds Cap. See "The Mortgage Pool."
The calculation of the Pass-Through Rate on each Class of the Group II
Certificates is based upon the value of an index (One-Month LIBOR) which is
different from the value of the index applicable to substantially all the
Adjustable Rate Mortgage Loans (Six-Month LIBOR) as described
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under "The Mortgage Pool--General" and is subject to the Group II Available
Funds Cap. The Group II Available Funds Cap effectively limits the amount of
interest accrued on each Class of the Group II Certificates to the amount of
interest accruing on the Adjustable Rate Mortgage Loans at a rate equal to the
weighted average of the Mortgage Rates of such Mortgage Loans, less the
Servicing Fee Rate and the Master Servicer Fee Rate. Furthermore, even if
One-Month LIBOR and Six-Month LIBOR were at the same level, various factors may
cause the Group II Available Funds Cap to limit the amount of interest that
would otherwise accrue on each Class of the Group II Certificates. In
particular, the Pass-Through Rate on each Class of the Group II Certificates
adjusts monthly, while the interest rates of the Adjustable Rate Mortgage Loans
adjust less frequently, with the result that the operation of the Group II
Available Funds Cap may cause the Pass-Through Rates to be reduced for extended
periods in a rising interest rate environment. In addition, the Adjustable Rate
Mortgage Loans are subject to periodic (i.e., semiannual) adjustment caps and
maximum rate caps, and the weighted average margin is subject to change based
upon prepayment experience, which also may result in the Group II Available
Funds Cap limiting increases in the Pass-Through Rate for such Classes of the
Group II Certificates. Finally, the Adjustable Rate Mortgage Loans accrue
interest on the basis of a 360-day year assumed to consist of twelve 30-day
months, while calculations of interest on each Class of the Group II
Certificates will be made on the basis of the actual number of days elapsed in
the related Accrual Period and a year of 360 days. This may result in the Group
II Available Funds Cap limiting the Pass-Through Rate for such Classes of
Certificates in Accrual Periods that have more than 30 days. Consequently, the
interest which becomes due on the Adjustable Rate Mortgage Loans (net of the sum
of the Servicing Fee and the Master Servicer Fee) with respect to any
Distribution Date may not equal the amount of interest that would accrue at
One-Month LIBOR plus the margin on each Class of the Group II Certificates.
Furthermore, if the Group II Available Funds Cap determines the Pass-Through
Rate for a Class of the Group II Certificates for a Distribution Date, the
market value of such Class of Certificates may be temporarily or permanently
reduced. Although the Pooling and Servicing Agreement provides a mechanism to
pay, on a subordinated basis, any Adjustable Rate Certificate Carryover, there
is no assurance that funds will be available to pay such amount. The ratings
assigned to the Group II Certificates do not address the likelihood of the
payment of any such amount.
In addition, the Pass-Through Rate on each Class of the Group II
Certificates is subject to the Group II Maximum Rate Cap, which is defined as
the weighted average of the maximum lifetime Mortgage Rate on the Adjustable
Rate Mortgage Loans less the Servicer Fee Rate and the Master Servicing Fee
Rate. The Group II Maximum Rate Cap may limit increases in the Pass-Through
Rates on such Class of the Group II Certificates and any shortfall of interest
will not be recovered.
On any Distribution Date, the Pass-Through Rate for the Class IA-1
Certificates will equal the lesser of (i) One-Month LIBOR plus [___]% and (ii)
the weighted average Net Mortgage Rate on the Group I Mortgage Loans. Therefore,
to the extent that the weighted average Net Mortgage Rate on the Group I
Mortgage Loans is ever reduced to less than One-Month LIBOR plus [___]%,
investors in the Class IA-1 Certificates may experience a lower than anticipated
yield and any shortfall of interest will not be recovered.
On any Distribution Date, the Pass-Through Rates for the Class IA-4,
Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates will equal the
lesser of the rate set forth for such Class in the table on page S-3 and (ii)
the weighted average Net Mortgage Rate on the Group I Mortgage Loans.
S-87
<PAGE>
Therefore, to the extent that the weighted average Net Mortgage Rate on the
Group I Mortgage Loans is ever reduced to less than the applicable rate
described in clause (i), investors in the Class IA-4, Class IA-5, Class IM-1,
Class IM-2 or Class IB Certificates may experience a lower than anticipated
yield and any shortfall of interest will not be recovered.
The extent to which the yield to maturity of the Offered Certificates
may vary from the anticipated yield will depend upon the degree to which it is
purchased at a discount or premium and, correspondingly, the degree to which the
timing of payments thereon is sensitive to prepayments, liquidations and
purchases of the Mortgage Loans in the related Loan Group. In particular, in the
case of an Offered Certificate purchased at a discount, an investor should
consider the risk that a slower than anticipated rate of principal payments,
liquidations and purchases of the Mortgage Loans in the related Loan Group could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of an Offered Certificate purchased at a premium, the
risk that a faster than anticipated rate of principal payments, liquidations and
purchases of such Mortgage Loans in the related Loan Group could result in an
actual yield to such investor that is lower than the anticipated yield.
The "Last Scheduled Distribution Date" for each Class of the Offered
Certificates is the date on which the Certificate Principal Balance thereof
would be reduced to zero assuming, among other things, that no prepayments are
received on the Mortgage Loans in the related Loan Group and that scheduled
monthly payments of principal of and interest on each of such Mortgage Loans are
timely received and that excess interest is not used to make accelerated
payments of principal. The Last Scheduled Distribution Date for each Class of
Offered Certificates is set forth in the chart appearing on page S-3. The actual
final Distribution Date with respect to each Class of Offered Certificates could
occur significantly earlier than its Last Scheduled Distribution Date because
(i) prepayments are likely to occur which will be applied to the payment of the
Certificate Principal Balances thereof, (ii) excess interest to the extent
available will be applied as an accelerated payment of principal on the Offered
Certificates as described herein and (iii) the Master Servicer may purchase all
the Mortgage Loans in a Loan Group when outstanding Stated Principal Balances
thereof has declined to 10% or less of the aggregate Certificate Principal
Balance of all of the Certificates of such Loan Group, as of the Cutoff Date.
Prepayments on mortgage loans are commonly measured relative to a
prepayment model or standard. The models used in this Prospectus Supplement
("Prepayment Models") are based on an assumed rate of prepayment each month of
the then unpaid principal balance of a pool of mortgage loans similar to the
Mortgage Loans in each Loan Group. For the Fixed Rate Mortgage Loan Group, the
Prepayment Model used in this Prospectus Supplement ("Home Equity Prepayment" or
"HEP") is a prepayment assumption which represents an assumed rate of prepayment
each month relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans. [__]% HEP, which represents
100% of the Prepayment Model for the Fixed Rate Mortgage Loan Group, assumes
prepayment rates of [___]% per annum of the then outstanding principal balance
of the related Mortgage Loans in the first month of the life of such Mortgage
Loans and an additional [___]% per annum in each month thereafter up to and
including the tenth month. Beginning in the eleventh month and in each month
thereafter during the life of such Mortgage Loans, [__]% HEP assumes a constant
prepayment rate of [__]% per annum. For the Adjustable Rate Mortgage Loan Group,
the Prepayment Model used in this Prospectus Supplement ("Constant Prepayment
S-88
<PAGE>
Rate" or "CPR") is a prepayment assumption which represents a constant assumed
rate of prepayment each month relative of the then outstanding principal balance
of a pool of mortgage loans for the life of such mortgage loans. [__]% CPR,
which represents 100% of the Prepayment Model for the Adjustable Rate Mortgage
Loan Group, assumes a constant prepayment rate of [__]% per annum.
As used in the following tables "0% of the Prepayment Model" assumes no
prepayments on the Mortgage Loans; "80% of the Prepayment Model" assumes the
Mortgage Loans will prepay at rates equal to 80% of the related Prepayment
Model; "100% of the Prepayment Model" assumes the Mortgage Loans will prepay at
rates equal to 100% of the related Prepayment Model; "150% of the Prepayment
Model" assumes the Mortgage Loans will prepay at rates equal to 150% of the
related Prepayment Model; and "200% of the Prepayment Model" assumes the
Mortgage Loans will prepay at rates equal to 200% of the Prepayment Model
assumed prepayment rates.
There is no assurance, however, that prepayments on the Mortgage Loans
will conform to any level of the Prepayment Model, and no representation is made
that the Mortgage Loans will prepay at the prepayment rates shown or any other
prepayment rate. The rate of principal payments on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors,
including the level of interest rates. Other factors affecting prepayment of
mortgage loans include changes in obligors' housing needs, job transfers,
unemployment, the solicitation of mortgagors to refinance their mortgage loans
and the existence of prepayment penalties. In the case of mortgage loans in
general, if prevailing interest rates fall significantly below the interest
rates on such mortgage loans, the mortgage loans are likely to be subject to
higher prepayment rates than if prevailing interest rates remain at or above the
rates borne by such mortgage loans. Conversely, if prevailing interest rates
rise above the interest on such mortgage loans, the rate of prepayment would be
expected to decrease.
The following tables have been prepared on the basis of the following
assumptions (collectively, the "Modeling Assumptions"): (i) the Mortgage Loans
of the related Loan Group prepay at the indicated percentage of the related
Prepayment Model; (ii) distributions on the Offered Certificates are received,
in cash, on the 25th day of each month, commencing [DATE], in accordance with
the payment priorities defined herein; (iii) 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; (iv) scheduled payments
are assumed to be received on the related Due Date commencing on [DATE], and
prepayments represent payment in full of individual Mortgage Loans and are
assumed to be received on the last day of each month, commencing in
[MONTH/YEAR], and include 30 days' interest thereon; (v) the level of Six-Month
LIBOR remains constant at [_____]%, and the level of One-Month LIBOR remains
constant at [_______]%; (vi) the Pass-Through Rates for the Group II
Certificates remain constant at the rates applicable prior to the related
Optional Termination Date; (vii) the Closing Date for the Certificates is June
18, 1999; (viii) the Mortgage Rate for each Adjustable Rate Mortgage Loan is
adjusted on its next Mortgage Rate Adjustment Date (and on any subsequent
Mortgage Rate Adjustment Dates, if necessary) to equal the sum of (a) the
assumed level of the Mortgage Index and (b) the respective Gross Margin (such
sum being subject to the applicable periodic adjustment caps and floors); (ix)
overcollateralization levels are initially set as specified in the Pooling and
Servicing Agreement, and thereafter decrease in accordance with the provisions
of the Pooling and Servicing Agreement; (x) the Mortgage Loans in the Fixed Rate
Mortgage Loan Group are purchased on the first applicable Optional Termination
Date and the Mortgage Loans in the Adjustable
S-89
<PAGE>
Rate Mortgage Loan Group are purchased on the first applicable Optional
Termination Date; [(xi) the Subsequent Mortgage Loans are purchased on [DATE]
resulting in no mandatory prepayment from the Pre-Funding Account on the
Distribution Date immediately following the end of the Funding Period; and (xii)
each Loan Group consists of Mortgage Loans having the approximate
characteristics described below:
Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Original
Amortization Remaining
Net Mortgage Original Term Term Term
Current Balance Mortgage Rate Rate (in months) (in months) (in months)
--------------- ------------- ------------- ------------- ------------ -----------
<S> <C>
$ % %
% %
% %
% %
% %
</TABLE>
Adjustable Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Months
Net Original Remaining Reset Until
Mortgage Mortgage Term Term Gross Periodic Change Next Rate
Current Balance Rate Rate (in months) (in months) Margin Cap Frequency Adjustment Date Index
- --------------- -------- -------- ----------- ----------- ------ -------- --------- --------------- -----
<S> <C>
$ % % % % 6 mo. LIBOR
$ % % % % 6 mo. LIBOR
$ % % % % 6 mo. LIBOR
$ % % % % 6 mo. LIBOR
</TABLE>
S-90
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Class IA-1 Class IA-2
---------- ----------
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
- ----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
<S> <C>
Initial.............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
Weighted Average Life in
years(1).........................
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-91
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Class IA-3 Class IA-4
---------- ----------
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
- ----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
<S> <C>
Initial ...........................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
Weighted Average Life in
years(1).........................
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-92
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Class IA-5 Class IM-1
---------- ----------
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
- ----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
<S> <C>
Initial ...........................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
Weighted Average Life in
years(1).........................
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-93
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Class IM-2 Class IB
---------- --------
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
- ----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
<S> <C>
Initial ...........................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
Weighted Average Life in
years(1).........................
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-94
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Class IIA-1 Class IIM-1
----------- -----------
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
- ----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
<S> <C>
Initial ...........................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
Weighted Average Life in
years(1).........................
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-95
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Class IIM-2 Class IIB
----------- ---------
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
- ----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
<S> <C>
Initial ...........................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
[DATE]..............................
Weighted Average Life in
years(1).........................
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-96
<PAGE>
Additional Information
The Depositor has filed certain additional yield tables and other
computational materials with respect to the Certificates with the Securities and
Exchange Commission in a report on Form 8-K. Such tables and materials were
prepared by the Underwriters for certain prospective investors. Such tables and
assumptions may be based on assumptions that differ from the Modeling
Assumptions. Accordingly, such tables and other materials may not be relevant to
or appropriate for investors other than those specifically requesting them.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the Trust Fund will include two
segregated asset pools, with respect to which elections will be made to treat
each as a separate REMIC. One REMIC (the "Subsidiary REMIC") will issue
uncertificated subclasses of nonvoting interest ("Subsidiary REMIC Regular
Interests"), which will be designated as the regular interests in the Subsidiary
REMIC. The assets of the Subsidiary REMIC will consist of the Mortgage Loans and
all other property in the Trust Fund except for the property in the Trust Fund
allocated to the second REMIC (the "Master REMIC"). The Master REMIC will issue
the Regular Certificates, which will be designated as the regular interests in
the Master REMIC. The Residual Certificates will represent the beneficial
ownership of the residual interest in the Subsidiary REMIC and the residual
interest in the Master REMIC. The assets of the Master REMIC will consist of the
Subsidiary REMIC Regular Interests. Aggregate distributions on the Subsidiary
REMIC Regular Interests will equal the aggregate distributions on the Regular
Certificates issued by the Master REMIC.
Holders of Subordinate Certificates may be required to accrue income
currently even though their distributions may be reduced due to defaults and
delinquencies on the related Mortgage Loans. See "Federal Income Tax
Consequences" in the Prospectus.
Original Issue Discount
Certain Classes of the Offered Certificates may be treated as being
issued with original issue discount. For purposes of determining the amount and
rate of accrual of original issue discount and market discount, the Depositor
intends to assume that there will be prepayments on the Mortgage Loans in each
Loan Group at a rate equal to 100% of the applicable Prepayment Model, as
described above. No representation is made as to whether the Mortgage Loans will
prepay at that rate or any other rate. See "Yield, Prepayment and Maturity
Considerations" herein and "Federal Income Tax Consequences" in the Prospectus.
Certain Classes of the Offered Certificates may be treated as being
issued at a premium. In such case, the Offered Certificateholders may elect
under Section 171 of the Code to amortize such premium under the constant yield
method and to treat such amortizable premium as an offset to interest income on
the Certificates. Such election, however, applies to all the Certificateholder's
debt
S-97
<PAGE>
instruments held during or after the first taxable year in which the election is
first made, and should only be made after consulting with a tax adviser.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder, such Certificateholder will be permitted to offset such
excess amounts only against the respective future income, if any, from such
Certificate. Although the tax treatment is uncertain, a Certificateholder may be
permitted to deduct a loss to the extent that such Holder's respective remaining
basis in such Certificate exceeds the maximum amount of future payments to which
such Holder is entitled, assuming no further Principal Prepayments on the
Mortgage Loans are received. Although the matter is not free from doubt, any
such loss might be treated as a capital loss.
Special Tax Attributes of the Offered Certificates
As is described more fully under "Federal Income Tax Consequences" in
the Prospectus, the Certificates will represent qualifying assets under Sections
856(c)(5)(B) and 7701(a)(19)(C)(v) of the Code, and net interest income
attributable to the Offered Certificates will be "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Code, to the extent the assets of the Trust Fund are assets
described in such sections. The Offered Certificates will represent qualifying
assets under Section 860G(a)(3) if acquired by a REMIC within the prescribed
time periods of the Code.
Prohibited Transactions Tax 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 Loan, the receipt of income from a source other
than a Mortgage Loan 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 Loans for temporary investment pending
distribution on the Certificates. It is not anticipated that the Trust Fund 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 that elects to be
treated 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"). The
Trust Fund will not accept contributions that would subject it to such tax.
In addition, a trust fund that elects to be treated 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 gain from the sale of a foreclosure property other than qualifying rents
and other qualifying income for a real estate investment trust. It is not
anticipated that the Trust Fund will recognize net income from foreclosure
property subject to federal income tax.
S-98
<PAGE>
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 the REMIC arises out of a breach of the Subservicer's or the
Trustee's obligations, as the case may be, under the Pooling and Servicing
Agreement and in respect of compliance with then applicable law, such tax will
be borne by the Subservicer or Trustee in either case out of its own funds. In
the event that either the Subservicer or the Trustee, as the case may be, fails
to pay or is not required to pay any such tax as provided above, such tax will
be paid by the Trust Fund first with amounts that might otherwise be
distributable to the holders of Certificates in the manner provided in the
Pooling and Servicing Agreement. It is not anticipated that any material state
or local income or franchise tax will be imposed on the Trust Fund.
For further information regarding the federal income tax consequences
of investing in the Offered Certificates, see "Federal Income Tax
Consequences--REMIC Certificates" in the Prospectus.
STATE TAXES
The Depositor makes no representations regarding the tax consequences
of purchase, ownership or disposition of the Offered Certificates under the tax
laws of any state. Investors considering an investment in the Offered
Certificates should consult their own tax advisors regarding such tax
consequences.
All investors should consult their own tax advisors regarding the
federal, state, local or foreign income tax consequences of the purchase,
ownership and disposition of the Offered Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), prohibits "parties in interest" with respect to an employee
benefit plan subject to ERISA and Section 4975 of the Code prohibits a
"disqualified person" with respect to a plan or other arrangement subject to the
excise tax provisions set forth under Section 4975 of the Code (each of the
foregoing, a "Plan") from engaging in certain transactions involving such Plan
and its assets unless a statutory, regulatory or administrative exemption
applies to the transaction. Section 4975 of the Code imposes certain excise
taxes on prohibited transactions involving plans described under that Section.
ERISA authorizes the imposition of civil penalties for prohibited transactions
involving plans not covered under Section 4975 of the Code. Any Plan fiduciary
which proposes to cause a Plan to acquire the Offered Certificates should
consult with its counsel with respect to the potential consequences under ERISA
and the Code of the Plan's acquisition and ownership of such Certificates.
See "ERISA Considerations" in the Prospectus.
Certain employee benefit plans, including governmental plans and
certain church plans, are not subject to ERISA's requirements. Accordingly,
assets of such plans may be invested in the Class A Certificates without regard
to the ERISA considerations described herein and in the Prospectus, subject to
the provisions of other applicable federal and state law. Any such plan which is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
may nonetheless be subject to the prohibited transaction rules set forth in
Section 503 of the Code.
S-99
<PAGE>
Except as noted above, 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. A fiduciary which decides to
invest the assets of a Plan in the Class A Certificates should consider, among
other factors, the extreme sensitivity of the investments to the rate of
principal payments (including prepayments) on the Mortgage Loans.
The U.S. Department of Labor has granted administrative exemptions
to[Underwriter] (Transaction Exemption ____, __ Fed. Reg. _______ (____)), to
[Underwriter] (Prohibited Transaction Exemption _____, __ Fed. Reg. ____ (1991))
___and to [Underwriter] (Prohibited Transaction Exemption _____, __ Fed. Reg.
______ (1990)) (together, the "Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemptions. The Exemptions apply to mortgage loans such as
the Mortgage Loans in the Trust Fund.
Among the conditions that must be satisfied for the Exemptions to apply
are the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the 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 fund;
(3) the certificates acquired by the Plan have received a rating at
the time of such acquisition that is one of the three highest
generic rating categories from Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co.
("DCR") or Fitch IBCA, Inc. ("Fitch");
(4) the trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) the sum of all payments made to and retained by the
underwriters in connection with the distribution of the
certificates represents not more than reasonable compensation
for underwriting the certificates; the sum of all payments made
to and retained by the seller pursuant to the assignment of the
loans to the trust fund represents not more than the fair
market value of such loans; the sum of all payments made to and
retained by the servicer and any other servicer represents not
more than reasonable compensation for such person's services
under the agreement pursuant to which the loans are pooled and
reimbursements of such person's reasonable expenses in
connection therewith; and
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<PAGE>
(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.
The trust fund must also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of
the type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been
rated in one of the three highest rating categories of S&P,
Moody's, Fitch or DCR for at least one year prior to the Plan's
acquisition of certificates; and
(iii) certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans
for at least one year prior to any Plan's acquisition of
certificates.
Each of the Exemptions was amended by Prohibited Transaction Exemption
97-34, 62 Fed. Reg. 39021 (1997), which, among other changes, permits the
inclusion of a pre-funding account in a trust fund, provided that the following
conditions are met:
(a) the pre-funding account may not exceed 25% of the total amount of
certificates being offered;
(b) additional obligations purchased generally must meet the same terms and
conditions as those of the original obligations used to create the
trust fund;
(c) the transfer of additional obligations to the trust during the
pre-funding period must not result in the certificates receiving a
lower rating at the termination of the pre-funding period than the
rating that was obtained at the time of the initial issuance of the
certificates;
(d) the weighted average interest rate for all of the obligations in the
trust at the end of the pre-funding period must not be more than 100
basis points less than the weighted average interest rate for the
obligations which were transferred to the trust on the closing date;
(e) the characteristics of the additional obligations must be monitored to
confirm that they are substantially similar to those which were
acquired as of the closing date either by a credit support provider or
insurance provider independent of the sponsor or by an independent
accountant retained by the sponsor that confirms such conformance in
writing;
(f) the pre-funding period must be described in the prospectus or private
placement memorandum provided to investing plans; and
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(g) the trustee of the trust must be a substantial financial institution or
trust company experienced in trust activities and familiar with its
duties, responsibilities and liabilities as a fiduciary under ERISA.
Further, the pre-funding period must be a period beginning on the
closing date and ending no later than the earliest to occur of (x) the date the
amount on deposit in the pre-funding account is less than the minimum dollar
amount specified in the pooling and servicing agreement; (y) the date on which
an event of default occurs under the pooling and servicing agreement; or (z) the
date which is the later of three months or 90 days after the closing date. It is
expected that the Pre-Funding Account will meet all of these requirements.
Moreover, the Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust and the
fiduciary (or its affiliate) is an obligor on the receivables held in the trust
provided that, among other requirements, (i) in the case of an acquisition in
connection with the initial issuance of certificates, at least fifty percent
(50%) of each class of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group; (ii) such fiduciary (or its
affiliate) is an obligor with respect to five percent (5%) or less of the fair
market value of the obligations contained in the trust; (iii) the Plan's
investment in certificates of any class does not exceed twenty-five percent
(25%) of all of the certificates of that class outstanding at the time of the
acquisition; and (iv) immediately after the acquisition, no more than
twenty-five percent (25%) of the assets of any Plan with respect to which such
person is a fiduciary are invested in certificates representing an interest in
one or more trusts containing assets sold or serviced by the same entity. The
Exemptions would not apply to Plans sponsored by either Underwriter, the
Trustee, the Master Servicer, the Subservicer, any obligor with respect to
Mortgage Loans included in the Trust Fund constituting more than five percent of
the aggregate unamortized principal balance of the assets in the Trust Fund, or
any affiliate of such parties (the "Restricted Group").
It is expected that the Exemptions will apply to the acquisition and
holding of the Class A Certificates by Plans and that all conditions of the
Exemptions other than those within the control of the investors will be met. In
addition, as of the date hereof, there is no single Mortgagor that is the
obligor on five percent (5%) of the Mortgage Loans included in the Trust Fund by
aggregate unamortized principal balance of the assets of the Trust Fund.
The Exemptions do not apply to the initial purchase, the holding or the
subsequent resale of the Subordinated Certificates because the Subordinated
Certificates are subordinate to certain other Classes of Certificates.
Consequently, transfers of the Subordinated Certificates will not be registered
by the Trustee unless the Trustee receives: (i) a representation from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or a plan or arrangement
subject to Section 4975 of the Code, nor a person acting on behalf of any such
plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer; (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the
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purchase and holding of such Certificates are covered under PTCE 95-60; or (iii)
an opinion of counsel satisfactory to the Trustee that the purchase or holding
of such Certificate by a Plan, any person acting on behalf of a Plan or using
such Plan's assets, will not result in the assets of the Trust Fund being deemed
to be "plan assets" and subject to the prohibited transaction requirements of
ERISA and the Code and will not subject the Trustee to any obligation in
addition to those undertaken in the Pooling and Servicing Agreement. Such
representation as described above shall be deemed to have been made to the
Trustee by the transferee's acceptance of a Subordinated Certificate. In the
event that such representation is violated, or any attempt to transfer to a Plan
or person acting on behalf of a Plan or using such Plan's assets is attempted
without such opinion of counsel, such attempted transfer or acquisition shall be
void and of no effect.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1
described in the Prospectus and the Exemptions, and the potential consequences
in their specific circumstances, prior to making an investment in the Offered
Certificates. Moreover, each Plan fiduciary should determine whether under the
general fiduciary standards of investment prudence and diversification, an
investment in the Offered Certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
LEGAL INVESTMENT MATTERS
The Class A and Class M-1 Certificates offered hereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated in
one of the two highest rating categories by at least one nationally recognized
statistical rating organization and, as such, will be legal investments for
certain entities to the extent provided in SMMEA. However, institutions subject
to the jurisdiction of the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, the National Credit Union
Administration or federal or state banking, insurance or other regulatory
authorities should review applicable rules, supervisory policies and guidelines,
since certain restrictions may apply to investments in such classes. It should
also be noted that certain states have enacted legislation limiting to varying
extents the ability of certain entities (in particular insurance companies) to
invest in mortgage related securities. Investors should consult with their own
legal advisors in determining whether, and to what extent the Class A and Class
M-1 Certificates constitute legal investments for such investors. See "Legal
Investment Matters" in the Prospectus.
The Class M-2 and Class B Certificates will not constitute "mortgage
related securities" under SMMEA. The appropriate characterization of the Class
M-2 and Class B Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase Class
M-2 and Class B Certificates, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Class M-2 and Class B Certificates will constitute legal
investments for them.
S-103
<PAGE>
Except as to the status of the Class A and Class M-1 Certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the Offered Certificates for legal investment or financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase the 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 Certificates) may adversely affect the
liquidity of the Offered Certificates.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Offered Certificates will be applied by the Depositor to the purchase price
of the Mortgage Loans.
METHOD OF DISTRIBUTION
Subject to the terms and conditions of the underwriting agreement dated
[DATE]and the terms agreement dated [DATE] between the Depositor and
[UNDERWRITER]. ("Underwriter"), as underwriter, the Offered Certificates are
being purchased from the Seller by the Underwriter in the respective initial
Certificate Principal Balance of each Class of Offered Certificates set forth
below, in each case upon issuance thereof. [Underwriter] is referred to herein
as an "Underwriter."
Class of Certificate [Underwriter]
-------------------- -------------
Class IA-1 Certificates..........
Class IA-2 Certificates..........
Class IA-3 Certificates..........
Class IA-4 Certificates..........
Class IA-5 Certificates..........
Class IM-1 Certificates..........
Class IM-2 Certificates..........
Class IB Certificates............
Class IIA-1 Certificates.........
Class IIM-1 Certificates.........
Class IIM-2 Certificates.........
Class IIB Certificates...........
Total...................
The Depositor has been advised that the Underwriter proposes initially
to offer the Offered Certificates to the public at the offering prices set forth
below. The Depositor has been advised that the Underwriter proposes initially to
offer the Offered Certificates to certain dealers at such offering prices less a
selling concession not to exceed the percentage of the Certificate denomination
set forth below, and that the Underwriter may allow and such dealers may reallow
a reallowance discount not to exceed the percentage of the Certificate
denomination set forth below:
S-104
<PAGE>
<TABLE>
<CAPTION>
Price to Underwriting Selling Reallowance
Class of Certificate Public Discount Concession Discount
-------------------- ------ ------------ ---------- ------------
<S> <C>
Class IA-1 Certificates.............
Class IA-2 Certificates.............
Class IA-3 Certificates.............
Class IA-4 Certificates.............
Class IA-5 Certificates.............
Class IM-1 Certificates.............
Class IM-2 Certificates.............
Class IB Certificates...............
Class IIA-1 Certificates............
Class IIM-1 Certificates............
Class IIM-2 Certificates............
Class IIB Certificates..............
</TABLE>
After the initial public offering, the public offering price, such
concessions and such discounts may be changed.
The Depositor has been advised by the Underwriter that it intends to
make a market in the Offered Certificates, but the Underwriter has no obligation
to do so. There can be no assurance that a secondary market for the Offered
Certificates (or any particular Class thereof) will develop or, if it does
develop, that it will continue or that such market will provide sufficient
liquidity to Certificateholders.
Until the distribution of the Offered Certificates is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriter and certain selling group members to bid for and purchase the
Offered Certificates. As an exception to these rules, the Underwriter is
permitted to engage in certain transactions that stabilize the price of the
Offered Certificates. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Offered Certificates.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Depositor nor of the Underwriter makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Offered Certificates.
In addition, neither the Depositor nor Underwriter makes any representation that
the Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
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, as amended.
S-105
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Morgan,
Lewis & Bockius LLP, New York, New York and for the Underwriters by
[________________________________________]. The material federal income tax
consequences of the Certificates will be passed upon for the Depositor by
Morgan, Lewis & Bockius LLP.
RATINGS
It is a condition of the issuance of the Offered Certificates that they
be assigned the ratings designated below by [Rating Agency] and [Rating Agency].
[RATING [RATING
CLASS AGENCY] AGENCY]
----- ------- -------
IA-1................................
IA-2................................
IA-3................................
IA-4................................
IA-5................................
IM-1................................
IM-2................................
IB..................................
IIA-1...............................
IIM-1...............................
IIM-2...............................
IIB.................................
The security ratings assigned to the Offered Certificates should be
evaluated independently from similar ratings on other types of securities. A
security rating is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the Rating Agencies. The
ratings on the Offered Certificates do not, however, constitute statements
regarding the likelihood or frequency of prepayments on the Mortgage Loans, the
payment of the Adjustable Rate Certificate Carryover or the anticipated yields
in light of prepayments.
The ratings of [Rating Agency] on mortgage pass-through certificates
addressed the likelihood of the receipt by Certificateholders of all
distributions to which such Certificateholders are entitled. [Rating Agency]
rating opinions address the structural and legal issues and tax-related aspects
associated with the Certificates, including the nature of the underlying
mortgage loans. [Rating Agency] ratings on pass-through certificates do not
represent any assessment of the likelihood that principal prepayments may differ
from those originally anticipated nor do they address the possibility that, as a
result of principal prepayments, Certificateholders may receive a lower than
anticipated yield.
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<PAGE>
The ratings assigned by [Rating Agency] to mortgage pass-through
certificates address the likelihood of the receipt of all distributions on the
mortgage loans by the related certificateholders under the agreements pursuant
to which such certificates are issued. [Rating Agency] ratings take into
consideration the credit quality of the related mortgage pool, including any
credit support providers, structural and legal aspects associated with such
certificates, and the extent to which the payment stream on the mortgage pool is
adequate to make the payments required by such certificates. [Rating Agency]
ratings on such certificates do not, however, constitute a statement regarding
frequency of prepayments of the mortgage loans or address the likelihood of
receipt of Interest Carryover Amounts.
The Depositor has not requested a rating of the Offered Certificates by
any rating agency other than [Rating Agency] and [Rating Agency]. However, there
can be no assurance as to whether any other rating agency will rate the Offered
Certificates or, if it does, what ratings would be assigned by such other rating
agency. The ratings assigned by any such other rating agency to the Offered
Certificates could be lower than the respective ratings assigned by the Rating
Agencies.
S-107
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1/29 Loans.............................................S-__ Class M-1 Certificates.................................S-__
2/28 Loans.............................................S-__ Class M-1 Principal Distribution Amount................S-__
3/27 Loans.............................................S-__ Class M-2 Certificates.................................S-__
5/25 Loans.............................................S-__ Class M-2 Principal Distribution Amount................S-__
Accounts...............................................S-__ Closing Date .....................................S-__
Accrual Period.........................................S-__ Collateral Value .....................................S-__
Adjustable Rate Certificate Carryover..................S-__ Collection Account.....................................S-__
Adjustable Rate Mortgage Loan..........................S-__ Compensating Interest..................................S-__
Adjustable Rate Mortgage Loans.........................S-__ Constant Prepayment Rate...............................S-__
Adjustment Date........................................S-__ Contributions Tax.....................................S-___
Advance................................................S-__ Cooperative............................................S-__
Advanta................................................S-__ CPR....................................................S-__
Advanta Parent.........................................S-__ CSI...................................................S-___
Applied Realized Loss Amount...........................S-__ Current Interest.......................................S-__
B&C....................................................S-__ Cut-off Date...........................................S-__
B&C Underwriting Guidelines............................S-__ DCR...................................................S-___
Balloon Amount.........................................S-__ Definitive Certificate.................................S-__
Balloon Loan...........................................S-__ Depositor..............................................S-__
Book-Entry Certificates................................S-__ Determination Date.....................................S-__
Cede...................................................S-__ Distribution Account...................................S-__
CEDEL..................................................S-__ Distribution Date .....................................S-__
CEDEL Participants.....................................S-__ DTC....................................................S-__
Certificate Account....................................S-__ Due Dates..............................................S-__
Certificate Group......................................S-__ Due Period.............................................S-__
Certificate Owners.....................................S-__ ERISA.................................................S-___
Certificate Principal Balances.........................S-__ Euroclear..............................................S-__
Certificates...........................................S-__ Euroclear Operator.....................................S-__
Class A Certificates...................................S-__ Euroclear Participants.................................S-__
Class A Group I Certificates...........................S-__ European Depositaries..................................S-__
Class A Group II Certificates..........................S-__ Exemptions............................................S-___
Class A Principal Distribution Amount..................S-__ Extra Principal Distribution Amount....................S-__
Class B Certificates...................................S-__ Financial Intermediary.................................S-__
Class B Principal Distribution Amount..................S-__ Fitch.................................................S-___
Class IA-5 Distribution Amount.........................S-__ Fixed Rate Mortgage Loan...............................S-__
Class IB Certificates..................................S-__ Fixed Rate Mortgage Loans..............................S-__
Class IIB Certificates.................................S-__ Foreclosure Rate.......................................S-__
Class IIM-1 Certificates...............................S-__ Funding Period.........................................S-__
Class IIM-2 Certificates...............................S-__ Gross Margin...........................................S-__
Class IM-1 Certificates................................S-__ Group I Certificates...................................S-__
Class IM-2 Certificates................................S-__ Group I Original Pre-Funded Amount.....................S-__
</TABLE>
S-108
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Group II Available Funds Cap...........................S-__ Percentage Interest....................................S-__
Group II Certificates..................................S-__ Periodic Rate Cap......................................S-__
Group II Maximum Rate Cap..............................S-__ Plan..................................................S-___
Group II Original Pre-Funded Amount....................S-__ Pooling and Servicing Agreement........................S-__
HEP....................................................S-__ Pre-Funding Account....................................S-__
Home Equity Prepayment.................................S-__ Prepayment Interest Shortfall..........................S-__
Indirect Participants..................................S-__ Prepayment Models .....................................S-__
Initial Mortgage Loans.................................S-__ Prepayment Period .....................................S-__
Interest Carry Forward Amount..........................S-__ Principal Distribution Amount..........................S-__
Interest Coverage Account..............................S-__ Principal Funds........................................S-__
Interest Determination Date............................S-__ Prohibited Transactions Tax...........................S-___
Interest Funds .....................................S-__ Prospectus.............................................S-__
Last Scheduled Distribution Date.......................S-__ PTCE 95-60............................................S-___
LIBOR Business Day.....................................S-__ Realized Loss..........................................S-__
Loan Group.............................................S-__ Record Date............................................S-__
Loan-to-Value Ratio....................................S-__ Reference Banks........................................S-__
Master REMIC..........................................S-___ Relevant Depositary....................................S-__
Master Servicer........................................S-__ REO Property...........................................S-__
Master Servicer Fee....................................S-__ Repurchase Price.......................................S-__
Maximum Mortgage Rate..................................S-__ Required Percentage....................................S-__
Mezzanine Certificates.................................S-__ Reserve Interest Rate..................................S-__
Mezzanine Group I Certificates.........................S-__ Residual Certificates..................................S-__
Mezzanine Group II Certificates........................S-__ Restricted Group......................................S-___
Minimum Mortgage Rate..................................S-__ Reuters Screen LIBO Page...............................S-__
Modeling Assumptions..................................S-___ Rules..................................................S-__
Mortgage Index.........................................S-__ S&P...................................................S-___
Mortgage Loan Schedule.................................S-__ Seller.................................................S-__
Mortgage Loans.........................................S-__ Servicer Advance Date..................................S-__
Mortgage Note..........................................S-__ Servicer Remittance Date...............................S-__
Mortgage Pool..........................................S-__ Servicing Fee..........................................S-__
Mortgage Rates.........................................S-__ Servicing Fee Rate.....................................S-__
Mortgaged Properties...................................S-__ Six Month LIBOR Loans..................................S-__
Mortgagors.............................................S-__ SMMEA.................................................S-___
Net Excess Cashflow....................................S-__ Stated Principal Balance...............................S-__
Net Mortgage Rate......................................S-__ Statistical Mortgage Pool..............................S-__
One-Month LIBOR........................................S-__ Stepdown Date..........................................S-__
Optional Termination Amount............................S-__ Stepup Trigger Event...................................S-__
Optional Termination Date..............................S-__ Subordinated Certificates..............................S-__
Original Pre-Funded Amount.............................S-__ Subordinated Group I Certificates......................S-__
Owned and Managed Servicing Subordinated Group II Certificates.....................S-__
Portfolio..............................................S-__ Subsequent Adjustable Rate Mortgage
Participants...........................................S-__ Loan...................................................S-__
Pass-Through Margin....................................S-__ Subsequent Cut-off Date................................S-__
Pass-Through Rate......................................S-__ Subsequent Fixed Rate Mortgage Loan....................S-__
</TABLE>
S-109
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subsequent Mortgage Loans.......................S-__ Terms and Conditions............................S-__
Subsequent Transfer Dates.......................S-__ Third Party Servicing Portfolio.................S-__
Subsequent Transfer Instruments.................S-__ Trigger Event...................................S-__
Subservicer.....................................S-__ Trust Fund......................................S-__
Subsidiary REMIC...............................S-___ Trustee.........................................S-__
Subsidiary REMIC Regular Interests.............S-___ Underwriter....................................S-___
Unpaid Realized Loss Amount.....................S-__
</TABLE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Chase
Funding Mortgage Loan Asset-Backed Certificates, Series [______] (the "Global
Securities") will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of The Depository Trust
Company ("DTC"), CEDEL or Euroclear. The Global Securities will be tradeable as
home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional Eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior mortgage pass-through certificate
issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
A-1
<PAGE>
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts as
DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior mortgage pass-through
certificate issues. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional Eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior mortgage
pass-through certificate issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional Eurobonds in same-day funds.
Trading between DTC Seller and CEDEL or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a CEDEL Participant or a Euroclear Participant, the purchaser
will send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, on the basis of either the actual number
of days in such accrual period and a year assumed to consist of 360 days or a
360-day year of twelve 30- day months, as applicable to the related Class of
Global Securities. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the first day of the following
month. Payment will then be made by the respective Depositary of the DTC
Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's account.
The securities credit will appear the next day (European time) and the cash debt
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the CEDEL or Euroclear cash debt will be valued instead as of
the actual settlement date.
A-2
<PAGE>
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each CEDEL
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases CEDEL
or Euroclear will instruct the respective Depositary, as appropriate, to deliver
the Global Securities to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment to and excluding the settlement date on the basis of either
the actual number of days in such accrual period and a year assumed to consist
of 360 days or a 360-day year of twelve 30-day months, as applicable to the
related Class of Global Securities. For transactions settling on the 31st of the
month, payment will include interest accrued to and excluding the first day of
the following month. The payment will then be reflected in the account of the
CEDEL Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the CEDEL Participant or Euroclear
Participant have a line of credit with its respective clearing system and elect
to be in debt in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
A-3
<PAGE>
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear account
in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the CEDEL Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
CEDEL or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with Effectively Connected Income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or Reduced Rate for non-U.S. Persons Resident in Treaty
Countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing in
a country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only
for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the Certificate
owners or his agent.
A-4
<PAGE>
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States, any state thereof or the District of Columbia (unless, in the
case of a partnership, Treasury regulations provide otherwise), including an
entity treated as a corporation or partnership for federal income tax purposes,
(iii) an estate the income of which is includible in gross income for United ,
States tax purposes, regardless of its source or (iv) a trust if a court within
the United States is able to exercise primary supervision of the administration
of the trust and one or more United States persons have the authority to control
all substantial decisions of the trust. Notwithstanding the preceding sentence,
to the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be a U.S.
Person. This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
A-5
<PAGE>
[________] (Approximate)
Chase Funding
Mortgage Loan Asset-Backed Certificates, Series [______]
[Chase Logo]
Chase Funding, Inc.
Depositor
[Advanta Mortgage Corp. USA]
Subservicer
Chase Manhattan Mortgage Corporation
Seller and Master Servicer
---------------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------------
(UNDERWRITER)
You should rely on the information contained or incorporated by reference in
this prospectus supplement and the attached prospectus. We have not authorized
anyone to provide you with different information.
We are not offering these certificates in any state where the offer is not
permitted.
We represent the accuracy of the information in this prospectus supplement and
the attached prospectus only as of the dates stated on their respective covers.
Dealers will be required to deliver a prospectus supplement and prospectus when
acting as underwriters of these certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling these certificates
will deliver a prospectus supplement and prospectus until (DATE].
(DATE]
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities Exchange Commission is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED OCTOBER 20, 1999
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus dated [DATE])
$[__________] (Approximate)
Chase Mortgage Trust, Series [_____]
Issuer
Chase Manhattan Acceptance Corporation
Seller
[Chase Manhattan Mortgage Corporation]
Servicer
Multi-Class Mortgage Pass-Through Certificates, Series [_________]
Investing in these certificates involves risks. You should not purchase these
certificates unless you fully understand their risks and structure. See "Risk
Factors" beginning on page S-__ of this prospectus supplement and page __ of the
accompanying prospectus.
Neither these certificates nor the underlying mortgage loans are obligations of
Chase Manhattan Acceptance Corporation, Chase Manhattan Mortgage Corporation, or
any of their affiliates. These certificates are not insured or guaranteed by any
governmental agency.
Chase Mortgage Trust, Series [_________] will issue [sixteen] classes of
certificates, of which [twelve] classes are offered by this prospectus
supplement and the accompanying prospectus. The table on page S-3 identifies the
various classes and specifies certain characteristics of each class, including
each class's initial principal balance (or notional balance), interest rate and
rating.
The trust fund will consist primarily of a pool of fixed rate one- to
four-family first lien mortgage loans with original terms to stated maturity of
approximately [15] [30] years.
The underwriter, [UNDERWRITER], will purchase the offered certificates from
Chase Manhattan Acceptance Corporation and will offer them to the public at
negotiated prices determined at the time of sale. Chase Manhattan Acceptance
Corporation will receive proceeds of approximately $[________], plus accrued
interest, less expenses of approximately $[_______]. The underwriter expects to
deliver the offered certificates to investors on or about [DATE].
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the offered certificates or passed
upon the adequacy or accuracy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
[UNDERWRITER]
The date of this Prospectus Supplement is [DATE]
<PAGE>
Important Notice about the Information in this
Prospectus Supplement and the Accompanying Prospectus
Information about the offered certificates is contained in (a) the
accompanying prospectus, which provides general information, some of which may
not apply to the offered certificates, and (b) this prospectus supplement, which
describes the specific terms of the offered certificates.
This prospectus supplement and the accompanying prospectus include
cross references to sections in these materials where you can find further
related discussions. The tables of contents in this prospectus supplement and
the prospectus identify the pages where those sections are located. In addition,
an index of defined terms can be found beginning on page S-__ of this prospectus
supplement and on page iii of the prospectus.
In this prospectus supplement, the terms "Seller," "we," "us" and "our"
refer to Chase Manhattan Acceptance Corporation.
TABLE OF CONTENTS
THE SERIES [_________] CERTIFICATES..........................................S-_
SUMMARY INFORMATION..........................................................S-_
RISK FACTORS.................................................................S-_
THE MORTGAGE POOL...........................................................S-__
General..................................................................S-__
Representations and Warranties...........................................S-__
Mortgage Loans...........................................................S-__
PREPAYMENT AND YIELD
CONSIDERATIONS..............................................................S-__
Yield Considerations with Respect to the
Class A-P Certificates...................................................S-__
CHASE MANHATTAN MORTGAGE
CORPORATION.................................................................S-__
THE POOLING AND SERVICING
AGREEMENT...................................................................S-__
Assignment of Mortgage Loans.............................................S-__
Servicing................................................................S-__
Servicing Compensation and Payment of
Expenses.................................................................S-__
Adjustment to Servicing Fee in Connection
with Prepaid Mortgage Loans..............................................S-__
Payments on Mortgage Loans; Collection
Account; Certificate Account.............................................S-__
Advances.................................................................S-__
Trustee..................................................................S-__
Optional Termination.....................................................S-__
Special Servicing Agreements.............................................S-__
DESCRIPTION OF THE CERTIFICATES.............................................S-__
General..................................................................S-__
Book-Entry Registration..................................................S-__
Definitive Certificates..................................................S-__
Restrictions on Transfer of the Class A-R,
Class M and Offered Class B Certificates.................................S-__
Distributions to Certificateholders......................................S-__
Interest.................................................................S-__
[Determination of LIBOR..................................................S-__
Principal (Including Prepayments)........................................S-__
Additional Rights of the Class A-R
Certificateholder........................................................S-__
Subordinated Certificates and Shifting
Interests................................................................S-__
FEDERAL INCOME TAX
CONSIDERATIONS..............................................................S-__
Class A-R Certificate....................................................S-__
ERISA CONSIDERATIONS........................................................S-__
LEGAL INVESTMENT MATTERS....................................................S-__
USE OF PROCEEDS.............................................................S-__
UNDERWRITING................................................................S-__
LEGAL MATTERS...............................................................S-__
RATINGS.....................................................................S-__
INDEX OF DEFINED TERMS......................................................S-__
S-2
<PAGE>
THE SERIES [_________] CERTIFICATES
<TABLE>
<CAPTION>
Original Expected
Certificate Ratings(3)
Principal Certificate ----------
Balance(1) Rate Principal Type(2) Interest Type(2) [Agency] [Agency]
---------- ----------- ----------------- ---------------- ----------------
Offered Certificates
<S> <C> <C> <C> <C> <C> <C>
Class A-1.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA
Class A-2.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA
Class A-3.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA
Class A-4.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA
Class A-5.................. $________ (4) Senior, Sequential Pay Floating Rate Class AAA AAA
Class A-6.................. $________ (4) Senior, Sequential Pay Inverse Floating Rate Class AAA AAA
Class A-7.................. $________ ____% Senior, Lock-out Class Fixed Rate AAA AAA
Class A-P.................. $________ (5) Senior Principal-Only Class AAA AAA
Class A-R.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA
Class M.................... $________ ____% Mezzanine Fixed Rate AA N/A
Class B-1.................. $________ ____% Subordinated Fixed Rate A N/A
Class B-2.................. $________ ____% Subordinated Fixed Rate BBB N/A
Non-Offered Certificates(6)
Class A-X.................. (7) (7) Senior, Notional Amount Interest Only N/A N/A
Class B-3.................. $________ ____% Subordinated Fixed Rate N/A N/A
Class B-4.................. $________ ____% Subordinated Fixed Rate N/A N/A
Class B-5.................. $________ ____% Subordinated Fixed Rate N/A N/A
</TABLE>
- ---------------
(1) These amounts are approximate. We may adjust the original certificate
principal balances upward or downward by up to 5%. (2) See "Description of
the Certificates--Categories of Classes of Certificates" in the prospectus
for a description of the principal types and interest types.
(3) See "Ratings."
(4) The certificate rate on the Class A-5 and Class A-6 Certificates are
adjustable based on LIBOR as described herein under "Description of the
Certificates--Distributions to Certificateholders--Interest."
(5) The Class A-P Certificates are principal-only Certificates and are not
entitled to payments of interest.
(6) The information presented for the non-offered certificates is provided
solely to assist your understanding of the offered certificates.
(7) The Class A-X Certificates are interest-only certificates, have no principal
balance, and will bear interest on their notional amount (initially,
approximately $__________).
S-3
<PAGE>
SUMMARY INFORMATION
This section briefly summarizes certain major characteristics of the
certificates and the mortgage loans. It does not contain all of the information
that you need to consider in making your investment decision. To fully
understand the terms of the certificates, you should read both this prospectus
supplement and the accompanying prospectus in their entirety.
The Trust Fund
The name of the trust fund is Chase Mortgage Trust, Series [______]. We are
forming a trust to own a pool of fixed rate one- to four-family first lien
mortgage loans. The certificates represent beneficial ownership interests in the
underlying trust fund assets. All payments to you will come only from the
amounts received in connection with those assets. The certificates will have the
original certificate principal balance, certificate rate and other features set
forth in the table on page S-3. The trust fund will issue the certificates under
a Pooling and Servicing Agreement dated as of [DATE] among Chase Manhattan
Acceptance Corporation, as depositor, [Chase Manhattan Mortgage Corporation], as
servicer and [TRUSTEE], as trustee. See "The Pooling and Servicing Agreement"
and "Description of the Certificates."
Principal Parties
Issuer: Chase Mortgage Trust, Series [______].
Seller: Chase Manhattan Acceptance Corporation, a Delaware corporation
whose address is 343 Thornall Street, Edison, New Jersey 08837 and whose
telephone number is (732) 205-0600.
Servicer: [Chase Manhattan Mortgage Corporation, a New Jersey corporation
whose address is 343 Thornall Street, Edison, New Jersey 08837 and whose
telephone number is (732) 205- 0600]. See "Chase Manhattan Mortgage Corporation"
and "The Pooling and Servicing Agreement--Servicing."
Trustee: [TRUSTEE], a _______ association whose corporate trust office is
[ADDRESS] and whose telephone number is [NUMBER]. See "The Pooling and Servicing
Agreement--The Trustee."
Cut-off Date
The cut-off date will be [DATE].
Closing Date
The closing date will be on or about [DATE].
Forms of Certificates; Denominations
Your certificates will be issued either in book-entry form or in fully
registered, certificated form. The table under "Description of the
Certificates--General" in this prospectus supplement sets forth the original
certificate form, the minimum denomination and the incremental denomination of
the offered certificates.
Description of the Certificates
The certificates will have an approximate aggregate initial principal balance of
$___________, subject to a permitted variance of plus or minus five percent.
The certificates will consist of:
o [Ten] classes of Class A Certificates, which initially will have an
approximate aggregate initial principal balance of $[_______] and
evidence an approximate undivided beneficial interest of [____]% of the
trust fund assets;
o The Class M Certificates, which initially will have an approximate
initial principal balance of $[_______] and evidence an approximate
undivided beneficial interest of [____]% of the trust fund assets; and
o Five classes of Class B Certificates, which
S-4
<PAGE>
initially will have an approximate aggregate initial principal balance
of $[_______] and evidence an approximate undivided beneficial interest
of [____]% of the trust fund assets.
Only the Class A (excluding Class A-X), Class M, Class B-1 and Class B-2
Certificates are being offered by this prospectus supplement and the
accompanying prospectus. We will sell or otherwise transfer the Class A-X, Class
B-3, Class B-4 and Class B-5 Certificates to a limited number of institutional
investors (which may include one or more of our affiliates) in a privately
placed offering.
The Mortgage Pool
The mortgage pool will consist of fixed rate one- to four-family first lien
residential mortgage loans with original terms to stated maturity of
approximately [15] [30] years.
We expect the mortgage loans to have the following approximate characteristics
as of [DATE]:
Number of Mortgage Loans [_____]
Aggregate Unpaid Principal Balance [_____]
Range of Unpaid Principal Balances $[_____] - $[_____]
Average Unpaid Principal Balance $[_____]
Range of Mortgage Rates [_____]% - [_____]%
Weighted Average Mortgage Rate [_____]%
Range of Remaining Terms to Stated [___] months-[___] months
Maturity
Weighted Average Remaining Term to [___] months
Stated Maturity
Range of Remaining Terms to Expected [___] months-[___] months
Maturity(1)
Weighted Average Remaining
Term to Expected Maturity(1) [___] months
Weighted Average Loan Age(2) [___] month[s]
Range of Original Loan-to-Value Ratios [_____]% - [_____]%
Weighted Average Original Loan-to- [_____]%
Value Ratio
Weighted Average Credit Score(3) [_____]
- ----------
(1) Based on payments actually received (or scheduled to be received) on each
mortgage loan as of the cut-off date.
(2) Based on the number of months from and including the first monthly payment
to and including the cut-off date.
(3) FICO scores are described on page S-__.
Before we issue the certificates, we may remove some mortgage loans from
the mortgage pool. We also may substitute other loans for some mortgage loans.
This may result in changes in the mortgage pool characteristics shown above and
could affect the weighted average lives and yields of the certificates. See "The
Mortgage Pool."
Distributions on the Certificates
The first distribution date will be [DATE]. Thereafter, distributions will be
made on the 25th day of each month, or on the next business day if the 25th day
is not a business day. In general, amounts available for distribution each month
will be distributed by the Servicer in the following order of priority:
First, the holders of the Class A Certificates will receive, on a pro rata
basis, the interest payments to which they are entitled on that distribution
date;
Second, the holders of the Class A Certificates will receive the payments
of principal to which they are entitled on that distribution date (however, not
every class of Class A Certificates will receive a principal distribution on
each distribution date; instead, principal payments will be allocated among the
various classes of Class A Certificates as described under "Description of the
Certificates--Distributions to Certificateholders--Principal (Including
Prepayments)";
Third, the holders of the Class M Certificates will receive the payments
of interest and then principal to which they are entitled on that distribution
date; and
Fourth, the holders of the Class B Certificates will receive, in numerical
order (that is, first to the Class B-1 Certificates, then to the Class B-2
Certificates, etc.) the payments of interest and then principal to which they
are entitled on that distribution date.
Credit Enhancement
Credit enhancement reduces the harm caused to holders of the certificates as a
result of shortfalls in payments received and losses realized on the mortgage
loans. The credit enhancement for the offered certificates will consist of
subordination utilizing a shifting interest structure.
S-5
<PAGE>
Subordination. The rights of the holders of each class of Class B
Certificates to receive distributions will be subordinated to the rights of the
holders of the Class A and Class M Certificates and the holders of the classes
of Class B Certificates, if any, with lower numerical designations to receive
distributions. The rights of the holders of the Class M Certificates to receive
distributions will be subordinated to the rights of the holders of the Class A
Certificates to receive distributions.
In general, the protection afforded the holders of more senior classes of
certificates by means of this subordination will be effected in two ways:
Priority of Distributions. By the preferential right of the holders of
such classes to receive, prior to any distribution being made on any
distribution date to the holders of the more junior classes of
certificates, the amount of interest and principal due on the more senior
classes of certificates and, if necessary, by the right of such more
senior holders to receive future distributions on the mortgage loans that
would otherwise have been allocated to the holders of the more junior
classes of certificates; and
Allocation of Losses. By the allocation to the more junior classes of
certificates (in inverse order of seniority), until their respective
certificate principal balances have been reduced to zero, of losses
resulting from the liquidation of defaulted mortgage loans or the
bankruptcy of mortgagors prior to the allocation of such losses to the
more senior classes of certificates (other than the certain excess losses
arising from special hazards, mortgagor fraud or mortgagor bankruptcy).
The chart below summarizes the relative seniority of the various classes of
certificates and indicates the initial level of credit enhancement provided to
the various classes of offered certificates:
Initial Credit
Credit Enhancement
Class Enhancement Percentage
A Class M and Class B [____]%
M Class B [____]%
B-1 Class B-2, Class B-3, [____]%
Class B-4 and Class
B-5
B-2 Class B-3, Class B-4 [____]%
and Class B-5
Shifting of Interests. In order to increase the period during which the Class
M and Class B Certificates remain available as credit enhancement to the Class A
Certificates, the Class A Certificates in the aggregate will receive 100% of
principal prepayments and certain unscheduled recoveries with respect to the
mortgage loans until the fifth anniversary of the first distribution date.
During the four years following that anniversary, the Class A Certificates in
the aggregate will receive a disproportionately large, but decreasing, share of
principal prepayments and such other unscheduled recoveries. This will result in
an accelerated amortization of principal to the Class A Certificates and, in the
absence of realized losses on the mortgage loans, an increase in the percentage
interest in the principal balance of the mortgage loans evidenced by the Class M
and Class B Certificates, thereby increasing the likelihood that holders of the
Class A Certificates will be paid the full amount of principal to which they are
entitled.
Optional Termination
Subject to certain restrictions, [Chase Manhattan Mortgage Corporation] will
have the option (but not the obligation) to purchase all of the mortgage loans
in the mortgage pool after the aggregate unpaid principal balance of such
mortgage loans is reduced to less than [10%] of the aggregate unpaid principal
balance of such mortgage loans as of the cut-off date. See "The Pooling and
Servicing Agreement-- Optional Termination."
Legal Investment
As of the closing date, the Class A and Class M Certificates will constitute
"mortgage related securities" under the Secondary Mortgage Market
S-6
<PAGE>
Enhancement Act of 1984, as amended. The Class B-1 and Class B-2 Certificates
will not constitute "mortgage related securities." You should consult your own
counsel as to whether and to what extent the offered certificates constitute
legal investments for you. See "Legal Investment Matters" in this prospectus
supplement and "Legal Investment Matters" in the accompanying prospectus.
Federal Income Tax Consequences
For federal income tax purposes, the trust fund will elect to be treated as a
Real Estate Mortgage Investment Conduit. The certificates (other than the Class
A-R Certificates) will represent ownership of regular interests in the trust
fund and will generally be treated as debt instruments of the trust fund for
federal income tax purposes. You will be required to include in income all
interest and original issue discount, if any, on your certificates in accordance
with the accrual method of accounting regardless of your usual method of
accounting. The Class A-R Certificates will represent ownership of the residual
interest in the trust fund. See "Federal Income Tax Considerations" in this
prospectus supplement and in the accompanying prospectus.
ERISA Considerations
In general, subject to important considerations described under "ERISA
Considerations" in this prospectus supplement and the accompanying prospectus,
the Class A Certificates (other than the Class A-R Certificates) will be
eligible for purchase by retirement or other employee benefit plans subject to
the Employee Retirement Income Security Act of 1986, as amended. You should
consult with your own counsel with respect to the legal consequences of an ERISA
plan's acquisition and ownership of the certificates. See "ERISA Considerations"
in this prospect supplement and in the accompanying prospectus.
Ratings
The offered certificates are required to receive the ratings from [RATING
AGENCY] and [RATING AGENCY] indicated under the heading "Expected Ratings" in
the chart shown on page S-3 of this prospectus supplement. The ratings on the
offered certificates address the likelihood of the receipt by holders of offered
certificates of all distributions on the underlying mortgage loans to which they
are entitled. They do not address the likely actual rate of prepayments. Such
rate of prepayments, if different than you originally anticipated, could
adversely affect your yield. See "Ratings."
S-7
<PAGE>
RISK FACTORS
Forward-Looking Statements
In this prospectus supplement and the accompanying prospectus, we use
certain forward-looking statements. Such forward-looking statements are found in
the material, including each of the tables, set forth under "Risk Factors" and
"Prepayment and Yield Considerations." Forward-looking statements are also found
elsewhere in this prospectus supplement and prospectus and include words like
"expects," "intends," "anticipates," "estimates" and other similar words. Such
statements are inherently subject to a variety of risks and uncertainties.
Actual results differ materially from those we anticipate due to changes in,
among other things:
o economic conditions and industry competition;
o political, social and economic conditions;
o the law and government regulatory initiatives; and
o interest rate fluctuations.
We will not update or revise any forward-looking statements to reflect
changes in our expectations or changes in the conditions or circumstances on
which such statements were originally based.
Prepayments May Adversely Affect Yield
The rate of distributions in reduction of the principal balance of any
class of offered certificates, the aggregate amount of distributions of
principal and interest on any class of offered certificates and the yield to
maturity of any class of offered certificates will be directly related to the
rate of payments of principal on the mortgage loans and to the amount and timing
of mortgagor defaults resulting in realized losses. The rate of principal
payments on the mortgage loans will in turn be affected by, among other things:
o the amortization schedules of the mortgage loans;
o the rate of principal prepayments (including partial
prepayments and prepayments resulting from refinancing)
thereon by mortgagors;
o liquidations of defaulted mortgage loans;
o repurchases of mortgage loans by us as a result of
defective documentation or breaches of representations
and warranties; and
o optional purchase by [Chase Manhattan Mortgage
Corporation] of all of the mortgage loans in connection
with the termination of the trust fund.
See "Prepayment and Yield Considerations" and "The Pooling and Servicing
Agreement--Optional Termination" herein and "The Pooling and Servicing
Agreement--Assignment of Mortgage Loans; Warranties," "--Repurchase or
Substitution" and "--Termination; Purchase of Mortgage Loans" in the prospectus.
Mortgagors are permitted to prepay the mortgage loans, in whole or in part, at
any time without penalty.
S-8
<PAGE>
The rate of payments (including prepayments, liquidations and defaults)
on pools of mortgage loans is influenced by a variety of economic, geographic,
social and other factors.
o If prevailing rates for similar mortgage loans fall below
the mortgage interest rates on the mortgage loans, the
rate of prepayment generally would be expected to
increase.
o Conversely, if interest rates on similar mortgage loans
rise above the mortgage interest rates on the mortgage
loans, the rate of prepayment generally would be expected
to decrease.
If you purchase any offered certificates at a discount, you should
consider the risk that a slower than anticipated rate of principal payments
(including prepayments, liquidations and defaults) on the mortgage loans in the
related mortgage group will result in an actual yield that is lower than your
expected yield. If you purchase any offered certificates at a premium, you
should consider the risk that a faster than anticipated rate of principal
payments (including prepayments, liquidations and defaults) on the mortgage
loans will result in an actual yield that is lower than your expected yield and,
under certain circumstances, you might not recoup your initial investment.
Subordination of Subordinated Certificates Increases Risk of Loss to Such
Classes
The rights of the holders of the Class M Certificates to receive
distributions with respect to the mortgage loans will be subordinated to such
rights of the holders of the Class A Certificates and the rights of the holders
of a Class of Class B Certificates to receive distributions with respect to the
mortgage loans will be subordinated to such rights of the holders of the Class A
Certificates, the Class M Certificates and the Classes of Class B Certificates
with lower numerical designations, all to the extent described herein under
"Description of the Certificates--Subordination Certificates and Shifting
Interests."
Geographic Concentration of the Mortgaged Properties May Increase Risk of Loss
We expect approximately [____]%, [___]% and [___]% of the mortgage
loans (by aggregate principal balance as of the cut-off date) to be secured by
mortgaged properties located in the states of __________, ________ and _______,
respectively. Consequently, losses and prepayments on the mortgage loans and
resultant payments on the offered certificates may, both generally and
particularly, be affected significantly by changes in the housing markets and
regional economies of, and the occurrence of natural disasters (such as
earthquakes, fires, floods or hurricanes) in, the states of __________, ________
and ________.
Certificates May Not Be Appropriate for Individual Investors
The offered certificates may not be an appropriate investment for
individual investors who do not have sufficient resources or expertise to
evaluate the particular characteristics of the applicable class of offered
certificates. This may be the case because, among other things:
S-9
<PAGE>
o The yield to maturity of offered certificates purchased
at a price other than par will be sensitive to the
uncertain rate and timing of principal prepayments on the
mortgage loans;
o The rate of principal distributions on, and the weighted
average life of, the offered certificates will be
sensitive to the uncertain rate and timing of principal
prepayments on the mortgage loans and the priority of
principal distributions among the classes of
certificates, and as such the offered certificates may be
inappropriate investments for you if you require a
distribution of a particular amount of principal on a
specific date or an otherwise predictable stream of
distributions;
o You may not be able to reinvest amounts distributed in
respect of principal on an offered certificate (which, in
general, are expected to be greater during periods of
relatively low interest rates) at a rate at least as high
as the certificate rate on the offered certificates; or
o It is possible that a secondary market for the offered
certificates will not develop or that your investment may
not be liquid. Lack of liquidity could result in a
substantial decrease in the market value of your
certificates.
You should also carefully consider the further risks and other special
considerations discussed above and under the heading "Prepayment and Yield
Considerations" in this prospectus supplement and in the accompanying prospectus
under the heading "Risk Factors."
Risks Associated with Year 2000 Compliance
We are aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000 problem" is pervasive and complex; virtually every computer operation will
be affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
We have been advised by [Chase Manhattan Mortgage Corporation] and
[TRUSTEE] that they are committed to either (i) implementing modifications to
their respective existing systems to the extent required to cause them to be
year 2000 compliant or (ii) acquiring computer systems that are year 2000
compliant in each case prior to January 1, 2000. However, neither we nor any of
our affiliates have made any independent investigation of the computer systems
of [TRUSTEE]. In the event that computer problems arise out of a failure of such
efforts to be completed on time, or in the event that the computer systems of
[Chase Manhattan Mortgage Corporation] or [TRUSTEE] are not fully year 2000
compliant, the resulting disruptions in the collection or distribution of
receipts on the mortgage loans could materially adversely affect the holders of
the offered certificates.
With respect to the year 2000 problem, The Depository Trust Company has
informed members of the financial community that it has developed and is
implementing a program so that its systems, as they relate to the timely payment
of distributions, including principal and interest payments to
certificateholders, book-entry deliveries, and settlement of trades within The
Depository Trust Company,
S-10
<PAGE>
continue to function appropriately on and after January 1, 2000. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, The Depository Trust Company's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, The Depository Trust Company's ability to perform properly its
services is also dependent upon other parties, including but not limited to, its
participating organizations, through which you will hold your certificates, as
well as the computer systems of third party service providers. The Depository
Trust Company has informed the financial community that it is contacting and
will continue to contact third party vendors from whom The Depository Trust
Company acquires services to:
o impress upon them the importance of such services being
year 2000 compliant; and
o determine the extent of their efforts for year 2000
remediation, and, as appropriate, testing, of their
services.
In addition, The Depository Trust Company has stated that it is in the
process of developing such contingency plans as it deems appropriate.
If problems associated with the year 2000 problem were to occur with
respect to The Depository Trust Company and the services described above,
payments to you could be delayed or otherwise adversely affected.
See "Risk Factors" in the accompanying prospectus for a description of
certain other risks and special considerations applicable to the offered
certificates.
S-11
<PAGE>
THE MORTGAGE POOL
General
The mortgage pool with respect to the Certificates (the "Mortgage
Pool") will consist of approximately _____ conventional mortgage loans (the
"Mortgage Loans") evidenced by fixed interest rate promissory notes (each, a
"Mortgage Note") having an aggregate principal balance on [DATE], (the "Cut-off
Date") of approximately $[___________]. References herein to percentages of
Mortgage Loans refer in each case to the percentage of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date, based on the outstanding
principal balances of the Mortgage Loans as of the Cut-off Date, after giving
effect to Monthly Payments (defined herein) due on or prior to the Cut-off Date,
whether or not received. References to percentages of Mortgaged Properties
(defined herein) refer, in each case, to the percentages of aggregate principal
balances of the related Mortgage Loans (determined as described in the preceding
sentence). The Mortgage Notes are secured by mortgages or deeds of trust or
other similar security instruments creating first liens on one- to four-family
residential properties (the "Mortgaged Properties"). The Mortgaged Properties
consist of individual dwelling units, individual cooperative apartment dwelling
units, individual condominium units, two- to four-family dwelling units,
attached planned unit developments and detached planned unit developments. The
Trust Fund includes, in addition to the Mortgage Pool, (i) the amounts held from
time to time in one or more accounts (collectively, the "Accounts") maintained
in the name of the Trustee pursuant to the Pooling and Servicing Agreement (the
"Agreement") to be dated as of [DATE] by and among Chase Manhattan Acceptance
Corporation (the "Seller"), [Chase Manhattan Mortgage Corporation ("Chase
Manhattan Mortgage")], as servicer (in such capacity, the "Servicer") and
[TRUSTEE], as trustee (the "Trustee"), (ii) any property which initially secured
a Mortgage Loan and which is acquired by foreclosure or deed-in-lieu of
foreclosure, (iii) all insurance policies and the proceeds thereof described
below and (iv) certain rights to require repurchase of the Mortgage Loans by the
Seller for breach of representation or warranty.
The Seller will cause the Mortgage Loans to be assigned to the Trustee.
The Servicer will service the Mortgage Loans either by itself or through other
mortgage servicing institutions (the "Subservicers"), pursuant to the Agreement.
With respect to those Mortgage Loans serviced by the Servicer through a
Subservicer, the Servicer will remain liable for its servicing obligations under
the Agreement as if the Servicer alone were servicing such Mortgage Loans.
Representations and Warranties
The Seller will make certain representations and warranties for the
benefit of the Trustee with respect to the Mortgage Loans as described in the
Prospectus under "The Mortgage Pools" and "The Pooling and Servicing
Agreement--Assignment of Mortgage Loans; Warranties" and "--Repurchase or
Substitution" and will be obligated to repurchase any Mortgage Loan as to which
there is a material breach of any such representation or warranty. Such
repurchase will constitute the sole remedy available to Certificateholders for a
breach of such representations or warranties. The Trustee will enforce the
repurchase obligations of the Seller. In lieu of such repurchase obligation, the
Seller may, within two years after the date of initial delivery of the
Certificates, substitute for the affected Mortgage Loans substitute mortgage
loans, as described under "The Pooling and Servicing Agreement--Assignment of
Mortgage Loans; Warranties" and "--Repurchase or Substitution" in the
Prospectus.
S-12
<PAGE>
Mortgage Loans
Statistical data with respect to the Mortgage Loans are set forth
below. The Mortgage Loans were originated between [DATE] and [DATE]. All of the
Mortgage Loans had original terms to stated maturity of [360] [180] months or
less.
The weighted average number of months from and including the first
Monthly Payment on the Mortgage Loans to and including the Cut-off Date was
approximately __ month[s].
Monthly payments of principal and interest on the Mortgage Loans
("Monthly Payments") will be due on the first day of each month (each, a "Due
Date").
All of the Mortgage Loans having original loan-to-value ratios of
greater than [___]% are insured under Primary Mortgage Insurance Policies (as
defined in the Prospectus). Not more than approximately [___]% of the Mortgage
Loans are insured by any one Primary Mortgage Insurance Policy insurer. At the
time of origination of the Mortgage Loans, each of the Primary Mortgage
Insurance Policy insurers was approved by the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").
See "Servicing of the Mortgage Loans--Private Mortgage Insurance" in the
Prospectus.
Approximately [_____]% of the Mortgage Loans have Credit Scores. The
weighted average Credit Score for the Mortgage Loans that were scored is [___]
and the range of such Credit Scores is [___] to [____]. "Credit Scores" are
statistical credit scores obtained by many mortgage lenders in connection with
the loan application to help assess a borrower's credit-worthiness. Credit
Scores are generated by models developed by a third party and are made available
to lenders through three national credit bureaus. The models were derived by
analyzing data on consumers in order to establish patterns which are believed to
be indicative of the borrower's probability of default. The Credit Score is
based on a borrower's historical credit data, including, among other things,
payment history, delinquencies on accounts, levels of outstanding indebtedness,
length of credit history, types of credit, and bankruptcy experience. Credit
Scores range from approximately 250 to approximately 900, with higher scores
indicating an individual with a more favorable credit history compared to an
individual with a lower score. However, a Credit Score purports only to be a
measurement of the relative degree of risk a borrower represents to a lender,
i.e., that a borrower with a higher score is statistically expected to be less
likely to default in payment than a borrower with a lower score. In addition, it
should be noted that Credit Scores were developed to indicate a level of default
probability over a two-year period which does not correspond to the life of a
mortgage loan. Furthermore, Credit Scores were not developed specifically for
use in connection with mortgage loans, but for consumer loans in general.
Therefore, a Credit Score does not take into consideration the effect of
mortgage loan characteristics on the probability of repayment by the borrower.
Neither the Seller nor Chase Manhattan Mortgage makes any representations or
warranties as to the actual performance of any Mortgage Loan or that a
particular Credit Score should be relied upon as a basis for an expectation that
the borrower will repay the Mortgage Loan according to its terms.
Additional data with respect to the Mortgage Loans are set forth in the
following tables (totals may not sum due to rounding):
S-13
<PAGE>
Mortgage Rates(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Mortgage Rate Mortgage Loans Cut-off Date Cut-off Date
- ------------- -------------- ----------------- --------------------
--------------------- ------------------------- --------------------------
Totals............................. $ %
===================== ========================= ==========================
</TABLE>
- -----------
(1) The Mortgage Rates borne by the Mortgage Loans as of the Cut-off Date
ranged from ____% per annum to _____% per annum, and the weighted
average Mortgage Rate on the Mortgage Loans as of the Cut-off Date was
approximately _____% per annum.
Geographical Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
State Mortgage Loans Cut-off Date Cut-off Date
- ----- -------------- ----------------- -------------------
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
State Mortgage Loans Cut-off Date Cut-off Date
- ----- -------------- ----------------- -------------------
--------------------- ------------------------- -----------------------
Totals.............................. $ %
===================== ========================= =======================
</TABLE>
S-15
<PAGE>
Original Principal Balance(2)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Original Principal Balance Mortgage Loans Cut-off Date Cut-off Date
- -------------------------- -------------- ----------------- -------------------
--------------------- ------------------------- -----------------------
Totals................................ $ %
===================== ========================= =======================
</TABLE>
- -----------
(2) The average outstanding principal balance of the Mortgage Loans as of
the Cut-off Date was approximately $_______. The original principal
balances of the Mortgage Loans ranged from $______ to $_________.
S-16
<PAGE>
Mortgage Loan Age (3)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Mortgage Loan Age Mortgage Loans Cut-off Date Cut-off Date
- ----------------- -------------- ---------------- ------------------
--------------------- ------------------------- --------------------------
Total................................... $ %
===================== ========================= ==========================
</TABLE>
- -----------
(3) The weighted average age of the Mortgage Loans was approximately
___month[s] as of the Cut-off Date.
S-17
<PAGE>
Original Loan-to-Value Ratio(4)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Original Loan-to-Value Ratio Mortgage Loans Cut-off Date Cut-off Date
- ---------------------------- -------------- ----------------- --------------------
--------------------- ----------------------- -------------------------
Totals.................................. $ %
===================== ======================== =========================
</TABLE>
- -----------
(4) The weighted average original loan-to-value ratio of the Mortgage Loans
was approximately [______]% as of the Cut-off Date.
S-18
<PAGE>
Loan Purpose
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Loan Purpose Mortgage Loans Cut-off Date Cut-off Date
- ------------ -------------- ---------------- -------------------
Purchase....................................
Cash-out Refinance..........................
Rate/Term Refinance......................... %
--------------------- ----------------------- ------------------------
Totals................................... $ %
===================== ======================= ========================
</TABLE>
Remaining Terms to Stated Maturity(5)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Months Remaining Mortgage Loans Cut-off Date Cut-off Date
- ---------------- --------------- ----------------- ------------------
%
--------------------- ------------------------ -------------------
Totals................................... $ %
===================== ======================== ====================
</TABLE>
- -----------
(5) The weighted average remaining term to stated maturity of the Mortgage
Loans as of the Cut-off Date was approximately [___] months.
S-19
<PAGE>
Remaining Terms to Expected Maturity(6)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Months Remaining Mortgage Loans Cut-off Date Cut-off Date
- ---------------- -------------- ----------------- ------------------
--------------------- -------------------------------------------------
Totals........................... $ %
===================== ========================= =======================
</TABLE>
- -----------
(6) Based on payments actually received (or scheduled to be received) on
each Mortgage Loan as of the Cut-off Date. The weighted average
remaining term to expected maturity of the Mortgage Loans as of the
Cut-off Date was approximately [___] months.
Types of Mortgaged Properties
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Property Type Mortgage Loans Cut-off Date Cut-off Date
- ------------- --------------- ----------------- -------------------
Single-family Detached......................
Cooperative Unit(7).........................
Attached Planned Unit Development...........
Detached Planned Unit Development...........
Condominium.................................
Two- to Four-Family Dwelling Unit...........
--------------------- -----------------------------------------------
Totals.............................. $ %
===================== ===============================================
</TABLE>
- -----------
(7) Mortgage Loans secured by "Cooperative Units" were made to finance or
refinance the purchase of stock allocated to units in residential
cooperative housing corporations (each, a "Co-op Loan").
S-20
<PAGE>
Occupancy(8)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Occupancy Mortgage Loans Cut-off Date Cut-off Date
- --------- -------------- ----------------- --------------------
--------------------- -----------------------------------------------
Totals................................ $ %
===================== ======================== =====================
</TABLE>
- -----------
(8) Based on representations by the Mortgagors at the time of origination
of the related Mortgage Loans.
Loan Documentation
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Loan Documentation Mortgage Loans Cut-off Date Cut-off Date
- ------------------ -------------- ----------------- --------------------
-------------------- ----------------------- -------------------
Totals................................. $ %
==================== ======================= ===================
</TABLE>
S-21
<PAGE>
Credit Scores (9)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Credit Score Mortgage Loans Cut-off Date Cut-off Date
- ------------ -------------- ------------------ ------------------
-------------------- ---------------------- -------------------
Totals................................. $ %
==================== ====================== ===================
</TABLE>
- -----------
(9) The Credit Scores of the Mortgage Loans as of the Cut-off Date ranged from
[___] to [___] and the weighted average Credit Score of the Mortgage Loans
as of the Cut-off Date was [_________].
At the date of issuance of the Certificates, no Mortgage Loan will be
delinquent more than 30 days or will have had more than one delinquency in
excess of 30 days as to any Monthly Payment during the preceding twelve months.
No zip code area contains greater than approximately [___]% of the
Mortgaged Properties.
A Standard Hazard Insurance Policy is required to be maintained by the
Mortgagor with respect to each Mortgage Loan in an amount equal to the maximum
insurable value of the improvements securing such Mortgage Loan or the principal
balance of such Mortgage Loan, whichever is less. See "Servicing of the Mortgage
Loans--Hazard Insurance" in the Prospectus. No Mortgage Pool Insurance Policy,
Special Hazard Insurance Policy or Mortgagor Bankruptcy Insurance will be
maintained with respect to the Mortgage Pool, nor will any Mortgage Loan be
insured by the FHA or guaranteed by the VA.
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as presently
constituted. Prior to the issuance of the Certificates, Mortgage Loans may be
removed from the Mortgage Pool if the Seller deems such removal necessary or
appropriate. Other mortgage loans may be included in the Mortgage Pool prior to
the issuance of the Certificates unless including such mortgage loans would
materially alter the characteristics of the Mortgage Pool as described herein.
The information set forth herein is representative of the characteristics of the
Mortgage Pool as it will be constituted at the time the Certificates are issued.
If any of the characteristics as of the Cut-Off Date of the Mortgage Loans on
the date of initial issuance of the Certificates vary materially from those
described herein, revised information regarding such Mortgage Loans will be
included in a Current Report on Form 8-K of the Seller that will be available to
purchasers of the Certificates at, and filed with the Securities and Exchange
Commission within 15 days of, the initial delivery of the Certificates. In any
event, no
S-22
<PAGE>
more than 5% of the Mortgage Loans described herein will be removed from or
added to the Mortgage Pool prior to the issuance of the Certificates unless a
revised prospectus supplement is delivered to prospective investors in the
Offered Certificates.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Offered Certificates, the
aggregate amount of each interest payment on the Offered Certificates (other
than the [Class A-P] Certificates) and the yield to maturity of such
Certificates are related to the rate and timing of payments of principal on the
underlying Mortgage Loans. The principal payments on such Mortgage Loans may be
in the form of scheduled principal payments or prepayments (for this purpose,
the term "prepayment" includes prepayments in full, curtailments and
liquidations due to default, casualty, condemnation and the like, as well as
repurchases by a mortgage loan seller). Any such prepayments will result in
distributions to holders of Certificates ("Certificateholders") of principal
amounts which would otherwise be distributed over the remaining terms of the
Mortgage Loans. In addition, because, for at least nine years after the issuance
of the Certificates, the Offered Class A Certificateholders [(other than the
[Class A-7] and [Class A-P] Certificateholders)] will be entitled to receive a
percentage of certain amounts, including principal prepayments, which is greater
than their proportionate interest in the Trust Fund, the rate of principal
prepayments on the Mortgage Loans will have a greater effect on the rate of
principal payments and the amount of interest payments on, and the yield to
maturity of, such Certificates than if such Certificateholders were entitled
only to their proportionate interest in such amounts. In general, the prepayment
rate may be influenced by a number of factors, including general economic
conditions and homeowner mobility.
Mortgagors are permitted to prepay the Mortgage Loans, in whole or in
part, at any time without penalty. The rate of payment of principal may also be
affected by any repurchase of the Mortgage Loans as to which there has been a
material breach of a representation or warranty or defect in documentation, or
by a purchase by the Servicer of certain Mortgage Loans modified at the request
of a Mortgagor (including Mortgagors with respect to which the Servicer has
solicited such a request), or by the exercise by the Servicer of its right to
purchase a defaulted Mortgage Loan. See "The Mortgage Pool--General" and "The
Pooling and Servicing Agreement--Optional Termination." In such event, the
repurchase price will be passed through to the Certificateholders as a
prepayment of principal in the month following the month of such repurchase.
The rate of prepayments with respect to mortgage loans on one- to
four-family residences has fluctuated significantly in recent years. The Seller
believes that in a fluctuating interest rate environment a predominant factor
affecting the prepayment rate on a large pool of mortgage loans is the
difference between the interest rates on the mortgage loans (giving
consideration to the cost of any refinancing) and prevailing mortgage rates. In
general, if mortgage interest rates were to fall below the interest rates on the
Mortgage Loans, the rate of prepayment would be expected to increase.
Conversely, in general, if mortgage interest rates were to rise above the
interest rates on the Mortgage Loans, the rate of prepayment would be expected
to decrease. Other factors affecting prepayment of mortgage loans include
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors'
net equity in the mortgaged properties and servicing decisions. Additionally, in
general, mortgage loans having relatively high principal balances and/or
relatively
S-23
<PAGE>
low loan-to-value ratios may be more likely to prepay than mortgage loans having
relatively low principal balances and/or relatively high loan-to-value ratios.
Therefore, if a mortgage pool consists of mortgage loans which generally have
relatively high principal balances and relatively low loan-to-value ratios, the
rate of prepayments with respect to such mortgage pool could be higher than
would otherwise be the case. In addition, prepayments generally will also result
from home sales by mortgagors and from foreclosures due to defaults on mortgage
loans. There is no historical prepayment data available for the Mortgage Pool,
and comparable data is not available because the Mortgage Loans do not
constitute a representative sample of mortgage loans generally. In addition,
historical data available with respect to mortgage loans underlying mortgage
pass-through certificates issued by GNMA, FNMA or FHLMC may not be comparable to
prepayments expected to be experienced by the Mortgage Pool, because the
Mortgage Loans have characteristics which differ from mortgage loans underlying
pass-through certificates issued by GNMA, FNMA and FHLMC.
The timing of changes in the rate of prepayments on the Mortgage Loans
may significantly affect the total distributions received, the date of receipt
of such distributions and the actual yield to maturity to an investor in the
Offered Certificates, even if the average rate of principal payments is
consistent with an investor's expectations. Because the rate of distribution of
principal of the Certificates will be directly related to the actual
amortization (including prepayments) of the Mortgage Loans, which may include
Mortgage Loans that have remaining terms to maturity shorter or longer than
those assumed and interest rates higher or lower than those assumed, the
distributions of the Offered Certificates are likely to differ from those
reflected in the following tables, even if all the Mortgage Loans prepay at the
indicated percentages of the Prepayment Model (defined below). In addition, it
is not likely that the Mortgage Loans will prepay at a constant rate until
maturity or that all of the Mortgage Loans will prepay at the same rate. In
general, the earlier a payment of principal on the Mortgage Loans, the greater
the effect on an investor's yield to maturity. As a result, if principal
payments occur at a rate higher (or lower) than the rate anticipated by an
investor in the Offered Certificates during the period immediately following the
issuance of the Certificates, the effect on such investor's yield will not be
equally offset by a subsequent like reduction (or increase) in the rate of
principal payments. If an Offered Certificate is offered at a discount from its
original principal amount and if the purchaser of such Offered Certificate
calculates its yield to maturity based on a faster assumed rate of payment of
principal than that actually received on such Certificate, its actual yield to
maturity will be lower than that so calculated. Conversely, if an Offered
Certificate is offered at a premium to its original principal amount, and if the
purchaser of such Offered Certificate calculates its yield to maturity based on
a slower assumed rate of payment of principal than that actually received on
such Certificate, its actual yield to maturity will be lower than that so
calculated and, under certain circumstances, such a purchaser may fail to recoup
its initial investment. No assurances can be given as to the rate of payments on
the Mortgage Loans.
[The yield to investors in the Class A-6 Certificates will be highly
sensitive to LIBOR and increases in LIBOR will have a negative effect on the
yield to investors in the Class A-6 Certificates. Investors in the Class A-6
Certificates should consider the risk that a high rate of LIBOR will have a
negative effect on the yield to such investors.]
S-24
<PAGE>
[Investors in the Class A-7 Certificates should be aware that because
the Class A-7 Certificates are not expected to receive distributions of payments
of principal prior to the Distribution Date occurring in [MONTH/YEAR] (unless
the principal balances of the Non-PO Class A Certificates (other than the Class
A-7 Certificates) have been reduced to zero), the weighted average life of the
Class A-7 Certificates will be longer than would otherwise be the case, and the
effect on the market value of the Class A-7 Certificates of changes in market
interest rates or market yields for similar securities will be greater than for
other Classes of Class A Certificates entitled to such distributions.]
If the aggregate principal balance of the Non-Offered Class B
Certificates is reduced to zero, the yield to maturity on the Class B-2
Certificates will be extremely sensitive to losses on the Mortgage Loans (and
the timing thereof), because the entire amount of any such losses (other than
Excess Losses) which occur after the aggregate principal balance of the
Non-Offered Class B Certificates has been reduced to zero will be allocable to
the Class B-2 Certificates, as described herein. If the aggregate principal
balance of the Class B-2 Certificates and the Non-Offered Class B Certificates
is reduced to zero, the yield to maturity on the Class B-1 Certificates will be
extremely sensitive to losses on the Mortgage Loans and the timing thereof
because the entire amount of any such losses (other than Excess Losses) which
occur after the aggregate principal balance of the Class B-2 Certificates and
the Non-Offered Class B Certificates has been reduced to zero will be allocable
to the Class B-1 Certificates, as described herein. If the aggregate principal
balance of the Class B Certificates is reduced to zero, the yield to maturity on
the Class M Certificates will be extremely sensitive to losses on the Mortgage
Loans and the timing thereof because the entire amount of any such losses (other
than Excess Losses) which occur after the aggregate principal balance of the
Class B Certificates has been reduced to zero will be allocable to the Class M
Certificates, as described herein. In addition, as described herein, for at
least nine years after the issuance of the Certificates or such lesser time as
the Class A Certificates are outstanding, each Class of Subordinated
Certificates (defined herein), will be entitled to receive a percentage of
certain amounts, including principal prepayments, which is generally less than
their proportionate interest in the trust fund. See "Description of the
Certificates--Subordinated Certificates and Shifting Interests."
No assurance can be given as to the rate or timing of principal
payments or prepayments on the Mortgage Loans. In addition, it is unlikely that
prepayments on the Mortgage Loans will occur at a constant rate even if the
average prepayment experience equals the indicated levels of the Prepayment
Model.
In the event of acceleration of Mortgage Loans as a result of
enforcement of "due-on-sale" provisions in connection with transfers of the
related Mortgaged Properties, the level of prepayments on the respective
Mortgage Loans will be increased, thereby shortening the weighted average lives
of the Offered Certificates. See "Yield, Maturity and Weighted Average Life
Considerations" in the Prospectus.
The yield to holders of the Offered Certificates will depend upon,
among other things, the price at which such Offered Certificates are purchased
and the amount of and rate at which principal, including both scheduled and
unscheduled payments thereof, is paid to the respective Certificateholders.
S-25
<PAGE>
The yield to Certificateholders (other than the [Class A-P]
Certificateholders) will be reduced by lags between the time interest income
accrues to Certificateholders and the time the related interest income is
received by Certificateholders. In addition, the yield to Certificateholders
(other than the [Class A-P] Certificateholders) may be reduced as a result of
Prepayment Interest Shortfalls (defined herein) to the extent described herein.
See "The Pooling and Servicing Agreement--Adjustment to Servicing Fee in
Connection with Prepaid Mortgage Loans."
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement (the
"Prepayment Model") represents an assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool of mortgage loans. A
prepayment assumption of 100% of the Prepayment Model assumes prepayment rates
of 0.2% per annum of the then outstanding principal balance of such mortgage
loans in the first month of the life of the mortgage 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 mortgage
loans, 100% of the Prepayment Model assumes a constant prepayment rate of 6.0%
per annum. The tables set forth below are based on the assumption that the
Mortgage Loans prepay at the indicated percentages of the Prepayment Model.
Neither the Prepayment Model nor any other prepayment model 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 Pool.
The tables set forth below have been prepared on the basis of the
characteristics of the Mortgage Loans that are expected to be included in the
Trust Fund and the respective expected initial principal balances of the Offered
Certificates. For purposes of preparation of the tables, it has been assumed
that the Mortgage Loans included in the Mortgage Pool on the Closing Date have
the actual characteristics of the Mortgage Loans described herein and that [(i)
scheduled payments on all Mortgage Loans are received on the first day of each
month beginning in [MONTH/YEAR], (ii) any principal prepayments on the Mortgage
Loans are received on the last day of each month beginning in [MONTH/YEAR] and
include 30 days of interest thereon, (iii) there are no defaults or
delinquencies on the Mortgage Loans, (iv) optional termination of the Trust Fund
does not occur, (v) there are no partial prepayments on the Mortgage Loans and
prepayments are computed after giving effect to scheduled payments received on
the following day, (vi) the Mortgage Loans prepay at the indicated constant
percentages of the Prepayment Model, (vii) the date of issuance for the
Certificates is [DATE], (viii) cash distributions are received by the
Certificateholders on the 25th day of each month when due and (ix) the scheduled
monthly payments for the Mortgage Loans are computed based upon the amount of
principal and interest contractually due each month under the Mortgage Note.]
The assumptions set forth in this paragraph are referred to herein as the
"Modeling Assumptions."
Any discrepancy between the characteristics of the Mortgage Loans
actually included in the Trust Fund and the characteristics of the Mortgage
Loans expected to be so included may affect the percentages of the original
principal balance outstanding set forth in the tables and the weighted average
lives of the Offered Certificates. In addition, to the extent that the Mortgage
Loans that actually are included in the Trust Fund have characteristics that
differ from those assumed in
S-26
<PAGE>
preparing the following tables, the outstanding principal balance of any Offered
Certificate will likely be reduced to zero earlier or later than indicated by
the tables.
Variations in actual prepayment experience and the principal balances
of Mortgage Loans that prepay may increase or decrease the percentages of the
original principal balances outstanding and the weighted average lives shown in
the following tables. Such variations may occur even if the average prepayment
experience of all such Mortgage Loans equals the indicated levels of the
Prepayment Model. There is no assurance that the Mortgage Loans will prepay at
any constant level of the Prepayment Model.
Based on the foregoing assumptions, the following tables indicate the
weighted average life of each Class of Offered Certificates and set forth the
percentages of the original principal balance of each Class of Offered
Certificates that would be outstanding after each of the dates shown at various
percentages of the Prepayment Model.
No assurance can be given as to the rate or timing of principal
payments or prepayments on any of the Mortgage Loans.
Percentage of Initial Principal Balance Outstanding at the Respective
Percentages of the Prepayment Model Set Forth Below
<TABLE>
<CAPTION>
Class A-1 Class A-2
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date _% ___% ___% ___% ___% _% ___% ___% ___% ___%
- ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
</TABLE>
S-27
<PAGE>
Weighted Average Life
in years(1)....................
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
Percentage of Initial Principal Balance Outstanding at the Respective
Percentages of the Prepayment Model Set Forth Below
<TABLE>
<CAPTION>
Class A-3 Class A-4
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 0% ___% ___% ___% ___% _% ___% ___% ___% ___%
- ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
</TABLE>
S-28
<PAGE>
Weighted Average Life
in years(1)...................
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates
S-29
<PAGE>
Percentage of Initial Principal Balance Outstanding at the Respective
Percentages of the Prepayment Model Set Forth Below
<TABLE>
<CAPTION>
Class A-5 Class A-6
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date _% ___% ___% ___% ___% _% ___% ___% ___% ___%
- ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
</TABLE>
Weighted Average Life
in years(1)....................
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-30
<PAGE>
Percentage of Initial Principal Balance Outstanding at the Respective
Percentages of the Prepayment Model Set Forth Below
<TABLE>
<CAPTION>
Class A-7 Class A-P
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date _% ___% ___% ___% ___% _% ___% ___% ___% ___%
- ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
</TABLE>
Weighted Average Life
in years(1)..................
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-31
<PAGE>
Percentage of Initial Principal Balance Outstanding at the Respective
Percentages of the Prepayment Model Set Forth Below
<TABLE>
<CAPTION>
Class A-R Class M, Class B-1 and Class B-2
--------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date __% ___% ___% ___% ___% _% ___% ___% ___% ___%
- ----------------- --- ---- ---- ---- ---- -- ---- ---- ---- ----
</TABLE>
Weighted Average
Life in years(1)............
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-32
<PAGE>
Yield Considerations with Respect to the Class A-P Certificates
The yield to maturity of the Class A-P Certificates will be extremely
sensitive to the rate and timing of principal payments (including prepayments,
liquidations, repurchases and defaults) on the Discount Mortgage Loans (defined
herein), which may fluctuate significantly from time to time. A slower rate of
principal payments on the Discount Mortgage Loans than that anticipated by
investors will have a material negative effect on the yield to maturity of the
Class A-P Certificates. An investor should fully consider the associated risks,
including the risk that a relatively slow rate of principal payments (including
prepayments, liquidations, repurchases and defaults) on the Discount Mortgage
Loans will have a material negative effect on the yield to an investor in the
Class A-P Certificates. The Discount Mortgage Loans will have lower Net Mortgage
Rates than the other Mortgage Loans. In general, mortgage loans with lower
mortgage interest rates may tend to prepay at a slower rate of payment in
respect of principal than mortgage loans with relatively higher mortgage
interest rates in response to changes in market interest rates. As a result, the
Discount Mortgage Loans may prepay at a slower rate of payment in respect of
principal than the other Mortgage Loans, resulting in a lower yield on the Class
A-P Certificates than would be the case if the Discount Mortgage Loans prepaid
at the same rate as the other Mortgage Loans. As of the Cut-off Date, there were
approximately [__] Discount Mortgage Loans, with an aggregate outstanding
principal balance of approximately $[_________].
The following table illustrates the significant effect that principal
prepayments on the Discount Mortgage Loans have upon the yield to maturity of
the Class A-P Certificates. The actual prices to be paid for the Class A-P
Certificates have not been determined and will be dependent on the
characteristics of the Mortgage Pool. The table shows the hypothetical pre-tax
yields to maturity of the Class A-P Certificates, stated on a corporate bond
equivalent basis, under five different prepayment assumptions based on the
Prepayment Model described above. The table is based on the Modeling Assumptions
and assumes further that the purchase price of the Class A-P Certificates is
[____]%.
Pre-Tax Yield
Prepayment Model
----------------
[____]% [____]% [____]% [____]% [____]%
[____]% [____]% [____]% [____]% [____]%
Any change in the composition of the Mortgage Pool from that assumed
could substantially alter the information set forth in the table above. No
assurances can be given as to the rate or timing of principal payments or
prepayments on the Discount Mortgage Loans.
The pre-tax yields set forth in the preceding table were calculated by
determining the monthly discount rates which, when applied to the assumed
streams of cash flows to be paid on the Class A-P Certificates, would cause the
discounted present value of such assumed streams of cash flows to equal the
assumed offering price of [_____]% for the Class A-P Certificates. In all cases
monthly rates are then converted to the corporate bond equivalent yields shown
above. Implicit in
S-33
<PAGE>
the use of any discounted present value or internal rate of return calculation
such as these is the assumption that intermediate cash flows are reinvested at
the discount rate or internal rate of return. Thus, these calculations do not
take into account the different interest rates at which investors may be able to
reinvest funds received by them as distributed on the Class A-P Certificates.
Consequently, these yields do not purport to reflect the return on any
investment in the Class A-P Certificates when such reinvestment rates are
considered.
It is unlikely that the characteristics of the Discount Mortgage Loans
will correspond exactly to those assumed in preparing the table above. The
pre-tax yield of the Class A-P Certificates may therefore differ even if all the
Discount Mortgage Loans prepay monthly at the assumed prepayment rate. In
addition, it is highly unlikely that any Discount Mortgage Loan will prepay at a
constant rate until maturity or that all the Discount Mortgage Loans will prepay
at the same rate. The timing of changes in the rate of prepayments on the
Discount Mortgage Loans may affect significantly the total distributions
received, the date of receipt of such distributions and the actual yield
received by a holder of a Class A-P Certificate even if the average rate of
principal prepayments on the Discount Mortgage Loans is consistent with an
investor's expectations.
The Seller makes no representation that any of the Mortgage Loans will
prepay in the manner or at any of the rates assumed in the tables set forth
above. Each investor must make its own decision as to the appropriate prepayment
assumption to be used in deciding whether or not to purchase any of the Offered
Certificates. Since the rate of principal payments (including prepayments) and
repurchases on the Mortgage Loans will significantly affect the yield to
maturity on the Offered Certificates, prospective investors are urged to consult
their investment advisors as to both the anticipated rate of future principal
payments (including prepayments) on the Mortgage Loans and the suitability of
the Offered Certificates to their investment objectives.
The Seller intends to file certain additional yield tables and other
computational materials with respect to one or more Classes of Offered
Certificates with the Securities and Exchange Commission in a Report on Form
8-K. See "Incorporation of Certain Documents By Reference" in the Prospectus.
Such tables and materials were prepared by the Underwriter at the request of
certain prospective investors, based on assumptions provided by, and satisfying
the special requirements of, such investors. Such tables and assumptions may be
based on assumptions that differ from the Modeling Assumptions. Accordingly,
such tables and other materials may not be relevant to or appropriate for
investors other than those specifically requesting them.
[CHASE MANHATTAN MORTGAGE CORPORATION
Chase Manhattan Mortgage is a New Jersey corporation, formed in 1920.
It is a wholly owned indirect subsidiary of Chase Manhattan Bank USA, National
Association. Chase Manhattan Mortgage is engaged in the mortgage origination and
servicing businesses. Chase Manhattan Mortgage is a HUD-approved mortgagee.
Chase Manhattan Mortgage is subject to supervision, examination and regulation
by the Office of the Comptroller of the Currency and various state regulatory
bodies. The address of Chase Manhattan Mortgage is 343 Thornall Street, Edison,
New Jersey 08837 and its telephone number is (732) 205-0600. Chase Manhattan
Mortgage makes loans in all 50 states primarily for the purpose of enabling
borrowers to purchase or refinance residential real property, secured by first
liens on such property. Chase Manhattan Mortgage's real estate loans primarily
are made to homeowners based on the security of one- to four-family residences.
S-34
<PAGE>
Loan Delinquency, Foreclosure and Loss Experience. The recent loan
delinquency and loan foreclosure experience of Chase Manhattan Mortgage as
servicer of first mortgage loans secured by one-to four-family residential
properties which were originated by or for Chase Manhattan Mortgage (exclusive
of any such mortgage loans as to which master servicing or subservicing
arrangements exist) (expressed as percentages of the total portfolio of such
loans as of such date) was as follows:
S-35
<PAGE>
<TABLE>
<CAPTION>
As of June 30, As of December 31,
-------------------------- -----------------------------------------------------------------
1999 1998 1997
-------------------------- ------------------------------ ------------------------------
By By By By By By
Number Principal Number of Principal Number of Principal
Period of Delinquency of Loan Balance Loans Balance Loans Balance
- ------------------------- ---------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
30 to 59 days............ 2.74% 2.24% 3.31% 2.74% 3.97% 3.28%
60 to 89 days............ 0.66 0.54 0.80 0.65 0.85 0.69
90 days or more.......... 0.53 0.42 0.61 0.50 0.56 0.48
---- ----- ---- ---- ---- ----
Total............... 3.93% 3.20% 4.72% 3.89% 5.38% 4.45%
===== ==== ==== ==== ==== ====
Foreclosure.............. 1.36% 1.09% 1.51% 1.24% 1.67% 1.37%
</TABLE>
The following table presents, for the portfolio of mortgage loans
originated by or for Chase Manhattan Mortgage which are owned by The Chase
Manhattan Bank or its affiliates, the net gains (losses) as a percentage of the
average principal amount of such portfolio on the disposition of properties
acquired in foreclosure or by deed-in-lieu of foreclosure during the periods
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Six Month Period Year Ended
Ended June 30, December 31,
---------------------- ---------------------
1999 1998
---------------------- ---------------------
(Dollars in Millions)
Average portfolio principal amount..................... $24,553 $23,648
Six Month Period Year Ended
Ended June 30, December 31
---------------------- ---------------------
1999 1998
---------------------- ---------------------
Net gains (losses) (1)................................. (0.03%) (0.13%)
</TABLE>
- ---------------
(1) Losses are defined as unrealized losses on properties acquired in
foreclosure by or deed-in-lieu of foreclosure and proceeds from sale
less outstanding book balance (after recognition of such unrealized
losses) less certain capitalized costs related to disposition of the
related property (exclusive of accrued interest). If accrued interest
were included in the calculation of losses, the level of losses could
substantially increase.
There can be no assurance that the delinquency, foreclosure and loss
experience on the Mortgage Loans will correspond to the delinquency, foreclosure
and loss experience set forth in the foregoing tables. In general, during
periods in which the residential real estate market is experiencing an overall
decline in property values such that the principal balances of the Mortgage
Loans and any secondary financing on the related Mortgaged Properties become
equal to or greater than the value of the related Mortgaged Properties, rates of
delinquencies, foreclosure and losses could be significantly higher than might
otherwise be the case. In addition, adverse economic conditions (which may
affect real property values) may affect the timely payment by Mortgagors of
Monthly Payments, and accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to the Mortgage Pool.
Underwriting Policies. The following is a description of the
underwriting policies customarily employed by Chase Manhattan Mortgage with
respect to residential mortgage loans which it originated during the period of
origination of the Mortgage Loans. Chase Manhattan Mortgage has represented to
the Seller that the Mortgage Loans were originated generally in accordance with
such policies.
Chase Manhattan Mortgage's real estate lending process for one-to four-
family residential mortgage loans follows procedures established to comply with
applicable federal and state laws and regulations. Chase Manhattan Mortgage's
S-36
<PAGE>
underwriting standards are designed to evaluate a borrower's credit standing and
repayment ability and the value and adequacy of the mortgaged property as
collateral.
The Mortgage Loans were originated in a manner generally consistent,
except as to loan amounts, with FNMA or FHLMC published underwriting guidelines.
Chase Manhattan Mortgage believes that each Mortgage Loan originated in such a
manner generally meets the credit, appraisal and underwriting standards
described in such published underwriting guidelines, except for the original
principal balances of such Mortgage Loans. Initially, a prospective borrower is
required to fill out an application designed to provide pertinent information
about the borrower's assets, liabilities, income and credit, the property to be
financed and the type of loan desired. Chase Manhattan Mortgage obtains a credit
report which summarizes the prospective borrower's credit history with
merchants, lenders and other creditors reporting such information as well as
matters of public record. In addition, Chase Manhattan Mortgage verifies
employment, income and assets. Self-employed prospective borrowers are generally
required to submit their federal income tax returns for the last two years
and/in certain cases a separate statement of income and expenses independently
verified by a third party.
Pursuant to Chase Manhattan Mortgage's Limited Documentation Program,
written verification of the borrower's income is not required. The borrower must
satisfy a 25% down-payment requirement from their own assets. These assets are
verified through bank statements and may be supplemented by third-party
verification. A residential mortgage credit report, or "in file" report, is
obtained and reviewed to determine the borrower's repayment history. The maximum
loan-to-value ratio of any mortgage loan originated under this program is
approximately 80% (67% for "cash out" refinancings).
Once the necessary information is received, a determination is made as
to whether the prospective borrower has sufficient monthly income available to
meet the borrower's monthly obligations on the proposed loan and other expenses
related to the residence (such as property taxes and insurance) as well as to
meet other financial obligations and monthly living expenses. For loans with a
loan-to-value ratio of 80% or less, Chase Manhattan Mortgage's lending
guidelines require that all current fixed obligations of the borrower (including
mortgage payments based on Chase Manhattan Mortgage's mortgage rates at the time
of the application and other expenses related to the residence) generally may
not exceed 40% of the borrower's gross income in the case of a borrower with
income of under $75,000, 42% of the borrower's gross income in the case of a
borrower with income of between $75,000 and $150,000 and 44% of the borrower's
gross income in the case of a borrower with income in excess of $150,000. For
loans with a loan-to-value ratio between 80.01% and 90%, Chase Manhattan
Mortgage's lending guidelines require that the mortgage payments (based on Chase
Manhattan Mortgage's mortgage rates at the time of application) plus applicable
real property taxes, any condominium common charges and hazard insurance,
generally may not exceed 33% of the borrower's gross income and that all monthly
payments, including those mentioned above and other fixed obligations, such as
car payments, generally may not exceed 38% of the borrower's gross income. For
loans with a loan-to-value ratio between 90.01% and 95%, Chase Manhattan
Mortgage's lending guidelines require that the mortgage payments (based on Chase
Manhattan Mortgage's mortgage rates at the time of application) plus applicable
real property taxes, any condominium common charges and hazard insurance,
generally may not exceed 28% of the borrower's gross income and that all monthly
payments, including those mentioned above and other fixed obligations, such as
car payments, generally may not exceed 36% of the borrower's gross income. Other
credit considerations may cause Chase Manhattan Mortgage to depart from these
guidelines in certain cases. Where there are two individuals signing the
mortgage note, the income and debts of both are included in the computation.
Chase Manhattan Mortgage requires an appraisal to be made of each
property to be financed. The appraisal is conducted by an independent fee
appraiser who visits the property and estimates its market value. The
independent appraisers do not receive any compensation dependent upon either the
amount of the loan or its consummation. In normal practice, the lower of
purchase price or appraised value determines the maximum amount which will be
lent on the property.
From time to time, exceptions and/or variances to Chase Manhattan
Mortgage's underwriting policies may be made. Such exceptions and/or variances
may be made only if specifically approved on a loan-by-loan basis by certain
credit personnel of Chase Manhattan Mortgage who have the authority to make such
exceptions and/or variances. Exceptions and/or variances may be made only after
careful consideration of certain mitigating factors such as borrower capacity,
liquidity, employment and residential stability and local economic conditions.
Chase Manhattan Mortgage obtains a search of the liens of record to
which the property being financed is subject at the time of origination. Title
insurance is required in the case of all mortgage loans.
Servicing Activities. As of [DATE], Chase Manhattan Mortgage serviced
approximately $___ billion of one- to four-family residential mortgage loans.]
S-37
<PAGE>
THE POOLING AND SERVICING AGREEMENT
The Certificates will be issued pursuant to the Agreement. The
following summaries, together with the summaries set forth under "The Pooling
and Servicing Agreement" in the accompanying Prospectus, describe the material
provisions of the Agreement. The summaries below do not purport to be complete
and are subject to, and qualified in their entirety by reference to, the
provisions of the Agreement. Where particular provisions or terms used in the
Agreement are referred to, such provisions or terms are as specified in the
Agreement. See "The Pooling and Servicing Agreement" in the Prospectus.
Assignment of Mortgage Loans
The Seller will cause the Mortgage Loans to be assigned to the Trustee,
together with the rights to all principal and interest due on or with respect to
the Mortgage Loans after the Cut-off Date other than interest accrued on the
Mortgage Loans prior to the Cut-off Date. The [Chase Manhattan Bank], as
authenticating agent, will, concurrently with such assignment, authenticate and
deliver the Certificates. Each Mortgage Loan will be identified in a schedule
appearing as an exhibit to the Agreement (the "Mortgage Loan Schedule"). The
Mortgage Loan Schedule will specify, among other things, with respect to each
Mortgage Loan, the original principal balance and the unpaid principal balance
as of the close of business on the Cut-off Date; the Monthly Payment; the months
remaining to stated maturity of the Mortgage Note; and the Mortgage Rate.
In addition, the Seller will, as to each Mortgage Loan, deliver or
cause to be delivered to the Trustee the Mortgage Note (together with all
amendments and modifications thereto) endorsed without recourse to the Trustee
or its designee, the original or a certified copy of the mortgage (together with
all amendments and modifications thereto) with evidence of recording indicated
thereon and an original or certified copy of an assignment of the mortgage in
recordable form. The Seller will cause the assignments to be recorded in the
appropriate public records.
Servicing
The Mortgage Loans will be serviced by the Servicer generally in
accordance with procedures described in the accompanying Prospectus under the
headings "Servicing of the Mortgage Loans" and "Description of the
Certificates."
When any Mortgaged Property is conveyed by the Mortgagor, the Servicer
generally will enforce any "due-on-sale" clause contained in the Mortgage Loan,
to the extent permitted under applicable law and governmental regulations.
Acceleration of Mortgage Loans as a result of enforcement of such "due-on-sale"
provisions in connection with transfers of the related Mortgaged Properties will
affect the level of prepayments on the Mortgage Loans, thereby affecting the
weighted average lives and yields to maturity of the Offered Certificates. See
"Prepayment and Yield Considerations" herein and "Yield, Maturity and Weighted
Average Life Considerations" in the Prospectus. The terms of the Mortgage Loans
or applicable law, however, may provide that the Servicer is prohibited from
exercising the "due-on-sale" clause if information is submitted so as to
evaluate the intended buyer as if a new loan were being made to the buyer and it
can reasonably be determined that the security under the related Mortgage Note
will not be impaired by the assumption of the Mortgage Loan and that the risk of
a breach of any covenant in the Mortgage Note is acceptable. Upon any such
assumption, a fee equal to a specified percentage of the outstanding principal
balance of the Mortgage Loan is typically required, which sum will be retained
by the Servicer as additional servicing compensation.
Servicing Compensation and Payment of Expenses
The Servicer will be paid a monthly fee (the "Servicing Fee")
(including sub-servicing compensation) with respect to each Mortgage Loan in an
amount equal to [____]% (the "Servicing Fee Rate") per annum of the unpaid
principal balance of each Mortgage Loan.
The Servicer is obligated to pay certain ongoing expenses associated
with the Mortgage Pool and incurred by the Servicer in connection with its
responsibilities under the Agreement. See "The Pooling and Servicing
Agreement--Servicing and Other Compensation and Payment of Expenses" in the
Prospectus for information regarding other possible compensation to the Servicer
and for information regarding expenses payable by the Servicer.
Adjustment to Servicing Fee in Connection with Prepaid Mortgage Loans
When a Mortgagor makes a full or partial principal prepayment of a
Mortgage Loan between Due Dates, the Mortgagor generally is required to pay
interest on the principal balance thereof only to the date of prepayment. In
order to minimize any resulting shortfall in interest (such shortfall, a
"Prepayment Interest Shortfall"), the aggregate amount of the Servicing Fee will
be reduced to the extent necessary to include an amount in payments to the
holders of the Offered Certificates equal to a full month's interest payment at
the applicable Net Mortgage Rate (defined herein) with respect to such prepaid
Mortgage Loan; provided, however, that such reductions in the Servicing Fee will
be made only up to the product of [(i) one-twelfth of 0.125% and (ii) the
aggregate scheduled principal balance of the Mortgage Loans with respect to the
related
S-38
<PAGE>
Distribution Date]. Any Prepayment Interest Shortfalls (adjusted to the
applicable Net Mortgage Rate) in excess of such amount (such excess, the
"Non-Supported Interest Shortfall") will be allocated on such Distribution Date
pro rata among the outstanding Classes of Certificates (including the Class A-X
Certificates) based upon the amount of interest which each such Class would
otherwise be paid on such Distribution Date and will consequently reduce the
yield on the applicable Classes of Certificates. Any principal prepayment,
together with a full month's interest thereon at the applicable Net Mortgage
Rate (to the extent described in this paragraph), will be paid on the
Distribution Date in the month following the month in which the last day of the
related Principal Prepayment Period (defined herein) occurred. See "Yield,
Maturity and Weighted Average Life Considerations" in the Prospectus.
Payments on Mortgage Loans; Collection Account; Certificate Account
The Agreement provides that the Servicer for the benefit of the
Certificateholders shall establish and maintain a Collection Account (the
"Collection Account"), into which the Servicer is generally required to deposit
or cause to be deposited on a daily basis the payments and collections described
in "The Pooling and Servicing Agreement--Payments on Mortgage Loans; Certificate
Account" in the Prospectus, except that the Servicer may deduct its Servicing
Fee and any expenses of liquidating defaulted Mortgage Loans or property
acquired in respect thereof. The Agreement permits the Servicer to direct any
depository institution maintaining the Collection Account to invest the funds in
the Collection Account in one or more investments acceptable to [RATING AGENCY]
and [RATING AGENCY] (as provided in the Agreement) that mature, unless payable
on demand, no later than the Business Day preceding the 25th day of each month,
or, if such day is not a business day, the preceding business day (the "Servicer
Remittance Date"). The Servicer will be entitled to all income and gain realized
from any such investment, and such income and gain will be subject to withdrawal
by the Servicer from time to time. The Servicer will be required to deposit the
amount of any losses incurred in respect of any such investments out of its own
funds as such losses are realized.
The Trustee will be obligated to establish an account (the "Certificate
Account"), into which the Servicer will deposit or cause to be deposited on the
Servicer Remittance Date the Available Distribution Amount (including any
Advances with respect to such Servicer Remittance Date) for the related
Distribution Date, together with certain other amounts specified in the
Agreement. Subject to the restrictions set forth in the Agreement, the Trustee
is permitted to direct the investment of funds in the Certificate Account. Any
such investments are required to mature, unless payable on demand, no later than
the related Distribution Date. The Trustee will be entitled to all income and
gain realized from any such investment, and such income and gain will be subject
to withdrawal by the Trustee from time to time. The Trustee will be required to
deposit the amount of any losses incurred in respect of any such investments out
of its own funds as such losses are realized.
Advances
In the event that any Mortgagor fails to make any payment of principal
or interest required under the terms of a Mortgage Loan, the Servicer will
advance the entire amount of such payment, net of the applicable Servicing Fee,
less the amount of any such payment that the Servicer reasonably believes will
not be recoverable out of liquidation proceeds or otherwise. The amount of any
scheduled payment required to be advanced by the Servicer will not be affected
by any agreement between the Servicer and a Mortgagor providing for the
postponement or modification of the due date or amount of such scheduled
payment. The Servicer will be entitled to reimbursement for any such advance
from related late payments on the Mortgage Loan as to which such advance was
made. Furthermore, in the event that any Mortgage Loan as to which an advance
has been made is foreclosed while in the Trust Fund, the Servicer will be
entitled to reimbursement for such advance from related liquidation proceeds or
insurance proceeds prior to payment to Certificateholders of the related
Mortgage Pool of the Scheduled Principal Balance of such Mortgage Loan.
If the Servicer makes a good faith judgment that all or any portion of
any advance made by it with respect to any Mortgage Loan may not ultimately be
recoverable from related liquidation proceeds (a "Non-recoverable Advance"), the
Servicer will so notify the Trustee and the Servicer will be entitled to
reimbursement for such Non-recoverable Advance from recoveries on all other
unrelated Mortgage Loans included in the related Mortgage Pool. The Servicer's
judgment that it has made a Non-recoverable Advance with respect to any Mortgage
Loan will be based upon its assessment of the value of the related Mortgaged
Property and such other facts and circumstances as it may deem appropriate in
evaluating the likelihood of receiving liquidation proceeds, net of expenses,
equal to or greater than the aggregate amount of unreimbursed advances made with
respect to such Mortgage Loan.
Trustee
The Trustee for the Certificates offered hereby will be [TRUSTEE],
a __________. The Corporate Trust Office of the Trustee is located at [ADDRESS]
(the "Corporate Trust Office"). The Servicer will pay to the Trustee a fee in
consideration
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for its services as trustee under the Agreement. [The Trustee will appoint The
Chase Manhattan Bank ("Chase") as certificate registrar and authenticating
agent. Chase's office for such purposes is 450 West 33rd Street, New York, New
York 10001.]
Optional Termination
The Servicer may, on any Distribution Date, repurchase from the Trust
Fund all Mortgage Loans remaining outstanding at such time as the aggregate
unpaid principal balance of such Mortgage Loans is less than [10%] of the
aggregate unpaid scheduled principal balance of the Mortgage Pool on the Cut-off
Date. The repurchase price will equal the greater of (A) the sum of (i) the
unpaid principal amount of such Mortgage Loans (other than any such Mortgage
Loans as to which the related Mortgaged Properties have been acquired and whose
fair market values are included in clause (ii) below), plus accrued interest
thereon at the Remittance Rate to the next Due Date and (ii) the fair market
value of any such acquired properties (as determined by an appraisal to be
conducted by an appraiser selected by the Trustee), in each case less any
unreimbursed Advances made with respect to such Mortgage Loans and (B) the
outstanding principal balance of the Offered Certificates plus accrued interest
thereon at the Remittance Rate. Upon any such repurchase, the Offered
Certificateholders will receive the outstanding principal balance of the Offered
Certificates plus accrued interest thereon at their respective Certificate
Rates. Such amounts will be distributed to Certificateholders on the
Distribution Date in the month following the month of repurchase.
Special Servicing Agreements
The Agreement may permit the Servicer to enter into a special servicing
agreement with an unaffiliated holder of a Class of Class B Certificates or of a
class of securities representing interests in the Class B Certificates and/or
other subordinated mortgage pass-through certificates. Pursuant to such
agreement, such holder may instruct the Servicer to commence or delay
foreclosure proceedings with respect to delinquent Mortgage Loans. Such
commencement or delay at such holder's direction will be taken by the Servicer
only after such holder deposits a specified amount of cash with the Servicer.
Such cash will be available for distribution to Certificateholders if
liquidation proceeds are less than the outstanding principal balance of the
related Mortgage Loan.
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DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. A copy of
the Agreement will be attached as an exhibit to the Current Report on Form 8-K
of the Seller that will be available to purchasers of the Certificates at, and
will be filed with the Securities and Exchange Commission within 15 days of, the
initial delivery of the Certificates. Reference is made to the Prospectus for
additional information regarding the terms and conditions of the Agreement. The
approximate initial principal amount of the Offered Certificates will be
$[___________], subject to a permitted variance of plus or minus 5%. Any
difference between the aggregate principal balance of the Certificates as of the
date of issuance of the Certificates and the approximate aggregate initial
principal balance thereof as of the date of this Prospectus Supplement will be
allocated among the various Classes of Certificates so as to retain materially
the characteristics thereof described herein.
The following summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Agreement. When particular provisions or terms used in the Agreement are
referred to, the actual provisions (including definitions of terms) are
incorporated by reference.
General
Initially, the Class A Certificates will evidence in the aggregate a
beneficial interest of approximately [_____]% in the aggregate principal balance
of the Mortgage Loans in the Trust Fund (the "Class A Percentage"), the Class M
Certificates will evidence a beneficial interest of approximately [____]% in the
aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class
M Percentage"), the Class B-1 Certificates will evidence a beneficial interest
of approximately [____]% in the aggregate principal balance of the Mortgage
Loans in the Trust Fund (the "Class B-1 Percentage"), the Class B-2 Certificates
will evidence in the aggregate a beneficial interest of approximately [____]% in
the aggregate principal balance of the Mortgage Loans in the Trust Fund (the
"Class B-2 Percentage") and the Non-Offered Class B Certificates will evidence
in the aggregate the remaining beneficial interest (the "Non-Offered Class B
Percentage") in the aggregate principal balance of the Mortgage Loans in the
Trust Fund. Initially, the Non-Offered Class B Percentage will be approximately
[____]%. The Class A Percentage, the Class M Percentage, the Class B-1
Percentage and the Class B-2 Percentage will vary from time to time to the
extent that the respective Class A, Class M, Class B-1 or Class B-2
Certificateholders do not receive amounts due to them on any Distribution Date,
losses are realized on the Mortgage Loans, or principal prepayments are made or
certain other unscheduled amounts of principal are received in respect of the
Mortgage Loans. See "Description of the Certificates-- Subordinated Certificates
and Shifting Interests." The Class A-X Certificates and the Non-Offered Class B
Certificates will be sold or otherwise transferred to a limited number of
institutional investors (which may include one or more affiliates of the Seller)
and are not offered hereby.
The following table sets forth the original certificate form, the
minimum denomination and the incremental denomination of the Offered
Certificates.
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<TABLE>
<CAPTION>
Original Minimum Incremental
Class Certificate Form Denomination Denomination
----- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Classes [A-1, A-2, A-3, A-4, A-5, Book-Entry $______ $1,000
A-6, A-7 and A-P]
Class A-R Definitive $100 N/A
Classes M, B-1 and B-2 Definitive $_______ $1,000
</TABLE>
The [Class A-R, Class M, Class B-1 and Class B-2 Certificates], as well
as other Definitive Certificates (defined herein), if any, will be transferable
and exchangeable at the Corporate Trust Office. No service charge will be made
for any registration or transfer of Offered Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge in connection with such transfer. The Offered Certificates, other than
the Class A-R, Class M, Class B-1 and Class B-2 Certificates (such Classes of
Certificates, the "Book-Entry Certificates") will be represented initially by
one or more physical certificates registered in the name of Cede & Co. ("Cede")
as the nominee of The Depository Trust Company ("DTC"). No person acquiring an
interest in the Book-Entry Certificates (a "Certificate Owner") will be entitled
to receive a certificate representing such person's interest in the Trust Fund,
except as set forth below under "Description of the Certificates-Definitive
Certificates." Unless and until Definitive Certificates are issued under the
limited circumstances described herein, all references to actions by the
Book-Entry Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below) and all references herein
to distributions, notices, reports and statements to the Book-Entry
Certificateholders shall refer to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the Book-Entry Certificates, as the
case may be, for distribution to Certificate Owners in accordance with DTC
procedures. See "Description of the Certificates Book-Entry Registration."
The "Final Scheduled Distribution Date" of each Class of Offered
Certificates is [DATE], which is the Distribution Date occurring in the month
that is one month following the latest stated maturity date of any Mortgage
Loan.
The rate of principal payments of the Certificates will depend on the
rate of principal payments of the Mortgage Loans (including prepayments,
defaults, delinquencies and liquidations) which, in turn, will depend on the
characteristics of the Mortgage Loans, the level of prevailing interest rates
and other economic factors, and no assurance can be given as to the actual
payment experience. The principal balance or notional amount, as applicable, of
each Class of Certificates may be reduced to zero earlier or later than its
Final Scheduled Distribution Date.
Book-Entry Registration
DTC is a limited purpose trust company organized under the laws of the
State of New York and is a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934. DTC was created to hold securities for its participating
organizations (each, a "Participant") and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (including
[UNDERWRITER]), banks, trust companies and clearing corporations. 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").
Certificate Owners that are not Participants or Indirect Participants
and that desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Book-Entry Certificates may do so only through Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest on the Book-Entry Certificates through a
Participant or an Indirect Participant. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants, which thereafter will forward them to
Certificate Owners directly or through an Indirect Participant. It is
anticipated that the only "Certificateholder" of a Book-Entry Certificate will
be Cede, as nominee of DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Agreement, and
Certificate Owners will be permitted to exercise the rights of Book-Entry
Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC will be required to make book-entry
transfers of Book-Entry Certificates among Participants and to receive and
transmit distributions of principal of, and interest on, Book-Entry
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Book-Entry Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although Certificate
Owners will not possess
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physical certificates, the Rules provide a mechanism by which Participants and
Certificate Owners will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, and on behalf of certain banks, the ability of
a Certificate Owner to pledge Book-Entry Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect to
such Certificates, may be limited due to the absence of physical certificates
for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Participants to whose accounts with DTC the Book-Entry Certificates are
credited. Additionally, DTC has advised the Seller that it will take such action
where the consent of specified percentages of the Offered Certificates is
required under the Agreement only at the direction of and on behalf of
Participants whose interests represent such specified percentages. DTC may take
conflicting actions on behalf of other Participants.
Neither the Seller, the Servicer nor the Trustee will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Book-Entry Certificates held by Cede,
as nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Definitive Certificates
The [Class A-R, Class M, Class B-1 and Class B-2] Certificates will be
issued in fully registered, certificated form ("Definitive Certificates"). The
Book-Entry Certificates will only be issued in fully registered, certificated
form to Certificate Owners or their nominees, rather than to DTC or its nominee,
if (i) the Seller advises the Servicer in writing that DTC is no longer willing
or able to discharge properly its responsibilities as depository with respect to
the Book-Entry Certificates and the Seller is unable to locate a qualified
successor within 30 days or (ii) the Seller, at its option, elects to terminate
the book-entry system through DTC.
Upon the occurrence of either event described in the immediately
preceding paragraph, the Trustee is required to notify DTC which in turn will
notify all Certificate Owners through Participants of the availability of
Definitive Certificates in exchange for Book-Entry Certificates. Upon surrender
by Cede, as nominee of DTC, of the definitive certificates representing the
Book-Entry Certificates and receipt of instructions for re-registration, the
Trustee or its agent will reissue the Book-Entry Certificates as Definitive
Certificates to Certificate Owners.
Restrictions on Transfer of the Class A-R, Class M and Offered Class B
Certificates
The Class A-R Certificate will be subject to the following restrictions
on transfer, and the Class A-R Certificate will contain a legend describing such
restrictions.
The REMIC provisions of the Internal Revenue Code of 1986, as amended
(the "Code") impose certain taxes on (i) transferors of residual interests to,
or agents that acquire residual interests on behalf of, Disqualified
Organizations (as defined in the Prospectus) and (ii) certain Pass-Through
Entities (as defined in the Prospectus) that have Disqualified Organizations as
beneficial owners. No tax will be imposed on a Pass-Through Entity (other than
an "electing large partnership" as defined in the Code) with respect to the
Class A-R Certificate to the extent it has received an affidavit from the owner
thereof that such owner is not a Disqualified Organization or a nominee for a
Disqualified Organization. The Agreement will provide that no legal or
beneficial interest in the Class A-R Certificate may be transferred to or
registered in the name of any person unless (i) the proposed purchaser provides
to the Trustee an affidavit to the effect that, among other items, such
transferee is not a Disqualified Organization and is not purchasing the Class
A-R Certificate as an agent for a Disqualified Organization (i.e., as a broker,
nominee, or other middleman thereof) and (ii) the transferor states in writing
to the Trustee that it has no actual knowledge that such affidavit or letter is
false. Further, such affidavit or letter requires the transferee to affirm that
it (i) historically has paid its debts as they have come due and intends to do
so in the future, (ii) understands that it may incur tax liabilities with
respect to the Class A-R Certificate in excess of cash flows generated thereby,
(iii) intends to pay taxes associated with holding the Class A-R Certificate as
such taxes become due and (iv) will not transfer the Class A-R Certificate to
any person or entity that does not provide a similar affidavit or letter.
In addition, the Class A-R Certificate may not be purchased by or
transferred to any person that is not a "U.S. Person," unless (i) such person
holds such Class A-R Certificate in connection with the conduct of a trade or
business within the United States and furnishes the transferor and the Trustee
with an effective Internal Revenue Service Form 4224 or (ii) the transferee
delivers to both the transferor and the Trustee an opinion of a nationally
recognized tax counsel to the effect that such transfer of the Class A-R
Certificate will not be disregarded for federal income tax purposes. The term
"U.S. Person" means a citizen or resident of the United States, a corporation,
or partnership (unless, in the case of a partnership, Treasury regulations are
adopted
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that provide otherwise) created or organized in or under the laws of the United
States, any State thereof or the District of Columbia, including an entity
treated as a corporation or partnership for federal income tax purposes, an
estate whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more such
U.S. Persons have the authority to control all substantial decisions of such
trust (or, to the extent provided in applicable Treasury regulations, certain
trusts in existence on August 20, 1996 which are eligible to elect to be treated
as U.S. Persons).
The Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest no
rights in any purported transferee. Any transferor or agent to whom the Trustee
provides information as to any applicable tax imposed on such transferor or
agent may be required to bear the cost of computing or providing such
information. See "Federal Income Tax Consequences--REMIC Certificates; --Income
from Residual Certificates; --Taxation of Certain Foreign Investors; --Transfers
of Residual Certificates; --Servicing Compensation and
Other REMIC Pool Expense" in the Prospectus.
The Class A-R Certificate may not be purchased by or transferred to a
Plan or a person acting on behalf of or investing the assets of a Plan. See
"ERISA Considerations" herein and in the Prospectus.
Because the Class M and Offered Class B Certificates are subordinated
to the Class A Certificates, the Class M Certificates and the Offered Class B
Certificates may not be transferred unless the transferee has delivered (i) a
representation letter to the Trustee stating either (a) that the transferee is
not a Plan and is not acting on behalf of a Plan or using the assets of Plan to
effect such purchase or (b) subject to the conditions described herein, that the
source of funds used to purchase the Class M or Offered Class B Certificates in
an "insurance company general account" or (ii) an opinion of counsel and such
other documentation as described herein under "ERISA Considerations." See "ERISA
Considerations" herein and in the Prospectus.
Distributions to Certificateholders
Distributions of principal and interest on the Certificates will be
made on the 25th day of each month or, if such day is not a business day, the
next succeeding business day (each, a "Distribution Date"), beginning [DATE], to
the persons in whose names the Certificates are registered at the close of
business on the last business day of the month preceding the month in which
payment is made (each, a "Record Date"). Distributions will be made to each
Class as described below and on a pro rata basis among the Certificates of each
Class. Distributions of principal and interest on the Book-Entry Certificates
will initially be made by the Trustee directly to Cede by wire transfer.
Distributions with respect to the Class A-R, Class M, Class B-1 and Class B-2
Certificates and, upon the issuance of Definitive Certificates to persons other
than Cede, distributions of principal and interest on such Definitive
Certificates will be made by the Trustee directly to holders in whose names such
Certificates were registered at the close of business on the related Record
Date. Such distributions will be made by check mailed to the address of the
person entitled thereto as it appears on the certificate register, or, upon
written request to the Trustee delivered at least ten business days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
by a holder of an Offered Certificate having an original aggregate principal
balance of at least $5,000,000 (or by a holder which holds all of the
Certificates of a Class), by wire transfer to such Certificateholder, except
that the final distribution in retirement of Certificates will be made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee specified in the final distribution notice to Certificateholders.
Principal received or advanced as part of a regularly scheduled Monthly
Payment on each Mortgage Loan will be passed through monthly on the Distribution
Date occurring in the month in which the related Due Date occurs. The Non-PO
Class A Certificateholders will be entitled to an amount equal to the Non-PO
Class A Percentage (defined herein) of the applicable Non-PO Percentage (defined
herein) of scheduled principal amounts due or advanced with respect to each
Mortgage Loan. Principal prepayments and certain other unscheduled amounts of
principal received during the period from the first day of any month to the last
day of such month (each, a "Principal Prepayment Period") will be passed through
on the Distribution Date occurring in the month following the month of receipt.
The Non-PO Class A Certificateholders will be entitled to an amount equal to the
Non-PO Class A Prepayment Percentage (defined herein) of the applicable Non-PO
Percentage of such unscheduled amounts of principal.
The aggregate amount available for distribution to Certificateholders
on each Distribution Date will be the Available Distribution Amount. The
"Available Distribution Amount" means, generally, as of any Distribution Date,
an amount equal to the amount on deposit in the Collection Account as of the
close of business on the related Servicer Remittance Date (including amounts to
be advanced by the Servicer in respect of delinquent Monthly Payments), except:
(a) amounts received as late payments or other recoveries of principal or
interest (including liquidation proceeds and insurance proceeds) and applied to
the reimbursement of unreimbursed Advances and amounts representing
reimbursement for Advances determined to be non-recoverable and amounts
representing reimbursement for certain losses and expenses incurred by the
Servicer, as described in the Agreement; (b) the Servicing Fee, as adjusted as
provided in the Agreement with respect to principal prepayments; (c) all
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amounts representing Monthly Payments due after the related Due Date; and (d)
all principal prepayments, liquidation proceeds, insurance proceeds,
condemnation proceeds and repurchase proceeds received after the related
Principal Prepayment Period.
On each Distribution Date, the Available Distribution Amount will be
allocated among the Classes of Certificates and distributed to the holders of
record thereof as of the related Record Date as follows:
[first, to each Class of Non-PO Class A Certificates, the sum of (i)
the Interest Accrual Amount with respect to such Class and (ii) any Interest
Shortfall with respect to such Class;
second, concurrently (i) to the Non-PO Class A Certificates, up to the
Non-PO Class A Optimal Principal Amount (allocated among such Classes as
described below under "--Principal (Including Prepayments)--Allocation of the
Non-PO Class A Optimal Principal Amount"), and (ii) to Class A-P Certificates,
the applicable PO Percentage (defined herein) of all principal received on or in
respect of each Discount Mortgage Loan;
third, to the Class A-P Certificates, the Class A-P Shortfall Amount
(defined herein); provided, however, that any amounts distributed pursuant to
this paragraph third will not cause a further reduction in the principal balance
of Class A-P;
fourth, to the Class M Certificates, the sum of (i) the Interest
Accrual Amount with respect to such Class and (ii) any Interest Shortfall with
respect to such Class;
fifth, to the Class M Certificates, in an amount up to the portion of
the Subordinated Optimal Principal Amount allocable to the Class M Certificates
as described below under "--Principal (Including Prepayment)--Allocation of the
Subordinated Optimal Principal Amount";
sixth, to the Class B-1 Certificates the sum of (i) the Interest
Accrual Amount with respect such Class and (ii) any Interest Shortfall with
respect to such Class;
seventh, to the Class B-1 Certificates, in an amount up to the portion
of the Subordinated Optimal Principal Amount allocable to the Class B-1
Certificates as described below under "--Principal (Including
Prepayments)--Allocation of the Subordinated Optimal Principal Amount";
eighth, to the Class B-2 Certificates, the sum of (i) the Interest
Accrual Amount with respect to such Class and (ii) any Interest Shortfall with
respect to such Class;
ninth, to the Class B-2 Certificates, in an amount up to the portion of
the Subordinated Optimal Principal Amount allocable to the Class B-2
Certificates as described below under "--Principal (Including
Prepayments)--Allocation of the Subordinated Optimal Principal Amount";
tenth, to the Class B-3 Certificates, the sum of (i) the Interest
Accrual Amount with respect to such Class and (ii) any Interest Shortfall with
respect to such Class;
eleventh, to the Class B-3 Certificates, in an amount up to the portion
of the Subordinated Optimal Principal Amount allocable to the Class B-3
Certificates as described below under "--Principal (Including
Prepayments)--Allocation of the Subordinated Optimal Principal Amount";
twelfth, to the Class B-4 Certificates, the sum of (i) the Interest
Accrual Amount with respect to such Class and (ii) any Interest Shortfall with
respect to such Class;
thirteenth, to the Class B-4 Certificates, in an amount up to the
portion of the Subordinated Optimal Principal Amount allocable to the Class B-4
Certificates as described below under "--Principal (Including
Prepayments)--Allocation of the Subordinated Optimal Principal Amount";
fourteenth, to the Class B-5 Certificates, the sum of (i) the Interest
Accrual Amount with respect to such Class and (ii) any Interest Shortfall with
respect to such Class;
fifteenth, to the Class B-5 Certificates, in an amount up to the po ion
of the Subordinated Optimal Distribution Amount allocable to the Class B-5
Certificates as described below under "--Principal (Including
Prepayments)--Allocation of the Subordinated Optimal Principal Amount"; and
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sixteenth, to the Class A-R Certificates, the remaining portion, if any
(which is expected to be zero), of the Available Distribution Amount for such
Distribution Date.]
"Class A Certificates" means [the Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R and Class A-X
Certificates, referred to collectively.]
The Class A Certificates (exclusive of the Class A-X Certificates),
Class M Certificates, Class B-1 Certificates and Class B-2 Certificates are
sometimes collectively referred to herein as the "Offered Certificates."
The Class A Certificates (exclusive of the Class A-P Certificates) are
sometimes collectively referred to herein as the "Non-PO Class A Certificates."
"Class B Certificates" means the Class B-1, Class B-2, Class B-3, Class
B-4 and Class B-5 Certificates, referred to collectively.
"Non-Offered Class B Certificates" means the Class B-3, Class B-4 and
Class B-5 Certificates, referred to collectively.
"Subordinated Certificates" means the Class M and Class B Certificates,
referred to collectively.
The "Credit Support Depletion Date" is the first Distribution Date on
which the aggregate outstanding principal balance of the Subordinated
Certificates has been or will be reduced to zero.
With respect to each Mortgage Loan, the "PO Percentage" will equal a
fraction, expressed as a percentage (but not less than 0%), the numerator of
which will equal the excess, if any, of [____]% per annum (the "Remittance
Rate") over the applicable Net Mortgage Rate (defined herein) and the
denominator of which will equal the Remittance Rate. The PO Percentage will be
0% with respect to Mortgage Loans for which the Net Mortgage Rate is greater
than or equal to the Remittance Rate. As of the Cut-off Date, the weighted
average Net Mortgage Rate of the Discount Mortgage Loans (defined below) was
approximately [_____]%.
With respect to each Mortgage Loan, the "Non-PO Percentage" will equal
a fraction, expressed as a percentage (but not greater than 100%), the numerator
of which will equal the applicable Net Mortgage Rate and the denominator of
which will equal the Remittance Rate. The Non-PO Percentage will be 100% with
respect to Mortgage Loans for which the Net Mortgage Rate is greater than or
equal to the Remittance Rate.
The "Discount Mortgage Loans" are those Mortgage Loans having Net
Mortgage Rates less than the Remittance Rate.
The "Non-Discount Mortgage Loans" are those Mortgage Loans having Net
Mortgage Rates greater than the Remittance Rate.
The Class A-P Certificates will not be entitled to receive interest and
will be entitled to receive principal with respect to the Discount Mortgage
Loans only. The Class A-X Certificates will not be entitled to receive principal
and will be entitled to receive interest with respect to the Non-Discount
Mortgage Loans only.
With respect to each Mortgage Loan, the "Net Mortgage Rate" equals the
applicable Mortgage Rate less the Servicing Fee Rate.
Interest
On each Distribution Date, interest will be payable to each Class
(other than the [Class A-P] Certificates) in an amount equal to the sum of (i)
the Interest Accrual Amount with respect to such Class and (ii) any Interest
Shortfall with respect to such Class.
As of any Distribution Date, the "Interest Accrual Amount" with respect
to any Class of Certificates (other than the [Class A-P] Certificates) means
generally one month's interest at the Certificate Rate on the outstanding
principal balance thereof (or, in the case of the [Class A-X] Certificates, on
the [Class A-X] Notional Amount), minus (i) any Non-Supported Interest
Shortfalls allocated to such Class on such Distribution Date (as described
herein under "The Pooling and Servicing Agreement--Adjustment to Servicing Fee
in Connection with Prepaid Mortgage Loans") and (ii) the interest portion of any
Realized Losses allocated to such Class as described herein.
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<PAGE>
As of any Distribution Date, the "Interest Shortfall" with respect to
any Class of Certificates (other than the [Class A-P] Certificates) means
generally any portion of the Interest Accrual Amount with respect to any
previous Distribution Amount which remains unpaid (before giving effect to
distributions made on such Distribution Date).
For any Class of Certificates (other than the [Class A-P, Class A-X and
Non-Offered Class B Certificates]), the "Certificate Rate" is the per annum rate
of interest specified or described for such Class on the table on page S-3
hereof. The "Certificate Rate" for each Class of Non-Offered Class B
Certificates is equal to [____]%. The "Certificate Rate" for the Class A-X
Certificates will equal, with respect to each Distribution Date, [the weighted
average, expressed as a percentage, of the Stripped Interest Rate on each
Non-Discount Mortgage Loan as of the Due Date in the month preceding the month
in which such Distribution Date occurs, weighted as the basis of the respective
principal balances of the Non-Discount Mortgage Loans].
The "Class A-X Notional Amount" with respect to any Distribution Date
will equal [the aggregate Scheduled Principal Balance of the Non-Discount
Mortgage Loans].
The "Stripped Interest Rate" means for each Mortgage Loan, the excess,
if any, of the Net Mortgage Rate for such Mortgage Loan over the Remittance
Rate.
The "Scheduled Principal Balance" of a Mortgage Loan as of any
Distribution Date is the unpaid principal balance of such Mortgage Loan as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such schedule by reason of bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) as of the first day of the month
preceding the month of such Distribution Date, after giving effect to any
previously applied prepayments, the payment of principal due on such first day
of the month and any reduction of the principal balance of such Mortgage Loan by
a bankruptcy court, irrespective of any delinquency in payment by the related
Mortgagor.
[Interest will accrue on the Class A-5 and Class A-6 Certificates at
their respective Certificate Rates during the calendar month preceding the month
of the related Distribution Date (each such period, an "Interest Accrual
Period"). Such Certificate Rates will be calculated as follows:
(i) the Certificate Rate on the Class A-5 Certificates with respect to
the first Distribution Date will be [______]%, and as to any Distribution Date
thereafter, the Certificate Rate on the Class A-5 Certificates will equal the
lesser of (A) [____]% plus LIBOR (as determined below) ("LIBOR") and (B)
[____]%.
(ii) the Certificate Rate on the Class A-6 Certificates with respect to
the first Distribution Date will be [________]%, and as to any Distribution Date
thereafter, the Certificate Rate on the Class A-6 Certificates will equal the
lesser of (A) [_____]% minus the product of (x) [____] and (y) LIBOR, but not
less than 0.00% and (B) [_____]%.]
[Determination of LIBOR
LIBOR for any Interest Accrual Period (other than the first Interest
Accrual Period) after the initial Interest Accrual Period will be determined as
described below.
On each Distribution Date, LIBOR shall be established by the Servicer
and as to any Interest Accrual Period (other than the first Interest Accrual
Period), LIBOR will equal the rate for United States dollar deposits for one
month which appears on the Dow Jones Telerate Screen Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day (defined below) prior to the first
day of such Interest Accrual Period (each such day, a "Rate Adjustment Date").
"Telerate Screen Page 3750" means 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
Servicer), the rate will be the Reference Bank Rate. The "Reference Bank Rate"
will be determined on the basis of the rates at which deposits in the U.S.
Dollars are offered by the reference banks (which shall be three major banks
that are engaged in transactions in the London interbank market, selected by the
Servicer) as of 11:00 A.M., London time, on the day that is two LIBOR Business
Days prior to the first date of the related Interest Accrual Period to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the aggregate outstanding principal balance of the Class
A-8 and Class A-11 Certificates. The Servicer will request the principal London
office of each of the reference banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate will be the arithmetic mean of
the quotations. If on such date fewer than two quotations are provided as
requested, the rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Servicer, as of 11:00 A.M.,
New York City time, on such date for loans in the U.S. Dollars to leading
European banks for a period of one month in amounts approximately equal to the
aggregate outstanding principal balance of the Class A-8 and Class A-11
Certificates. If no such quotations can be obtained, the rate will be LIBOR for
the prior Distribution Date, or in the case of
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<PAGE>
the first Rate Adjustment Date, 4.95%. "LIBOR Business Day" means any day other
than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in
the city of London, England are required or authorized by law to be closed.
The establishment of LIBOR by the Servicer and its subsequent
calculation of the Certificate Rates applicable to the Class A-8 and Class A-11
Certificates for the relevant Interest Accrual Period, in the absence of
manifest error, will be final and binding.]
Principal (Including Prepayments)
[Distribution to the Class A-P Certificates
On each Distribution Date, the Class A-P Certificates will receive a
portion of the Available Distribution Amount attributable to principal received
on or with respect to any Discount Mortgage Loan equal to the amount of such
principal so attributable multiplied by the PO Percentage with respect to such
Discount Mortgage Loan. In addition, on each Distribution Date prior to and
including the Credit Support Depletion Date, the Class A-P Certificates also
will be allocated principal, to the extent of amounts available to pay the
Subordinated Optimal Principal Amount (without regard to clause (2) of the
definition of such term) on such Distribution Date, in an amount (the "Class A-P
Shortfall Amount") generally equal to (i) the applicable PO Percentage of the
principal portion of any Realized Loss with respect to a Discount Mortgage Loan
other than an Excess Loss and (ii) the sum of amounts, if any, by which the
amounts specified in clause (i) with respect to each prior Distribution Date
exceeded the amount actually distributed in respect thereof on such prior
Distribution Date and not subsequently distributed to the Class A-P
Certificates; provided, however, that such payments in respect of the Class A-P
Shortfall Amount will not cause a further reduction in the principal balance of
the Class A-P Certificates. The aggregate of the amounts payable to the Class
A-P Certificates described in this paragraph are referred to herein as the
"Class A-P Certificates Distribution Amount."
Allocation of the Non-PO Class A Optimal Principal Amount
Except after the Credit Support Depletion Date, distributions in
respect of principal will be made on each Distribution Date to the Non-PO Class
A Certificates as described below. On each Distribution Date, the Non-PO Class A
Optimal Principal Amount (defined herein) will be distributed to the Non-PO
Class A Certificateholders as follows:
[DESCRIBE PRINCIPAL PAYMENT METHODOLOGY]
On any Distribution Date after the Credit Support Depletion Date,
distributions among the Classes of Non-PO Class A Certificates then outstanding
will be made pro rata in accordance with their respective outstanding principal
balances and not in accordance with the priorities set forth above.]
[The "Lockout Principal Distribution Amount" for any Distribution Date
will equal the sum of (i) the Adjusted Lockout Percentage (defined below) of the
applicable Non-PO Percentage of 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, (ii) the Lockout Prepayment Percentage
(defined below) of the applicable Non-PO Percentage of (A) the principal portion
of principal prepayments, (B) the sum of the principal portion of 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 Collection
Account, which were received during the related Principal Prepayment Period, net
of related unreimbursed servicing advances and net of any portion hereof which,
as to any Mortgage Loan, constitutes a late collection with respect to which an
Advance has previously been made and (C) the principal portion of the purchase
price thereof (net of amounts with respect to which a distribution has
previously been made to the Non-PO Class A Certificateholders), in each case
received during the related Principal Prepayment Period and (iii) with respect
to any Distribution Date on or after the Distribution Date in [MONTH/YEAR], the
Lockout Liquidation Amount (defined below).]
[The "Adjusted Lockout Percentage" will equal (i) for any Distribution
Date prior to the Distribution Date in [MONTH/YEAR], 0% and (ii) for any
Distribution Date on or after the Distribution Date in [MONTH/YEAR], the Lockout
Percentage.]
[The "Lockout Percentage" for any Distribution Date will equal (A) the
outstanding principal balance of the Class A-7 Certificates divided by (B) the
Non-PO Allocated Amount, in each case immediately prior to the Distribution
Date, but in no event will the Lockout Percentage exceed 100%. The Lockout
Percentage as of the Cut-Off Date will be approximately
- ---------%.]
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<PAGE>
[The "Lockout Liquidation Amount" is, with respect to any Distribution
Date on or after the Distribution Date in [MONTH/YEAR], the aggregate, for each
Mortgage Loan which became a Liquidated Mortgage Loan during the calendar month
preceding the month of such Distribution Date, of the lesser of (i) the Lockout
Percentage of the applicable Non-PO Percentage of the outstanding principal
balance of such Mortgage Loan and (ii) the Lockout Prepayment Percentage
(defined below) on such Distribution Date of the Liquidation Principal with
respect to such Mortgage Loan.]
["Liquidation Principal" is, with respect to each Mortgage Loan which
has become a Liquidated Mortgage Loan during the related Principal Prepayment
Period, an amount equal to the applicable Non-PO Percentage of the net
liquidation proceeds, if any, with respect to such Liquidated Mortgage Loan (net
of any unreimbursed Advances).]
[The "Lockout Prepayment Percentage" will equal the product of (a) the
Lockout Percentage and (b) the Step Down Percentage.]
[The "Step Down Percentage" for any Distribution Date will be the
percentage indicated below:
Step Down
Distribution Date Occurring in Percentage
- ------------------------------ ----------
[MONTH/YEAR] through [MONTH/YEAR]..................................... 0%
[MONTH/YEAR] through [MONTH/YEAR]..................................... 30%
[MONTH/YEAR] through [MONTH/YEAR]..................................... 40%
[MONTH/YEAR] through [MONTH/YEAR]..................................... 60%
[MONTH/YEAR] through [MONTH/YEAR]..................................... 80%
[MONTH/YEAR] and thereafter........................................... 100%]
Principal distributions made on each Class of Certificates will be paid
pro rata among the Certificates of such Class in accordance with their
respective outstanding principal balances.
The "Non-PO Class A Optimal Principal Amount" means generally as of any
Distribution Date, an amount, not in excess of the Non-PO Class A Principal
Balance equal to the sum of: (a) an amount equal to the Non-PO Class A
Percentage of the applicable Non-PO Percentage of 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) an amount equal to the
Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of all
principal prepayments received during the related Principal Prepayment Period;
(c) with respect to each Mortgage Loan not described in (d) below, an amount
equal to the Non-PO Class A Percentage of the applicable Non-PO Percentage of
the sum of the principal portion of 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 Collection Account, which were received
during the related Principal Prepayment Period, net of related unreimbursed
servicing advances and net of any portion thereof which, as to any Mortgage
Loan, constitutes a late collection with respect to which an Advance has
previously been made; (d) with respect to each Mortgage Loan which has become a
Liquidated Mortgage Loan (defined below) during the related Principal Prepayment
Period, an amount equal to the lesser of (i) the Non-PO Class A Percentage of
the applicable Non-PO Percentage of an amount equal to the principal balance of
such Mortgage Loan (net of Advances with respect to principal) as of the Due
Date immediately preceding the date on which it became a Liquidated Mortgage
Loan and (ii) the Non-PO Class A Prepayment Percentage of the applicable Non-PO
Percentage of the net liquidation proceeds, if any, with respect to such
Liquidated Mortgage Loan (net of any unreimbursed Advances); (e) with respect to
each Mortgage Loan repurchased during the related Principal Prepayment Period,
an amount equal to the Non-PO Class A Prepayment Percentage of the applicable
Non-PO Percentage of the principal portion of the purchase price thereof (net of
amounts with respect to which a distribution has previously been made to the
Non-PO Class A Certificateholders); and (f) while none of the Subordinated
Certificates remains outstanding, the excess of the outstanding principal
balance of the Non-PO Class A Certificates (calculated after giving effect to
reductions thereof on such Distribution Date with respect to amounts described
in (a)-(e) above) over the Non-PO Allocated Amount (defined below).
A "Liquidated Mortgage Loan" is a Mortgage Loan as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Mortgage Loan, whether from insurance proceeds, liquidation
proceeds or otherwise, have been recovered.
As of any Distribution Date, the "Non-PO Class A Percentage" will equal
a fraction, expressed as a percentage, the numerator of which is the Non-PO
Class A Principal Balance and the denominator of which is the Non-PO Allocated
Amount immediately prior to the Due Date in the month of such Distribution Date.
The "Non-PO Allocated Amount" will be calculated as of any date by (i)
multiplying the outstanding principal balance of each Mortgage Loan as of such
date (giving effect to any Advances but prior to giving effect to any principal
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<PAGE>
prepayments received with respect to such Mortgage Loan that have not been
passed through to the Certificateholders) by the Non-PO Percentage with respect
to such Mortgage Loan and (ii) summing the results.
The "Non-PO Class A Principal Balance" means, generally, as of any
Distribution Date, (a) the Non-PO Class A Principal Balance for the preceding
Distribution Date less (b) amounts distributed to the Non-PO Class A
Certificateholders on such preceding Distribution Date allocable to principal
(including Advances) and any losses allocated to the Non-PO Class A
Certificates; provided that the Non-PO Class A Principal Balance on the first
Distribution Date will be the initial Non-PO Class A Principal Balance, which is
expected to be approximately [_________].
The "Non-PO Class A Prepayment Percentage" means, generally, as of any
Distribution Date up to and including the Distribution Date in [MONTH/YEAR],
100%; as of any Distribution Date in the first year thereafter, the Non-PO Class
A Percentage plus [___]% of the Subordinated Percentage for such Distribution
Date; as of any Distribution Date in the second year thereafter, the Non-PO
Class A Percentage plus [__]% of the Subordinated Percentage for such
Distribution Date; as of any Distribution Date in the third year thereafter, the
Non-PO Class A Percentage plus [__]% of the Subordinated Percentage for such
Distribution Date; as of any Distribution Date in the fourth year thereafter,
the Non-PO Class A Percentage plus [__]% of the Subordinated Percentage for such
Distribution Date; and as of any Distribution Date after the fourth year
thereafter, the Non-PO Class A Percentage; provided that, if the Non-PO Class A
Percentage as of any such Distribution Date is greater than the initial Non-PO
Class A Percentage, the Non-PO Class A Prepayment Percentage shall be 100%; and
provided further, however, that no reduction of the Non-PO Class A Prepayment
Percentage below the level in effect for the most recent period shall occur with
respect to any Distribution Date unless, as of the last day of the month
preceding such Distribution Date, (i) the aggregate outstanding principal
balance of Mortgage Loans delinquent 60 days or more (including for this purpose
any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the
related Mortgaged Property has been acquired by the Trust Fund) does not exceed
[__]% of the aggregate principal balance of the Subordinated Certificates as of
such date and (ii) cumulative Realized Losses do not exceed (a) [__]% of the
aggregate principal balance of the Subordinated Certificates as of the date of
issuance of the Certificates (the "Original Subordinated Principal Balance") if
such Distribution Date occurs in the year beginning with and including the fifth
anniversary of the first Distribution Date, (b) [__]% of the Original
Subordinated Principal Balance if such Distribution Date occurs in the year
beginning with and including the sixth anniversary of the first Distribution
Date, (c) [__]% of the Original Subordinated Principal Balance if such
Distribution Date occurs in the year beginning with and including the seventh
anniversary of the first Distribution Date, (d) [__]% of the Original
Subordinated Principal Balance if such Distribution Date occurs in the year
beginning with and including the eighth anniversary of the first Distribution
Date, and (e) [__]% of the Original Subordinated Principal Balance if such
Distribution Date occurs in the year beginning with and including the ninth
anniversary of the first Distribution Date and thereafter.
As of any Distribution Date, the "Subordinated Percentage" means the
difference between 100% and the Non-PO Class A Percentage, and the "Subordinated
Prepayment Percentage" means the difference between 100% and the Non-PO Class A
Prepayment Percentage.
Allocation of the Subordinated Optimal Principal Amount
On each Distribution Date, distributions in respect of principal will
be made to each Class of Subordinated Certificates up to an amount equal to the
portion of the Subordinated Optimal Principal Amount (defined below) allocable
to such Class, calculated as described below.
The "Subordinated Optimal Principal Amount" means generally as of any
Distribution Date, an amount, not in excess of the aggregate outstanding
principal balance of the Subordinated Certificates, equal to (1) the sum of: (a)
an amount equal to the Subordinated Percentage of the applicable Non-PO
Percentage of 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) an amount equal to the Subordinated Prepayment
Percentage of the applicable Non-PO Percentage of all principal prepayments
received during the related Principal Prepayment Period; (c) with respect to
each Mortgage Loan not described in (d) below, an amount equal to the
Subordinated Percentage of the applicable Non-PO Percentage of the sum of the
principal portion of 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 Collection Account, which were received during the related
Principal Prepayment Period, net of related unreimbursed servicing advances and
net of any portion thereof which, as to any Mortgage Loan, constitutes a late
collection with respect to which an Advance has previously been made; (d) with
respect to each Mortgage Loan which has become a Liquidated Mortgage Loan during
the related Principal Prepayment Period, an amount equal to the portion (if any)
of the net liquidation proceeds with respect to such Liquidated Mortgage Loan
(net of any unreimbursed Advances) that was not included in the Class A-P
Distribution Amount or the Non-PO Class A Optimal Principal Amount with respect
to such Distribution Date; and (e) with respect to each Mortgage Loan
repurchased during the related Principal Prepayment Period, an amount equal to
the Subordinated Prepayment Percentage of the applicable Non-PO Percentage of
the principal portion of the
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<PAGE>
purchase price thereof (net of amounts with respect to which a distribution has
previously been made to the Subordinated Certificateholders), minus (2) the
Class A-P Shortfall Amount with respect to such Distribution Date.
On each Distribution Date, the Subordinated Optimal Principal Amount
will be allocated among the outstanding Classes of Subordinated Certificates
entitled to receive distributions in respect thereof on such Distribution Date,
as described in the second succeeding sentence. Each such Class will be
allocated its pro rata portion of the Subordinated Optimal Principal Amount
based upon the outstanding principal balances of all Classes of Subordinated
Certificates entitled to distributions in respect of the Subordinated Optimal
Principal Amount on such Distribution Date. On each Distribution Date, the
Subordinated Optimal Principal Amount will be allocated among the following
Classes of Certificates: (i) any Class of Subordinated Certificates which has
current Credit Support (defined herein) (before giving effect to any
distribution of principal thereon on such Distribution Date) greater than or
equal to the original Credit Support for such Class; (ii) the Class of
Subordinated Certificates having the lowest numerical class designation of any
outstanding Class of Subordinated Certificates which does not meet the criteria
in (i) above; and (iii) the Class B-5 Certificates if all other outstanding
Classes of Subordinated Certificates meet the criteria in (i) above or if no
other Class of Subordinated Certificates is outstanding; provided, however, that
no Class of Subordinated Certificates will receive any distribution in respect
of the Subordinated Optimal Principal Amount on any Distribution Date if on such
Distribution Date any Class of Subordinated Certificates having a lower
numerical class designation than such Class fails to meet the criteria in (i)
above. For the purposes of (ii) above, the Class M Certificates will be deemed
to have a lower numerical class designation than each Class of Class B
Certificates.
Each Class of Subordinated Certificates (other than the Class B-5
Certificates) will have the benefit of a level of credit support, expressed as a
percentage of the aggregate outstanding principal balance of the Certificates
("Credit Support"). Credit Support for such Classes of Certificates will equal
in each case the percentage obtained by dividing the aggregate outstanding
principal balance of all Classes of Subordinated Certificates having higher
numerical class designations than such Class by the aggregate outstanding
principal balance of all outstanding Classes of Certificates (exclusive of the
outstanding principal balance of Class A-P Certificates) (for this purpose, the
Class M Certificates shall be deemed to have a lower numerical class designation
than each Class of Class B Certificates). Generally, the level of Credit Support
for any Class will decrease to the extent Realized Losses are allocated to any
Class of Subordinated Certificates having a higher numerical class designation
and will increase to the extent that any Class or Classes of Certificates not
subordinated to such Class receives a disproportionate portion of payments
(including prepayments) of principal on the Mortgage Loans.
Additional Rights of the Class A-R Certificateholder
The Class A-R Certificate will remain outstanding for so long as the
Trust Fund shall exist, whether or not such Certificate is receiving current
distributions of principal or interest. In addition to distributions of
principal and interest distributable as described under "Distributions on the
Certificateholders," the holder of the Class A-R Certificate will be entitled to
receive (i) the amounts, if any, of the Available Distribution Amount remaining
in the Certificate Account on any Distribution Date after distributions of
principal and interest on the Certificates on such date and (ii) the proceeds of
the assets of the Trust Fund, if any, remaining in the Trust Fund on the final
Distribution Date for the Certificates, after distributions in respect of any
accrued and unpaid interest on such Certificates, and after distributions in
respect of principal have reduced the Certificate Principal Balances of the
Certificates to zero. It is not anticipated that there will be any material
assets remaining in the Trust Fund at any such time or that any material
distributions will be made with respect to the Class A-R Certificate at any
time. See "Federal Income Tax Consequences--Residual Certificates" in the
Prospectus.
Subordinated Certificates and Shifting Interests
The rights of the Class M Certificateholders to receive distributions
with respect to the Mortgage Loans will be subordinated to the rights of the
Class A Certificateholders and the rights of the holders of each Class of Class
B Certificates to receive distributions with respect to the Mortgage Loans will
be subordinated to the rights of the holders of the Class A Certificates, the
Class M Certificates, and each Class of Class B Certificates having a lower
numerical class designation than such Class of Class B Certificates, each to the
extent described below. The subordination provided by the Class M and Class B
Certificates is intended to enhance the likelihood of regular receipt by the
Class A Certificateholders of the full amount of monthly distributions due them
and to protect the Class A Certificateholders against losses. The subordination
provided by each Class of Class B Certificates is intended to enhance the
likelihood of regular receipt by the holders of the Class A Certificates, the
Class M Certificates, and each Class of Class B Certificates having a lower
numerical class designation than such Class of Class B Certificates of the full
amount of monthly distributions due them and to protect such Certificateholders
against losses.
On each Distribution Date payments to the Class A Certificateholders
will be made prior to payments to the Class M and Class B Certificateholders,
payments to the Class M Certificateholders will be made prior to payments to the
Class B Certificateholders, payments to the Class B-1 Certificateholders will be
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<PAGE>
made prior to payments to the Class B-2 Certificateholders and the Non-Offered
Class B Certificateholders and payments to the Class B-2 Certificateholders will
be made prior to payments to the Non-Offered Class B Certificateholders. If on
any Distribution Date on which the aggregate outstanding principal balance of
the Class M and Class B Certificates is greater than zero the Non-PO Class A
Certificateholders are paid less than the Non-PO Class A Optimal Principal
Amount for such date, the interest of the Non-PO Class A Certificateholders in
the Trust Fund will vary so as to preserve the entitlement of the Non-PO Class A
Certificateholders to unpaid principal of the Mortgage Loans and interest
thereon. This may have the effect of increasing the proportionate interest of
the Non-PO Class A Certificateholders in the Trust Fund.
The Non-PO Class A Certificateholders will be entitled to receive the
Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the
amount of principal prepayments and certain other unscheduled amounts of
principal received on the Mortgage Loans as described above. This will have the
effect of initially accelerating principal payments to the Non-PO Class A
Certificateholders and reducing their proportionate interest in the Trust Fund
and correspondingly increasing (in the absence of offsetting Realized Losses)
the Credit Support of each Class of Subordinated Certificates having Credit
Support. See "Description of the Certificates--Distributions to
Certificateholders; and Principal (Including Prepayments) herein." Increasing
the interest of the Class M and Class B Certificates in the Trust Fund relative
to that of the Class A Certificates is intended to preserve the availability of
the benefits of the subordination provided by the Class M and Class B
Certificates.
All Realized Losses on the Mortgage Loans (other than Excess Losses
(defined below)) generally will be allocated first, to the Non-Offered Class B
Certificates until the principal balance of the Non-Offered Class B Certificates
has been reduced to zero; second, to the Class B-2 Certificates until the
principal balance of the Class B-2 Certificates has been reduced to zero; third,
to the Class B-1 Certificates until the principal balance of the Class B-1
Certificates has been reduced to zero; fourth, to the Class M Certificates until
the principal balance of the Class M Certificates has been reduced to zero; and
fifth, to the Non-PO Class A Certificates pro rata based upon their respective
outstanding principal balances until the principal balance of the Non-PO Class A
Certificates has been reduced to zero; provided, however, that if a Realized
Loss occurs with respect to a Discount Mortgage Loan (A) the amount of such
Realized Loss equal to the product of (i) the amount of such Realized Loss and
(ii) the PO Percentage with respect to such Discount Mortgage Loan will be
allocated to the Class A-P Certificates and (B) the remainder of such Realized
Loss will be allocated as described above.
A "Realized Loss" is generally the amount, if any, with respect to any
defaulted Mortgage Loan which has been liquidated in accordance with the
Agreement, by which the unpaid principal balance and accrued interest thereon at
a rate equal to the Net Mortgage Rate exceeds the amount actually recovered by
the Servicer with respect thereto (net of reimbursement of certain expenses) at
the time such defaulted Mortgage Loan was liquidated.
Excess Fraud Losses, Excess Bankruptcy Losses and Excess Special Hazard
Losses (collectively, "Excess Losses") will be allocated to all Classes pro rata
based upon their respective outstanding principal balances; provided, however,
that the applicable PO Percentage of any Excess Losses on the Discount Mortgage
Loans will be allocated to the Class A-P Certificates.
<PAGE>
The aggregate amount of Realized Losses that may be allocated in
connection with Special Hazard Losses (defined below) on the Mortgage Loans (the
"Special Hazard Amount") to the Subordinated Certificates will initially be
equal to approximately $[_________]. As of each anniversary of the Cut-off Date,
the Special Hazard Amount generally will be reduced, but not increased, to an
amount equal to the lesser of (i) the Special Hazard Amount as of the previous
anniversary of the Cut-off Date less the sum of all amounts allocated to the
Certificates in respect of Special Hazard Losses on the Mortgage Loans since
such previous anniversary or (ii) the Adjustment Amount. The "Adjustment Amount"
with respect to each anniversary of the Cut-off Date will be equal to the
greatest of (i) [____]% multiplied by the aggregate outstanding principal
balance of the Mortgage Loans, (ii) the aggregate outstanding principal balance
of the Mortgage Loans secured by Mortgaged Properties located in the
[California] postal zip code area in which the highest percentage of the
Mortgage Loans are located and (iii) twice the outstanding principal balance of
the Mortgage Loan having the largest outstanding principal balance, in each case
as of such anniversary of the Cut-off Date.
A "Special Hazard Loss" is a loss incurred in respect of any defaulted
Mortgage Loan as a result of direct physical loss or damage to the Mortgaged
Property, which is not insured against under the standard hazard insurance
policy or blanket policy insuring against hazard losses which the Servicer is
required to cause to be maintained on each Mortgage Loan. See "Servicing of the
Mortgage Loans-Hazard Insurance" in the Prospectus.
"Excess Special Hazard Losses" are Special Hazard Losses in excess of
the Special Hazard Amount.
The aggregate amount of Realized Losses incurred on defaulted Mortgage
Loans as to which there was fraud in the origination of such Mortgage Loan
("Fraud Losses") which may be allocated to the Subordinated Certificates (the
"Fraud Loss Amount") will initially be equal to approximately $[_________]. As
of any date of determination after the Cut-off Date, the Fraud Loss Amount
generally will be equal to (X) prior to the first anniversary of the Cut-off
Date an amount equal to [____]% of
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the aggregate principal balance of all of the Mortgage Loans as of the Cut-off
Date minus the aggregate amounts allocated to the Certificates with respect to
Fraud Losses on the Mortgage Loans up to such date of determination and (Y) from
the first to the fifth anniversary of the Cut-off Date, an amount equal to (1)
[____]% of the aggregate principal balance of all of the Mortgage Loans as of
the most recent anniversary of the Cut-off Date minus (2) the aggregate amounts
allocated to the Certificates with respect to Fraud Losses on the Mortgage Loans
since the most recent anniversary of the Cut-off Date up to such date of
determination. On and after the fifth anniversary of the Cut-off Date, the Fraud
Loss Amount will be zero.
"Excess Fraud Losses" are Fraud Losses in excess of the Fraud Loss
Amount.
The aggregate amount of Realized Losses which may be allocated in
connection with Bankruptcy Losses on the Mortgage Loans (the "Bankruptcy
Amount") to the Subordinate Certificates will initially be equal to
approximately $[______]. As of any date of determination, the Bankruptcy Amount
will equal approximately $[______] less the sum of any amounts allocated to the
Certificates for such losses up to such date of determination.
A "Bankruptcy Loss" is a Deficient Valuation or a Debt Service
Reduction. With respect to any Mortgage Loan, a "Deficient Valuation" is a
valuation by a court of competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under the Mortgage Loan,
which valuation results from a proceeding initiated under the United States
Bankruptcy Code. A "Debt Service Reduction" is any reduction in the amount which
a mortgagor is obligated to pay on a monthly basis with respect to a Mortgage
Loan as a result of any proceeding initiated under the United States Bankruptcy
Code, other than a reduction attributable to a Deficient Valuation.
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<PAGE>
"Excess Bankruptcy Losses" are Bankruptcy Losses in excess of the
Bankruptcy Amount.
Amounts actually paid at any time to the Class M and Class B
Certificateholders in accordance with the terms of the Agreement will not be
subsequently recoverable from the Class M and Class B Certificateholders.
FEDERAL INCOME TAX CONSIDERATIONS
The Seller intends to cause an election to be made to treat the assets
of the Trust Fund as a real estate mortgage investment conduit (a "REMIC") for
federal income tax purposes. The Offered Certificates (other than the Class A-R
Certificate) will constitute "regular interests" in the REMIC. The Class A-R
Certificate will represent the "residual interest" in the REMIC.
All Certificateholders will be required to use the accrual method of
accounting with respect to interest income on the Certificates, regardless of
their normal method of accounting. Holders of Offered Certificates that have
original issue discount will be required to include amounts in income with
respect to such Certificates in advance of the receipt of cash attributable to
such income. It is anticipated that the Class ______________ Certificates will
be issued with original issue discount for federal income tax purposes. It is
also anticipated that the Class ____________________ Certificates will be issued
at a premium, and that the Class ___________ Certificates will be issued with de
minimis original issue discount for federal income tax purposes. The prepayment
assumption that will be used in computing the amount and rate of accrual of
original issue discount includible periodically will be [___]% of the Prepayment
Model set forth herein. See "Prepayment and Yield Considerations." No
representation is made that payments on the Offered Certificates will occur at
that rate or any other rate.
The Offered Certificates will be treated as (i) assets described in
section 7701(a)(19)(C) of the Code and (ii) "real estate assets" within the
meaning of section 856(c)(5)(B) of the Code, in each case to the extent
described herein and in the Prospectus. Interest on the Offered Certificates
will be treated as "interest on obligations secured by mortgages on real
property" within the meaning of section 856(c)(3)(B) of the Code to the same
extent that the Offered Certificates are treated as "real estate assets" within
the meaning of section 856(c)(5)(B) of the Code.
Class A-R Certificate
The holder of the Class A-R Certificate must include the taxable income
or loss of the REMIC in determining its federal taxable income. The Class A-R
Certificate will remain outstanding for federal income tax purposes until there
are no Certificates of any other Class outstanding. Prospective investors are
cautioned that the Class A-R Certificateholder's REMIC taxable income and the
tax liability thereon may exceed, and may substantially exceed, cash
distributions to such holder during certain periods, in which event, the holder
thereof must have sufficient alternative sources of funds to pay such tax
liability. Furthermore, it is anticipated that all or a substantial portion of
the taxable income of the REMIC includible by the holder of the Class A-R
Certificate will be treated as "excess inclusion" income, resulting in (i) the
inability of such holder to use net operating losses to offset such income from
the REMIC, (ii) the treatment of such income as "unrelated business taxable
income" to certain holders who are otherwise tax-exempt, and (iii) the treatment
of such income as subject to 30% withholding tax to certain non-U.S. investors,
with no exemption or treaty reduction.
The Class A-R Certificate will be considered a "noneconomic residual
interest," with the result that transfers thereof would be disregarded for
federal income tax purposes if any significant purpose of the transferor was to
impede the assessment or collection of tax. Accordingly, the transferee
affidavit used for transfer of the Class A-R Certificate will require the
transferee to affirm that it (i) historically has paid its debts as they have
come due and intends to do so in the future, (ii) understands that it may incur
tax liabilities with respect to the Class A-R Certificate in excess of cash
flows generated thereby, (iii) intends to pay taxes associated with holding the
Class A-R Certificate as such taxes become due and (iv) will not transfer the
Class A-R Certificate to any person or entity that does not provide a similar
affidavit. The transferor must certify in writing to the Trustee that, as of the
date of the transfer, it had no knowledge or reason to know that the
affirmations made by the transferee pursuant to the preceding sentence were
false. Additionally, the Class A-R Certificate generally may not be transferred
to certain persons who are not U.S. Persons (as defined herein). See
"Description of the Certificates --Restrictions on Transfer of the Class A-R,
Class M and Offered Class B Certificates" herein and "Federal Income Tax
Consequences --REMIC Certificates;--Income from Residual Certificates; Taxation
of Certain Foreign Investors;--Transfers of Residual Certificates" in the
Prospectus.
An individual, trust or estate that holds the Class A-R Certificate
(whether such Certificate is held directly or indirectly through certain
pass-through entities) also may have additional gross income with respect to,
but may be subject to limitations on the deductibility of, Servicing Fees on the
Mortgage Loans and other administrative expenses of the Trust Fund in computing
such holder's regular tax liability, and may not be able to deduct such fees or
expenses to any extent in computing such holder's alternative minimum tax
liability. In addition, some portion of a purchaser's basis, if any, in the
Class A-R Certificate may not be recovered until termination of the Trust Fund.
Furthermore, the federal income tax consequences of any consideration paid to a
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transferee on a transfer of the Class A-R Certificate are unclear. The preamble
to the REMIC Regulations indicates that the Internal Revenue Service anticipates
providing guidance with respect to the federal tax treatment of such
consideration. Any transferee receiving consideration with respect to the Class
A-R Certificate should consult its tax advisors.
Due to the special tax treatment of residual interests, the effective
after-tax return of the Class A-R Certificate may be significantly lower than
would be the case if the Class A-R Certificate were taxed as a debt instrument,
or may be negative.
For further information regarding the federal income tax consequences
of investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or section 4975 of
the Code, including an individual retirement account (each, a "Plan"), or any
other person investing "plan assets" of any Plan, should carefully review with
its legal advisors whether the purchase or holding of Class A Certificates could
give rise to a transaction prohibited or not otherwise permissible under ERISA
or the Code. See "ERISA Considerations" in the Prospectus.
The Class A-R Certificate may not be purchased by or transferred to a
Plan or any other person investing "plan assets" of any Plan. Accordingly, the
following discussion does not purport to discuss any considerations under ERISA
with respect to the purchase, acquisition or resale of the Class A-R Certificate
and for purposes of the following discussion all references to the Offered
Certificates are deemed to exclude the Class A-R Certificate.
The U.S. Department of Labor ("DOL") has issued Prohibited Transaction
Class Exemption 83-1 ("PTCE 83-1") exempting certain transactions involving
mortgage pool investment entities holding mortgages on certain residential
property from the prohibited transaction provisions of ERISA and the Code. See
"ERISA Considerations" in the Prospectus for a discussion of PTCE 83-1 and the
prohibited transaction provisions of ERISA and the Code.
Prohibited Transaction Exemption _____, __ Fed. Reg. _____ [DATE]
granted by the DOL [UNDERWRITER] (the "Exemption"), exempts the purchase and
holding of the Class A Certificates by or with "plan assets" of a Plan from
certain of the prohibited transaction provisions of section 406(a) of ERISA (and
the excise taxes imposed by section 4975(c)(1)(A) of the Code) provided that
certain conditions are met. Among the conditions are the following: (i) the
Underwriter is the sole underwriter, or the manager or co-manager of the
underwriting syndicate for such Class A Certificates, (ii) the Class A
Certificates are rated in one of the three highest generic rating categories by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or
Fitch IBCA, Inc., (iii) the Class A Certificates are collateralized by, among
other things, obligations that bear interest or are purchased at a discount and
which are secured by single-family residential, multifamily residential or
commercial real property (including obligations secured by leasehold interests
on commercial real property), or fractional undivided interests in such
obligations, (iv) the Class A Certificates are not subordinated to other
Certificates of the Trust Fund, (v) the Plan is an "accredited investor" (as
defined under Rule 501(a)(1) of Regulation D under the Securities Act of 1933,
as amended (the "Act")), (vi) the acquisition of the Class A Certificates by a
Plan is on terms that are at least as favorable to the Plan as they would be in
an arm's length transaction with an unrelated third party, and (vii) the
compensation to the Underwriter represents reasonable compensation, the proceeds
to the Seller represent no more than the fair market value of the obligations
securing such Class A Certificates and the sum of all payments made to and
retained by the Servicer represents not more than reasonable compensation for
the Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith. The Underwriter expects that the
Class A Certificates will satisfy the conditions of the Exemption set forth
above in clauses (i), (iii), (iv) and (vii). Whether the remaining conditions of
the Exemption will be satisfied with respect to the Class A Certificates will
depend on the circumstances at the time "plan assets" of a Plan are used to
acquire such Certificates. In that connection, the Class A Certificates will, on
the date of their original issue, satisfy the condition set forth in clause
(ii). In addition, if certain additional conditions specified in the Exemption
are met, the Exemption would provide an exemption from the prohibited
transaction provisions of ERISA section 406(b) (and the excise taxes imposed by
section 4975(c)(1)(E) of the Code) relating to possible self-dealing
transactions by fiduciaries who have discretionary authority, or render
investment advice, with respect to assets of Plans used to purchase Class A
Certificates where the fiduciary (or its affiliate) is an obligor on the
obligations or receivables held in the Trust Fund. The Exemption would not apply
to certain otherwise prohibited transactions with respect to Plans sponsored by
the following entities (or any affiliate of any such entity): (a) the Seller,
(b) [UNDERWRITER], (c) the Trustee, (d) the Servicer or (e) any obligor with
respect to obligations or receivables included in the Seller constituting more
than five percent of the aggregate unamortized principal balance of the assets
in the Seller.
Before purchasing a Class A Certificate, a fiduciary of a Plan or any
other person investing "plan assets" of any Plan, should itself confirm that (a)
the Class A Certificates constitute "certificates" for the purposes of the
Exemption and (b) that the
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specific and general conditions 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 fiduciary or other Plan investor
should consider its general fiduciary obligations under ERISA in determining
whether to purchase a Certificate on behalf or with "plan assets" of a Plan.
Neither the Exemption nor PTCE 83-1 will apply to the Class M, the
Class B-1 or the Class B-2 Certificates; therefore, the purchase or holding of a
Class M, a Class B-1 or a Class B-2 Certificate by or with "plan assets" of a
Plan may result in prohibited transactions or the imposition of excise taxes or
civil penalties. Accordingly, transfer of the Class M, Class B-1 or Class B-2
Certificates will not be made unless the transferee (i) executes a
representation letter in form and substance satisfactory to the Trustee and the
Seller stating that (a) it is not, and is not acting on behalf of, any such Plan
or using the "plan assets" of any such Plan to effect such purchase or (b) if it
is an insurance company, that the source of funds used to purchase the Class M,
Class B-1 or Class B-2 Certificates is an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995) and the terms
and conditions of Section III of PTCE 95-60 applicable to the acquisition and
holding of such certificates will be met or (ii) provides an opinion of counsel
in form and substance satisfactory to the Trustee and the Seller that the
purchase or holding of the Class M, Class B-1 or Class B-2 Certificates by or on
behalf of such Plan 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 Seller, the Servicer or the Trustee
to any obligation in addition to those undertaken in the Agreement. The Class M,
Class B-1 and Class B-2 Certificates will contain a legend describing such
restrictions on transfer and the Agreement will provide that any attempted or
purported transfer in violation of these transfer restrictions will be null and
void and will vest no rights in any purported transferee.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1, the
Exemption or other exemptions, and the potential consequences to their specific
circumstances prior to making an investment in the Class A Certificates.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment procedure and diversification an investment in
the Class A Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
The sale of Certificates to a Plan is in no respect a representation by
the Seller or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or by any particular
Plan, or that this investment is appropriate for Plans generally or for any
particular Plan.
LEGAL INVESTMENT MATTERS
[The Class A and Class M Certificates offered hereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated in
one of the two highest rating categories by at least one nationally recognized
statistical rating organization and, as such, will be legal investments for
certain entities to the extent provided in SMMEA. However, institutions subject
to the jurisdiction of the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, the National Credit Union
Administration or federal or state banking, insurance or other regulatory
authorities should review applicable rules, supervisory policies and guidelines,
since certain restrictions may apply to investments in such classes. It should
also be noted that certain states have enacted legislation limiting to varying
extents the ability of certain entities (in particular insurance companies) to
invest in mortgage related securities. Investors should consult with their own
legal advisors in determining whether, and to what extent the Class A and Class
M Certificates constitute legal investments for such investors. See "Legal
Investment Matters" in the Prospectus.
The Class B-1 and Class B-2 Certificates will not constitute "mortgage
related securities" under SMMEA. The appropriate characterization of the Class
B-1 and Class B-2 Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase Class
B-1 and Class B-2 Certificates, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Class B-1 and Class B-2 Certificates will constitute legal
investments for them.
Except as to the status of the Class A and Class M Certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the Offered Certificates for legal investment or financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase the 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 Certificates) may adversely affect the
liquidity of the Offered Certificates.]
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USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Offered Certificates will be applied by the Seller to the purchase price of
the Mortgage Loans.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
[DATE] and the terms agreement, dated [DATE] (together, the "Underwriting
Agreement") between the Seller and [UNDERWRITER], as underwriter (the
"Underwriter"), the Offered Certificates are being purchased from the Seller by
the Underwriter.
The Underwriting Agreement provides that the Underwriter's obligations
thereunder are subject to certain conditions precedent. The Underwriter is
committed to purchase all of the Offered Certificates if any such Certificates
are purchased.
The Underwriter has advised the Seller that it proposes to offer the
Offered Certificates purchased by the Underwriter, from time to time in one or
more negotiated transactions, or otherwise, at varying prices to be determined,
in each case, at the time of sale. The Underwriter may effect such transactions
by selling the Offered Certificates purchased by the Underwriter to or through
dealers, and such dealers may receive from such Underwriter, for whom they act
as agents, compensation in the form of underwriting discounts, concessions or
commissions. The Underwriter and any dealers that participate with the
Underwriter in the distribution of the Offered Certificates may be deemed to be
underwriters, and any discounts, concessions or commissions received by them,
and any profit on the resale of the Offered Certificates by them, may be deemed
to be underwriting discounts and commissions under the Act.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Act.
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<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Seller by Morgan,
Lewis & Bockius LLP, New York, New York and for the Underwriter by
_________________. The material federal income tax consequences of the
Certificates will be passed upon for the Seller by Morgan, Lewis & Bockius LLP.
RATINGS
It is a condition to the issuance of the Offered Certificates that the
Class A Certificates be rated ["AAA" by each of [RATING AGENCY] and [RATING
AGENCY], and that the Class M, Class B-1 and Class B-2 Certificates be rated at
least "AA", "A" and "BBB", respectively, by [RATING AGENCY].
The ratings of [RATING AGENCY] on mortgage pass-through certificates
address [the likelihood of the receipt by Certificateholders of all
distributions to which such Certificateholders are entitled. [RATING AGENCY]
rating opinions address the structural and legal issues and tax-related aspects
associated with the Certificates, including the nature of the underlying
mortgage loans. [RATING AGENCY] ratings on pass-through certificates do not
represent any assessment of the likelihood that principal prepayments may differ
from those originally anticipated nor do they address the possibility that, as a
result of principal prepayments, Certificateholders may receive a lower than
anticipated yield.]
The ratings by [RATING AGENCY] assigned to the Offered Certificates [do
not constitute a recommendation to purchase or sell such Certificates. Rather,
they are an indication of the likelihood of the payment of principal and
interest as set forth in the transaction documentation. The ratings do not
address the effect on the Offered Certificates' yield attributable to
prepayments or recoveries on the underlying Mortgage Loans. Further the ratings
on the [Class A-X] Certificates do not address whether investors will recoup
their initial investment. Additionally, the rating on the Class A-R Certificates
addresses only the return of the Class A-R Certificate's principal balance and
interest thereon at the stated rate. The ratings on the Class A-P certificates
do not assess the likelihood of return to investors except to the extent of the
principal balance thereof.]
The ratings of the Offered Certificates should be evaluated
independently from similar ratings on other types of securities. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
The Seller has not requested a rating of the Offered Certificates by
any rating agency other than [RATING AGENCY] and [RATING AGENCY] and the Seller
has not provided information relating to the Certificates offered hereby or the
Mortgage Loans to any rating agency other than [RATING AGENCY] and [RATING
AGENCY]. However, there can be no assurance as to whether any other rating
agency will rate the Offered Certificates or, if another rating agency rates
such Certificates, what rating would be assigned to such Certificates by such
rating agency. Any such unsolicited rating assigned by another rating agency to
the Offered Certificates may be lower than the rating assigned to such
Certificates by either, or both, of [RATING AGENCY] and [RATING AGENCY].
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INDEX OF DEFINED TERMS
Accounts ...................................................................S-__
Act ........................................................................S-__
Adjusted Lockout Percentage.................................................S-__
Agreement ..................................................................S-__
Available Distribution Amount...............................................S-__
Bankruptcy Amount ..........................................................S-__
Bankruptcy Loss ..........................................................S-__
Book-Entry Certificates.....................................................S-__
Cede .......................................................................S-__
Certificate Account.........................................................S-__
Certificate Owner ..........................................................S-__
Certificate Rate ..........................................................S-__
Certificateholders..........................................................S-__
Chase ......................................................................S-__
Chase Manhattan Mortgage....................................................S-__
Class A Certificates........................................................S-__
Class A Percentage..........................................................S-__
Class A-X Notional Amount...................................................S-__
Class B Certificates........................................................S-__
Class B-1 Percentage........................................................S-__
Class B-2 Percentage........................................................S-__
Class M Percentage..........................................................S-__
Code .......................................................................S-__
Collection Account..........................................................S-__
Corporate Trust Office......................................................S-__
Credit Scores...............................................................S-__
Credit Support .............................................................S-__
Credit Support Depletion Date...............................................S-__
Cut-off Date ...............................................................S-__
DCR ........................................................................S-__
Definitive Certificates.....................................................S-__
Discount Mortgage Loans.....................................................S-__
Distribution Date ..........................................................S-__
DOL ........................................................................S-__
DTC ........................................................................S-__
Due Date ...................................................................S-__
ERISA ......................................................................S-__
Excess Bankruptcy Losses....................................................S-__
Excess Fraud Losses.........................................................S-__
Excess Losses ..............................................................S-__
Excess Special Hazard Losses................................................S-__
Exemption ..................................................................S-__
FHLMC ......................................................................S-__
Final Scheduled Distribution Date...........................................S-__
FNMA .......................................................................S-__
Fraud Loss Amount ..........................................................S-__
Fraud Losses ...............................................................S-__
Indirect Participants.......................................................S-__
Interest Accrual Amount.....................................................S-__
Interest Accrual Period.....................................................S-__
Interest Shortfall..........................................................S-__
LIBOR ......................................................................S-__
LIBOR Business Day..........................................................S-__
Liquidated Mortgage Loan....................................................S-__
Liquidation Principal.......................................................S-__
Lockout Liquidation Amount..................................................S-__
Lockout Percentage..........................................................S-__
Lockout Prepayment Percentage...............................................S-__
<PAGE>
INDEX OF DEFINED TERMS
Lockout Principal Distribution Amount.......................................S-__
Monthly Payments ..........................................................S-__
Moody's ....................................................................S-__
Mortgage Loan Schedule......................................................S-__
Mortgage Loans .............................................................S-__
Mortgage Note ..............................................................S-__
Mortgage Pool ..............................................................S-__
Mortgaged Properties........................................................S-__
Net Mortgage Rate ..........................................................S-__
Non-Discount Mortgage Loans.................................................S-__
Non-Offered Class B Certificates............................................S-__
Non-Offered Class B Percentage..............................................S-__
Non-PO Allocated Amount.....................................................S-__
Non-PO Class A Certificates.................................................S-__
Non-PO Class A Optimal Principal
Amount .....................................................................S-__
Non-PO Class A Prepayment Percentage........................................S-__
Non-PO Class A Principal Balance............................................S-__
Non-PO Percentage ..........................................................S-__
Non-recoverable Advance.....................................................S-__
Non-Supported Interest Shortfall............................................S-__
Offered Certificates........................................................S-__
Participant ................................................................S-__
PO Percentage ..........................................................S-__
Prepayment Interest Shortfall...............................................S-__
Prepayment Model ..........................................................S-__
Principal Prepayment Period.................................................S-__
PTCE 83-1 ..................................................................S-__
PTCE 95-60 .................................................................S-__
Rate Adjustment Date........................................................S-__
Realized Loss ..............................................................S-__
Record Date ................................................................S-__
Reference Bank Rate.........................................................S-__
REMIC ......................................................................S-__
Remittance Rate ..........................................................S-__
Rules ......................................................................S-__
Scheduled Principal Balance.................................................S-__
Seller .....................................................................S-__
Servicer ...................................................................S-__
Servicer Remittance Date....................................................S-__
Servicing Fee ..............................................................S-__
Servicing Fee Rate..........................................................S-__
SMMEA ......................................................................S-__
Special Hazard Amount.......................................................S-__
Special Hazard Loss.........................................................S-__
Step Down Percentage........................................................S-__
Stripped Interest Rate......................................................S-__
Subordinated Certificates...................................................S-__
Subordinated Optimal Principal Amount.......................................S-__
Subordinated Percentage.....................................................S-__
Subordinated Prepayment Percentage..........................................S-__
Subservicers ...............................................................S-__
Telerate Screen Page 3750...................................................S-__
Trustee ....................................................................S-__
U.S. Person ................................................................S-__
Underwriter ................................................................S-__
Underwriting Agreement......................................................S-__
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$___________ (Approximate)
Chase Mortgage Trust, Series [_________]
Issuer
Chase Manhattan Acceptance Corporation
Seller
[Chase Manhattan Mortgage Corporation]
Servicer
[LOGO]
Multi-Class Mortgage Pass-Through Certificates, Series [_________]
-----------------------------
PROSPECTUS SUPPLEMENT
-----------------------------
[UNDERWRITER]
You should rely on the information contained or incorporated by reference in
this prospectus supplement and the attached prospectus. We have not authorized
anyone to provide you with different information.
We are not offering these certificates in any state where the offer is not
permitted.
Dealers will be required to deliver a prospectus supplement and prospectus when
acting as underwriters of these certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling these certificates
will deliver a prospectus supplement and prospectus until [DATE].
[DATE]
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION DATED OCTOBER 20, 1999
Chase Manhattan Acceptance Corporation
Chase Funding, Inc.
Seller, as specified in the related Prospectus Supplement
Mortgage Pass-Through Certificates
(Issuable in Series)
The Mortgage Pass-Through Certificates offered hereby and by the
Prospectus Supplement (as defined below) (the "Certificates") will be offered
from time to time in series. The Seller with respect to any series of
Certificates will be either Chase Manhattan Acceptance Corporation or Chase
Funding, Inc. as specified in the related Prospectus Supplement (as to either,
the "Seller"). Each series of Certificates will represent in the aggregate the
entire beneficial ownership interest, minus any interest retained by the
Seller, in a segregated pool of various types of conventional one- to
four-family residential first mortgage loans (the "Mortgage Loans") which may,
if so specified in the related Prospectus Supplement, include cooperative
apartment loans ("Cooperative Loans"), together with other assets described
herein (collectively, a "Trust Fund"). Information regarding the Mortgage Loans
in a Trust Fund, including the approximate aggregate principal amount and
general characteristics of such Mortgage Loans and the applicable Certificate
Rate (as defined herein), will be furnished in a supplement to this Prospectus
at the time of offering (a "Prospectus Supplement").
Each series of Certificates will include one or more classes. Each class
of Certificates of any series will represent the right, which may be senior or
subordinate to the rights of one or more of the other classes of Certificates,
to receive a specified portion of distributions of principal or interest (or
both) on the Mortgage Loans in the related Trust Fund in the manner described
herein and in the related Prospectus Supplement. A series may include one or
more classes of Certificates entitled to principal distributions, with
disproportionate, nominal or no interest distributions, or to interest
distributions, with disproportionate, nominal or no principal distributions.
See "Description of the Certificates". A series may include two or more classes
of Certificates which differ as to the timing, sequential order, priority of
payment, pass-through rate or amount of distributions of principal or interest
or both. Distributions of principal and interest will be made on the 25th day
of each month or, if such day is not a business day, on the next succeeding
business day, commencing with the month following delivery unless otherwise
specified in the related Prospectus Supplement.
The only obligations of the Seller with respect to a series of
Certificates will be pursuant to its representations and warranties with
respect to such Certificates as described herein. Unless otherwise specified in
the related Prospectus Supplement, the Servicer for each series of Certificates
will be Chase Manhattan Mortgage Corporation. The principal obligations of the
Servicer with respect to a series of Certificates will be Chase Manhattan
Mortgage Corporation. The principal obligations of the services with respect to
a series of Certificates will be limited to its contractual servicing
obligations, and its obligation in the event of payment delinquencies on the
Mortgage Loans, to make certain cash advances with respect to the Mortgage
Loans to the extent described herein and in the related Prospectus Supplement.
The Trust Fund for a series of Certificates may include any combination of
a mortgage pool insurance policy, letter of credit, bankruptcy bond, special
hazard insurance policy, reserve fund or other form of credit support. In
addition to or in lieu of the foregoing, credit enhancement may be provided by
means of subordination as described herein and in the related Prospectus
Supplement. See "Description of the Certificates" and "Credit Support".
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 as more fully described herein. If so provided in the Prospectus
Supplement for a series of Certificates, one or more separate elections will be
made to treat the related Trust Fund (or designated portions thereof) as one or
more "real estate mortgage investment conduits" (each, a "REMIC") for federal
income tax purposes. See "Federal Income Tax Consequences".
A series of Certificates may include one or more senior classes and one or
more subordinate classes. Each such class will represent the right to receive a
specified portion of payments of principal and interest on the Mortgage Loans
in the related Trust Fund in the manner described herein and in the related
Prospectus Supplement. See "Description of Certificates".
THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE SELLER, THE CHASE MANHATTAN BANK OR CHASE MANHATTAN MORTGAGE
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH HEREIN
AND IN THE RELATED PROSPECTUS SUPPLEMENT, NEITHER THE CERTIFICATES NOR THE
UNDERLYING MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY THE SELLER, THE CHASE MANHATTAN BANK OR
CORPORATION OR ANY OF THEIR AFFILIATES.
<PAGE>
The yield on each class of Certificates of a series will be affected by
the rate of payment of principal (including prepayments) on the assets in the
related Trust Fund and the timing of receipt of such payments as described
herein and in the related Prospectus Supplement. Each series of Certificates
may be subject to early termination only under the circumstances described
herein and in the related Prospectus Supplement.
Prospective investors in the Certificates should consider the factors
discussed under "Risk Factors" beginning on page __.
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. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Offers of the Certificates 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.
There will have been no public market for any series of Certificates prior to
the offering thereof. Accordingly, once an offering of any Series of
Certificates has been made, there can be no assurance that a secondary market
for Certificates of such Series will develop or, if it does develop, that such
market will continue. No application will be made to list the Certificates on
any securities exchange.
This Prospectus may not be used to consummate sales of Certificates unless
accompanied by a Prospectus Supplement.
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The date of this Prospectus is [DATE].
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a series of Certificates being
offered hereby will, among other things, set forth with respect to such series
of Certificates (i) information as to the assets comprising the Trust Fund,
including the characteristics of the Mortgage Loans and, if applicable, the
insurance, guarantees or other instruments or agreements included in the Trust
Fund and the amount and source of any reserve accounts; (ii) the aggregate
original principal balance of each class of Certificates entitled to
distributions allocable to principal and, if a fixed rate of interest, the
interest rate for each class of such Certificates entitled to distributions
allocable to interest; (iii) information as to any class of Certificates that
has a rate of interest that is subject to change from time to time and the
basis on which such interest rate will be determined; (iv) information as to
any class of Certificates on which interest will accrue and be added to the
principal or, if applicable, the notional principal balance thereof; (v)
information as to the method used to calculate the amount of interest to be
paid on any class entitled to distributions of interest only; (vi) information
as to the nature and extent of subordination with respect to any class of
Certificates that is subordinate in right of payment to any other class; (vii)
the circumstances, if any, under which the Trust Fund is subject to early
termination; (viii) if applicable, the final distribution date and the first
mandatory principal distribution date of each class of such Certificates; (ix)
the method used to calculate the aggregate amounts of principal and interest
required to be distributed on each distribution date in respect of each class
of such Certificates and, with respect to any series consisting of more than
one class, the basis on which such amounts will be allocated among the classes
of such series; (x) the distribution date for each class of the Certificates,
the date on which payments received in respect of the assets included in the
Trust Fund during the related period will be deposited in the related
Collection Account (as defined herein) and, if applicable, the assumed
reinvestment rate applicable to payments received in respect of such assets and
the date on which such payments are assumed to be received for such series of
Certificates; (xi) the name of the trustee of the Trust Fund; (xii) information
with respect to the administrator, if any, of the Trust Fund; (xiii) whether an
election will be made to treat all or a portion of the Trust Fund as a REMIC or
a double REMIC and, if applicable, the designation of the regular interests and
residual interests therein; and (xiv) information with respect to the plan of
distribution of such Certificates.
AVAILABLE INFORMATION
The Seller will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect
to the series of Certificates offered hereby and by the related Prospectus
Supplement, and in accordance therewith will file reports and other information
with the Securities and Exchange Commission (the "Commission"). Such reports
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material can also be obtained from the web site that the
Commission maintains at http://www.sec.gov.
The Seller has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended, with respect to the Certificates. This
Prospectus, which forms a part of the Registration Statement, omits certain
information contained in such Registration Statement pursuant to the rules and
regulations of the Commission. The Registration Statement can be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission as described in the preceding paragraph.
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act with respect to a series of Certificates subsequent
to the date of this Prospectus and the related Prospectus Supplement and prior
to the termination of the offering of such series of Certificates shall be
deemed to be incorporated by reference in this Prospectus as supplemented by
the related Prospectus Supplement. If so specified in any such document, such
document shall also be deemed to be incorporated by reference in the
Registration Statement of which this Prospectus forms a part.
Any statement contained herein or in a Prospectus Supplement for a series
of Certificates or in a document incorporated or deemed to be incorporated by
reference herein or therein shall be deemed to be modified or superseded for
purposes of this Prospectus and such Prospectus Supplement to the extent that a
statement contained herein or in such Prospectus Supplement or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in such Prospectus Supplement modifies or supersedes such
statement, except to the extent that such subsequently filed document expressly
states otherwise. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the related Prospectus Supplement or, if applicable, the
Registration Statement.
The Seller will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus and the related Prospectus
Supplement is delivered, on the written or oral request of any such person, a
copy of any and all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Seller c/o Chase Manhattan Mortgage Corporation, 343
Thornall Street, Edison, New Jersey 08837, Attention: Structured Finance.
Telephone requests for such copies should be directed to the Seller at (732)
205-0600.
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Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the series of Certificates 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 Supplement and
Prospectus when acting as underwriters of the series of Certificates covered by
such Prospectus Supplement and with respect to their unsold allotments or
subscriptions.
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 as having been
authorized. This Prospectus and any Prospectus Supplement with respect hereto
do not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the Certificates offered hereby and thereby nor an offer
to sell or a solicitation of an offer to buy the Certificates to any person in
any state or other jurisdiction in which such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus or any Prospectus Supplement
with respect hereto nor any sale made hereunder and thereunder shall, under any
circumstances, create any implication that the information herein or therein is
correct as of any time subsequent to the date of such information.
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REPORTS TO CERTIFICATEHOLDERS
The Servicer will provide to the holders of Certificates of each series,
annually and on each Distribution Date, reports concerning the Trust Fund
related to such Certificates. See "The Pooling and Servicing Agreement--Reports
to Certificateholders". The Servicer will file with the Commission such reports
with respect to the Trust Fund for a series of Certificates as are required
under the Exchange Act and the rules and regulations of the Commission
thereunder until the completion of the reporting period required by Rule 15d-1
under the Exchange Act.
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iii
<PAGE>
TABLE OF CONTENTS
SUMMARY OF PROSPECTUS ............................ _
RISK FACTORS ..................................... _
DESCRIPTION OF THE CERTIFICATES .................. __
General ....................................... __
Classes of Certificates ....................... __
Distributions of Principal and Interest ....... __
THE MORTGAGE POOLS ............................... __
CREDIT SUPPORT ................................... __
General ....................................... __
Limited Guarantee of the Guarantor ............ __
Subordination ................................. __
Certificate Guaranty Insurance Policies ....... __
Overcollateralization ......................... __
Cross-Support ................................. __
Pool Insurance ................................ __
Special Hazard Insurance ...................... __
Bankruptcy Bond ............................... __
Repurchase Bond ............................... __
Guaranteed Investment Contracts ............... __
Reserve Accounts .............................. __
Other Insurance and Guarantees ................ __
YIELD, MATURITY AND WEIGHTED
AVERAGE LIFE CONSIDERATIONS ................... __
CHASE MANHATTAN ACCEPTANCE
CORPORATION ................................... __
CHASE FUNDING, INC. .............................. __
SERVICING OF THE MORTGAGE LOANS . __
Collection and Other Servicing Procedures ..... __
Private Mortgage Insurance .................... __
Hazard Insurance .............................. __
Advances ...................................... __
Servicing and Other Compensation and
Payment of Expenses ........................ __
Resignation, Succession and Indemnification
of the Servicer ............................ __
THE POOLING AND SERVICING
AGREEMENT ..................................... __
Assignment of Mortgage Loans; Warranties . __
Payments on Mortgage Loans; Collection
Account .................................... __
Repurchase or Substitution .................... __
Certain Modifications and Refinancings ........ __
Forward Commitments; Pre-Refunding ............ __
Evidence as to Compliance ..................... __
The Trustee ................................... __
Reports to Certificateholders ................. __
Events of Default ............................. __
Rights Upon Event of Default .................. __
<PAGE>
Amendment ..................................... __
Termination; Purchase of Mortgage Loans ....... __
MATERIAL LEGAL ASPECTS OF THE
MORTGAGE LOANS ................................ __
General ....................................... __
Foreclosure ................................... __
Right of Redemption ........................... __
Anti-Deficiency Legislation and Other
Limitations on Lenders ..................... __
Consumer Protection Laws ...................... __
Enforceability of Due-on-Sale Clauses ......... __
Applicability of Usury Laws ................... __
Soldiers' and Sailors' Civil Relief Act ....... __
Late Charges, Default Interest and
Limitations on Prepayment .................. __
Environmental Considerations .................. __
Forfeiture in Drug and RICO Proceedings ....... __
LEGAL INVESTMENT MATTERS ......................... __
ERISA CONSIDERATIONS ............................. __
FEDERAL INCOME TAX CONSEQUENCES
General ....................................... __
REMIC Elections ............................... __
REMIC Certificates ............................ __
Tax Opinion ................................... __
Status of Certificates ........................ __
Income from Regular Certificates .............. __
Income from Residual Certificates ............. __
Sale or Exchange of Certificates .............. __
Taxation of Certain Foreign Investors ......... __
Transfers of Residual Certificates ............ __
Servicing Compensation and Other REMIC
Pool Expenses .............................. __
Reporting and Administrative Matters .......... __
Non-REMIC Certificates ........................ __
Trust Fund as Grantor Trust ................... __
Status of the Certificates .................... __
Possible Application of Stripped Bond Rules
Taxation of Certificates if Stripped Bond
Rules Do Not Apply ......................... __
Taxation of Certificates if Stripped Bond
Rules Apply ................................ __
Sales of Certificates ......................... __
Foreign Investors ............................. __
Reporting ..................................... __
Backup Withholding ............................ __
PLAN OF DISTRIBUTION ............................. __
USE OF PROCEEDS .................................. __
LEGAL MATTERS .................................... __
iv
<PAGE>
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the Prospectus Supplement to be prepared in connection with each Series of
Certificates. Unless otherwise specified, capitalized terms used and not
defined in this Summary of Prospectus have the meanings given to them in this
Prospectus and in the related Prospectus Supplement.
Title of Securities...... Mortgage Pass-Through Certificates, issuable in
series.
Seller; Servicer......... Chase Funding, Inc. or Chase Manhattan Acceptance
Corporation (either such entity, as specified in the
related Prospectus Supplement, the "Seller"). See
"Chase Funding, Inc." and "Chase Manhattan
Acceptance Corporation." Chase Manhattan Mortgage
Corporation ("Chase Manhattan Mortgage" or the
"Servicer"), or such other entity or entities
specified in the Prospectus Supplement will service,
and may act as master servicer with respect to, the
Mortgage Loans included in the Trust Fund.
Description of
Certificates............. Each Certificate will represent a beneficial
ownership interest in one of a number of trusts to
be created by the Seller from time to time pursuant
to a pooling and servicing agreement (each, an
"Agreement") among the Seller, the Servicer and the
commercial bank or trust company acting as trustee
specified in the Prospectus Supplement. The property
of each trust (a "Trust Fund") will consist of a
pool (a "Mortgage Pool") of residential one- to
four-family mortgage loans (the "Mortgage Loans")
and related property and interests (including, for
example, (i) amounts received as Monthly Payments or
principal prepayments which are on deposit in the
Collection Account from time to time, (ii) property
which secured a Mortgage Loan which has been
acquired by foreclosure or (iii) proceeds of the
liquidation of a Mortgaged Property) conveyed to
each Trust Fund by the Seller. As specified in the
related Prospectus Supplement, each Mortgage Pool
will consist entirely of fixed-rate or
adjustable-rate Mortgage Loans originated by the
Servicer, either directly or through correspondent
originators, or originated by other originators and,
in any such case, acquired by the Servicer or an
affiliate thereof. If specified in the related
Prospectus Supplement, a Trust Fund may also include
one or more of the following: reinvestment income,
reserve accounts, insurance policies, guarantees or
similar instruments or agreements intended to
decrease the likelihood that Certificateholders will
experience delays in distributions of scheduled
payments on, or losses in respect of, the assets in
such Trust Fund.
The Certificates of any series will be entitled to
payment only from the assets of the related Trust
Fund. The Certificates of any series may be issued
in a single class or in two or more classes, as
specified in the Prospectus Supplement. One or more
classes of Certificates of each series (i) may be
entitled to receive distributions allocable only to
principal, only to interest or to any combination
thereof; (ii) may be entitled to receive
distributions only of prepayments of principal
throughout the lives of the Certificates or during
specified periods; (iii) may be subordinated in the
right to receive
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<PAGE>
distributions of scheduled payments of principal,
prepayments of principal, interest or any
combination thereof to one or more other classes of
Certificates of such series throughout the lives of
the Certificates or during specified periods; (iv)
may be entitled to receive such distributions only
after the occurrence of events specified in the
Prospectus Supplement; (v) may be entitled to
receive distributions in accordance with a schedule
or formula or on the basis of collections from
designated portions of the assets in the Trust
Fund; (vi) as to Certificates entitled to
distributions allocable to interest, may be
entitled to receive interest at a fixed rate or a
rate that is subject to change from time to time;
and (vii) as to Certificates entitled to
distributions allocable to interest, may be
entitled to distributions allocable to interest
only after the occurrence of events specified in
the Prospectus Supplement and may accrue interest
until such events occur, in each case as specified
in the Prospectus Supplement. The timing and
amounts of such distributions may vary among
classes, over time, or otherwise as specified in
the related Prospectus Supplement.
The Certificates will be offered in
fully-registered form only in the denominations
specified in the Prospectus Supplement. The
Certificates will not be guaranteed or insured by
any governmental agency or instrumentality or any
other issuer and, except as described in the
Prospectus Supplement, the Mortgage Loans included
in the related Trust Fund will not be guaranteed or
insured by any governmental agency or
instrumentality or any other person.
Distributions on the
Certificates............ Distributions on the Certificates entitled thereto
will be made on the 25th day (or, if such day is not
a business day, the business day immediately
following such 25th day) of each month or such other
date specified in the Prospectus Supplement solely
out of the payments received in respect of the
assets of the related Trust Fund. The amount
allocable to payments of principal and interest on
any distribution date will be determined as
specified in the Prospectus Supplement. All
distributions will be made pro rata to
Certificateholders of the class entitled thereto or
by the other method specified in the Prospectus
Supplement. See "Description of the Certificates."
The aggregate original principal balance of the
Certificates will equal the aggregate distributions
allocable to principal that such Certificates will
be entitled to receive. If specified in the
Prospectus Supplement, the Certificates of a series
will have an aggregate original principal balance
equal to the aggregate unpaid principal balance of
the related Mortgage Loans as of the first day of
the month of creation of the Trust Fund and will
bear interest in the aggregate at a rate equal to
the interest rate borne by the underlying Mortgage
Loans, net of servicing fees payable to the
Servicer and any primary or sub-services of the
Mortgage Loans and any other amounts (including
fees payable to the Servicer as master Servicer, if
applicable) specified in the Prospectus Supplement
(as to each Mortgage Loan, the "Remittance Rate").
See "Description of the Certificates--Distributions
of Principal and Interest."
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<PAGE>
The rate at which interest will be passed through
to holders of Certificates entitled thereto may be
a fixed rate or a rate that is subject to change
from time to time, in each case as specified in the
Prospectus Supplement. Any such rate may be
calculated on a loan-by-loan, weighted average or
other basis, in each case as described in the
Prospectus Supplement. See "Description of the
Certificates--Distributions of Principal and
Interest."
The Mortgage Pools....... As specified in the Prospectus Supplement, each
Mortgage Pool will consist of Mortgage Loans which
were represented to the Seller as meeting certain
standards. Each Mortgage Pool will contain one or
more of the following types of Mortgage Loans:(1)
20- to 30-year ("30-year") fixed-rate, fully
amortizing Mortgage Loans providing for level
monthly payments of principal and interest; (2) 10-
to 15-year ("15-year") fixed-rate, fully amortizing
Mortgage Loans providing for level monthly payments
of principal and interest; (3) adjustable-rate
Mortgage Loans ("ARMs" or "ARM Loans"), which may
include loans providing for negative amortization;
(4) another type of Mortgage Loan, as described in
the applicable Prospectus Supplement. If specified
in the applicable Prospectus Supplement, a Mortgage
Pool may contain Mortgage Loans subject to buy-down
plans ("Buy-Down Mortgage Loans"). See "The Mortgage
Pools."
Primary Mortgage
Insurance................ To the extent specified in the applicable Prospectus
Supplement, each Mortgage Loan having a
Loan-to-Value Ratio above a specified level will be
covered by a Primary Mortgage Insurance Policy
insuring against default by the Borrower with
respect to all or a specified portion of the
principal amount thereof until the principal balance
of such Mortgage Loan is reduced below a specified
percentage of the lesser of the sales price or
appraised value of the Mortgaged Property. See "The
Mortgage Pools."
Purchase of
Mortgage Loans........... As described in the applicable Prospectus
Supplement, the Agreement for each series may
permit, but not require, the Seller, the Servicer or
another party to purchase from the Trust Fund for
such series all remaining Mortgage Loans and all
property acquired in respect of the Mortgage Loans,
at a price described in the Prospectus Supplement,
subject to the condition that the aggregate
outstanding principal balance of the Mortgage Loans
for such series at the time of purchase shall be
less than a percentage of the aggregate principal
balance at the Cut-Off Date specified in the
Prospectus Supplement. The exercise of such right
will result in the early retirement of the
Certificates of that series. See "The Pooling and
Servicing Agreement--Termination; Purchase of
Mortgage Loans."
Collection Account....... With respect to each Trust Fund, the Servicer will
be obligated to establish an account into which it
will deposit on the dates specified in the related
Prospectus Supplement payments received in respect
of the assets in such Trust Fund. See "The Pooling
and Servicing Agreement--Payments on Mortgage Loans;
Collection Account."
Advances................. If specified in the Prospectus Supplement, the
Servicer, as Servicer or master servicer of the
Mortgage Loans, will be obligated to advance, using
its own funds, delinquent installments of principal
and interest (the latter adjusted to the applicable
Remittance Rate)
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<PAGE>
on the Mortgage Loans in a Trust Fund. Any such
obligation to make advances may be limited to
amounts due holders of certain classes of
Certificates of the related series, to amounts
deemed to be recoverable from late payments or
liquidation proceeds, for specified periods or any
combination thereof, in each case as specified in
the related Prospectus Supplement. Any such advance
will be recoverable by the Servicer as specified in
the related Prospectus Supplement. See "Servicing
of the Mortgage Loans--Advances."
Credit Support........... If specified in the Prospectus Supplement, a
series of Certificates, or certain classes within
such series, may have the benefit of one or more of
the following types of credit support. The
protection against losses afforded by any such
credit support will be limited. See "Credit
Support."
A. Limited Guarantee..... If specified in the Prospectus Supplement, certain
obligations of the Servicer under the related
Agreement, including obligations of the Servicer to
cover certain deficiencies in principal or interest
payments on the Mortgage Loans resulting from the
bankruptcy of the related borrower, may be covered
by a financial guarantee policy, limited guarantee
or other similar instrument (the "Limited
Guarantee"), limited in scope and amount, issued by
an entity named in the Prospectus Supplement (the
"Guarantor"). If so specified, the Guarantor may be
obligated to take either or both of the following
actions in the event the Servicer fails to do so:
make deposits to the Collection Account (a "Deposit
Guarantee"); or make advances (an "Advance
Guarantee"). Any such Limited Guarantee will be
limited in amount and a portion of the coverage of
any such Limited Guarantee may be separately
allocated to certain events. The scope, amount and,
if applicable, the allocation of any Limited
Guarantee will be described in the related
Prospectus Supplement. See "Credit Support--Limited
Guarantee of the Guarantor."
B. Subordination......... A series of Certificates may include one or more
classes that are subordinate in the right to receive
distributions on such Certificates to one or more
senior classes of Certificates of the same series,
to the extent described in the related Prospectus
Supplement. If so specified in the related
Prospectus Supplement, subordination may apply only
in the event of certain types of losses not covered
by other forms of credit support, such as hazard
losses not covered by standard hazard insurance
policies or losses resulting from the bankruptcy of
the borrower.
If specified in the Prospectus Supplement, a
reserve fund may be established and maintained by
the deposit therein of distributions allocable to
the holders of subordinate Certificates until a
specified level is reached. The related Prospectus
Supplement will set forth information concerning
the amount of subordination of a class or classes
of subordinate Certificates in a series, the
circumstances in which such subordination will be
applicable, the manner, if any, in which the amount
of subordination will decrease over time, the
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manner of funding the related reserve fund, if any,
and the conditions under which amounts in any such
reserve fund will be used to make distributions to
holders of senior Certificates or released from the
related Trust Fund. See "Credit Support--
Subordination."
C. Certificate Guaranty
Insurance Policies..... If specified in the related Prospectus Supplement,
one or more certificate guaranty insurance policies
(each, a "Certificate Guaranty Insurance Policy")
will be obtained and maintained for one or more
Classes or Series of Certificates. The issuer of any
such Certificate Guaranty Insurance Policy (the
"Certificate Insurer") will be named int he related
Prospectus Supplement. In general, Certificate
Guaranty Insurance Policies unconditionally and
irrevocably guarantee that the full amount of the
distributions of principal and interest to which the
holders of the related Certificates are entitled
under the related Agreement, as well as any other
amounts specified in the related Prospectus
Supplement, will be received by an agent of the
Trustee for distribution by the Trustee to such
holders.
D. Overcollateralization.. If specified in the related Prospectus
Supplement, the aggregate principal balance of the
Mortgage Assets included in a Trust Fund may exceed
the original principal balance of the related
Certificates. In addition, if so specified in the
related Prospectus Supplement, certain Classes of
Certificates may be entitled to receive
distributions, creating a limited acceleration of
the payment of the principal of such Certificates
relative to the amortization of the related Mortgage
Loans by applying excess interest collected on the
Mortgage Loans to distributions of principal on such
Classes of Certificates. Such acceleration feature
may continue for the life of the applicable Classes
of Certificates or may be limited. In the case of
limited acceleration, once the required level of
overcollateralization is reached, and subject to
certain provisions specified in the related
Prospectus Supplement, the acceleration feature will
cease unless necessary to maintain the required
overcollateralization level.
E. Cross-Support......... If specified in the Prospectus Supplement, the
beneficial ownership of separate groups of assets
included in a Trust Fund may be evidenced by
separate classes of the related series of
Certificates. In such case, and if so specified,
credit support may be provided by a cross-support
feature which requires that distributions be made
with respect to Certificates evidencing beneficial
ownership of one or more asset groups prior to
distributions to subordinate Certificates evidencing
a beneficial ownership interest in other asset
groups within the same Trust Fund. If specified in
the Prospectus Supplement, the coverage provided by
one or more forms of credit support may apply
concurrently to two or more separate Trust Funds. If
applicable, the Prospectus Supplement will identify
the Trust Funds to which such credit support relates
and the manner of determining the amount of the
coverage provided thereby and of the application of
such coverage to the identified Trust Funds. See
"Credit Support--Cross Support."
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F. Pool and Special
Hazard Insurance ..... In order to decrease the likelihood that
Certificateholders will experience losses in
respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one
or more insurance policies to cover (i) losses by
reason of defaults by borrowers (a "Mortgage Pool
Insurance Policy") and (ii) losses by reason of
hazards not covered under the standard form of
hazard insurance (a "Special Hazard Insurance
Policy"), in each case up to the amounts, for the
periods and subject to the conditions specified in
the Prospectus Supplement. See "Credit Support--Pool
Insurance" and "--Special Hazard Insurance."
G. Reserve Accounts, Other
Insurance, Guarantees
and Similar Instruments
and Agreements......... In order to decrease the likelihood that
Certificateholders will experience delays in the
receipt of scheduled payments on, and losses in
respect of, the assets in a Trust Fund, if specified
in the related Prospectus Supplement, such Trust
Fund may also include reserve accounts, other
insurance, guarantees and similar instruments and
agreements entered into with the entities, in the
amounts, for the purposes and subject to the
conditions specified in the Prospectus Supplement.
See "Credit Support--Reserve Accounts" and "--Other
Insurance, Guarantees and Similar Instruments or
Agreements."
Pre-Funding Account...... A Trust Fund may enter into an agreement (each, a
"Pre-Funding Agreement") with the Depositor whereby
the Depositor will agree to transfer additional
Mortgage Assets to such Trust Fund following the
date on which such Trust Fund is established and the
related Securities are issued. Any Pre-Funding
Agreement will require that any Mortgage Loans so
transferred conform to the requirements specified in
such Pre-Funding Agreement. If a Pre-Funding
Agreement is to be utilized, the related Trustee
will be required to deposit in a segregated account
(each, a "Pre-Funding Account") all or a portion of
the proceeds received by the Trustee in connection
with the sale of one or more classes of Securities
of the related series; subsequently, the additional
Mortgage Assets will be transferred to the related
Trust Fund in exchange for money released to the
Depositor from the related Pre-Funding Account. Each
Pre-Funding Agreement will set a specified period
during which any such transfers must occur, which
period will not exceed 90 days from the date the
Trust Fund is established. If all moneys originally
deposited to such Pre-Funding Account are not used
by the end of such specified period, then any
remaining moneys will be applied as a mandatory
prepayment of a class or classes of Securities as
specified in the related Prospectus Supplement. The
specified period for the acquisition by a Trust Fund
of additional Mortgage Loans will generally not
exceed three months form the date such Trust Fund is
established.
Federal Income Tax
Consequences............ The federal income tax consequences to
Certificateholders will depend on, among other
factors, whether an election is made to treat
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the Trust Fund or specified portions thereof as a
"real estate mortgage investment conduit" ("REMIC")
under the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). See "Federal
Income Tax Consequences".
ERISA Considerations..... A fiduciary of any employee benefit plan subject
to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or a plan subject to
Section 4975 of the Code should carefully review
with its own legal advisors whether the purchase or
holding of Certificates could give rise to a
transaction prohibited or otherwise impermissible
under ERISA or the Code. See "ERISA Considerations".
Legal Investment
Matters.................. The Prospectus Supplement for each series of
Certificates will specify which, if any, of the
classes of Certificates offered thereby will
constitute "mortgage related securities" under the
Secondary Mortgage Market Enhancement Act of 1984,
as amended ("SMMEA"). Classes of Certificates that
qualify as "mortgage related securities" will be
legal investments for certain types of institutional
investors to the extent provided in SMMEA, subject,
in any case, to any other regulations which may
govern investments by such institutional investors.
Institutions whose investment authority is subject
to legal restrictions should consult with their own
legal advisors or the applicable authorities to
determine whether and to what extent an investment
in a particular class of Certificates (whether or
not such class constitutes a "mortgage related
security") constitutes a legal investment for them.
See "Legal Investment Matters".
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RISK FACTORS
Prospective Certificateholders should consider, among other things, the
following factors in connection with the purchase of the Certificates:
l. Losses on the Mortgage Pool. An investment in Certificates evidencing
interests in Mortgage Loans may be affected, among other things, by a decline
in real estate values or changes in mortgage market rates. If the residential
real estate market in the locale of properties securing the Mortgage Loans
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 in a particular Mortgage Pool, become equal to or greater
than the value of Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. To the extent that such losses are not covered
by any subordination feature, applicable insurance policies or other credit
enhancement, holders of the Certificates of a Series evidencing interests in
such Mortgage Pool 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 of the
defaulted Mortgage Loans. See "The Mortgage Pools."
2. Limited Obligations. The Certificates will not represent an interest in
or obligation of the Seller. The Certificates will not be insured or guaranteed
by any government agency or instrumentality, nor, unless expressly provided in
the related Prospectus Supplement, by The Chase Manhattan Bank, Chase Manhattan
Mortgage Corporation, Chase Funding, Inc., Chase Manhattan Acceptance
Corporation or any of their affiliates.
3. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates of any Series or, if it does develop, that it
will provide the holders of Certificates of such Series with liquidity of
investment or that it will remain for the term of such series of Certificates.
Although the Certificateholders of each series receive monthly statements
containing certain statistical information with respect to the related Mortgage
Pool, neither the Company nor the Servicer publishes any information relating
to the Certificates of any series or any Mortgage Pool. The limited
availability of any such published information may influence the liquidity of
the Certificates. The Certificates will not be listed on any securities
exchange.
4. Prepayment Considerations. The prepayment experience on the Mortgage
Loans will affect the average life of the Certificates or each class of
Certificates. Prepayments on the Mortgage Loans may be influenced by a variety
of economic, geographic, social and other factors, including the difference
between the interest rates on the Mortgage Loans and prevailing mortgage rates
(giving consideration to the cost of refinancing). In general, if mortgage
interest rates fall below the interest rates on the Mortgage Loans, the rate of
prepayment would be expected to increase, and the yields at which an investor
in the Certificates may be able to reinvest amounts received as payments on
such investor's Certificates may be lower than the yield on such Certificates.
Conversely, if mortgage interest rates rise above the interest rates on the
Mortgage Loans, the rate of prepayment would be expected to decrease, and the
amount of payments available to a Certificateholder for reinvestment may be
relatively low. Other factors affecting prepayment of mortgage loans include
changes in housing needs, job transfers, unemployment and servicing decisions.
See "Yield, Maturity and Weighted Average Life Considerations."
5. Yield, Maturity and Weighted Average Life Considerations. The yield of
the Certificates of each series will depend in part on the rate of principal
payment on the Mortgage Loans (including prepayments, liquidations due to
defaults and mortgage loan repurchases). Such yield may be adversely affected,
depending upon whether a particular Certificate is purchased at a premium or
discount price, by a higher or lower than anticipated rate of prepayments on
the related Mortgage Loans. In particular, the yield on Classes of Certificates
entitling the holders thereof primarily or exclusively to payments of interest
or primarily or exclusively to payments of principal will be extremely
sensitive to the rate of prepayments on the related Mortgage Loans. In
addition, the yield on certain Classes of Certificates may be relatively more
sensitive to the rate of prepayment of specified Mortgage Loans than other
Classes of Certificates. Furthermore, the yield to investors may be adversely
affected by interest shortfalls which may result from the timing of the receipt
of prepayments or liquidations to the extent that such interest shortfalls are
not covered by aggregate Servicing Fees or other mechanisms specified in the
applicable Prospectus Supplement. The yield to investors in Classes of
Certificates will be adversely affected to the extent that losses on the
Mortgage Loans in the related Trust Fund are allocated to such Classes
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and may be adversely affected to the extent of unadvanced delinquencies on the
Mortgage Loans in the related Trust Fund. Classes of Certificates identified in
the applicable Prospectus Supplement as subordinated Certificates are more
likely to be affected by delinquencies and losses than other Classes of
Certificates. See "Yield, Maturity and Weighted Average Life Considerations."
6. Subordination. With respect to Certificates of a series having one or
more classes of subordinated Certificates, while the subordination feature is
intended to enhance the likelihood of timely payment of principal and interest
to senior Certificateholders, such subordination will be limited as specified
in the Prospectus Supplement, any reserve fund could be depleted under certain
circumstances, and payments applied to the senior Certificates which are
otherwise due to the subordinated Certificates may be less than losses.
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DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to a separate pooling
and servicing agreement (each, an "Agreement") entered into among the Seller,
the Servicer and a commercial bank or trust company named in the Prospectus
Supplement, as trustee (the "Trustee") for the benefit of holders of
Certificates of that Series. The provisions of each Agreement will vary
depending upon the nature of the Certificates to be issued thereunder and the
nature of the related Trust Fund. The Agreement will be substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
is a part, or in such similar form as will reflect the terms of a series of
Certificates described in the Prospectus Supplement. The following summaries
describe the material provisions which may appear in each Agreement. The
Prospectus Supplement for a series of Certificates will describe any provision
of the Agreement relating to such series that materially differs from 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 series of
Certificates and the applicable Prospectus Supplement. The Seller will provide
any Certificateholder, without charge, on written request a copy of the
Agreement for any series. Requests should be addressed to the Seller c/o Chase
Manhattan Mortgage Corporation, 343 Thornall Street, Edison, New Jersey 08837,
Attention: Structured Finance. The Agreement relating to a series of
Certificates will be filed with the Securities and Exchange Commission in a
report on Form 8-K within 15 days after the date of issuance of such series of
Certificates (the "Delivery Date").
The Certificates of a series will be entitled to payment only from the
assets included in the Trust Fund related to such series and will not be
entitled to payments in respect of the assets included in any other trust fund
established by the Seller. The Certificates will not represent obligations of
the Seller, the Servicer or any of their affiliates and will not be insured or
guaranteed by any governmental agency or any other person. The Seller's only
obligations with respect to the Certificates will consist of its obligations
pursuant to certain representations and warranties made by it. The Servicer's
only obligations with respect to the Certificates will consist of its
contractual servicing and/or master servicing obligations, including any
obligation to make advances under certain limited circumstances specified
herein of delinquent installments of principal and interest (adjusted to the
applicable Remittance Rate), and its obligations pursuant to certain
representations and warranties made by it.
The Mortgage Loans will not be insured or guaranteed by any governmental
entity or, except as specified in the Prospectus Supplement, by any other
person. To the extent that delinquent payments on or losses in respect of
defaulted Mortgage Loans are not advanced by the Servicer or any other entity
or paid from any applicable credit support arrangement, such delinquencies may
result in delays in the distribution of payments to the holders of one or more
classes of Certificates, and such losses will be borne by the holders of one or
more classes of Certificates.
General
The Certificates of each series will be issued in fully-registered form
only. The minimum original Certificate Principal Balance or Notional Principal
Balance that may be represented by a Certificate (the "denomination") will be
specified in the Prospectus Supplement. The original Certificate Principal
Balance of each Certificate will equal the aggregate distributions allocable to
principal to which such Certificate is entitled. Distributions allocable to
interest on each Certificate that is not entitled to distributions allocable to
principal will be calculated based on the Notional Principal Balance of such
Certificate. The Notional Principal Balance of a Certificate will not evidence
an interest in or entitlement to distributions allocable to principal but will
be used solely for convenience in expressing the calculation of interest and
for certain other purposes.
The Certificates of a series will be transferable and exchangeable on a
Certificate Register to be maintained at the corporate trust office of the
Trustee for the related series or such other office or agency maintained for
such purposes by the Trustee in New York City (or at the office of the
certificate registrar specified in the related Prospectus Supplement). No
service charge will be made for any registration of transfer or exchange of
Certificates, but payment of a sum sufficient to cover any tax or other
governmental charge may be required.
Classes of Certificates
Each series of Certificates will be issued in a single class or in two or
more classes. The Certificates of each class will evidence the beneficial
ownership of (i) any distributions in respect of the assets of the Trust Fund
that
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are allocable to principal, in the aggregate amount of the original Certificate
Principal Balance, if any, of such class of Certificates as specified in the
Prospectus Supplement and (ii) any distributions in respect of the assets of
the Trust Fund that are allocable to interest on the Certificate Principal
Balance or Notional Principal Balance of such Certificates from time to time at
the Certificate Rate, if any, applicable to such class of Certificates as
specified in the Prospectus Supplement. If specified in the Prospectus
Supplement, one or more classes of a series of Certificates may evidence
beneficial ownership interests in separate groups of assets included in the
related Trust Fund.
If specified in the Prospectus Supplement, the Certificates will have an
aggregate original Certificate Principal Balance equal to the aggregate unpaid
principal balance of the Mortgage Loans as of the close of business on the
first day of the month of creation of the Trust Fund (the "Cut-Off Date") after
deducting payments of principal due on or before, and prepayments of principal
received on or before, the Cut-Off Date and in the aggregate will bear interest
equal to the weighted average of the Remittance Rates. The Remittance Rate will
equal the rate of interest payable on each Mortgage Loan minus the Servicer's
servicing fee as described herein, the servicing fee of any third party
servicer of the Mortgage Loans and such other amounts (including fees payable
to the Servicer as master servicer, if applicable) as are specified in the
Prospectus Supplement. The Certificates may have an original Certificate
Principal Balance as determined in the manner specified in the Prospectus
Supplement.
Each class of Certificates that is entitled to distributions allocable to
interest will bear interest at a fixed rate or a rate that is subject to change
from time to time (a) in accordance with a schedule, (b) in reference to an
index, or (c) otherwise (each, a "Certificate Rate"), in each case as specified
in the Prospectus Supplement. One or more classes of Certificates may provide
for interest that accrues, but is not currently payable ("Accrual
Certificates"). With respect to any class of Accrual Certificates, if specified
in the Prospectus Supplement, any interest that has accrued but is not paid on
a given Distribution Date (as defined below under "Distributions of Principal
and Interest") will be added to the aggregate Certificate Principal Balance of
such class of Certificates on that Distribution Date.
A series of Certificates may include one or more classes entitled only to
distributions (i) allocable to interest, (ii) allocable to principal (and
allocable as between scheduled payments of principal and Principal Prepayments,
as defined below) or (iii) allocable to both principal (and allocable as
between scheduled payments of principal and Principal Prepayments) and
interest. A series of Certificates may consist of one or more classes as to
which distributions will be allocated (i) on the basis of collections from
designated portions of the assets of the Trust Fund, (ii) in accordance with a
schedule or formula, (iii) in relation to the occurrence of events, or (iv)
otherwise, in each case as specified in the Prospectus Supplement. The timing
and amounts of such distributions may vary among classes, over time or
otherwise, in each case as specified in the Prospectus Supplement.
The taking of action with respect to certain matters under the Agreement,
including certain amendments thereto, will require the consent of the holders
of the Certificates. The voting rights allocated to each class of Certificates
will be specified in the Prospectus Supplement. Votes may be allocated in
different proportions among classes of Certificates depending on whether the
Certificates of a class have a Notional Principal Balance or a Certificate
Principal Balance.
Distributions of Principal and Interest
Distributions of principal and interest at the applicable Certificate Rate
(if any) on the Certificates will be made to the extent of funds available from
the related Trust Fund on the 25th day (or if such 25th day is not a business
day, on the business day next following such 25th day) of each calendar month
(each, a "Distribution Date"), commencing in the month following the issuance
of the related series, or on such other date as is specified in the Prospectus
Supplement. Distributions will be made to the persons in whose names the
Certificates are registered at the close of business on the dates specified in
the Prospectus Supplement (each, a "Record Date"). Distributions will be made
by check or money order mailed to the person entitled thereto at the address
appearing in the Certificate Register or, if specified in the Prospectus
Supplement, in the case of Certificates that are of a certain minimum
denomination as specified in the Prospectus Supplement, upon written request by
the Cer-tificateholder, by wire transfer or by such other means as are agreed
upon with the person entitled thereto; pro-
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vided, however, that the final distribution in retirement of the Certificates
will be made only upon presentation and surrender of the Certificates at the
office or agency of the Trustee specified in the notice to Certificateholders
of such final distribution.
Distributions allocable to principal and interest on the Certificates will
be made by the entity specified in the Prospectus Supplement as the paying
agent (the "Paying Agent") out of, and only to the extent of, funds in a
separate account established and maintained under the Agreement for the benefit
of holders of the Certificates of the related series (the "Collection
Account"), including any funds transferred from any Reserve Account. As between
Certificates of different classes and as between distributions of principal
(and, if applicable, between distributions of Principal Prepayments and
scheduled payments of principal) and interest, distributions made on any
Distribution Date will be applied as specified in the Prospectus Supplement.
Distributions to any class of Certificates will be made pro rata to all
Certificateholders of that class or by the other method described in the
Prospectus Supplement. If so specified in the Prospectus Supplement, the
amounts deposited into the Collection Account as described below under "The
Pooling and Servicing Agreement--Payments on Mortgage Loans; Collection
Account" will be invested in the eligible investments specified in the
Agreement and all income or other gain from such investments will be deposited
in the Collection Account and will be for the benefit of the Servicer or other
entity specified in the Prospectus Supplement and subject to withdrawal from
time to time.
Distributions of Interest. Interest will accrue on the aggregate
Certificate Principal Balance (or, in the case of Certificates entitled only to
distributions allocable to interest, the aggregate Notional Principal Balance)
of each class of Certificates entitled to interest from the date, at the
Certificate Rate and for the periods (each, an "Interest Accrual Period")
specified in the Prospectus Supplement. To the extent funds are available
therefor, interest accrued during each Interest Accrual Period on each class of
Certificates entitled to interest (other than a class of Accrual Certificates)
will be distributable on the Distribution Dates specified in the Prospectus
Supplement until the aggregate Certificate Principal Balance of the
Certificates of such class has been distributed in full or, in the case of
Certificates entitled only to distributions allocable to interest, until the
aggregate Notional Principal Balance of such Certificates is reduced to zero or
for the period of time designated in the Prospectus Supplement. Distributions
of interest on each class of Accrual Certificates will commence only after the
occurrence of the events specified in the Prospectus Supplement. Prior to such
time, the beneficial ownership interest of such class of Accrual Certificates
in the Trust Fund, as reflected in the aggregate Certificate Principal Balance
of such class of Accrual Certificates, will increase on each Distribution Date
by the amount of interest that accrued on such class of Accrual Certificates
during the preceding Interest Accrual Period but that was not required to be
distributed to such class on such Distribution Date. Any such class of Accrual
Certificates will thereafter accrue interest on its outstanding Certificate
Principal Balance as so adjusted.
Distributions of Principal. The aggregate Certificate Principal Balance of
any class of Certificates entitled to distributions of principal generally will
be the aggregate original Certificate Principal Balance of such class of
Certificates specified in the Prospectus Supplement, reduced by all
distributions reported to the holders of such Certificates as allocable to
principal, and, in the case of Accrual Certificates, as specified in the
Prospectus Supplement, increased on each Distribution Date by all interest
accrued but not then distributable on such Accrual Certificates. The Prospectus
Supplement will specify the method by which the amount of principal to be
distributed on the Certificates on each Distribution Date will be calculated
and the manner in which such amount will be allocated among the classes of
Certificates entitled to distributions of principal.
If so specified in the Prospectus Supplement, one or more classes of
senior Certificates will be entitled to receive all or a disproportionate
percentage of the payments or other recoveries of principal on a Mortgage Loan
which are received in advance of their scheduled due dates and not accompanied
by amounts of interest representing scheduled interest due after the month of
such payments ("Principal Prepayments") in the percentages and under the
circumstances or for the periods specified in the Prospectus Supplement. Any
such allocation of Principal Prepayments to such class or classes of
Certificateholders will have the effect of accelerating the amortization of
such Certificates while increasing the interests evidenced by the remaining
Certificates in the Trust Fund.
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THE MORTGAGE POOLS
Each mortgage pool (a "Mortgage Pool") will consist of one- to four-family
residential mortgage loans evidenced by promissory notes (each, a "Note")
secured by first mortgages or first deeds of trust or other similar security
instrument (each, a "Mortgage") creating a first lien on properties (the
"Mortgaged Properties"). When each series of Certificates is issued, the Seller
will cause the Mortgage Loans comprising each Mortgage Pool to be assigned to
the Trustee for the benefit of the holders of the Certificates of that series,
and will receive the Certificates in exchange therefor. Certain Certificates
evidencing interests in a Trust Fund may not form part of the offering made
pursuant to this Prospectus and the related Prospectus Supplement.
The Mortgaged Properties in each Mortgage Pool may consist of single-unit
dwellings, two-, three- and four-unit detached, townhouse or rowhouse
dwellings, condominium and planned-unit development ("PUD") units and such
other types of homes or units as are described in the applicable Prospectus
Supplement, and may include vacation and second homes and investment properties
(i.e. one-to-four family properties owned for investment and rented to generate
income). The applicable Prospectus Supplement will contain information
concerning the originators of the Mortgage Loans and the underwriting standards
employed by such originators.
All Mortgage Loans will (i) be secured by Mortgaged Properties located in
one of the states of the United States or the District of Columbia, and (ii) be
of one or more of the following types of Mortgage Loans:
(1) Fully-amortizing Mortgage Loans, each with a 20-to 30-year ("30-Year")
term at origination, interest (the "Mortgage Rate") at a fixed rate and level
monthly payments over the term of the Mortgage Loan.
(2) Fully-amortizing Mortgage Loans, each with a 10-to 15-year ("15-Year")
term at origination, a fixed Mortgage Rate and level monthly payments over the
term of the Mortgage Loan.
(3) Mortgage Loans, each with an adjustable Mortgage Rate.
Mortgage Loans with certain Loan-to-Value Ratios and/or certain principal
balances may be covered wholly or partially by primary mortgage guaranty
insurance policies (each, a "Primary Mortgage Insurance Policy"). The
existence, extent and duration of any such coverage will be described in the
applicable Prospectus Supplement. The "Loan-to-Value Ratio" is the ratio,
expressed as a percentage, of the principal amount of the Mortgage Loan to the
lesser of (i) the sales price for such property at the time the Mortgage Loan
is closed and (ii) the appraised value at origination or, in the case of
refinancings, the value set forth in the appraisal, if any, obtained by the
loan originator in connection with such refinancing. Each Mortgage Loan will
also be covered by a Standard Hazard Insurance Policy, as described under
"Servicing of the Mortgage Loans--Hazard Insurance" below.
In addition, other credit enhancements acceptable to the rating agency (or
agencies) rating the Certificates may be provided for coverage of certain risks
of default or losses. See "Credit Support" herein.
If specified in the applicable Prospectus Supplement, a Mortgage Pool may
contain Mortgage Loans subject to buy-down plans ("Buy-Down Mortgage Loans")
pursuant to which the monthly payments made by the Borrower will be less than
the scheduled monthly payments on the Buy-Down Mortgage Loan, the resulting
difference to be drawn from an amount contributed by the seller of the
Mortgaged Property or another source at the time of origination of the Buy-Down
Mortgage Loan and placed in a trust or custodial account (the "Buy-Down Fund")
(such amount hereinafter referred to as the "Buy-Down Reserve"). The applicable
Prospectus Supplement or Current Report (as defined below) will contain
information, with respect to any Buy-Down Mortgage Loans, concerning
limitations on the interest rate payable by the Borrower initially, on annual
increases in the interest rate, on the length of the buy-down period, and on
the Buy-Down Fund. The repayment of a temporary Buy-Down Mortgage Loan is
dependent on the ability of the Borrower to make larger monthly payments after
the Buy-Down Reserves have been depleted and, for certain Buy-Down Mortgage
Loans, while such funds are being depleted. The inability of the Borrower to
make larger monthly payments may lead to a default on the Buy-Down Mortgage
Loan or, if the Borrower is able to obtain refinancing on favorable terms, a
prepayment of such loan. See "Yield, Maturity and Weighted Average Life
Considerations."
The Prospectus Supplement for a series of Certificates may specify that
the related Mortgage Pool contains Mortgage Loans that have been used for
refinancing for the purpose of removing equity from the related Mortgaged
Properties ("Cash-Out Refinance Loans").
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The Prospectus Supplement for each series of Certificates will specify the
approximate aggregate principal balance of the Mortgage Loans (within the
percentage or dollar range specified therein). The Prospectus Supplement for
each series of Certificates will contain information regarding the Mortgage
Loans which are expected to be included in the related Mortgage Pool, including
among other things, information, as of the applicable Cut-Off Date and to the
extent then specifically known to the Seller, as to (i) the aggregate principal
balance of the Mortgage Loans, (ii) the aggregate principal balance or
percentage by aggregate principal balance of Mortgage Loans secured by each
type of property, (iii) the original terms to maturity of the Mortgage Loans,
(iv) the smallest and largest in principal balance at origination of the
Mortgage Loans, (v) the earliest origination date and latest maturity date of
the Mortgage Loans, (vi) the aggregate principal balance or percentage by
aggregate principal balance of Mortgage Loans having Loan-to-Value Ratios at
origination exceeding 80%, (vii) the Mortgage Rate or range of Mortgage Rates
borne by the Mortgage Loans and (viii) the average outstanding principal
balance of the Mortgage Loans. If specific information with respect to the
Mortgage Loans is not known at the time the related series of Certificates is
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 on Form 8-K to be filed with the Securities and Exchange
Commission within fifteen days after the initial issuance of such Certificates
(the "Current Report"). A copy of the Agreement with respect to a series of
Certificates will be attached to the related Current Report and will be
available for inspection at the corporate trust office of the Trustee specified
in the related Prospectus Supplement.
The Seller's assignment of the Mortgage Loans to the Trustee will be
without recourse. The Seller or another party identified in the applicable
Prospectus Supplement will make certain representations concerning the Mortgage
Loans, including that no Mortgage Loan in a Mortgage Pool evidenced by
Certificates will be more than one month delinquent as of the date of the
initial issuance of the Certificates. For a description of other
representations that will be made by the party specified in the applicable
Prospectus Supplement concerning the Mortgage Loans, see "The Pooling and
Servicing Agreement--Assignment of Mortgage Loans; Warranties." The Seller's
obligations with respect to the Mortgage Loans will be limited to any
representations and warranties made by it in, as well as its contractual
obligations under, the Agreement for each series of Certificates. These
obligations consist primarily of the obligation under certain circumstances to
repurchase or replace Mortgage Loans as to which there has been a material
breach of the Seller's representations and warranties which materially and
adversely affects the interests of the Certificateholders in a Mortgage Loan or
to cure such breach, and of the obligation, under certain circumstances, to
ensure the timely payment of premiums on certain insurance policies and bonds.
See "The Pooling and Servicing Agreement--Assignment of Mortgage Loans;
Warranties."
In addition, to the extent specified in the applicable Prospectus
Supplement, in the event of delinquencies in payments of principal and interest
on the Mortgage Loans in any Mortgage Pool, the Servicer (or, if so indicated
in the applicable Prospectus Supplement, another entity) will advance cash in
amounts described herein under "The Pooling and Servicing Agreement-Advances"
and "--Payments on Mortgage Loans; Collection Account." The Servicer is not
required to make any advance which it determines in its good faith judgment not
to be ultimately recoverable under any applicable policy of insurance
("Insurance Proceeds") or out of the proceeds of liquidation of a Mortgage Loan
("Liquidation Proceeds"). Each month, the Trustee (or such other paying agent
as may be specified in the applicable Prospectus Supplement) will be obligated
to remit to Certificateholders of each series all amounts relating to the
Mortgage Loans due to the Certificateholders to the extent such amounts have
been collected or advanced by the Servicer or such other entity and remitted to
the Trustee pursuant to the terms of the Agreement for such series. See
"Description of the Certificates--Distributions of Principal and Interest."
There can be no assurance that real estate values will remain at present
levels in the areas in which the Mortgaged Properties will be located. 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, in a particular Mortgage Pool
become equal to or greater than the value of the properties subject to the
Mortgage Loans included in such Mortgage Pool, the actual rates of
delinquencies, foreclosures and losses could be significantly higher than those
now generally experienced in the mortgage lending industry. To the extent that
such delinquencies, foreclosures and losses are not covered by applicable
credit enhancements described in the Prospectus Supplement, the losses
resulting therefrom will be borne by holders of the Certificates of the series
evidencing interests in such Mortgage Pool. With respect to any series as to
which
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subordinated Certificates shall have been issued, such losses will first be
borne by the holders of subordinated Certificates as a result and to the extent
of the subordination in right of payment of the subordinated Certificates to
the senior Certificates and as a result of first allocating such losses to
reduce the Certificate Principal Balance of such subordinated Certificates.
Because the principal amounts of Mortgage Loans decline monthly as
principal payments, including prepayments, are received, the fractional
undivided interest in principal evidenced by each Certificate in a series
multiplied by the aggregate principal balance of the Mortgage Loans in the
related Mortgage Pool will decline correspondingly. The principal balance
represented by a Certificate, therefore, ordinarily will decline over time.
CREDIT SUPPORT
General
Credit support may be provided with respect to one or more classes of a
series of Certificates or with respect to the assets in the related Trust Fund.
Credit support may be in the form of a limited financial guarantee policy,
limited guarantee or other similar instrument (a "Limited Guarantee") issued by
an entity named in the Prospectus Supplement (the "Guarantor"), the
subordination of one or more classes of the Certificates of such series, the
establishment of one or more reserve accounts, the use of a pool insurance
policy, bankruptcy bond, special hazard insurance policy, repurchase bond,
guaranteed investment contract or another method of credit support described in
the related Prospectus Supplement, or any combination of the foregoing. Any
credit support will not provide protection against all risks of loss and will
not guarantee repayment of the entire principal balance of the Certificates and
interest thereon. If losses occur which exceed the amount covered by credit
support or which are not covered by the credit support, Certificateholders will
bear their allocable share of the resulting deficiencies.
Limited Guarantee of the Guarantor
If specified in the Prospectus Supplement, certain obligations of the
Servicer under the related Agreement may be covered by a Limited Guarantee,
limited in scope and amount, issued by the Guarantor. If so specified, the
Guarantor may be obligated to take either or both of the following actions in
the event the Servicer fails to do so: make deposits to the Collection Account
(a "Deposit Guarantee"); or make advances (an "Advance Guarantee"). Any such
Limited Guarantee will be limited in amount and a portion of the coverage of
any such Limited Guarantee may be separately allocated to certain events. The
scope, amount and, if applicable, the allocation of any Limited Guarantee will
be described in the related Prospectus Supplement.
Subordination
If so specified in the Prospectus Supplement, distributions in respect of
scheduled principal, Principal Prepayments, interest or any combination thereof
that otherwise would have been payable to one or more classes of Certificates
of a series (the "subordinated Certificates") will instead be payable to
holders of one or more other classes of such series (the "senior Certificates")
under the circumstances and to the extent specified in the Prospectus
Supplement. If specified in the Prospectus Supplement, delays in receipt of
scheduled payments on the Mortgage Loans and losses on defaulted Mortgage Loans
will be borne first by the various classes of subordinated Certificates and
thereafter by the various classes of senior Certificates, in each case under
the circumstances and subject to the limitations specified in the Prospectus
Supplement. The aggregate distributions in respect of delinquent payments on
the Mortgage Loans over the lives of the Certificates or at any time, the
aggregate losses in respect of defaulted Mortgage Loans which must be borne by
the subordinated Certificates by virtue of subordination and the amount of the
distributions otherwise distributable to the subordinated Certificateholders
that will be distributable to senior Certificateholders on any Distribution
Date may be limited as specified in the Prospectus Supplement. If aggregate
distributions in respect of delinquent payments on the Mortgage Loans or
aggregate losses in respect of such Mortgage Loans were to exceed the total
amounts payable and available for distribution to holders of subordinated
Certificates or, if applicable, were to exceed the specified maximum amount,
holders of senior Certificates could experience losses on the Certificates.
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In addition to or in lieu of the foregoing, if so specified in the
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of subordinated Certificates on any Distribution Date may instead be
deposited into one or more reserve accounts (a "Reserve Account") established
by the Trustee. If so specified in the Prospectus Supplement, such deposits may
be made on each Distribution Date, on each Distribution Date for specified
periods or until the balance in the Reserve Account has reached a specified
amount and, following payments from the Reserve Account to holders of senior
Certificates or otherwise, thereafter to the extent necessary to restore the
balance in the Reserve Account to required levels, in each case as specified in
the Prospectus Supplement. If so specified in the Prospectus Supplement,
amounts on deposit in the Reserve Account may be released to the Servicer or
the holders of any class of Certificates at the times and under the
circumstances specified in the Prospectus Supplement.
If specified in the Prospectus Supplement, one or more classes of
Certificates may bear the risk of certain losses on defaulted Mortgage Loans
not covered by other forms of credit support prior to other classes of
Certificates. Such subordination might be effected by reducing the Certificate
Principal Balance of the subordinated Certificates on account of such losses,
thereby decreasing the proportionate share of distributions allocable to such
Certificates, or by another means specified in the Prospectus Supplement.
If specified in the Prospectus Supplement, various classes of senior
Certificates and subordinated Certificates may themselves be subordinate in
their right to receive certain distributions to other classes of senior and
subordinated Certificates, respectively, through a cross-support mechanism or
otherwise.
As between classes of senior Certificates and as between classes of
subordinated Certificates, distributions may be allocated among such classes
(i) in the order of their scheduled final distribution dates, (ii) in
accordance with a schedule or formula, (iii) in relation to the occurrence of
events, or (iv) otherwise, in each case as specified in the Prospectus
Supplement. As between classes of subordinated Certificates, payments to
holders of senior Certificates on account of delinquencies or losses and
payments to any Reserve Account will be allocated as specified in the
Prospectus Supplement.
Certificate Guaranty Insurance Policies
If specified in the related Prospectus Supplement, one or more certificate
guaranty insurance policies (each, a "Certificate Guaranty Insurance Policy")
will be obtained and maintained for one or more Classes or Series of
Certificates. The issuer of any such Certificate Guaranty Insurance Policy (the
"Certificate Insurer") will be named in the related Prospectus Supplement. In
general, Certificate Guaranty Insurance Policies unconditionally and
irrevocably guarantee that the full amount of the distributions of principal
and interest to which the holders of the related Certificates are entitled
under the related Agreement, as well as any other amounts specified in the
related Prospectus Supplement, will be received by an agent of the Trustee for
distribution by the Trustee to such holders.
The specific terms of any Certificate Guaranty Insurance Policy will be
set forth in the related Prospectus Supplement. Certificate Guaranty Insurance
Policies may have limitations including, but not limited to, limitations on the
obligation of the Certificate Insurer to guarantee any Servicer's obligation to
repurchase or substitute for any specified date. The Certificate Insurer may be
subrogated to the rights of the holders of the related Certificates to receive
distributions to which they are entitled, as well as certain other amounts
specified in the related Prospectus Supplement, to the extent of any payments
made by such Certificate Insurer under the related Certificate Guaranty
Insurance Policy.
Overcollateralization
If specified in the related Prospectus Supplement, the aggregate principal
balance of the Mortgage Assets included in a Trust Fund may exceed the original
principal balance of the related Certificates. In addition, if so specified in
the related Prospectus Supplement, certain Classes of Certificates may be
entitled to receive distributions, creating a limited acceleration of the
payment of the principal of such Certificates relative to the amortization of
the related Mortgage Loans by applying excess interest collected on the
Mortgage Loans to distributions of principal on such Classes of Certificates.
Such acceleration feature may continue for the life of the
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applicable Classes of Certificates or may be limited. In the case of limited
acceleration, once the required level of overcollateralization is reached, and
subject to certain provisions specified in the related Prospectus Supplement,
the acceleration feature will cease unless necessary to maintain the required
overcollateralization level.
Cross-Support
If specified in the Prospectus Supplement, the beneficial ownership of
separate groups of assets included in a Trust Fund may be evidenced by separate
classes of the related series of Certificates. In such case, credit support may
be provided by a cross-support feature which may require that distributions be
made with respect to Certificates evidencing beneficial ownership of one or
more asset groups prior to distributions to subordinated Certificates
evidencing a beneficial ownership interest in other asset groups within the
same Trust Fund. The Prospectus Supplement for a series which includes a
cross-support feature will describe the manner and conditions for applying such
cross-support feature.
If specified in the Prospectus Supplement, the coverage provided by one or
more forms of credit support may apply concurrently to two or more separate
Trust Funds. If applicable, the Prospectus Supplement will identify the Trust
Funds to which such credit support relates and the manner of determining the
amount of the coverage provided thereby and of the application of such coverage
to the identified Trust Funds.
Pool Insurance
In order to decrease the likelihood that Certificateholders will
experience losses in respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one or more pool insurance
policies. Any such policies may be in lieu of or in addition to any obligations
of the Seller or the Servicer in respect of the Mortgage Loans. Such pool
insurance policy will, subject to the limitations described below and in the
Prospectus Supplement, cover loss by reason of default in payments on the
Mortgage Loans up to the amounts specified in the Prospectus Supplement or the
Detailed Description and for the periods specified in the Prospectus
Supplement. The Servicer will agree to use its best reasonable efforts to
maintain in effect any such pool insurance policy and to present claims
thereunder to the pool insurer on behalf of itself, the Trustee and the
Certificateholders. The pool insurance policy, however, is not a blanket policy
against loss, since claims thereunder may only be made respecting particular
defaulted Mortgage Loans and only upon satisfaction of certain conditions
precedent described below. The pool insurance policy, if any, will not cover
losses due to a failure to pay or denial of a claim under a primary mortgage
insurance policy, irrespective of the reason therefor. The related Prospectus
Supplement will describe any provisions of a pool insurance policy that are
materially different from those described below.
Any pool insurance policy may provide that no claims may be validly
presented thereunder unless (i) any required primary mortgage insurance policy
is in effect for the defaulted Mortgage Loan and a claim thereunder has been
submitted and settled; (ii) hazard insurance on the related Mortgaged Property
has been kept in force and real estate taxes and other protection and
preservation expenses have been paid; (iii) if there has been physical loss or
damage to the Mortgaged Property, it has been restored to its condition
(reasonable wear and tear excepted) at the Cut-Off Date; (iv) the insured has
acquired good and merchantable title to the Mortgaged Property free and clear
of liens, except certain permitted encumbrances; and (v) the Servicer has
advanced foreclosure costs. Upon satisfaction of these conditions, the pool
insurer will have the option either (a) to purchase the Mortgaged Property at a
price equal to the Principal Balance thereof plus accrued and unpaid interest
at the Mortgage Rate to the date of purchase and certain expenses incurred by
the Servicer on behalf of the Trustee and the Certificateholders, or (b) to pay
the amount by which the sum of the Principal Balance of the defaulted Mortgage
Loan plus accrued and unpaid interest at the Mortgage Rate to the date of
payment of the claim and the aforementioned expenses exceeds the proceeds
received from an approved sale of the Mortgaged Property, in either case net of
certain amounts paid or assumed to have been paid under any related primary
mortgage insurance policy. If any property securing a defaulted Mortgage Loan
is damaged and proceeds, if any, from the related hazard insurance policy or
any applicable special hazard insurance policy are insufficient to restore the
damaged property to a condition sufficient to permit recovery under the pool
insurance policy, the Servicer will not be 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 Mortgage
Loan after reimbursement of the Servicer for its expenses, and (ii) that such
expenses will be recoverable by it through proceeds of the sale of the property
or proceeds of the pool insurance policy or any primary mortgage insurance
policy.
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In general, no pool insurance policy will insure (and many primary
mortgage insurance policies may not insure) against loss sustained by reason of
a default arising from, among other things, (i) fraud or negligence in the
origination or servicing of a Mortgage Loan, including misrepresentation by the
Mortgagor or persons involved in the origination thereof, or (ii) failure to
construct a Mortgaged Property in accordance with plans and specifications. If
so specified in the related Prospectus Supplement, a failure of coverage
attributable to one of the foregoing events might result in a breach of a
representation of the Seller (or another party) and in such event might give
rise to an obligation on the part of the Seller (or such other party) to
purchase or replace the defaulted Mortgage Loan if the breach materially and
adversely affects the interests of Certificateholders and cannot be cured.
As specified in the Prospectus Supplement, the original amount of coverage
under any pool insurance policy will be reduced over the life of the related
series of Certificates by the aggregate dollar amount of claims paid less the
aggregate of the net amounts realized by the pool insurer upon disposition of
all foreclosed properties. The amount of claims paid will include certain
expenses incurred by the Servicer as well as accrued interest on delinquent
Mortgage Loans to the date of payment of the claim. See "Material Legal Aspects
of the Mortgage Loans --Foreclosure". Accordingly, if aggregate net claims paid
under any pool insurance policy reach the original policy limit, coverage under
that pool insurance policy will be exhausted and any further losses will be
borne by one or more classes of Certificateholders unless assumed by some other
entity, if and to the extent specified in the Prospectus Supplement.
Since any mortgage pool insurance policy may require that the property
subject to a defaulted Mortgage Loan be restored to its original condition
prior to claiming against the pool insurer, such policy may not provide
coverage against hazard losses. The hazard policies concerning the Mortgage
Loans typically exclude from coverage physical damage resulting from a number
of causes and, even when the damage is covered, may afford recoveries which are
significantly less than the full replacement cost of such losses. Even if
special hazard insurance is applicable as specified in the Prospectus
Supplement, no coverage in respect of special hazard losses will cover all
risks, and the amount of any such coverage will be limited. See "Special Hazard
Insurance" below. As a result, certain hazard risks will not be insured against
and will therefore be borne by Certificateholders, unless otherwise assumed by
some other entity, as specified in the Prospectus Supplement.
Special Hazard Insurance
In order to decrease the likelihood that Certificateholders will
experience losses in respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one or more special hazard
insurance policies with respect to the Mortgage Loans. Such a special hazard
insurance policy will, subject to limitations described below and in the
Prospectus Supplement, protect holders of Certificates from (i) loss by reason
of damage to Mortgaged Properties caused by certain hazards (including
earthquakes and, to a limited extent, tidal waves and related water damage) not
covered by the standard form of hazard insurance policy for the respective
states in which the Mortgaged Properties are located or under flood insurance
policies, if any, covering the Mortgaged Properties, and (ii) loss from partial
damage caused by reason of the application of the co-insurance clause contained
in hazard insurance policies. See "Servicing of the Mortgage Loans--Hazard
Insurance" below. Any special hazard insurance policy may not cover losses
occasioned by war, civil insurrection, certain governmental actions, errors in
design, faulty workmanship or materials (except under certain circumstances),
nuclear reaction, flood (if the Mortgaged Property is located in a federally
designated flood area), chemical contamination and certain other risks.
Aggregate claims under each special hazard insurance policy may be limited to a
specified percentage of the aggregate principal balance as of the Cut-Off Date
of the Mortgage Loans. Any special hazard insurance policy may also provide
that no claim may be paid unless hazard and, if applicable, flood insurance on
the Mortgaged Property has been kept in force and other protection and
preservation expenses have been paid by the Servicer.
Subject to the foregoing limitations, any special hazard insurance policy
may provide that, where there has been damage to property securing a foreclosed
Mortgage Loan (title to which has been acquired by the insured) and to the
extent such damage is not covered by the hazard insurance policy or flood
insurance policy, if any, maintained by the mortgagor or the Servicer, the
special hazard insurer will pay the lesser of (i) the cost of repair or
replacement of such property or (ii) upon transfer of the property to the
special hazard insurer, the unpaid
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principal balance of such Mortgage Loan at the time of acquisition of such
property by foreclosure or deed in lieu of foreclosure, plus accrued interest
to the date of claim settlement and certain expenses incurred by the Servicer
with respect to such property. If the unpaid principal balance plus accrued
interest and certain expenses is paid by the insurer, the amount of further
coverage under the related special hazard insurance policy will be reduced by
such amount less any net proceeds from the sale of the property. Any amount
paid as the cost of repair or replacement of the property will also reduce
coverage by such amount. Restoration of the property with the proceeds
described under clause (i) above will satisfy the condition under any pool
insurance policy that the property be restored before a claim under such pool
insurance policy may be validly presented with respect to the defaulted
Mortgage Loan secured by such property. The payment described under clause (ii)
above will render unnecessary presentation of a claim in respect of such
Mortgage Loan under the related pool insurance policy. Therefore, so long as a
pool insurance policy remains in effect, the payment by the insurer under a
special hazard insurance policy of the cost of repair or replacement or the
unpaid principal balance of the Mortgage Loan plus accrued interest and certain
expenses will not affect the total insurance proceeds paid to
Certificateholders, but will affect the relative amounts of coverage remaining
under the related special hazard insurance policy and pool insurance policy.
Bankruptcy Bond
In the event of a bankruptcy of a borrower, the bankruptcy court may
establish the value of the Mortgaged Property securing the related Mortgage
Loan at an amount less than the then outstanding principal balance of such
Mortgage Loan secured by such Mortgaged Property and could reduce the secured
debt to such value. In such case, the holder of such Mortgage Loan would become
an unsecured creditor to the extent of the difference between the outstanding
principal balance of such Mortgage Loan and such reduced secured debt. In
addition, certain other modifications of the terms of a Mortgage Loan can
result from a bankruptcy proceeding, including the reduction in monthly
payments required to be made by the borrower. See "Material Legal Aspects of
the Mortgage Loans -- Enforceability of Certain Provisions". If so provided in
the related Prospectus Supplement, the Servicer will obtain a bankruptcy bond
or similar insurance contract (the "bankruptcy bond") for proceedings with
respect to borrowers under the Bankruptcy Code. Any such bankruptcy bond will
cover certain losses resulting from a reduction by a bankruptcy court of
scheduled payments of principal of and interest on a Mortgage Loan or a
reduction by such court of the secured principal amount of a Mortgage Loan and
will cover certain unpaid interest on the amount of such a principal reduction
from the date of the filing of a bankruptcy petition.
Any such bankruptcy bond will provide coverage in the aggregate amount
specified in the related Prospectus Supplement. Such amount will be reduced by
payments made under such bankruptcy bond in respect of the related Mortgage
Loans, to the extent specified in the related Prospectus Supplement, and will
not be restored.
In lieu of a bankruptcy bond, the Servicer may obtain a Limited Guarantee
to cover such bankruptcy-related losses.
Repurchase Bond
If so specified in the related Prospectus Supplement, the Servicer will be
obligated to purchase any Mortgage Loan up to an aggregate dollar amount
specified in the related Prospectus Supplement) for which insurance coverage is
denied due to dishonesty, misrepresentation or fraud in connection with the
origination or sale of such Mortgage Loan. Such obligation may be secured by a
surety bond or other instrument or mechanism guaranteeing payment of the amount
to be paid by the Servicer.
Guaranteed Investment Contracts
If so specified in the Prospectus Supplement, on or prior to the Delivery
Date, the Trustee will enter into a guaranteed investment contract (a "GIC")
pursuant to which all amounts deposited in the Collection Account, and if so
specified the Reserve Accounts, will be invested by the Trustee and under which
the issuer of the GIC will pay to the Trustee interest at an agreed rate per
annum with respect to the amounts so invested.
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Reserve Accounts
If specified in the Prospectus Supplement, cash, U.S. Treasury securities,
instruments evidencing ownership of principal or interest payments thereon,
letters of credit, demand notes, certificates of deposit, other instruments or
obligations or a combination thereof in the aggregate amount specified in the
Prospectus Supplement will be deposited by the Servicer on the Delivery Date in
one or more Reserve Accounts established by the Trustee. Such cash and the
principal and interest payments on such other instruments will be used to
enhance the likelihood of timely payment of principal of, and interest on, or,
if so specified in the Prospectus Supplement, to provide additional protection
against losses in respect of, the assets in the related Trust Fund, to pay the
expenses of the Trust Fund or for such other purposes specified in the
Prospectus Supplement. Whether or not the Servicer has any obligation to make
such a deposit, certain amounts to which the subordinated Certificateholders,
if any, will otherwise be entitled may instead be deposited into the Reserve
Account from time to time and in the amounts as specified in the Prospectus
Supplement. Any cash in the Reserve Account and the proceeds of any other
instrument upon maturity will be invested in Eligible Investments, which will
include obligations of the United States and certain agencies thereof,
certificates of deposit, certain commercial paper, time deposits and bankers
acceptances sold by eligible commercial banks, certain repurchase agreements of
United States government securities with eligible commercial banks and certain
other Eligible Investments described in the Agreement. If a letter of credit is
deposited with the Trustee, such letter of credit will be irrevocable. Any
instrument deposited therein will name the Trustee, in its capacity as trustee
for the holders of the related Certificates, as beneficiary and will be issued
by an entity acceptable to each rating agency that rates the Certificates.
Additional information with respect to such instruments deposited in the
Reserve Accounts will be set forth in the Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Account for distribution to the
holders of Certificates for the purposes, in the manner and at the times
specified in the Prospectus Supplement.
Other Insurance and Guarantees
If specified in the Prospectus Supplement, the related Trust Fund may also
include insurance, guarantees or letters of credit for the purpose of (i)
maintaining timely payments or providing additional protection against losses
on the assets included in such Trust Fund, (ii) paying administrative expenses
or (iii) establishing a minimum reinvestment rate on the payments made in
respect of such assets or principal payment rate on such assets. Such
arrangements may include agreements under which Certificateholders are entitled
to receive amounts deposited in various accounts held by the Trustee upon the
terms specified in the Prospectus Supplement. Such arrangements may be in lieu
of any obligation of the Servicer to advance delinquent installments in respect
of the Mortgage Loans.
YIELD, MATURITY AND WEIGHTED AVERAGE LIFE CONSIDERATIONS
The yields to maturity and weighted average lives of the Certificates will
be affected primarily by the rate and timing of principal payments received on
or in respect of the Mortgage Loans included in the related Trust Fund. Such
principal payments will include scheduled payments as well as Principal
Prepayments (including refinancings) and prepayments resulting from
foreclosure, condemnation and other dispositions of the Mortgaged Properties
(including amounts paid by insurers under applicable insurance policies), from
purchase by the Seller of any Mortgage Loan as to which there has been a
material breach of warranty or defect in documentation (or deposit of certain
amounts in respect of delivery of a substitute Mortgage Loan), purchase by the
Servicer of Mortgage Loans modified by it in lieu of refinancing thereof and
from the repurchase by the Seller of all of the Mortgage Loans in certain
circumstances. See "The Pooling and Servicing Agreement--Termination; Purchase
of Mortgage Loans." The yield to maturity and weighted average lives of the
Certificates may also be affected by the amount and timing of delinquencies and
losses on the Mortgage Loans.
A number of social, economic, tax, geographic, demographic, legal and
other factors may influence prepayments, delinquencies and losses. For a Trust
Fund comprised of Mortgage Loans, these factors may include the age of the
Mortgage Loans, the geographic distribution of the Mortgaged Properties, the
payment terms of the Mortgages, the characteristics of the mortgagors,
homeowner mobility, economic conditions generally and in the
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geographic area in which the Mortgaged Properties are located, enforceability
of due-on-sale clauses, servicing decisions, prevailing mortgage market
interest rates in relation to the interest rates on the Mortgage Loans, the
availability of mortgage funds, the use of second or "home equity" mortgage
loans by mortgagors, the availability of refinancing opportunities (including
refinancing opportunities offered by Chase Manhattan Mortgage Corporation to
existing borrowers or to its affiliates), the use of the properties as second
or vacation homes, the extent of the mortgagors' net equity in the Mortgaged
Properties and, where investment properties are securing the Mortgage Loans,
tax-related considerations and the availability of other investments. The rate
of principal payment may also be subject to seasonal variations.
The rate of principal prepayments on pools of conventional housing loans
has fluctuated significantly in recent years. Generally, if prevailing interest
rates were to fall significantly below the interest rates on the Mortgage
Loans, the Mortgage Loans would be expected to prepay at higher rates than if
prevailing rates were to remain at or above the interest rates on the Mortgage
Loans. Conversely, if interest rates were to rise above the interest rates on
the Mortgage Loans, the Mortgage Loans would be expected to prepay at lower
rates than if prevailing rates were to remain at or below interest rates on the
Mortgage Loans. The timing of changes in the rate of prepayments may
significantly affect a Certificateholder's actual yield to maturity, even if
the average rate of principal payments is consistent with a Certificateholder's
expectation. In general, the earlier a prepayment of principal the greater the
effect on a Certificateholder's yield to maturity. As a result, the effect on a
Certificateholder's yield of principal payments occurring at a rate higher (or
lower) than the rate anticipated by the investor during the period immediately
following the issuance of the related series of Certificates will not be offset
by a subsequent like reduction (or increase) in the rate of principal payments.
To the extent described in the applicable Prospectus Supplement, the
effective yields to Certificateholders will be lower than the yields produced
by the interest rates on the Certificates because, while interest will accrue
on each Mortgage Loan from the first day of each month, the distribution of
such interest to Certificateholders will be made in the month following the
month of accrual.
When a Mortgage Loan prepays in full, the borrower will generally be
required to pay interest on the amount of prepayment only to the prepayment
date. When a partial prepayment of principal is made on a Mortgage Loan, the
borrower generally will not be required to pay interest on the amount of the
partial prepayment during the month in which such prepayment is made. In
addition, a full or partial prepayment will not be required to be passed
through to Certificateholders until the month following receipt.
If and to the extent specified in the applicable Prospectus Supplement,
under the Agreement, if a full or partial voluntary prepayment of a Mortgage
Loan is made and does not include the full amount of interest on such Mortgage
Loan which would have been due but for such prepayment to and including the end
of the month in which the prepayment takes place, the servicer will be
obligated to pay the interest thereon at the Remittance Rate from the date of
prepayment through the end of such month (each such payment, a "Compensating
Interest Payment"), provided that the aggregate of such Compensating Interest
Payments by the Servicer with respect to any Distribution Date will not exceed
the aggregate Servicing Fee to which the Servicer is entitled in connection
with such Distribution Date. The Servicer will not be entitled to reimbursement
for such Compensating Interest Payments. Consequently, to the extent the
Servicer is so obligated, neither partial nor full prepayments will reduce the
amount of interest passed through to Certificateholders the following month
from the amount which would have been passed through in the absence of such
prepayments. If the Servicer is not obligated to make Compensating Interest
Payments, or if such payments are insufficient to cover the interest shortfall,
partial or full prepayments will reduce the amount of interest passed through
to Certificateholders, as described in the applicable Prospectus Supplement.
Factors other than those identified herein and in the Prospectus
Supplement could significantly affect principal prepayments at any time and
over the lives of the Certificates. The relative contribution of the various
factors affecting prepayment may also vary from time to time. There can be no
assurance as to the rate of payment of principal of the Mortgage Loans at any
time or over the lives of the Certificates.
The Prospectus Supplement relating to a series of Certificates will
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of such Certificates.
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CHASE MANHATTAN ACCEPTANCE CORPORATION
Chase Manhattan Acceptance Corporation was incorporated in the State of
Delaware on March 1, 1988 and is a direct wholly-owned subsidiary of The Chase
Manhattan Bank. The principal office of Chase Manhattan Acceptance Corporation
is located at 343 Thornall Street, Edison, New Jersey 08837 and its telephone
number is (732) 205-0600.
It is not expected that Chase Manhattan Acceptance Corporation will have
any business operations other than acquiring and pooling mortgage loans and
other receivables and instruments, offering Certificates of the type described
herein or other mortgage-related or asset-backed securities, and related
activities.
CHASE FUNDING, INC.
Chase Funding, Inc. was incorporated in the State of New York on November
17, 1987 and is a direct wholly-owned subsidiary of The Chase Manhattan
Corporation. The principal office of Chase Funding, Inc. is located at 343
Thornall Street, Edison, New Jersey 08837 and its telephone number is (732)
205-0600.
It is not expected that Chase Funding, Inc. will have any business
operations other than acquiring and pooling mortgage loans and other
receivables and instruments, offering Certificates of the type described herein
or other mortgage-related or asset-backed securities, and related activities.
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SERVICING OF THE MORTGAGE LOANS
With respect to each series of Certificates, the related Mortgage Loans
will be serviced by Chase Manhattan Mortgage (or such other entity identified
in the Prospectus Supplement), acting alone or, as master servicer, through one
or more direct servicers. If Chase Manhattan Mortgage acts as master servicer
with respect to a series, the related Agreement will provide that Chase
Manhattan Mortgage shall not be released from its obligations to the Trustee
and Certificateholders with respect to the servicing and administration of the
Mortgage Loans, that any servicing agreement entered into between Chase
Manhattan Mortgage and a direct servicer will be deemed to be between Chase
Manhattan Mortgage and the direct servicer alone and that the Trustee and the
Certificateholders will have no claims, obligations, duties or liabilities with
respect to any such agreement.
Collection and Other Servicing Procedures
Subject to the terms of the Agreement, the Servicer generally will be
obligated to service and administer the Mortgage Loans in accordance with the
specific procedures set forth in the Fannie Mae Seller's Guide and Fannie Mae
Servicing Guide, as amended or supplemented from time to time, and, to the
extent such procedures are unavailable, in accordance with the mortgage
servicing practices of prudent mortgage lending institutions.
The Servicer will be responsible for using its best reasonable efforts to
collect all payments called for under the Mortgage Loans and shall, consistent
with each Agreement, follow such collection procedures as it deems necessary
and advisable with respect to the Mortgage Loans. Consistent with the above,
the Servicer, may, in its discretion, (i) waive any late payment charge and
(ii) if a default on the related Mortgage Loan has occurred or is reasonably
foreseeable, arrange with the mortgagor a schedule for the liquidation of a
delinquency. In the event of any such arrangement the Servicer will be
responsible for distributing funds with respect to such Mortgage Loan during
the scheduled period in accordance with the original amortization schedule
thereof and without regard to the temporary modification thereof.
The Servicer will be obligated to use it best reasonable efforts to
realize upon a defaulted Mortgage Loan in such manner as will maximize the
payments to Certificateholders. In this regard, the Servicer may (directly or
through a local assignee) sell the property at a foreclosure or trustee's sale,
negotiate with the mortgagor for a deed in lieu of foreclosure or, in the event
a deficiency judgment is available against the mortgagor or other person,
foreclose against such property and proceed for the deficiency against the
appropriate person. See "Material Legal Aspects of the Mortgage
Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" for a
description of the limited availability of deficiency judgments. The amount of
the ultimate net recovery (including the proceeds of any pool insurance or
other guarantee), after reimbursement to the Servicer of its expenses incurred
in connection with the liquidation of any such defaulted Mortgage Loan will be
distributed to the related Certificateholders on the next Distribution Date
following the month of receipt. If specified in the Prospectus Supplement, if
such net recovery exceeds the Principal Balance of such Mortgage Loan plus one
month's interest thereon at the Remittance Rate, the excess will be paid to the
Servicer as additional servicing compensation. The Servicer will not be
required to expend its own funds in connection with any foreclosure or towards
the restoration of any Mortgaged Property unless it shall determine (i) that
such restoration or foreclosure will increase the Liquidation Proceeds in
respect of the related Mortgaged Loan to Certificateholders after reimbursement
to itself for such expenses and (ii) that such expenses will be recoverable to
it either through Liquidation Proceeds or Insurance Proceeds in respect of the
related Mortgage Loan.
If a Mortgaged Property has been or is about to be conveyed by the
mortgagor, the Servicer will be obligated to accelerate the maturity of the
Mortgage Loan, unless it reasonably believes it is unable to enforce that
Mortgage Loan's "due-on-sale" clause under applicable law or such enforcement
would adversely affect or jeopardize coverage under any related primary
mortgage insurance policy or pool insurance policy. If it reasonably believes
it may be restricted by law, for any reason, from enforcing such a
"due-on-sale" clause, the Servicer, with the consent of the insurer under any
insurance policy implicated thereby, may enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note. Any fee collected by the Servicer for entering into an
assumption agreement will be retained by the Servicer as additional servicing
compensation. For a description of circumstances in which the Servicer may be
unable to enforce "due-on-sale" clauses, see "Material Legal Aspects of the
Mortgage Loans--Enforceability of Certain Provisions". In connection with any
such assumption, the Mortgage Rate borne by the related Mortgage Note may not
be decreased.
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The Servicer will maintain with one or more depository institutions one or
more accounts into which it will deposit all payments of taxes, insurance
premiums, assessments or comparable items received for the account of the
mortgagors. Withdrawals from such account or accounts may be made only to
effect payment of taxes, insurance premiums, assessments or comparable items,
to reimburse the Servicer out of related collections for any cost incurred in
paying taxes, insurance premiums and assessments or otherwise preserving or
protecting the value of the Mortgages, to refund to mortgagors any amounts
determined to be overages and to pay interest to mortgagors on balances in such
account or accounts to the extent required by law.
Private Mortgage Insurance
If so specified in the related Prospectus Supplement, each Agreement will
obligate the Servicer to exercise its best reasonable efforts to maintain and
keep in full force and effect a private mortgage insurance policy on all
Mortgage Loans that have a Loan-to-Value Ratio in excess of 80%.
A private mortgage insurance policy may provide that, as an alternative to
paying a claim thereunder, the mortgage insurer will have the right to purchase
the Mortgage Loan following the receipt of a notice of default, at a purchase
price equal to the sum of the principal balance of the Mortgage Loan, accrued
interest thereon and the amount of certain advances made by the Servicer with
respect to the Mortgage Loan. The mortgage insurer may have such purchase right
after the borrower has failed to make three scheduled monthly payments (or one
payment if it is the first payment due on the Mortgage Loan) or after any
foreclosure or other proceeding affecting the Mortgage Loan or the Mortgaged
Property has been commenced. The proceeds of any such purchase will be
distributed to Certificateholders on the applicable Distribution Date. A
mortgage insurer may be more likely to exercise such purchase option when
prevailing interest rates are low relative to the interest rate borne by the
defaulted Mortgage Loan, in order to reduce the aggregate amount of accrued
interest that the insurer would be obligated to pay upon payment of a claim.
Hazard Insurance
The Servicer will cause to be maintained for each Mortgaged Property a
standard hazard insurance policy. The coverage of such policy is required to be
in an amount at least equal to the maximum insurable value of the improvements
which are a part of such property from time to time or the principal balance
owing on such Mortgage Loan from time to time, whichever is less. All amounts
collected by the Servicer under any hazard policy (except for amounts to be
applied to the restoration or repair of property subject to the related
Mortgage or property acquired by foreclosure or amounts released to the related
mortgagor in accordance with the Servicer's normal servicing procedures) will
be deposited in the Collection Account.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements on the property by fire,
lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Mortgage Loans will be
underwritten by different insurers and, therefore, will not contain identical
terms and conditions, the basic terms thereof are dictated by state law. Such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and mud
flow), nuclear reactions, pollution, wet or dry rot, vermin, rodents, insects
or domestic animals, theft and, in certain cases, vandalism. The foregoing list
is merely indicative of certain kinds of uninsured risks and is not intended to
be all-inclusive. If the property securing a Mortgage Loan is located in a
federally designated flood area, the Agreement will require that flood
insurance be maintained in an amount representing coverage not less than the
least of (i) the principal balance owing on such Mortgage Loan from time to
time, (ii) the maximum insurable value of the improvements which are a part of
such property from time to time or (iii) the maximum amount of insurance which
is available under the Flood Disaster Protection Act of 1973, as amended. The
Seller may also purchase special hazard insurance against certain of the
uninsured risks described above. See "Credit Support--Special Hazard
Insurance."
Most of the properties securing the Mortgage Loans will be covered by
homeowners' insurance policies, which, in addition to the standard form of fire
and extended coverage, provide coverage for certain other risks. These
homeowners' policies typically contain a "coinsurance" clause which in effect
requires the insured at all
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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, then the insurer's liability in the event of
partial loss will not exceed the lesser of (i) the actual cash value (generally
defined as replacement cost at the time and place of loss, less physical
depreciation) of the improvements damaged or destroyed, or (ii) such proportion
of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
Since the amount of hazard insurance the Servicer is required to cause to
be maintained on the improvements securing the Mortgage Loans declines as the
principal balances owing thereon decrease, if the residential properties
securing the Mortgage Loans appreciate in value over time, the effect of
coinsurance in the event of partial loss may be that hazard insurance proceeds
will be insufficient to restore fully the damaged property.
The Servicer will cause to be maintained on any Mortgaged Property
acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to the lesser of
(i) the maximum insurable value from time to time of the improvements which are
a part of such property or (ii) the unpaid principal balance of the related
Mortgage Loan at the time of such foreclosure or deed in lieu of foreclosure,
plus accrued interest and the Servicer's good-faith estimate of the related
liquidation expenses to be incurred in connection therewith.
The Servicer may maintain, in lieu of causing individual hazard insurance
policies to be maintained with respect to each Mortgage Loan, one or more
blanket insurance policies covering hazard losses on the Mortgage Loans. The
Servicer will pay the premium for such policy on the basis described therein
and will pay any deductible amount with respect to claims under such policy
relating to the Mortgage Loans.
Advances
To the extent specified in the Prospectus Supplement, in the event that
any borrower fails to make any payment of principal or interest required under
the terms of a Mortgage Loan, the Servicer will be obligated to advance the
entire amount of such payment adjusted in the case of any delinquent interest
payment to the applicable Net Mortgage Rate. This obligation to advance will be
limited to amounts which the Servicer reasonably believes will be recoverable
by it out of liquidation proceeds or otherwise in respect of such Mortgage
Loan. The Servicer will be entitled to reimbursement for any such advance from
related late payments on the Mortgage Loan as to which such advance was made.
Furthermore, the Servicer will be entitled to reimbursement for any such
advance (i) from Liquidation Proceeds or Insurance Proceeds received if such
Mortgage Loan is foreclosed prior to any payment to Certificateholders in
respect of the repossession or foreclosure and (ii) from receipts or recoveries
on all other Mortgage Loans or from any other assets of the Trust Fund, for all
or any portion of such advance which the Servicer determines, in good faith,
may not be ultimately recoverable from such liquidation or insurance proceeds
(a "Nonrecoverable Advance"). Any Nonrecoverable Advance will be reimbursable
out of the assets of the Trust Fund. The amount of any scheduled payment
required to be advanced by the Servicer will not be affected by any agreement
between the Servicer and a borrower providing for the postponement or
modification of the due date or amount of such scheduled payment. If specified
in the Prospectus Supplement, the Trustee for the related series will make
advances of delinquent payments of principal and interest in the event of a
failure by the Servicer to perform such obligation.
Any such obligation to make advances may be limited to amounts due holders
of certain classes of Certificates of the related series or may be limited to
specified periods or otherwise as specified in the Prospectus Supplement.
Servicing and Other Compensation and Payment of Expenses
The Servicer's primary compensation for its servicing activities will come
from the payment to it, with respect to each interest payment on a Mortgage
Loan, of all or a portion of the difference between the Mortgage Rate for such
Mortgage Loan and the related Remittance Rate. In addition to its primary
compensation, the Servicer will retain all assumption fees, late payment
charges and other miscellaneous charges, all to the extent collected from
borrowers. In the event the Servicer is acting as master servicer under an
Agreement, it will receive compensation with respect to the performance of its
activities as master servicer.
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The Servicer generally will be responsible for paying all expenses
incurred in connection with the servicing of the Mortgage Loans (subject to
limited reimbursement as described under "The Pooling and Servicing
Agreement---Payments on Mortgage Loans; Collection Account"), including,
without limitation, payment of any premium for any Advance Guarantee, Deposit
Guarantee, bankruptcy bond, repurchase bond or other guarantee or surety,
payment of the fees and the disbursements of the Trustee and the and
independent accountants, payment of the compensation of any direct servicers of
the Mortgage Loans, payment of all fees and expenses in connection with the
realization upon defaulted Mortgage Loans and payment of expenses incurred in
connection with distributions and reports to Certificateholders. The Servicer
may assign any of its primary servicing compensation in excess of that amount
customarily retained as servicing compensation for similar assets.
Resignation, Succession and Indemnification of the Servicer
The Agreement will provide that the Servicer may not resign from its
obligations and duties as servicer or master servicer thereunder, except upon
determination that its performance of such duties is no longer permissible
under applicable law. No such resignation will become effective until the
Trustee or a successor has assumed the Servicer's servicing obligations and
duties under such Agreement. The Guarantor's obligations under any Advance
Guarantee or Deposit Guarantee will, upon issuance thereof, be irrevocable,
subject to certain limited rights of assignment as described in the Prospectus
Supplement if applicable.
The Agreement will provide that neither the Seller nor the Servicer nor,
if applicable, the Guarantor, nor any of their respective directors, officers,
employees or agents, shall be under any liability to the Trust Fund or the
Certificateholders of the related series for taking any action, or for
refraining from taking any action, in good faith pursuant to such Agreement, or
for errors in judgment; provided, however, that neither the Servicer nor, if
applicable, the Guarantor, nor any such person, will be protected against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties thereunder. The Agreement will
also provide that the Seller, the Servicer and, if applicable, the Guarantor
and their respective directors, officers, employees and agents are 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 Certificates, other than any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties thereunder or by reason of reckless
disregard of obligations and duties thereunder. In addition, each Agreement
will provide that neither the Seller nor the Servicer nor, if applicable, the
Guarantor is under any obligation to appear in, prosecute or defend any legal
action which is not incidental to the Servicer's servicing responsibilities
under such Agreement or the Guarantor's payment obligations under any Limited
Guarantee, respectively, and which in its respective opinion may involve it in
any expense or liability. Each of the Seller, the Servicer and, if applicable,
the Guarantor may, however, in its respective discretion undertake any such
action which it may deem necessary or desirable in respect of such Agreement
and the rights and duties of the parties thereto and the interests of the
Certificateholders thereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust Fund, and the Seller, the Servicer and, if applicable,
the Guarantor, will be entitled to be reimbursed therefor from amounts
deposited in the Collection Account.
Any corporation into which the Servicer may be merged or consolidated or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer is a party, or any corporation succeeding to the business of the
Servicer, which assumes the obligations of the Servicer, will be the successor
of the Servicer under each Agreement.
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THE POOLING AND SERVICING AGREEMENT
This prospectus summarizes the material provisions of the Agreement. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Agreement applicable to a
particular series of Certificates. Where particular provisions or terms used in
the Agreements are referred to, such provisions or terms are as specified in
the Agreements.
Assignment of Mortgage Loans; Warranties
At the time of issuance of each series of Certificates, the Seller will
cause the Mortgage Loans in the Trust Fund represented by that series of
Certificates to be assigned to the Trustee, together with all principal and
interest due on or with respect to such Mortgage Loans, other than principal
and interest due on or before the Cut-Off Date and prepayments of principal
received before the Cut-Off Date. The Trustee, concurrently with such
assignment, will execute and deliver Certificates evidencing such Trust Fund to
the Seller in exchange for the Mortgage Loans. Each Mortgage Loan will be
identified in a schedule appearing as an exhibit to the Agreement for that
series (the "Mortgage Loan Schedule"). The Mortgage Loan Schedule will include,
as to each Mortgage Loan, information as to the outstanding principal balance
as of the close of business on the Cut-Off Date, as well as information
respecting the Mortgage Rate, the current scheduled monthly payment, the number
of months remaining until the stated maturity date of each Note and the
location of the related Mortgaged Property.
In addition, the Seller will, as to each Mortgage Loan, deliver to the
Trustee (i) the Note, endorsed to the order of the Trustee by the holder/payee
thereof without recourse; (ii) the "buy-down" agreement (if applicable); (iii)
a Mortgage and Mortgage assignment meeting the requirements of the Agreement;
(iv) all Mortgage assignments from the original holder of the Mortgage Loan,
through any subsequent transferees to the transferee to the Trustee; (v) the
original Lender's Title Insurance Policy, or other evidence of title, or if a
policy has not been issued, a written commitment or interim binder or
preliminary report of title issued by the title insurance or escrow company ;
(vi) as to each Mortgage Loan, an original certificate of Primary Mortgage
Insurance Policy (or copy certified to be true by the originator) to the extent
required under the applicable requirements for the Mortgage Pool; and (vii)
such other documents as may be described in the applicable Prospectus
Supplement. Except as expressly permitted by the Agreement, all documents so
delivered are to be original executed documents; provided, however, that in
instances where the original recorded document has been retained by the
applicable jurisdiction or has not yet been returned from recordation, the
Seller may deliver a photocopy containing a certification of the appropriate
judicial or other governmental authority of the jurisdiction, and the Servicer
shall cause the originals of each Mortgage and Mortgage assignment which is so
unavailable to be delivered to the Trustee as soon as available.
The Trustee will hold such documents for each series of Certificates in
trust for the benefit of all Certificateholders of such series. The Trustee is
obligated to review such documents for each Mortgage Loan within 270 days after
the conveyance of the Mortgage Loan to it. If any document is found by the
Trustee not to have been executed or received or to be unrelated to the
Mortgage Loan identified in the Agreement, the Trustee will promptly notify the
Seller. The Seller, or another party specified in the applicable Prospectus
Supplement, will be required to cure such defect or to repurchase the Mortgage
Loan or to provide a substitute Mortgage Loan. See "Repurchase or Substitution"
below.
In the Agreement for each series, the Seller or another party described in
the Agreement (the "Representing Party") will make certain representations and
warranties with respect to the Mortgage Loans. The representations and
warranties in each Agreement will generally include that (i) the information
set forth in the Mortgage Loan Schedule is true and correct in all material
respects at the date or dates with respect to which such information is
furnished; (ii) each Mortgage constitutes a valid and enforceable first lien on
the Mortgaged Property, including all improvements thereon (subject only to (A)
the lien of current real property taxes and assessments, (B) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions generally
and specifically referred to in the Lender's Title Insurance Policy delivered
to the originator of the Mortgage Loan and not adversely affecting the value of
the Mortgaged Property and (C) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage); (iii) at the date of
initial issuance of the Certificates, no more than the percentage of the
Mortgage Loans specified in the applicable Prospectus Supplement
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were more than 30 days delinquent in payment and no more than the percentage of
the Mortgage Loans specified in the applicable Prospectus Supplement had more
than one delinquency in excess of 30 days during the preceding 12-month period;
(iv) at the time each Mortgage Loan was originated and, to the best knowledge
of the Representing Party, at the date of initial issuance of the Certificates,
there are no delinquent taxes, assessments or other outstanding charges
affecting the Mortgaged Property; (v) each Mortgage Loan was originated in
compliance with and complied at the time of origination in all material
respects with applicable laws, including usury, equal credit opportunity and
disclosure laws; (vi) each Mortgage Loan is covered by a lender's title
insurance policy insuring the priority of the lien of the Mortgage in the
original principal amount of such Mortgage Loan (subject to exceptions
acceptable in the industry, including exceptions with respect to surveys and
endorsements), and each such policy is in full force and effect; and (vii)
immediately prior to the assignment to the Trust Fund the Seller had good title
to, and was the sole owner of, each Mortgage Loan free and clear of any lien,
claim, charge, encumbrance or security interest of any kind.
Upon the discovery or notice of a breach of any of such representations or
warranties which materially and adversely affects the interests of the
Certificateholders in a Mortgage Loan, the Seller or the applicable party will
cure the breach or repurchase such Mortgage Loan or will provide a substitute
Mortgage Loan in the manner described under "Repurchase or Substitution" below.
This obligation to repurchase or substitute constitutes the sole remedy
available to the Certificateholders or the Trustee for any such breach of
representations and warranties.
The Agreement for a Series of Certificates may provide that the Servicer
may, at its sole option, purchase from the Trust Fund, at the price specified
in the Agreement, any Mortgage Loan as to which the related Borrower has failed
to make full payments as required under the related Note for three consecutive
months.
Payments on Mortgage Loans; Collection Account
It is expected that the Agreement for each series of Certificates will
provide that the Servicer will establish and maintain a trust account or
accounts (the "Collection Account") in the name of the Trustee for the benefit
of the Certificateholders. The amount at any time credited to the Collection
Account will be fully-insured to the maximum coverage possible or shall be
invested in Permitted Investments, all as described in the applicable
Prospectus Supplement. In addition, a Certificate Account may be established
for the purpose of making distributions to Certificateholders if and as
described in the applicable Prospectus Supplement.
The Servicer will deposit in the Collection Account, as described more
fully in the applicable Prospectus Supplement, amounts representing the
following collections and payments (other than in respect of principal of or
interest on the Mortgage Loans due on or before the Cut-Off Date and
prepayments of principal received before the Cut-Off Date): (i) all
installments of principal and interest on the applicable Mortgage Loans and any
principal and/or interest required to be advanced by the Servicer that were due
on the immediately preceding Due Date, net of servicing fees due the Servicer
and other amounts, if any, specified in the applicable Prospectus Supplement;
(ii) all amounts received in respect of such Mortgage Loans representing late
payments of principal and interest to the extent such amounts were not
previously advanced by the Servicer with respect to such Mortgage Loans, net of
servicing fees due the Servicer; (iii) all principal prepayments (whether full
or partial) on such Mortgage Loans received, together with interest calculated
at the Mortgage Rate (net of servicing fees due the Servicer) to the end of the
calendar month during which such principal prepayment shall have been received
by the Servicer, to the extent received from the mortgagor or advanced by the
Servicer, as described under "Servicing of the Mortgage Loans--Advances"
herein; and (iv) any amounts received by the Servicer as Insurance Proceeds (to
the extent not applied to the repair or restoration of the Mortgaged Property)
or Liquidation Proceeds.
Repurchase or Substitution
The Trustee will review the documents delivered to it with respect to the
assets of the applicable Trust Fund within 270 days after execution and
delivery of the related Agreement. If any document required to be delivered by
the Seller is not delivered or is found to be defective in any material
respect, then within 90 days after notice of such defect, the Seller will (a)
cure such defect, (b) remove the affected Mortgage Loan from the Trust Fund
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and substitute one or more other mortgage loans therefor or (c) repurchase the
Mortgage Loan from the Trustee for a price equal to 100% of its Principal
Balance plus interest thereon at the applicable Remittance Rate from the date
on which interest was last paid to the first day of the month in which such
purchase price is to be distributed to the related Certificateholders. This
repurchase and substitution obligation constitutes the sole remedy available to
Certificateholders or the Trustee on behalf of Certificateholders against the
Seller for a material defect in a document relating to a Mortgage Loan.
The Seller will agree, within 90 days of the earlier of the discovery by
the Seller or receipt by the Seller of notice from the Trustee or the Servicer
of its discovery of any breach of any representation or warranty of the Seller
set forth in the related Agreement with respect to the Mortgage Loans that
materially and adversely affects the interests of the Certificateholders in a
Mortgage Loan (a "Defective Mortgage Loan") or the value of a Mortgage Loan, to
either (a) cure such breach in all material respects, (b) repurchase such
Defective Mortgage Loan at a price equal to 100% of its Principal Balance plus
interest thereon at the applicable Remittance Rate from the date on which
interest was last paid to the first day of the month in which such purchase
price is to be distributed or (c) remove the affected Mortgage Loan from the
Trust Fund and substitute one or more other mortgage loans or contracts
therefor. This repurchase or substitution obligation will constitute the sole
remedy available to Certificateholders or the Trustee on behalf of
Certificateholders for any such breach.
If so specified in the Prospectus Supplement for a series where the Seller
has acquired the related Mortgage Loans, in lieu of agreeing to repurchase or
substitute Mortgage Loans as described above, the Seller may obtain such an
agreement from the entity which sold such mortgage loans, which agreement will
be assigned to the Trustee for the benefit of the holders of the Certificates
of such series. In such event, the Seller will have no obligation to repurchase
or substitute mortgage loans if such entity defaults in its obligation to do
so.
If a mortgage loan is substituted for another Mortgage Loan as described
above, the new mortgage loan will have the following characteristics, or such
other characteristics as may be specified in the Prospectus Supplement: (i) a
Principal Balance (together with any other new mortgage loan so substituted),
as of the first Distribution Date following the month of substitution, after
deduction of all payments due in the month of substitution, not in excess of
the Principal Balance of the removed Mortgage Loan as of such Distribution Date
(the amount of any difference, plus one month's interest thereon at the
applicable Net Mortgage Rate, to be deposited in the Collection Account on the
business day prior to the applicable Distribution Date), (ii) a Mortgage Rate
not less than, and not more than one percentage point greater than, that of the
removed Mortgage Loan, (iii) a remaining term to stated maturity not later
than, and not more than one year less than, the remaining term to stated
maturity of the removed Mortgage Loan, (iv) a Loan-to Value Ratio at
origination not greater than that of the removed Mortgage Loan, and (v) in the
reasonable determination of the Seller, be of the same type, quality and
character (including location of the Mortgaged Property) as the removed
Mortgage Loan (as if the defect or breach giving rise to the substitution had
not occurred) and be, as of the substitution date, in compliance with the
representations and warranties contained in the Agreement.
If a REMIC election is to be made with respect to all or a portion of a
Trust Fund, any such substitution will occur within two years after the initial
issuance of the related Certificates.
Certain Modifications and Refinancings
The Agreement will permit the Servicer to modify any Mortgage Loan upon
the request of the related Mortgagor, and will also permit the Servicer to
solicit such requests by offering Mortgagors the opportunity to refinance their
Mortgage Loans, provided in either case that the Servicer purchases such
Mortgage Loan from the Trust Fund immediately following such modification. Any
such modification may not be made unless the modification includes a change in
the interest rate on the related Mortgage Loan to approximately a prevailing
market rate. Any such purchase will be for a price equal to 100% of the
Principal Balance of such Mortgage Loan, plus accrued and unpaid interest
thereon to the date of purchase at the applicable Remittance Rate, net of any
unreimbursed advances of principal and interest thereon made by the Servicer.
Such purchases may occur when prevailing interest rates are below the interest
rates on the Mortgage Loans and Mortgagors request (and/or the Servicer offers)
modifications as an alternative to refinancings through other mortgage
originators. If a REMIC election is made with respect to all or a portion of
the related Trust Fund, the Servicer will indemnify the REMIC against liability
for any prohibited transactions taxes and any related interest, additions or
penalties imposed on the REMIC as a result of any such modification or
purchase.
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The Agreement will provide that if the Servicer in its individual capacity
agrees to refinance any Mortgage Loan as described above, such Mortgage Loan
will be assigned to the Servicer by the Trustee upon certification that the
Principal Balance of such Mortgage Loan and accrued and unpaid interest thereon
at the Remittance Rate has been deposited in the Collection Account.
Forward Commitments; Pre-Funding
The Trustee of a Trust Fund may enter into a Pre-Funding Agreement for the
transfer of additional Mortgage Loans and Contracts to such Trust following the
date on which such Trust is established and the related Securities are issued.
The Trustee of a Trust may enter into Pre-Funding Agreements to permit the
acquisition of additional Mortgage Loans that could not be delivered by the
Depositor or have not formally completed the origination process, in each case
prior to the Delivery Date. Any Pre-Funding Agreement will require that any
Mortgage Loans so transferred to a Trust conform the requirements specified in
such Pre-Funding Agreement. If a Pre-Funding Agreement is to be utilized, the
related Trustee will be required to deposit in the Purchase Account all or a
portion of the proceeds received by the Trustee in connection with the sale of
one or more classes of Securities of the related series; the additional
Mortgage Loans will be transferred to the related Trust in exchange for money
released from the related Pre-Funding Account. Each Pre-Funding Agreement will
set a specified period during which any such transfers must occur. The
Pre-Funding Agreement or the related Agreement will require that, if all moneys
originally deposited to such Pre-Funding Account are not so used by the end of
such specified period, then any remaining moneys will be applied as a mandatory
prepayment of the related class or classes of Securities as specified in the
related Prospectus Supplement. The specified period for the acquisition by a
Trust of additional Mortgage Loans is not expected to exceed three months from
the date such Trust is established.
Evidence as to Compliance
The Agreement will provide that a firm of independent public accountants
will furnish to the Trustee on or before April 15 of each year, beginning with
April 15 in the fiscal year which begins not less than three months after the
date of the initial issue of Certificates, a statement as to compliance by the
Servicer with certain standards relating to the servicing of the Mortgage
Loans.
The Agreement will also provide for delivery to the Trustee on or before
April 15 of each fiscal year, beginning with April 15 in the fiscal year which
begins not less than three months after the date of the initial issue of the
Certificates, a statement signed by an officer of the Servicer to the effect
that, to the best of such officer's knowledge, the Servicer has fulfilled its
obligations under the Agreement throughout the preceding year or, if there has
been a default in the fulfillment of any such obligation, describing each such
default.
The Trustee
Any commercial bank or trust company serving as Trustee may have normal
banking relationships with the Seller and the Servicer. In addition, the Seller
and the Trustee acting jointly will have the power and the responsibility for
appointing co-trustees or separate trustees of all or any part of the Trust
Fund relating to a particular series of Certificates. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the
Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) or of any Mortgage Loan or
related document, and will not be accountable for the use or application by the
Seller or Servicer of any funds paid to the Seller or Servicer in respect of
the Certificates or the related assets, or amounts deposited into the
Collection Account. If no Event of Default has occurred, the Trustee will be
required to perform only those duties specifically required of it under the
Agreement. However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the Trustee will be required to
examine them to determine whether they conform to the requirements of the
Agreement.
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The Trustee may resign at any time, and the Seller may remove the Trustee
if the Trustee ceases to be eligible to continue as such under the Agreement,
if the Trustee becomes insolvent or in such other instances, if any, as are set
forth in the Agreement. Following any resignation or removal of the Trustee,
the Seller will be obligated to appoint a successor Trustee, any such successor
to be approved by the Guarantor if so specified in the Prospectus Supplement in
the event that the Guarantor has issued any Limited Guarantee with respect to
the Certificates. Any resignation or removal of the Trustee and appointment of
a successor Trustee does not become effective until acceptance of the
appointment by the successor Trustee.
Reports to Certificateholders
On each Distribution Date, the Servicer or the paying agent will mail to
Certificateholders a statement prepared by it and generally setting forth, to
the extent applicable to any series, among other things:
(i) The aggregate amount of the related distribution allocable to
principal, separately identifying the amount allocable to each class;
(ii) The amount of such distribution allocable to interest separately
identifying the amount allocable to each class;
(iii) The amount of servicing compensation received by the Servicer in
respect of the Mortgage Loans during the month preceding the month of the
Distribution Date;
(iv) The aggregate Certificate Principal Balance (or Notional Principal
Balance) of each class of Certificates after giving effect to distributions
and allocations, if any, of losses on the Mortgage Loans on such
Distribution Date;
(v) The aggregate Certificate Principal Balance of any class of Accrual
Certificates after giving effect to any increase in such Certificate
Principal Balance that results from the accrual of interest that is not yet
distributable thereon;
(vi) The aggregate amount of any advances made by the Servicer included
in the amounts distributed to Certificateholders on such Distribution Date;
(vii) If any class of Certificates has priority in the right to receive
Principal Prepayments, the amount of Principal Prepayments in respect of
the Mortgage Loans; and
(viii) The aggregate Principal Balance of Mortgage Loans which were
delinquent as to a total of one, two or three or more installments of
principal and interest or were in foreclosure.
The Servicer will provide Certificateholders which are federally insured
savings and loan associations with certain reports and with access to
information and documentation regarding the Mortgage Loans included in the
Trust Fund sufficient to permit such associations to comply with applicable
regulations of the Office of Thrift Supervision.
Events of Default
Events of Default under the Agreement with respect to a series of
Certificates will consist of: (i) any failure by the Servicer in the
performance of any obligation under the Agreement which causes any payment
required to be made under the terms of the Certificates or the Agreement not to
be timely made, which failure continues unremedied for a period of three
business 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 Seller, or to the Servicer, the Seller and the Trustee by
Certificateholders representing not less than 25% of the Voting Rights of any
class of Certificates; (ii) any failure on the part of the Servicer duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of the Servicer in the Certificates or in the Agreement
which failure continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by Certificateholders representing not less than 25% of the Voting
Rights of all classes of Certificates; (iii) the entering against the Servicer
of a decree or order of a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver or
liquidator in any
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insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
provided that any such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; (iv) the consent by the
Servicer to the appointment of a conservator, receiver, liquidator or
liquidating committee in any insolvency, readjustment of debt, marshalling of
assets and liabilities, voluntary liquidation or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all of its
property; (v) the admission by the Servicer in writing of its inability to pay
its debts generally as they become due, the filing by the Servicer of a
petition to take advantage of any applicable insolvency or reorganization
statute, the making of an assignment for the benefit of its creditors or the
voluntary suspension of the payment of its obligations; and (vi) notice by the
Servicer that it is unable to make an Advance required to be made pursuant to
the Agreement.
Rights Upon Event of Default
As long as an Event of Default under the Agreement remains unremedied by
the Servicer, the Trustee, or holders of Certificates evidencing interests
aggregating more than 50% of such Certificates, may terminate all of the rights
and obligations of the Servicer under the Agreement, whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under the Agreement and will be entitled to similar compensation arrangements,
provided that if the Trustee had no obligation under the Agreement to make
advances of delinquent principal and interest on the Mortgage Loans upon the
failure of the Servicer to do so, or if the Trustee had such obligation but is
prohibited by law or regulation from making such advances, the Trustee will not
be required to assume such obligation of the Servicer. The Servicer shall be
entitled to payment of certain amounts payable to it under the Agreement,
notwithstanding the termination of its activities as servicer. No such
termination will affect in any manner the Guarantor's obligations under any
Limited Guarantee, except that the obligation of the Servicer to make advances
of delinquent payments of principal and interest (adjusted to the applicable
Remittance Rate) will become the direct obligations of the Guarantor under the
Advance Guarantee until a new servicer is appointed. In the event that the
Trustee is unwilling or unable so to act, it may appoint, or petition a court
of competent jurisdiction for the appointment of, a housing and home finance
institution with a net worth of at least $15,000,000 and is a FNMA or FHLMC
approved seller/servicer in good standing and, if the Guarantor has issued any
Limited Guarantee with respect to the Certificates, approved by the Guarantor,
to act as successor to the Company, as servicer, under such Agreement. In
addition, if the Guarantor has issued any Limited Guarantee with respect to the
related series of Certificates, the Guarantor will have the right to replace
any successor servicer with an institution meeting the requirements described
in the preceding sentence. The Trustee and such successor may agree upon the
servicing compensation to be paid, which in no event may be greater than the
compensation to the Servicer under such Agreement.
No holder of Certificates will have any right under the Agreement to
institute any proceeding with respect to the Agreement, unless such holder
previously has given to the Trustee written notice of default and unless the
holders of Certificates of any class evidencing, in the aggregate, 25% or more
of the interests in such class have made written request to the Trustee to
institute such proceeding in its own name as Trustee thereunder and have
offered to the Trustee reasonable indemnity and the Trustee for 60 days after
receipt of such notice, request and offer of indemnity has neglected or refused
to institute any such proceedings. However, the Trustee is under no obligation
to exercise any of the trusts or powers vested in it by the 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 Certificateholders, unless such
Certificateholders have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
Amendment
The Agreement may be amended by the Seller, the Servicer and the Trustee,
and if the Guarantor has issued any Limited Guarantee with respect to the
Certificates, with the consent of the Guarantor, but without Certificateholder
consent, to cure any ambiguity, to correct or supplement any provision therein
which may be inconsistent with any other provision therein, to take any action
necessary to maintain REMIC status of any Trust Fund as to which a REMIC
election has been made, to avoid or minimize the risk of the imposition of any
tax on the Trust Fund pursuant to the Code or to make any other provisions with
respect to matters or questions
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arising under the Agreement which are not materially inconsistent with the
provisions of the Agreement; provided that such action will not, as evidenced
by an opinion of counsel satisfactory to the Trustee, adversely affect in any
material respect the interests of any Certificateholders of that series. The
Agreement may also be amended by the Seller, the Servicer and the Trustee with
the consent of holders of Certificates evidencing interests aggregating not
less than 66 2/3% of all interests of each class affected by such amendment,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Agreement or of modifying in any
manner the rights of Certificateholders of that series; 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 in respect of any Certificate without the consent of the holder of
such Certificate, or (ii) reduce the aforesaid percentage of Certificates, the
holders of which are required to consent to any such amendment, without the
consent of the holders of all Certificates of such affected class then
outstanding.
Termination; Purchase of Mortgage Loans
The obligations of the parties to the Agreement for each Series will
terminate upon (i) the purchase of all the Mortgage Loans, as described in the
applicable Prospectus Supplement or (ii) the later of (a) the distribution to
Certificateholders of that series of final payment with respect to the last
outstanding Mortgage Loan, or (b) the disposition of all property acquired upon
foreclosure or deed-in-lieu of foreclosure with respect to the last outstanding
Mortgage Loan and the remittance to the Certificateholders of all funds due
under the Agreement. In no event, however, will the trust created by an
Agreement continue beyond the expiration of 21 years from the death of the
survivor of the descendants living on the date of the Agreement of a specific
person named in such Agreement. With respect to each series, the Trustee will
give or cause to be given written notice of termination of the Agreement to
each Certificateholder, and the final distribution under the Agreement will be
made only upon surrender and cancellation of the related Certificates at an
office or agency specified in the notice of termination.
As described in the applicable Prospectus Supplement, the Agreement for
each series may permit, but not require, the Seller, the Servicer or another
party to purchase from the Trust Fund for such series all remaining Mortgage
Loans and all property acquired in respect of the Mortgage Loans, at a price
described in the Prospectus Supplement, subject to the condition that the
aggregate outstanding principal balance of the Mortgage Loans for such series
at the time of purchase shall be less than a percentage of the aggregate
principal balance at the Cut-Off Date specified in the Prospectus Supplement.
The exercise of such right will result in the early retirement of the
Certificates of that series.
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MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of the material legal aspects
of mortgage loans.
General
The Mortgages will be either deeds of trust or mortgages. A mortgage
creates a lien upon the real property encumbered by the mortgage. It is not
prior to the lien for real estate taxes and assessments. Priority between
mortgages depends on their terms and generally on the order of filing with a
state or county office. There are two parties to a mortgage: the mortgagor, who
is the borrower and homeowner or the land trustee or the trustee of an inter
vivos revocable trust (as described below), and the mortgagee, who is the
lender. Under the mortgage instrument, the mortgagor delivers to the mortgagee
a note or bond and the mortgage. In the case of a land trust, there are three
parties because title to the property is held by a land trustee under a land
trust agreement of which the borrower/homeowner is the beneficiary; at
origination of a mortgage loan, the borrower executes a separate undertaking to
make payments on the mortgage note. In the case of an inter vivos revocable
trust, there are three parties because title to the property is held by the
trustee under the trust instrument of which the home occupant is the primary
beneficiary; at origination of a mortgage loan, the primary beneficiary and the
trustee execute a mortgage note and the trustee executes a mortgage or deed of
trust, with the primary beneficiary agreeing to be bound by its terms. Although
a deed of trust is similar to a mortgage, a deed of trust normally has three
parties, the borrower-homeowner called the trustor (similar to a mortgagor), a
lender (similar to a mortgagee) called the beneficiary, and a third-party
grantee called the trustee. Under a deed of trust, the borrower grants the
property, irrevocably until the debt is paid, in trust and generally with a
power of sale, to the trustee to secure payment of the obligation. The
trustee's authority under a deed of trust and the mortgagee's authority under a
mortgage are governed by the law of the state in which the real property is
located, as well as by federal law, the express provisions of the deed of trust
or mortgage and, in some cases, the directions of the beneficiary.
Foreclosure
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell the property to a third party upon any default by the
borrower under the terms of the note or deed of trust. In some states, the
trustee must record a notice of default and send a copy to the borrower-trustor
and any person who has recorded a request for a copy of a notice of default and
notice of sale. In addition, the trustee must provide notice in some states to
any other individual having an interest in the real property, including any
junior lien holders. The borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. Generally, state law controls the amount
of foreclosure expenses and costs, including attorney's fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of sale
must be posted in a public place and, in most states, published for a specific
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest in the real property.
Foreclosure of a mortgage is generally accomplished by judicial action.
The action is initiated by the service of legal pleadings upon all parties
having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties defendant. Judicial foreclosure proceedings are often not protested by
any of the parties defendant. However, when the mortgagee's right to foreclose
is contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of judicial foreclosure, the court generally
issues a judgment of foreclosure and appoints a referee or other court officer
to conduct the sale of the property.
A junior mortgagee may not foreclose on the property securing a junior
mortgage unless it forecloses subject to the senior mortgages, in which case it
must either pay the entire amount due on the senior mortgages to the senior
mortgagees prior to or at the time of the foreclosure sale or undertake the
obligation to make payments on the senior mortgages in the event the mortgagor
is in default thereunder. In either event, the amounts expended are added to
the balance due on the junior loan, and the rights of the junior mortgagee may
be subrogated to the rights of the senior mortgagees. In addition, in the event
that the foreclosure of a junior mortgage
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triggers the enforcement of a "due-on-sale" clause, the junior mortgagee may be
required to pay the full amount of the senior mortgages to the senior
mortgagees. Accordingly, with respect to those Mortgage Loans which are junior
mortgage loans, if the lender purchases the property, the lender's title will
be subject to all senior liens and claims 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 or deed of trust under which the sale was
conducted. Any remaining proceeds are generally payable to the holders of
junior mortgages or deeds of trust and other liens and claims in order of their
priority, whether or not the borrower is in default. Any additional proceeds
are generally payable to the mortgagor or trustor. The payment of the proceeds
to the holders of junior mortgages may occur in the foreclosure action of the
senior mortgagee or may require the institution of separate legal proceeds.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the property at the
foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or referee for an amount equal to the principal amount of the
mortgage or deed of trust, accrued and unpaid interest and expenses of
foreclosure. Thereafter, the lender will assume the burdens of ownership,
including obtaining casualty insurance, paying taxes and making such repairs at
its own expense as are necessary to render the property suitable for sale. The
lender will commonly obtain the services of a real estate broker and pay the
broker's commission in connection with the sale of the property. Depending upon
market conditions, the ultimate proceeds of the sale of the property may not
equal the lender's investment in the property. Any loss may be reduced by the
receipt of any mortgage insurance proceeds.
In foreclosure, courts have imposed general equitable principles. The
equitable principles are generally designed to relieve the borrower from the
legal effect of its defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that the lenders reinstate loans or
recast payment schedules in order to accommodate borrowers who are suffering
from temporary financial disability. In other cases, courts have limited the
right of a lender to foreclose if the default under the mortgage instrument is
not monetary, such as the borrower's failure to adequately maintain the
property or the borrower's execution of a second mortgage or deed of trust
affecting the property.
Some courts have been faced with the issue of whether or not federal or
state constitutional provisions reflecting due process concerns for adequate
notice require that borrowers under deeds of trust or mortgages receive notices
in addition to the statutorily prescribed minimum. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust, or under a mortgage having a power
of sale, does not involve sufficient state action to afford constitutional
protections to the borrower.
Right of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, the right to redeem is an equitable right. The equity of redemption,
which is a non-statutory right that must be exercised prior to a foreclosure
sale, should be distinguished from statutory rights of redemption. In some
states, redemption may occur only upon payment of the entire principal balance
of the loan, accrued interest and expenses of foreclosure. In other states,
redemption may be authorized if the former borrower pays only a portion of the
sums due. The effect of a statutory right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The rights of redemption
would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect
of the redemption right is to force the lender to retain the property and pay
the expenses of ownership until the redemption period has run.
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Anti-Deficiency Legislation and Other Limitations on Lenders
Anti-Deficiency Statutes
Certain states have imposed statutory prohibitions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former borrower equal in most cases to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender. Other statutes require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. Finally, other statutory provisions limit any deficiency judgment
against the former borrower 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
beneficiary or a mortgagee from obtaining a large deficiency judgment against
the former borrower as a result of low or no bids at the judicial sale.
Bankruptcy Laws
In addition to laws limiting or prohibiting deficiency judgments, numerous
other 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 and/or enforce a
deficiency judgment. For example, with respect to federal bankruptcy law, the
filing of a petition acts as a stay against the enforcement of remedies in
connection with the collection of a debt. Moreover, a court with federal
bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or
Chapter 13 plan of reorganization 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 if
the borrower has filed a petition under Chapter 11 or Chapter 13. These courts
have suggested that such modifications may include reducing the amount of each
monthly payment, changing the rate of interest, altering the repayment schedule
and reducing the lender's security interest to the value of the residence, thus
leaving the lender a general unsecured creditor for the difference between the
value of the residence and the outstanding balance of the loan. If the borrower
has filed a petition under Chapter 13, federal bankruptcy law and limited case
law indicate that the foregoing modifications could not be applied to the terms
of a loan secured solely by property that is the principal residence of the
debtor. In all cases, the secured creditor is entitled to the value of its
security plus post-petition interest, attorneys' fees, if specifically provided
for, and costs to the extent the value of the security exceeds the debt.
Tax Liens
The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage. This may have the effect of
delaying or interfering with the enforcement of rights with respect to a
defaulted Mortgage Loan.
Consumer Protection Laws
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 and their implementing
regulations include the federal Truth in Lending Act (and Regulation Z), Real
Estate Settlement Procedures Act (and Regulation X), Equal Credit Opportunity
Act (and Regulation B), Fair Credit Billing Act, Fair Credit Reporting Act,
Fair Housing Act, as well as other related statutes and regulations. 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 In particular,
the
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originators' failure to comply with certain requirements of the federal
Truth-in-Lending Act, as implemented by Regulation Z, could subject both
originators and assignees of such obligations to monetary penalties and could
result in obligors rescinding the mortgage loans against either the originators
or assignees.
For Truth in Lending violations, one of the remedies available to the
borrowers under certain affected non-purchase money mortgage loans is
rescission, which, if elected by the borrower, would serve to cancel the loan
and merely require the borrower to pay the principal balance of the mortgage
loan, less a credit for interest paid, closing costs and prepaid finance
charges.
The Seller or another Representing Party will represent in the Agreement
that all applicable laws, including the Truth in Lending Act, were complied
with in connection with origination of the Mortgage Loans. In the event that
such representation is breached in respect of any Mortgage Loan in a manner
that materially and adversely affects Certificateholders, the Seller or such
Representing Party will be obligated to repurchase the affected Mortgage Loan
at a price equal to the unpaid principal balance thereof plus accrued interest
as provided in the Agreement or to substitute a new mortgage loan in place of
the affected Mortgage Loan.
Enforceability of Due-on-Sale Clauses
Unless the Prospectus Supplement indicates otherwise, all of the Mortgage
Loans will contain due-on-sale clauses. These clauses permit the lender to
accelerate the maturity of a loan if the borrower sells, transfers, or conveys
the property. The enforceability of these clauses was the subject of
legislation or litigation in many states, and in some cases the enforceability
of these clauses was limited or denied. However, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act") preempts state
constitutional, statutory and case law prohibiting the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limited exceptions contained in the
Garn-St Germain Act and regulations promulgated by Office of Thrift Supervision
(the "OTS"), as successor to the Federal Home Loan Bank Board. The Garn-St
Germain Act does "encourage" lenders to permit assumption of loans at the
original rate of interest or at some other rate less than the average of the
original rate and the market rate.
Due-on-sale clauses contained in mortgage loans originated by federal
savings and loan associations or federal savings banks are fully enforceable
pursuant to regulations of the OTS which preempt state law restrictions on the
enforcement of due-on-sale clauses.
The Garn-St Germain Act also sets forth nine specific instances in which a
mortgage lender covered by the Garn-St Germain 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 three years or less and the creation of a junior encumbrance.
Regulations promulgated under the Garn-St Germain Act by the Federal Home Loan
Bank Board as succeeded by the OTS also prohibit the imposition of a prepayment
penalty upon the acceleration of a loan pursuant to a due-on-sale clause. If
interest rates were to rise above the interest rates on the Mortgage Loans,
then any inability of the Servicer to enforce due-on-sale clauses may result in
the Trust Fund including a greater number of loans bearing below-market
interest rates than would otherwise be the case, since a transferee of the
property underlying a Mortgage Loan would have a greater incentive in such
circumstances to assume the transferor's Mortgage Loan. Any inability of the
Servicer to enforce due-on-sale clauses may affect the average life of the
Mortgage Loans and the number of Mortgage Loans that may be outstanding until
maturity.
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. The OTS, as successor
to the Federal Home Loan
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Bank Board, 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 which 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.
Under the Agreement for each series of Certificates, the Seller will
represent and warrant to the Trustee that the Mortgage Loans have been
originated in compliance in all material respects with applicable state laws,
including usury laws.
Soldiers' and Sailors' Civil Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination for such borrower's Mortgage Loan (including a borrower 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 borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies
to borrowers who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard, and officers of the U.S. Public Health Service
ordered to federal duty with the military. Because the Relief Act applies to
borrowers 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 for the Master Servicer to collect full amounts of
interest on certain of the Mortgage Loans. Any shortfalls in interest
collections resulting from the application for the Relief Act will be allocated
on a pro rata basis to the Certificates. In addition, the Relief Act imposes
limitations that would impair the ability of the Master Servicers to foreclose
on an affected Mortgage Loan during the borrower'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.
Under the applicable Agreement, the Servicer will not be required to make
deposits to the Collection Account for a series of Certificates in respect of
any Mortgage Loan as to which the Relief Act has limited the amount of interest
the related borrower is required to pay each month, and Certificateholders will
bear such loss.
Late Charges, Default Interest and Limitations on Prepayment
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower
for delinquent payments. Certain states also limit the amounts that a lender
may collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon involuntary prepayment is unclear under the laws of many states.
Most conventional single-family mortgage loans may be prepaid in full or in
part without penalty. The regulations of the Federal Home Loan Bank Board, as
succeeded by the OTS, prohibit the imposition of a prepayment penalty or
equivalent fee for or in connection with the acceleration of a loan by exercise
of a due-on-sale clause. A mortgagee to whom a prepayment in full has been
tendered may be compelled to give either a release of the mortgage or an
instrument assigning the existing mortgage. The absence of a restraint on
prepayment, particularly with respect to Mortgage Loans having higher mortgage
rates, may increase the likelihood of refinancing or other early retirements of
the Mortgage Loans.
Environmental Considerations
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), and under state law in certain states, a
secured party which takes a deed-in-lieu of foreclosure, purchases a mortgaged
property at a foreclosure sale, or operates a mortgaged property may become
liable in
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certain circumstances for the costs of cleaning up hazardous substances
regardless of whether they have contaminated the property. CERCLA imposes
strict, as well as joint and several, liability on several classes of
potentially responsible parties, including current owners and operators of the
property who did not cause or contribute to the contamination. Furthermore,
liability under CERCLA is not limited to the original or unamortized principal
balance of a loan or to the value of the property securing a loan. Lenders may
be held liable under CERCLA as owners or operators unless they qualify for the
secured creditor exemption to CERCLA. This exemption exempts from the
definition of owners and operators those who, without participating in the
management of a facility, hold indicia of ownership primarily to protect a
security interest in the facility.
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996
(the "Conservation Act") amended, among other things, the provisions of CERCLA
with respect to lender liability and the secured creditor exemption. The
Conservation Act offers substantial protection to lenders by defining the
activities in which a lender can engage and still have the benefit of the
secured creditor exemption. In order for lender to be deemed to have
participated in the management of a mortgaged property, the lender must
actually participate in the operational affairs of the property of the
borrower. The Conservation Act provides that "merely having the capacity to
influence, or unexercised right to control" operations does not constitute
participation management. A lender will lose the protection of the secured
creditor exemption only if it exercises decision-making control over the
borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the mortgaged property. The Conservation Act also provides that a
lender will continue to have the benefit of the secured creditor exemption even
if it forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell
the mortgaged property at the earliest practicable commercially reasonable time
on commercially reasonable terms.
Other federal and state laws in certain circumstances may impose liability
on a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a mortgaged property on
which contaminants other than CERCLA hazardous substances are present,
including petroleum, agricultural chemicals, hazardous wastes, asbestos, radon,
and lead-based paint. Such cleanup costs may be substantial. It is possible
that such cleanup costs could become a liability of a Trust Fund and reduce the
amounts otherwise distributable to the holders of the related series of
Certificates. Moreover, certain federal statutes and certain states by statute
impose a lien for any cleanup costs incurred by such state on the property that
is the subject of such cleanup costs (an "Environmental Lien"). All subsequent
liens on such property generally are subordinated to Environmental Liens. In
the latter states, the security interest of the Trustee in a related parcel of
real property that is subject to such an Environmental Lien could be adversely
affected.
Traditionally, many residential mortgage lenders have not taken steps to
evaluate whether contaminants are present with respect to any mortgaged
property prior to the origination of the mortgage loan or prior to foreclosure
or accepting a deed-in-lieu of foreclosure. Neither the Seller nor any
replacement Servicer will be required by any Agreement to undertake any such
evaluations prior to foreclosure or accepting a deed-in-lieu of foreclosure.
The Seller does not make any representations or warranties or assume any
liability with respect to the absence or effect of contaminants on any related
real property or any foreclose on related real property or accept a
deed-in-lieu of foreclosure if it knows or reasonably believes that there are
material contaminated conditions on such property. A failure so to foreclose
may reduce the amounts otherwise available to Certificateholders of the related
series.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, no environmental assessment or a
very limited environment assessment of the Mortgaged Properties will have been
conducted.
Forfeiture in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of
drug-related crimes or 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
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.
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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.
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LEGAL INVESTMENT MATTERS
The Prospectus Supplement for each series of Certificates will specify,
which, if any, of the classes of Certificates offered thereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). The appropriate characterization
of those Certificates not qualifying as "mortgage related securities"
("Non-SMMEA Certificates") under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase such
Certificates, may be subject to interpretive uncertainties. Accordingly,
investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether and to what extent the
Non-SMMEA Certificates constitute legal investments for them.
Generally, only classes of Certificates that (i) are rated in one of the
two highest rating categories by one or more nationally recognized statistical
rating organizations and (ii) are part of a series evidencing interests in a
Trust Fund consisting of Mortgage Loans, each secured by, among other things,
first liens on a single parcel of real estate upon which is located a dwelling
or mixed residential and commercial structure, such as certain multifamily
loans, originated by certain types of originators as specified in SMMEA, will
be "mortgage related securities" for purposes of SMMEA. As "mortgage related
securities", such classes will constitute legal investments for persons,
trusts, corporations, partnerships, associations, business trusts and business
entities (including but not limited to, state-chartered depository institutions
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.
Pursuant to SMMEA, a number of states enacted legislation, on or before
the October 3, 1991 cutoff 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. Accordingly,
the investors affected by such legislation will be authorized to invest in
Certificates qualifying as "mortgage related securities" only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in 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. Section 24 (Seventh), subject in each case to such regulations as the
applicable federal regulatory authority may prescribe. In this connection, the
Office of the Comptroller of the Currency (the "OCC") amended 12 C.F.R. Part 1
to authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards in 12 C.F.R. Section 1.5 concerning
"safety and soundness" and retention of credit information), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(1) to include certain "residential
mortgage-related securities." As so defined, "residential mortgage-related
security" means, in relevant part, "mortgage related security" within the
meaning of SMMEA. The National Credit Union Administration ("NCUA") has adopted
rules, codified at 12 C.F.R. Part 703, which permit federal credit unions to
invest in "mortgage related securities" under certain limited circumstances,
other than stripped mortgage related securities and residual interests in
mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140. The OTS has issued Thrift Bulletin 13a
(December 1, 1998), "Management of Interest Rate Risk, Investment Securities and
Derivative Activities," which thrift institutions subject to the jurisdiction of
the OTS should consider before investing in any of the Certificates.
All depository institutions considering an investment in the Certificates
should review the "Supervisory Policy Statement on Investment Securities and
End-User Derivatives Activities" (the "1998 Policy Statement") of the Federal
Financial Institutions Examination Council, which has been adopted by the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the OCC and OTS, effective May 26, 1998, and by the NCUA,
effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines
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which depository institutions must follow in managing risks (including market,
credit, liquidity, operational (transaction), and legal risks) applicable to
all securities (including mortgage pass-through securities and
mortgage-derivative products) used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as certain series or classes may be deemed to be unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
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, provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying", and with regard to any Certificates issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain Certificates as "mortgage related
securities," no representation is made as to the proper characterization of the
Certificates for legal investment purposes, financial institution regulatory
purposes, or other purposes, or as to the ability of particular investors to
purchase Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial regulatory characteristics of the
Certificates) may adversely affect the liquidity of the Certificates. Investors
should consult their own legal advisors in determining whether and to what
extent the Certificates constitute legal investments for such investors or are
subject to investment, capital or other restrictions and, if applicable,
whether SMMEA has been overridden in any jurisdiction relevant to such
investor.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Internal Revenue Code of 1986, as amended, (the "Code") impose
requirements on employee benefit plans (including retirement plans and
arrangements, collective investment funds and separate accounts in which such
plans, accounts or arrangements are invested) subject to ERISA or the Code
(collectively, "Plans") and on persons who are fiduciaries with respect to such
Plans. Among other things, ERISA requires that the assets of a Plan subject to
ERISA be held in trust and that the trustee, or other duly authorized
fiduciary, have exclusive authority and discretion to manage and control the
assets of such Plan. ERISA also imposes certain duties on persons who are
fiduciaries with respect to a Plan. Under ERISA, any person who exercises any
authority or control respecting the management or disposition of the assets of
a Plan generally is considered to be a fiduciary of such Plan. In addition to
the imposition by ERISA of general fiduciary standards of investment prudence
and diversification, ERISA and Section 4975 of the Code prohibit a broad range
of transactions involving Plan assets and persons having certain specified
relationships to a Plan ("Parties in Interest") and impose additional
prohibitions where Parties in Interest are fiduciaries with respect to such
Plan.
The United States Department of Labor (the "DOL") has issued regulations
concerning the definition of what constitutes the assets of a Plan (DOL Reg.
Section 2510.3-101). Under this regulation, the underlying assets and
properties of corporations, partnerships and certain other entities in which a
Plan makes an "equity" investment could be deemed for purposes of ERISA and
Section 4975 of the Code to be assets of the investing Plan in certain
circumstances. In such a case, the fiduciary making such an investment for the
Plan could be deemed to have delegated the fiduciary's asset management
responsibility, the underlying assets and properties could be subject to the
reporting and disclosure requirements of ERISA, and transactions involving the
underlying assets and properties could be subject to the fiduciary
responsibility requirements of ERISA and Section 4975 of the Code. Certain
exceptions to the regulation may apply in the case of a Plan's investment in
the Certificates, but it cannot be predicted in advance whether such exceptions
will apply due to the factual nature of the conditions to be met. Accordingly,
because the Mortgage Loans may be deemed Plan assets of each Plan that
purchases Certificates, an investment in the Certificates by a Plan might give
rise to a prohibited transaction under ERISA Sections 406 or 407 and be subject
to an excise tax under Code Section 4975 unless a statutory or administrative
exemption applies.
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DOL Prohibited Transaction Class Exemption 83-1 ("PTE 83-1") exempts from
the prohibited transaction rules of ERISA and Section 4975 of the Code certain
transactions relating to the operation of residential mortgage pool investment
trusts and the direct or indirect sale, exchange, transfer and holding of
"mortgage pool pass-through certificates" in the initial issuance of such
certificates. PTE 83-1 permits, subject to certain conditions, transactions
which might otherwise be prohibited between Plans and Parties in Interest with
respect to those Plans involving the origination, maintenance and termination
of mortgage pools consisting of mortgage loans secured by either first or
second mortgages, or deeds of trust on single-family residential property, and
the acquisition and holding of certain mortgage pool pass-through certificates
representing an interest in such mortgage pools by Plans.
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system
of insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying certificateholders against reductions
in pass-through payments due to property damage or defaults in loan payments in
an amount not less than the greater of one percent of the aggregate principal
balance of all covered pooled mortgage loans or the principal balance of the
largest covered pooled mortgage loan; (ii) the existence of a pool trustee who
is not an affiliate of the pool sponsor (other than generally in the event of a
default by the pool sponsor which causes the pool trustee to assume duties of
the sponsor); and (iii) a limitation on the amount of the payments retained by
the pool sponsor, together with other funds inuring to its benefit, to not more
than adequate consideration for selling the mortgage loans plus reasonable
compensation for services provided by the pool sponsor to the mortgage pool.
Although the Trustee for any series of Certificates will be unaffiliated
with the Servicer, there can be no assurance that the first or third conditions
of PRE 83-1 referred to above will be satisfied with respect to any
Certificates. In addition, the nature of a trust fund's assets or the
characteristics of one or more classes of the related series of Certificates
may not be included within the scope of PTE 83-1 or any other class exemption
under ERISA.
Several underwriters of mortgage-backed securities have applied for and
obtained individual prohibited transaction exemptions which are in some
respects broader than PTE 83-1. Such exemptions only apply to mortgage-backed
securities which, in addition to satisfying other conditions, are sold in an
offering with respect to which such underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If such an exemption
might be applicable to a series of Certificates, the related Prospectus
Supplement will refer to such possibility. In addition, there may also be other
class exemptions that are available to provide relief from the prohibited
transaction provisions of ERISA and the Code.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Certificates must make
its own determination as to whether the general and the specific conditions of
PTE 83-1 have been satisfied, or as to the availability of any other prohibited
transaction exemptions. Each Plan fiduciary should also determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Any Plan proposing to invest in Certificates should consult with its
counsel to confirm that such investment will not result in a prohibited
transaction and will satisfy the other requirements of ERISA and the Code. The
sale of Certificates to a Plan is in no respect a representation by any party
that this investment meets all relevant legal requirements with respect to
investments by Plans generally or by any particular Plan, or that this
investment is appropriate for Plans generally or for any particular Plan.
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FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion represents the opinion of Morgan, Lewis & Bockius
LLP as to the material federal income tax consequences of purchasing, owning
and disposing of Certificates. It does not address special rules which may
apply to particular types of investors. The authorities on which this
discussion is based are subject to change or differing interpretations, and any
such change or interpretation could apply retroactively. It is recommended that
investors consult their own tax advisors regarding the Certificates.
For purposes of this discussion, unless otherwise specified, the term
"Owner" will refer to the beneficial owner of a Certificate.
REMIC Elections
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election may be made to treat the Trust Fund related to each Series of
Certificates (or segregated pools of assets within the Trust Fund) as a "real
estate mortgage investment conduit" ("REMIC") within the meaning of Section
860D(a) of the Code. If one or more REMIC elections are made, the Certificates
of any class will be either "regular interests" in a REMIC within the meaning
of Section 860G(a)(1) of the Code ("Regular Certificates") or "residual
interests" in a REMIC within the meaning of Section 860G(a)(2) of the Code
("Residual Certificates"). The Prospectus Supplement for each Series of
Certificates will indicate whether an election will be made to treat the Trust
Fund as one or more REMICs, and if so, which Certificates will be Regular
Certificates and which will be Residual Certificates.
If a REMIC election is made, the Trust Fund, or each portion thereof that
is treated as a separate REMIC, will be referred to as a "REMIC Pool". If the
Trust Fund is comprised of two REMIC Pools, one will be an "Upper-Tier REMIC"
and one a "Lower-Tier REMIC". The assets of the Lower-Tier REMIC will consist
of the Mortgage Loans and related Trust Fund assets. The assets of the
Upper-Tier REMIC will consist of all of the regular interests issued by the
Lower-Tier REMIC.
The discussion below under the heading "REMIC Certificates" considers
Series for which a REMIC election will be made. Series for which no such
election will be made are addressed under "Non-REMIC Certificates".
REMIC Certificates
The discussion in this section applies only to a Series of Certificates
for which a REMIC election is made.
Tax Opinion.
Qualification as a REMIC requires ongoing compliance with certain
conditions. Upon the issuance of each Series of Certificates for which a REMIC
election is made, Morgan, Lewis & Bockius LLP, counsel to the Seller, will
deliver an additional opinion, dated as of the date of such issuance, that with
respect to each such Series of Certificates, under then existing law and
assuming compliance by the Seller, the Servicer and the Trustee for such Series
with all of the provisions of the related Agreement (and such other agreements
and representations as may be referred to in such opinion), each REMIC Pool
will be a REMIC, and the Certificates of such Series will be treated as either
Regular Certificates or Residual Certificates.
Status of Certificates.
The Certificates will be:
o assets described in Code Section 7701(a)(19)(C) (relating to the
qualification of certain corporations, trusts, or associations as real
estate investment trusts); and
o "real estate assets" under Code Section 856(c)(5)(B) (relating to real
estate interests, interests in real estate mortgages, and shares or
certificates of beneficial interests in real estate investment trusts), to
the extent the assets of the related REMIC Pool are so treated. Interest
on the Regular Certificates will be
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"interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Code Section
856(c)(3)(B) in the same proportion that the income of the REMIC Pool is
so treated. If at all times 95% or more of the assets or income of the
REMIC Pool qualifies under the foregoing Code sections, the Certificates
(and income thereon) will so qualify in their entirety.
The rules described in the two preceding paragraphs will be applied to a
Trust Fund consisting of two REMIC Pools as if the Trust Fund were a single
REMIC holding the assets of the Lower-Tier REMIC.
Income from Regular Certificates.
General. Except as otherwise provided in this tax discussion, Regular
Certificates will be taxed as newly originated debt instruments for federal
income tax purposes. Interest, original issue discount and market discount
accrued on a Regular Certificate will be ordinary income to the Owner. All
Owners must account for interest income under the accrual method of accounting,
which may result in the inclusion of amounts in income that are not currently
distributed in cash.
Except as otherwise noted, the discussion below is based upon regulations
adopted by the Internal Revenue Service applying the original issue discount
rules of the Code ("the OID Regulations").
Original Issue Discount. Certain Regular Certificates may have "original
issue discount." An Owner must include original issue discount in income as it
accrues, without regard to the timing of payments.
The total amount of original issue discount on a Regular Certificate is
the excess of its "stated redemption price at maturity" over its "issue price."
The issue price for any Regular Certificate is the price (including any accrued
interest) at which a substantial portion of the class of Certificates including
such Regular Certificate are first sold to the public. In general, the stated
redemption price at maturity is the sum of all payments made on the Regular
Certificate, other than payments of interest that (i) are actually payable at
least annually over the entire life of the Certificates and (ii) are based on a
single fixed rate or variable rate (or certain combinations of fixed and
variable rates). The stated redemption price at maturity of a Regular
Certificate always includes its original principal amount, but generally does
not include distributions of stated interest, except in the case of Accrual
Certificates, and, as discussed below, Interest Only Certificates. An "Interest
Only Certificate" is a Certificate entitled to receive distributions of some or
all of the interest on the Mortgage Loans or other assets in a REMIC Pool and
that has either a notional or nominal principal amount. Special rules for
Regular Certificates that provide for interest based on a variable rate are
discussed below in "Income from Regular Certificates -- Variable Rate Regular
Certificates".
With respect to an Interest Only Certificate, the stated redemption price
at maturity is likely to be the sum of all payments thereon, determined in
accordance with the Prepayment Assumption (as defined below). In that event,
Interest Only Certificates would always have original issue discount.
Alternatively, in the case of an Interest Only Certificate with some principal
amount, the stated redemption price at maturity might be determined under the
general rules described in the preceding paragraph. If, applying those rules,
the stated redemption price at maturity were considered to equal the principal
amount of such Certificate, then the rules described below under "Premium"
would apply. The Prepayment Assumption is the assumed rate of prepayment of the
Mortgage Loans used in pricing the Regular Certificates. The Prepayment
Assumption will be set forth in the related Supplement.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered zero if it is less than 0.25% of the Certificate's stated
redemption price at maturity multiplied by the Certificate's weighted average
maturity. The weighted average maturity of a Regular Certificate is computed
based on the number of full years (i.e., rounding down partial years) each
distribution of principal (or other amount included in the stated redemption
price at maturity) is scheduled to be outstanding. The schedule of such
distributions should be determined in accordance with the Prepayment
Assumption.
The Owner of a Regular Certificate must include in income the original
issue discount that accrues for each day on which the Owner holds such
Certificate, including the date of purchase, but excluding the date of
disposition. The original issue discount accruing in any period equals:
PV End + Dist - PV Beg
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Where:
PV End = present value of all remaining distributions to be made as of the end
of the period;
Dist = distributions made during the period includible in the stated redemption
price at maturity; and
PV Beg = present value of all remaining distributions as of the beginning of
the period.
The present value of the remaining distributions is calculated based on
(i) the original yield to maturity of the Regular Certificate, (ii) events
(including actual prepayments) that have occurred prior to the end of the
period and (iii) the Prepayment Assumption. For these purposes, the original
yield to maturity of a Regular Certificate will be calculated based on its
issue price, assuming that the Certificate will be prepaid in all periods in
accordance with the Prepayment Assumption, and with compounding at the end of
each accrual period used in the formula.
Assuming the Regular Certificates have monthly Distribution Dates,
discount would be computed under the formula generally for the one-month
periods (or shorter initial period) ending on each Distribution Date. The
original issue discount accruing during any accrual period is divided by the
number of days in the period to determine the daily portion of original issue
discount for each day.
The daily portions of original issue discount will increase if prepayments
on the underlying Mortgage Loans exceed the Prepayment Assumption and decrease
if prepayments are slower than the Prepayment Assumption (changes in the rate
of prepayments having the opposite effect in the case of an Interest Only
Certificate). If the relative principal payment priorities of the classes of
Regular Certificates of a Series change, any increase or decrease in the
present value of the remaining payments to be made on any such class will
affect the computation of original issue discount for the period in which the
change in payment priority occurs.
If original issue discount computed as described above is negative for any
period, the Owner generally will not be allowed a current deduction for the
negative amount but instead will be entitled to offset such amount only against
future positive original issue discount from such Certificate.
Acquisition Premium. If an Owner of a Regular Certificate acquires such
Certificate at a price greater than its "adjusted issue price," but less than
its remaining stated redemption price at maturity, the daily portion for any
day (as computed above) is reduced by an amount equal to the product of (i)
such daily portion and (ii) a fraction, the numerator of which is the amount by
which the price exceeds the adjusted issue price and the denominator of which
is the sum of the daily portions for such Regular Certificate for all days on
and after the date of purchase. The adjusted issue price of a Regular
Certificate on any given day is its issue price, increased by all original
issue discount that has accrued on such Certificate and reduced by the amount
of all previous distributions on such Certificate of amounts included in its
stated redemption price at maturity.
Market Discount. A Regular Certificate may have market discount (as
defined in the Code). Market discount equals the excess of the adjusted issue
price of a Certificate over the Owner's adjusted basis in the Certificate. The
Owner of a Certificate with market discount must report ordinary interest
income, as the Owner receives distributions on the Certificate of principal or
other amounts included in its stated redemption price at maturity, equal to the
lesser of (a) the excess of the amount of those distributions over the amount,
if any, of accrued original issue discount on the Certificate or (b) the
portion of the market discount that has accrued and not previously been
included in income. Also, such Owner must treat gain from the disposition of
the Certificate as ordinary income to the extent of any accrued, but
unrecognized, market discount. Alternatively, an Owner may elect in any taxable
year to include market discount in income currently as it accrues on all market
discount instruments acquired by the Owner in that year or thereafter. An Owner
may revoke such an election only with the consent of the Internal Revenue
Service.
In general terms, market discount on a Regular Certificate may be treated,
at the Owner's election, as accruing either (a) on the basis of a constant
yield (similar to the method described above for accruing original issue
discount) or (b) alternatively, either (i) in the case of a Regular Certificate
issued without original issue discount, in the ratio of stated interest
distributable in the relevant period to the total stated interest remaining to
be distributed from the beginning of such period (computed taking into account
the Prepayment Assumption)
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or (ii) in the case of a Regular Certificate issued with original issue
discount, in the ratio of the amount of original issue discount accruing in the
relevant period to the total remaining original issue discount at the beginning
of such period. An election to accrue market discount on a Regular Certificate
on a constant yield basis is irrevocable with respect to that Certificate.
An Owner may be required to defer a portion of the deduction for interest
expense on any indebtedness that the Owner incurs or maintains in order to
purchase or carry a Regular Certificate that has market discount. The deferred
amount would not exceed the market discount that has accrued but not been taken
into income. Any such deferred interest expense is, in general, allowed as a
deduction not later than the year in which the related market discount income
is recognized.
Market discount with respect to a Regular Certificate will be considered
to be zero if such market discount is de minimis under a rule similar to that
described above in the fourth paragraph under "Original Issue Discount". Owners
should consult their own tax advisors regarding the application of the market
discount rules as well as the advisability of making any election with respect
to market discount.
Discount on a Regular Certificate that is neither original issue discount
nor market discount, as defined above, must be allocated ratably among the
principal payments on the Certificate and included in income (as gain from the
sale or exchange of the Certificate) as the related principal payments are made
(whether as scheduled payments or prepayments).
Premium. A Regular Certificate, other than an Accrual Certificate or, as
discussed above under "Original Issue Discount", an Interest Only Certificate,
purchased at a cost (net of accrued interest) greater than its principal amount
is considered to be purchased at a premium. The Owner may elect under Code
Section 171 to amortize such premium under the constant yield method, using the
Prepayment Assumption. To the extent the amortized premium is allocable to
interest income from the Regular Certificate, it is treated as an offset to
such interest rather than as a separate deduction. An election made by an Owner
would apply to all its debt instruments and may not be revoked without the
consent of the Internal Revenue Service.
Special Election to Apply OID Rules. In lieu of the rules described above
with respect to de minimis discount, acquisition premium, market discount and
premium, an Owner of a Regular Certificate may elect to accrue such discount,
or adjust for such premium, by applying the principles of the OID rules
described above. An election made by a taxpayer with respect to one obligation
can affect other obligations it holds. Owners should consult with their tax
advisors regarding the merits of making this election.
Retail Regular Certificates. For purposes of the original issue and market
discount rules, a repayment in full of a Retail Certificate that is subject to
payment in units or other increments, rather than on a pro rata basis with
other Retail Certificates, will be treated in the same manner as any other
prepayment.
Variable Rate Regular Certificates. The Regular Certificates may provide
for interest that varies based on an interest rate index. The OID Regulations
provide special rules for calculating income from certain "variable rate debt
instruments" or "VRDIs." A debt instrument must meet certain technical
requirements to qualify as a VRDI, which are outlined in the next paragraph.
Under the regulations, income on a VRDI is calculated by (1) creating a
hypothetical debt instrument that pays fixed interest at rates equivalent to
the variable interest, (2) applying the original issue discount rules of the
Code to that fixed rate instrument, and (3) adjusting the income accruing in
any accrual period by the difference between the assumed fixed interest amount
and the actual amount for the period. In general, where a variable rate on a
debt instrument is based on an interest rate index (such as LIBOR), a fixed
rate equivalent to a variable rate is determined based on the value of the
index as of the issue date of the debt instrument. In cases where rates are
reset at different intervals over the life of a VRDI, adjustments are made to
ensure that the equivalent fixed rate for each accrual period is based on the
same reset interval.
A debt instrument must meet a number of requirements in order to qualify
as a VRDI. A VRDI cannot be issued at a premium above its principal amount that
exceeds a specified percentage of its principal amount (15% or if less, 1.5%
times its weighted average life). As a result, Interest Only Certificates will
never be VRDIs. Also, a debt instrument that pays interest based on a multiple
of an interest rate index is not a VRDI if the multiple is less than or equal
to 0.65 or greater than 1.35, unless, in general, interest is paid based on a
single formula
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that lasts over the life of the instrument. A debt instrument is not a VRDI if
it is subject to caps and floors, unless they remain the same over the life of
the instrument or are not expected to change significantly the yield on the
instrument. Variable rate Regular Certificates other than Interest Only
Certificates may or may not qualify as VRDIs depending on their terms.
In a case where a variable rate Regular Certificate does not qualify as a
VRDI, it will be treated under the OID Regulations as a contingent payment debt
instrument. The Internal Revenue Service has issued final regulations
addressing contingent payment debt instruments, but such regulations are not
applicable by their terms to REMIC regular interests. Until further guidance is
forthcoming, one method of calculating income on such a Regular Certificate
that appears to be reasonable would be to apply the principles governing VRDIs
outlined above.
Subordinated Certificates. Certain Series of Certificates may contain one
or more classes of subordinated Certificates. In the event there are defaults
or delinquencies on the related Mortgage Loans, amounts that otherwise would be
distributed on a class of subordinated Certificates may instead be distributed
on other more senior classes of Certificates. Since Owners of Regular
Certificates are required to report income under an accrual method, Owners of
subordinated Certificates will be required to report income without giving
effect to delays and reductions in distributions on such Certificates
attributable to defaults or delinquencies on the Mortgage Loans, except to the
extent that it can be established that amounts are uncollectible. As a result,
the amount of income reported by an Owner of a subordinated Certificate in any
period could significantly exceed the amount of cash distributed to such Owner
in that period. The Owner will eventually be allowed a loss (or 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 Loans. Such a loss could in some
circumstances be a capital loss. Also, the timing and amount of such losses or
reductions in income are uncertain. Owners of subordinated Certificates should
consult their tax advisors on these points.
Income from Residual Certificates.
Taxation of REMIC Income. Owners of Residual Certificates in a REMIC Pool
("Residual Owners") must report ordinary income or loss equal to their pro rata
shares (based on the portion of all Residual Certificates they own) of the
taxable income or net loss of the REMIC. Such income must be reported
regardless of the timing or amounts of distributions on the Residual
Certificates.
The taxable income of a REMIC Pool is determined under the accrual method
of accounting in the same manner as the taxable income of an individual
taxpayer. Taxable income is generally gross income, including interest and
original issue discount income, if any, on the assets of the REMIC Pool and
income from the amortization of any premium on Regular Certificates, minus
deductions. Market discount (as defined in the Code) with respect to Mortgage
Loans held by a REMIC Pool is recognized in the same fashion as if it were
original issue discount. Deductions include interest and original issue
discount expense on the Regular Certificates, reasonable servicing fees
attributable to the REMIC Pool, other administrative expenses and amortization
of any premium on assets of the REMIC Pool. As previously discussed, the timing
of recognition of "negative original issue discount," if any, on a Regular
Certificate is uncertain; as a result, the timing of recognition of the
corresponding income to the REMIC Pool is also uncertain.
If the Trust Fund consists of an Upper-Tier REMIC and a Lower-Tier REMIC,
the OID Regulations provide that the regular interests issued by the Lower-Tier
REMIC to the Upper- Tier REMIC will be treated as a single debt instrument for
purposes of the original issue discount provisions. A determination that these
regular interests are not treated as a single debt instrument would have a
material adverse effect on the Owners of Residual Certificates issued by the
Lower-Tier REMIC.
A Residual Owner may not amortize the cost of its Residual Certificate.
Taxable income of the REMIC Pool, however, will not include cash received by
the REMIC Pool that represents a recovery of the REMIC Pool's initial basis in
its assets, and such basis will include the issue price of the Residual
Certificates (assuming the issue price is positive). Such recovery of basis by
the REMIC Pool will have the effect of amortization of the issue price of the
Residual Certificate over its life. The period of time over which such issue
price is
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effectively amortized, however, may be longer than the economic life of the
Residual Certificate. The issue price of a Residual Certificate is the price at
which a substantial portion of the class of Certificates including the Residual
Certificate are first sold to the public (or if the Residual Certificate is not
publicly offered, the price paid by the first buyer).
A subsequent Residual Owner must report the same amounts of taxable income
or net loss attributable to the REMIC Pool as an original Owner. No adjustments
are made to reflect the purchase price.
Losses. A Residual Owner that is allocated a net loss of the REMIC Pool
may not deduct such loss currently to the extent it exceeds the Owner's
adjusted basis (as defined in "Sale or Exchange of Certificates" below) in its
Residual Certificate. A Residual Owner that is a U.S. person (as defined below
in "Taxation of Certain Foreign Investors"), however, may carry over any
disallowed loss to offset any taxable income generated by the same REMIC Pool.
Excess Inclusions. A portion of the taxable income allocated to a Residual
Certificate is subject to special tax rules. That portion, referred to as an
"excess inclusion," is calculated for each calendar quarter and equals the
excess of such taxable income for the quarter over the daily accruals for the
quarter. The daily accruals equal the product of (i) 120% of the federal
long-term rate under Code Section 1274(d) for the month which includes the
Closing Date (determined on the basis of quarterly compounding and properly
adjusted for the length of the quarter) and (ii) the adjusted issue price of
the Certificate at the beginning of such quarter. The adjusted issue price of a
Residual Certificate at the beginning of a quarter is the issue price of the
Certificate, plus the amount of daily accruals on the Certificate for all prior
quarters, decreased (but not below zero) by any prior distributions on the
Certificate. If the aggregate value of the Residual Certificates is not
considered to be "significant," then to the extent provided in Treasury
regulations, a Residual Owner's entire share of REMIC taxable income will be
treated as an excess inclusion. The regulations that have been adopted under
Code Sections 860A through 860G (the "REMIC Regulations") do not contain such a
rule.
Excess inclusions generally may not be offset by unrelated losses or loss
carryforwards or carrybacks of a Residual Owner. In addition, for all taxable
years beginning after August 20, 1996, and unless a Residual Owner elects
otherwise for all other taxable years, the alternate minimum taxable income of
a Residual Owner for a taxable year may not be less than the Residual Owner's
excess inclusions for the taxable year and excess inclusions are disregarded
when calculating a Residual Owner's alternate minimum tax operating loss
deduction.
Excess inclusions are treated as unrelated business taxable income for an
organization subject to the tax on unrelated business income. In addition,
under Treasury regulations yet to be issued, if a real estate investment trust,
regulated investment company or certain other pass-through entities are
Residual Owners, a portion of the distributions made by such entities may be
treated as excess inclusions.
Distributions. Distributions on a Residual Certificate (whether at their
scheduled times or as a result of prepayments) generally will not result in any
taxable income or loss to the Residual Owner. If the amount of any distribution
exceeds a Residual Owner's adjusted basis in its Residual Certificate, however,
the Residual Owner will recognize gain (treated as gain from the sale or
exchange of its Residual Certificate) to the extent of such excess. See "Sale
or Exchange of Certificates" below.
Prohibited Transactions; Special Taxes. Net income recognized by a REMIC
Pool from "prohibited transactions" is subject to a 100% tax and is disregarded
in calculating the REMIC Pool's taxable income. In addition, a REMIC Pool is
subject to federal income tax at the highest corporate rate on "net income from
foreclosure property." A 100% tax also applies to certain contributions to a
REMIC Pool made after it is formed. It is not anticipated that any REMIC Pool
will (i) engage in prohibited transactions in which it recognizes a significant
amount of net income, (ii) receive contributions of property that are subject
to tax, or (iii) derive a significant amount of net income from foreclosure
property that is subject to tax.
Negative Value Residual Certificates. The federal income tax treatment of
any consideration paid to a transferee on a transfer of a Residual Certificate
is unclear. Such a transferee should consult its tax advisor. The preamble to
the REMIC Regulations indicates that the Internal Revenue Service may issue
future guidance on the tax treatment of such payments.
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In addition, on December 23, 1996, the Internal Revenue Service released
final regulations under Code Section 475 relating to the requirement that a
dealer mark certain securities to market. These regulations provide that a
REMIC residual interest that is acquired on or after January 4, 1995 is not a
"security" for the purposes of Section 475 of the Code, and thus is not subject
to the mark to market rules.
The method of taxation of Residual Certificates described in this section
can produce a significantly less favorable after-tax return for a Residual
Certificate than would be the case if the Certificate were taxable as a debt
instrument. Also, a Residual Owner's return may be adversely affected by the
excess inclusions rules described above. In certain periods, taxable income and
the resulting tax liability for a Residual Owner may exceed any distributions
it receives. In addition, a substantial tax may be imposed on certain
transferors of a Residual Certificate and certain Residual Owners that are
"pass-thru" entities. See "Transfers of Residual Certificates" below. Investors
should consult their tax advisors before purchasing a Residual Certificate.
Sale or Exchange of Certificates.
An Owner will recognize gain or loss upon sale or exchange of a Regular or
Residual Certificate equal to the difference between the amount realized and
the Owner's adjusted basis in the Certificate. The adjusted basis in a
Certificate will equal the cost of the Certificate, increased by income
previously recognized, and reduced (but not below zero) by previous
distributions, and by any amortized premium in the case of a Regular
Certificate, or net losses allowed as a deduction in the case of a Residual
Certificate.
Except as described below, any gain or loss on the sale or exchange of a
Certificate held as a capital asset will be capital gain or loss and will be
long-term or short-term depending on whether the Certificate has been held for
more than one year or one year or less. Such gain or loss will be ordinary
income or loss (i) for a bank or thrift institution, and (ii) in the case of a
Regular Certificate, (a) to the extent of any accrued, but unrecognized, market
discount, or (b) to the extent income recognized by the Owner is less than the
income that would have been recognized if the yield on such Certificate were
110% of the applicable federal rate under Code Section 1274(d).
A Residual Owner should be allowed a loss upon termination of the REMIC
Pool equal to the amount of the Owner's remaining adjusted basis in its
Residual Certificates. Whether the termination will be treated as a sale or
exchange (resulting in a capital loss) is unclear.
Except as provided in Treasury regulations, the wash sale rules of Code
Section 1091 (relating to the disallowance of losses on the sale or disposition
of certain stock or securities) will apply to dispositions of a Residual
Certificate where the seller of the interest, during the period beginning six
months before the sale or disposition of the interest and ending six months
after such sale or disposition, acquires (or enters into any other transaction
that results in the application of Code Section 1091) any REMIC residual
interest, or any interest in a "taxable mortgage pool" (such as a non-REMIC
owner trust) that is economically comparable to a residual interest.
Taxation of Certain Foreign Investors.
Regular Certificates. A Regular Certificate held by an Owner that is a
non-U.S. person (as defined below), and that has no connection with the United
States other than owning the Certificate, will not be subject to U.S.
withholding or income tax with respect to the Certificate provided such Owner
(i) is not a "10-percent shareholder", related to the issuer, within the
meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation,
related to the issuer, described in Code Section 881(c)(3)(C), and (ii)
provides an appropriate statement, signed under penalties of perjury,
identifying the Owner and stating, among other things, that the Owner is a
non-U.S. person. If these conditions are not met, a 30% withholding tax will
apply to interest (including original issue discount) unless an income tax
treaty reduces or eliminates such tax or unless the interest is effectively
connected with the conduct of a trade or business within the United States by
such Owner. In the latter case, such Owner will be subject to United States
federal income tax with respect to all income from the Certificate at regular
rates then applicable to U.S. taxpayers (and in the case of a corporation,
possibly also the "branch profits tax").
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The term "non-U.S. person" means any person other than a U.S. person. A
U.S. person is a citizen or resident of the United States, a corporation, or
partnership (unless, in the case of a partnership, Treasury regulations are
adopted that provide otherwise) created or organized in or under the laws of
the United States, any State thereof or the District of Columbia, including an
entity treated as a corporation or partnership for federal income tax purposes,
an estate whose income is subject to United States federal income tax
regardless of its source, or a trust if a court within the United States is
able to exercise primary supervision over the administration of such trust, and
one or more such U.S. Persons have the authority to control all substantial
decisions of such trust (or, the extent provided in applicable Treasury
regulations, certain trusts in existence on August 20, 1996 which are elibible
to elect to be treated as U.S. Persons).
Residual Certificates. A Residual Owner that is a non-U.S. person, and
that has no connection with the United States other than owning a Residual
Certificate, will not be subject to U.S. withholding or income tax with respect
to the Certificate (other than with respect to excess inclusions) provided that
(i) the conditions described in the second preceding paragraph with respect to
Regular Certificates are met and (ii) in the case of a Residual Certificate in
a REMIC Pool holding Mortgage Loans, the Mortgage Loans were originated after
July 18, 1984. Excess inclusions are subject to a 30% withholding tax in all
events (notwithstanding any contrary tax treaty provisions) when distributed to
the Residual Owner (or when the Residual Certificate is disposed of). The Code
grants the Treasury Department authority to issue regulations requiring excess
inclusions to be taken into account earlier if necessary to prevent avoidance
of tax. The REMIC Regulations do not contain such a rule. The preamble thereto
states that the Internal Revenue Service is considering issuing regulations
concerning withholding on distributions to foreign holders of residual
interests to satisfy accrued tax liability due to excess inclusions.
With respect to a Residual Certificate that has been held at any time by a
non-U.S. person, the Trustee (or its agent) will be entitled to withhold (and
to pay to the Internal Revenue Service) any portion of any payment on such
Residual Certificate that the Trustee reasonably determines is required to be
withheld. If the Trustee (or its agent) reasonably determines that a more
accurate determination of the amount required to be withheld from a
distribution can be made within a reasonable period after the scheduled date
for such distribution, it may hold such distribution in trust for the Residual
Owner until such determination can be made.
Special tax rules and restrictions that apply to transfers of Residual
Certificates to and from non-U.S. persons are discussed in the next section.
Transfers of Residual Certificates.
Special tax rules and restrictions apply to transfers of Residual
Certificates to disqualified organizations or foreign investors, and to
transfers of noneconomic Residual Certificates.
Disqualified Organizations. In order to comply with the REMIC rules of the
Code, the Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless (i) the proposed purchaser provides to the Trustee an "affidavit"
(within the meaning of the REMIC Regulations) to the effect that, among other
items, such transferee is not a "disqualified organization" (as defined below),
is not purchasing a Residual Certificate as an agent for a disqualified
organization (i.e., as a broker, nominee, or other middleman) and is not an
entity that holds REMIC residual securities as nominee to facilitate the
clearance and settlement of such securities through electronic book-entry
changes in accounts of participating organizations (a "Book-Entry Nominee") and
(ii) the transferor states in writing to the Trustee that it has no actual
knowledge that such affidavit is false.
If, despite these restrictions, a Residual Certificate is transferred to a
disqualified organization, the transfer may result in a tax equal to the
product of (i) the present value of the total anticipated future excess
inclusions with respect to such Certificate and (ii) the highest corporate
marginal federal income tax rate. Such a tax generally is imposed on the
transferor, except that if the transfer is through an agent for a disqualified
organization, the agent is liable for the tax. A transferor is not liable for
such tax if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that the affidavit is
false.
A disqualified organization may hold an interest in a REMIC Certificate
through a "pass-thru entity" (as defined below). In that event, the pass-thru
entity is subject to tax (at the highest corporate marginal federal income tax
rate) on excess inclusions allocable to the disqualified organization. However,
such tax will not apply
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to the extent the pass-thru entity receives affidavits from record holders of
interests in the entity stating that they are not disqualified organizations
and the entity does not have actual knowledge that the affidavits are false;
provided that all partners of an "electing large partnership" (as defined in
the Code) are deemed to be disqualified organizations for purposes of such
tax.
For these purposes, (i) "disqualified organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing, certain organizations that are exempt from taxation under the Code
(including tax on excess inclusions) and certain corporations operating on a
cooperative basis, and (ii) "pass-thru entity" means any regulated investment
company, real estate investment trust, common trust fund, partnership, trust or
estate and certain corporations operating on a cooperative basis. Except as may
be provided in Treasury regulations, any person holding an interest in a
pass-thru entity as a nominee for another will, with respect to that interest,
be treated as a pass-thru entity.
Foreign Investors. Under the REMIC Regulations, a transfer of a Residual
Certificate to a non-U.S. person that will not hold the Certificate in
connection with a U.S. trade or business will be disregarded for all federal
tax purposes if the Certificate has "tax avoidance potential." A Residual
Certificate has tax avoidance potential unless, at the time of transfer, the
transferor reasonably expects that:
(i) for each excess inclusion, the REMIC will distribute to the transferee
residual interest holder an amount that will equal at least 30 percent of the
excess inclusion, and
(ii) each such amount will be distributed at or after the time at which
the excess inclusion accrues and not later than the close of the calendar year
following the calendar year of accrual.
A transferor has such reasonable expectation if the above test would be
met assuming that the REMIC's Mortgage Loans will prepay at each rate between
50 percent and 200 percent of the Prepayment Assumption.
The REMIC Regulations also provide that a transfer of a Residual
Certificate from a non-U.S. person to a U.S. person (or to a non-U.S. person
that will hold the Certificate in connection with a U.S. trade or business) is
disregarded if the transfer has "the effect of allowing the transferor to avoid
tax on accrued excess inclusions."
In light of these provisions, the Agreement provides that a Residual
Certificate may not be purchased by or transferred to any person that is not a
U.S. person, unless (i) such person holds the Certificate in connection with
the conduct of a trade or business within the United States and furnishes the
transferor and the Trustee with an effective Internal Revenue Service Form
4224, or (ii) the transferee delivers to both the transferor and the Trustee an
opinion of nationally recognized tax counsel to the effect that such transfer
is in accordance with the requirements of the Code and the regulations
promulgated thereunder and that such transfer will not be disregarded for
federal income tax purposes.
Noneconomic Residual Certificates. Under the REMIC Regulations, a transfer
of a "noneconomic" Residual Certificate will be disregarded for all federal
income tax purposes if a significant purpose of the transfer is to impede the
assessment or collection of tax. Such a purpose 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 to lack such knowledge if:
(i) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they become due, and
(ii) the transferee represents to the transferor that it understands that,
as the holder of the noneconomic residual interest, it may incur tax
liabilities in excess of any cash flows generated by the interest and that it
intends to pay taxes associated with holding the residual interest as they
become due.
A Residual Certificate (including a Certificate with significant value at
issuance) is noneconomic unless, at the time of the transfer, (i) the present
value of the expected future distributions on the 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 on the Certificate, at or after the time at which taxes
accrue, in an amount sufficient to pay the taxes.
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The Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless the transferor represents to the Trustee that it has conducted
the investigation of the transferee, and made the findings, described in the
preceding paragraph, and the proposed transferee provides to the Trustee the
transferee representations described in the preceding paragraph, and agrees
that it will not transfer the Certificate to any person unless that person
agrees to comply with the same restrictions on future transfers.
Servicing Compensation and Other REMIC Pool Expenses.
Under Code Section 67, an individual, estate or trust is allowed certain
itemized deductions only to the extent that such deductions, in the aggregate,
exceed 2% of the Owner's adjusted gross income, and such a person is not
allowed such deductions to any extent in computing its alternative minimum tax
liability. Under Treasury regulations, if such a person is an Owner of a REMIC
Certificate, the REMIC Pool is required to allocate to such a person its share
of the servicing fees and administrative expenses paid by a REMIC together with
an equal amount of income. Those fees and expenses are deductible as an offset
to the additional income, but subject to the 2% floor.
In the case of a REMIC Pool that has multiple classes of Regular
Certificates with staggered maturities, fees and expenses of the REMIC Pool
would be allocated entirely to the Owners of Residual Certificates. However, if
the REMIC Pool were a "single-class REMIC" as defined in applicable Treasury
regulations, such deductions would be allocated proportionately among the
Regular and Residual Certificates.
Reporting and Administrative Matters.
Annual reports will be made to the Internal Revenue Service, and to
Holders of record of Regular Certificates, and Owners of Regular Certificates
holding through a broker, nominee or other middleman, that are not excepted
from the reporting requirements, of accrued interest, original issue discount,
information necessary to compute accruals of market discount, information
regarding the percentage of the REMIC Pool's assets meeting the qualified
assets tests described above under "Status of Certificates" and, where
relevant, allocated amounts of servicing fees and other Code Section 67
expenses. Holders not receiving such reports may obtain such information from
the related REMIC by contacting the person designated in IRS Publication 938.
Quarterly reports will be made to Residual Holders showing their allocable
shares of income or loss from the REMIC Pool, excess inclusions, and Code
Section 67 expenses.
The Trustee will sign and file federal income tax returns for each REMIC
Pool. To the extent allowable, the Trustee will act as the tax matters person
for each REMIC Pool. Each Owner of a Residual Certificate, by the acceptance of
its Residual Certificate, agrees that the Trustee will act as the Owner's agent
in the performance of any duties required of the Owner in the event that the
Owner is the tax matters person.
An Owner of a Residual Certificate is required to treat items on its
federal income tax return consistently with the treatment of the items on the
REMIC Pool's return, unless the Owner owns 100% of the Residual Certificate for
the entire calendar year or the Owner either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC Pool. The Internal Revenue Service may
assess a deficiency resulting from a failure to comply with the consistency
requirement without instituting an administrative proceeding at the REMIC
level. Any person that holds a Residual Certificate as a nominee for another
person may be required to furnish the REMIC Pool, in a manner to be provided in
Treasury regulations, the name and address of such other person and other
information.
Non-REMIC Certificates
The discussion in this Section applies only to a series of Certificates
for which no REMIC election is made.
Trust Fund as Grantor Trust.
Upon issuance of each series of Certificates, Morgan, Lewis & Bockius LLP,
counsel to the Seller, will deliver an additional opinion, dated as of the date
of such issuance, to the effect that, under then current law,
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assuming compliance by the Seller, the Servicer and the Trustee with all the
provisions of the Agreement (and such other agreements and representations as
may be referred to in the opinion), the Trust Fund will be classified for
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation.
Under the grantor trust rules of the Code, each Owner of a Certificate
will be treated for federal income tax purposes as the owner of an undivided
interest in the Mortgage Loans (and any related assets) included in the Trust
Fund. The Owner will include in its gross income, gross income from the portion
of the Mortgage Loans allocable to the Certificate, and may deduct its share of
the expenses paid by the Trust Fund that are allocable to the Certificate, at
the same time and to the same extent as if it had directly purchased and held
such interest in the Mortgage Loans and had directly received payments thereon
and paid such expenses. If an Owner is an individual, trust or estate, the
Owner will be allowed deductions for its share of Trust Fund expenses
(including reasonable servicing fees) only to the extent that the sum of those
expenses and the Owner's other miscellaneous itemized deductions exceeds 2% of
adjusted gross income, and will not be allowed to deduct such expenses for
purposes of the alternative minimum tax. Distributions on a Certificate will
not be taxable to the Owner, and the timing or amount of distributions will not
affect the timing or amount of income or deductions relating to a Certificate.
Status of the Certificates.
The Certificates, other than Interest Only Certificates, will be:
o "real estate assets" under Code Section 856(c)(5)(B) (relating to the
qualification of certain corporations, trusts, or associations as real
estate investment trusts); and
o assets described in Section 7701(a)(19)(B) of the Code (relating to real
estate interests, interests in real estate mortgages, and shares or
certificates of beneficial interests in real estate investment trusts),
to the extent the assets of the Trust Fund are so treated. Interest income from
such Certificates will be "interest on obligations secured by mortgages on real
property" under Code Section 856(c)(3)(B) to the extent the income of the Trust
Fund qualifies under that section. An "Interest Only Certificate" is a
Certificate which is entitled to receive distributions of some or all of the
interest on the Mortgage Loans or other assets in a REMIC Pool and that has
either a notional or nominal principal amount. Although it is not certain,
Certificates that are Interest Only Certificates should qualify under the
foregoing Code sections to the same extent as other Certificates.
Possible Application of Stripped Bond Rules.
In general, the provisions of Section 1286 of the Code (the "Stripped Bond
Rules") apply to all or a portion of those Certificates where there has been a
separation of the ownership of the rights to receive some or all of the
principal payments on a Mortgage Loan from the right to receive some or all of
the related interest payments. Certain Non-REMIC Certificates may be subject to
these rules either because they represent specifically the right to receive
designated portions of the interest or principal paid on the Mortgage Loans, or
because the Servicing Fee is determined to be excessive (each, a "Stripped
Certificate").
Each Stripped Certificate will be considered to have been issued with
original issue discount for federal income tax purposes. Original issue
discount with respect to a Stripped Certificate must be included in ordinary
income as it accrues, which may be prior to the receipt of the cash
attributable to such income. For these purposes, under original issue discount
regulations, each Stripped Certificate should be treated as a single
installment obligation for purposes of calculating original issue discount and
gain or loss on disposition. The Internal Revenue Service has indicated that
with respect to certain mortgage loans, original issue discount would be
considered zero either if (i) the original issue discount did not exceed an
amount that would be eligible for the de minimis rule described above under
"REMIC Certificates -- Income From Regular Certificates -- Original Issue
Discount", or (ii) the annual stated rate of interest on the mortgage loan was
not more than 100 basis points lower than on the loan prior to its being
stripped. In either such case the rules described above under "REMIC
Certificates--Income From Regular Certificates--Market Discount" (including the
applicable de minimis rule) would apply with respect to the mortgage loan.
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Taxation of Certificates if Stripped Bond Rules Do Not Apply.
If the stripped bond rules do not apply to a Certificate, then the Owner
will be required to include in income its share of the interest payments on the
Mortgage Loans held by the Trust Fund in accordance with its tax accounting
method. The Owner must also account for discount or premium on the Mortgage
Loans if it is considered to have purchased its interest in the Mortgage Loans
at a discount or premium. An Owner will be considered to have purchased an
interest in each Mortgage Loan at a price determined by allocating its purchase
price for the Certificate among the Mortgage Loans in proportion to their fair
market values at the time of purchase. It is likely that discount would be
considered to accrue and premium would be amortized, as described below, based
on an assumption that there will be no future prepayments of the Mortgage
Loans, and not based on a reasonable prepayment assumption. Legislative
proposals which are currently pending would, however, generally require a
reasonable prepayment assumption.
Discount. The treatment of any discount relating to a Mortgage Loan will
depend on whether the discount is original issue discount or market discount.
Discount at which a Mortgage Loan is purchased will be original issue discount
only if the Mortgage Loan itself has original issue discount; the issuance of
Certificates is not considered a new issuance of a debt instrument that can
give rise to original issue discount. A Mortgage Loan will be considered to
have original issue discount if the greater of the amount of points charged to
the borrower, or the amount of any interest foregone during any initial teaser
period, exceeds 0.25% of the stated redemption price at maturity times the
number of full years to maturity, or if interest is not paid at a fixed rate or
a single variable rate (disregarding any initial teaser rate) over the life of
the Mortgage Loan. It is not anticipated that the amount of original issue
discount, if any, accruing on the Mortgage Loans in each month will be
significant relative to the interest paid currently on the Mortgage Loans, but
there can be no assurance that this will be the case.
In the case of a Mortgage Loan that is considered to have been purchased
with market discount that exceeds a de minimis amount (generally, 0.25% of the
stated redemption price at maturity times the number of whole years to maturity
remaining at the time of purchase), the Owner will be required to include in
income in each month the amount of such discount that has accrued through such
month and not previously been included in income, but limited to the amount of
principal on the Mortgage Loan that is received by the Trust Fund in that
month. Because the Mortgage Loans will provide for monthly principal payments,
such discount may be required to be included in income at a rate that is not
significantly slower than the rate at which such discount accrues. Any market
discount that has not previously been included in income will be recognized as
ordinary income if and when the Mortgage Loan is prepaid in full. For a more
detailed discussion of the market discount rules of the Code, see "REMIC
Certificates -- Income from Regular Certificates -- Market Discount" above.
In the case of market discount that does not exceed a de minimis amount,
the Owner will be required to allocate ratably the portion of such discount
that is allocable to a Mortgage Loan among the principal payments on the
Mortgage Loan and to include the discount in ordinary income as the related
principal payments are made (whether as scheduled payments or prepayments).
Premium. In the event that a Mortgage Loan is purchased at a premium, the
Owner may elect under Section 171 of the Code to amortize such premium under a
constant yield method based on the yield of the Mortgage Loan to such Owner,
provided that such Mortgage Loan was originated after September 27, 1985.
Premium allocable to a Mortgage Loan originated on or before that date should
be allocated among the principal payments on the Mortgage Loan and allowed as
an ordinary deduction as principal payments are made (whether as scheduled
payments or prepayments).
Taxation of Certificates if Stripped Bond Rules Apply.
If the stripped bond rules apply to a Certificate, income on the
Certificate will be treated as original issue discount and will be included in
income as it accrues under a constant yield method. More specifically, for
purposes of applying the original issue discount rules of the Code, the Owner
will likely be taxed as if it had purchased a newly issued, single debt
instrument providing for payments equal to the payments on the interests in the
Mortgage Loans allocable to the Certificate, and having original issue discount
equal to the excess of the sum of such payments over the Owner's purchase price
for the Certificate (which would be treated as the issue
55
<PAGE>
price). The amount of original issue discount income accruing in any taxable
year will be computed as described above under "REMIC Certificates -- Income
from Regular Certificates -- Original Issue Discount". It is possible, however,
that the calculation must be made using as the Prepayment Assumption an
assumption of zero prepayments. If the calculation is made assuming no future
prepayments, then the Owner would be allowed to deduct currently any negative
amount of original issue discount produced by the accrual formula.
Different approaches could be applied in calculating income under the
stripped bond rules. For example, a Certificate could be viewed as a collection
of separate debt instruments (one for each payment allocable to the
Certificate) rather than a single debt instrument. Also, in the case of an
Interest-Only Certificate, it could be argued that certain proposed regulations
governing contingent payment debt obligations apply. It is recommended that
Owners consult their own tax advisors regarding the calculation of income under
the stripped bond rules.
Sales of Certificates.
A Certificateholder that sells a Certificate will recognize gain or loss
equal to the difference between the amount realized in the sale and its
adjusted tax basis in the Certificate. In general, such adjusted basis will
equal the Certificateholder's cost for the Certificate, increased by the amount
of any income previously reported with respect to the Certificate and decreased
(but not below zero) by the amount of any distributions received thereon, the
amount of any losses previously allowable to such Owner with respect to such
Certificate and any premium amortization thereon. Any such gain or loss would
be capital gain or loss if the Certificate was held as a capital asset, subject
to the potential treatment of gain as ordinary income to the extent of any
accrued but unrecognized market discount under the market discount rules of the
Code, if applicable.
Foreign Investors.
Except as described in the following paragraph, an Owner that is not a
U.S. person (as defined under "REMIC Certificates -- Taxation of Foreign
Investors" above) and that is not subject to federal income tax as a result of
any direct or indirect connection to the United States in addition to its
ownership of a Certificate will not be subject to United States income or
withholding tax in respect of a Certificate (assuming the underlying Mortgage
Loans were originated after July 18, 1984), if the Owner provides an
appropriate statement, signed under penalties of perjury, identifying the Owner
and stating, among other things, that the Owner is not a U.S. person. If these
conditions are not met, a 30% withholding tax will apply to interest (including
original issue discount) unless an income tax treaty reduces or eliminates such
tax or unless the interest is effectively connected with the conduct of a trade
or business within the United States by such Owner. Income effectively
connected with a U.S. trade or business will be subject to United States
federal income tax at regular rates then applicable to U.S. taxpayers (and in
the case of a corporation, possibly also the branch profits tax).
In the event the Trust Fund acquires ownership of real property located in
the United States in connection with a default on a Mortgage Loan, then any
rental income from such property allocable to an Owner that is not a U.S.
person generally will be subject to a 30% withholding tax. In addition, any
gain from the disposition of such real property allocable to an Owner that is
not a U.S. person may be treated as income that is effectively connected with a
U.S. trade or business under special rules governing United States real
property interests. The Trust Fund may be required to withhold tax on gain
realized upon a disposition of such real property by the Trust Fund at a 35%
rate.
Reporting
Tax information will be reported annually to the Internal Revenue Service
and to Holders of Certificates that are not excluded from the reporting
requirements.
Backup Withholding
Distributions made on a Certificate and proceeds from the sale of a
Certificate to or through certain brokers may be subject to a "backup"
withholding tax of 31% unless, in general, the Owner of the Certificate
complies with certain procedures or is a corporation or other person exempt
from such withholding. Any amounts so withheld from distributions on the
Certificates would be refunded by the Internal Revenue Service or allowed as a
credit against the Owner's federal income tax.
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PLAN OF DISTRIBUTION
The Seller may sell Certificates of each series to or through underwriters
(the "Underwriters") by a negotiated firm commitment underwriting and public
reoffering by the Underwriters, and also may sell and place Certificates
directly to other purchasers or through agents. The Seller intends that
Certificates will be offered through such various methods from time to time and
that offerings may be made concurrently through more than one of these methods
or that an offering of a particular series of Certificates may be made through
a combination of such methods.
The distribution of the Certificates may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If so specified in the Prospectus Supplement relating to a series of
Certificates, the Seller or any affiliate thereof may purchase some or all of
one or more classes of Certificates of such series from the Underwriter or
Underwriters at a price specified in such Prospectus Supplement. Such purchaser
may thereafter from time to time offer and sell, pursuant to this Prospectus,
some or all of such Certificates so purchased directly, through one or more
underwriters to be designated at the time of the offering of such Certificates
or through broker-dealers acting as agent and/or principal. Such offering may
be restricted in the manner specified in such Prospectus Supplement and may be
effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
In connection with the sale of the Certificates, Underwriters may receive
compensation from the Seller or from the purchasers of Certificates for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell the Certificates of a series to or through dealers and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of the Certificates of a series may be deemed to be
Underwriters and any discounts or commissions received by them from the Seller
and any profit on the resale of the Certificates by them may be deemed to be
underwriting discounts and commissions, under the Securities Act of 1933, as
amended (the "Act"). Any such Underwriters or agents will be identified, and
any such compensation received from the Seller will be described, in the
applicable Prospectus Supplement.
It is anticipated that the underwriting agreement pertaining to the sale
of any series or class of Certificates will provide that the obligations of the
underwriters will be subject to certain conditions precedent and that the
underwriters will be obligated to purchase all such Certificates if any are
purchased.
Under agreements which may be entered into by the Seller, Underwriters and
agents who participate in the distribution of the Certificates may be entitled
to indemnification by the Seller against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement, the Seller will authorize
Underwriters or other persons acting as the Seller's agents to solicit offers
by certain institutions to purchase the Certificates from the Seller pursuant
to contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational
charitable institutions and others, but in all cases such institutions must be
approved by the Seller. The obligation of any purchaser under any such contract
will be subject to the condition that the purchaser of the offered Certificates
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject from purchasing such
Certificates. The Underwriters and such other agents will not have
responsibility in respect of the validity or performance of such contracts.
The Underwriters may, from time to time, buy and sell Certificates, but
there can be no assurance that an active secondary market will develop and
there is no assurance that any market, if established, will continue.
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USE OF PROCEEDS
Substantially all of the net proceeds from the sale of each series of
Certificates will be applied by the Seller to the purchase price of the
Mortgage Loans underlying the Certificates of such Series.
LEGAL MATTERS
Certain legal matters in connection with the Certificates offered hereby,
including certain federal income tax matters, will be passed upon for the
Seller by Morgan, Lewis & Bockius LLP, New York, New York.
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INDEX OF PROSPECTUS DEFINITIONS
Defined Term Page
- ------------ ----
1998 Policy Statement .......................... __
Accrual Certificates ........................... __
Act ............................................ __
Advance Guarantee .............................. __
Agreement ...................................... __
ARM Loans ...................................... __
ARMs ........................................... __
Book-Entry Nominee ............................. __
Buy-Down Fund .................................. __
Buy-Down Mortgage Loans ........................ __
Buy-Down Reserve ............................... __
Cash-Out Refinance Loans ....................... __
Certificates ................................... __
Certificate Guaranty Insurance Policy .......... __
Certificate Issurer ............................ __
Certificate Rate ............................... __
CERCLA ......................................... __
Chase Manhattan Mortgage ....................... __
Code ........................................... __
Collection Account ............................. __
Commission ..................................... __
Compensating Interest Payment .................. __
Conservation Act ............................... __
Cooperative Loans .............................. __
Current Report ................................. __
Cut-Off Date ................................... __
Defective Mortgage Loan ........................ __
Delivery Date .................................. __
Denomination ................................... __
Deposit Guarantee .............................. __
Distribution Date .............................. __
DOL ............................................ __
Environmental Lien ............................. __
ERISA .......................................... __
Exchange Act ................................... __
Garn-St. Germain Act ........................... __
GIC ............................................ __
Guarantor ...................................... __
Insurance Proceeds ............................. __
Interest Accrual Period ........................ __
Interest Only Certificate ...................... __
Limited Guarantee .............................. __
Liquidation Proceeds ........................... __
Mortgage ....................................... __
Mortgage Loan Schedule ......................... __
Mortgage Loans ................................. __
Mortgage Pool .................................. __
Mortgage Rate .................................. __
Mortgage Pool Insurance Policy ................. __
Mortgaged Properties ........................... __
NCUA ........................................... __
59
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Defined Term Page
- ------------ ----
Nonrecoverable Advance ........................ __
Non-SMMEA Certificates ........................ __
Non-U.S. Person ............................... __
Note .......................................... __
OCC ........................................... __
OID Regulations ............................... __
OTS ........................................... __
Parties in Interest ........................... __
Paying Agent .................................. __
Plans ......................................... __
Pre-Funding Account ........................... __
Pre-Funding Agreement ......................... __
Primary Mortgage Insurance Policy ............. __
Principal Prepayments ......................... __
Prospectus Supplement ......................... __
PTE 83-1 ...................................... __
PUD ........................................... __
Record Date ................................... __
Regular Certificates .......................... __
Relief Act .................................... __
REMIC ......................................... __
REMIC Regulations ............................. __
Remittance Rate ............................... __
Representing Party ............................ __
Reserve Account ............................... __
Residual Certificates ......................... __
Residual Owners ............................... __
RICO .......................................... __
Seller ........................................ __
Senior Certificates ........................... __
Servicer ...................................... __
SMMEA ......................................... __
Special Hazard Insurance Policy ............... __
Stripped Bond Rules ........................... __
Stripped Certificate .......................... __
Subordinated Certificates ..................... __
Title V ....................................... __
Trustee ....................................... __
Trust Fund .................................... __
Underwriters .................................. __
60
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the filing
fee, are estimated.
SEC Registration Fee.............. *
Legal Fees and Expenses........... *
Accounting Fees and Expenses...... *
Trustee's Fees and Expenses....... *
Printing and Engraving Fees....... *
Rating Agency Fees................ *
Miscellaneous..................... *
---------
Total............................ $ *
- -------------------
* To be filed by amendment
Item 15. Indemnification of Directors and Officers.
(a) Chase Manhattan Acceptance Corporation ("CMAC")
The CMAC Bylaws provide for indemnification of directors and
officers of CMAC and provide, in substance, that CMAC shall, under specified
circumstances, indemnify its directors and officers in connection with actions
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 or
officers, against expenses incurred in any such action, suit or proceeding.
(b) Chase Funding, Inc. ("CFI").
CFI's Certificate of Incorporation provides for
indemnification of its directors and officers to the full extent permitted by
the Delaware General Corporation Law ("DGCL").
Section 145 of the DGCL 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,
<PAGE>
officers, employees or agents, against expenses incurred in any such action,
suit or proceeding. The DGCL also provides that CFI may purchase insurance on
behalf of any such director, officer, employee or agent.
Item 16. Exhibits.
1.1 Form of Underwriting Agreement with respect to CFI.
1.2 Form of Underwriting Agreement with respect to CMAC.
4.1 Form of Pooling and Servicing Agreement with respect to CFI.
4.2 Form of Pooling and Servicing Agreement with respect to CMAC.
5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality
of the securities being registered.
8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain
federal income tax matters with respect to the securities
being registered.
23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in
Exhibits 5.1 and 8.1).
24.1 Powers of Attorney (incorporated in Signatures).
Item 17. Undertakings.
(a) Undertaking pursuant to Rule 415.
The undersigned Registrants hereby undertake:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(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;
<PAGE>
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) that, for the purpose of determining any liability under
the 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; and
(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 indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of either Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
either Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, that it reasonably believes that the
security rating requirement set forth in Transaction Requirement B-5 will be met
by the time of sale of the registered securities and that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Edison, New Jersey, on the 18th day of October,
1999.
CHASE FUNDING, INC.
By: /s/ Samuel Cooper
------------------
Name: Samuel Cooper
Title: President
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Samuel Cooper and Michael D. Katz, and
both of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities as directors and officers of Chase Funding, Inc. in the capacities
and on the date indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Luke S. Hayden Principal Executive October 20, 1999
- ------------------------------ Officer and Director
Luke S. Hayden
/s/ Stephen J. Fortunato Treasurer (Principal October 20, 1999
- ------------------------------ Financial and Accounting
Stephen J. Fortunato Officer)
/s/ Samuel Cooper Director October 20, 1999
- ------------------------------
Samuel Cooper
/s/ Michael D. Katz Director October 20, 1999
- ------------------------------
Michael D. Katz
/s/ Douglas A. Potolsky Director October 20, 1999
- ------------------------------
Douglas A. Potolsky
/s/ Matthew Whalen Director October 20, 1999
- ------------------------------
Matthew Whalen
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, that it reasonably believes that the
security rating requirement set forth in Transaction Requirement B-5 will be met
by the time of sale of the registered securities and that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Edison, New Jersey, on the 18th day of October,
1999.
CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: /s/ Paul Mullings
---------------------------------
Name: Paul Mullings
Title: President
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul E. Mullings and Michael D. Katz, and
both of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities as directors and officers of Chase Manhattan Acceptance Corporation
in the capacities and on the date indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Luke S. Hayden Principal Executive October 20, 1999
- ------------------------------ Officer and Director
Luke S. Hayden
/s/ Stephen J. Fortnato Treasurer (Principal October 20, 1999
- ------------------------------ Financial and Accounting
Stephen J. Fortunato Officer)
/s/ Samuel Cooper Director October 20, 1999
- ------------------------------
Samuel Cooper
/s/ Michael D. Katz Director October 20, 1999
- ------------------------------
Michael D. Katz
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
1.1 Form of Underwriting Agreement with respect to Chase Funding, Inc.
("CFI").
1.2 Form of Underwriting Agreement with respect to Chase Manhattan
Acceptance Corporation ("CMAC").
4.1 Form of Pooling and Servicing Agreement with respect to CFI.
4.2 Form of Pooling and Servicing Agreement with respect to CMAC.
5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality of
the securities being registered.
8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain federal
income tax matters with respect to the securities being registered.
23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in Exhibits
5.1 and 8.1).
24.1 Powers of Attorney (incorporated in Signatures).
<PAGE>
Chase Funding, Inc.
Pass-Through Certificates
UNDERWRITING AGREEMENT
[DATE]
[Underwriter]
[Address]
Ladies and Gentlemen:
Chase Funding, Inc. (the "Company"), a New York corporation, has
authorized the issuance and sale of Pass-Through Certificates (such certificates
evidencing interests in pools of Mortgage Loans, the "Certificates") evidencing
interests in pools of mortgage loans (the "Mortgage Loans"). The Certificates
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 Certificates 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
servicer to be identified in the prospectus supplement for each such Series (the
"Servicer") and a trustee to be identified in the prospectus supplement for each
such Series (the "Trustee"). The Certificates of each Series will evidence
specified interests in separate pools of Mortgage Loans (each a "Mortgage Pool")
or separate pools of Agency Securities, and certain other property held in trust
with respect to such Series (each, a "Trust Fund").
The Certificates are more fully described in a Registration Statement
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. The term "you" as used herein, unless the context otherwise requires,
shall mean you and such persons as are named as co-managers in the applicable
Terms Agreement (defined below).
Whenever the Company determines to make an offering of Certificates
pursuant to this Agreement through you or through an underwriting syndicate
managed by you it will enter into an agreement (the "Terms Agreement") providing
for the sale of such Certificates 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
<PAGE>
whether acting alone in the sale of Certificates or as a member of an
underwriting syndicate; as the context requires, [Underwriter] is sometimes
referred to individually herein as ["Underwriter"]). The Terms Agreement
relating to each offering of Certificates shall specify, among other things, the
stated balance or balances of Certificates to be issued, the price or prices at
which the Certificates 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 Certificates 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 such offering of Certificates which the
Company elects to make pursuant to this Agreement 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 Certificates.
SECTION 1. Representations and Warranties. The Company represents and
warrants to you as of the date hereof, and to the Underwriters named in the
applicable Terms Agreement, all as of the date of such Terms Agreement (in each
case, the "Representation Date"), as follows (any representations and warranties
so made to the Underwriters named in an applicable Terms Agreement respecting
the Certificates being deemed to relate only to the Certificates described
therein):
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
33-92950), relating to the offering of Certificates 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 the
same has become effective under the 1933 Act and the rules of the
Commission thereunder (the "Regulations") and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceedings for that purpose have been initiated or, to the Company's
knowledge, threatened, by the Commission. Such registration statement,
including incorporated documents, exhibits and financial statements, as
amended at the time when it became effective under the 1933 Act, and
the prospectus relating to the sale of Certificates by the Company
constituting a part thereof, as from time to time each is amended or
supplemented pursuant to the 1933 Act or otherwise, are referred to
herein as the "Registration Statement" and the "Prospectus,"
respectively; provided, however, that a supplement to the Prospectus
contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall
be deemed to have supplemented the Prospectus only with respect to the
offering or offerings of Certificates to which it relates. Any
reference herein to the Registration Statement, a preliminary
prospectus, the Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "1934 Act") on or before the date
on which the Registration Statement, as amended, became effective or
the issue date of such preliminary prospectus, Prospectus, or
Prospectus Supplement, as the case may be; and any reference herein to
the terms "amend,"
-2-
<PAGE>
"amendment" or supplement with respect to the Registration Statement,
any preliminary prospectus, the Prospectus or the Prospectus Supplement
shall be deemed to refer to and include the filing of any document
under the 1934 Act after the date on which the Registration Statement
became effective or the issue date of any preliminary prospectus, the
Prospectus or the Prospectus Supplement, as the case may be, deemed to
be incorporated therein by reference. The Registration Statement and
Prospectus, at the time the Registration Statement became effective
did, and as of the applicable Representation Date will, conform in all
material respects to 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 and the
applicable Closing Time (as defined in Section 2 hereof) 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 not misleading. The Prospectus, as amended or
supplemented as of the applicable Representation Date and the
applicable Closing Time (as defined in Section 2 hereof), will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in, or omissions from, (i) the
Registration Statement or 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
Prospectus or (ii) the [Underwriter] Information (as defined in Section
10 hereof). 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 incorporated and is validly
existing as a corporation in good standing under the laws of the State
of New York with corporate power and authority to enter into and
perform its obligations under this Agreement, the applicable Pooling
and Servicing Agreement, and with respect to a Series of Certificates,
the Certificates and the applicable Terms Agreement; and the Company is
duly qualified or registered 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 material contract, indenture, mortgage, loan agreement, note,
lease or other material 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
-3-
<PAGE>
or assets thereof or the Company's ability to perform its obligations
under this Agreement, the applicable Terms Agreement or the applicable
Pooling and Servicing Agreement.
(4) The execution and delivery by the Company of this
Agreement, the applicable Terms Agreement and the applicable Pooling
and Servicing 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 with respect to a Series of Certificates described in
the applicable Terms Agreement, neither the issuance and sale of the
Certificates to the Underwriters, nor the execution and delivery by the
Company of this Agreement, such Terms Agreement and the related Pooling
and Servicing Agreement, nor the consummation by the Company of the
transactions herein or therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company other than as contemplated by a Pooling and Servicing
Agreement, pursuant to any material indenture, mortgage, contract or
other material instrument to which the Company is a party or by which
it is bound or to which the property or assets of the Company are
subject, or result in the violation of the provisions of the
certificate of incorporation or by-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(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 (assuming due authorization,
execution and delivery by the other parties thereto), 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 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
(assuming due authorization, execution and delivery by the other
parties thereto), 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); and as of the Closing Date, the
-4-
<PAGE>
representations and warranties made by the Company in the applicable
Pooling and Servicing Agreement will be true and correct as of the date
made.
(7) As of the Closing Time (as defined in Section 2 hereof)
with respect to a Series of Certificates, the Certificates will have
been duly and validly authorized by the Company, and, when executed and
authenticated as specified in the related Pooling and Servicing
Agreement, will be validly issued and outstanding and will be entitled
to the benefits of the related Pooling and Servicing Agreement.
(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 Terms Agreement, the applicable Pooling and Servicing
Agreement or with respect to a Series of Certificates, the
Certificates, (ii) seeking to prevent the issuance of such Certificates
or the consummation of any of the transactions contemplated by this
Agreement, the applicable Terms Agreement or such Pooling and Servicing
Agreement, (iii) which would be likely to materially and adversely
affect the performance by the Company of its obligations under, or
which would if adversely determined materially and adversely affect the
validity or enforceability of, this Agreement, the applicable Terms
Agreement, such Pooling and Servicing Agreement or such Certificates or
(iv) seeking to adversely affect the federal income tax attributes of
such Certificates 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 Terms Agreement, the
applicable Pooling and Servicing Agreement and with respect to a Series
of Certificates, the Certificates, shall have been paid at or prior to
the Closing Time.
(10) No filing or registration with, notice to or consent,
approval, authorization, order or qualification of or with any court or
governmental agency or body is required for the issuance and sale of
the Certificates or the consummation by the Company of the transactions
contemplated by this Agreement, the applicable Pooling and Servicing
Agreement or the applicable Terms Agreement, except the registration
under the 1933 Act of the Certificates, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Certificates by the Underwriters.
(11) The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies deemed by the Company
to be reasonably 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
-5-
<PAGE>
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
Certificates described in the relevant Terms Agreement evidencing
interests in a Mortgage Pool, the Trustee will have either good and
marketable title, free and clear of all prior liens, charges and
encumbrances, to or a validly perfected first priority security
interest in the Mortgage Notes and the related Mortgages included in
the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery
thereof to the Trustee and (b) the Mortgages, upon delivery to the
Trustee of instruments of assignment in recordable form assigning each
Mortgage to the Trustee and the recording of each such instrument of
assignment in the appropriate recording office in which the Mortgaged
Property is located, or if supported by an opinion of counsel, without
recording.
(13) As of the Closing Time, with respect to a Series of
Certificates as to which there is a Reserve Fund, to the extent that
the Reserve Fund does not constitute part of the Trust Fund for such
Series, the Trustee will have acquired either good and marketable title
to or a duly and validly perfected security interest in the Reserve
Fund with respect to such Series, if any, subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance.
(14) As of the Closing Time, with respect to a Series of
Certificates, the Mortgage Pool will have substantially the
characteristics described in the Prospectus Supplement and in the Form
8-K of the Company prepared with respect to such Certificates, if the
Mortgage Pool is described in such Form 8-K.
(15) Neither the Company nor the Trust Fund created by the
applicable Pooling and Servicing Agreement will be subject to
registration as an "investment company" under the Investment Company
Act of 1940, as amended (the "1940 Act").
(16) The Certificates, the applicable Pooling and Servicing
Agreement, the applicable Terms Agreement and any Primary Insurance
Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance
Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy
Insurance and Alternate Credit Enhancement related to the Certificates
described in the relevant Terms Agreement conform in all material
respects to the descriptions thereof contained in the Prospectus.
SECTION 2. Purchase and Sale. The commitment of each Underwriter to
purchase Certificates pursuant to any Terms Agreement shall be several and not
joint and 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.
-6-
<PAGE>
Payment of the purchase price for, and delivery of, any Certificates to
be purchased by the Underwriters shall be made at the offices of Morgan, Lewis &
Bockius LLP, New York, New York, 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 in immediately available Federal funds
wired to such bank as may be designated by the Company. Such Certificates 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
Certificates 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.
It is understood that the Underwriters intend to offer the Certificates
for sale to the public as set forth in the Prospectus Supplement.
SECTION 3. Covenants of the Company. The Company covenants with each of
you and each Underwriter participating in an offering of Certificates pursuant
to a Terms Agreement, with respect to such Certificates and such offering, as
follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Certificates covered thereby, the price
or prices at which the Certificates are to be purchased by the
Underwriters, either the initial public offering price or prices or the
method by which the price or prices by which the Certificates 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 Certificates. 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 the delivery of a prospectus is required at any time in
connection with the offering or sale of the Certificates described in
the relevant Terms Agreement and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period of time to
amend or supplement the Prospectus in order to comply with the 1933
Act, the Company agrees to notify you promptly and upon your request so
to amend or supplement the Prospectus and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance.
-7-
<PAGE>
(c) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement 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, and 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.
(d) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
notify you promptly (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 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 or any amendment or
supplement to the Prospectus or for additional information, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Certificates for sale in any
jurisdiction or the threat of any proceeding for that purpose and (vi)
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 use its best efforts to
prevent the issuance of any such stop order and, if any stop order is
issued, to obtain the lifting thereof as soon as possible.
(e) The Company will deliver to you 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 Certificates 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 Certificates, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction. 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 Certificates have been qualified as above
provided.
(g) If the Company has elected to cause the applicable
Mortgage Pool to be treated as a real estate mortgage investment
conduit (a "REMIC"), the Company will prepare, or cause to be prepared,
and file, or cause to be filed a timely election to treat the Mortgage
Pool as a REMIC for federal income tax purposes and will file, or cause
to be filed, such tax
-8-
<PAGE>
returns and take such actions, all on a timely basis, as are required
to elect and maintain such status.
SECTION 4. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase Certificates pursuant to any Terms Agreement shall
be 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 additional conditions precedent:
(a) At the applicable Closing Time (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission, (ii) the Certificates 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, together
with the applicable Prospectus Supplement at the time it was required
to be delivered to a purchaser of the Certificates, 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. No challenge by
the Commission shall have been made to the accuracy or adequacy of the
Registration Statement and any request of the Commission for inclusion
of additional information in the Registration Statement or the
Prospectus or the Prospectus Supplement shall have been complied with
and the Company shall not have filed with the Commission any amendment
or supplement to the Registration Statement, the Prospectus or the
Prospectus Supplement without the consent of the Underwriters.
(b) At the applicable Closing Time you shall have received:
(1) The opinion, dated as of the applicable
Closing Time, of Morgan, Lewis & Bockius LLP, counsel for 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
New York.
(ii) This Agreement and the applicable
Terms Agreement have been duly authorized, executed and
delivered by the Company, and each is a legal, 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,
(B) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding
-9-
<PAGE>
therefor may be brought, and (C) the enforceability as to
rights to indemnity thereunder may be subject to limitations
of public policy under applicable securities laws.
(iii) The applicable Pooling and Servicing
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 enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms' of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor
may be brought.
(iv) The execution and delivery by the
Company of this Agreement, the applicable Terms Agreement and
applicable Pooling and Servicing 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 Certificates nor the
consummation of the transactions contemplated herein or
therein nor the fulfillment of the terms hereof or thereof
will, conflict with or constitute a breach or violation of any
of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, or other
instrument to which the Company is a party or by which it may
be bound of which such counsel is aware, other than the lien
or liens created by the applicable Pooling and Servicing
Agreement, nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws of
the Company or, any statute, rule or regulation to which the
Company is subject or by which it is bound or any writ,
injunction or decree of any court, governmental authority or
regulatory body to which it is subject or by which it is bound
of which such counsel is aware.
(v) The Certificates have been duly
authorized and, when executed and authenticated as specified
in the related Pooling and Servicing Agreement and delivered
and paid for, will be validly issued and entitled to the
benefits of the related Pooling and Servicing Agreement.
(vi) To the best of such counsel's
knowledge, no filing or registration with or notice to or
consent, approval, authorization, order or qualification of or
with any court or governmental agency or body is required for
the issuance and sale of the Certificates or the consummation
by the Company of the transactions contemplated by this
Agreement, the applicable Pooling and Servicing Agreement or
the applicable Terms Agreement, except the registration under
the 1933 Act of the
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Certificates, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Certificates by the Underwriters.
(vii) To the best of such counsel's
knowledge, there is no action, suit or proceeding of which
such counsel is aware before or by any court or governmental
agency or body, domestic or foreign, now pending or threatened
against the Company which 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 or might
materially and adversely affect the performance by the Company
of its obligations under, or the validity or enforceability
of, the Certificates, this Agreement or the Pooling and
Servicing Agreement, or which is required to be disclosed in
the Registration Statement.
(viii) The Registration Statement is
effective under the 1933 Act and, to the best of such
counsel's knowledge, 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 applicable Pooling and Servicing
Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended.
(x) The Registration Statement and the
Prospectus (other than the financial statements and other
financial and statistical information included therein, as to
which no opinion need be rendered) as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the 1933 Act and the
Regulations thereunder.
(xi) The statements in the Prospectus under
the headings "ERISA Considerations" and "Federal Income Tax
Consequences" and the statements in the applicable Prospectus
Supplement under the headings "Federal Income Tax
Considerations" and "ERISA Considerations", to the extent that
they describe matters of United States federal income tax law
or ERISA or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are accurate in all
material respects with respect to those consequences or
matters discussed therein.
(xii) The statements in the Prospectus and
the applicable Prospectus Supplement under the caption
"Description of the Certificates", insofar as they purport to
summarize certain terms of the Certificates and the applicable
Pooling and Servicing Agreement, constitute a fair summary of
the provisions purported to be summarized.
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(xiii) The Trust Fund created by the
applicable Pooling and Servicing Agreement is not, and will
not as a result of the offer and sale of the Certificates as
contemplated in the Prospectus and in this Agreement become,
an "investment company" required to be registered under the
1940 Act.
(xiv) The Classes of Certificates so
designated in the Prospectus Supplement will be "mortgage
related securities", as defined in ss.3(a)(41) of the 1934
Act, so long as the Certificates are rated in one of the two
highest grades by at least one nationally recognized
statistical rating organization.
(xv) If a REMIC election is to be made with
respect to the Trust Fund, assuming (a) ongoing compliance
with all of the provisions of the Pooling and Servicing
Agreement and (b) the filing of an election, in accordance
with the Pooling and Servicing Agreement, to be treated as a
"real estate mortgage investment conduit" (a "REMIC") pursuant
to Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code") for Federal income tax purposes, the
Trust Fund will qualify as a REMIC as of the Closing Date and
will continue to qualify as a REMIC for so long as it complies
with amendments after the date hereof to any applicable
provisions of the Code and applicable Treasury Regulations.
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 Mortgage Loans and other property included in the Trust Fund at the
Closing Time as may be required by each Rating Agency rating the Certificates.
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 and related matters 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 (xi) and (xii) above) and has made no independent check or
verification thereof for the purpose of rendering its opinion, on the basis of
the foregoing, nothing has come to their attention that leads such counsel to
believe that either the Registration Statement, at the time it became effective
and at the applicable Closing Time, contained, an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or that the Prospectus
contained or contains as of the date thereof and at the applicable Closing Time
any untrue statement of a material fact or omitted or omits to state a material
fact necessary 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
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financial statements, schedules and other financial and statistical data
included in or incorporated by reference into the Registration Statement, the
Prospectus or the Prospectus Supplement.
Such counsel may state that their opinions relate only to laws of the
State of New York, the Federal laws of the United States and the General
Corporation Law of the State of Delaware.
In rendering such opinions, such counsel may rely, as to matters of
fact, to the extent deemed proper and stated therein, on certificates of
responsible officers of the Company, the Trustee or public officials.
(2) The favorable opinion of counsel to the 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 Trustee is a ____________, duly
authorized and validly existing in good standing under the
laws of the ___________, and has all requisite power and
authority to enter into the Pooling and Servicing Agreement
and to perform its obligations thereunder.
(ii) To the knowledge of such counsel, there is
no action, suit, proceeding or investigation pending or
threatened against the Trustee that could materially adversely
affect the ability of the Trustee to perform its obligations
under the Pooling and Servicing Agreement.
(iii) The Trustee has duly authorized, executed
and delivered the applicable Pooling and Servicing Agreement
and such Pooling and Servicing Agreement will constitute the
legal, valid and binding obligation of the Trustee.
(iv) The Trustee has full power and authority to
execute and deliver the applicable Pooling and Servicing
Agreement and to perform its obligations thereunder.
(v) No consent, approval or authorization of,
or registration, declaration or filing with, any court or
governmental agency or body of the jurisdiction of its
organization is required for the execution, delivery or
performance by the Trustee of the Pooling and Servicing
Agreement.
(vi) The Certificates have been duly and validly
executed, authenticated and delivered by the Trustee in
accordance with the Pooling and Servicing Agreement.
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(vii) The performance by the Trustee of its
duties pursuant to the Pooling and Servicing Agreement does
not conflict with or result in a breach or violation of any
term or provision of, or constitute a default under, any
statute or regulation currently governing the Trustee.
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 Trustee or public officials.
(3) The favorable opinion of counsel to the 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 Servicer is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation.
(ii) The execution and delivery by the Servicer
of the applicable Pooling and Servicing Agreement is within
the corporate power of the Servicer and has been duly
authorized by all necessary corporate action on the part of
the Servicer; and to the knowledge of such counsel, neither
the execution and delivery of such instrument, nor the
consummation of the transactions provided for therein, nor
compliance with the provisions 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 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
Servicer or to the knowledge of such counsel, any law,
administrative regulation or administrative or court decree.
(iii) The applicable Pooling and Servicing
Agreement has been duly executed and delivered by the Servicer
and constitutes a valid and binding obligation of the Servicer
enforceable against the 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) To the knowledge of such counsel, the
execution, delivery and performance by the 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.
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(v) To the knowledge of such counsel, there is
no action, suit or proceeding of which such counsel is aware
before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against the
Servicer which might materially and adversely affect the
performance by the Servicer under, or the validity or
enforceability of, the applicable Pooling and Servicing
Agreement.
(vi) The description of the Servicer in the
applicable Prospectus Supplement is true and correct in all
material respects.
(4) The favorable opinion or opinions, dated as of
the applicable Closing Time, of counsel for the Underwriters,
acceptable to the Underwriters.
(c) At the applicable Closing Time you shall have received a
certificate of the President or a Vice President and the Treasurer or
the Secretary 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 and that the
Company has complied with all agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Time.
(d) You shall have received from Price Waterhouse LLP, or
other independent certified public accountants acceptable to you,
letters, dated as of the date of the applicable Terms Agreement and as
of the applicable Closing Time, delivered at such times, in the form
and substance reasonably satisfactory to you.
(e) At the applicable Closing Time, with respect to a Series
of Certificates, each of the representations and warranties of the
Servicer set forth in the related Pooling and Servicing Agreement will
be true and correct and you shall have received a Certificate of an
Executive Vice President, Senior Vice President or Vice President of
the Servicer, dated as of such Closing Time, to such effect.
(f) At the applicable Closing Time, with respect to a Series
of Certificates, the Certificates 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 other documents and
opinions as they may reasonably require for the purpose of enabling
them to pass upon the issuance and sale of the Certificates as herein
contemplated and related proceedings or in order to evidence the
accuracy and completeness of any of the representations and warranties,
or the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and
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sale of the Certificates as herein contemplated shall be reasonably
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 5.
SECTION 5. Payment of Expenses. The Company covenants and agrees with
the Underwriters that the Company will pay or cause to be paid all expenses
incident to the performance of its obligations under this Agreement, including
without limitation: (i) expenses related to the preparation and filing of the
Registration Statement and all amendments thereto, (ii) the cost of 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 and selling agreement and the Underwriters' questionnaires and
powers of attorney, (iii) the cost of preparation, issuance and delivery of the
Certificates to the Underwriters, (iv) the fees and disbursements of the
Company's counsel and accountants for the Company, (v) all expenses (other than
legal fees) in connection with the qualification of the Certificates under
securities and Blue Sky laws and the determination of the eligibility of the
Certificates for investment in accordance with the provisions of Section 3(f),
including filing fees, (vi) the cost of 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 cost of printing and delivery to the Underwriters,
in such quantities as you may reasonably request, of copies of each Pooling and
Servicing Agreement, (viii) the fees charged by not more than two investment
rating agencies for rating the Certificates, (ix) the fees and expenses, if any,
incurred in connection with the listing of the Certificates on any national
securities exchange, (x) any filing fees and expenses incident to any required
review by the National Association of Securities Dealers, Inc., and (xi) the
fees and expenses of the Trustee and its counsel. It is understood, however,
that except as provided in this Section and Section 6 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of counsel,
transfer taxes on resale of any of the Certificates by them and any advertising
expenses connected with any offers they may make.
If a Terms Agreement is terminated by you in accordance with the
provisions of Section 4 or Section 8(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 6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter or such
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controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading in each case in respect of the relevant Certificates, and
will reimburse each Underwriter and each such controlling person for
any legal or other expenses reasonably incurred by such Underwriter or
controlling person in connection with investigating or defending any
such action or claim; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
such document in reliance upon and in conformity with written
information furnished to the Company by any Underwriter expressly for
use therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) [Underwriter] will indemnify and hold harmless the
Company, each of its officers who signed the Registration Statement in
the case of the Company, their respective directors, and any person
controlling the Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which the Company or any such
officer, director or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto) or
the Prospectus (or any amendment or supplement thereto), or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of [Underwriter] expressly for use therein and will reimburse
the Company or any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company, any such
officer, director or controlling person in connection with
investigating or defending any such action or claim. This indemnity
agreement is in addition to any liability which [Underwriter] may
otherwise have. The Company acknowledges that, unless otherwise set
forth in the applicable Terms Agreement, the statements set forth [in
the last paragraph of the cover page, the first and second sentences of
the third paragraph under the caption "Underwriting" and in the third
to last paragraph of the cover page relating to [Underwriter]'s
intention to create a secondary market], each as included in the
applicable Prospectus Supplement relating to a Series of Certificates,
together with the [Underwriter] Information (as defined in Section 10
hereof) relating to a Series of Certificates
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constitute the only information furnished in writing by or on behalf of
[Underwriter] expressly for use in the Registration Statement relating
to such Series of Certificates as originally filed or in any amendment
thereof, any related preliminary prospectus or the Prospectus or in any
amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify such indemnifying party
in writing of the commencement thereof; but the omission so to notify
the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section. In
case any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying
party); and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case and the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel
shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party
shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the
action, or (iii) the indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them and/or
other indemnified parties which are different from or additional to
those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party). Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was
not unreasonably withheld.
(e) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Certificates to which
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such loss, claim, damage or liability (or actions in respect thereof)
relates. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from
such offering (before deducting expenses) received by the Company bear
to the total underwriting discounts and commissions (or in the case of
a public offering in negotiated transactions, the difference between
the proceeds to the Company and the aggregate price received from the
public) received by such Underwriters. The relative fault of the
Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or such Underwriters on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding anything to the contrary in this Section 6(d), if the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in this Section 6(d) arise out of an untrue statement or
alleged untrue statement of a material fact contained in any
[Underwriter] 8-K (as such term is defined in Section 10 hereof) then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Underwriters on the other (determined in accordance with
the preceding sentence) in connection with the statements or omissions
in such [Underwriter] 8-K which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other equitable considerations. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation even if the
Underwriters were treated as one entity for such purpose or by any
other method of allocation which does not take account of the equitable
considerations referred to in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigation or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Certificates underwritten by it and
distributed to the public were sold to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
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entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Underwriters to
contribute pursuant to this subsection (d) are several in proportion to
their respective underwriting obligations with respect to such
Certificates and not joint.
SECTION 7. Representations, Warranties, and Agreements to 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 the applicable Terms Agreement or any
investigation made by or on behalf of the Underwriters or any controlling person
thereof, or by or on behalf of the Company, its officers or directors and shall
survive delivery of any Certificates to the Underwriters.
SECTION 8. 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; provided,
however, that if a Terms Agreement has been entered into with respect to a
particular transaction, this Agreement and the Terms Agreement may not be
terminated in the manner set forth in this sentence with respect to such
particular transaction. 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 Registration 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 Certificates, or (ii) if there has occurred any material
outbreak or escalation 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 reasonable judgment, impracticable to market the Certificates or enforce
contracts for the sale of the Certificates, or (iii) if trading in securities
generally on either the New York Stock Exchange or the American Stock Exchange
has been suspended or any setting of minimum prices shall have been established,
or (iv) if a general moratorium of commercial banking activities has been
declared by either Federal or New York State authorities. In the event of any
such termination, (A) the covenants set forth in Section 3 with respect to any
offering of Certificates shall remain in effect so long as the Underwriters own
any such Certificates purchased from the Company pursuant to the applicable
Terms Agreement and (B) the covenant set forth in Section 3(c), the provisions
of Section 5, the indemnity agreement and contribution provisions set forth in
Section 6, and the provisions of Sections 7 and 12 shall remain in effect.
SECTION 9. Default by One or More of the Underwriters.
(a) If one or more of the Underwriters participating in an
offering of Certificates shall fail at the applicable Closing Time to
purchase the Certificates which it or they are obligated to purchase
hereunder and under the applicable Terms Agreement (the "Defaulted
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Certificates"), then such of you as are named therein may in your
discretion arrange for you or another party or other parties to
purchase the Defaulted Certificates upon the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do
not arrange for the purchase of such Defaulted Certificates, then the
Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to
you to purchase such Defaulted Certificates on the terms contained
herein. In the event that, within the respective prescribed periods,
you notify the Company that you have so arranged for the purchase of
such Defaulted Certificates, or the Company notifies you that it has so
arranged for the purchase of such Defaulted Certificates, you or the
Company shall have the right to postpone the Closing Time for a period
of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been party to this Agreement with respect to the
Certificate.
(b) If, after giving effect to any arrangements for the
purchase of Defaulted Certificates of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted Certificates
which remains unpurchased does not exceed 10% of the aggregate
principal amount of the Certificates to be purchased pursuant to the
applicable Terms Agreement, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the principal
amount of Certificates which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of
Certificates which such Underwriter agreed to purchase pursuant to the
applicable Terms Agreement) of the Defaulted Certificates of the
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Defaulted Certificates of the defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted Certificates
which remains unpurchased exceeds 10% of the aggregate principal amount
of the Certificates to be purchased pursuant to the applicable Terms
Agreement, or if the Company shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase
Defaulted Certificates of a defaulting Underwriter or Underwriters,
then this Agreement shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as provided in
Section 5 hereof and the indemnity agreement and contribution
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<PAGE>
provisions in Section 6 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
SECTION 10. Computational Materials and ABS Term Sheets.
(a) The parties acknowledge that, subsequent to the date on
which the Registration Statement became effective and up to and
including the date on which the Prospectus Supplement and Prospectus
with respect to a Series of Certificates is first made available to the
Underwriters, the Underwriters may furnish to various potential
investors in such Series of Certificates, in writing: (i)
"Computational Materials", as defined in a no-action letter (the
"Kidder No-Action Letter") issued by the staff of the Commission on May
20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as
modified by a no-action letter (the "First PSA No-Action Letter")
issued by the staff of the Commission on May 27, 1994 to the Public
Securities Association (the "PSA") and as further modified by a
no-action letter (the "Second PSA No-Action Letter", and together with
the Kidder No-Action Letter and the First PSA No-Action Letter, the
"No-Action Letters") issued by the staff of the Commission on February
17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the
Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as
defined in the Second PSA No-Action Letter.
(b) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the 1933 Act, all Computational Materials used by [Underwriter]
and required to be filed with the Commission in order for [Underwriter]
to avail itself of the relief granted in the No-Action Letters (such
Computational Materials, the "[Underwriter] Furnished Computational
Materials").
(c) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the Act, all Structural Term Sheets used by [Underwriter] and
required to be filed with the Commission in order for [Underwriter] to
avail itself of the relief granted in the No-Action Letters (such
Structural Term Sheets, the "[Underwriter] Furnished Structural Term
Sheets").
(d) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, within one (1) business day
after the first use thereof, all Collateral Term Sheets used by
[Underwriter] and required to be filed with the Commission in order for
[Underwriter] to avail itself of the relief granted in the No-Action
Letters (such Collateral Term Sheets, the "[Underwriter] Furnished
Collateral Term Sheets") and shall advise the Company of the date on
which each such Collateral Term Sheet was first used.
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<PAGE>
(e) [Underwriter] covenants to prepare for signature by the
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission one or more current reports on
Form 8-K (collectively, together with any amendments and supplements
thereto, the "[Underwriter] 8-K," and each a "[Underwriter] 8-K") such
that [Underwriter] may avail itself of the relief granted in the
No-Action Letters. In particular, [Underwriter] covenants to cause to
be filed with the Commission (i) all [Underwriter] Furnished
Computational Materials and all [Underwriter] Furnished Structural Term
Sheets on a [Underwriter] 8-K concurrently with the filing of the
Prospectus Supplement and Prospectus with respect to the related Series
of Certificates pursuant to Rule 424 under the 1933 Act; and (ii) all
[Underwriter] Furnished Collateral Term Sheets on a [Underwriter] 8-K
not later than two (2) business days after the first use thereof. Any
[Underwriter] 8-K containing Furnished Structural Term Sheets and/or
Furnished Collateral Term Sheets shall be filed electronically via
EDGAR. Any [Underwriter] 8-K containing Furnished Computational
Materials shall be filed in paper under cover of Form SE in accordance
with Rule 311(i) of Resolution S-T.
(f) [Underwriter] shall cooperate with the Company and with
Price Waterhouse LLP in obtaining a letter, in form and substance
satisfactory to the Company and [Underwriter], of Price Waterhouse LLP
regarding the information in any [Underwriter] 8-K consisting of
[Underwriter] Furnished Computational Materials and/or [Underwriter]
Furnished Structural Term Sheets. Any such letter shall be obtained
prior to the filing of any such [Underwriter] 8- K with the Commission
at [Underwriter]'s sole expense.
(g) [Underwriter] represents and warrants to, and covenants
with, the Company that as presented in the [Underwriter] 8-K, the
[Underwriter] Information (defined below) is not misleading and not
inaccurate in any material respect and that any Pool Information
(defined below) contained in any [Underwriter] 8-K which is not
otherwise inaccurate in any material respect is not presented in the
[Underwriter] 8-K in a way that is either misleading or inaccurate in
any material respect. [Underwriter] further covenants with the Company
that if any Computational Materials or ABS Term Sheets (as such term is
defined in the Second PSA No-Action Letter) contained in any
[Underwriter] 8-K are found to include any information that is
misleading or inaccurate in any material respect, [Underwriter]
promptly shall inform the Company of such finding, provide the Company
with revised and/or corrected Computational Materials or ABS Term
Sheets, as the case may be, and promptly prepare for signature by the
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission in accordance herewith, revised
and/or corrected Computational Materials or ABS Term Sheets, as the
case may be.
(h) [Underwriter] covenants that all Computational Materials
and ABS Term Sheets used by it shall contain the following legend:
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<PAGE>
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE
UNDERWRITER] AND NOT BY CHASE FUNDING, INC. OR ANY OF ITS
AFFILIATES. [THE UNDERWRITER] IS NOT ACTING AS CHASE
FUNDING, INC.'S AGENT."
(i) [Underwriter] covenants that all Collateral Term Sheets
used by it shall contain the following additional legend:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY
THE DESCRIPTION OF THE MORTGAGE LOANS CONTAINED IN THE
PROSPECTUS SUPPLEMENT."
(j) [Underwriter] covenants that all Collateral Term Sheets
(other than the initial Collateral Term Sheet) shall contain the
following additional legend:
"THE INFORMATION CONTAINED HEREIN SUPERSEDES THE
INFORMATION IN ALL PRIOR COLLATERAL TERM SHEETS, IF ANY."
(k) [Underwriter] shall deliver to the Company a copy of each
[Underwriter] 8-K (including written evidence of filing) promptly upon
filing the same with the Commission (but in any event not later than
the earlier to occur of (i) the second business day after filing and
(ii) the Closing Time).
(l) For purposes of this Agreement, the term "[Underwriter]
Information" means such portion, if any, of the information contained
in the [Underwriter] 8-K that is not Pool Information. "Pool
Information" means the information furnished to the Underwriters by the
Company regarding the Mortgage Loans; provided, however, that if any
information that would otherwise constitute Pool Information is
presented in the [Underwriter] 8-K in a way that is either inaccurate
or misleading in any material respect, such information shall not be
Pool Information.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed,
delivered, telexed, or telegraphed and confirmed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to you
at the respective addresses set forth on the first page hereof, to the attention
of [the General Counsel]. Notices to the Company shall be directed to Chase
Funding, Inc., 343 Thornall Street, Edison, New Jersey 8837, Attention: Luke S.
Hayden.
SECTION 12. Parties. This Agreement shall be binding upon and inure
solely to the benefit of you and the Company and to the extent provided in
Section 6 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter and their respective heirs,
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<PAGE>
executors, administrators, successors and assigns and any Terms Agreement shall
be binding upon and inure solely to the benefit of the Company and any
Underwriter who becomes a party to a Terms Agreement and to the extent provided
in Section 6 hereof, the officers and directors of the Company and each person
who controls the Company or any Underwriter and their respective heirs,
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement or a 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 Section 6 hereof and their heirs any legal
or equitable right, remedy or claim under or with respect to this Agreement or a
Terms Agreement or any provision herein or therein contained.
SECTION 13. Governing Law and Time. This Agreement and each Terms
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. Specified times of day refer to New York City time.
SECTION 14. Counterparts. This Agreement and any Terms Agreement may be
executed in any number of counterparts (which execution may take the form of an
exchange of any standard form of written telecommunication between you and the
Company), 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.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
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<PAGE>
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,
CHASE FUNDING, INC.
By:________________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
[UNDERWRITER]
By:_______________________________
Name:
Title:
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<PAGE>
EXHIBIT A
PASS-THROUGH CERTIFICATES
CHASE FUNDING, INC., SELLER
TERMS AGREEMENT
Dated: _________, 19__
To: Chase Funding, Inc.
Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting Agreement")
Ladies and Gentlemen:
The undersigned (being herein called the "Underwriters"), understand
that Chase Funding, Inc., a New York corporation (the "Company"), proposes to
issue and sell $_________ original principal amount of Pass-Through Certificates
described below (the "Certificates"). The Certificates will be issued under a
Pooling and Servicing Agreement dated as of _______________ among the Company,
as seller, _______________, as servicer and _____________ as trustee. The terms
of the Certificates are summarized below and are more fully described in the
Company's Prospectus supplement prepared with respect to the Certificates.
All the provisions (including defined terms) contained in the
Underwriting Agreement are incorporated by reference herein in their entirety
and shall be deemed to be part of this Terms Agreement to the same extent as if
such provisions had been set forth in full herein. The Closing Time referred to
in Section 2 of the Underwriting Agreement shall be _______ a.m., New York City
time, on _____________. Subject to the terms and conditions set forth or
incorporated by reference herein, the Company hereby agrees to sell and the
Underwriters agree to purchase [, severally and not jointly,] the [respective]
original principal amount[ s] of Certificates set forth opposite [its] [their]
name[s] in Exhibit I hereto at the purchase price set forth below.
The Underwriters will offer the Certificates for sale upon the terms
and conditions set forth in the Prospectus.
Subject to the terms and conditions set forth or incorporated by
reference herein, the Underwriters will pay for the Certificates at the time and
place and in the manner set forth in the Underwriting Agreement.
Series Designation:____________
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<PAGE>
Terms of the Certificates and Underwriting Compensation:
Original
Principal Remittance Price to
Classes Amount* Rate Public
- ------- --------- ---------- --------
**
* Approximate. Subject to permitted variance in each case of plus or minus 5%.
** The [Class A] Certificates 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.
Certificate Rating:
_____ by [Rating Agency]
_____ by [Rating Agency]
REMIC Election:
The Company [does not] intend[s] to cause the Mortgage Pool to be treated as
a REMIC.
Credit Enhancement:
Cut-off Date:
The Cut-off Date is ___________, 19__.
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<PAGE>
Remittance Date:
The ____ day of each month (or, if such ____ day is not a
business day, the business day immediately following) commencing __________,
19__.
Purchase Price:
The purchase price payable by the Underwriter for the [Class
A] Certificates is ___% of the aggregate principal balance of the [Class A]
Certificates as of the Closing Date plus accrued interest at the per annum rate
of ___% from __________, 19__ up to but not including the Closing Date.
Underwriting Commission:
Notwithstanding anything to the contrary in the Underwriting
Agreement, no additional underwriting commission shall be payable by the Company
to the Underwriter in connection with the purchase of the Certificates.
Information Provided by Underwriter:
Closing Date and Location:
__________ 19__ at the offices of Morgan, Lewis & Bockius LLP.
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<PAGE>
Please confirm your agreement by having an authorized Officer
sign a copy of this Agreement in the space set forth below and returning a
signed copy to us.
[UNDERWRITER]
By:________________________
Name:
Title:
ACCEPTED:
CHASE FUNDING, INC.
By:___________________________
Name:
Title:
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<PAGE>
Exhibit I
Original
Principal
Amount of
Name Certificates
- ---- ------------
Total ==============
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<PAGE>
CHASE MANHATTAN ACCEPTANCE CORPORATION
Pass-Through Certificates
UNDERWRITING AGREEMENT
----------------------
[DATE]
[Underwriter]
[Address]
Ladies and Gentlemen:
Chase Manhattan Acceptance Corporation (the "Company"), a Delaware
corporation, has authorized the issuance and sale of Pass-Through Certificates
(such certificates evidencing interests in pools of Mortgage Loans, the
"Certificates") evidencing interests in pools of mortgage loans (the "Mortgage
Loans"). The Certificates 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 Certificates 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 servicer to be identified in the prospectus
supplement for each such Series (the "Servicer") and a trustee to be identified
in the prospectus supplement for each such Series (the "Trustee"). The
Certificates of each Series will evidence specified interests in separate pools
of Mortgage Loans (each a "Mortgage Pool") or separate pools of Agency
Securities, and certain other property held in trust with respect to such Series
(each, a "Trust Fund").
The Certificates are more fully described in a Registration Statement
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. The term "you" as used herein, unless the context otherwise requires,
shall mean you and such persons as are named as co-managers in the applicable
Terms Agreement (defined below).
Whenever the Company determines to make an offering of Certificates
pursuant to this Agreement through you or through an underwriting syndicate
managed by you it will enter into an agreement (the "Terms Agreement") providing
for the sale of such Certificates 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
<PAGE>
whether acting alone in the sale of Certificates or as a member of an
underwriting syndicate; as the context requires, [Underwriter] is sometimes
referred to individually herein as ["Underwriter"]). The Terms Agreement
relating to each offering of Certificates shall specify, among other things, the
stated balance or balances of Certificates to be issued, the price or prices at
which the Certificates 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 Certificates 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 such offering of Certificates which the
Company elects to make pursuant to this Agreement 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 Certificates.
SECTION 1. Representations and Warranties. The Company represents and
warrants to you as of the date hereof, and to the Underwriters named in the
applicable Terms Agreement, all as of the date of such Terms Agreement (in each
case, the "Representation Date"), as follows (any representations and warranties
so made to the Underwriters named in an applicable Terms Agreement respecting
the Certificates being deemed to relate only to the Certificates described
therein):
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
33-92950), relating to the offering of Certificates 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 the
same has become effective under the 1933 Act and the rules of the
Commission thereunder (the "Regulations") and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceedings for that purpose have been initiated or, to the Company's
knowledge, threatened, by the Commission. Such registration statement,
including incorporated documents, exhibits and financial statements, as
amended at the time when it became effective under the 1933 Act, and
the prospectus relating to the sale of Certificates by the Company
constituting a part thereof, as from time to time each is amended or
supplemented pursuant to the 1933 Act or otherwise, are referred to
herein as the "Registration Statement" and the "Prospectus,"
respectively; provided, however, that a supplement to the Prospectus
contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall
be deemed to have supplemented the Prospectus only with respect to the
offering or offerings of Certificates to which it relates. Any
reference herein to the Registration Statement, a preliminary
prospectus, the Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "1934 Act") on or before the date
on which the Registration Statement, as amended, became effective or
the issue date of such preliminary prospectus, Prospectus, or
Prospectus Supplement, as the case may be; and any reference herein to
the terms "amend,"
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<PAGE>
"amendment" or supplement with respect to the Registration Statement,
any preliminary prospectus, the Prospectus or the Prospectus Supplement
shall be deemed to refer to and include the filing of any document
under the 1934 Act after the date on which the Registration Statement
became effective or the issue date of any preliminary prospectus, the
Prospectus or the Prospectus Supplement, as the case may be, deemed to
be incorporated therein by reference. The Registration Statement and
Prospectus, at the time the Registration Statement became effective
did, and as of the applicable Representation Date will, conform in all
material respects to 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 and the
applicable Closing Time (as defined in Section 2 hereof) 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 not misleading. The Prospectus, as amended or
supplemented as of the applicable Representation Date and the
applicable Closing Time (as defined in Section 2 hereof), will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in, or omissions from, (i) the
Registration Statement or 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
Prospectus or (ii) the [Underwriter] Information (as defined in Section
10 hereof). 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 incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to enter into and
perform its obligations under this Agreement, the applicable Pooling
and Servicing Agreement, and with respect to a Series of Certificates,
the Certificates and the applicable Terms Agreement; and the Company is
duly qualified or registered 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 material contract, indenture, mortgage, loan agreement, note,
lease or other material 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
-3-
<PAGE>
or assets thereof or the Company's ability to perform its obligations
under this Agreement, the applicable Terms Agreement or the applicable
Pooling and Servicing Agreement.
(4) The execution and delivery by the Company of this
Agreement, the applicable Terms Agreement and the applicable Pooling
and Servicing 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 with respect to a Series of Certificates described in
the applicable Terms Agreement, neither the issuance and sale of the
Certificates to the Underwriters, nor the execution and delivery by the
Company of this Agreement, such Terms Agreement and the related Pooling
and Servicing Agreement, nor the consummation by the Company of the
transactions herein or therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company other than as contemplated by a Pooling and Servicing
Agreement, pursuant to any material indenture, mortgage, contract or
other material instrument to which the Company is a party or by which
it is bound or to which the property or assets of the Company are
subject, or result in the violation of the provisions of the
certificate of incorporation or by-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(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 (assuming due authorization,
execution and delivery by the other parties thereto), 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 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
(assuming due authorization, execution and delivery by the other
parties thereto), 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); and as of the Closing Date, the
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<PAGE>
representations and warranties made by the Company in the applicable
Pooling and Servicing Agreement will be true and correct as of the date
made.
(7) As of the Closing Time (as defined in Section 2 hereof)
with respect to a Series of Certificates, the Certificates will have
been duly and validly authorized by the Company, and, when executed and
authenticated as specified in the related Pooling and Servicing
Agreement, will be validly issued and outstanding and will be entitled
to the benefits of the related Pooling and Servicing Agreement.
(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 Terms Agreement, the applicable Pooling and Servicing
Agreement or with respect to a Series of Certificates, the
Certificates, (ii) seeking to prevent the issuance of such Certificates
or the consummation of any of the transactions contemplated by this
Agreement, the applicable Terms Agreement or such Pooling and Servicing
Agreement, (iii) which would be likely to materially and adversely
affect the performance by the Company of its obligations under, or
which would if adversely determined materially and adversely affect the
validity or enforceability of, this Agreement, the applicable Terms
Agreement, such Pooling and Servicing Agreement or such Certificates or
(iv) seeking to adversely affect the federal income tax attributes of
such Certificates 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 Terms Agreement, the
applicable Pooling and Servicing Agreement and with respect to a Series
of Certificates, the Certificates, shall have been paid at or prior to
the Closing Time.
(10) No filing or registration with, notice to or consent,
approval, authorization, order or qualification of or with any court or
governmental agency or body is required for the issuance and sale of
the Certificates or the consummation by the Company of the transactions
contemplated by this Agreement, the applicable Pooling and Servicing
Agreement or the applicable Terms Agreement, except the registration
under the 1933 Act of the Certificates, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Certificates by the Underwriters.
(11) The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies deemed by the Company
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1-PH/1077598.1
<PAGE>
to be reasonably 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
Certificates described in the relevant Terms Agreement evidencing
interests in a Mortgage Pool, the Trustee will have either good and
marketable title, free and clear of all prior liens, charges and
encumbrances, to or a validly perfected first priority security
interest in the Mortgage Notes and the related Mortgages included in
the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery
thereof to the Trustee and (b) the Mortgages, upon delivery to the
Trustee of instruments of assignment in recordable form assigning each
Mortgage to the Trustee and the recording of each such instrument of
assignment in the appropriate recording office in which the Mortgaged
Property is located, or if supported by an opinion of counsel, without
recording.
(13) As of the Closing Time, with respect to a Series of
Certificates as to which there is a Reserve Fund, to the extent that
the Reserve Fund does not constitute part of the Trust Fund for such
Series, the Trustee will have acquired either good and marketable title
to or a duly and validly perfected security interest in the Reserve
Fund with respect to such Series, if any, subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance.
(14) As of the Closing Time, with respect to a Series of
Certificates, the Mortgage Pool will have substantially the
characteristics described in the Prospectus Supplement and in the Form
8-K of the Company prepared with respect to such Certificates, if the
Mortgage Pool is described in such Form 8-K.
(15) Neither the Company nor the Trust Fund created by the
applicable Pooling and Servicing Agreement will be subject to
registration as an "investment company" under the Investment Company
Act of 1940, as amended (the "1940 Act").
(16) The Certificates, the applicable Pooling and Servicing
Agreement, the applicable Terms Agreement and any Primary Insurance
Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance
Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy
Insurance and Alternate Credit Enhancement related to the Certificates
described in the relevant Terms Agreement conform in all material
respects to the descriptions thereof contained in the Prospectus.
SECTION 2. Purchase and Sale. The commitment of each Underwriter to
purchase Certificates pursuant to any Terms Agreement shall be several and not
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joint and 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 Certificates to
be purchased by the Underwriters shall be made at the offices of Morgan, Lewis &
Bockius LLP, New York, New York, 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 in immediately available Federal funds
wired to such bank as may be designated by the Company. Such Certificates 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
Certificates 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.
It is understood that the Underwriters intend to offer the Certificates
for sale to the public as set forth in the Prospectus Supplement.
SECTION 3. Covenants of the Company. The Company covenants with each of
you and each Underwriter participating in an offering of Certificates pursuant
to a Terms Agreement, with respect to such Certificates and such offering, as
follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Certificates covered thereby, the price
or prices at which the Certificates are to be purchased by the
Underwriters, either the initial public offering price or prices or the
method by which the price or prices by which the Certificates 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 Certificates. 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 the delivery of a prospectus is required at any time in
connection with the offering or sale of the Certificates described in
the relevant Terms Agreement and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period of time to
amend or supplement the Prospectus in order to comply with the 1933
Act, the Company agrees to notify you promptly and upon your request so
to amend or supplement the Prospectus and to prepare and furnish
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without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance.
(c) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement 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, and 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.
(d) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
notify you promptly (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 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 or any amendment or
supplement to the Prospectus or for additional information, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Certificates for sale in any
jurisdiction or the threat of any proceeding for that purpose and (vi)
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 use its best efforts to
prevent the issuance of any such stop order and, if any stop order is
issued, to obtain the lifting thereof as soon as possible.
(e) The Company will deliver to you 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 Certificates 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 Certificates, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction. The Company will file or cause the filing of such
statements and reports as may be required by the laws of each
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jurisdiction in which the Certificates have been qualified as above
provided.
(g) If the Company has elected to cause the applicable
Mortgage Pool to be treated as a real estate mortgage investment
conduit (a "REMIC"), the Company will prepare, or cause to be prepared,
and file, or cause to be filed a timely election to treat the Mortgage
Pool as a REMIC for federal income tax purposes and will file, or cause
to be filed, such tax returns and take such actions, all on a timely
basis, as are required to elect and maintain such status.
(h) With respect to a Series, so long as the Certificates of
such Series are outstanding, the Company will furnish, or cause to be
furnished, to you, copies of all reports and statements available to
Certificateholders pursuant to the Pooling and Servicing Agreement.
SECTION 4. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase Certificates pursuant to any Terms Agreement shall
be 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 additional conditions precedent:
(a) At the applicable Closing Time (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission, (ii) the Certificates 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, together
with the applicable Prospectus Supplement at the time it was required
to be delivered to a purchaser of the Certificates, 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. No challenge by
the Commission shall have been made to the accuracy or adequacy of the
Registration Statement and any request of the Commission for inclusion
of additional information in the Registration Statement or the
Prospectus or the Prospectus Supplement shall have been complied with
and the Company shall not have filed with the Commission any amendment
or supplement to the Registration Statement, the Prospectus or the
Prospectus Supplement without the consent of the Underwriters.
(b) At the applicable Closing Time you shall have received:
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(1) The opinion, dated as of the applicable Closing
Time, of Morgan, Lewis & Bockius LLP, counsel for 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) This Agreement and the applicable Terms
Agreement have been duly authorized, executed and delivered by
the Company, and each is a legal, 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, (B) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought,
and (C) the enforceability as to rights to indemnity
thereunder may be subject to limitations of public policy
under applicable securities laws.
(iii) The applicable Pooling and Servicing
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 enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms' of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor
may be brought.
(iv) The execution and delivery by the Company of
this Agreement, the applicable Terms Agreement and applicable
Pooling and Servicing 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 Certificates nor the
consummation of the transactions contemplated herein or
therein nor the fulfillment of the terms hereof or thereof
will, conflict with or constitute a breach or violation of any
of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, or other
instrument to which the Company is a party or by which it may
be bound of which such counsel is aware, other than the lien
or liens created by the applicable Pooling and Servicing
Agreement, nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws of
the Company or, any statute, rule or regulation to which the
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Company is subject or by which it is bound or any writ,
injunction or decree of any court, governmental authority or
regulatory body to which it is subject or by which it is bound
of which such counsel is aware.
(v) The Certificates have been duly authorized,
executed and authenticated as specified in the related Pooling
and Servicing Agreement and when delivered and paid for, will
be validly issued and entitled to the benefits of the related
Pooling and Servicing Agreement.
(vi) To the best of such counsel's knowledge, no
filing or registration with or notice to or consent, approval,
authorization, order or qualification of or with any court or
governmental agency or body is required for the issuance and
sale of the Certificates or the consummation by the Company of
the transactions contemplated by this Agreement, the
applicable Pooling and Servicing Agreement or the applicable
Terms Agreement, except the registration under the 1933 Act of
the Certificates, and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Certificates by the
Underwriters.
(vii) To the best of such counsel's knowledge,
there is no action, suit or proceeding of which such counsel
is aware before or by any court or governmental agency or
body, domestic or foreign, now pending or threatened against
the Company which 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 or might materially and
adversely affect the performance by the Company of its
obligations under, or the validity or enforceability of, the
Certificates, this Agreement or the Pooling and Servicing
Agreement, or which is required to be disclosed in the
Registration Statement.
(viii) The Registration Statement is effective
under the 1933 Act and, to the best of such counsel's
knowledge, 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 applicable Pooling and Servicing
Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended.
(x) The Registration Statement and the Prospectus
(other than the financial statements and other financial and
statistical information included therein, as to which no
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opinion need be rendered) as of their respective effective or
issue dates, complied as to form in all material respects with
the requirements of the 1933 Act and the Regulations
thereunder.
(xi) The statements in the Prospectus under the
headings "ERISA Considerations" and "Federal Income Tax
Consequences" and the statements in the applicable Prospectus
Supplement under the headings "Federal Income Tax
Considerations" and "ERISA Considerations", to the extent that
they describe matters of United States federal income tax law
or ERISA or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are accurate in all
material respects with respect to those consequences or
matters discussed therein.
(xii) The statements in the Prospectus and the
applicable Prospectus Supplement under the caption
"Description of the Certificates", insofar as they purport to
summarize certain terms of the Certificates and the applicable
Pooling and Servicing Agreement, constitute a fair summary of
the provisions purported to be summarized.
(xiii) The Trust Fund created by the applicable
Pooling and Servicing Agreement is not, and will not as a
result of the offer and sale of the Certificates as
contemplated in the Prospectus and in this Agreement become,
an "investment company" required to be registered under the
1940 Act.
(xiv) The Classes of Certificates so designated
in the Prospectus Supplement will be "mortgage related
securities", as defined in ss.3(a)(41) of the 1934 Act, so
long as the Certificates are rated in one of the two highest
grades by at least one nationally recognized statistical
rating organization.
(xv) If a REMIC election is to be made with
respect to the Trust Fund, assuming (a) ongoing compliance
with all of the provisions of the Pooling and Servicing
Agreement and (b) the filing of an election, in accordance
with the Pooling and Servicing Agreement, to be treated as a
"real estate mortgage investment conduit" (a "REMIC") pursuant
to Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code") for Federal income tax purposes, the
Trust Fund will qualify as a REMIC as of the Closing Date and
will continue to qualify as a REMIC for so long as it complies
with amendments after the date hereof to any applicable
provisions of the Code and applicable Treasury Regulations.
Such counsel shall deliver to you such additional opinions addressed to
you addressing the transfer by the Company to the Trustee of its right, title
and interest in and to the Mortgage Loans and other property included in the
Trust Fund at the Closing Time as may be required by each Rating Agency rating
the Certificates.
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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 and related matters 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 (xi) and (xii) above) and has made no independent check or
verification thereof for the purpose of rendering its opinion, on the basis of
the foregoing, nothing has come to their attention that leads such counsel to
believe that either the Registration Statement, at the time it became effective
and at the applicable Closing Time, contained, an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or that the Prospectus
contained or contains as of the date thereof and at the applicable Closing Time
any untrue statement of a material fact or omitted or omits to state a material
fact necessary 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, the Prospectus or the Prospectus Supplement.
Such counsel may state that their opinions relate only to laws of the
State of New York, the Federal laws of the United States and the General
Corporation Law of the State of Delaware.
In rendering such opinions, such counsel may rely, as to matters of
fact, to the extent deemed proper and stated therein, on certificates of
responsible officers of the Company, the Trustee or public officials.
(2) The favorable opinion of counsel to the 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 Trustee is a national banking
association, duly authorized and validly existing in good
standing under the laws of the United States, and has all
requisite power and authority to enter into the Pooling and
Servicing Agreement and to perform its obligations thereunder.
(ii) To the knowledge of such counsel, there is
no action, suit, proceeding or investigation pending or
threatened against the Trustee that could materially adversely
affect the ability of the Trustee to perform its obligations
under the Pooling and Servicing Agreement.
(iii) The Trustee has duly authorized, executed
and delivered the applicable Pooling and Servicing Agreement
and such Pooling and Servicing Agreement will constitute the
legal, valid and binding obligation of the Trustee.
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(iv) The Trustee has full power and authority to
execute and deliver the applicable Pooling and Servicing
Agreement and to perform its obligations thereunder.
(v) No consent, approval or authorization of, or
registration, declaration or filing with, any court or
governmental agency or body of the jurisdiction of its
organization is required for the execution, delivery or
performance by the Trustee of the Pooling and Servicing
Agreement.
(vi) The performance by the Trustee of its duties
pursuant to the Pooling and Servicing Agreement does not
conflict with or result in a breach or violation of any term
or provision of, or constitute a default under, any statute or
regulation currently governing the Trustee.
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 Trustee or public officials.
(3) The favorable opinion of counsel to the 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 Servicer is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation.
(ii) The execution and delivery by the Servicer
of the applicable Pooling and Servicing Agreement is within
the corporate power of the Servicer and has been duly
authorized by all necessary corporate action on the part of
the Servicer; and to the knowledge of such counsel, neither
the execution and delivery of such instrument, nor the
consummation of the transactions provided for therein, nor
compliance with the provisions 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 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
Servicer or to the knowledge of such counsel, any law,
administrative regulation or administrative or court decree.
(iii) The applicable Pooling and Servicing
Agreement has been duly executed and delivered by the Servicer
and constitutes a valid and binding obligation of the Servicer
enforceable against the 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
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equity (regardless whether enforcement is sought in a
proceeding in equity or at law).
(iv) To the knowledge of such counsel, the
execution, delivery and performance by the 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) To the knowledge of such counsel, there is no
action, suit or proceeding of which such counsel is aware
before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against the
Servicer which might materially and adversely affect the
performance by the Servicer under, or the validity or
enforceability of, the applicable Pooling and Servicing
Agreement.
(vi) The description of the Servicer in the
applicable Prospectus Supplement is true and correct in all
material respects.
(4) The favorable opinion or opinions, dated as of
the applicable Closing Time, of counsel for the Underwriters,
acceptable to the Underwriters.
(c) At the applicable Closing Time you shall have received a
certificate of the President or a Vice President and the Treasurer or
the Secretary 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 and that the
Company has complied with all agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Time.
(d) You shall have received from Price Waterhouse LLP, or
other independent certified public accountants acceptable to you,
letters, dated as of the date of the applicable Terms Agreement and as
of the applicable Closing Time, delivered at such times, in the form
and substance reasonably satisfactory to you.
(e) At the applicable Closing Time, with respect to a Series
of Certificates, each of the representations and warranties of the
Servicer set forth in the related Pooling and Servicing Agreement will
be true and correct and you shall have received a Certificate of an
Executive Vice President, Senior Vice President or Vice President of
the Servicer, dated as of such Closing Time, to such effect.
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(f) At the applicable Closing Time, with respect to a Series
of Certificates, the Certificates 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 other documents and
opinions as they may reasonably require for the purpose of enabling
them to pass upon the issuance and sale of the Certificates as herein
contemplated and related proceedings or in order to evidence the
accuracy and completeness of any of the representations and warranties,
or the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and
sale of the Certificates as herein contemplated shall be reasonably
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 5.
SECTION 5. Payment of Expenses. The Company covenants and agrees with
the Underwriters that the Company will pay or cause to be paid all expenses
incident to the performance of its obligations under this Agreement, including
without limitation: (i) expenses related to the preparation and filing of the
Registration Statement and all amendments thereto, (ii) the cost of 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 and selling agreement and the Underwriters' questionnaires and
powers of attorney, (iii) the cost of preparation, issuance and delivery of the
Certificates to the Underwriters, (iv) the fees and disbursements of the
Company's counsel and accountants for the Company, (v) all expenses (other than
legal fees) in connection with the qualification of the Certificates under
securities and Blue Sky laws and the determination of the eligibility of the
Certificates for investment in accordance with the provisions of Section 3(f),
including filing fees, (vi) the cost of 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 cost of printing and delivery to the Underwriters,
in such quantities as you may reasonably request, of copies of each Pooling and
Servicing Agreement, (viii) the fees charged by not more than two investment
rating agencies for rating the Certificates, (ix) the fees and expenses, if any,
incurred in connection with the listing of the Certificates on any national
securities exchange, (x) any filing fees and expenses incident to any required
review by the National Association of Securities Dealers, Inc., and (xi) the
fees and expenses of the Trustee and its counsel. It is understood, however,
that except as provided in this Section and Section 6 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of counsel,
transfer taxes on resale of any of the Certificates by them and any advertising
expenses connected with any offers they may make.
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If a Terms Agreement is terminated by you in accordance with the
provisions of Section 4 or Section 8(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 6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in each case in respect of the relevant
Certificates, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by such Underwriter or controlling person in connection with
investigating or defending any such action or claim; provided, however,
that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any such document in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter expressly for use therein. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) [Underwriter] will indemnify and hold harmless the
Company, each of its officers who signed the Registration Statement,
its respective directors, and any person controlling the Company within
the meaning of the 1933 Act against any losses, claims, damages or
liabilities to which the Company or any such officer, director or
controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of [Underwriter] expressly for use therein and will reimburse
the Company or any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company, any such
officer, director or controlling person in connection with
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investigating or defending any such action or claim. This indemnity
agreement is in addition to any liability which [Underwriter] may
otherwise have. The Company acknowledges that, unless otherwise set
forth in the applicable Terms Agreement, the statements set forth [in
the last paragraph of the cover page, the first and second sentences of
the third paragraph under the caption "Underwriting" and in the third
to last paragraph of the cover page relating to [Underwriter]'s
intention to create a secondary market], each as included in the
applicable Prospectus Supplement relating to a Series of Certificates,
together with the [Underwriter] Information (as defined in Section 10
hereof) relating to a Series of Certificates constitute the only
information furnished in writing by or on behalf of [Underwriter]
expressly for use in the Registration Statement relating to such Series
of Certificates as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify such indemnifying party
in writing of the commencement thereof; but the omission so to notify
the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section. In
case any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying
party); and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case and the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel
shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party
shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the
action, or (iii) the indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them and/or
other indemnified parties which are different from or additional to
those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party). Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was
not unreasonably withheld.
-18-
<PAGE>
(d) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Certificates to which such loss, claim, damage or
liability (or actions in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions (or in the case of a public
offering in negotiated transactions, the difference between the
proceeds to the Company and the aggregate price received from the
public) received by such Underwriters. The relative fault of the
Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or such Underwriters on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding anything to the contrary in this Section 6(d), if the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in this Section 6(d) arise out of an untrue statement or
alleged untrue statement of a material fact contained in any
[Underwriter] 8-K (as such term is defined in Section 10 hereof) then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Underwriters on the other (determined in accordance with
the preceding sentence) in connection with the statements or omissions
in such [Underwriter] 8-K which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other equitable considerations. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation even if the
Underwriters were treated as one entity for such purpose or by any
other method of allocation which does not take account of the equitable
considerations referred to in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigation or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter
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<PAGE>
shall be required to contribute any amount in excess of the amount by
which the total price at which the Certificates underwritten by it and
distributed to the public were sold to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Underwriters to contribute
pursuant to this subsection (d) are several in proportion to their
respective underwriting obligations with respect to such Certificates
and not joint.
SECTION 7. Representations, Warranties, and Agreements to 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 the applicable Terms Agreement or any
investigation made by or on behalf of the Underwriters or any controlling person
thereof, or by or on behalf of the Company, its officers or directors and shall
survive delivery of any Certificates to the Underwriters.
SECTION 8. 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; provided,
however, that if a Terms Agreement has been entered into with respect to a
particular transaction, this Agreement and the Terms Agreement may not be
terminated in the manner set forth in this sentence with respect to such
particular transaction. 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 Registration 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 Certificates, or (ii) if there has occurred any material
outbreak or escalation 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 reasonable judgment, impracticable to market the Certificates or enforce
contracts for the sale of the Certificates, or (iii) if trading in securities
generally on either the New York Stock Exchange or the American Stock Exchange
has been suspended or any setting of minimum prices shall have been established,
or (iv) if a general moratorium of commercial banking activities has been
declared by either Federal or New York State authorities. In the event of any
such termination, (A) the covenants set forth in Section 3 with respect to any
offering of Certificates shall remain in effect so long as the Underwriters own
any such Certificates purchased from the Company pursuant to the applicable
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<PAGE>
Terms Agreement and (B) the covenant set forth in Section 3(c), the provisions
of Section 5, the indemnity agreement and contribution provisions set forth in
Section 6, and the provisions of Sections 7 and 12 shall remain in effect.
SECTION 9. Default by One or More of the Underwriters.
(a) If one or more of the Underwriters participating in an
offering of Certificates shall fail at the applicable Closing Time to
purchase the Certificates which it or they are obligated to purchase
hereunder and under the applicable Terms Agreement (the "Defaulted
Certificates"), then such of you as are named therein may in your
discretion arrange for you or another party or other parties to
purchase the Defaulted Certificates upon the terms contained
herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Defaulted
Certificates, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Defaulted Certificates on the
terms contained herein. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged
for the purchase of such Defaulted Certificates, or the Company
notifies you that it has so arranged for the purchase of such Defaulted
Certificates, you or the Company shall have the right to postpone the
Closing Time for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to
the Registration Statement or the Prospectus which in your opinion may
thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with
like effect as if such person had originally been party to this
Agreement with respect to the Certificate.
(b) If, after giving effect to any arrangements for the
purchase of Defaulted Certificates of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted Certificates
which remains unpurchased does not exceed __% of the aggregate
principal amount of the Certificates to be purchased pursuant to the
applicable Terms Agreement, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the principal
amount of Certificates which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of
Certificates which such Underwriter agreed to purchase pursuant to the
applicable Terms Agreement) of the Defaulted Certificates of the
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Defaulted Certificates of the defaulting Underwriter or
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<PAGE>
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted Certificates
which remains unpurchased exceeds __% of the aggregate principal amount
of the Certificates to be purchased pursuant to the applicable Terms
Agreement, or if the Company shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase
Defaulted Certificates of a defaulting Underwriter or Underwriters,
then this Agreement shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as provided in
Section 5 hereof and the indemnity agreement and contribution
provisions in Section 6 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
SECTION 10. Computational Materials and ABS Term Sheets.
(a) The parties acknowledge that, subsequent to the date on
which the Registration Statement became effective and up to and
including the date on which the Prospectus Supplement and Prospectus
with respect to a Series of Certificates is first made available to the
Underwriters, the Underwriters may furnish to various potential
investors in such Series of Certificates, in writing: (i)
"Computational Materials", as defined in a no-action letter (the
"Kidder No-Action Letter") issued by the staff of the Commission on May
20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as
modified by a no-action letter (the "First PSA No-Action Letter")
issued by the staff of the Commission on May 27, 1994 to the Public
Securities Association (the "PSA") and as further modified by a
no-action letter (the "Second PSA No-Action Letter", and together with
the Kidder No-Action Letter and the First PSA No-Action Letter, the
"No-Action Letters") issued by the staff of the Commission on February
17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the
Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as
defined in the Second PSA No-Action Letter.
(b) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the 1933 Act, all Computational Materials used by [Underwriter]
and required to be filed with the Commission in order for [Underwriter]
to avail itself of the relief granted in the No-Action Letters (such
Computational Materials, the "[Underwriter] Furnished Computational
Materials").
(c) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the Act, all Structural Term Sheets used by [Underwriter] and
required to be filed with the Commission in order for [Underwriter] to
avail itself of the relief granted in the No-Action Letters (such
Structural Term Sheets, the "[Underwriter] Furnished Structural Term
Sheets").
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(d) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, within one (1) business day
after the first use thereof, all Collateral Term Sheets used by
[Underwriter] and required to be filed with the Commission in order for
[Underwriter] to avail itself of the relief granted in the No-Action
Letters (such Collateral Term Sheets, the "[Underwriter] Furnished
Collateral Term Sheets") and shall advise the Company of the date on
which each such Collateral Term Sheet was first used.
(e) [Underwriter] covenants to prepare for signature by the
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission one or more current reports on
Form 8-K (collectively, together with any amendments and supplements
thereto, the "[Underwriter] 8-K," and each a "[Underwriter] 8-K") such
that [Underwriter] may avail itself of the relief granted in the
No-Action Letters. In particular, [Underwriter] covenants to cause to
be filed with the Commission (i) all [Underwriter] Furnished
Computational Materials and all [Underwriter] Furnished Structural Term
Sheets on a [Underwriter] 8-K concurrently with the filing of the
Prospectus Supplement and Prospectus with respect to the related Series
of Certificates pursuant to Rule 424 under the 1933 Act; and (ii) all
[Underwriter] Furnished Collateral Term Sheets on a [Underwriter] 8-K
not later than two (2) business days after the first use thereof. Any
[Underwriter] 8-K containing Furnished Structural Term Sheets and/or
Furnished Collateral Term Sheets shall be filed electronically via
EDGAR. Any [Underwriter] 8-K containing Furnished Computational
Materials shall be filed in paper under cover of Form SE in accordance
with Rule 311(i) of Resolution S-T.
(f) [Underwriter] shall cooperate with the Company and with
Price Waterhouse LLP in obtaining a letter, in form and substance
satisfactory to the Company and [Underwriter], of Price Waterhouse LLP
regarding the information in any [Underwriter] 8-K consisting of
[Underwriter] Furnished Computational Materials and/or [Underwriter]
Furnished Structural Term Sheets. Any such letter shall be obtained
prior to the filing of any such [Underwriter] 8- K with the Commission
at [Underwriter]'s sole expense.
(g) [Underwriter] represents and warrants to, and covenants
with, the Company that as presented in the [Underwriter] 8-K, the
[Underwriter] Information (defined below) is not misleading and not
inaccurate in any material respect and that any Pool Information
(defined below) contained in any [Underwriter] 8-K which is not
otherwise inaccurate in any material respect is not presented in the
[Underwriter] 8-K in a way that is either misleading or inaccurate in
any material respect. [Underwriter] further covenants with the Company
that if any Computational Materials or ABS Term Sheets (as such term is
defined in the Second PSA No-Action Letter) contained in any
[Underwriter] 8-K are found to include any information that is
misleading or inaccurate in any material respect, [Underwriter]
promptly shall inform the Company of such finding, provide the Company
with revised and/or corrected Computational Materials or ABS Term
Sheets, as the case may be, and promptly prepare for signature by the
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Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission in accordance herewith, revised
and/or corrected Computational Materials or ABS Term Sheets, as the
case may be.
(h) [Underwriter] covenants that all Computational Materials
and ABS Term Sheets used by it shall contain a legend substantially in
the form of the following legend:
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE
UNDERWRITER] AND NOT BY CHASE MANHATTAN ACCEPTANCE
CORPORATION ("CMAC") OR ANY OF ITS AFFILIATES. [THE
UNDERWRITER] IS NOT ACTING AS CMAC'S AGENT."
(i) [Underwriter] covenants that all Collateral Term Sheets
used by it shall contain the following additional legend:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY
THE DESCRIPTION OF THE MORTGAGE LOANS CONTAINED IN THE
PROSPECTUS SUPPLEMENT."
(j) [Underwriter] covenants that all Collateral Term Sheets
(other than the initial Collateral Term Sheet) shall contain the
following additional legend:
"THE INFORMATION CONTAINED HEREIN SUPERSEDES THE
INFORMATION IN ALL PRIOR COLLATERAL TERM SHEETS, IF ANY."
(k) [Underwriter] shall deliver to the Company a copy of each
[Underwriter] 8-K (including written evidence of filing) promptly upon
filing the same with the Commission (but in any event not later than
the earlier to occur of (i) the second business day after filing and
(ii) the Closing Time).
(l) For purposes of this Agreement, the term "[Underwriter]
Information" means such portion, if any, of the information contained
in the [Underwriter] 8-K that is not Pool Information. "Pool
Information" means the information furnished to the Underwriters by the
Company regarding the Mortgage Loans; provided, however, that if any
information that would otherwise constitute Pool Information is
presented in the [Underwriter] 8-K in a way that is either inaccurate
or misleading in any material respect, such information shall not be
Pool Information.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed,
delivered, telexed, or telegraphed and confirmed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to you
at the respective addresses set forth on the first page hereof, to the attention
of [the General Counsel]. Notices to the Company shall be directed to Chase
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<PAGE>
Manhattan Acceptance Corporation, c/o Chase Manhattan Mortgage Corporation, 300
Tice Boulevard, Woodcliff Lake, New Jersey 07645, Attention: Michael D. Katz.
SECTION 12. Parties. This Agreement shall be binding upon and inure
solely to the benefit of you and the Company and to the extent provided in
Section 6 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter and their respective heirs, executors,
administrators, successors and assigns and any Terms Agreement shall be binding
upon and inure solely to the benefit of the Company and any Underwriter who
becomes a party to a Terms Agreement and to the extent provided in Section 6
hereof, the officers and directors of the Company and each person who controls
the Company or any Underwriter and their respective heirs, executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement or a 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 Section 6 hereof and their heirs any legal or equitable right,
remedy or claim under or with respect to this Agreement or a Terms Agreement or
any provision herein or therein contained.
SECTION 13. Governing Law and Time. This Agreement and each Terms
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. Specified times of day refer to New York City time.
SECTION 14. Counterparts. This Agreement and any Terms Agreement may be
executed in any number of counterparts (which execution may take the form of an
exchange of any standard form of written telecommunication between you and the
Company), 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.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
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<PAGE>
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,
CHASE MANHATTAN ACCEPTANCE
CORPORATION
By:________________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
[UNDERWRITER]
By:_______________________________
Name:
Title:
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EXHIBIT A
PASS-THROUGH CERTIFICATES
CHASE MANHATTAN ACCEPTANCE CORPORATION, SELLER
TERMS AGREEMENT
---------------
Dated: _________, 19__
To: Chase Manhattan Acceptance Corporation
Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting
Agreement")
Ladies and Gentlemen:
The undersigned (being herein called the "Underwriters"), understand
that Chase Manhattan Acceptance Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell $_________ original principal amount of
Pass-Through Certificates described below (the "Certificates"). The Certificates
will be issued under a Pooling and Servicing Agreement dated as of
_______________ among the Company, as seller, _______________, as servicer and
_____________ as trustee. The terms of the Certificates are summarized below and
are more fully described in the Company's Prospectus supplement prepared with
respect to the Certificates.
All the provisions (including defined terms) contained in the
Underwriting Agreement are incorporated by reference herein in their entirety
and shall be deemed to be part of this Terms Agreement to the same extent as if
such provisions had been set forth in full herein. The Closing Time referred to
in Section 2 of the Underwriting Agreement shall be _______ a.m., New York City
time, on _____________. Subject to the terms and conditions set forth or
incorporated by reference herein, the Company hereby agrees to sell and the
Underwriters agree to purchase [, severally and not jointly,] the [respective]
original principal amount[ s] of Certificates set forth opposite [its] [their]
name[s] in Exhibit I hereto at the purchase price set forth below.
The Underwriters will offer the Certificates for sale upon the terms
and conditions set forth in the Prospectus.
Subject to the terms and conditions set forth or incorporated by
reference herein, the Underwriters will pay for the Certificates at the time and
place and in the manner set forth in the Underwriting Agreement.
Series Designation: ____________
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<PAGE>
Terms of the Certificates and Underwriting Compensation:
- --------------------------------------------------------
Original
Principal Remittance Price to
Classes Amount* Rate Public
- ------- --------- ---------- --------
**
* Approximate. Subject to permitted variance in each case of plus or minus
__%.
** The [Class A] Certificates 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.
Certificate Rating:
- -------------------
_____ by [Rating Agency]
_____ by [Rating Agency]
REMIC Election:
- ---------------
The Company [does not] intend[s] to cause the Mortgage Pool to
be treated as a
REMIC.
Credit Enhancement:
- -------------------
Cut-off Date:
- -------------
The Cut-off Date is ___________, 19__.
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<PAGE>
Remittance Date:
- ----------------
The ____ day of each month (or, if such ____ day is not a
business day, the business day immediately following) commencing __________,
19__.
Purchase Price:
- ---------------
The purchase price payable by the Underwriter for the [Class
A] Certificates is ___% of the aggregate principal balance of the [Class A]
Certificates as of the Closing Date plus accrued interest at the per annum rate
of ___% from __________, 19__ up to but not including the Closing Date.
Underwriting Commission:
- ------------------------
Notwithstanding anything to the contrary in the Underwriting
Agreement, no additional underwriting commission shall be payable by the Company
to the Underwriter in connection with the purchase of the Certificates.
Information Provided by Underwriter:
- ------------------------------------
Closing Date and Location:
- --------------------------
__________ 19__ at the offices of Morgan, Lewis & Bockius LLP.
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<PAGE>
Please confirm your agreement by having an authorized Officer
sign a copy of this Agreement in the space set forth below and returning a
signed copy to us.
[UNDERWRITER]
By:_______________________
Name:
Title:
ACCEPTED:
CHASE MANHATTAN ACCEPTANCE CORPORATION
By:___________________________________
Name:
Title:
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<PAGE>
Exhibit I
---------
Original
Principal
Amount of
Name Certificates
- ---- ------------
Total ==============
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================================================================================
CHASE FUNDING, INC.
Company,
[ADVANTA MORTGAGE CORP, USA]
Servicer,
THE CHASE MANHATTAN BANK
Certificate Administrator
and
-------------------------------------
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of [DATE]
$________________ (Approximate)
Multi-Class Mortgage Pass-Through Certificates
Series [___]
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.....................................................................
Section 1.01 Certain Defined Terms....................................
Section 1.02 Provisions of General Application........................
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND........................................
Section 2.01 Conveyance of Mortgage Loans.............................
Section 2.02 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee..................
Section 2.03. Trust Fund; Authentication of Certificates...............
Section 2.04. REMIC Election...........................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MASTER SERVICER;
REPURCHASE OF MORTGAGE LOANS
Section 3.01 Representations and Warranties of the Company with
respect to the Mortgage Loans........................
Section 3.02 [Reserved]...............................................
Section 3.03 [Reserved]...............................................
Section 3.04 Representations of the Servicer..........................
Section 3.05 Purchase and Substitution................................
ARTICLE IV
THE CERTIFICATES................................................................
Section 4.01 The Certificates.........................................
Section 4.02 Registration of Transfer and Exchange of Certificates....
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates........
Section 4.04 Persons Deemed Owners....................................
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<PAGE>
Section 4.05 Establishment of Certificate Accounts;
Deposit in Certificate Accounts..........................
Section 4.06 Permitted Withdrawals from the Certificate Accounts......
Section 4.07 Appointment of Paying Agent; Paying Agent Account........
Section 4.08. Authenticating Agents....................................
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 Appointment of the Servicer..............................
Section 5.02 Subservicing Agreements Between the Servicer and
Subservicers...........................
Section 5.03 Collection of Certain Mortgage Loan Payments; Collection
Account..................................................
Section 5.04 Permitted Withdrawals from the Collection Account........
Section 5.05 Payment of Taxes, Insurance and other Charges............
Section 5.06 The Maintenance of Casualty Insurance....................
Section 5.07 Maintenance of Mortgage Impairment Insurance Policy......
Section 5.08 Fidelity Bond; Errors and Omissions Policy...............
Section 5.09 Collection of Taxes, Assessments and Other Items;
Servicing Account .......................................
Section 5.10 Enforcement of Due-on-Sale Clauses, Assumption Agreements
Section 5.11 Realization upon Defaulted Mortgage Loans................
Section 5.12 Trustee to Cooperate; Release of Mortgage Files..........
Section 5.13 Servicing Fee; Servicing Compensation....................
Section 5.14 Reports to the Trustee and Certificate Administration;
Collection Account Statements............................
Section 5.15 Annual Statement as to Compliance........................
Section 5.16 Annual Independent Public Accountants' Servicing Report..
Section 5.17 Optional Purchase of Defaulted Mortgage Loans............
Section 5.18 Reports to be Provided by the Servicer...................
Section 5.19 Adjustment of Servicing Compensation in Respect of
Prepaid Mortgage Loans...................................
Section 5.20 Periodic Advances........................................
Section 5.21 [Reserved]...............................................
Section 5.22 Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer.........................
Section 5.23 Assignment of Agreement by Servicer, Servicer Not to
Resign...................................................
- ii -
<PAGE>
Section 5.24 Information Reports to be Filed by the Servicer..........
Section 5.25. REMIC Related Covenants..................................
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS......................................................
Section 6.01 Collection of Money......................................
Section 6.02 The Certificate Insurance Policy.........................
Section 6.03 Distributions............................................
Section 6.04 Reports by Certificate Administrator.....................
Section 6.05 Compensating Interest....................................
Section 6.06 Effect of Payments by the Certificate Insurer;
Subrogation..............................................
Section 6.07 Allocation of Liquidated Loan Losses.....................
ARTICLE VII
REPORTS TO BE PREPARED BY CERTIFICATE ADMINISTRATOR.............................
Section 7.01 Certificate Administrator Shall Provide
Information as Reasonably Required.......................
Section 7.02 Tax and Information Returns and Reports to
Certificateholders ......................................
ARTICLE VIII
THE COMPANY, THE SERVICER AND THE CERTIFICATE ADMINISTRATOR
Section 8.01 Liability of the Servicer................................
Section 8.02 Merger or Consolidation of the Servicer; Transfer of
Servicing ...............................................
Section 8.03 Limitation on Liability of the Servicer and Others.......
Section 8.04 Liability of the Company and the Certificate
Administrator ...........................................
Section 8.05 Merger or Consolidation of the Company or the Certificate
Administrator............................................
Section 8.06 Limitation on Liability of the Company, the Certificate
Administrator, the Trustee and Others....................
Section 8.07 Company and Certificate Administrator Not to Resign......
Section 8.08 Compensation to the Certificate Administrator............
Section 8.09 Successor to the Servicer. .............................
Section 8.10 Maintenance of Ratings...................................
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<PAGE>
ARTICLE IX
DEFAULT.........................................................................
Section 9.01 Events of Default........................................
Section 9.02 Trustee to Act; Appointment of Successor.................
Section 9.03 Waiver of Defaults.......................................
Section 9.04 Mortgage Loans, Trust Fund and Accounts Held for Benefit
of the Certificate Insurer...............................
ARTICLE X
CONCERNING THE TRUSTEE..........................................................
Section 10.01 Duties of Trustee........................................
Section 10.02 Certain Matters Affecting the Trustee....................
Section 10.03 Trustee Not Liable for Certificates or Mortgage Loans....
Section 10.04 Trustee May Own Certificates.............................
Section 10.05 Fees and Expenses........................................
Section 10.06 Eligibility Requirements for Trustee.....................
Section 10.07 Resignation and Removal of the Trustee...................
Section 10.08 Successor Trustee........................................
Section 10.09 Merger or Consolidation of Trustee.......................
Section 10.10 Appointment of Co-Trustee or Separate Trustee............
Section 10.11 Appointment of Office or Agency..........................
ARTICLE XI
TERMINATION.....................................................................
Section 11.01 Termination..............................................
Section 11.02 Additional Termination Requirements......................
Section 11.03 Accounting Upon Termination of Servicer..................
ARTICLE XII
MISCELLANEOUS PROVISIONS........................................................
Section 12.01 Severability of Provisions...............................
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Section 12.02 Limitation on Rights of Certificateholders...............
Section 12.03 Amendment................................................
Section 12.04 Counterparts.............................................
Section 12.05 Duration of Agreement....................................
Section 12.06 Governing Law............................................
Section 12.07 Notices..................................................
Section 12.08 The Certificate Insurer Default..........................
Section 12.09 Third Party Beneficiary..................................
Section 12.10 Intent of the Parties....................................
EXHIBIT A FORM OF CERTIFICATES.....................................
EXHIBIT B [RESERVED]...............................................
EXHIBIT C [RESERVED]...............................................
EXHIBIT D FORM OF CLASS R CERTIFICATE..............................
EXHIBIT E [RESERVED]...............................................
EXHIBIT F MORTGAGE LOAN SCHEDULE...................................
EXHIBIT G [RESERVED]...............................................
EXHIBIT H FORM OF TRUSTEE CERTIFICATION............................
EXHIBIT I FORM OF TRANSFEREE'S LETTER AND AFFIDAVIT................
EXHIBIT J FORM OF TRANSFEROR CERTIFICATE...........................
EXHIBIT K FORM OF INVESTMENT LETTER................................
EXHIBIT L FORM OF RULE 144A LETTER.................................
EXHIBIT M REQUEST FOR RELEASE......................................
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This Pooling and Servicing Agreement, dated as of [DATE], is executed
among Chase Funding , Inc., as depositor, [Advanta Mortgage Corp. USA], as
servicer, The Chase Manhattan Bank, as certificate administrator and
_____________________________________________, as trustee.
In consideration of the mutual agreements herein contained, the
Company, the Servicer, the Certificate Administrator and the Trustee agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
"Accepted Servicing Practices": The Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located.
"Account": Any Eligible Account established pursuant to
Sections 4.05, 4.07, 5.03 or 6.02 hereof.
"Accrual Period": With respect to (i) the Group I Certificates
and any Distribution Date other than the first Distribution Date, the period
commencing on the Distribution Date immediately preceding the month in which
such Distribution Date occurs and ending on the calendar day immediately
preceding such Distribution Date, and with respect to the first Distribution
Date, the period commencing on [DATE] and ending on [DATE] and (ii) the Group II
Certificates and any Distribution Date, the prior calendar month.
"Advanta": Advanta Mortgage Corp. USA, a Delaware corporation.
"Affiliate": With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
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whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement": This Pooling and Servicing Agreement, including
the Exhibits hereto, and all amendments hereof and supplements hereto.
"Amortized Group I Subordinated Amount Requirement": As of
any Distribution Date, the product of (i) _____% and (ii) the aggregate
outstanding Group I Certificate Principal Balance immediately preceding such
Distribution Date.
"Amortized Group II Subordinated Amount Requirement": As of
any Distribution Date, the product of (i) _____% and (ii) the aggregate
outstanding Group II Certificate Principal Balance immediately preceding such
Distribution Date.
"Appraised Value": As to any Mortgaged Property, the lesser of
(i) the appraised value of such Mortgaged Property based upon the appraisal made
at the time of the origination of the related Mortgage Loan, and (ii) the sales
price of the Mortgaged Property at such time of origination, except in the case
of a Mortgaged Property securing a refinanced or modified Mortgage Loan as to
which it is the lesser of the appraised value determined above or the appraised
value determined in an appraisal at the time of refinancing or modification, as
the case may be.
"Assignment of Mortgage": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect of record the sale of the
Mortgage to the Trustee for the benefit of the Certificateholders.
"Authorized Denominations": With respect to each class of
Class A Certificates, the minimum Percentage Interest corresponding to a minimum
denomination of $25,000 and integral multiples of $1 in excess thereof. With
respect to each class of Class S Certificates and Class R Certificates, a
minimum Percentage Interest of 10.00% and integral multiples of 0.01 % in excess
thereof.
"Available Funds Shortfall": With respect to the Group I Loans
and any Distribution Date, an amount equal to the sum of (a) the Group I Class A
Interest Distribution Amount minus the Group I Available Funds for such
Distribution Date and (b) the Group I
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Subordination Deficit. With respect to the Group II Loans and any Distribution
Date, an amount equal to the sum of (a) the Group II Class A Interest
Distribution Amount minus the Group II Available Funds for such Distribution
Date and (b) the Group II Subordination Deficit.
"Balloon Mortgage Loan": Any Mortgage Loan that provided on
the date of origination for an amortization schedule extending beyond its stated
maturity date.
"Balloon Payment": With respect to any Balloon Mortgage Loan,
as of any date of determination, the Monthly Payment payable on the stated
maturity date of such Mortgage Loan.
"Business Day": Any day other than (a) a Saturday or Sunday,
or (b) a day on which banking institutions in the State of California, the State
of New York or the state where the Trustee's corporate trust office is located
are authorized or obligated by law or executive order to be closed.
"Certificate": Any Class A Certificate, Class S Certificate or
Class R Certificate executed by the Trustee on behalf of the Trust Fund and
authenticated by the Trustee.
"Certificate Account": The Group I Certificate Account or the
Group II Certificate Account, as applicable.
"Certificate Administration Fee": As to any Mortgage Loan and
any Distribution Date, the fee payable to the Certificate Administrator in
respect of its services as Certificate Administrator that accrues monthly at a
rate equal to 1/12 of ____% of the Principal Balance of such Mortgage Loan as of
the immediately preceding Due Date.
"Certificate Administrator": The Chase Manhattan Bank, a New
York State banking corporation, or its successor in interest or permitted
assigns.
"Certificateholder or Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that, neither a
Disqualified Organization nor a Non-United States Person shall be a Holder of a
Class R Certificate for any purposes hereof and, solely for the purposes of
giving any consent (except any consent required to be obtained pursuant to
Section 12.03), waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Company, the Servicer or the
Certificate Administrator
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or any Affiliate thereof shall be deemed not to be outstanding and the rights to
which it is entitled shall not be taken into account in determining whether the
requisite percentage of rights necessary to effect any such consent has been
obtained, except as otherwise provided in Section 12.03. The Trustee shall be
entitled to rely upon a certification of the Company, the Servicer or the
Certificate Administrator in determining if any Certificates are registered in
the name of a respective Affiliate. Any Certificates on which payments are made
under the Certificate Insurance Policy shall be deemed to be outstanding and
held by the Certificate Insurer to the extent of such payment.
"Certificate Insurance Payments Account": The Certificate
Insurance Payments Account established in accordance with Section 6.02(c) hereof
and maintained by the Trustee.
"Certificate Insurance Policy": As the context requires,
either (i) the Group I Certificate Insurance Policy and the Group II Certificate
Insurance Policy together or (ii) the Group I Certificate Insurance Policy or
the Group II Certificate Insurance Policy, as applicable.
"Certificate Insurer": [Certificate Insurer], a [stock
insurance company organized and created under the laws of the State of New
York], and any successors thereto.
"Certificate Insurer Default": The failure by the Certificate
Insurer to make a payment required under either of the Group I or Group II
Certificate Insurance Policies in accordance with its terms.
"Certificate Owner": Any Person who is the beneficial owner of
a Class A Certificate registered in the name of the Depository or its nominee.
"Certificate Principal Balance": With respect to each class of
Class A Certificates, as determined separately, as of any time of determination,
the related Original Certificate Principal Balance less any amounts distributed
in reduction of the Certificate Principal Balance thereof pursuant to Section
6.03 on all prior Distribution Dates. With respect to each class of Class S
Certificates, as determined separately, as of any date of determination, the
related Original Certificate Principal Balance, plus the portion of the related
Class S Interest Distribution Amount added to the Certificate Principal Balance
thereof on each Distribution Date prior to such date pursuant to Section 6.03,
plus the related Subordination Increase Amount added to the Certificate
Principal Balance thereof on each Distribution Date prior to such date pursuant
to Section 6.03, less any amounts distributed in reduction of the Certificate
Principal
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Balance thereof pursuant to Section 6.03 on all prior Distribution Dates and
less any losses allocated thereto pursuant to Section 6.09. The Class R
Certificates do not have a "Certificate Principal Balance".
"Certificate Register": As described in Section 4.02(a).
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
"Civil Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) interest accrued for the related
Accrual Period on the Principal Balance of such Mortgage Loan, calculated at a
rate equal to the sum of (A)(1) with respect to a Group I Loan, the Class IA
Pass-Through Rate on the Class IA Certificates or (2) with respect to a Group II
Loan, the weighted average of the Class IIA Pass-Through Rates on the Class IIA
Certificates, weighted on the basis of the Certificate Principal Balances of
such Certificates, in each case for such Distribution Date and (B) the per annum
rates at which the related Servicing Fee, the Certificate Administration Fee and
Trustee Fee accrue and the related Premium Percentage.
"Chase": The Chase Manhattan Bank, a New York banking
corporation.
"Class A Certificate": Any of the Class IA-1 Certificates,
Class IIA-1 Certificates, Class IIA-2 Certificates, Class IIA-3 Certificates,
Class IIA-4 Certificates or Class IIA-5 Certificates.
"Class A Certificateholder": A Holder of a Class A
Certificate.
"Class IA Available Funds Pass-Through Rate": As of any
Distribution Date, a per annum rate, expressed as a percentage, equal to the
weighted average of the Net Mortgage Interest Rates on the Group I Loans.
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"Class IIA Available Funds Pass-Through Rate": As of any
Distribution Date, a per annum rate, expressed as a percentage, equal to the
weighted average of the Net Mortgage Interest Rates on the Group II Loans.
"Class IA Carry-Forward Amount": As of any Distribution Date,
the sum of (a) the amount, if any, by which (1) the Group I Insured Distribution
Amount as of the immediately preceding Distribution Date exceeded (ii) the
amount actually distributed to the Holders of the Class IA Certificates on such
Distribution Date in respect thereof (including, without limitation, any Insured
Payments paid to the Holders of the Class IA Certificates by the Certificate
Insurer as described in Sections 6.02 and 6.03 hereof) and (b) interest accrued
for the related Accrual Period on the amount described in clause (a), calculated
at an interest rate equal to the Class IA Pass-Through Rate on the Class IA
Certificates applicable to such Distribution Date. Any Class IA Carry-Forward
Amount shall be deemed to be allocated first to any related Group I
Subordination Deficit and second to any related Class IA Interest Distribution
Amount.
"Class IIA Carry-Forward Amount": As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Group II Insured
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the amount actually distributed to the Holders of the Class IIA
Certificates on such Distribution Date in respect thereof (including, without
limitation, any Insured Payments paid to the Holders of the Class IIA
Certificates by the Certificate Insurer as described in Sections 6.02 and 6.03
hereof) and (b) interest accrued for the related Accrual Period on the amount
described in clause (a), calculated at an interest rate equal to the weighted
average of the Class IIA Pass-Through Rate applicable to such Distribution Date,
weighted on the basis of the Certificate Principal Balances of such
Certificates. Any Class IIA Carry-Forward Amount shall be deemed to be allocated
first to any related Group II Subordination Deficit and second to any related
Class IIA Interest Distribution Amount.
"Class IA Certificates": The Class IA-1 Certificates.
"Class IIA Certificates": Collectively, the Class IIA-1
Certificates, the Class IIA-2 Certificates, the Class IIA-3 Certificates, the
Class IIA-4 Certificates and the Class IIA-5 Certificates.
"Class IA Interest Distribution Amount": With respect to the
Class IA Certificates for any Distribution Date the sum of (i) (a) the aggregate
amount of interest accrued for the related Accrual Period on the related
Certificate Principal Balance immediately prior to
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such Distribution Date at the related Class IA Pass-Through Rate (based on a
360-day year and the actual number of days in the prior calendar month if clause
(i) of the definition of Class IA Pass-Through Rate is used with respect to such
Distribution Date, or a 360-day year and a 30-day month if clause (ii) of the
definition of Class IA Pass-Through Rate is used with respect to such
Distribution Date) minus (b) the aggregate related Mortgage Loan Interest
Shortfall for such Distribution Date and (ii) the portion of any related Class
IA Carry-Forward Amount which relates to a shortfall (other than a related
Mortgage Loan Interest Shortfall) in a distribution of a Class IA Interest
Distribution Amount in respect of such Class IA Certificates, in each case as of
such Distribution Date.
"Class IIA Interest Distribution Amount": With respect to each
class of Group II Class A Certificates for any Distribution Date the sum of (i)
(a) the aggregate amount of interest accrued for the related Accrual Period on
the related Certificate Principal Balance immediately prior- to such
Distribution Date at the related Class A Pass-Through Rate (based on a 360-day
year and a 30-day month) minus (b) the aggregate related Mortgage Loan Interest
Shortfall for such Distribution Date with all such reductions allocated among
the Class IIA-1 Certificates, Class IIA-2 Certificates, Class IIA-3
Certificates, Class IIA-4 Certificates and Class IIA-5 Certificates in
proportion to their respective amount of Class IIA Interest Distribution Amount
which would have resulted absent such reductions and (ii) the portion of any
related Class IIA, Carry-Forward Amount which relates to a shortfall (other than
a related Mortgage Loan Interest Shortfall) in a distribution of a Class IIA
Interest Distribution Amount in respect of such Class IIA Certificates, in each
case as of such Distribution Date.
"Class IA Pass-Through Rate": With respect to any Distribution
Date and the Class IA-1 Certificates, the per annum rate equal to the lesser of:
(i) with respect to (a) any Distribution Date
which occurs on or prior to the date on
which the Pool Principal Balance is less
than 10% of the Original Pool Principal
Balance, [One-Month LIBOR] plus ____% and
(b) any Distribution Date thereafter
[One-Month LIBOR] plus ____%; and
(ii) the Class IA Available Funds Pass-Through
Rate for such Distribution Date.
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"Class IIA Pass-Through Rate": With respect to any
Distribution Date, [the lesser of] ____% per annum [and the Class IIA Available
Funds Pass-Through Rate.]
"Class IA Principal Distribution Amount": With respect to the
Class IA Certificates for any Distribution Date, the lesser of:
(a) excess of (i) the sum, as of such Distribution Date,
of (A) the Group I Available Funds and (B) any
related Insured Payment over (ii) the Class IA
Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Class IA Carry-Forward
Amount which relates to a shortfall in a
distribution of a Group I Subordination
Deficit,
(ii) all scheduled installments of principal in
respect of the Group I Loans received or
advanced during the related Due Period,
together with all unscheduled recoveries of
principal in respect of the Group I Loans
received by the Servicer during the prior
calendar month,
(iii) the Principal Balance of each Group I Loan
that was repurchased by the Seller during
the prior calendar month,
(iv) any Substitution Adjustments delivered by
the Seller on the related Servicer
Remittance Date in connection with a
substitution of a Group I Loan,
(v) the Net Liquidation Proceeds collected by
the Servicer of all Group I Loans during the
related Due Period (to the extent such Net
Liquidation Proceeds related to principal),
(vi) the amount of any Group I Subordination
Deficit for such Distribution Date,
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(vii) the proceeds received by the Trustee with
respect to the Group I Loans from any
termination of the Trust Fund (to the extent
such proceeds are related to principal), and
(viii) the amount of any Group I Subordination
Increase Amount for such Distribution Date;
minus
(ix) the amount of any Group I Subordination
Reduction Amount for such Distribution Date.
"Class IIA Principal Distribution Amount": With respect to the
Class IIA Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of
(A) the Group II Available Funds and (B) any related Insured
Payment over (ii) the Class IIA Interest Distribution Amount;
and
(b) the sum, without duplication, of:
(i) the portion of any Class IIA Carry-Forward Amount
which relates to a shortfall in a distribution of a
Group II Subordination Deficit,
(ii) all scheduled installments of principal in respect of
the Group II Loans received or advanced during the
related Due Period, together with all unscheduled
recoveries of principal in respect of the Group II
Loans received by the Servicer during the prior
calendar month,
(iii) the Principal Balance of each Group II Loan that
either was repurchased by the Seller during the prior
calendar month,
(iv) any Substitution Adjustments delivered by the Seller
on the related Servicer Remittance Date in connection
with a substitution of a Group II Loan,
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(v) the Net Liquidation Proceeds collected by the
Servicer of all Group II Loans during the related Due
Period (to the extent such Net Liquidation Proceeds
related to principal),
(vi) the amount of any Subordination Deficit for such
Distribution Date,
(vii) the proceeds received by the Trustee with respect to
the Group II Loans of any termination of the Trust
Fund (to the extent such proceeds are related to
principal), and
(viii) the amount of any Group II Subordination Increase
Amount for such Distribution Date;
minus
(ix) the amount of any Group II Subordination Reduction
Amount for such Distribution Date.
"Class IA-1 Certificate": Any Certificate designated as a
"Class IA-1 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class IIA-1 Certificate": Any Certificate designated as a
"Class IIA-1 Certificate" on the face thereof, in the form of Exhibit B-1
hereto, and authenticated by the Trustee in accordance with the procedures set
forth herein.
"Class IIA-2 Certificate": Any Certificate designated as a
"Class IIA-2 Certificate" on the face thereof, in the form of Exhibit B-1
hereto, and authenticated by the Trustee in accordance with the procedures set
forth herein.
"Class IIA-3 Certificate": Any Certificate designated as a
"Class IIA-3 Certificate" on the face thereof, in the form of Exhibit B-1
hereto, and authenticated by the Trustee in accordance with the procedures set
forth herein.
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"Class IIA-4 Certificate": Any Certificate designated as a
"Class IIA-4 Certificate" on the face thereof, in the form of Exhibit B-1
hereto, and authenticated by the Trustee in accordance with the procedures set
forth herein.
"Class IIA-5 Certificate": Any Certificate designated as a
"Class IIA-5 Certificate" on the face thereof, in the form of Exhibit B-1
hereto, and authenticated by the Trustee in accordance with the procedures set
forth herein.
"Class I S Certificate": Any Certificate designated as a
"Class I S Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class II S Certificate": Any Certificate designated as a
"Class II S Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class R Certificate": Any one of the Class R Certificates
executed by the Trustee and authenticated by the Certificate Registrar
substantially in the form annexed hereto as Exhibit B-2, subordinate to the
Class A Certificates in right of payment to the extent set forth herein and
evidencing an interest designated as a "residual interest" in the REMIC for
purposes of the REMIC Provisions.
"Class R Certificateholder": A Holder of a Class R
Certificate.
"Class S Certificate": Any of the Class I S or Class II S
Certificates.
"Class S Certificateholder": A Holder of a Class S
Certificate.
"Class S Interest Distribution Amount": With respect to each
class of Class S Certificates for any Distribution Date, the aggregate amount of
interest accrued for the related Accrual Period on the related Notional Amount
immediately prior to such Distribution Date at the related Class S Pass-Through
Rate (based on a 360-day year and the actual number of days in the prior
calendar month in the case of the Class I S Certificates and a 360-day year and
a 30-day month in the case of the Class II S Certificates.
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"Class S Pass-Through Rate": With respect to the Class I S
Certificates and any Distribution Date, a rate equal to the weighted average,
expressed as a percentage, of the related Pool Strip Rates of all of the Group I
Loans in the Trust Fund as of the Due Date in the month immediately preceding
the month in which such Distribution Date occurs, weighted on the basis of the
respective Principal Balances of such Mortgage Loans at the beginning of the
related Due Period. With respect to the Class II S Certificates and any
Distribution Date, a rate equal to the weighted average, expressed as a
percentage, of the related Pool Strip Rates of all of the Group II Loans in the
Trust Fund as of the Due Date in the month immediately preceding the month in
which such Distribution Date occurs, weighted on the basis of the respective
Principal Balances of such Mortgage Loans at the beginning of the related Due
Period.
"Closing Date": [DATE].
"Code": The Internal Revenue Code of 1986, as amended.
"Collection Account": The Eligible Account established and
maintained by the Servicer pursuant to Section 5.03.
"Combined Loan-to-Value Ratio": With respect to any Mortgage
Loan secured by a second lien on the related Mortgaged Property, as of any date,
the fraction, expressed as a percentage, the numerator of which is the sum of
(i) the current principal balance of such Mortgage Loan and (ii) the current
aggregate principal balance of the related Senior Mortgage Loans (if any) at the
date of determination, and the denominator of which is the Appraised Value of
the related Mortgaged Property.
"Company": Chase Funding, Inc., a New York corporation, and
any successor thereto.
"Compensating Interest": As defined in Section 6.05 hereof.
"Corporate Trust Office": The principal office of the Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this instrument is
located at _____________________________________________________________________
________________________________________________________________.
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"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
"Cut-off Date": [DATE].
"DCR": Duff & Phelps Credit Rating Co., or its successor in
interest.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the United States Bankruptcy Code,
except such a reduction that constitutes a Deficient Valuation or a permanent
forgiveness of principal.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of such Mortgage
Loan, which valuation results from a proceeding initiated under the United
States Bankruptcy Code.
"Deleted Mortgage Loan": A Mortgage Loan replaced by or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Depository": The Depository Trust Company, 55 Water Street,
New York, New York 10041 and any successor Depository hereafter named. The
nominee of the initial Depository for purposes of registering those Certificates
that are to be Class A Certificates is Cede & Co. The Depository shall at all
times be a "clearing corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the State of New York and a "clearing agency"
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registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended.
"Depository Participant": Any broker-dealer, bank or other
financial institution for which the Depository holds Class A Certificates from
time to time as a securities depositary.
"Disqualified Organization": Any of (i) the United States, any
State or political subdivision thereof, any possession of the United States, or
any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for the FHLMC, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (unless such organization is subject to the tax imposed by
Section 511 of the Code on unrelated business taxable income). or rural electric
and telephone cooperatives described in Section 1381(a)(2)(C) of the Code and
(iv) any other Person so designated by the Trustee based upon an Opinion of
Counsel provided to the Trustee that the holding of an ownership interest in a
Class R Certificate by such Person may cause the REMIC or any Person having an
ownership interest in any Class of Certificates (other than such Person) to
incur liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the transfer of an ownership interest in the Class
R Certificate to such Person. The terms "United States", "State" and
"international organization" shall have the meanings set forth in Section 7701
of the Code.
"Distribution Date": The 25th day of any month or if such 25th
day is not a Business Day, the first Business Day immediately following,
commencing on [DATE].
"Due Date": The first day of each calendar month.
"Due Period": With respect to each Distribution Date, the
period beginning on the opening of business on the second day of the calendar
month preceding the calendar month in which such Distribution Date occurs, and
ending at the close of business on the first day of the calendar month in which
such Distribution Date occurs.
"Eligible Account": Either (A) an account or accounts
maintained with an institution (which may include the Trustee, provided such
institution otherwise meets these
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requirements) whose deposits are insured by the FDIC, the unsecured and
uncollateralized debt obligations of which institution shall be rated AA or
better by S&P and DCR and Aa2 or better by Moody's and in the highest short term
rating by the Rating Agencies, and which is (i) a federal savings and loan
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association (including the Trustee) duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Certificate Insurer and the Rating Agencies or (B) a trust account or accounts
maintained with the corporate trust department of a federal or state chartered
depository institution acceptable to each Rating Agency and the Certificate
Insurer (Chase shall be deemed acceptable, provided that Chase otherwise meets
these requirements), having capital and surplus of not less than $50,000,000,
acting in its fiduciary capacity.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Event Of Default": One or more of the events described in
Section 9.01 hereof.
"FDIC": The Federal Deposit Insurance Corporation and any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation and any
successor
thereto.
"FNMA": The Federal National Mortgage Association and any
successor thereto.
"Foreclosure Profits": As to any Distribution Date, (i) Net
Liquidation Proceeds in respect of each Mortgage Loan that became a Liquidated
Mortgage Loan during the month immediately preceding the month of such
Distribution Date minus (ii) the sum of the unpaid principal balance of each
such Liquidated Mortgage Loan plus accrued and unpaid interest at the applicable
Mortgage Interest Rate on the unpaid principal balance thereof from the Due Date
to which interest was last paid by the Mortgagor (or, in the case of a
Liquidated Mortgagee Loan that had been an REO Mortgage Loan, from the Due Date
to which interest was last deemed to have been paid pursuant to Section 5.11) to
the first day of the month following the month in which such Mortgage Loan
became a Liquidated Mortgage Loan.
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"Fund": The VISTA U.S. Government Money Market Fund and the
VISTA Prime Money Market Fund, referred to collectively. The Servicer shall
instruct the Trustee regarding the voting of any proxies with respect to the
Fund.
"GAAP": Generally accepted accounting principles.
"Gross Margin": As to each Group I Loan, the fixed percentage
set forth in the related Mortgage Note and indicated in the related Mortgage
Loan Schedules as the 'Gross Margin, " which percentage is added to the related
Index on each Rate Adjustment Date to determine (subject to rounding, the
Periodic Cap, Lifetime Floor and the Lifetime Cap) the Mortgage Interest Rate on
such Mortgage Loan until the next Rate Adjustment Date.
"Group I Available Funds": As defined in Section 6.02(a).
"Group II Available Funds": As defined in Section 6.02(a).
"Group I Certificate Account": The Certificate Account
established with respect to the Group I Certificates in accordance with Section
4.05 hereof and maintained by the Trustee.
"Group II Certificate Account": The Certificate Account
established with respect to the Group II Certificates in accordance with Section
4.05 hereof and maintained by the Trustee.
"Group I Certificate Insurance Policy": The certificate
guaranty insurance policy No. _____, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Group I
Certificateholders, a copy of which is attached hereto as Exhibit A-1.
"Group II Certificate Insurance Policy": The certificate
guaranty insurance policy No. _____, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Group II
Certificateholders, a copy of which is attached hereto as Exhibit A-2.
"Group I Certificates": Collectively, the Class IA-1
Certificates, the Class I S Certificates and the Class R Certificates.
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"Group II Certificates": Collectively, the Class IIA
Certificates, the Class II S Certificates and the Class R Certificates.
"Group I Excess Subordinated Amount": With respect to any
Distribution Date, the difference, if any, between (a) the Group I Subordinated
Amount that would exist on such Distribution Date after taking into account all
distributions to be made on such Distribution Date (exclusive of any reductions
thereto attributable to Group I Subordination Reduction Amounts on such
Distribution Date) and (b) the Group I Required Subordinated Amount for such
Distribution Date.
"Group II Excess Subordinated Amount": With respect to any
Distribution Date, the difference, if any, between (a) the Group II Subordinated
Amount that would exist on such Distribution Date after taking into account all
distributions to be made on such Distribution Date (exclusive of any reductions
thereto attributable to Group II Subordination Reduction Amounts on such
Distribution Date) and (b) the Group II Required Subordinated Amount for such
Distribution Date.
"Group I Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Class IA Interest Distribution Amount with
respect to such Distribution Date and (b) the Group I Subordination Deficit, if
any, as of such Distribution Date.
"Group II Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Class IIA Interest Distribution Amount
with respect to such Distribution Date and (b) the Group II Subordination
Deficit, if any, as of such Distribution Date.
"Group I Loans" or "Loan Group I": The group of Mortgage Loans
identified on Exhibit D- I from time to time.
"Group II Loans"or "Loan Group II": The group of Mortgage
Loans identified on Exhibit D-2 from time to time.
"Group I Net Monthly Excess Cashflow": As of any Distribution
Date, an amount equal to (x) the Group I Available Funds minus (y) the sum of
(1) the sum of the Class IA Interest Distribution Amount and the amount
described in clause (b) of the definition of Class IA Principal Distribution
Amount (calculated for this purpose without regard to any Group IA
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Subordination Increase Amount or portion thereof included therein) and (ii) the
Group I Reimbursement Amount, if any, for such Distribution Date.
"Group II Net Monthly Excess Cashflow": As of any Distribution
Date, an amount equal to (x) the Group II Available Funds minus (y) the sum of
(i) sum of the Class IIA Interest Distribution Amount and the amount described
in clause (b) of the definition of Class IIA Principal Distribution Amount
(calculated for this purpose without regard to any Group II Subordination
Increase Amount or portion thereof included therein) and (ii) the Group II
Reimbursement Amount, if any, for such Distribution Date.
"Group I Pool Principal Balance": The aggregate Principal
Balances of the Group I Loans as of any date of determination.
"Group II Pool Principal Balance": The aggregate Principal
Balances of the Group II Loans as of any date of determination.
"Group I Principal Remittance Amount": As of any Distribution
Date, the sum, without duplication, of the amounts specified in clauses (b)(ii)
through (v), (vii) and (viii) of the definition of Class IA Principal
Distribution Amount.
"Group II Principal Remittance Amount": As of any Distribution
Date, the sum, without duplication, of the amounts specified in clauses (b)(1)
through (v), (vii) and (viii) of the definition of Class IIA Principal
Distribution Amount.
"Group I Reimbursement Amount": As of any Distribution Date,
the sum of (a)(i) all Group I Insured Payments (as defined in the Group I
Certificate Insurance Policy) previously paid by the Certificate Insurer and in
each case not previously repaid to the Certificate Insurer pursuant to Sections
6.03(b) or 6.03(c) hereof plus (ii) interest accrued on each such Group I
Insured Payment and Group I Preference Payments not previously repaid calculated
at the Class IA Pass-Through Rate from the date such Group I Insured Payment or
Group I Preference Amount was made and (b)(i) any amounts then due and owing to
the Certificate Insurer under the Insurance Agreement, as certified to the
Trustee by the Certificate Insurer plus (ii) interest on such amounts at the
Late Payment Rate (as defined in the Insurance Agreement), The Certificate
Insurer shall notify the Trustee, the Certificate Administrator and the Company
of the amount of any Group I Reimbursement Amount.
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"Group II Reimbursement Amount": As of any Distribution Date,
the sum of (a)(i) all Group II Insured Payments (as defined in the Group II
Certificate Insurance Policy) previously paid by the Certificate Insurer and in
each case not previously repaid to the Certificate Insurer pursuant to Sections
6.03(b) or 6.03(c) hereof plus (ii) interest accrued on each such Group II
Insured Payment and Group II Preference Payments not previously repaid
calculated at the Class IIA Pass-Through Rate from the date such Group II
Insured Payment or Group II Preference Amount was made and (b)(i) any amounts
then due and owing to the Certificate Insurer under the Insurance Agreement, as
certified to the Trustee by the Certificate Insurer plus (ii) interest on such
amounts at the Late Payment Rate (as defined in the Insurance Agreement). The
Certificate Insurer shall notify the Trustee, the Certificate Administrator and
the Company of the amount of any Group II Reimbursement Amount.
"Group I Required Subordinated Amount": For each Distribution
Date, the amount determined as follows:
(a) for any Distribution Date occurring during the period
commencing on the Closing Date and ending on the later of (x) the date
upon which principal payments on the Group I Loans equal to one-half of
the Original Group I Pool Principal Balance have been received and (y)
the thirtieth Distribution Date following the Closing Date, the greater
of the following:
(i) the Initial Group I Specified Subordinated
Amount; and
(ii) two times an amount equal to (x) one-half of the
aggregate Principal Balances of all Group I Loans which are 91
or more days Delinquent (including REO Properties) minus (y)
three times the Group I Net Monthly Excess Cashflow for such
Distribution Date; and
(b) for any Distribution Date occurring after the end
of the period in clause (a) above, the greatest of the
following:
(i) the lesser of (A) the Initial Group I
Specified Subordinated Amount and (B) two times the
Amortized Group I Subordinated Amount Requirement,
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(ii) two times the difference of (A)
one-half of the aggregate Principal Balances of all
Group I Loans which are 91 or more days Delinquent
(including REO Properties) and (B) three times the
Group I Net Monthly Excess Cashflow for such
Distribution Date,
(iii) an amount equal to 0.50% of the
Original Group I Pool Principal Balance and
(iv) the sum of the outstanding Principal
Balances of the Group I Loans with the four largest
outstanding Principal Balances.
Notwithstanding anything to the contrary set forth in clauses
(a) or (b) above, on or after any Distribution Date on which a Group I Insured
Payment is made, or any Distribution Date on which an Event of Default has
occurred and is continuing, the Group I Required Subordinated Amount shall be
equal to the Group I Required Subordinated Amount as of the Distribution Date
immediately prior to the Distribution Date on which either such event occurred.
"Group II Required Subordinated Amount": For each Distribution
Date, the amount determined as follows:
(a) for any Distribution Date occurring during the period
commencing on the Closing Date and ending on the later of (x) the date
upon which principal payments on the Group II Loans equal to one-half
of the Original Group II Pool Principal Balance have been received and
(y) the thirtieth Distribution Date following the Closing Date, the
greater of the following:
(i) the Initial Group II Specified Subordinated
Amount; and
(ii) two times an amount equal to (x) one-half of the
aggregate Principal Balances of all Group II Loans which are
91 or more days Delinquent (including REO Properties) minus
(y) three times the Group II Net Monthly Excess Cashflow for
such Distribution Date; and
(b) or any Distribution Date occurring after the end of the
period in clause (a) above, the greatest of the following:
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(i) the lesser of (A) the Initial Group II
Specified Subordinated Amount and (B) two times the Amortized
Group II Subordinated Amount Requirement,
(ii) two times the difference of (A)
one-half of the aggregate Principal Balances of all Group II
Loans which are 91 or more days Delinquent (including REO
Properties) and (B) three times the Group II Net Monthly
Excess Cashflow for such Distribution Date,
(iii) an amount equal to 0.50% of the
Original Group II Pool Principal Balance and
(iv) the sum of the then outstanding
Principal Balances of the Group II Loans with the four largest
outstanding Principal Balances.
Notwithstanding anything to the contrary set forth in clauses (a) or
(b) above, on or after any Distribution Date on which a Group II Insured Payment
is made, or any Distribution Date on which an Event of Default has occurred and
is continuing, the Group II Required Subordinated Amount shall be equal to the
Group II Required Subordinated Amount as of the Distribution Date immediately
prior to the Distribution Date on which either such event occurred.
"Group I Subordinated Amount": As of any Distribution Date,
the difference, if any, between (a) the Group I Pool Principal Balance as of the
close of business on the last day of the related Due Period and (b) the
aggregate Certificate Principal Balance of the Class IA Certificates as of such
Distribution Date (after taking into account the payment of the Group I
Principal Remittance Amount on such Distribution Date); provided, however, that
such amount shall not be less than zero.
"Group II Subordinated Amount": As of any Distribution Date,
the difference, if any, between (a) the Group II Pool Principal Balance as of
the close of business on the last day of the related Due Period and (b) the
aggregate Certificate Principal Balance of the Class IIA Certificates as of such
Distribution Date (after taking into account the payment of the Group II
Principal Remittance Amount on such Distribution Date); provided, however, that
such amount shall not be less than zero.
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"Group I Subordination Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which (a) the Group I Required
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group I
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Group I Subordination Increase Amounts on
such Distribution Date.
"Group II Subordination Deficiency Amount": With respect to
any Distribution Date, the amount, if any, by which (a) the Group II Required
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group
II Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Group II Subordination Increase Amounts on
such Distribution Date.
"Group I Subordination Deficit": As of any Distribution Date,
the amount, if any, by which (a) the aggregate Certificate Principal Balance of
the Class IA Certificates (after taking into account the payment of the Class IA
Principal Distribution Amount (other than payments in respect thereof under the
Group I Certificate Insurance Policy)) on such date exceeds (b) the Group I Pool
Principal Balance determined as of the end of the immediately preceding Due
Period.
"Group II Subordination Deficit": As of any Distribution Date,
the amount, if any, by which (a) the aggregate Certificate Principal Balance of
the Class IIA Certificates (after taking into account the payment of the Class
IIA Principal Distribution Amount (other than payments in respect thereof under
the Group II Certificate Insurance Policy)) on such date exceeds (b) the Group
II Pool Principal Balance determined as of the end of the immediately preceding
Due Period.
"Group I Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Group I Subordination Deficiency Amount
as of such Distribution Date (after taking into account the payment of the Class
IA Principal Distribution Amount on such Distribution Date (other than clause
(viii) thereof)) and (b) the amount of Group I Net Monthly Excess Cashflow on
such Distribution Date.
"Group II Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Group II Subordination Deficiency
Amount as of such Distribution
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Date (after taking into account the payment of the Class IIA Principal
Distribution Amount on such Distribution Date (other than clause (viii)
thereof)) and (b) the amount of Group II Net Monthly Excess Cashflow on such
Distribution Date.
"Group I Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Group I Excess
Subordinated Amount for such Distribution Date and (b) the Group I Principal
Remittance Amount for the prior Due Period.
"Group II Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Group II Excess
Subordinated Amount for such Distribution Date and (b) the Group II Principal
Remittance Amount for the prior Due Period.
"Index": As to any Group I Loan, a rate per annum equal to the
average of the interbank offered rates for six month United States dollar
deposits in the London market as published in the Western Edition of The Wall
Street Journal, as most recently available as of the first business day
forty-five, thirty or five days prior to any Rate Adjustment Date, as specified
in the related Mortgage Note.
"Indirect Participant": Any financial institution for whom any
Depository Participant holds an interest in a Class A Certificate.
"Initial Group I Specified Subordinated Amount": An amount
equal to ____% of the Original Group I Pool Principal Balance.
"Initial Group II Specified Subordinated Amount": An amount
equal to ____% of the Original Group II Pool Principal Balance.
"Insurance Agreement": The Insurance Agreement dated as of
[DATE] among the Certificate Insurer, the Company, the Servicer, the Certificate
Administrator and the Trustee and attached hereto as Exhibit R, as such
agreement may be amended or supplemented in accordance with the provisions
thereof.
"Insurance Proceeds": Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
"Insurance Proceeds" do not include "Insured Payments."
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"Insured Payment": As determined separately for the Group I
and Group II Class A Certificates, the sum of (i) with respect to each
Distribution Date, the related Available Funds Shortfall and (ii) any related
unpaid Preference Amount.
"Interest Determination Date": With respect to any Accrual
Period, the second London Business Day preceding the commencement of such
Accrual Period.
"Lifetime Cap": As to any Mortgage Loan in Loan Group I, the
maximum Mortgage Interest Rate set forth in the related Mortgage Note and
indicated in the Mortgage Loan Schedule, which rate may be applicable to such
Mortgage Loan at any time during the life of such Mortgage Loan.
"Lifetime Floor": As to any Mortgage Loan in Loan Group I, the
minimum Mortgage Interest Rate set forth in the related Mortgage Note and
indicated in the Mortgage Loan Schedule, which rate may be applicable to such
Mortgage Loan at any time during the life of such Mortgage Loan.
"Liquidated Loan Loss": With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan during the Due Period preceding such
Distribution Date, equal to (i) the unpaid principal balance of each such
Liquidated Mortgage Loan, plus accrued interest thereon in accordance with the
amortization schedule at the time applicable thereto at the applicable Mortgage
Interest Rate from the Due Date as to which interest was last paid with respect
thereto through the last day of the month in which such Mortgage Loan became a
Liquidated Mortgage Loan, minus (ii) Net Liquidation Proceeds with respect to
such Liquidated Mortgage Loan.
"Liquidated Mortgage Loan": A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
"Liquidation Expenses": Expenses incurred by the Servicer or
any Subservicer in connection with the liquidation of any defaulted Mortgage
Loan or property acquired in respect thereof (including, without limitation,
legal fees and expenses, committee or referee fees, and, if applicable,
brokerage commissions and conveyance taxes), any unreimbursed amount expended by
the Servicer pursuant to Sections 5.05, 5.06 and 5.11 respecting the related
Mortgage Loan
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and any unreimbursed expenditures for real property taxes or for property
restoration or preservation of the related Mortgaged Property. Liquidation
Expenses shall not include any previously incurred expenses in respect of an PEO
Mortgage Loan which have been netted against related REO Proceeds.
"Liquidation Proceeds": Amounts received by the Servicer
(including Insurance Proceeds) in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, whether through
foreclosure, sale or otherwise, including payments in connection with such
Mortgage loans received from the Mortgagor, other than amounts required to be
paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be
applied otherwise pursuant to law.
"Loan-to-Value Ratio or LTV": With respect to any Mortgage
Loan, the fraction, expressed as a percentage, the numerator of which is the
principal balance of such Mortgage Loan, as of the date of origination of the
Mortgage Loan, divided by the Appraised Value of the related Mortgaged Property.
"London Business Day": Any day in which banks in the City of
London, England are open and conducting transactions in United States dollars.
"Majority Certificateholders": With respect to each Loan
Group, the Holder or Holders of Class A Certificates evidencing Percentage
Interests in excess of 51 % in the aggregate.
"Monthly Payment": As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the scheduled payment of principal and interest
due thereon for such Due Date (after adjustment for any Curtailments and
Deficient Valuations occurring prior to such Due Date but before any adjustment
to such amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
"Moody's": Moody's Investors Service, Inc., or any successor
thereto.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien or second lien on the Mortgaged Property.
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"Mortgage File": The mortgage documents listed in Exhibit C
attached hereto pertaining to a particular Mortgage Loan and any additional
documents required to be added to the Mortgage File pursuant to this Agreement;
provided that whenever the term "Mortgage File" is used to refer to documents
actually received by the Trustee, such term shall not be deemed to include such
additional documents required to be added unless they are actually so added.
"Mortgage Impairment Insurance Policy": As defined in Section
5.07.
"Mortgage Interest Rate": As to any Group I Loan, the per
annum rate at which interest accrues on the unpaid principal balance thereof, as
adjusted from time to time in accordance with the provisions of the related
Mortgage Note, which rate is (a) prior to the first related Rate Adjustment Date
occurring after the Cut-off Date, the initial Mortgage Interest Rate for such
Mortgage Loan indicated on the Mortgage Loan Schedule and (b) from and after
such first Rate Adjustment Date, the sum of the related Index applicable to the
most recent Rate Adjustment Date, and the Gross Margin, rounded as set forth in
such Mortgage Note, subject to the Periodic Cap, the Lifetime Cap and Lifetime
Floor set forth in the related Mortgage Note that may be applicable to such
Mortgage Loan at any time during the life of such Mortgage Loan. As to any Group
II Loan, the fixed per annum rate at which interest accrued on the unpaid
principal balance thereof, which rate is the Mortgage Interest Rate for such
Group II Loan indicated on the related Mortgage Loan Schedule.
"Mortgage Loan": An individual mortgage loan which is assigned
and transferred to the Trustee pursuant to this Agreement, together with the
rights and obligations of a holder thereof and payments thereon and proceeds
therefrom (other than payments of interest that accrued on each Mortgage Loan up
to and including the Due Date therefor occurring, with respect to the Mortgage
Loans prior to the Cut-off Date), the Mortgage Loans originally subject to this
Agreement being identified on the Mortgage Loan Schedule. As applicable,
Mortgage Loan shall be deemed to refer to the related REO Property.
"Mortgage Loan Group": The Group I Loans or Group II Loans.
References herein to "Mortgage Loan Group" when used with respect to any
Certificate shall mean (i) Group I Loans, in the case of the Group I
Certificates, and (ii) Group II Loans, in the case of the Group II Certificates.
"Mortgage Loan Interest Shortfall": With respect to any
Distribution Date, as to the Mortgage Loans in either Loan Group, the sum of (a)
any Civil Relief Act Interest Shortfalls
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in respect of such Mortgage Loans for such Distribution Date and (b) any related
Servicer Default Prepayment Interest Shortfall. A "Servicer Default Prepayment
Interest Shortfall" will only exist on a Distribution Date with respect to which
the Servicer has defaulted on its obligations under Sections 5.19 and 6.05 with
respect to Prepayment Interest Shortfalls and on such a Distribution Date will
equal, for Loan Groups I and II in the aggregate, the excess of (i) the
aggregate maximum amount of Compensating Interest required pursuant to Sections
5.19 and 6.05 to have been paid by the Servicer or a Subservicer or netted
against the Servicer's aggregate Servicing Fee for such Distribution Date over
(ii) the amount of Compensating Interest actually paid by the Servicer or a
Subservicer or actually netted against the Servicer's aggregate Servicing Fee
for such Distribution Date.
"Mortgage Loan Schedule": The lists of the Mortgage Loans
transferred to the Trustee on or before the Closing Date as part of the Trust
Fund and attached hereto as Exhibits D-1 and D-2 and delivered in computer
readable format, which list shall set forth at a minimum the following
information as to each Mortgage Loan:
(i) the Mortgage loan identifying number,
(ii) the city, state and zip code of the Mortgaged
Property;
(iii) the type of property;
(iv) the current Monthly Payment as of the Cut-off Date;
(v) the original number of months to maturity;
(vi) the scheduled maturity date;
(vii) the Principal Balance as of the Cut-off Date;
(viii) the Loan-to-Value Ratio or Combined Loan-to-Value
Ratio at origination;
(ix) the Mortgage Interest Rate as of the Cut-off Date;
(x) the Mortgage Interest Rate at origination;
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(xi) the Gross Margin (with respect to Group I Loans) and
the frequency of the adjustment thereof;
(xii) the first Rate Adjustment Date (with respect to Group
I Loans) after the Cut-off Date;
(xiii) the first Rate Adjustment Date after origination and
the frequency of adjustment (with respect to Group I
Loans);
(xiv) the Lifetime Cap (with respect to Group I Loans);
(xv) the Lifetime Floor (with respect to Group I Loans);
(xvi) the Appraised Value;
(xvii) the stated purpose of the loan at origination;
(xviii) the type of occupancy at origination;
(xix) the documentation type (as described in the
Underwriting Guidelines),
(xx) the Periodic Cap (with respect to Group I Loans);
(xxi) the loan classification (as described in the
Underwriting Guidelines),
(xxii) the related Index (with respect to Group I Loans) and
the look-back period for such Mortgage Loan;
(xxiii) the Servicing Fee with respect to such Mortgage Loan,
expressed as a rate per annum; and
(xxiv) whether such Mortgage Loan is secured by a first lien
or second lien.
Such schedule may consist of multiple reports that collectively set forth all of
the information required.
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"Mortgage Note": The original, executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, consisting of a fee simple estate in a single parcel of land
improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Foreclosure Profits": As to any Distribution Date, an
amount equal to (i) the aggregate Foreclosure Profits with respect to such
Distribution Date minus (ii) Liquidated Loan Losses with respect to such
Distribution Date.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any
unreimbursed Periodic Advances and unreimbursed Servicing Advances made by the
Servicer. For all purposes of this Agreement, Net Liquidation Proceeds shall be
allocated first to accrued and unpaid interest on the related Mortgage Loan and
then to the unpaid principal balance thereof.
"Net Mortgage Interest Rate": With respect to each Mortgage
Loan at any time of determination, a rate equal to (i) the Mortgage Interest
Rate on such Mortgage Loan minus (ii) the sum of the per annum rates used to
determine the related Servicing Fee and Certificate Administration Fee and the
Premium Percentage. Any regular monthly computation of interest at such rate
shall be based upon annual interest at such rate on the applicable amount
divided by twelve.
"Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
"Nonrecoverable Advances": With respect to any Mortgage Loan,
(a) any Periodic Advance or Servicing Advance previously made and not reimbursed
from late collections pursuant to Section 5.04(b), or (b) a Periodic Advance or
Servicing Advance proposed to be made in respect of a Mortgage Loan or REO
Property either of which, in the good faith business judgment of the Servicer,
as evidenced by an Officer's Certificate delivered to the Certificate Insurer
and the Trustee would not be ultimately recoverable pursuant to Section 5.04.
"Non-United States Person": Any Person other than a United
States Person.
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"Notional Amount": As of any Distribution Date, with respect
to the Class I S Certificates, an amount equal to the aggregate Principal
Balance of the Group I Loans immediately prior to such date. As of any
Distribution Date, with respect to the Class II S Certificates, an amount equal
to the aggregate Principal Balance of the Group II Loans immediately prior to
such date.
"Officer's Certificate": A certificate signed by the Chairman
of the Board, the President or a Vice President and the Treasurer, the Secretary
or one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or
the Servicer, or the Company, as required by this Agreement.
"One-Month LIBOR": With respect to any Accrual Period, the
rate determined by the Trustee on the related Interest Determination Date on the
basis of the offered rates of the Reference Banks for one-month United States
dollar deposits, as such rates appear on the Reuters Screen LIBO Page, as of
11:00 a.m. (London time) on such Interest Determination Date. On each Interest
Determination Date, One-Month LIBOR for the related Accrual Period will be
established by the Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations,
One-month LIBOR for the related Accrual Period shall
be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole
multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations,
One-Month LIBOR for the related Accrual Period shall
be the higher of (1) One-Month LIBOR as determined on
the previous Interest Determination Date and (2) the
Reserve Interest Rate.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be counsel for the Seller, the Servicer, the Certificate
Administrator, the Trustee, a Certificateholder or a Certificateholder's
prospective transferee or the Certificate Insurer (including except as otherwise
provided herein, in-house counsel) reasonably acceptable to each addressee of
such opinion and experienced in matters relating to the subject of such opinion;
except that any opinion of counsel relating to (a) the qualification of the
Trust Fund as a REMIC or (b) compliance with the REMIC Provisions must be an
opinion of counsel who (i) is in fact
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independent of the Seller, the Servicer, the Certificate Administrator and the
Trustee, (ii) does not have any direct financial interest or any material
indirect financial interest in the Seller, the Servicer, the Certificate
Administrator or the Trustee or in an Affiliate thereof, (iii) is not connected
with the Seller, the Servicer, the Certificate Administrator or the Trustee as
an officer, employee, director or person performing similar functions and (iv)
is reasonably acceptable to the Certificate Insurer,
"Original Group I Pool Principal Balance": The Group I Pool
Principal Balance as of the Cut-off Date, which is $_____________.
"Original Group II Pool Principal Balance": The Group II Pool
Principal Balance as of the Cut-off Date, which is $_____________.
"Original Certificate Principal Balance": As of the Startup
Day and as to the Class IA-1 Certificates, $_____________, as to the Class IIA-1
Certificates, $_____________, as to the Class IIA-2 Certificates,
$_____________, as to the Class IIA-3 Certificates, $_____________, as to the
Class IIA-4 Certificates, $____________, as to the Class IIA-5 Certificates,
$____________, and as to the each class of Class S Certificates, $0.00. The
Class R Certificates do not have an Original Certificate Principal Balance.
"Original Pool Principal Balance": The Pool Principal Balance
as of the Cut-off Date, which is $______________.
"Outstanding Mortgage Loan": As to any Due Date, a Mortgage
Loan (including an REO Mortgage Loan) which was not the subject of a Principal
Prepayment in Full prior to such Due Date, which did not become a Liquidated
Mortgage Loan prior to such Due Date, which was not repurchased by the Seller
prior to such Due Date pursuant to Section 2.02 and which was not repurchased by
an Affiliate of the Seller pursuant to Section 5.17.
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Owner-Occupied Mortgaged Property": A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary, secondary or
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vacation residence at the origination of the Mortgage Loan, and (b) the Seller
has no actual knowledge that such Residential Dwelling is not so occupied.
"Paying Agent": The Person appointed by the Trustee as Paying
Agent pursuant to Section 4.07.
"Paying Agent Account": The account created and maintained
pursuant to Section 4.07.
"Percentage Interest": With respect to a Class A Certificate
and any date of determination, the portion evidenced by such Certificate,
expressed as a percentage rounded to four decimal places, equal to a fraction
the numerator of which is the initial Authorized Denomination represented by
such Certificate and the denominator of which is the Original Certificate
Principal Balance of such Certificate. With respect to a Class S or Class R
Certificate and any date of determination, the portion evidenced thereby as
stated on the face of such Certificate.
"Periodic Advance": The aggregate of the advances with respect
to Mortgage Loans and REO Properties required to be made by the Servicer on any
Servicer Remittance Date pursuant to Section 5.20 hereof, the amount of any such
advances being equal to the sum of: (i) with respect to the Mortgage Loans
(other than Balloon Mortgage Loans with delinquent Balloon Payments as described
in clause (iii) below and other than REO Properties as described in clauses (ii)
and (iv) below), all Monthly Payments (net of the related Servicing Fee) on such
Mortgage loans that were delinquent as of the close of business on the Business
Day preceding the related Servicer Remittance Date, plus (ii) with respect to
each REO Property (other than any REO Property relating to a Balloon Mortgage
Loan with a delinquent Balloon Payment as described in clause (iv) below), which
REO Property was acquired during or prior to the related Due Period and as to
which an REO Disposition did not occur during the related Due Period, an amount
equal to the Monthly Payment (net of the related Servicing Fee) for the most
recently ended Due Period for the related Mortgage Loan minus the net income
from such REO Property transferred to the related Certificate Account for such
Distribution Date, plus (iii) with respect to each Balloon Mortgage Loan with a
delinquent Balloon Payment (other than any related REO Property as described in
clause (iv) below), an amount equal to the assumed monthly principal and
interest payment (net of the related Servicing Fee) that would have been due on
the related Due Date based on the original principal amortization schedule for
such Balloon Mortgage Loan, plus (iv) with respect to each REO Property relating
to a Balloon Mortgage Loan with a
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delinquent Balloon Payment, which REO Property was acquired during or prior to
the related Due Period and as to which an REO Disposition did not occur during
the related Due Period, an amount equal to the assumed monthly principal and
interest payment (net of the related Servicing Fee) that would have been due on
the related Due Date based on the original principal amortization schedule for
the related Balloon Mortgage Loan minus the net income from such REO Property
transferred to the related Certificate Account for such Distribution Date, minus
(v) the amount of any advance otherwise required for such Distribution Date
pursuant to clauses (i) through (iv) above which the Servicer has determined to
be a Nonrecoverable Advance.
"Periodic Cap": With respect to each Group I Loan, the
provision in the related Mortgage Note that provides for an absolute maximum
amount by which the Mortgage Interest Rate therein may increase or decrease on a
Rate Adjustment Date above or below the Mortgage Interest Rate previously in
effect.
"Permitted Investments:" One or more of the following:
(i) 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; provided that any such obligation held as a "cash
flow investment" within the meaning of Section 860G(a)(6) of the Code
shall not have a remaining maturity of more than 45 days;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than two months 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 its two highest rating categories and the
short-term debt obligations of the party agreeing to repurchase are
rated A-1 by S&P and Prime-1 by Moody's;
(iii) federal funds, certificates of deposit, time deposits
and bankers' acceptances (which shall each have an original maturity of
not more than 60 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
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and the short-term obligations of such depository institution or trust
company are rated A-1 by S&P and Prime-1 by Moody's;
(iv) 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 each Rating Agency in its highest short-term unsecured
commercial paper rating category; provided that such commercial paper
shall have a remaining maturity of not more than 45 days;
(v) the Fund unless S&P or Moody's notifies the Servicer in
writing that investment in the Fund would result in a reduction or
withdrawal of the rating of any of the Class A or Class M Certificates;
and
(vi) other obligations or securities that are "permitted
investments" within the meaning of Section 860G(a)(5) of the Code and
acceptable to each Rating Agency and S&P rating the Certificates as an
Eligible Investment hereunder and will not result in a reduction or
withdrawal in the then current rating of any Class of Certificates, as
evidenced by a letter to such effect from each Rating Agency;
provided that no such instrument shall be a Permitted Investment if such
instrument evidences either (a) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (b) 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.
"Permitted Transferee": Any transferee of a Class R
Certificate other than a Non-United States Person or Disqualified Organization.
"Person": Any individual, corporation, partnership, Joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan": As defined in Section 4.02(d).
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"Policy Business Day": A Business Day as defined in the
Certificate Insurance Policy.
"Pool Principal Balance": The sum of the Group I Pool
Principal Balance and the Group II Pool Principal Balance as of any date of
determination.
"Pool Strip Rate": With respect to the Class I S Certificates
and the Group I Loans, a per annum rate equal to the weighted average of the
related Net Mortgage Interest Rates, weighted on the basis of the related
Principal Balances of such Mortgage Loans at the beginning of the related Due
Period, minus the Class IA Pass Through Rate. With respect to the Class II S
Certificates and the Group II Loans, a per annum rate equal to the related Net
Mortgage Interest Rate minus the Class IIA Pass-Through Rate. The Pool Strip
Rates are also designated on the related Mortgage Loan Schedule as the "Class I
S Strip" or the "Class II S Strip" as applicable for such Mortgage Loan and the
related Class S Certificates.
"Preference Amount": Any amount previously distributed to a
Class A Certificateholder that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Preference Claim": As defined in Section 6.02(f).
"Premium Amount": The product of 1/12 of the Premium
Percentage and the Certificate Principal Balance for the related Distribution
Date.
"Premium Percentage": With respect to any Group I Loan or
Group II Loan, the fixed percentage per annum set forth in the Insurance
Agreement.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment in Full or Curtailment, an amount
equal to (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to the Mortgage Interest Rate (or at such lower rate as
may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus the
rate at which the Servicing Fee is calculated minus (b) the amount of interest
actually remitted by the Mortgagor in
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connection with such Principal Prepayment in Full or Curtailment less the
Servicing Fee for such Mortgage Loan in such month.
"Principal Balance": As to any Mortgage Loan and Distribution
Date, the principal balance of such Mortgage Loan as of the Due Date preceding
such date of determination as specified for such Due Date in the amortization
schedule (before any adjustment to such amortization schedule by reason of any
bankruptcy (other than Deficient Valuations) or similar proceeding or any
moratorium or similar waiver or grace period) after giving effect to Principal
Prepayments in Full or Curtailments received prior to such Due Date, Deficient
Valuations incurred prior to such Due Date, to any Curtailments applied by the
Servicer in reduction of the unpaid principal balance of such Mortgage Loan as
of such Due Date and to the payment of principal due on such Due Date and
irrespective of any delinquency in payment by the related Mortgagor. The
Principal Balance of a Mortgage Loan which becomes a Liquidated Mortgage Loan
prior to such Due Date shall be zero.
"Principal Prepayment in Full": Any payment or other recovery
of principal on a Mortgage Loan equal to the outstanding principal balance
thereof, received in advance of the final scheduled Due Date which is not
intended as an advance payment of a scheduled Monthly Payment.
"Purchase Price": With respect to any Mortgage Loan required
to be purchased on any date pursuant to Section 2.02, 3.01, 5.17 or 11.01, an
amount equal to the sum of (a) 100% of the Principal Balance thereof, (b) unpaid
accrued interest at the Mortgage Rate thereon from the Due Date on which
interest was lade paid by the Mortgagor or Advanced by the Servicer to the Due
Date next following the date of repurchase and (c) the aggregate of any
unreimbursed Advances.
"Qualified Mortgage": "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860(G)(a)(3) of the Code (or any successor statute thereto).
"Qualified Substitute Mortgage Loan": A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section 2.02
or 3.05 hereof, which (a)(i) with respect to a Group I Loan, has or have the
same interest rate index, a margin over such index and a maximum interest rate
at least equal to those applicable to the Deleted Mortgage Loan and (ii) with
respect to a Group II Loan, has the same or greater interest rate, (b) relates
or
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relate to a detached one-family residence or to the same type of Residential
Dwelling as the Deleted Mortgage Loan and in each case has or have the same or a
better lien priority as the Deleted Mortgage Loan and has the same occupancy
status or is an Owner Occupied Mortgaged Property, (c) matures or mature no
later than (and not more than one year earlier than) the Deleted Mortgage Loan
(except during the first 90 days after the Cut-Off Date), (d) has or have a
Loan-to-Value Ratio or Loan-to-Value Ratios (or Combined Loan-to-Value Ratio or
Combined Loan-to-Value Ratios, with respect to a Second Mortgage Loan) at the
time of such substitution no higher than the Loan-to-Value Ratio (or Combined
Loan-to-Value Ratio, with respect to a Second Mortgage Loan) of the Deleted
Mortgage Loan, (e) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
not substantially less and not more than the Principal Balance of the Deleted
Mortgage Loan as of such date, (f) satisfies or satisfy the criteria set forth
from time to time in the definition of "qualified replacement mortgage" at
Section 860G(a)(4) of the Code (or any successor statute thereto) and (g)
complies or comply as of the date of substitution with each representation and
warranty set forth in Section 3.01(b).
"Rate Adjustment Date": The date on which the Mortgage
Interest Rate is adjusted with respect to each Group I Loan. The first Rate
Adjustment Date for each Group I Loan is set forth on the Mortgage Loan
Schedule.
"Rating Agency": S&P, DCR or Moody's.
"Record Date": With respect to any Distribution Date, the
close of business on the last Business Day of the month immediately preceding
the month of such Distribution Date.
"Reference Banks": ____________________, ____________________
and ___________________; provided that if any of the foregoing banks are not
suitable to serve as a Reference Bank, then any leading banks selected by the
Trustee which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Company or any affiliate thereof, (iii) whose quotations appear on the
Reuters Screen LIBO Page on the relevant Interest Determination Date and (iv)
which have been designated as such by the Certificate Administrator.
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"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 86OG of Subchapter M of Chapter I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
"Remittance Report": As defined in Section 6.04.
"REO Acquisition": The acquisition of any REO Property
pursuant to Section 5.11.
"REO Disposition": The final sale by the Servicer of a
Mortgaged Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
"REO Mortgage Loan": Any Mortgage Loan which is not a
Liquidated Mortgage Loan and as to which the indebtedness evidenced by the
related Mortgage Note is discharged and the related Mortgaged Property is held
as part of the Trust Fund.
"REO Proceeds": Proceeds received in respect of any REO
Mortgage Loan ('including, without limitations, proceeds from the rental of the
related Mortgaged Property).
"REO Property": As described in Section 5.11.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
"Request for Release": A request for release in substantially
the form attached as Exhibit H hereto.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Certificate Administrator
determines to be either (i) the arithmetic mean (rounded upwards if necessary to
the nearest whole multiple of 1/16%) of the three-month United
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States dollar lending rates which New York City banks selected by the
Certificate Administrator are quoting on the relevant Interest Determination
Date to the principal London offices of leading banks in the London interbank
market or (ii) in the event that the Certificate Administrator can determine no
such arithmetic mean, the lowest three-month United States dollar lending rate
which New York City banks selected by the Certificate Administrator are quoting
on such Interest Determination Date to leading European banks.
"Residential Dwelling": A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development, a townhouse
or a manufactured housing unit which is non-mobile.
"Residual Interest": The Interest of the Trust Fund
represented by: (i) the amounts, if any, remaining in the Certificate Account
following the termination of the Trust Fund after payments to the Class A and
Class S Certificateholders and (ii) all other amounts distributable to the Class
R Certificates pursuant to this Agreement. The Residual Interest is represented
by the Class R Certificates.
"Responsible Officer": When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to the Seller,
the Certificate Administrator or the Servicer, the President or any Vice
President, Assistant Vice President, or any Secretary or Assistant Secretary.
"Sale Agreement": The Mortgage Loan Sale Agreement, dated as
of the date hereof, between the Seller and the Company relating to the sale of
the Mortgage Loans to the Company.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.
"Second Mortgage Loan": Any Mortgage Loan secured by a second
lien on the related Mortgaged Property.
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"Seller": Chase Manhattan Mortgage Corporation, or its
successor.
"Senior Mortgage Loan": With respect to any Second Mortgage
Loan, a mortgage loan on the related Mortgaged Property that is senior to the
lien provided by such Second Mortgage Loan.
"Servicer": [Advanta Mortgage Corp. USA,] a Delaware
corporation, or any successor appointed as herein provided.
"Servicer Remittance Amount": With respect to any Servicer
Remittance Date and each Loan Group, an amount equal to the sum of (i) all
unscheduled collections of principal and interest on the Mortgage Loans in the
related Loan Group (including Principal Prepayments in Full and Curtailments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the prior calendar month and all scheduled Monthly Payments due on the
related Due Date and received on or prior to the Business Day preceding such
Servicer Remittance Date, (ii) all Periodic Advances made by the Servicer with
respect to payments due to be received on the Mortgage Loans in the related Loan
Group on the related Due Date and (iii) any other amounts required to be placed
in the Collection Account by the Servicer pursuant to this Agreement but
excluding the following:
(a) amounts received on particular Mortgage Loans as late
payments of principal or interest and respecting which the Servicer has
previously made an unreimbursed Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds
which represents any unpaid Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(e) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
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(f) certain other amounts which are reimbursable to the
Servicer, as provided in this Agreement; and
(g) Net Foreclosure Profits.
"Servicer Remittance Date": With respect to any Distribution
Date, the [18th] of the month in which such Distribution Date occurs, or if such
[18th] day is not a Business Day, the Business Day preceding such [18th] day.
"Servicing Account": The account created and maintained
pursuant to Section 5.09.
"Servicing Advances": All reasonable and customary
"out-of-pocket" costs and expenses relating to a borrower default or delinquency
or other unanticipated event incur-red by the Servicer in the performance of its
servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property including,
without limitation, taxes and insurance costs, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of the
REO Property, including reasonable fees paid to any independent contractor in
connection therewith, (d) compliance with the obligations under Sections 5.02
(limited solely to the reasonable and customary out-of-pocket expenses of the
subservicer), 5.05, 5.07 or 5.09, all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Servicer to the extent
provided in Section 5.04(a).
"Servicing Compensation": The Servicing Fee and other amounts
to which the Servicer is entitled pursuant to Section 5.13.
"Servicing Fee": As to each Mortgage Loan, the annual fee
payable to the Servicer and the related Subservicer, if any, as indicated on the
related Mortgage Loan Schedule. Such fee shall not be in excess of ____% per
annum. Such fee shall be calculated and payable monthly only from the amounts
received in respect of interest on such Mortgage Loan and shall be computed on
the basis of the same principal amount and for the period respecting which any
related interest payment on a Mortgage Loan is computed. The Servicing Fee
includes any servicing fees owed or payable to any Subservicer.
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature
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appear on a list of servicing officers furnished to the Trustee and the
Certificate Insurer by the Servicer, as such list may from time to time be
amended.
"Startup Day": The day designated as such pursuant to Section
2.04(a) hereof.
"Subservicer": Any Person with whom the Servicer has entered
into a Subservicing Agreement and who satisfies the requirements set forth in
Section 5.02(a) hereof in respect of the qualification of a Subservicer.
"Subservicing Agreement": Any agreement between the Servicer
and any Subservicer relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.02, a copy of which shall be delivered,
along with any modifications thereto, to the Trustee and the Certificate
Insurer.
"Substitution Adjustment": As to any date on which a
substitution occurs pursuant to Section 2.02 or 3.05, the amount (if any) by
which the aggregate principal balances (after application of principal payments
received on or before the date of substitution of any Qualified Substitute
Mortgage Loans as of the date of substitution), are less than the aggregate of
the Principal Balances of the related Deleted Mortgage Loans.
"Tax Return": The federal income tax return on Internal
Revenue Service Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income
Tax Return," including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provision of federal, state or local tax laws in
connection with the Trust Fund.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
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"Transferor": Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
"Trustee": _____________________, or its successor in
interest, or any successor trustee appointed as herein provided.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (a) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto and all collections
thereon and proceeds thereof after the Cut-off Date, (b) such assets as from
time to time are identified as deposited in the Certificate Accounts, (c) such
assets as from time to time are identified as REO Property and collections
thereon and proceeds thereof, assets that are deposited in the Accounts,
including amounts on deposit in the Accounts and invested in Permitted
Investments, (d) the Trustee's rights with respect to the Mortgage Loans under
all insurance policies required to be maintained pursuant to this Agreement
(including the Certificate Insurance Policy) and any Insurance Proceeds (and any
proceeds of the Certificate Insurance Policy), (e) Liquidation Proceeds, (f)
Released Mortgaged Property Proceeds and (g) the representations and warranties
of the Seller pursuant to the Sale Agreement.
"12 Month Loss Amount": With respect to any Distribution Date,
an amount equal to the aggregate of all Liquidation Loan Losses on the Mortgage
Loans which became Liquidated Mortgage Loans during the 12 preceding Due
Periods.
"UCC": The Uniform Commercial Code in effect in the applicable
jurisdiction.
"UCC Financing Statement": A financing statement executed and
filed pursuant to the UCC.
"Underwriter": ______________________.
"Underwriting Guidelines": The underwriting guidelines of the
Seller.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United
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States is includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States.
"Unpaid REO Amortization": As to any REO Mortgage Loan and any
month, the aggregate of the installments of principal and accrued interest
(adjusted to the related Net Mortgage Interest Rate) deemed to be due in such
month and in any prior months that remain unpaid, calculated in accordance with
Section 5.11.
Section 1.02 Provisions of General Application. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined in this Article include the plural as well as the
singular.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to the
Mortgage Loans, or as otherwise specifically set forth herein) provided for
herein shall be made on the basis of a 360-day year and the actual number of
days elapsed in the related period. All calculations of interest with respect to
any Mortgage Loan provided for herein shall be made in accordance with the terms
of the related Mortgage Note and Mortgage or, if such documents do not specify
the basis upon which interest accrues thereon, on the basis of a 360-day year
and the actual number of days elapsed in the related period, to the extent
permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the date such
payment is actually received by the Servicer, provided, however, that for
purposes of calculating distributions on the Certificates, prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Mortgage Note and Mortgage to reduce the outstanding
principal balance of such Mortgage Loan on which interest accrues.
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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 received on or with respect to the Mortgage Loans on or after the
Cut-off Date (other than Monthly Payments due on the Mortgage Loans on or before
the Cut-off Date).
In connection with such assignment, the Company does hereby
deliver to, and deposit with, the Trustee the Certificate Insurance Policy and
each of the following documents or instruments with respect to each Mortgage
Loan so assigned:
(A)(I) Original Mortgage Note (or a lost note affidavit
(including a copy of the original Mortgage Note)) or (II) original
Consolidation, Extension and Modification Agreement (or a lost note
affidavit (including a copy of the original Consolidation, Extension
and Modification Agreement), in either case endorsed (by facsimile if
so authorized by the Company), "Pay to the order of
___________________, as trustee, under that certain Pooling and
Servicing Agreement dated as of [DATE] for Multi-Class Mortgage
Pass-Through Certificates, Series ______ (Chase Funding, Inc.) without
recourse" and signed in the name of the Seller by an authorized person
and showing a complete chain of endorsement from the originator to the
Seller.
(B) Original (or a court-certified copy of the original)
recorded Mortgage with evidence of recording thereon, or if such
original has been delivered to the appropriate public recording office,
a certified copy thereof certified true and complete by the Seller,
with the original thereof with evidence of recording thereon to be
delivered by the Company within 270 days of the Closing Date.
(C) Original Assignment of Mortgage (or copy thereof) by the
Seller or its agent in recordable form to "___________________, as
trustee." Subject to the foregoing, such assignments may, if permitted
by law, be by blanket assignments for Mortgage Loans covering Mortgaged
Properties situated within the same county. If the
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Assignment of Mortgage is in blanket form, a copy of the Assignment of
Mortgage shall be included in the related individual Mortgage File.
(D) Original (or a court-certified copy of the original)
recorded Assignments of Mortgage (or copies thereof) showing a complete
chain of assignment from the originator of the related Mortgage Loan to
the Seller, and, if copies are delivered, with the original thereof
with evidence of recording thereon to be delivered by the Company
within 270 days of the Closing Date.
(E) Originals (or lost note affidavit, including copies of the
originals) of all assumption, consolidation and modification
agreements, with evidence of recording thereon, to the extent required
by applicable law, relating to the Mortgage or the Mortgage Note, if
any, or, if such original has been delivered to the appropriate public
recording office, a certified copy thereof certified true and complete
by the applicable Seller, with the original thereof with evidence of
recording thereon to be delivered by the Company within 270 days of the
Closing Date.
(F) The original title policy or, in the event such original
title policy is unavailable, a certified true copy of the related
policy binder or commitment for title certified true and complete by
the title insurance policy company, with the original title policy to
be delivered by the Company within 270 days of the Closing Date.
(G) Copy of Primary Insurance Policy, if any.
If in connection with any Mortgage Loan the Company cannot
deliver the Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, with evidence of recording thereon
concurrently with the execution and delivery of this Agreement, or within the
270 days permitted in (B), (D) and (E) above, solely because of a delay caused
by the public recording office where such Mortgage, Assignments of Mortgage or
assumption, consolidation or modification, as the case may be, has been
delivered for recordation, the Company shall deliver or cause to be delivered to
the Trustee written notice stating that such Mortgage, Assignments of Mortgage
or assumption, consolidation or modification, as the case may be, has been
delivered to the appropriate public recording office for recordation.
Thereafter, the Seller shall cause to be delivered to the Trustee such Mortgage,
Assignments of Mortgage or assumption, consolidation or modification, as the
case may be, with evidence of recording indicated thereon upon receipt thereof
from the public recording office. In
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any event, the Seller shall use all reasonable efforts to cause each original
Mortgage, Assignments of Mortgage or assumption, consolidation or modification,
as the case may be, with evidence of recording thereon to be delivered to the
Trustee within 300 days of the Closing Date.
The Seller shall cause to be recorded in the appropriate
public recording office for real property records each Assignment of Mortgage
referred to in this Section 2.01 as soon as practicable. While each Assignment
of Mortgage to be recorded is being recorded, the Seller shall deliver to the
Trustee a photocopy of such document. If any such Assignment of Mortgage is
returned unrecorded to the Seller because of any defect therein, the Seller
shall cause such defect to be cured and such document to be recorded in
accordance with this paragraph. The Seller shall deliver or cause to be
delivered each original recorded Assignment of Mortgage and intermediate
assignment to the Trustee within 270 days of the Closing Date or shall deliver
to the Trustee on or before such date an Officer's Certificate stating that such
document 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. In any event, the Seller shall use all reasonable efforts to
cause each such document with evidence of recording thereon to be delivered to
the Trustee within 300 days of the Closing Date.
The ownership of each Mortgage Note, the Mortgage and the
contents of the related Mortgage File is vested in the Trustee. Neither the
Company nor the Servicer shall take any action inconsistent with such ownership
and shall not claim any ownership interest therein. The Company and the Servicer
shall respond to any third party inquiries with respect to ownership of the
Mortgage Loans by stating that such ownership is held by the Trustee on behalf
of the Certificateholders. Mortgage documents relating to the Mortgage Loans not
delivered to the Trustee are and shall be held in trust by the Servicer or any
Sub-Servicer, for the benefit of the Trustee as the owner thereof, and the
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 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. Each Mortgage File and the mortgage
documents relating to the Mortgage Loans contain proprietary business
information of the Seller and its customers. The Trustee and the Servicer agree
that they will not use such information for business purposes without the
express written consent of the Seller and that all such information shall be
kept strictly confidential.
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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 a
conveyance of Mortgage Loans from the Seller to the Company is characterized as
a pledge and not a sale, then the Company shall be deemed to have transferred to
the Trustee all of the Company's right, title and interest in, to and under the
obligations of the Seller deemed to be secured by said pledge; and it is the
intention of this Agreement that the Company shall also be deemed to have
granted to the Trustee a first priority security interest in all of the
Company's right, title, and interest in, to and under the obligations of the
Seller to the Company deemed to be secured by said pledge and that the Trustee
shall be deemed to be an independent custodian for purposes of perfection of the
security interest granted to the Company. 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 Company shall be deemed to have
granted to the Trustee a first priority security interest in all of 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 (b), (c), (d), (e), (f) and (g) of the definition thereof and
further assigns to the Trustee for the benefit of the Certificateholders those
representations and warranties of the Seller contained in the Sale Agreement and
described in Section 3.01 hereof and the benefit of the repurchase obligations
of the Seller described in Sections 2.02 and 3.01 hereof and the obligations of
the Seller contained in the Sale Agreement to take, at the request of the
Company or the Trustee, all action on its part which is reasonably necessary to
ensure the enforceability of a Mortgage Loan.
Section 2.02 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and
deliver to the Company, the Certificate Insurer, the Servicer, the Certificate
Administrator and the Seller on or prior to the Closing Date an acknowledgment
of receipt of the Certificate Insurance Policy and, with respect to each
Mortgage Loan, on or prior to the Closing Date, an acknowledgment of receipt of
the original Mortgage Note (with any exceptions noted), in the form attached as
Exhibit E hereto and
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declares that it will hold such documents and any amendments, replacements or
supplements thereto, as well as any other assets included in the definition of
Trust Fund and delivered to the Trustee, as Trustee in trust upon and subject to
the conditions set forth herein for the benefit of the Certificateholders and
the Certificate Insurer. The Trustee agrees, for the benefit of the
Certificateholders and the Certificate Insurer, to review (or cause to be
reviewed) each Mortgage File within __ Business Days after the Closing Date
(with respect to the Mortgage Loans), and to deliver to the Seller, the
Servicer, the Company, the Certificate Administrator and the Certificate Insurer
a certification in the form attached hereto as Exhibit F to effect that, as to
each Mortgage Loan listed in the related Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to Section 2.01 are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Mortgage Loan Schedule as to the information set forth in (i), (ii), (v),
(vi), (x), (xi), (xiii), (xiv), (xv), (xx) and (xxii) of the definition of
"Mortgage Loan Schedule" set forth herein accurately reflects the information
set forth in the Mortgage File delivered on such date. The Trustee makes no
representations as to and shall not be responsible to verify (i) the validity,
legality, enforceability, sufficiency, due authorization, recordability or to
verify genuineness of any of the documents contained in each Mortgage File or of
any of the Mortgage Loans or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
By [DATE], the Trustee shall deliver (or cause to be delivered) to the
Servicer, the Seller, the Company and the Certificate Insurer a final
certification in the form attached hereto as Exhibit G to the effect that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (1) all documents required
to be delivered to it pursuant to Section 2.01 are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, tom
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth in
(i), (ii), (v), (vi), (x), (xi), (xiii), (xiv), (xv), (xx) and (xx) of the
definition of "Mortgage Loan Schedule" set forth herein accurately reflects the
information set forth in the Mortgage File delivered on such date.
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(b) If the Certificate Insurer or the Trustee during the process of
reviewing the Mortgage Files finds any document constituting a part of a
Mortgage File which is not executed, has not been received, Is unrelated to the
Mortgage Loan identified in the related Mortgage Loan Schedule, or does not
conform to the requirements of Section 2.01 or the description thereof as set
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate
Insurer, as applicable, shall promptly so notify the Servicer, the Seller, the
Certificate Insurer, the Certificate Administrator and the Trustee. In
performing any such review, the Trustee may conclusively rely on the Seller as
to the purported genuineness of any such document and any signature thereon, It
is understood that the scope of the Trustee's review of the Mortgage Files is
limited solely to confirming that the documents listed in Section 2.01 have been
executed and received and relate to the Mortgage Files identified in the related
Mortgage Loan Schedule and such documents conform to the standard set forth in
clause (ii) of the paragraph directly above. The Trustee shall request that the
Seller cure any such defect within 60 days from the date on which the Seller was
notified of such defect, and if the Seller does not cure such defect in all
material respects during such period, request that the Seller (i) substitute in
lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan in the manner
and subject to the conditions set forth in Section 3.05 or (ii) purchase such
Mortgage Loan on the next succeeding Servicer Remittance Date at a purchase
price equal to the Purchase Price, which purchase price shall be deposited in
the Collection Account on the same Business Day, after deducting therefrom any
amounts received in respect of such repurchased Mortgage Loan or Loans and being
held in the Collection Account for future distribution to the extent such
amounts have not yet been applied to principal or interest on such Mortgage
Loan. It is understood and agreed that the obligation of the Seller to so cure,
substitute for or purchase 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 Certificateholders or the
Trustee on behalf of Certificateholders. In addition, it is understood and
agreed that the Company has assigned to the Trustee all of its rights under the
Sale Agreement and the right to enforce any remedy against the Seller as
provided in Section 2.01 of the Sale Agreement. For purposes of calculating the
amount the Servicer is required to remit on the Servicer Remittance Date
following such repurchase or substitution, any Purchase Price or Substitution
Adjustment that is paid and deposited in the related Collection Account as
provided above shall be deemed to have been deposited in the related Collection
Account in the Due Period preceding such Servicer Remittance Date.
(c) Upon receipt by the Trustee of a certification of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,
upon receipt of the related Mortgage File, and the deposit of the amounts
described above in the Collection Account (which
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certification shall be in the form of Exhibit H hereto), the Trustee shall
release to the Servicer for release to the Seller the related Mortgage File and
shall execute, without recourse, and deliver such instruments of transfer
furnished by the Seller as may be necessary to transfer such Mortgage Loan to
the Seller. The Trustee shall notify the Certificate Insurer if the Seller fails
to repurchase or substitute for a Mortgage Loan in accordance with the
foregoing.
Section 2.03. Trust Fund; Authentication of Certificates. 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. The Trustee acknowledges the assignment to it for the
benefit of the Trust Fund of the Mortgage Loans and has caused to be
authenticated and delivered to or upon the order of the Company, in exchange for
the Mortgage Loans, Certificates duly authenticated by the Authenticating Agent
in authorized denominations evidencing ownership of the entire Trust Fund.
Section 2.04. REMIC Election.
(a) The Company hereby instructs and authorizes the Trustee to
make an appropriate election to treat the Trust Fund as a REMIC. This Agreement
shall be construed so as to carry out the intention of the parties that the
Trust Fund be treated as a REMIC at all times prior to the date on which the
Trust Fund is terminated. The Closing Date is hereby designated as the "startup
day" of the 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
the REMIC shall consist of the Class A Certificates and the Class S Certificates
and the "residual interest" (within the meaning of Section 860G(a)(2) of the
Code) in the REMIC shall consist of the Residual Interest, and all such
interests shall be designated as such on the startup day.
(b) The principal amount of the regular interests in the REMIC
is equal to the sum of the aggregate Original Certificate Principal Balance of
the Class A and Class S Certificates.
(c) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of
the Treasury regulations, the "latest possible maturity date" of any regular
interest in the REMIC is [DATE], which is the Remittance Date immediately
following the latest scheduled maturity of any Mortgage Loan.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE MASTER SERVICER; REPURCHASE OF MORTGAGE LOANS
Section 3.01. Representations and Warranties of the Company
with respect to the Mortgage Loans. The Company hereby represents and warrants
to the Trustee and the Certificate Insurer that on the Closing Date it has
entered into the Purchase Agreement with respect to the Mortgage Loans with the
Seller, that the Seller has made the following representations and warranties in
such Purchase Agreement as of the Closing Date, which representations and
warranties run to and are for the benefit of the Company and the Trustee, and as
to which the Company has assigned to the Trustee, pursuant to Section 2.01
hereof, the right to cause the Seller to repurchase a Mortgage Loan as to which
there has occurred an uncured breach of representations and warranties in
accordance with the provisions of the Sale Agreement. References in this Section
to percentages of Mortgage Loans refer in each case to the percentage of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date, based
on the outstanding balances of the Mortgage Loans as of the Cut-off Date, and
giving effect to scheduled Monthly Payments due on or prior to the Cut-off Date,
whether or not received. References to percentages of Mortgaged Properties
refer, in each case, to the percentages of expected aggregate principal balances
of the related Mortgage Loans (determined as described in the preceding
sentence).
(a) With respect to the Seller:
(i) The Seller is a corporation validly existing and
in good standing under the laws of the State of New York;
(ii) The Seller has the full power and authority to
hold each Mortgage Loan, to sell each Mortgage Loan and to
execute, deliver and perform, and to enter into and consummate
all transactions contemplated by the Purchase Agreement and to
conduct its business as presently conducted, has duly
authorized the execution, delivery and performance of the
Purchase Agreement, has duly executed and delivered the
Purchase Agreement, and the Purchase Agreement and each
Assignment of Mortgage to the Company constitutes a legal,
valid and binding obligation of the Seller, enforceable
against it in accordance with its terms;
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(iii) None of the execution and delivery of the
Purchase Agreement, the acquisition of the Mortgage Loans by
the Seller, 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
the Purchase Agreement will conflict with any of the terms,
conditions or provisions of the Seller's charter or by-laws or
materially conflict with or result in a material breach of any
of the terms, conditions or provisions of any legal
restriction or any agreement or instrument to which the Seller
is now a party or by which it is bound, or constitute a
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
Seller or its property is subject;
(iv) Each Mortgage Note, each Mortgage, each
Assignment of Mortgage and any other documents required
pursuant to the Purchase Agreement to be delivered to the
Company or its assignee for each Mortgage Loan have been, on
or before the Closing Date, delivered to the Company or its
assignee, except for such documents as are noted in the
Exception Report;
(v) There is no litigation pending or threatened with
respect to the Seller which is reasonably likely to have a
material adverse effect on the sale of the Mortgage Loans or
which is reasonably likely to have a material adverse effect
on the financial condition of the Seller;
(vi) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
execution, delivery and performance by the Seller of or
compliance by the Seller with the Purchase Agreement, the sale
of the Mortgage Loans or the consummation of the transactions
contemplated by the Purchase Agreement except for consents,
approvals, authorizations and orders which have been obtained;
(vii) The consummation of the transactions
contemplated by the Purchase Agreement is in the ordinary
course of business of the Seller, and the transfer, assignment
and conveyance of the Mortgage Notes and the Mortgages by the
Seller pursuant to the Purchase Agreement are not subject to
bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction;
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(viii) The origination and collection practices used
by the Seller with respect to each Mortgage Note and Mortgage
have been in all material respects legal, proper and prudent
in the mortgage origination and servicing business. With
respect to escrow deposits and payments that the Seller
collects, all such payments are in the possession of, or under
the control of, the Seller, and 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 under the Mortgage Note have
been capitalized under any Mortgage or the related Mortgage
Note; and
(ix) The Seller will treat the sale of the Mortgage
Loans to the Company as a sale for reporting and accounting
purposes and, to the extent appropriate, for federal income
tax purposes.
(b) With respect to the Mortgage Loans:
(i) The information set forth in the Mortgage Loan
Schedule is complete, true and correct;
(ii) Unless otherwise specified on the Mortgage Loan
Schedule, no Monthly Payment required under the Mortgage Loan
has been delinquent for more than 30 days more than once in
the 12 months preceding the Closing Date; as of the Closing
Date, no more than approximately ____% and ____% of the Group
I and Group II Mortgage Loans, respectively will be 30-59 days
delinquent in payment of principal or interest; and as of the
Closing Date, [no] Mortgage Loan is sixty (60) or more days
delinquent in payment of principal or interest;
(iii) There are no defaults in complying with the
terms of the Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents which previously
became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is
not yet due and payable, except that the Mortgage Loans may be
delinquent by 30 days or less. 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 under
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the Mortgage Loan, except for interest accruing from the date
of the Mortgage Note or date of disbursement of the Mortgage
Loan proceeds, whichever is earlier, to the day which precedes
by one month the Due Date of the first Monthly Payment;
(iv) The terms of the Mortgage Note and Mortgage have
not been impaired, waived, altered or modified in any respect,
except by a written instrument which has been recorded, if
necessary, to protect the interests of the Trustee on behalf
of the Certificateholders and the Certificate Insurer and
which has been delivered to the Trustee. The substance of any
such waiver, alteration or modification has been approved by
the title insurer, to the extent required by the policy, and
its terms are reflected on the Mortgage Loan Schedule. No
Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement approved by the title
insurer, to the extent required by the policy, and which
assumption agreement is part of the Mortgage File delivered to
the Trustee and the terms of which are reflected in the
Mortgage Loan Schedule;
(v) The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including,
without limitation, the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render
either the Mortgage Note or the Mortgage unenforceable, in
whole or in part, or subject to any right of rescission,
set-off, recoupment, counterclaim or defense, including,
without limitation, the defense of usury, and no such right of
rescission, set-off, recoupment, counterclaim or defense has
been asserted with respect thereto, and no Mortgagor was a
debtor in any state or federal bankruptcy or insolvency
proceeding at the time the Mortgage Loan was originated;
(vi) Pursuant to the terms of the Mortgage, all
improvements upon the Mortgaged Property are insured by an
insurer acceptable to FNMA against loss by fire and such other
risks as are usually insured against in the broad form of
extended coverage hazard insurance available in the locale
where the Mortgaged Property is located, including flood
hazards 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 if flood insurance was required by
federal regulation and such flood
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insurance has been made available in the locate where the
Mortgaged Property is located). All such insurance policies
(collectively, the "hazard insurance policy") meet the
requirements of the current guidelines of the Federal
Insurance Administration, conform to the requirements of the
FNMA Sellers' Guide and the FNMA Servicers' Guide, and are a
standard policy of insurance for the locale where the
Mortgaged Property is located. The amount of the hazard
insurance is at least in the amount of the maximum amount
available under federal law in the locale where the Mortgaged
Property is located and the unpaid balance of the Mortgage
Loan, whichever is less. The hazard insurance policy names
(and will name) the Mortgagor as the insured and contains a
standard mortgagee loss payable clause in favor of the
original seller, and its successors and assigns. The Mortgage
obligates the Mortgagor thereunder to maintain the hazard
insurance policy at the Mortgagor's cost and expense, and on
the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such insurance at such
Mortgagor's cost and expense, and to seek reimbursement
therefor from the Mortgagor. Where required by state law or
regulation, the Mortgagor has been given an opportunity to
choose the carrier of the required hazard insurance, provided
the policy is not a "master" or "blanket" hazard insurance
policy covering a condominium or the common facilities of a
planned unit development. The hazard insurance policy is the
valid and binding obligation of the insurer, is in full force
and effect, and will be in full force and effect and inure to
the benefit of the Trustee upon the consummation of the
transactions contemplated by this Agreement. The Seller has
not engaged in, and has no knowledge of the Mortgagor's or any
subservicer's having engaged in, any act or omission which
would impair the coverage of any such policy, the benefits of
the endorsement provided for herein, or the validity and
binding effect of either. In connection with the issuance of
the hazard insurance policy, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind
has been or will be received, retained or realized by any
attorney, firm or other person or entity to the Seller's
knowledge, and no such unlawful items have been received,
retained or realized by the Seller;
(vii) 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 and
the
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consummation of the transactions contemplated hereby will not
involve the violation of any such laws;
(viii) The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the
Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such release, cancellation,
subordination or rescission. The Seller has not waived the
performance by the Mortgagor of any action, if the Mortgagor's
failure to perform such action would cause the Mortgage Loan
to be in default, nor has the Seller waived any default
resulting from any action or inaction by the Mortgagor;
(ix) The Mortgaged Property is located in the state
identified in the Mortgage Loan Schedule and consists of a
single parcel of real property with a detached single family
residence erected thereon, or a two- to four-family dwelling,
or an individual condominium unit in a low-rise or high-rise
condominium project, or an individual unit in a planned unit
development or a manufactured dwelling (non-mobile); provided,
however, that no more than ____% and ____% of the Group I and
Group II Loans, respectively, are secured by condominiums,
townhouses or planned unit developments and, provided,
however, that any manufactured home meets the requirements of
Section 25(e)(10) of the Internal Revenue Code of 1986 by
having a minimum of 400 square feet of living space and a
minimum width in excess of 102 inches and is of a kind
customarily used in a fixed location. No more than _____% and
____% of the Group I and Group II Loans, respectively, are
secured by investor-owned properties. The Mortgaged Property
is either a fee simple estate or a long-term residential
lease. If the Mortgage Loan is secured by a long-term
residential lease, (1) the terms of such lease expressly
permit the mortgaging of the leasehold estate, the assignment
of the lease without the lessor's consent and the acquisition
by the holder of the Mortgage of the rights of the lessee upon
foreclosure or assignment in lieu of foreclosure or provide
the holder of the Mortgage with substantially similar
protections; (2) the terms of such lease do not (A) allow the
termination thereof upon the lessee's default without the
holder of the Mortgage being entitled to receive written
notice of, and opportunity to cure, such default, (B) allow
the termination of the lease in the event of damage or
destruction as long as the Mortgage is in existence or (C)
prohibit the holder of the Mortgage
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from being insured under the hazard insurance policy relating
to the Mortgaged Property; (3) the original term of such lease
is not less than 15 years; (4) the term of such lease
(including any term for which such lease may be renewed) does
not terminate earlier than five years after the maturity date
of the Mortgage Note; and (5) the Mortgaged Property is
located in a jurisdiction in which the use of leasehold
estates for residential properties is an accepted practice;
(x) The Mortgage is a valid, subsisting, enforceable and
perfected first lien or second lien on the Mortgaged Property,
including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, hearing
and air conditioning systems located in or annexed to such
buildings, and all additions, alterations and replacements
made at any time with respect to the foregoing. The lien of
the Mortgage is subject only to:
(1) The lien of 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 acceptable to prudent
mortgage lending institutions generally and
specifically referred to in the lender's title
insurance policy delivered to the originator of the
Mortgage Loan and referred to or otherwise considered
in the appraisal made for the originator of the
Mortgage Loan; and
(3) other matters to which like properties are
commonly subject which do not materially interfere
with the benefits of the security intended to be
provided by the Mortgage or the use, enjoyment, value
or marketability of the related Mortgaged Property as
a residential 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 or second lien and first or second
priority security interest on the collateral described therein
and the Seller has full right to sell and assign the same to
the Company. The Mortgaged Property was not, as of the date of
origination of the Mortgage Loan, subject to a mortgage, deed
of trust,
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deed to secure debt or other security instrument creating a
lien subordinate to the lien of the Mortgage;
(xi) The Mortgage Note and the Mortgage and every other
agreement, if any, executed and delivered by the Mortgagor in
connection with the Mortgage Loan are genuine, and each is the
legal, valid and binding obligation of the maker thereof
enforceable in accordance with its terms. All parties to the
Mortgage Note and the Mortgage and any other related agreement
had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and such
other related agreements, and the Mortgage Note and the
Mortgage and such other related agreements have been duly and
properly executed by such parties;
(xii) The Mortgage Loan has been closed and the proceeds
of the Mortgage Loan have been fully disbursed and there is no
requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site
improvement and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgagee Loan and the
recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the
Mortgage Note or Mortgage;
(xiii) Immediately prior to the sale of the Mortgage
Loan to the Company under this Agreement, (1) the Seller was
the sole owner an holder of the Mortgage Loan, (2) the
Mortgage Loan was not assigned or pledged, (3) the Seller had
good, indefeasible and marketable title thereto, (4) the
Seller had full right to transfer and sell the Mortgage Loan
to the Company free and clear of any encumbrance, equity
interest, participation interest, lien, pledge, charge, claim
or security interest, and (5) the Seller had full right and
authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each
Mortgage Loan to the Company under this Agreement, and
following the sale of each Mortgage Loan, the Company will own
such Mortgage Loan free and clear of any encumbrance, equity
interest, participation interest, lien, pledge, charge, claim
or security interest;
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(xiv) All parties which had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise,
and including, without limitation, the Seller, to the best
knowledge of the Seller, are (or, during the period in which
they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements
of the laws of the state wherein the Mortgaged Property is
located and (2)(a) organized under the laws of such state, or
(b) qualified to do business in such state, or (c) federal
savings and loan associations, savings banks, or national
banks having principal offices in such state, or (d) not doing
business in such state;
(xv) The Group I Loans have an original LTV equal to or
less than 90.00% and the Group II Loans have an original LTV
(or Combined Loan-to- Value Ratio in the case of Second
Mortgage Loans) equal to or less than 95.00%;
(xvi) The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title the form and
stance of which is acceptable to FNMA or (ii) an ALTA lender's
title insurance policy or other generally acceptable form of
policy of insurance issued by a title insurer qualified to do
business in the jurisdiction where the Mortgaged Property is
located, or a commitment or binder to issue such a policy
insuring the Seller, its successors and assigns, as to the
first priority lien or second priority lien of the Mortgage in
the original principal amount of the Mortgage Loan, and
subject only to the exceptions contained in clauses (1), (2)
and (3) of paragraph (j) above and against any loss by reason
of the invalidity or unenforceability of the lien resulting
from the provisions of the Mortgage providing for adjustment
in the Mortgage Interest Rate and Monthly Payment. Where
required by state law or regulation, the Mortgagor has been
given the opportunity to choose the carrier of the required
mortgage title insurance. Additionally, such lender's title
insurance policy affirmatively insured ingress and egress, and
against encroachments by or upon the Mortgaged Property or any
interest therein. Immediately prior to the sale of the
Mortgage Loan to the Company under the terms of this
Agreement, the Seller, its successors and assigns were the
sole insureds of such lender's title policy. Such lender's
title insurance policy is in full force and effect and will be
in force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under
such lender's title insurance policy, and no prior holder of
the Mortgage, including the Seller, has done, by act or
omission, anything which
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would impair the coverage of such lender's title insurance
policy. In connection with the issuance of such lender's title
insurance policy, no unlawful fee, commission, kickback or
other unlawful compensation or value of any kind has been or
will be received, retained or realized by any attorney, firm
or other person or entity to the knowledge of the Seller, and
no such unlawful items have been received, retained or
realized by the Seller;
(xvii) There is no default, breach, violation or event
of acceleration existing under the Mortgage or the Mortgage
Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of
acceleration, and neither the Seller nor its predecessors have
waived any default, breach, violation or event of
acceleration, except that the Mortgage Loans may be delinquent
by 30 days or less;
(xviii) To the Seller's knowledge, there are no
mechanics' or similar liens or claims which have been filed
for work, labor or material (and no rights are outstanding
that under the law could give rise to such liens) affecting
the related Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the related
Mortgage;
(xix) All improvements which were considered in
determining the Appraised Value of the Mortgaged Property lay
wholly within the boundaries and building restriction lines of
the Mortgaged Property and no improvements on adjoining
properties encroach upon the Mortgaged Property. No
improvement located on or being part of the Mortgaged Property
is in violation of any applicable zoning law or regulation;
provided, that in no event shall a legal nonconforming use of
the Mortgaged Property be considered a violation of any such
zoning law or regulation;
(xx) The Mortgage Interest Rate and Monthly Payment are
adjusted in accordance with the terms of the Mortgage Note.
All required notices of interest rate and payment amount
adjustments have been sent to the Mortgagor on a timely basis
and the computations of such adjustments were properly
calculated. Installments of interest are subject to change due
to the adjustments to the Mortgage Interest Rate on each Rate
Adjustment Date, with interest calculated
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and payable in arrears and on each Rate Adjustment Date the
Monthly Payment will be adjusted to an amount, and pay
interest at the Mortgage Interest Rate as so adjusted,
sufficient to amortize the Mortgage Loan fully by the stated
maturity date (except with respect to __ Mortgage Loans,
representing approximately ____% of the Cut-Off Date Aggregate
Principal Balance of the Group II Loans, which are balloon
loans). All Mortgage Interest Rate adjustments have been made
in strict compliance with state and federal law and the terms
of the related Mortgage Note. Unless otherwise specified in
the Mortgage Loan Schedule, any interest required to be paid
by a Mortgagor pursuant to state and local law has been
properly paid and credited;
(xxi) The Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security provided
thereby, including, (A) in the case of a Mortgage designated
as a deed of trust, by trustee's sale, and (B) otherwise by
judicial foreclosure. There is no 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 subject to applicable
federal and state laws and judicial precedent with respect to
bankruptcy and right of redemption;
(xxii) All inspections, licenses and certificates
required to be made are issued with respect to the use and
occupancy of 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;
(xxiii) The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding
Mortgage and the security interest of any applicable security
agreement or chattel mortgage referred to in (x) above;
(xxiv) In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and duly qualified under
applicable law to serve as such, has been properly designated
and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Trustee to
the trustee under the deed of trust, except in connection with
a trustee's sale after default by the
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Mortgagor, provided that this representation and warranty
shall in no way obligate the Trustee to pay any such amounts;
(xxv) The Mortgage Note, the Mortgage, the related
assignment of Mortgage and any other documents required to be
delivered by the Seller have been delivered to the Trustee as
and to the extent required to be delivered by this Agreement;
(xxvi) The Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event that the Mortgaged Property is
sold or transferred without the prior written consent of the
Mortgagee thereunder, at the option of the Mortgagee. This
provision provides that the Mortgagee cannot exercise its
option if the exercise of such option is prohibited by federal
law;
(xxvii) Each of the Mortgage and the assignment of
Mortgage is in recordable form and is acceptable for recording
under the laws of the jurisdiction in which the Mortgaged
Property is located;
(xxviii) The Mortgage Loan does not contain provisions
pursuant to which Monthly Payments are paid or partially paid
with funds deposited in any separate account established by
the Seller, the Mortgagor or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor, nor
does it contain any other similar provisions currently in
effect which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other
contingent interest feature;
(xxix) Any future advances made prior to the Cut-Off
Date have been consolidated with the outstanding principal
amount secured by the Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and
single repayment term. The lien of the Mortgage securing the
consolidated principal amount is expressly insured as having
first lien priority by a title insurance policy, an
endorsement to the policy insuring the mortgagee's
consolidated interest or by other title evidence acceptable to
FNMA and FHLMC.
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The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;
(xxx) There is no proceeding pending or to the Seller's
knowledge threatened for the total or partial condemnation of
the Mortgaged Property. The Mortgaged Property is undamaged by
waste, fire, earthquake or earth movement, windstorm, flood,
tornado, other types of water damage or other casualty so as
to materially adversely affect the value of the Mortgaged
Property as security for the Mortgage Loan or the use for
which the premises were intended and each Mortgaged Property
is in good repair;
(xxxi) The origination and collection practices used
with respect to the Mortgage Loan have been in accordance with
Accepted Servicing Practices, and in all respects in
compliance with all applicable laws and regulations. With
respect to escrow deposits and any escrow payments, all such
payments collected are in the possession of the Servicer and
there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not bee
made. All escrow payments have been collected in full
compliance with state and federal law. Unless prohibited by
applicable law, an escrow of funds has been established, if
required, in an amount sufficient to pay for every item which
remains unpaid and which has been assessed by is not yet due
and payable. No escrow deposits or escrow payments or other
charges or payments due with respect to the Mortgage Loans,
other than origination points, fees and expenses, have been
capitalized under the Mortgage or Mortgage Note;
(xxxii) The Mortgage File contains an appraisal of the
related Mortgage Property signed prior to the approval of the
Mortgage Loan application by a Qualified Appraiser;
(xxxiii) The Mortgagor has not notified the Seller, and
the Seller has no knowledge, of any relief requested or
allowed to the Mortgagor under the Soldiers' and Sailors'
Civil Relief Act of 1940;
(xxxiv) To the Seller's knowledge, there exists no
violation of any local, state, or federal environmental law,
rule or regulation in respect of the Mortgaged Property which
violation has or could have a material adverse effect on the
market
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value of such Mortgaged Property. The Seller has no knowledge
of any pending action or proceeding directly involving the
related Mortgaged Property in which compliance with any
environmental law, rule or regulation is in issue; and, to the
best of the Seller's knowledge, nothing further remains to be
done to satisfy in full all requirements of each such law,
rule or regulation constituting a prerequisite to the use and
employment of such Mortgaged Property;
(xxxv) No Mortgage Loan was made in connection with (1)
the construction or rehabilitation of a Mortgaged Property or
(2) facilitating the trade-in or exchange of a Mortgaged
Property;
(xxxvi) 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,
and the Seller has and shall maintain in its possession,
available for the Trustee's inspection, and shall deliver to
the Trustee upon demand, evidence of compliance with all such
requirements;
(xxxvii) All information regarding the Mortgage Loans
which could reasonably be expected to adversely affect the
value or the marketability of any Mortgaged Property or
Mortgage Loan and of which the Seller is aware has been
provided by the Seller to the Company and the Certificate
Insurer;
(xxxviii) The Mortgage Note, the Mortgage and all other
documents contained in the Mortgage File are on FNMA or FHLMC
uniform instruments or are on forms acceptable to FNMA or
FHLMC. The documents, instruments and agreements submitted for
loan underwriting were not falsified by the Seller and contain
no untrue statement of material fact by the Seller and do not
omit to state a material fact required to be stated by the
Seller therein or necessary to make the statements therein not
misleading. The Seller has not made any representations to the
Mortgagor that are inconsistent with the mortgage instruments
used. The Mortgage Loans are representative of the Seller's
portfolio of fixed rate or adjustable rate mortgage loans, and
the Seller used no selection procedures that identified the
Mortgage Loans as being less desirable or valuable than other
comparable mortgage loans originated or acquired by the
Seller;
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(xxxix) All Monthly Payment amounts, with respect to the
Mortgage Loan, received after the Cut-Off Date and to which
the Seller is not entitled, have been deposited into the
Certificate Account;
(xl) To the Seller's knowledge there is no delinquent
tax or assessment lien on the Mortgaged Property;
(xli) The Seller has performed or directed the Servicer
to perform any and all acts required to be performed to
preserve the rights and remedies of the Trustee in any
insurance policies applicable to the Mortgage Loan, including,
without limitation, any necessary notification of insurers,
assignments of policies or interests therein, and
establishment of co-insurer, joint loan payer and mortgagee
rights in favor of the Trustee;
(xlii) The Mortgage Loan conforms, and all of the
Mortgage Loans in the aggregate conform, to the description
thereof set forth in the Prospectus Supplement, including
Appendix C;
(xliii) As of the Cut-Off Date, no more than
approximately 1.53% and 0.96% of the Group I and Group II
Loans, respectively, by aggregate principal balance as of the
Cut-Off Date, will be secured by Mortgaged Properties located
within any single zip code area;
(xliv) Each Mortgage Loan constitutes a qualified
mortgage under Section 860G(a)(3)(A) of the Internal Revenue
Code of 1986 and Treasury Regulations Section 1.860G-2(a)(1);
(xlv) With respect to each Mortgaged Property situated
in the 39 counties of California which were declared federal
disaster areas on March 21, 1995 due to flooding, none of the
Mortgagors residing in such Mortgaged Properties have
contacted the Seller with any reports of damage of any kind or
requests for forbearance of any payments as a result of such
flood damage;
(xlvi) Each Mortgage Loan contains a customary
due-on-sale clause;
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(xlvii) Except as previously disclosed in writing to the
Trustee and the Certificate Insurer, with respect to each
Mortgage Loan, there is only one originally executed Mortgage
Note not stamped as a duplicate;
(xlviii) The aggregate loan balance of all Group I and
Group II Loans, as of the Cut-Off Date is $_____________ and
$_____________, respectively;
(xlviv) Each Mortgage Loan is being serviced by the
Servicer or by an entity within the control of the Servicer
which is qualified to service mortgage loans;
(l)The Mortgage Note related to each fixed-rate Mortgage
Loan bears a fixed coupon rate of at least _____% per annum
and the Mortgage Note related to each adjustable rate Mortgage
Loan bears a current coupon rate of at least _____% as of the
Cut-Off Date;
(li) No funds provided to a borrower from a Second
Mortgage Loan were concurrently used as a down payment for a
First Mortgage Loan;
(lii) With respect to each Second Mortgage Loan, the
maturity date of the Mortgage Loan is prior to the maturity
date of the related prior lien if such prior lien provides for
a balloon payment;
(liii) With respect to each Second Mortgage Loan, the
Seller has not received, and is not aware of, a notice of
default of any senior mortgage loan which has not been cured;
(liv) The first date on which the applicable Mortgagor
must make a payment on each Mortgage Loan is due no later
than [DATE];
(lv) No property securing a Mortgage Loan is a
cooperative or mobile home or constitutes other than real
property under applicable state law;
(lvi) The Mortgage Loans are not being transferred
with any intent to hinder, delay or defraud any creditors;
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(lvii) With respect to each Second Mortgage Loan, the
related prior lien does not provide for negative amortization;
(lviii) The margin for the adjustable rate Mortgage
Loans (which margin, when added to the applicable current
index, establishes the interest rate paid applicable to the
Mortgage Loan) range from ____% to ____%;
(lix) No Mortgage Loan has a remaining term in excess
of 360 months; and
(lx) Each Mortgage Loan is secured by a property
having an appraised values of less than $____________.
The Purchase Agreement provides that the representations and
warranties described in this Section 3.01 shall survive the delivery of the
respective Mortgage Files to the Trustee and shall be continuing as long as any
Certificate shall be outstanding or this Agreement has not been terminated.
Upon discovery by any of the Company, the Servicer, the
Certificate Insurer or the Trustee of a breach of any of the foregoing
representations and warranties, irrespective of any limitation in such
representation or warranty regarding the knowledge of the Seller, 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 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 Seller, which notice shall specify the date of discovery. The
Servicer shall in any event notify the Seller of such breach, which notice shall
also specify the date of discovery. Pursuant to the Sale Agreement, the Seller
shall within 90 days from the earlier of (i) the date specified in the notice as
the date of discovery of such breach or (ii) the date the Seller otherwise
discovers such breach, cure such breach, substitute a Mortgage Loan pursuant to
the provisions of Section 3.05 or, if the breach relates to a particular
Mortgage Loan, purchase such Mortgage Loan from the Trustee at the Purchase
Price or, if the breach relates to a representation or warranty regarding the
Mortgage Loans as a whole, repurchase Mortgage Loans selected by the Company
such that the representations and warranties with respect to the Mortgage Loans
are materially correct (without using any selection procedures to identify
Mortgage Loans to remain in the Trust Fund as being less valuable than
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the Mortgage Loans to be repurchased, but, in the case of a repurchase of any
obligation pursuant to a breach of a representation or warranty relating to the
Mortgage Loans as a whole, using selection procedures to identify loans to be
repurchased that will not give rise to the tax imposed by Section 860F(a)(1) of
the Code either because no net income would be recognized or because, as set
forth in an Opinion of Counsel, which shall not be an expense of the Trust Fund,
delivered by the Seller to the Servicer, the transaction is not a "prohibited
transaction" within the meaning of Section 860F(a)(2) of the Code). The Purchase
Price for the purchased Mortgage Loan shall be paid to the Servicer and shall be
deposited by the Servicer in the Collection Account promptly upon receipt and,
upon receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee shall promptly release to the Seller the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment as may be provided to it by the Servicer, without
recourse, as shall be necessary to vest in the Seller or its designee, as the
case may be, 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 Seller to cure, substitute or
purchase any Mortgage Loan as to which such a breach has occurred shall
constitute the sole remedy respecting such breach available to
Certificateholders, the Certificate Insurer or the Trustee on behalf of
Certificateholders. The Trustee shall notify each Rating Agency of any
repurchase or substitution of a Mortgage Loan pursuant to this Section 3.01.
Section 3.02. [Reserved]
Section 3.03. [Reserved]
Section 3.04 Representations of the Servicer. The Servicer
hereby represents and warrants to the Trustee, the Company, the Certificate
Insurer and the Certificateholders as of the Closing Date:
(a) The Servicer is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the state of
its incorporation and is in compliance with the laws of each state in
which any Mortgaged Property is located to the extent necessary to
enable it to perform its obligations under the terms of this Agreement;
the Servicer has the full corporate power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement by the Servicer
and the consummation of the transactions contemplated hereby have been
duly and validly authorized; this Agreement evidences the valid,
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binding and enforceable obligation of the Servicer; and all requisite
corporate action has been taken by the Servicer to make this Agreement
valid and binding upon the Servicer in accordance with its terms,
(b) Neither the execution and delivery of this Agreement, nor
the fulfillment of or compliance with the terms and conditions of this
Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Servicer's charter or by-laws or
any legal restriction or any agreement or instrument to which the
Servicer is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation. order, judgment
or decree to which the Servicer or its property is subject, or impair
the ability of the Trustee (or the Servicer as the agent of the
Trustee) to realize on the Mortgage Loans, or impair the value of the
Mortgage Loans;
(c) The Servicer is an approved seller/servicer of
conventional residential mortgage loans for FNMA and FHLMC,
(d) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Servicer, threatened against the
Servicer which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Servicer, or in any
material impairment of the right or ability of the Servicer to carry on
its business substantially as now conducted, or of any action taken or
to be taken in connection with the obligations of the Servicer
contemplated herein, or which would materially impair the ability of
the Servicer to perform under the terms of this Agreement;
(e) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Servicer of or compliance by the Servicer with
this Agreement or the Mortgage Loans or the consummation of the
transactions contemplated by this Agreement, or if required, such
approval has been obtained prior to the Closing Date; and
(f) Neither this Agreement nor any statement, report or other
document furnished by the Servicer pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement of material fact regarding
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the Servicer or omits to state a material fact necessary to make the
statements regarding the Servicer contained herein or therein not
misleading.
It is understood and agreed that the representations and warranties set forth in
this Section 3.04 shall survive the delivery of the respective Mortgage Files to
the Trustee or to a custodian, as the case may be, and inure to the benefit of
the Trustee, the Certificateholders and the Certificate Insurer.
Section 3.05 Purchase and Substitution. It is understood and
agreed that the representations and warranties set forth in Section 2.01 of the
Sale Agreement shall survive delivery of the Certificates to the
Certificateholders. Pursuant to the Sale Agreement, with respect to any
representation or warranty contained in Section 2.01 of the Sale Agreement that
is made to the best of the Seller's knowledge, if it is discovered by the
Servicer, any Subservicer, the Trustee, the Certificate Insurer or any
Certificateholder that the substance of such representation and warranty was
inaccurate as of the Closing Date and such inaccuracy materially and adversely
affects the value of the related Mortgage Loan, then notwithstanding the
Seller's lack of knowledge with respect to the inaccuracy 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 the Seller, the
Servicer, any Subservicer, the Trustee or the Certificate Insurer of a breach of
any of such representations and warranties which materially and adversely
affects the value of the Mortgage Loans or the interest of the
Certificateholders or the Certificate Insurer, or which materially and adversely
affects the interests of the Certificate Insurer or the Certificateholders in
the related Mortgage Loan in the case of a representation and warranty relating
to a particular Mortgage Loan (notwithstanding that such representation and
warranty was made to the Seller's best knowledge), the party discovering such
breach shall give prompt written notice to the others. Subject to the last
paragraph of this Section 3.05, within 60 days of the earlier of its discovery
or its receipt of notice of any breach of a representation or warranty, pursuant
to the Sale Agreement, the Seller shall be required to (a) promptly cure such
breach in all material respects, or (b) purchase such Mortgage Loan on the next
succeeding Servicer Remittance Date, in the manner and at the price specified in
Section 2.02(b), or (c) remove such Mortgage Loan from the Trust Fund (in which
case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans; provided, that, such substitution is
effected not later than the date which is two years after the Startup Day or at
such later date, if the Trustee and the Certificate Insurer receive an Opinion
of Counsel to the effect set forth below in this Section. Pursuant to the Sale
Agreement, any such substitution shall
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be accompanied by payment by the Seller of the Substitution Adjustment, if any,
to be deposited in the Collection Account.
(b) As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans, the Seller shall be required to
effect such substitution by delivering to the Trustee a certification in the
form attached hereto as Exhibit H, executed by a Servicing Officer and the
documents described in Sections 2.01 for such Qualified Substitute Mortgage Loan
or Loans.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Mortgage Loan or Loans
after the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Mortgage Loans on or before the date of substitution will
be retained by the Seller. The Trust Fund will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the Seller
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Mortgage Loan. The Servicer shall give written notice to
the Trustee and the Certificate Insurer that such substitution has taken place
and shall amend the Mortgage Loan Schedule to reflect the removal of such
Deleted Mortgage Loan from the terms of this Agreement and the substitution of
the Qualified Substitute Mortgage Loan. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects.
(d) It is understood and agreed that the obligations of the Seller set
forth in Sections 2.02 and 2.03 of the Sale Agreement to cure, purchase or
substitute for a defective Mortgage Loan as provided in Sections 2.02 and 2.03
constitute the sole remedies of the Trustee, the Certificate Insurer and the
Certificateholders respecting a breach of the representations and warranties of
the Seller set forth in Section 2.01 of the Sale Agreement. In addition, it is
understood and agreed that the Company has assigned to the Trustee all of its
rights under the Sale Agreement and the right to enforce any remedy against the
Seller as provided in Section 2.01 of the Sale Agreement. The Trustee shall give
prompt written notice to the Certificate Insurer and the Rating Agencies of any
repurchase or substitution made pursuant to this Section 3.03 or Section
2.02(b).
(e) Upon discovery by the Servicer, the Trustee, the Certificate
Insurer or any Certificateholder that any Mortgage Loan does not constitute a
Qualified Mortgage, the party discovering such fact shall promptly (and in any
event within five days of the discovery) give
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written notice thereof to the other parties. In connection therewith, the Seller
shall be required to repurchase or substitute a Qualified Substitute Mortgage
Loan for the affected Mortgage Loan within 90 days of the earlier of such
discovery by an, of the foregoing parties, or the Trustee's or the Seller's
receipt of notice, in the same manner as it would a Mortgage Loan for a breach
of representation or warranty contained in Section 2.01 of the Sale Agreement.
The Trustee shall reconvey to the Seller the Mortgage Loan to be released
pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty
contained in Section 2.01 of the Sale Agreement.
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates. (a) The Class A, Class S and
Class R Certificates shall be substantially in the forms thereof included within
Exhibits C and D and shall, on original issue, be executed by the Company and
authenticated by the Trustee upon receipt by the Trustee of the documents
specified in Section 2.01, delivered to or upon the order of the Company.
(b) The Depository, the Company and the Trustee have entered
into a Depository Agreement dated as of [DATE] (the "Depository Agreement").
Except as provided in paragraph (c) below, the Class A 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 a successor to the Depository; (ii) 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;
(iii) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (iv) the Trustee shall deal with the
Depository, Depository Participants and Indirect Participants as representatives
of the Certificate Owners of the Class A Certificates for purposes of exercising
the rights of such 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 (v) 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 Participants and persons shown
on the books of such Indirect Participants as direct or indirect Certificate
Owners. The Depository Agreement provides that the Depository shall maintain
Class A records with respect to the Certificate Owners and with respect to
ownership and transfers of such Certificates.
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All transfers by Certificate Owners of Class A Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owners. Each
Depository Participant shall only transfer Class A Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
(c) If (i)(A) the Company advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Trustee or the Company are unable
after exercise of their reasonable best efforts to locate a qualified successor
or (ii) the Company at its option advises the Trustee in writing that it elects
to terminate the Class A system through the Depository, the Trustee shall notify
all Certificate Owners, through the Depository, of the occurrence of any such
event and of the availability of definitive, fully registered Certificates (the
"Definitive Certificates") to Certificate Owners requesting the same. Upon
surrender to the Trustee of the Class A Certificates by the Depository for
registration and receipt by the Trustee of an adequate supply of certificates
from the Company, the Trustee shall issue the Definitive Certificates. Neither
the Company, the Servicer, the Certificate Administrator 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.
(d) The Certificates shall be issuable in the minimum original
dollar denominations (and integral multiples of $1,000 in excess of such amount)
and aggregate original dollar denominations per Class as set forth in the
following table (except that one Certificate of each Class may be issued in a
different denomination).
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Aggregate Original Certificate
Minimum Principal Balance of all
Original Certificates of the CUSIP
Class Denomination Indicated Class Number
- ----- ------------ ------------------------------- ------
IA-1 $ $
IIA-2 $ $
IIA-3 $ $
IIA-4 $ $
IIA-5 $ $
I S $ $
II S $ $
R(1) (1) (1) N/A
- ---------------
(1) The Class R Certificate represents the Residual Interest and has no
Certificate Principal Balance.
The Certificates shall be signed by manual or facsimile
signature on behalf of the Company by its President or one of its Vice
Presidents. 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, 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 a Responsible 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.
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
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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.
The Trustee will notify the Paying Agent within five Business Days after each
Record Date of any transfer of Certificates on or prior to such Record Date.
(b) 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 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.
(c) No transfer of a Class S Certificate shall be made unless
such transfer is made pursuant to an effective registration statement or
otherwise in accordance with 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 or the Company shall require (except if the transferee
executes a certificate substantially in the form of Exhibit J-1 hereto) a
written opinion of independent counsel acceptable to and in form and substance
satisfactory to the Trustee and the Company 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 Trust Fund, the Trustee,
the Company or the Servicer, and (ii) the Trustee shall require the transferee
to execute a certification substantially in the form of Exhibit J or Exhibit
J-1.
(d) No transfer of a Class S Certificate shall be made to any
employee benefit plan subject to Section 406 of ERISA (a "Plan"), nor a person
acting on behalf of such plan or using the assets of such plan. No transfer of a
Class S Certificate shall be made unless the Trustee shall have received either
(i) a representation letter from the transferee of such Certificate or interest,
acceptable to and in form and substance satisfactory to the Trustee and the
Company, to the effect that (A) such transferee is not an employee benefit plan
subject to Section 406 of ERISA, nor a person acting on behalf of any such plan
or using the assets of such plan, or, alternatively, in the case of an insurance
company, the assets of any separate accounts to effect such acquisition, or
alternatively, (B) the source of funds for the purchase of such Certificate is
an "insurance company general account" within the meaning of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995), and the conditions set forth in Section I and III of PTCE 95-60 are
satisfied with respect to the purchase and holding of such Certificate, which
representation letter shall not be an expense of the Trustee, the Company,
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the Certificate Administrator or the Servicer, or (ii) in the case of a Class S
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 or any other Person who is
using the assets of any such plan to effect such acquisition, an Opinion of
Counsel satisfactory to the Trustee and the Company to the effect that the
purchase or holding of such Class S Certificate will not result in the assets of
the Trust Fund being deemed to be "plan assets" pursuant to the Department of
Labor Plan Asset Regulations set forth in 29 C.F.R. ss.2510.3-101 and subject to
the fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of the Code, will not constitute or result in a prohibited
transaction within the meaning of Section 406 or Section 407 of ERISA or Section
4975 of the Code, and will not subject the Trustee, the Company, the Certificate
Administrator 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 Company, the Certificate Administrator or the Servicer.
(e) At the option of a Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of authorized denominations of
a like Class, 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 Company shall execute and the Trustee shall
authenticate 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 a 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 such
Certificate.
(g) All Certificates surrendered for transfer or exchange
shall be destroyed by the Trustee in accordance with the Trustee's standard
procedures.
(h) [Reserved]
(i) A Disqualified Organization is prohibited from acquiring
beneficial ownership of a Class R Certificate. Notwithstanding anything to the
contrary contained herein,
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unless and until the Certificate Administrator shall have received an Opinion of
Counsel, satisfactory in form and substance to the Certificate Administrator, to
the effect that the absence of the conditions contained in this Section 4.02(i)
would not result in the imposition of federal tax upon the REMIC or cause the
REMIC to fail to qualify as a REMIC, no transfer, sale or other disposition of
the Class R Certificate (including for purposes of this Section any beneficial
interest therein) may be made without the express written consent of the
Certificate Administrator, which consent is to be granted in the sole discretion
of the Certificate Administrator and a copy of which written consent shall be
supplied to the Trustee.
As a condition to the granting of the consent referred to in
this Section 4.02(i), prior to the transfer, sale, pledge, hypothecation or
other disposition of the Class R Certificate or any interest therein, the
Certificate Administrator shall require that the proposed transferee deliver to
the Certificate Administrator and the Trustee its taxpayer identification number
and state, under penalties of perjury that such number is the social security
number of the transferee or an affidavit under penalties of perjury stating that
as of the date of such transfer such transferee is not and has no intention of
becoming a Disqualified Organization, and, in either case, an affidavit stating
(i) that such transferee is not acquiring such Class R Certificate as an agent,
broker, nominee, or middleman for a Disqualified Organization, (ii) if the
Residual Interest is a "non-economic residual interest" within the meaning of
Treas. Reg. ss.1.860E-1(c)(2),(I) that no purpose of the acquisition of the
Class R Certificate is to avoid or impede the assessment or collection of tax,
(II) that such transferee has historically paid its debts as they came due and
will continue to pay its debts as they come due and (III) that such transferee
represents that it understands that, as the holder of the non-economic residual
interest, the transferee may incur tax liabilities in excess of any cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest and (iii) unless the Certificate
Administrator consents to the transfer of the Class R Certificate to a Person
who is not a U.S. Person, that it is a U.S. Person. The Certificate
Administrator shall not grant the consent referred to in this Section 4.02(i) if
it has actual knowledge that any statement made in the affidavit issued pursuant
to the preceding sentence is not true. Notwithstanding any purported transfer,
sale or other disposition of the Class R Certificate to a Disqualified
Organization, such transfer, sale or other disposition shall be deemed to be of
no legal force or effect whatsoever and such Disqualified Organization shall not
be deemed to be a Class R Certificateholder for any purpose hereunder,
including, but not limited to, the receipt of distributions on such Class R
Certificate. If any purported transfer shall be in violation of the provisions
of this Section 4.02(i) then the prior holder of the Class R Certificate shall,
upon discovery that the transfer of such Class R Certificate was not in fact
permitted by this Section
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4.02(i), be restored to all rights as a Holder thereof retroactive to the date
of the purported transfer of such Class R Certificate. The Trustee and the
Certificate Administrator shall be under no liability to any Person for any
registration or transfer of a Class R Certificate that is not permitted by this
Section 4.02(i) or for making payments due on such Class R 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 not registered under the written certification of the Certificate
Administrator as described in this Section 4.02(i). The prior Holder shall be
entitled to recover from any purported Holder of a Class R Certificate that was
in fact not a permitted purported transferee under this Section 4.02(i) at the
time it became a purported Holder all payments made to such purported Holder on
such Class R Certificate; provided that the Certificate Administrator shall not
be responsible for such recovery. Each Class R Certificateholder, by the
acceptance of the Class R Certificate, shall be deemed for all purposes to have
consented to the provisions of this Section 4.02(i) and to any amendment to this
Agreement deemed necessary by counsel of the Certificate Administrator to ensure
that the Class R Certificate is not transferred to a Disqualified Organization
and that any transfer of such Class R Certificate will not cause the imposition
of a tax upon the REMIC or cause the Trust Fund to fail to qualify as a REMIC.
The restrictions on transfer of the Class R Certificate will cease to apply and
be void upon receipt by the Trustee of a certificate of the Certificate
Administrator stating that the Certificate Administrator has received an Opinion
of Counsel to the effect that such restrictions on transfer are no longer
necessary to avoid the risk of material federal taxation to the REMIC or prevent
the Trust Fund from qualifying as a REMIC.
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 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
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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, to the
extent permitted by law.
Section 4.04. Persons Deemed Owners. Prior to due presentation
of a Certificate of any Class for registration of transfer, the Company, the
Certificate Administrator and the Trustee may treat the person in whose name any
Certificate is registered on the Record Date as the owner of such Certificate
and the Percentage Interest in the distributions to which the Certificateholders
of such Class are entitled on the relevant date as the Holder of such
Certificate and the Percentage Interest represented by such Certificate for the
purpose of receiving remittances pursuant to Section 6.01 and for all other
purposes whatsoever, and neither the Company, the Certificate Administrator nor
the Trustee shall be affected by notice to the contrary.
Section 4.05. Establishment of Certificate Accounts; Deposit
in Certificate Accounts. (a) The Certificate Administrator shall establish and
maintain two separate Certificate Accounts for the benefit of the
Certificateholders (each, a "Certificate Account", and collectively, the
"Certificate Account") which are Eligible Accounts, in the form of a trust
account, in the name of "[Trustee], in trust for and for the benefit of the
Certificateholders of Multi-Class Mortgage Pass-Through Certificates, Chase
Funding, Inc. Series ____-__- [Group I] [Group II] Certificate Account." Each
Certificate Account shall be established with a commercial bank, a savings bank
or a savings and loan association.
(b) On each Servicer Remittance Date, the Servicer shall cause to be
deposited in the applicable Certificate Account, from funds on deposit in the
Collection Account, an amount equal to the related Servicer Remittance Amount
with respect to Loan Group I and Loan Group II, respectively. Upon becoming
aware of any failure of the Servicer to make any such required deposit, the
Certificate Administrator shall promptly give written notice of such failure to
the Servicer.
(c) The Certificate Administrator may invest, or cause the institution
maintaining the Certificate Accounts to invest, moneys in the Certificate
Account in Permitted Investments, which shall mature not later than the Business
Day next preceding the Distribution Date next following the date of such
investment (except that if such Permitted Investment is an obligation of the
institution that maintains the related Certificate Account, then, subject to
Section 4.07, such Permitted Investment shall mature not later than the related
Distribution Date) and shall not be sold or disposed of prior to its maturity.
All such Permitted Investments shall be made in the
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name of the Trustee and shall be held by the Trustee or its agent. All income
and gain realized from any such investment shall be for the benefit of the
Certificate Administrator as additional compensation 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 (to the extent not offset by income from other
such investments) shall be deposited in the related Certificate Account by the
Certificate Administrator out of its own funds immediately as realized. The
creation of each Certificate Account shall be evidenced by a certification or
letter agreement in the form of Exhibit H or Exhibit I, respectively. A copy of
such certification or letter agreement shall be furnished to the Trustee.
Section 4.06. Permitted Withdrawals from the Certificate
Accounts. The Certificate Administrator may, from time to time, make withdrawals
from the Certificate Accounts for the following purposes:
(i) to reimburse itself for expenses incurred by it and
reimbursable pursuant to Section 8.06 and to reimburse the Company for
expenses incurred by it and reimbursable pursuant to Section 8.06;
(ii) to pay to the Seller with respect to each Mortgage Loan
or property acquired in respect thereof that has been repurchased or
replaced pursuant to Section 2.02 or 3.01 or to pay to the Servicer
with respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased pursuant to Section 11.01 all amounts
received thereon and not required to be distributed as of the date on
which the related Repurchase Price was determined;
(iii) to reimburse the Servicer for unreimbursed Periodic
Advances and Servicing Advances made by it with respect to previous
Distribution Dates, to the extent such reimbursement is permitted to be
made from the Collection Account pursuant to Section 5.04(a) and only
if such reimbursement has not been made from the Collection Account;
(iv) to make deposits to the Paying Agent Account in the
amounts and in the manner provided for herein;
(v) to pay itself any interest earned on or investment income
earned with respect to funds in the Certificate Accounts;
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(vi) to return to the Collection Account any amount deposited
in either Certificate Account that was not required to be deposited
therein;
(vii) to pay itself the Certificate Administration Fee in
accordance with Section 8.08; and
(viii) to clear and terminate the Certificate Accounts
pursuant to Section 11.01.
The Certificate Administrator shall keep and maintain a
separate accounting for each Mortgage Loan for the purpose of accounting for
withdrawals from the Certificate Accounts pursuant to each of the subparagraphs
listed above.
Section 4.07. Appointment of Paying Agent; Paying Agent
Account. The Trustee may appoint a Paying Agent hereunder, which Paying Agent
shall not be the Company, the Seller, or an affiliate of the Company or the
Seller unless such Paying Agent is the Corporate Trust Department of Chase and
is rated at least Baa3 or P-3 by Moody's at the time of such appointment and at
all times thereafter. In the event of any such appointment, on the Business Day
prior to each Distribution Date, the Certificate Administrator shall deposit or
cause to be deposited with the Paying Agent from funds on deposit in the
Certificate Account a sum sufficient to make the payments to Certificateholders
and the Certificate Insurer in the amounts and in the manner provided for in
Section 6.03, such sum to be held in trust for the benefit of Certificateholders
in a segregated account (the "Paying Agent Account") which shall be an Permitted
Account in the name of "[Trustee], as Trustee, in trust for and for the benefit
of the Certificateholders of Multi-Class Mortgage Pass-Through Certificates,
Chase Funding, Inc. Series ____-__ - Paying Agent Account". The Certificate
Administrator 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.
If the Paying Agent is a party other than the Trustee, the Trustee shall have no
liability in connection with the performance or failure of performance of the
Paying Agent. The Trustee designates the Corporate Trust Department of Chase as
the initial Paying Agent. The Trustee may withdraw funds from the Paying Agent
Account, although it is recognized and understood that for purposes of
administrative efficiency, in the ordinary course the Paying Agent and not the
Trustee will make all withdrawals from the Paying Agent Account necessary to
make payments to Certificateholders.
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If, on any Remittance Date, the Paying Agent fails to
distribute to Certificateholders the amounts then on deposit in the Paying Agent
Account for the purposes specified herein, the Trustee shall be obligated
promptly upon its knowledge thereof to distribute such amounts to
Certificateholders in the manner and in such amounts based upon information
provided by the Certificate Administrator; provided that in no event shall the
Trustee be obligated for purposes of this paragraph to distribute to
Certificateholders any amounts other than those on deposit in the Paying Agent
Account.
The Certificate Administrator shall cause each Paying Agent
other than the Trustee to execute and deliver to the Certificate Administrator
and the Trustee on the Closing Date or, if subsequently appointed, on the date
of appointment, a written instrument executed by an officer of the Paying Agent
in which such Paying Agent shall agree with the Certificate Administrator and
the Trustee that 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 4.08. Authenticating Agents. (a) The Trustee may
appoint one or more Authenticating Agents (each, an "Authenticating Agent")
which shall be authorized to act on behalf of the Trustee in authenticating the
Certificates. Wherever reference is made in this Agreement to the authentication
of Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
must be a corporation organized and doing business under the laws of the United
States of America or of any state, having a combined capital and surplus of at
least $15,000,000, authorized under such laws to do a trust business and subject
to supervision or examination by federal or state authorities. The Trustee
hereby appoints Chase as Authenticating Agent.
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
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(c) Any Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee and the Company.
The Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Company. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be permitted in
accordance within the provisions of this Section 4.08, the Trustee may appoint a
successor Authenticating Agent, shall give written notice of such appointment to
the Company and shall mail notice of such appointment to all Holders of
Certificates. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section 4.08. No
Authenticating Agent shall have responsibility or liability for any action taken
by it as such at the direction of the Trustee. Any Authenticating Agent shall be
entitled to reasonable compensation for its services and any such compensation
shall be payable solely by the Trustee, without any right of reimbursement from
the Company, the Servicer, the Certificate Administrator or the Trust Fund.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 Appointment of the Servicer. (a) [ Advanta Mortgage Corp. USA]
agrees to act as the Servicer and to perform all servicing duties
under this Agreement subject to the terms hereof.
(b) The Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and shall have full power and authority, acting
alone or through one or more Subservicers, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer, in
its own name or the name of a Subservicer, may, and is hereby authorized and
empowered by the Trustee to, execute and deliver, on behalf of itself, 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 Mortgage Loans, the insurance
policies and accounts related thereto and the properties subject to the
Mortgages. Upon the execution and delivery of this Agreement, and from time to
time as may be
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required thereafter, the Trustee shall execute for the Servicer or its
Subservicers any powers of attorney and such other documents as may be necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures consistent with Accepted Servicing Practices and in a manner
consistent with recovery under any insurance policy required to be maintained by
the Servicer pursuant to this Agreement.
The Servicer shall make Mortgage Interest Rate and Monthly Payment
adjustments on each Rate Adjustment Date in compliance with applicable
regulatory adjustable mortgage loan requirements and the Mortgage Notes with
respect to each Group I Loan. The Servicer shall establish procedures to monitor
the Rate Adjustment Dates and the Index in order to assure that it uses the
correct Index in determining an interest rate change, and it will comply with
those procedures. In the event the Index is no longer available, the Servicer
shall choose a new comparable Index in accordance with the provisions hereof, of
the applicable Mortgage Note and of Accepted Servicing Practices, and shall
provide the Mortgagor and the Trustee with notice of the new Index sufficient
under law and the Mortgage Loan Documents. The Servicer shall execute and
deliver all appropriate notices required by the applicable adjustable mortgage
loan laws and regulations and the Mortgage Loan Documents regarding such
Mortgage Interest Rate adjustments and payment adjustments.
Each adjustment in the Mortgage Interest Rate shall result in an
adjustment to the related Monthly Payment. If the Servicer fails to make a
timely Mortgage Interest Rate or Monthly Payment adjustment, the Servicer shall
use its own funds to satisfy any shortage in the Mortgagor's remittance so long
as such shortage shall continue; any such amount paid by the Servicer shall be
reimbursable to it from any subsequent amounts collected on account of the
related Mortgage Loan with respect to such adjustments.
Costs incurred by the Servicer in effectuating the timely payment of
taxes and assessments on the property securing a Mortgage Note and foreclosure
costs may be added by the Servicer to the amount owing under such Mortgage Note
where the terms of such Mortgage Note so permit; provided, however, that the
addition of any such cost shall not be taken into account for purposes of
calculating the principal amount of the Mortgage Note and Mortgage Loan, the
Monthly Payments on the Mortgage Note and Mortgage Loan or distributions to be
made to Certificateholders. Such costs shall be recoverable by the Servicer
pursuant to Section 5.04.
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(c) Subject to Section 5.12, the Servicer is hereby authorized
and empowered to execute and deliver on behalf of the Trustee and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the Mortgaged Properties. If
reasonably required by the Servicer, each Certificateholder and the Trustee
shall execute any powers of attorney furnished to the Trustee by the Servicer
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Agreement.
(d) On and after such time as the Trustee receives the
resignation of, or notice of the removal of, the Servicer from its rights and
obligations under this Agreement, and with respect to resignation pursuant to
Section 5.23, after receipt by the Trustee and the Certificate Insurer of the
Opinion of Counsel required pursuant to Section 5.23, the Trustee or its
designee approved by the Certificate Insurer (which approval shall not be
unreasonably withheld) shall assume all of the rights and obligations of the
Servicer, subject to Section 8.09 hereof. The Servicer shall, upon request of
the Trustee but at the expense of the Servicer, deliver to the Trustee all
documents and records relating to the Mortgage Loans and an accounting of
amounts collected and held by the Servicer and otherwise use its best efforts to
effect the orderly and efficient transfer of servicing rights and obligations to
the assuming party.
(e) 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
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 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.
(f) The Servicer shall deliver a list of Servicing Officers to
the Certificate Administrator, the Trustee and the Certificate Insurer on or
before the Closing Date.
Section 5.02 Subservicing Agreements Between the Servicer and
Subservicers. (a) The Servicer may, subject to the prior written approval of the
Certificate insurer, enter into
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Subservicing Agreements with Subservicers for the servicing and administration
of the Mortgage Loans and for the performance of any and all other activities of
the Servicer hereunder. Each Subservicer shall be either (i) a depository
institution the accounts of which are insured by the FDIC or (ii) another entity
that engages in the business of originating, acquiring or servicing loans, and
in either case shall be authorized to transact business in the state or states
where the related Mortgaged Properties it is to service are situated and in
either case shall be a FNMA-approved mortgage servicer. In addition, each
Subservicer will obtain and preserve its qualifications 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 or cause to be
performed its duties under the related Subservicing Agreement. Each Subservicing
Agreement shall provide that the Subservicer's rights shall automatically
terminate at the option of the successor Servicer and without a termination fee
upon the termination, resignation or other removal of the Servicer under this
Agreement.
(b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, Certificateholders and the Certificate Insurer for the servicing and
administering of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Mortgage Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Mortgage Loans when the Subservicer has received such payments.
In the event the Servicer shall for any reason no longer be the
Servicer (including, by reason of an Event of Default), the Trustee or its
designee may, at its option, either (i) notwithstanding the last sentence of
Section 5.02(a), assume all of the rights and obligations of the Servicer under
each Subservicing Agreement that the Servicer may have entered into or (ii)
notwithstanding anything to the contrary contained in each such Subservicing
Agreement, terminate the related Subservicer without being required to pay any
fee in connection therewith.
Section 5.03 Collection of Certain Mortgage Loan Payments;
Collection Account. (a) The Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be
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consistent with this Agreement and any applicable primary mortgage insurance
policy, follow such collection procedures as shall constitute Accepted Servicing
Practices. Consistent with the foregoing, the Servicer may in its discretion (i)
waive any prepayment charge, assumption fee, late payment charge or other charge
in connection with a Mortgage Loan, and (ii) arrange a schedule, running for no
more than 180 days after the Due Date for payment of any installment on any
Mortgage Note, for the liquidation of delinquent items. Any provision of this
agreement to the contrary notwithstanding, the Servicer shall not agree to the
modification or waiver of any provision of a Mortgage Loan at a time when such
Mortgage Loan is not in default or such default is not reasonably foreseeable,
if such modification or waiver would be treated as a taxable exchange under
Section 1001 of the Code, unless such exchange would not be considered a
"prohibited transaction" under the REMIC Provisions.
The Servicer shall establish and maintain in the name of the Trustee
the Collection Account, in trust for the benefit of the Certificateholders and
the Certificate Insurer. The Collection Account shall be established and
maintained as an Eligible Account.
The Servicer shall deposit in the Collection Account (i) any amounts
representing Monthly Payments on the Mortgage Loans due or to be applied as of a
date after the Cut-off Date, (ii) any amounts representing Monthly Payments due
or to be applied as of a date on or before the Cut-off Date (except for any
interest accrued prior to [DATE] and except for any principal received by the
Company prior to the Cut-off Date the receipt of which is reflected on the
Mortgage Loan Schedule) and (iii) thereafter, on a daily basis within two
Business Days of receipt (except as otherwise permitted herein), the following
payments and collections received or made by it (other than any amounts in
respect of principal of or interest on the Mortgage Loans which, under clauses
(i) and (ii) above, are not required to be deposited in the Collection Account):
(i) all payments received after the Cut-off Date on
account of principal on the Mortgage Loans and all Principal
Prepayments in Full, Curtailments and all Net REO Proceeds
collected after the Cut-off Date;
(ii) all payments received after the Cut-off Date on
account of interest on the Mortgage Loans (other than payments
of interest that accrued on each Mortgage Loan up to and
including the Cut-off Date;
(iii) all Net Liquidation Proceeds;
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(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the
repurchase of any Mortgage Loan and the amount of any
Substitution Adjustment pursuant to Sections 2.02 and 3.05;
and
(vii) any amount expressly required to be deposited
in the Collection Account in accordance with certain
provisions of this Agreement, including, without limitation
Sections 2.02, 3.01, 5.06, 5.07 and 5.17 of this Agreement;
provided, however, that the Servicer shall be entitled, at its election, either
(a) to withhold and to pay to itself the applicable Servicing Fee from any
payment on account of interest or other recovery (including Net REO Proceeds) as
received and prior to deposit of such payments in the Collection Account or (b)
to withdraw the applicable Servicing Fee from the Collection Account after the
entire payment or recovery has been deposited therein; provided, further, that
with respect to any payment of interest received by the Servicer in respect of a
Mortgage Loan (whether paid by the Mortgagor or received as Liquidation
Proceeds, Insurance Proceeds or otherwise) which is less than the full amount of
interest then due with respect to such Mortgage Loan, only that portion of such
payment that bears the same relationship to the total amount of such payment of
interest as the rate used to determine the Servicing Fee bears to the Mortgage
Interest Rate borne by such Mortgage Loan shall be allocated to the Servicing
Fee with respect to such Mortgage Loan. All other amounts shall be deposited in
the Collection Account not later than the second Business Day following the day
of receipt and posting by the Servicer.
The Servicer may invest the funds in the Collection Account only in
Permitted Investments. No Permitted Investment shall be sold or disposed of at a
gain prior to maturity unless the Servicer has obtained an Opinion of Counsel
(at the Servicer's expense) that such sale or disposition will not cause the
Trust Fund to be subject to the tax on income from prohibited transactions
imposed by Section 860F(a)(i) of the Code, otherwise subject the Trust Fund to
tax or cause the Trust Fund to fail to qualify as a REMIC. All income (other
than any gain from a sale or disposition of the type referred to in the
preceding sentence) realized from any such Permitted Investment shall be for the
benefit of the Servicer as additional servicing compensation. The amount of any
losses incurred in respect of any such investments shall be deposited in the
Collection Account by the Servicer out of its own funds immediately as realized.
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The foregoing requirements for deposit in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of those described in the
last paragraph of Section 5.13 and payments in the nature of prepayment charges,
late payment charges or assumption fees need not be deposited by the Servicer in
the Collection Account. If the Servicer deposits in the Collection Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Collection Account, any provision herein to the contrary
notwithstanding. All funds deposited by the Servicer in the Collection Account
shall be held in the Collection Account for the account of the Trustee in trust
for the Certificateholders until disbursed in accordance with Section 6.03 or
withdrawn in accordance with Section 5.04.
(b) Prior to the time of their required deposit in the
Collection Account, all amounts required to be deposited therein may be
deposited in an account in the name of Servicer, provided that such account is
an Eligible Account. All such funds shall be held by the Servicer in trust for
the benefit of the Certificateholders and the Certificate Insurer pursuant to
the terms hereof.
(c) The Collection Account may, upon written notice by the
Trustee to the Certificate Insurer, be transferred to a different depository so
long as such transfer is to an Eligible Account.
Section 5.04 Permitted Withdrawals from the Collection
Account. The Servicer may, from time to time, make withdrawals from the
Collection Account for the following purposes:
(a) to reimburse itself for any accrued unpaid Servicing Fees
and for unreimbursed Periodic Advances and Servicing Advances. The Servicer's
right to reimbursement for unpaid Servicing Fees and unreimbursed Servicing
Advances shall be limited to late collections on the related Mortgage Loan,
including Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Servicer from the
related Mortgagor or otherwise relating to the Mortgage Loan in respect of which
such unreimbursed amounts are owed. The Servicer's right to reimbursement for
unreimbursed Periodic Advances shall be limited to late collections of interest
on any Mortgage Loan and to Liquidation Proceeds and Insurance Proceeds on
related Mortgage Loans;
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(b) to reimburse itself for any Periodic Advances or Servicing
Advances determined in good faith to have become Nonrecoverable Advances, such
reimbursement to be made from any funds in the Collection Account;
(c) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(d) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein;
(e) to pay itself Servicing Compensation pursuant to Section
5.13 hereof to the extent not retained or paid pursuant to Section 5.03, 5.04 or
5.13;
(f) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or replaced
pursuant to Section 2.02 or 3.01 or to pay to itself with respect to each
Mortgage Loan or property acquired in respect thereof that has been purchased
pursuant to Section 11.01 all amounts received thereon and not required to be
distributed as of the date on which the related repurchase or purchase price or
Principal Balance, as the case may be, was determined;
(g) to pay to the Seller with respect to each Mortgage Loan
the amount of interest accrued and unpaid on such Mortgage Loan on the Cut-off
Date;
(h) to make deposits to the Certificate Accounts (which shall
include the Certificate Administration Fee and the Trustee Fee) in the amounts
and in the manner provided for herein;
(i) to pay itself any interest earned on or investment income
earned with respect to funds in the Collection Account;
(j) to reimburse itself for expenses incurred by it and
reimbursable pursuant to Section 8.03; and
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(k) to clear and terminate the Collection Account upon the
termination of this Agreement.
The Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to subclause (a).
Section 5.05 Payment of Taxes, Insurance and other Charges.
With respect to each Mortgage Loan, the Servicer shall maintain accurate records
reflecting casualty insurance coverage.
With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates and other charges which
are or may become a lien upon the Mortgaged Property and the status of primary
mortgage guaranty insurance premiums, if any, and casualty insurance coverage
and shall obtain, from time to time, all bills for the payment of such charges
(including renewal premiums) and shall effect payment thereof prior to the
applicable penalty or termination date and at a time appropriate for securing
maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in any escrow account which shall have been estimated and accumulated
by the Servicer in amounts sufficient for such purposes, as allowed under the
terms of the Mortgage. To the extent that a Mortgage does not provide for escrow
payments, the Servicer shall, if it has received notice of a default or
deficiency, monitor such payments to determine if they are made by the
Mortgagor.
Section 5.06 The Maintenance of Casualty Insurance. The
Servicer shall cause to be maintained for each Mortgage Loan a casualty
insurance policy with extended coverage issued by a generally acceptable insurer
in an amount which is not less than the full insurable value of the Mortgaged
Property securing such Mortgage Loan or the unpaid principal balance of such
Mortgage Loan, whichever is less; provided, however, that such insurance may not
be less than the minimum amount required to fully compensate for any loss or
damage on a replacement cost basis. If, upon origination of the Mortgage Loan,
the improvements on the Mortgaged Property were 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) the 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
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acceptable insurance carrier, in an amount representing coverage not less than
the least of (i) the unpaid principal balance of the Mortgage Loan, (ii) the
full insurable value and (iii) the maximum amount of insurance which was
available under the Flood Disaster Protection Act of 1973. The Servicer shall
also maintain similar fire insurance coverage and, if applicable, flood
insurance on property acquired upon foreclosure, or by deed in lieu of
foreclosure, of any Mortgage Loan in an amount which is at least equal to the
lesser of (i) the full insurable value of the improvements which are a part of
such property and (ii) the principal balance owing on such Mortgage Loan at the
time of such foreclosure or grant of deed in lieu of foreclosure; provided,
however, that such insurance may not be less than the minimum amount required to
fully compensate for any loss or damage on a replacement cost basis. It is
understood and agreed that such insurance shall be with insurers approved by the
Servicer and that no earthquake or other additional insurance is to be required
of any Mortgagor, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
Pursuant to Section 5.03, any amounts collected by the Servicer under any
insurance policies maintained pursuant to this Section 5.06 (other than amounts
to be applied to the restoration or repair of the related Mortgaged Property or
released to the Mortgagor In accordance with Accepted Servicing Practices) shall
be deposited into the Collection Account, subject to withdrawal pursuant to
Section 5.04. Any cost incurred by the Servicer in maintaining any such
Insurance shall 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
any such cost shall not be taken into account for purposes of calculating the
principal amount of the Mortgage Note or Mortgage Loan, the Monthly Payments on
the Mortgage Note or the distributions to be made to the Certificateholders.
Such costs shall be recoverable by the Servicer pursuant to Section 5.04. In the
event that the Servicer shall obtain and maintain a blanket policy issued by an
insurer that is acceptable to FNMA or FHLMC, insuring against hazard losses on
all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligation as set forth in the first sentence of this Section 5.06, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related mortgaged or acquired property an insurance policy complying with
the first sentence of this Section 5.06 and there shall have been a loss which
would have been covered by such a policy had it been maintained, be required to
deposit from its own funds into the Collection Account the amount not otherwise
payable under the blanket policy because of such deductible clause.
Section 5.07 Maintenance of Mortgage Impairment Insurance
Policy. In the event that the Servicer shall obtain and maintain a blanket
policy (the "Mortgage Impairment Insurance
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Policy") with an insurer either (i) having a General Policy rating of A:VIII or
better in Best's Key Rating Guide or (ii) approved in writing by the Certificate
Insurer, such approval not to be unreasonably withheld, insuring against fire
and hazards of extended coverage on all of the Mortgage Loans, then, to the
extent such policy names the Servicer as loss payee and provides coverage in an
amount equal to the aggregate unpaid principal balance on the Mortgage Loans
without co-insurance, and otherwise complies with the requirements of Section
5.06, the Servicer shall be deemed conclusively to have satisfied its
obligations with respect to fire and hazard insurance coverage under Section
5.06, it being understood and agreed that such blanket policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with Section 5.06, and there shall have been a loss which would have
been covered by such policy, deposit in the Collection Account the difference,
if any, between the amount that would have been payable under a policy complying
with Section 5.06 and the amount paid under such blanket policy. Upon the
request of the Certificate Insurer, the Trustee or any Certificateholder, the
Servicer shall cause to be delivered to the Certificate Insurer, the Trustee or
such Certificateholder, as the case may be, a certified true copy of such
policy. The Servicer agrees to prepare and present, on behalf of itself, the
Trustee, the Certificate Insurer and Certificateholders, claims under any such
policy in a timely fashion in accordance with the terms of such policy.
Section 5.08 Fidelity Bond; Errors and Omissions Policy. (a)
The Servicer shall maintain with a responsible company, and at its own expense,
a blanket fidelity bond (a "Fidelity Bond") and an errors and omissions
insurance policy (an "Errors and Omissions Policy"), in a minimum amount
acceptable to FNMA or FHLMC or, if [Advanta] is the Servicer or if the Trustee
is the successor Servicer, in an amount generally maintained by prudent mortgage
loan servicers having servicing portfolios of a similar size.
(b) The Servicer shall be deemed to have complied with this
provision if one of its respective Affiliates has such a Fidelity Bond and
Errors and Omissions Policy and, by the terms of such fidelity bond and errors
and omission policy, the coverage afforded thereunder extends to the Servicer.
The Servicer shall cause each and every Subservicer for it to maintain a policy
of insurance covering errors and omissions and a fidelity bond which would meet
the requirements of Section 5.08(a). If [Advanta] is not the Servicer and the
Trustee is not the successor Servicer, any such Fidelity Bond and Errors and
Omissions Policy shall not be canceled or modified in a materially adverse
manner without 10 days prior written notice to the Certificate Insurer.
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Section 5.09 Collection of Taxes, Assessments and Other Items;
Servicing Account. In addition to the Collection Account, the Servicer shall
establish and maintain a Servicing Account, which shall be an Eligible Account,
and shall deposit therein all payments by Mortgagors for taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items. Withdrawals
from the Servicing Account may be made to effect payment of taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items, to reimburse
the Servicer out of related collections for any advances made in the nature of
any of the foregoing, to refund to any Mortgagors any sums determined to be
overages, or to pay any interest owed to Mortgagors on such account to the
extent required by law or to clear and terminate the Servicing Account at the
termination of this Agreement upon the termination of the Trust Fund. The
Servicer shall advance the payments referred to in the first sentence of this
Section 5.09 that are not timely paid by the Mortgagors on the date when the
tax, premium or other cost for which such payment is intended is due, but the
Servicer shall be required to so advance only to the extent that such advances,
in the good faith judgment of the Servicer, will be recoverable by the Servicer
pursuant to Section 5.04 out of Liquidation Proceeds, Insurance Proceeds or
otherwise.
Section 5.10 Enforcement of Due-on-Sale Clauses, Assumption
Agreements. In any case in which a Mortgaged Property is about to be conveyed by
the Mortgagor (whether by absolute conveyance or by contract of sale, and
whether or not the Mortgagor remains liable thereon) and the Servicer has
knowledge of such prospective conveyance, the Servicer shall effect assumptions
in accordance with the terms of any due-on-sale provision contained in the
related Mortgage Note or Mortgage. The Servicer shall enforce any due-on-sale
provision contained in such Mortgage Note or Mortgage to the extent the
requirements thereunder for an assumption of the Mortgage Loan have not been
satisfied to the extent permitted under the terms of the related Mortgage Note,
unless such provision is not exercisable under applicable law and governmental
regulations or in the Servicer's judgment, such exercise is reasonably likely to
result in legal action by the Mortgagor, or such conveyance is in connection
with a permitted assumption of the related Mortgage Loan. Subject to the
foregoing, the Servicer is authorized to take or enter into an assumption
agreement from or with the Person to whom such property is about to be conveyed,
pursuant to which such person becomes liable under the related Mortgage Note
and, unless prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Mortgage Interest Rate with respect to such Mortgage
Loan shall remain unchanged. The Servicer is also authorized, to release the
original Mortgagor from liability upon the Mortgage Loan and substitute the new
Mortgagor as obligor thereon. In connection with such
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assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual for
mortgage loans similar to the Mortgage Loans and as it applies to mortgage loans
owned solely by it. The Servicer shall notify the Trustee that any such
assumption or substitution agreement has been completed by forwarding to the
Trustee the original copy of such assumption or substitution agreement, which
copy shall be added by the Trustee to the related Mortgage File and shall, for
all purposes, be considered a part of such Mortgage File to the same extent as
all other documents and instruments constituting a part thereof. In connection
with any such assumption or substitution agreement, the Mortgage Interest Rate
of the related Mortgage Note and the payment terms shall not be changed. Any fee
collected by the Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Servicer as servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any conveyance by the
Mortgagor of the property subject to the Mortgage or any assumption of a
Mortgage Loan by operation of law which the Servicer in good faith determines it
may be restricted by law from preventing, for any reason whatsoever, or if the
exercise of such right would impair or threaten to impair any recovery under any
applicable insurance policy or, in the Servicer's judgment, be reasonably likely
to result in legal action by the Mortgagor.
Section 5.11 Realization upon Defaulted Mortgage Loans.
(a) Except as provided in the last two paragraphs of this
Section 5.11(a), the Servicer shall foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 5.03. In
connection with such foreclosure or other conversion, the Servicer shall follow
Accepted Servicing Practices. The foregoing is subject to the proviso that the
Servicer shall not be required to expend its own funds in connection with any
foreclosure or to restore any damaged property unless it shall determine that
(i) such foreclosure and/or restoration will increase the proceeds of
liquidation of the Mortgage Loan to Certificateholders after reimbursement to
itself for such expenses and (ii) such expenses will be recoverable to it
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawal from the Collection Account pursuant to Section 5.04) or
otherwise. The Servicer shall be entitled to reimbursement of the
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Servicing Fee and other amounts due it, if any, to the extent, but only to the
extent, that withdrawals from the Collection Account with respect thereto are
permitted under Section 5.04.
The Servicer may foreclose against the Mortgaged Property securing a
defaulted Mortgage Loan either by foreclosure, by sale or by strict foreclosure,
and in the event a deficiency judgment is available against the Mortgagor or any
other person, may proceed for the deficiency.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be issued to the Servicer on behalf of the Trustee in
the name of the Trustee on behalf of the Certificateholders. Notwithstanding any
such acquisition of title and cancellation of the related Mortgage Loan, such
Mortgage Loan shall be considered to be a Mortgage Loan held in the Trust Fund
until such time as the related Mortgaged Property shall be sold and such
Mortgage Loan becomes a Liquidated Mortgage Loan. Consistent with the foregoing,
for purposes of all calculations hereunder, so long as such Mortgage Loan shall
be considered to be an Outstanding Mortgage Loan:
(i) It shall be assumed that, notwithstanding that
the indebtedness evidenced by the related Mortgage Note shall
have been discharged, such Mortgage Note and the related
amortization schedule in effect at the time of any such
acquisition of title (after giving effect to any previous
Curtailments and before any adjustment thereto by reason of
any bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period) remain in effect, except that
such schedule shall be adjusted to reflect the application of
Net REO Proceeds received in any month pursuant to the
succeeding clause.
(ii) Net REO Proceeds received in any month shall be
deemed to have been received first in payment of the accrued
interest that remained unpaid on the date that such Mortgage
Loan became an REO Mortgage Loan, with the excess thereof, if
any, being deemed to have been received in respect of the
delinquent principal installments that remained unpaid on such
date. Thereafter, Net REO Proceeds received in any month shall
be applied to the payment of installments of principal and
accrued interest on such Mortgage Loan deemed to be due and
payable in accordance with the terms of such Mortgage Note and
such amortization schedule. If such Net REO Proceeds exceed
the then Unpaid REO
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Amortization, the excess shall be treated as a Curtailment
received in respect of such Mortgage Loan.
(iii) Only that portion of Net REO Proceeds allocable
to interest that bears the same relationship to the total
amount of Net REO Proceeds allocable to interest as the rate
of the Servicing Fee bears to the Mortgage Interest Rate borne
by such Mortgage Loan shall be allocated to the Servicing Fee
with respect thereto.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or reasonably foreseeable
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of the Trust Fund within two years after its acquisition by the Trust
Fund unless (a) the Servicer shall have provided to the Trustee an Opinion of
Counsel (at the expense of the Trust Fund) to the effect that the holding by the
Trust Fund of such Mortgaged Property subsequent to two years after its
acquisition (and specifying the period beyond such two-year period for which the
Mortgaged Property may be held) will not cause the Trust Fund to be subject to
the tax on prohibited transactions imposed by Section 860F(a)(i) of the Code,
otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to
qualify as a REMIC at any time that any Certificates are outstanding, or (b) the
Servicer (at the Trust Fund's expense) shall have applied for, at least 60 days
prior to the expiration of such two-year period, an extension of such two-year
period in the manner contemplated by Section 856(e)(3) of the Code, in which
case the two-year period shall be extended by the applicable period. The
Servicer shall further ensure that the Mortgaged Property is administered so
that it constitutes "foreclosure property" within the meaning of Section
860G(a)(8) of the Code at all times, that the sale of such property does not
result in the receipt by the Trust Fund of any income from non-permitted assets
as described in Section 860F(a)(2)(B) of the Code, and that the Trust Fund does
not derive any "net income from foreclosure property" within the meaning of
Section 860G(c)(2) of the Code with respect to such property.
Any REO Disposition shall be for cash only (unless changes in
the REMIC Provisions made subsequent to the Startup Day allow a sale for other
consideration).
In lieu of foreclosing upon any defaulted Mortgage Loan, the
Servicer may, in its discretion, permit the assumption of such Mortgage Loan if,
in the Servicer's judgment, such default is unlikely to be cured and if the
assuming borrower satisfies the Servicer's underwriting guidelines with respect
to mortgage loans owned by the Servicer. In connection with any such
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assumption, the Mortgage Interest Rate of the related Mortgage Note and the
payment terms shall not be changed. Any fee collected by the Servicer for
entering into an assumption agreement will be retained by the Servicer as
servicing compensation. Alternatively, the Servicer may encourage the
refinancing of any defaulted Mortgage Loan by the Mortgagor.
Notwithstanding the foregoing, prior to instituting
foreclosure proceedings or accepting a deed-in-lieu of foreclosure with respect
to any Mortgaged Property, the Servicer shall make, or cause to be made,
inspection of the Mortgaged Property in accordance with the Accepted Servicing
Practices and, with respect to environmental hazards, such procedures are as
required by the provisions of the Federal National Mortgage Association's
selling and servicing guide applicable to single-family homes and in effect on
the date hereof. The Servicer shall be entitled to rely upon the results of any
such inspection made by others. In cases where the inspection reveals that such
Mortgaged Property is potentially contaminated with or affected by hazardous
wastes or hazardous substances, the Servicer shall promptly give written notice
of such fact to the Certificate Insurer, the Trustee and each Class A
Certificateholder. The Servicer shall not commence foreclosure proceedings or
accept a deed-in-lieu of foreclosure for Mortgaged Property with respect to this
paragraph without obtaining the written consent of the Certificate Insurer.
(b) Promptly after the Closing Date, the Servicer shall, with
respect to each Mortgage Loan for which the Mortgage provides a second lien on
the related Mortgaged Property, cause to be recorded in the appropriate public
office for real property records, where permitted by applicable law and where
applicable law does not require that a second mortgagee be named as a party
defendant in foreclosure or comparable proceedings in order to foreclose or
otherwise preempt such mortgagee's equity of redemption, a request for notice of
any action by or on behalf of any mortgagee under a Senior Mortgage Loan. The
Servicer also shall promptly provide written notice to each mortgagee under a
Senior Mortgage Loan of the existence of the related Mortgage Loan and request
notification of any action taken or to be taken against the related Mortgagor or
Mortgaged Property by or on behalf of such mortgagee in respect of such Senior
Mortgage Loan.
(c) Upon becoming aware that a Senior Mortgage Loan has come
into default or of any action that the related mortgagee has taken or may take
in respect thereof, the Servicer shall, consistent with the REMIC Provisions,
take such actions as it shall deem necessary or advisable, as shall be normal
and usual in its general mortgage servicing activities and as shall be required
or permitted by Accepted Servicing Practices. In taking such actions, the
Servicer may
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advance such funds as are necessary to cure such default, maintain such Senior
Mortgage Loan, acquire the related mortgagee's interest therein or redeem the
related Mortgaged Property. The Servicer, however, shall not be required to
expend its own funds in connection therewith unless it shall determine that such
expense will be recoverable to it. All such expenses shall be included as
Liquidation Expenses pursuant to the definition thereof, and shall be
reimbursable from the related Liquidation Proceeds in accordance with Section
5.04.
Section 5.12 Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer of
a notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer shall immediately notify the Trustee in the form of
a Request for Release in the form attached hereto as Exhibit H (which request
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 5.03 have been or shall be so deposited) of a Servicing
Officer and shall request delivery to it of the Mortgage File. Upon receipt of
such Request for Release, the Trustee, or the Custodian on its behalf, shall
promptly release the related Mortgage File to the Servicer. Upon any such
payment in full, the Servicer is authorized to give, as agent for the Trustee
and the mortgagee under the Mortgage which secured the Mortgage Loan, an
instrument of satisfaction (or assignment of mortgage without recourse)
regarding the property subject to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of such payment, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Collection Account. In connection therewith, the Trustee shall
execute and return to the Servicer any required power of attorney provided to
the Trustee by the Servicer and other required documentation in accordance with
Section 5.01(c). From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan and in accordance with Accepted Servicing
Practices, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a Request for Release signed by a Servicing Officer, release, or
cause the Custodian to release, the related Mortgage File to the Servicer and
shall execute such documents as shall be necessary to the prosecution of any
such proceedings. Such Request for Release shall obligate the Servicer to return
the Mortgage File to the Trustee when the need therefor by the 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 the Request for
Release hereinabove specified, the Mortgage File shall be delivered by the
Trustee to the Servicer.
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Section 5.13 Servicing Fee; Servicing Compensation. The
Servicer shall be entitled, at its election, either (a) to pay itself the
Servicing Fee out of any Mortgagor payment on account of interest or Net REO
Proceeds prior to the deposit of such payment in the Collection Account or (b)
to withdraw from the Collection Account such Servicing Fee pursuant to Section
5.04. The Servicer shall also be entitled, at its election, either (a) to pay
itself the Servicing Fee in respect of each delinquent Mortgage Loan out of
Liquidation Proceeds in respect of such Mortgage Loan or other recoveries with
respect thereto to the extent permitted in Section 5.03(a) to withdraw from the
Collection Account the Servicing Fee in respect of each such Mortgage Loan to
the extent of such Liquidation Proceeds or other recoveries, to the extent
permitted by Section 5.04(a).
Servicing compensation in the form of Net Foreclosure Profits,
assumption fees, late payment charges, tax service fees, fees for statement of
account or payoff of the Mortgage Loan (to the extent permitted by applicable
law) or otherwise shall be retained by the Servicer and are not required to be
deposited in the Collection Account. The aggregate Servicing Fee is reserved for
the administration of the Trust Fund and, in the event of replacement of the
Servicer as servicer of the Mortgage Loans, for the payment of other expenses
related to such replacement. The aggregate Servicing Fee shall be offset as
provided in Section 5.19. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder (including
maintenance of the hazard insurance required by Section 5.05) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
Section 5.14 Reports to the Trustee and the Certificate
Administrator; Collection Account Statements. Not later than 15 days after each
Distribution Date, the Servicer shall provide to the Trustee and the Certificate
Administrator a statement, certified by a Servicing Officer, setting forth the
status of the Collection Account as of the close of business on the last day of
the immediately preceding calendar month, stating that all distributions
required by this Agreement to be made by the Servicer on behalf of the Trustee
have been made (or if any required distribution has not been made by the
Servicer, specifying the nature and status thereof) and showing, for the period
covered by such statement, the aggregate of deposits into and withdrawals from
the Collection Account for each category of deposit specified in Section 5.03
and each category of withdrawal specified in Section 5.04 and the aggregate of
deposits into the Certificate Accounts as specified in Section 4.05(b). Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request. The Servicer shall
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provide to the Certificate Administrator such information as is required for the
Certificate Administrator to prepare the reports or additional information
specified in Section 6.04.
Section 5.15 Annual Statement as to Compliance. The Servicer
will deliver to the Trustee, the Certificate Administrator, the Certificate
Insurer and the Rating Agencies on or before June 30th of each year, beginning
with June 30, 1997, an Officers' Certificate stating as to each signer thereof,
that (i) a review of the activities of the Servicer during the preceding
calendar year and of its 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 all its obligations under this
Agreement throughout such year, or if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Such Officers' Certificate shall be
accompanied by the statement described in Section 5.16 of this Agreement. Copies
of such statement shall, upon request, be provided to any Certificateholder by
the Servicer, or by the Trustee at the Servicer's expense if the Servicer shall
fail to provide such copies.
Section 5.16 Annual Independent Public Accountants' Servicing
Report. On or before March 30th of every year, beginning with March 30, 1997,
the Servicer, at its expense, shall cause a firm of nationally recognized
independent public accountants to furnish a statement to the Trustee, the
Certificate Administrator, the Certificate Insurer and the Rating Agencies to
the effect that, on the basis of an examination of certain documents and records
relating to the servicing of the mortgage loans being serviced by the Servicer
under pooling and servicing agreements similar to this Agreement, conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers, such firm is of the opinion that such servicing has been
conducted in compliance with this Agreement. Copies of such statement shall,
upon request, be provided to Certificateholders by the Servicer, or by the
Trustee at the Servicer's expense if the Servicer shall fail to provide such
copies. For purposes of such statement, such firm may conclusively presume that
any pooling and servicing agreement which governs mortgage pass-through
certificates offered by the Company (or any predecessor or successor thereto) in
a registration statement under the Securities Act of 1933, as amended, is
similar to this Agreement, unless such other pooling and servicing agreement
expressly states otherwise.
Section 5.17 Optional Purchase of Defaulted Mortgage Loans.
Any Affiliate of the Seller, in its sole discretion, shall have the right to
elect (by written notice sent to the Servicer, the Trustee, the Certificate
Administrator and the Certificate Insurer), but shall not be obligated, to
purchase for its own account from the Trust Fund any Mortgage Loan which is 90
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days or more delinquent in the manner and at the price specified in Section
2.02. The purchase price for any Mortgage Loan purchased hereunder shall be
deposited in the Collection Account and the Trustee, upon receipt of such
deposit, shall release or cause to be released to the purchaser of such Mortgage
Loan the related Mortgage File and shall execute and deliver such instruments of
transfer or assignment prepared by the purchaser of such Mortgage Loan, in each
case without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
Section 5.18 Reports to be Provided by the Servicer. The
Servicer agrees to make available on a reasonable basis to the Certificate
Insurer a knowledgeable financial or accounting officer for the purpose of
answering reasonable questions respecting recent developments affecting the
Servicer or the financial statements of the Servicer and to permit the
Certificate Insurer to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Certificate Insurer that the
Servicer has the ability to service the Mortgage Loans in accordance with this
Agreement.
Section 5.19 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the
Servicer and any Subservicer shall be entitled to receive with respect to all of
the Mortgage Loans and each Distribution Date shall be offset on such
Distribution Date by an amount equal to the aggregate Prepayment Interest
Shortfall with respect to all Mortgage Loans which were subjects of Principal
Prepayments in Full or Curtailments during the month preceding the month of such
Distribution Date. The amount of any offset against the aggregate Servicing Fee
with respect to any Distribution Date under this Section 5.19 shall be limited
to the aggregate amount of the Servicing Fees otherwise payable to the Servicer
and any Subservicer (without adjustment on account of Prepayment Interest
Shortfalls) with respect to (i) scheduled payments having the Due Date occurring
in the month of such Distribution Date received by the Servicer or any
Subservicer prior to the Servicer Remittance Date, and (ii) Principal
Prepayments in Full, Curtailments and Liquidation Proceeds received in the month
preceding the month in which such Distribution Date occurs, and the rights of
the Certificateholders to the offset of the aggregate Prepayment Interest
Shortfalls shall not be cumulative.
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Section 5.20 Periodic Advances. If, on any Servicer Remittance
Date, the Servicer determines that any Monthly Payments due on the Due Date
immediately preceding such Servicer Remittance Date have not been received as of
the close of business on the Business Day preceding such Servicer Remittance
Date, the Servicer shall determine the amount of any Periodic Advance required
to be made with respect to the related Distribution Date. The Servicer shall, on
the Servicer Remittance Date, deliver in a computer-readable form (including
electronic transmission) to the Certificate Administrator indicating the payment
status of each Mortgage Loan as of the Business Day prior to such Servicer
Remittance Date. The Servicer shall include in the amount to be deposited in the
related Certificate Account on such Servicer Remittance Date an amount equal to
the Periodic Advance, if any, which deposit may be made in whole or in part from
funds in the Collection Account being held for future distribution or withdrawal
on or in connection with Distribution Dates in subsequent months. Any funds
being held for future distribution to Certificateholders and so used shall be
replaced by the Servicer from its own funds by deposit in the related
Certificate Account on or before the Business Day preceding any such future
Servicer Remittance Date to the extent that funds in the related Certificate
Account on such Servicer Remittance Date shall be less than payments to
Certificateholders required to be made on such date.
The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.04.
Section 5.21 [Reserved]
Section 5.22 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. (a) The Servicer will keep in full
effect its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 to be true and correct at all
times under this Agreement.
(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established
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mortgage loan servicing institution acceptable to the Certificate Insurer that
has a net worth of at least $15,000,000, and in all events shall be the
successor of the Servicer 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 Servicer shall send notice of any such merger or
consolidation to the Trustee and the Certificate Insurer.
Section 5.23 Assignment of Agreement by Servicer, Servicer Not
to Resign. The Servicer shall not assign this Agreement or resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Certificate Insurer, the Certificate Administrator and the Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without incurring, in the reasonable judgment of the Certificate Insurer,
unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Company, the Certificate Administrator and the Certificate
Insurer. No such resignation shall become effective until the Trustee or a
successor appointed in accordance with the terms of this Agreement has assumed
the Servicer's responsibilities and obligations hereunder in accordance with
Section 8.09. The Servicer shall provide the Trustee, the Rating Agencies, the
Certificate Administrator and the Certificate Insurer with 30 days prior written
notice of its intention to resign pursuant to this Section 5.23.
In the case of any assignment and delegation of rights, duties
and obligations under this Agreement pursuant to this Section 5.23, the Servicer
shall be released from its duties and obligations under this Agreement, except
that the Servicer shall remain liable for all liabilities and obligations
incurred by it as Servicer hereunder prior to the satisfaction of the conditions
to such assignment and delegation set forth in the preceding paragraph.
Section 5.24 Information Reports to be Filed by the Servicer.
The Servicer shall file (or cause any Subservicers to file) information returns
with respect to the receipt of mortgage interest received in a trade or
business, reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively.
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Section 5.25. REMIC-Related Covenants. For as long as the Trust Fund
shall exist, the Servicer, the Certificate Administrator and the Trustee shall
act in accordance herewith to assure continuing treatment of the Trust Fund as a
REMIC. In particular:
(a) Neither the Servicer nor the Certificate Administrator shall
create, or permit the creation of, any "interests" in the Trust Fund within the
meaning of Section 860G(a) of the Code other than the "regular interests" in the
REMIC designated as such in Section 2.04(a) and the Residual Interest;
(b) As of all times as may be required by the Code, the Servicer and
the Certificate Administrator will ensure that substantially all of the assets
of the Trust Fund will consist of Qualified Mortgages and "permitted
investments" as defined in Section 860G(a)(5) of the Code. The Certificate
Administrator and the Trustee, upon the direction of the Certificate
Administrator, also will maintain records that are sufficient to indicate the
Trust Fund's compliance with applicable requirements of the Code (and applicable
Proposed, Temporary or final Treasury Regulations) relating to the assets held
by the Trust Fund. Further, the Servicer shall not permit and the Trustee shall
not accept the transfer or substitution of any Mortgage Loan other than pursuant
to Section 3.05 of this Agreement and the Servicer shall, in any case, not
permit substitution later than two years from the Closing Date unless the
Servicer and the Trustee have received an Opinion of Counsel, which will not be
an expense of the Trust Fund, 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 Servicer and the Certificate Administrator each 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 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; provided, however,
that the Trust Fund shall not be prohibited from recognizing its "net income
from foreclosure property," as provided in Section 860G(c) of the Code with
respect to any Mortgage Loan foreclosed upon as provided in Section 5.10;
(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 pursuant to this Agreement or the
Trustee has received an Opinion of Counsel, which will not be an expense of the
Trust Fund, to the effect that such sale (i) is pursuant to a
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"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 that results
in the realization of a material amount of gain or loss for federal income tax
purposes;
(e) The Trustee shall not accept any contribution to the Trust Fund
after the Startup Day without an Opinion of Counsel that such contribution is
included within the exceptions provided in Section 860G(d)(2) of the Code and,
therefore, will not be subject to the tax imposed by Section 860G(d)(1) of the
Code; and
(f) Notwithstanding anything to the contrary in this Agreement, the
Certificate Administrator and the Trustee, at the direction of the Certificate
Administrator, shall take any other action or refuse to take any action
otherwise required (including adjusting the Purchase Price for any Mortgage
Loan) where the Certificate Administrator deems such action or inaction
reasonably necessary to ensure the REMIC status of the Trust Fund under the Code
and applicable regulations or to avoid the imposition of any material tax
liability on the Trust Fund that will affect amounts distributable to the
Certificateholders.
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ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01 Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Subservicer
and (b) Insured Payments. The Trustee shall hold all such money and property
received by it, as part of the Trust Fund and shall apply it as provided in this
Agreement.
Section 6.02 The Certificate Insurance Policy. (a) Within two
Business Days after each Servicer Remittance Date the Certificate Administrator
shall determine with respect to the immediately following Distribution Date the
amount to be on deposit in the Certificate Accounts on such Distribution Date as
a result of the Servicer's remittance of the Servicer Remittance Amount on the
related Servicer Remittance Date, less the amounts described in clause (i) of
Section 6.03(b) or (c) for the related Distribution Date, and not including the
amount of any Insured Payment which is required to be deposited in the related
Certificate Account for such Distribution Date. The amounts described in the
preceding sentence, as determined separately with respect to the Group I Loans,
and Group II Loans, with respect to each Distribution Date are the "Group I
Available Funds" and "Group II Available Funds" for such Distribution Date.
(b) If on any Distribution Date there is an Available Funds
Shortfall, the Certificate Administrator shall complete a Notice in the form of
Exhibit A to the related Certificate Insurance Policy and submit such notice to
the Certificate Insurer no later than 12:00 noon New York City time on the
second Policy Business Day preceding such Distribution Date as a claim for an
Insured Payment in an amount equal to such Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account
for the benefit of Holders of the Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payments Account" over which
the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit upon receipt any amount paid under the Certificate
Insurance Policy in the Certificate Insurance Payments Account and distribute
such amount only for purposes of payment to Certificateholders of the Group I
Insured Distribution Amount or
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Group II Insured Distribution Amount for which a claim was made and such amount
may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Certificate Administrator, the Trustee or the Trust Fund. Amounts
paid under the Certificate Insurance Policy, to the extent needed to pay the
Group I Insured Distribution Amount or Group II Insured Distribution Amount
shall be transferred by the Trustee from the Certificate Insurance Payments
Account to the related Certificate Account on the related Distribution Date and
disbursed by the Paying Agent to Certificateholders in accordance with Section
6.03. It shall not be necessary for payments made under the Certificate
Insurance Policy to be made by checks or wire transfers separate from other
amounts distributed pursuant to Section 6.03. However, the amount of any payment
of principal or of interest on the Certificates to be paid from funds
transferred from the Certificate Insurance Payments Account shall be noted as
provided in paragraph (d) below. Funds held in the Certificate Insurance
Payments Account shall not be invested. Any funds remaining in the Certificate
Insurance Payments Account on the first Policy Business Day following a
Distribution Date shall be returned to the Certificate Insurer pursuant to the
written instructions of the Certificate Insurer by the end of such Policy
Business Day.
(d) The Remittance Report shall indicate the amount of
interest and principal paid in respect of the Group I Class A Certificates and
the Group II Class A Certificates from moneys received under the Certificate
Insurance Policy.
(e) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any Insured Payment has been
voided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to
Certificateholders of the affected Certificates that, in the event any
Certificateholder's Insured Payment is so recovered, such Certificateholder will
be entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent if any, and the Trustee shall furnish to
the Certificate Insurer or its fiscal agent, if any, agent, its records
evidencing the payments which have been made by the Trustee and subsequently
recovered from Certificateholders, and dates on which such payments were made.
(f) The Trustee shall promptly notify the Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy,
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insolvency, receivership or similar law (a "Preference Claim") of any
distribution made with respect to the Certificates. Each Certificateholder, by
its purchase of Certificates, the Servicer, the Certificate Administrator and
the Trustee agree that, the Certificate Insurer (so long as no Certificate
Insurer Default exists) may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim, including, without limitation, (i) the direction of any appeal
of any order relating to such Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Certificate Insurer shall be subrogated
to, and each Certificateholder, the Servicer, the Certificate Administrator and
the Trustee hereby delegate and assign to the Certificate Insurer, to the
fullest extent permitted by law, the rights of the Servicer, the Certificate
Administrator, the Trustee and each Certificateholder in the conduct of any such
Preference Claim, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
Section 6.03 Distributions. (a) No later than 12:00 noon
California time on each Servicer Remittance Date, the Servicer shall deliver to
the Certificate Administrator a report in computer-readable form (including
electronic transmission, provided that a portion of such report relating to
certain delinquency information may be delivered in hard copy form rather than
computer-readable form) containing such information as to each Mortgage Loan as
of such date and such other information as the Certificate Administrator shall
reasonably require.
(b) With respect to funds deposited in the Group I Certificate
Account, on each Distribution Date, the Paying Agent shall make the following
allocations, disbursements and transfers in the following order of priority, and
each such allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and disbursements have
occurred:
(i) to the Certificate Insurer, the Premium Amount
with respect to the Group I Loans;
(ii) to the Certificate Insurer the lesser of (x) an
amount equal to (A) the amount then on deposit in the Group I
Certificate Account remaining after the distributions in (i)
minus (B) the Group I Insured Distribution Amount for such
Distribution Date and (y) the outstanding Group I
Reimbursement Amounts, if any, as of such Distribution Date;
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(iii) from amounts then on deposit in the Group I
Certificate Account (including any Group I Insured Payments),
to the Class IA Certificateholders an amount equal to the
Class IA Interest Distribution Amount;
(iv) from amounts then on deposit in the Group I
Certificate Account (including any Group I Insured Payments),
to the Class IA Certificateholders an amount equal to the
lesser of (a) the Class IA Principal Distribution Amount (to
the extent not covered by payments to be made pursuant to
Section 6.03(c)(v) below) and (b) the amount remaining in the
Group I Certificate Account after distributions pursuant to
clauses (i) through (iii) above, in the manner described
below;
(v) from amounts then on deposit in the Group I
Certificate Account, to the Class IIA Certificateholders, on
any Distribution Date where a Group II Subordination Deficit
exists, an amount equal to such Group II Subordination
Deficit;
(vi) from amounts then on deposit in the Group I
Certificate Account, to the Class IIA Certificateholders, on
any Distribution Date when, following distributions to be made
on such date, the Group II Subordinated Amount would be less
than the Group II Required Subordinated Amount, an amount
equal to such difference;
(vii) from amounts then on deposit in the Group I
Certificate Account, to the Certificate Insurer, an amount
equal to the outstanding Group II Reimbursement Amount
remaining unpaid following any distributions made on such
Distribution Date pursuant to Section 6.03(c)(ii);
(viii) from amounts then on deposit in the Group I
Certificate Account, to the Class I S Certificateholders an
amount equal to the related Class S Interest Distribution
Amount to the extent not added to the Certificate Principal
Balance thereof as described below;
(ix) from amounts then on deposit in the Group I
Certificate Account, to the Class I S Certificateholders the
amount remaining on such Distribution Date, if any, until the
Certificate Principal Balance thereof is reduced to zero; and
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(x) from amounts then on deposit in the Group I
Certificate Account, to the Holders of the Class R
Certificates, the amount remaining on such Distribution Date,
if any.
Notwithstanding clause (iv) above, the aggregate amounts distributed on all
Distribution Dates to the Holders of the Class IA Certificates on account of the
Class IA Principal Distribution Amount shall not exceed the Original Certificate
Principal Balance of the Class IA Certificates.
Distributions of the Class IA Principal Distribution Amount
and amounts allocated pursuant to Section 6.03(c)(v) and (vi) will be allocated
to the Class IA Certificates in reduction of the Certificate Principal Balance
thereof, until the Certificate Principal Balance thereof has been reduced to
zero.
On each Distribution Date, an amount equal to the Group I
Subordination Increase Amount for such Distribution Date will be added to the
Certificate Principal Balance of the Class I S Certificates.
(c) With respect to funds deposited in the Group II
Certificate Account, on each Distribution Date, the Paying Agent shall make the
following allocations, disbursements and transfers in the following order of
priority, and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) to the Certificate Insurer, the Premium Amount
with respect to the Group II Loans;
(ii) to the Certificate Insurer the lesser of (x) an
amount equal to (A) the amount then on deposit in the Group II
Certificate Account remaining after the distributions in (i)
above minus (B) the Group II Insured Distribution Amount for
such Distribution Date and (y) the outstanding Group II
Reimbursement Amounts, if any, as of such Distribution Date;
(iii) from amounts then on deposit in the Group II
Certificate Account (including any Group II Insured Payments),
to the Class IIA-1 Certificateholders, Class IIA-2
Certificateholders, Class IIA-3 Certificateholders, and Class
IIA-4 Certificateholders, on a pro rata basis in proportion to
the related Class IIA
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Interest Distribution Amount payable thereon, an amount equal
to the Class IIA Interest Distribution Amount;
(iv) from amounts then on deposit in the Group II
Certificate Account (including any Group II Insured Payments),
to the Class IIA Certificateholders an amount equal to the
lesser of (a) the Class IIA Principal Distribution Amount (to
the extent not covered by payments to be made pursuant to
Section 6.03(b)(v) above) and (b) the amount remaining in the
Group II Certificate Account after distributions pursuant to
clauses (i) through (iii) above, in the manner described
below;
(v) from amounts then on deposit in the Group II
Certificate Account, to the Class IA Certificateholders, on
any Distribution Date where a Group I Subordination Deficit
exists, an amount equal to such Group I Subordination Deficit;
(vi) from amounts then on deposit in the Group II
Certificate Account, to the Class IA Certificateholders, on
any Distribution Date when, following distributions to be made
on such date, the Group I Subordinated Amount would be less
than the Group I Required Subordinated Amount, an amount equal
to such difference;
(vii) from amounts then on deposit in the Group II
Certificate Account, to the Certificate Insurer, an amount
equal to the outstanding Group I Reimbursement Amount
remaining unpaid following any distributions made on such
Distribution Date pursuant to Section 6.03(b)(ii);
(viii) from amounts then on deposit in the Group II
Certificate Account, to the Class II S Certificateholders, an
amount equal to the related Class S Interest Distribution
Amount to the extent not added to the Certificate Principal
Balance thereof as described below;
(ix) from amounts then on deposit in the Group II
Certificate Account, to the Class II S Certificateholders, the
amount remaining on such Distribution Date, if any, until the
Certificate Principal Balance thereof is reduced to zero; and
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(x) from amounts then on deposit in the Group II
Certificate Account, to the Holders of the Class R
Certificates, the amount remaining on such Distribution Date,
if any.
Notwithstanding clause (iv) above, the aggregate amounts distributed on all
Distribution Dates to the Holders of the Class IIA Certificates on account of
the Class IIA Principal Distribution Amount shall not exceed the Original
Certificate Principal Balance of the Class IIA Certificates.
Distributions of the Class IIA Principal Distribution Amount
and amounts allocated pursuant to Section 6.03(b)(v) and (vi) will be allocated
first to the Class IIA-1 Certificates, second to the Class IIA-2 Certificates,
third to the Class IIA-3 Certificateholders, and fourth, to the Class IIA-4
Certificates, in each case until the Certificate Principal Balance thereof has
been reduced to zero.
On each Distribution Date, an amount equal to the Group II
Subordination Increase Amount for such Distribution Date will be added to the
Certificate Principal Balance of the Class II S Certificates.
Section 6.04 Reports by Certificate Administrator. (a) On each
Distribution Date the Certificate Administrator shall provide to each Holder, to
the Trustee, to the Servicer, to the Certificate Insurer, to the Underwriter, to
the Company and to each Rating Agency a written report (the "Remittance
Report"), setting forth information including, without limitation, the following
information:
(i) the amount of the distribution with respect to
each class of the Class A Certificates, Class S Certificates
and Class R Certificates;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments in Full and Curtailments or other unscheduled
recoveries of principal included therein and separately
identifying any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to
interest and the calculation thereof;
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(iv) the Certificate Principal Balance of each class
of the Class A Certificates and Class S Certificates as of
such Distribution Date, together with the principal amount of
each class of the Class A Certificates and Class S
Certificates (based on a Certificate in an original principal
amount of $1,000) then outstanding, in each case after giving
effect to any payment of principal on such Distribution Date;
(v) the amount of any Insured Payment included in the
amounts distributed to the Class A Certificateholders on such
Distribution Date;
(vi) the Group I Required Subordinated Amount, the
Group II Required Subordinated Amount, the Group I
Subordinated Amount and the Group II Subordinated Amount as of
such Distribution Date;
(vii) the amounts, if any, of any Liquidation Loan
Losses for the related Due Period and the cumulative amount of
Liquidated Loan Losses from the Closing Date; and
(viii) the applicable Pass-Through Rate for each
class of Class A Certificates and Class S Certificates for
such distribution.
Items (i), (ii) and (iii) above shall, with respect to the Class A Certificates,
be presented on the basis of a Certificate having a $1,000 denomination. In
addition, by January 31 of each calendar year following any year during which
the Certificates are outstanding, the Certificate Administrator shall furnish a
report to each Holder of record if so requested in writing at any time during
each calendar year as to the aggregate of amounts reported pursuant to (i), (ii)
and (iii) with respect to the Certificates for such calendar year.
(b) All distributions made to the Class A Certificateholders,
Class S Certificateholders and the Class R Certificateholders as a Class on each
Distribution Date will be made on a pro rata basis among the Certificateholders
of such Class on the next preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and shall be made by wire transfer
of immediately available funds to the account of such Certificateholder at a
bank or other entity having appropriate facilities therefor, if, in the case of
a Class A Certificateholder, such Certificateholder shall own of record
Certificates of the same Class which have denominations aggregating at least
$10,000,000 appearing in the Certificate
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Register and shall have provided complete wiring instructions by the Record
Date, and otherwise by check mailed to the address of such Certificateholder
appearing in the Certificate Register.
(c) In addition, on each Distribution Date the Certificate
Administrator will distribute to each Holder, to the Trustee, to the Certificate
Insurer, to the Underwriter, to the Servicer, to the Company and to each Rating
Agency, together with the information described in subsection (a) preceding, the
following information with respect to the Group I Loans and the Group II Loans
as of the close of business on the last Business Day of the prior calendar
month, which is hereby required to be prepared by the Servicer and furnished to
the Certificate Administrator for such purpose on or prior to the related
Servicer Remittance Date (such information to be provided for the Group I Loans
and the Group II Loans separately):
(i) the total number of Mortgage Loans and the
aggregate Principal Balances thereof, together with the number
and aggregate principal balances of such Mortgage Loans and
the percentage (based on the aggregate Principal Balances of
the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all
Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days
Delinquent and (C) 90 or more days Delinquent;
(ii) the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the aggregate
Principal Balances of such Mortgage Loans to the aggregate
Principal Balance of all Mortgage Loans in foreclosure
proceedings and the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage
Loans which are also included in any of the statistics
described in the foregoing clauses (i)(A), (i)(B) and (i)(C);
(iii) the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the aggregate
Principal Balances of such Mortgage Loans to the aggregate
Principal Balance of all Mortgage Loans relating to Mortgagors
in bankruptcy proceedings and the number and aggregate
Principal Balances of all Mortgage Loans and percentage (based
on the aggregate Principal Balances of the
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Mortgage loans) of any such Mortgage Loans which are also
included in any of the statistics described in the foregoing
clauses (i)(A), (i)(B) and (i)(C);
(iv) the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the aggregate
Principal Balances of such Mortgage Loans to the aggregate
Principal Balance of all Mortgage Loans relating to REO
Properties and the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage
Loans which are also included in any of the statistics
described in the foregoing clause (i)(A), (i)(B) and (i)(C);
(v) the weighted average Mortgage Interest Rate as of
the Due Date occurring in the Due Period related to such
Distribution Date;
(vi) weighted average remaining term to stated
maturity of all Mortgage Loans; and
(vii) book value of any REO Property.
Section 6.05 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution Date, the
Servicer or any Subservicer shall deposit into the related Certificate Account
an amount equal to the lesser of (a) the aggregate of the Prepayment Interest
Shortfalls for the related Distribution Date resulting from Principal
Prepayments in Full and Curtailments during the related Due Period and (b) its
aggregate Servicing Fees payable in the related Due Period and shall not have
the right to reimbursement therefor ("Compensating Interest").
Section 6.06 Effect of Payments by the Certificate Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Class A Certificates which is made
with moneys received pursuant to the terms of the Certificate Insurance Policy
shall not be considered payment of the Certificates from the Trust Fund. The
Company, the Servicer, the Certificate Administrator and the Trustee
acknowledge, and each Holder by its acceptance of a Certificate agrees, that
without the need for any further action on the part of the Certificate Insurer,
the Company, the Servicer, the Certificate Administrator, the Trustee or the
Certificate Registrar (a) to the extent the Certificate
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Insurer makes payments, directly or indirectly, on account of principal of or
interest on the Class A Certificates to the Holders of such Certificates, the
Certificate Insurer will be fully subrogated to, and each Certificateholder, the
Servicer, the Certificate Administrator and the Trustee hereby delegate and
assign to the Certificate Insurer, to the fullest extent permitted by law, the
rights of such Holders to receive such principal and interest from the Trust
Fund, including, without limitation, any amounts due to the Certificateholders
in respect of securities law violations arising from the offer and sale of the
Class A Certificates, and (b) the Certificate Insurer shall be paid such amounts
but only from the sources and in the manner provided herein for the payment of
such amounts. The Trustee, the Certificate Administrator and the Servicer shall
cooperate in all respects with any reasonable request by the Certificate Insurer
for action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Holders as otherwise set forth herein.
Section 6.07 Allocation of Liquidated Loan Losses. Prior to
each Distribution Date the Servicer shall determine the total amount of related
Liquidated Loan Losses, if any, that occurred during the related Due Period with
respect to the Group I Loans and the Group II Loans. The amount of such
Liquidated Loan Losses shall be evidenced by an Officer's Certificate to be
delivered to the Certificate Administrator not later than the Servicer
Remittance Date. On each Distribution Date, the principal portion of all
Liquidated Loan Losses on the Mortgage Loans in Loan Group I shall be allocated
in reduction of the Certificate Principal Balance of the Class I S Certificates,
until the Certificate Principal Balance thereof has been reduced to zero, and
then in reduction of the Certificate Principal Balance of the Class II S
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero. On each Distribution Date, the principal portion of all Liquidated Loan
Losses on the Mortgage Loans in Loan Group II shall be allocated in reduction of
the Certificate Principal Balance of the Class II S Certificates, until the
Certificate Principal Balance thereof has been reduced to zero, and then in
reduction of the Certificate Principal Balance of the Class IS Certificates,
until the Certificate Principal Balance thereof has been reduced to zero. In
each case above, Liquidated Loan Losses after the Certificate Principal Balances
of the Certificates described above have been reduced to zero shall not be
allocated to any specific class of related Certificates, but shall increase the
Group I Subordination Deficit or Group II Subordination Deficit, as applicable,
in the manner described in this Agreement.
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ARTICLE VII
REPORTS TO BE PREPARED BY CERTIFICATE ADMINISTRATOR
Section 7.01. Certificate Administrator Shall Provide
Information as Reasonably Required. The Certificate Administrator shall furnish
to the Trustee, 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 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
directions as the Trustee may reasonably require.
Section 7.02. Tax and 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 Certificate Administrator shall
maintain or cause the maintenance of the books of the Trust Fund on the accrual
method of accounting.
(b) The Certificate Administrator shall prepare and file or
cause to be filed with the Internal Revenue Service and applicable state or
local tax authorities, federal and state or local tax or information returns,
respectively, with respect to the Trust Fund and the Certificates containing
such information and at the times and in the manner as may be required by the
Code or applicable Treasury regulations or corresponding provisions of state or
local law, and shall furnish to each Holder of Certificates at any time during
the calendar year for which such returns or reports are made such statements or
information at the times and in the manner as may be required thereby. Without
limitation on any other requirement of this Section 7.02, the Certificate
Administrator shall make available the information necessary for the application
of Section 860E(e) of the Code within 60 days of such request. With respect to
the Class R Certificate, the Certificate Administrator shall provide such
information or cause such information to be provided to (i) the Internal Revenue
Service, (ii) the transferor of a Class R Certificate to a Disqualified
Organization and (iii) a Pass-Thru Entity that holds a Class R Certificate with
one or more record holders that are Disqualified Organizations. The Certificate
Administrator also shall provide or cause to be provided promptly the above
described computation and information relating to the tax on transfers to
Disqualified Organizations or holdings by Pass-Thru Entities within 60 days
after becoming aware of the transfer to a Disqualified Organization or Pass-Thru
Entity with one or more Disqualified Organization
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owners, as the case may be. In addition, except as may be provided in Treasury
Regulations, any person holding an interest in a Pass-Thru Entity as a nominee
for another will, with respect to such interest, be treated as a Pass-Thru
Entity. In connection with the foregoing, the Certificate Administrator shall
provide the name, address and telephone number of the person who can be
contacted to obtain information required to be reported to the holders of
regular interests in the REMIC (the "REMIC Reporting Agent") as required by IRS
Form 8811. The Trustee hereby designates [NAME] to serve as the REMIC Reporting
Agent. The Certificate Administrator shall indicate the election to treat the
Trust Fund as a REMIC (which election shall apply to the taxable period ending
December 31, 1996 and each calendar year thereafter) in such manner as the Code
or applicable Treasury regulations may prescribe. The Trustee shall sign all tax
and information returns filed pursuant to this Section 7.02 and any other
returns as may be required by the Code or any state or local law, and in doing
so shall rely entirely upon, and shall have no liability for information
provided by, or calculations provided by, the Certificate Administrator. The
Certificate Administrator is hereby designated as the "tax matters person"
(within the meaning of Treas. Reg. ss.1.860F-4(d)) for the Trust Fund. Any
Holder of a Class R Certificate will by acceptance thereof so appoint the
Certificate Administrator as agent and attorney-in-fact for the purpose of
acting as tax matters person. In the event that the Code or applicable Treasury
Regulations prohibit the Trustee from signing tax or information returns or
other statements, or the Certificate Administrator from acting as tax matters
person (as an agent or otherwise), the Trustee or the Certificate Administrator,
as the case may be, 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 Holder of a
Class R Certificate to sign such returns or act as tax matters person. Each
Holder of a Class R Certificate shall be bound by this Section 7.02 by virtue of
its acceptance of a Class R Certificate.
[End of Article VII]
ARTICLE VIII
THE COMPANY, THE SERVICER AND THE CERTIFICATE ADMINISTRATOR
Section 8.01. Liability of the Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Servicer herein. If the Servicer delegates
any of its duties hereunder to one or more Sub-Servicers, the Servicer shall
not be relieved thereby of its liability with respect thereto.
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Section 8.02 Merger or Consolidation of the Servicer. Any
person into which the Servicer may be merged or consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Servicer
shall be a party, or any Person succeeding to the business of the Servicer,
shall be the successor of the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that any
such successor or resulting person shall be qualified to service mortgage loans
for FNMA and FHLMC and shall have a net worth of not less than $15,000,000.
Section 8.03. Limitation on Liability of the Servicer and
Others. Neither the Servicer nor any of its directors, officers, employees or
agents, shall be under any liability to the Trust Fund or the Certificateholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Servicer or any such person against
breach of warranties or representations made herein, or for failure to perform
its obligations in strict compliance with this Agreement or any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of his or its duties or by reason of reckless
disregard of his or its obligations and duties hereunder. The Servicer and any
of its directors, officers, employees or agents, 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 Servicer and each of its
directors, officers, employees or agents, shall be indemnified and held harmless
by the Trust Fund against any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the Certificates, other than
any loss, liability or expense related to the Servicer's servicing obligations
with respect to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or related to the Servicer's obligations under this Agreement or any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of his or its duties hereunder or by reason of
reckless disregard of his or its obligations and duties hereunder. Neither the
Servicer nor any subservicer shall be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties under
this Agreement and that in its opinion may involve any expense or liability;
provided, however, that the Servicer may in its discretion undertake any such
action which it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties hereto and the interest of the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action, if previously approved in writing by the Certificate Insurer, which
approval shall not be unreasonably withheld, and any liability resulting
therefrom shall be
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expenses, costs and liabilities of the Trust Fund, and the Servicer shall be
entitled to be reimbursed therefor out of the Collection Account as provided by
Section 5.04, and such amounts shall, on the following Distribution Date or
Distribution Dates, be allocated in reduction of distributions on the
Certificates in the same manner as Liquidated Loan Losses are allocated
hereunder.
Section 8.04. Liability of the Company and the Certificate
Administrator. The Company and the Certificate Administrator shall each be
liable in accordance herewith only to the extent of the obligations specifically
imposed by this Agreement and undertaken hereunder by the Company and the
Certificate Administrator herein.
Section 8.05 Merger or Consolidation of the Company or the
Certificate Administrator. The Company and the Certificate Administrator 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.
Any person into which the Company or the Certificate
Administrator may be merged or consolidated, or to whom the Company or the
Certificate Administrator has sold substantially all of its assets, or any
corporation resulting from any merger, conversion or consolidation to which the
Company or the Certificate Administrator shall be a party, or any Person
succeeding to the business of the Company or the Certificate Administrator,
shall be the successor of the Company or the Certificate Administrator
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.
Notwithstanding anything else in this Section 8.05 and Section
8.07 to the contrary, the Certificate Administrator may assign its rights and
delegate its duties and obligations under this Agreement; provided that the
Person accepting such assignment or delegation shall execute and deliver to the
Company and the Trustee an agreement, in form and substance reasonably
satisfactory to the Company 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 Certificate Administrator under
this Agreement; provided further that each Rating Agency's rating of any of the
Classes of Certificates that have been rated in effect immediately prior to such
assignment and delegation will not be qualified or
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reduced or withdrawn as a result of such assignment and delegation. In the case
of any such assignment and delegation, the Certificate Administrator shall be
released from its obligations as Certificate Administrator under this Agreement,
except that the Certificate Administrator shall remain liable for all
liabilities and obligations incurred by it as Certificate Administrator
hereunder prior to the satisfaction of the conditions to such assignment and
delegation set forth in the next preceding sentence.
Section 8.06 Limitation on Liability of the Company, the
Certificate Administrator, the Trustee and Others. Neither the Company, the
Certificate Administrator nor any of the directors, officers, employees or
agents of the Company or the Certificate Administrator 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 Company or the Certificate Administrator against any
breach of warranties or representations made herein, or failure to perform its
obligations in strict 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 Certificate Administrator, the Trustee, and
any director, officer, employee or agent of the Company, the Certificate
Administrator 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 matters
arising hereunder. Neither the Company, the Trustee nor the Certificate
Administrator 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
cause it to incur any expenses or liability; provided, however, that the
Company, the Trustee or the Certificate Administrator may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interest of the Certificateholders hereunder. 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 Certificate Administrator shall be entitled to be reimbursed
therefor out of the Certificate Account as provided by Section 4.06 and such
amounts shall, on the following Distribution Date or Distribution Dates, be
allocated in the same manner as Liquidated Loan Losses are allocated hereunder.
Section 8.07 Company and Certificate Administrator Not to
Resign. Except as described in Section 8.05, neither the Company nor the
Certificate Administrator shall assign this Agreement or resign from the
obligations and duties hereby imposed on it except by mutual
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consent of the Company, the Certificate Administrator and all of the
Certificateholders 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 Certificate Administrator. Any such determination
permitting the resignation of the Company or the Certificate Administrator shall
be evidenced by an opinion of independent counsel to such effect delivered to
the Trustee which opinion of counsel shall be in form and substance acceptable
to the Trustee. Upon any such assignment or resignation, the Company or the
Certificate Administrator, as appropriate, shall send notice to the Certificate
Insurer and all Certificateholders of the effect of such assignment or
resignation upon the then current rating of the Class of Certificates by each
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
Certificate Administrator'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 8.08 Compensation to the Certificate Administrator.
The Certificate Administrator shall be entitled to receive the Certificate
Administration Fee as compensation for services rendered by the Certificate
Administrator under this Agreement. The Certificate Administrator shall pay
itself such Certificate Administration Fee monthly from amounts on deposit in
the Certificate Account.
Section 8.09 Successor to the Servicer. In connection with the
termination of the Servicer's responsibilities and duties under this Agreement
pursuant to Section 5.23 or 9.01, the Trustee shall (i) succeed to and assume
all of the Servicer's responsibilities, rights, duties and obligations as
Servicer (but not in any other capacity) under this Agreement (except that the
Trustee shall not be obligated to make Periodic Advances if prohibited by
applicable law nor to effectuate repurchases or substitutions of Mortgage Loans
pursuant to Section 2.02 and except that the Trustee makes no representations
and warranties pursuant to Section 3.04). Prior to the termination of the
Servicer's responsibilities, duties and liabilities under this Agreement, the
Trustee may appoint a successor having a net worth of not less than $15,000,000
and which is a FNMA or FHLMC approved seller/servicer in good standing and which
shall succeed to all rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement, except as aforesaid, if the
Trustee receives a letter from each Rating Agency that such appointment would
not result in a reduction or withdrawal of the current rating of any Class of
Certificates that is rated by a Rating Agency. If the Trustee has become the
successor to the Servicer in accordance with this Section or Section 9.02, 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
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a court of competent jurisdiction to appoint, any established housing and home
finance institution having a net worth of not less than $15,000,000 and which is
a FNMA or FHLMC approved seller/servicer in good standing as the successor to
the Servicer hereunder in the assumption of all of the responsibilities, duties
or liabilities of the 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. If the Servicer's duties,
responsibilities and liabilities under this Agreement should be terminated
pursuant to Section 5.23, 8.02 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,
and shall take no action whatsoever that might impair or prejudice the rights or
financial condition of its successor or the Trust Fund. The resignation or
removal of the Servicer pursuant to Section 5.23, 8.02 or 9.01 shall not become
effective until a successor shall be appointed pursuant to this Section and
shall in no event relieve the Servicer of liability for breach of the
representations and warranties made pursuant to Section 3.04.
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 termination or resignation of the
Servicer or this Agreement pursuant to Section 5.23, 8.02, 9.01 or 11.01 shall
not affect any claims that the Trustee may have against the Servicer for events
or actions taken or not taken by the Servicer arising prior to any such
termination or resignation.
The Servicer shall timely deliver to the successor the funds
that were, or were required to be, in the Collection Account and the Servicing
Account, if any, and all Mortgage Files and related documents, statements and
recordkeeping 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 may
reasonably 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.
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Upon a successor's acceptance of appointment as such, the
Servicer shall notify in writing the Trustee, the Certificate Insurer, the
Certificateholders, the Certificate Administrator and each Rating Agency of such
appointment.
Section 8.10 Maintenance of Ratings. The Servicer shall
cooperate with the Company and the Certificate Administrator and take any action
that may be reasonably necessary to maintain the current rating or ratings on
the Certificates.
[End of Article VIII]
ARTICLE IX
DEFAULT
Section 9.01 Events of Default. (a) "Event of Default",
wherever used herein, means any one of the following events:
(i) any failure by the Servicer to make any deposit
into the Certificate Account required by Section 4.05 which
continues unremedied for one Business Day after the date upon
which such deposit was required to be made;
(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a
period of 30 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Trustee or to the Servicer
and the Trustee by any Certificateholder or the Certificate
Insurer,
(iii) any failure on the part of the Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Servicer contained
in this Agreement, or the failure of any representation and
warranty made pursuant to Section 3.01 to be true and correct
which continues unremedied for a period of 30 days (or 15 days
in the case of a failure to pay the premium for any insurance
policy which is required to be maintained under this
Agreement) after the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given to the Servicer, as the case may be, by
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the Company or the Trustee or to the Servicer and the Trustee
by any Certificateholder or the Certificate Insurer;
(iv) a decree or order of a court or agency or
supervisory authority having jurisdiction in an involuntary
case under any present or future federal or state bankruptcy,
insolvency or similar law or for the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force,
undischarged or unstayed for a period of 60 days;
(v) the Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of the Servicer's
property,
(vi) the Servicer shall admit in writing its
inability to pay its debts as they become due, file a petition
to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations"
(vii) on any Distribution Date the average Sixty-Day
Delinquency Ratio, for each of the three (or one or two, in
the case of the first and second Distribution Dates)
immediately preceding Due Periods, exceeds 13%. The Sixty-Day
Delinquency Ratio with respect to any Distribution Date means
a fraction, expressed as a percentage, (a) the numerator of
which is the aggregate Principal Balances of all Mortgage
Loans that are 60 or more days Delinquent, in foreclosure or
converted to REO Property as of the last day of the related
Due Period and (b) the denominator of which is the Pool
Principal Balance as of the last day of the related Due
Period;
(viii) if on any Distribution Date occurring in
[MONTH] of any year, commencing in [MONTH/YEAR], the 12 Month
Loss Amount exceeds 1.05% of the average Pool Principal
Balance as of the close of business on the last day of each of
the twelve preceding Due Periods; or
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(ix) if (a) on any Distribution Date occurring
before_____ 1, [YEAR], the aggregate Liquidated Loan Losses
since the Cut-off Date exceed ____% of the Original Pool
Principal Balance, (b) on any Distribution Date on or after
____ 1,[YEAR] and before ____ 1,[YEAR], the aggregate
Liquidated Loan Losses since the Cut-off Date exceed ____% of
the Original Pool Principal Balance, (c) on any Distribution
Date on or after ____ 1,[YEAR] and before ____ 1,[YEAR], the
aggregate Liquidated Loan Losses since the Cut-off Date exceed
____% of the Original Pool Principal Balance, (d) on any
Distribution Date on or after ____ 1,[YEAR] and before ____
1,[YEAR], the aggregate Liquidated Loan Losses since the
Cut-off Date exceed ____% of the Original Pool Principal
Balance, or (e) on any Distribution Date on or after ____
1,[YEAR], the aggregate Liquidated Loan Losses since the
Cut-off Date exceed ____% of the Original Pool Principal
Balance.
(b) If an Event of Default described in this Section shall
occur, then, and in each and every such case, so long as such Event of Default
shall not have been remedied: with respect to clauses (i), (ii), (iii), (iv),
(v) and (vi) above, the Trustee shall, but only at the direction of the
Certificate Insurer or the Majority Certificateholders and with the prior
written consent of the Certificate Insurer, by notice in writing to the Servicer
and a Responsible Officer of the Trustee, and in addition to whatever rights
such Certificateholders may have at law or equity to damages, including
injunctive relief and specific performance, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, as servicer; and with respect to clauses
(vii)-(ix) above, the Trustee shall, but only at the direction of the
Certificate Insurer, after notice in writing to the Servicer and a Responsible
Officer of the Trustee, terminate all the rights and obligations of the Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
as servicer. Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall, subject to Section 9.02, pass to and be
vested in the Trustee or its designee approved by the Certificate Insurer and
the Trustee is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, at the expense of the
Servicer, any and all documents and other instruments and do or cause to be done
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the Mortgage Loans and related documents. The
Servicer agrees to cooperate (and pay any related costs and expenses) with the
Trustee in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer
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to the Trustee or its designee for administration by it of all amounts which
shall at the time be credited by the Servicer to the Collection Account or
thereafter received with respect to the Mortgage Loans. The Trustee shall
promptly notify the Certificate Insurer and the Rating Agencies of the
occurrence of an Event of Default.
Section 9.02 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 to the extent provided in Section 8.09.
Section 9.03 Waiver of Defaults. The Majority
Certificateholders may, on behalf of all Certificateholders, and subject to the
consent of the Certificate Insurer, waive any events permitting removal of the
Servicer as servicer pursuant to this Article IX; provided, however, that the
Majority Certificateholders may not waive a default in making a required
distribution on a Certificate without the consent of the holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to the Rating Agencies.
Section 9.04 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund
and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Certificate Insurer.
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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 or waiver 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 or waived), 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 unless the Trustee is
acting as Servicer pursuant to Section 9.03, in which case it shall use the same
degree of skill in case (when acting as Servicer) as the Servicer hereunder.
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, and, if the Trustee is acting as the
successor Servicer pursuant to Section 8.09 or 9.02, 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 or waiver 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 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 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
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any Class holding Certificates which evidence, as to such Class,
Percentage 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 advice or
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 advice or 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 or waived), to exercise such of the
rights and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of such man's
own affairs;
(d) Neither the Trustee nor any of its directors, officers,
employees or agents shall be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it or any of
them to be authorized or within the discretion or rights or powers
conferred upon the Trustee by this Agreement;
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(e) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by Holders of Certificates of any Class evidencing, as to such Class,
Percentage Interests aggregating not less than 25% (in the case of
conflicting requests by two or more 25% or greater Percentage
Interests, the Trustee shall act in accordance with the first such
request); 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 Certificateholder
requesting the investigation;
(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; and
(g) Nothing in this Agreement shall be construed to require
the Trustee (acting in its capacity as Trustee) to expend its own
funds.
Section 10.03 Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein and in the Certificates (other than the
authentication of the Certificates by an authorized signatory of the Trustee)
shall be taken as the statements of the Company, the Certificate Administrator
or the Servicer, as the case may be, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations or warranties as to
the validity or sufficiency of this Agreement or of the Certificates (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, the Certificate Administrator 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 Company, the Certificate
Administrator or the Servicer in respect of the Mortgage Loans or deposited in
or withdrawn from the Collection Account or the Certificate Account by the
Company, the Certificate Administrator or the
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Servicer. The Trustee, in its capacity as trustee hereunder, shall have no
responsibility for the timeliness or the amount of payments made by the Paying
Agent to the Certificateholders.
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 Fees and Expenses. The Certificate Administrator
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 Certificate Administrator 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)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. Notwithstanding anything to the contrary in this
Agreement, 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 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 $50,000,000 and subject to supervision or
examination by federal or state authority. The Trustee shall not be an affiliate
of the Seller, the Certificate Administrator 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, and any co-trustee may at any time resign and be discharged from the
trusts hereby created by giving written
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notice thereof to the Company, the Servicer, the Certificate Administrator and
each Rating Agency. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee or co-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 any of the Classes
of Certificates that have been rated. 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 Company, 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
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 Percentage Interest 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 or any resignation
of any co-trustee and appointment of a successor trustee or co-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, or upon
acceptance of appointment by a co-trustee, as applicable, unless with respect to
a co-trustee, the Trustee receives written notice from each Rating Agency that
the failure to appoint a successor co-trustee would not result in a withdrawal
or reduction of the rating of any of the Classes of Certificates that have been
rated, in which case the resignation of any co-trustee shall be effective upon
receipt of such written notice. Any co-trustee may not be removed unless the
Company and the Trustee each receive written notice from each Rating Agency that
such removal would not result in a withdrawal or reduction of the rating of any
of
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the Classes of Certificates that have been rated, in which case the removal of
any co-trustee shall be effective upon receipt of such written notice.
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 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 Servicer, the Certificate Administrator 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. Prior to the appointment of
any successor trustee becoming effective, the Company shall have received from
each Rating Agency written confirmation that such appointment would not result
in a reduction or withdrawal of the rating of the Certificates.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Certificate Administrator shall mail notice of the
succession of such trustee hereunder to all Holders of Certificates at their
addresses as shown in the Certificate Register, to the Servicer, any
Sub-Servicer and to each Rating Agency. If the Certificate Administrator 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 Certificate Administrator.
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,
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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.
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 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 Holders of
Certificates 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 and severally, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed (whether as
Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall
be incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
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.
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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.
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]
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ARTICLE XI
TERMINATION
Section 11.01 Termination. (a) Subject to Section 11.02, this
Agreement shall terminate upon notice to the Trustee of either: (i) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Certificate Insurer and the Trustee or (it) mutual consent of the
Servicer, the Certificate Insurer and all Certificateholders in writing;
provided, however, that in no event shall the Trust established by this
Agreement terminate later than twenty-one years after the death of the last
surviving lineal descendant of Joseph P. Kennedy, late Ambassador of the United
States to the Court of St. James's, alive as of the date hereof.
(b) In addition, subject to Section 11.02, the Holder of a
50.01% Percentage Interest or greater of the Class R Certificates or the
Servicer (or the Certificate Insurer, if [Advanta Mortgage Corp. USA] is removed
as Servicer) may, at its option and at its sole cost and expense, terminate this
Agreement on any date on which the related Pool Principal Balance is less than
10%, if the holder of the Class R Certificates exercises this option, or is less
than 5%, if the Servicer or the Certificate Insurer exercises this option, of
the aggregate of the Principal Balances of the Mortgage Loans on the Cut-off
Date, by purchasing, on the next succeeding Distribution Date, all of the
outstanding Mortgage Loans and REO Properties at a price (the "Termination
Price") equal to the sum of (i) 100% of the Principal Balance of each such
outstanding Mortgage Loan and each REO Property, (ii) the aggregate amount of
accrued and unpaid interest on such Mortgage Loans through the related due
period and 30 days' interest on such Mortgage Loans at a rate equal to the
related Mortgage Interest Rate (net of the Servicing Fee if the Servicer
exercises this option) with respect to such Mortgage Loan, (iii) any
unreimbursed amounts due to the Certificate Insurer under this Agreement or the
Insurance Agreement and (iv) any excess of the actual stated principal balance
of each such Mortgage Loan and REO Property over the Principal Balance thereof,
the aggregate amount of accrued and unpaid interest on such excess through the
related due period and 30 days' interest on such excess at a rate equal to the
related Mortgage Interest Rate with respect to each related Mortgage Loan. Any
such purchase shall be accomplished by deposit into the related Certificate
Account of the Termination Price. From the Termination Price so deposited, the
Trustee shall reimburse the Servicer for the amount of any unpaid Servicing
Fees, unreimbursed Periodic Advances and unreimbursed Servicing Advances made by
the Servicer with respect to the related Mortgage Loans. No such termination is
permitted without the prior written consent of the Certificate
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Insurer (i) if it would result in a draw on the Certificate Insurance Policy or
(ii) unless the Servicer shall have delivered to the Certificate Insurer an
opinion of counsel reasonably satisfactory to the Certificate Insurer stating
that no amounts paid hereunder are subject to recapture as preferential
transfers under the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101 et seq.,
as amended.
(c) If on any Distribution Date, the Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than funds in the related Certificate Account, the Servicer
shall send a final distribution notice promptly to the related
Certificateholders in accordance with paragraph (d) below.
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust Fund will terminate and that the Certificateholders
shall surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Servicer by letter
to the Certificateholders mailed during the month of such final distribution
before the Servicer Remittance Date in such month, specifying (i) the
Distribution Date upon which final payment of the Certificates will be made upon
presentation and surrender of the Certificates at the office of the Trustee
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Trustee therein specified. The Servicer shall give such notice
to the Trustee therein specified. The Servicer shall give such notice to the
Trustee at the time such notice is given to the Certificateholders. The
obligations of the Certificate Insurer hereunder shall terminate upon the
deposit by the Servicer with the Trustee of a sum sufficient to purchase all of
the Mortgage Loans and REO Properties in the Trust Fund as set forth above and
when the aggregate Certificate Principal Balance of the Certificates has been
reduced to zero.
(e) In the event that all Certificateholders do not surrender
their Certificates for cancellation within six months after the time specified
in the above-mentioned written notice, the Servicer shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice, all of the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and the cost
thereof shall be paid out of the funds and other assets which remain subject
hereto. If within nine months after the second notice all the Certificates shall
not have been surrendered for
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<PAGE>
cancellation, the Class R Certificateholders shall be entitled to all unclaimed
funds and other assets which remain subject hereto and the Trustee upon transfer
of such funds shall be discharged of any responsibility for such funds and the
Certificateholders shall look only to such Class R Certificateholders for
payment. Such funds shall remain uninvested.
Section 11.02 Additional Termination Requirements. (a) In the
event that the Holder of a 50.01% Percentage Interest or greater of the Class R
Certificates, Servicer or Certificate Insurer (any of which, an "Exercising
Party") exercises its purchase option with respect to the Trust Fund as provided
in Section 11.01, the Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee has been furnished with an
Opinion of Counsel to the effect that the failure of the Trust Fund to comply
with the requirements of this Section 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 fall to qualify as a
REMIC at any time that any Class A Certificates or Class S Certificates are
outstanding:
(i) The Trustee shall establish a 90-day liquidation
period for the Trust Fund and specify the first day of such
period in a statement attached to the Trust Fund's final Tax
Return pursuant to Treasury Regulation Section 1.860F-1. The
Trustee shall satisfy all the requirements of a qualified
liquidation under Section 860F of the Code and any regulations
thereunder, as evidenced by an Opinion of Counsel obtained at
the expense of the Exercising Party;
(ii) During such 90-day liquidation period, and at or
prior to the time of making of the final payment on the
Certificates, the Trustee shall sell all of the assets of the
Trust Fund for cash; and
(iii) At the time of the making of the final payment
on the Certificates, the Trustee shall distribute or credit,
or cause to be distributed or credited, to the Holders of the
Class R Certificates all cash on hand in the Trust Fund (other
than cash retained to meet claims), and the REMIC shall
terminate at that time.
(b) By their acceptance of the Class R Certificates, the
Holders thereof hereby agree to authorize the Trustee to specify the 90-day
liquidation period for the Trust Fund, which authorization shall be binding upon
all successor Class R Certificateholders.
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<PAGE>
Section 11.03 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all of the Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for the payments
or charges with respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the "Servicer" under this
Agreement.
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.
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<PAGE>
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 the Holders of
Certificates of any Class evidencing in the aggregate not less than 25% of the
Percentage Interests of such Class shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder (in the case of conflicting requests by two or more 25% or greater
Percentage Interests, the Trustee shall act in accordance with the first such
request) 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
expressly covenanted by each Certificateholder 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 Certificateholders 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 Servicer, the Certificate Administrator and the
Trustee, without the consent of any of the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, to ensure continuing treatment of
the Trust Fund as a REMIC, or to make any other provisions with respect to
matters
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<PAGE>
or questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, provided that such actions
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder of a Class having an
outstanding Certificate Principal Balance of greater than zero.
This Agreement may also be amended from time to time by the
Company, the Servicer, the Certificate Administrator and the Trustee with the
consent of the Holders of Certificates evidencing in the aggregate not less than
66% of the Percentage Interest of each Class of Certificates having an
Outstanding Certificate Principal Balance greater than zero and affected thereby
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, (ii) reduce the aforesaid percentage of Certificates of any class
the Holders of which are required to consent to any such amendment or (iii)
change the percentage specified in clause (ii) of the first paragraph of Section
11.01, without the consent of the Holders of all Certificates of such Class then
outstanding.
Promptly after the execution of any such amendment the Trustee
shall furnish written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.
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.
Section 12.04 Counterparts. 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 12.05 Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
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<PAGE>
Section 12.06 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 12.07 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 first class or registered mail, postage
prepaid, to (i) in the case of the Company, Chase Funding, Inc., 343 Thornall
Street, Edison, New Jersey 08843, Attention: President, (ii) in the case of
Chase, The Chase Manhattan Bank, 450 West 33rd Street, New York New York 10001,
Attention: _______________, (iv) in the case of the Trustee,
____________________________________________________________________, (v) in the
case of Moody's, Moody's Investors Service, Inc., 99 Church Street, Fourth
Floor, New York, New York, 10007, Attention: Residential Pass-Through
Surveillance, (vi) in the case of S&P, Standard & Poor's Corporation, 25
Broadway, New York, New York 10004, (vii) in the case of the Certificate
Insurer, ________________________________________, and (viii) 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.
Section 12.08 The Certificate Insurer Default. Any right
conferred to the Certificate Insurer shall be suspended during any period in
which a Certificate Insurer Default exists. At such time as the Certificates are
no longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer's rights hereunder shall
terminate.
Section 12.09 Third Party Beneficiary. The parties agree that
each of the Seller and the Certificate Insurer are intended and shall have all
rights of a third-party beneficiary of this Agreement.
Section 12.10 Intent of the Parties. It is the intent of the
Company and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
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<PAGE>
IN WITNESS WHEREOF, the Company, the Servicer, the Certificate
Administrator and the Trustee have caused their officers thereunto duly
authorized as of the day and year first above written.
CHASE FUNDING, INC., as Company
By:___________________________________
Name:
Title:
[ADVANTA MORTGAGE CORP. USA], as
Servicer
By:___________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Certificate Administrator
By:___________________________________
Name:
Title:
___________________________,
as Trustee
By:___________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
SOLELY FOR 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 OF 1986, AS
AMENDED.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE
FUNDING, INC. ("CHASE FUNDING"), THE MASTER SERVICER, THE SUBSERVICER OR THE
TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE,
THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED OR INSURED BY CHASE FUNDING, CHASE MANHATTAN MORTGAGE
CORPORATION, ADVANTA MORTGAGE CORP., USA THE TRUSTEE OR BY ANY OF THEIR
AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN BELOW.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY
INQUIRY OF THE MASTER SERVICER.
CLASS IA-1 CERTIFICATE
Number 99- -1 Original Denomination
$
Cut-off Date: [DATE] Final Scheduled
Distribution Date:
First Distribution Date: Aggregate Initial Certificate
[Date] Balance of all Class IA-1
Certificates: $
Pass-Through Rate: CUSIP:
<PAGE>
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
Series [______]
evidencing an ownership interest in distributions allocable to the Class IA-1-1
Certificates with respect to a pool of conventional, sub-prime mortgage loans
formed and sold by
CHASE FUNDING, INC.
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Trustee 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.
This certifies that CEDE & CO. is the registered owner of the
ownership interest (the "Ownership Interest") evidenced by this Certificate
(obtained by dividing the Original Denomination of this Certificate by the
aggregate Original Denomination of all Class IA-1 Certificates) in certain
distributions with respect to a pool of conventional, sub-prime mortgage loans
(the "Mortgage Loans") formed and sold by Chase Funding, Inc. (hereinafter
called the "Depositor"), and certain other property held in trust for the
benefit of Certificateholders (collectively, the "Trust Fund"). The Mortgage
Loans are serviced by Advanta Mortgage Corp., USA (the "Subservicer") and are
secured by first mortgages on Mortgaged Properties. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of
[Date] among the Depositor, the Subservicer, Chase Manhattan Mortgage
Corporation (the "Master Servicer") and Citibank, N.A., 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 Loan Asset-Backed Certificates, Series
______, Class IA-1 (the "Class IA-1 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 Agreement such Holder is bound. Also issued under the
Agreement are Certificates designated as Mortgage Loan Asset-Backed
Certificates, Series ______, Class IA-2, Class IA-3, Class IA-4, Class IA-5 and
Class IA-6 Certificates (collectively, with the Class IA-1 Certificates, the
"Group I Class A Certificates"), Class IIA-1 Certificates (the "Group II Class A
Certificates"), Class IM-1 and Class IM-2 Certificates (the "Mezzanine Group I
Certificates"), Class IIM-1 and Class IIM-2 Certificates (together the
"Mezzanine Group II Certificates"), Class IB Certificates (the "Class IB
Certificates") and Class IIB Certificates (the "Class IIB Certificates").
<PAGE>
The Group I Class A Certificates, the Group II Class A
Certificates, the Mezzanine Group I Certificates, the Mezzanine Group II
Certificates, the Class IB Certificates and the Class IIB Certificates are
collectively referred to herein as the "Certificates".
Pursuant to the terms of the Agreement, the Master Servicer
will distribute from funds in the Distribution Account the amount as described
on the reverse hereof on the 25th day of each month or, if such 25th day is not
a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing on [Date] Such distributions will be made to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month preceding the month in which such payment is made, or
if such last day is not a Business Day, the Business Day immediately preceding
such last day.
Distributions on this Certificate will be made 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 Master Servicer in writing at least 5 Business Days prior to
the first Distribution Date for which distribution by wire transfer is to be
made, and such Holder's Certificates evidence an aggregate original principal
balance of not less than $1,000,000 or such Holder holds a 100% Percentage
Interest of such Class. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Master Servicer, of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office of the Master Servicer or at such other office as may
be designated by such notice of final distribution.
The Master Servicer will maintain or cause to be maintained a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Master Servicer 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 Master Servicer,
or, if an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, maintained for such purpose, the Master Servicer, or, if
an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, 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 dated the date of authentication
by the Authenticating Agent. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Master Servicer, of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Master Servicer, for that
purpose and specified in such notice of final distribution.
<PAGE>
Reference is hereby made to the further provisions of this
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 has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed.
Dated: [Date] CHASE FUNDING, INC.
By:
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class IA-1
Certificates referred to
in the within-mentioned
Agreement.
THE CHASE MANHATTAN BANK
as Authenticating Agent
By:
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
SERIES ________
This Certificate is one of a duly authorized issue of
Certificates, designated as Chase Funding Mortgage Loan Asset-Backed
Certificates, Series _________, issued in [six] Classes of Group I Class A
Certificates, [one] Class of Group II Class A Certificates, [two] Classes of
Mezzanine Group I Certificates, [two] Classes of Mezzanine Group II
Certificates, [one] Class of Class IB Certificates and [one] Class of Class IIB
Certificates, each evidencing an interest in certain distributions with respect
to a pool of conventional, sub-prime Mortgage Loans formed and sold by the
Depositor and certain other property conveyed by the Depositor to the Trustee.
Following the initial issuance of the Certificates, the
Principal Balance of this Certificate will be different from the Original
Denomination shown above. Anyone acquiring this Certificate may ascertain its
current Principal Balance by inquiry of the Master Servicer.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Master Servicer will maintain or cause to be maintained a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Master Servicer 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 Master Servicer,
or, if an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, maintained for such purpose, the Master Servicer, or, if
an Authenticating Agent has been appointed under Section 5.10, the
Authenticating Agent, 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 dated the date of authentication
by the Authenticating Agent. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Master Servicer of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office of the Master Servicer or at such other office as may
be designated by such notice of final distribution.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Master Servicer may require payment of a
sum sufficient to cover any tax or
<PAGE>
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 Subservicer, the Master 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
Subservicer, the Master 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 Subservicer, the Master Servicer and the Trustee, without the
consent of any of the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions therein which may be inconsistent with the other
provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC,
or 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, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Depositor, the Subservicer, the Master Servicer and the Trustee with the consent
of the Holders of Certificates evidencing in the aggregate not less than 66 2/3%
of the Percentage Interests of each Class of Certificates affected thereby 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, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing 66 2/3% or more
of the Voting Rights of such Class or (iii) change the percentage specified in
clause (ii) of the third paragraph of Section 10.01 of the Agreement, without
the consent of the Holders of all Certificates of such Class then outstanding.
For federal income tax purposes, the Trust Fund includes two
segregated asset pools. The Depositor intends to make an election to treat each
as a "real estate mortgage investment conduit" (a "REMIC"). As described more
fully herein and in the Prospectus, the Certificates, other than the Residual
Certificates, will constitute "regular interests" in the Master REMIC. The
Residual Certificates will represent the sole class of "residual interests" in
both the Master REMIC and the Subsidiary REMIC.
The respective obligations and responsibilities of the
Depositor, the Subservicer, 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 the 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, on any Distribution Date on which
the aggregate Stated Principal Balances of the Mortgage Loans in such Loan Group
is equal to
<PAGE>
or less than 10% of the aggregate Initial Certificate Principal Balance of the
Certificates in such Mortgage Loan Group, so long as the Master Servicer
deposits or causes to be deposited in the Distribution Account during the
Principal Prepayment Period related to such Distribution Date an amount equal to
the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan in
such Loan Group (other than in respect of REO Property), (ii) accrued interest
thereon at the applicable Mortgage Rate, (iii) the appraised value of any REO
Property in such Loan Group (up to the Stated Principal Balance of the related
Mortgage Loan), such appraisal to be conducted by an appraiser mutually agreed
upon by the Depositor and the Trustee and (iv) any unreimbursed Servicing Fees,
Advances and Servicing Advances, and the principal portion of any unreimbursed
Advances, made on the Mortgage Loans in such Loan Group prior to such
Distribution Date; provided, however, that in no event shall the trust created
hereby continue beyond the earlier of (i) 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 or (ii) the Latest Possible Maturity Date.
<PAGE>
[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 Type 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.)
<PAGE>
EXHIBIT B
[RESERVED]
<PAGE>
EXHIBIT C
[RESERVED]
<PAGE>
EXHIBIT D
FORM OF CLASS R CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN EACH OF TWO "REAL ESTATE MORTGAGE INVESTMENT CONDUITS," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE
FUNDING, INC. ("CHASE FUNDING"), THE SUBSERVICER OR THE TRUSTEE REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR
INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR
INSURED BY CHASE FUNDING, CHASE MANHATTAN MORTGAGE CORPORATION, ADVANTA MORTGAGE
CORP.,USA, THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
THIS CLASS R CERTIFICATE HAS NOT BEEN AND WILL NOT BE 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 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 5.02 OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I
<PAGE>
AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND
HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR
REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE
PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY
OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH
ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO
BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET
FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF
THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND
WILL NOT SUBJECT THE TRUSTEE, THE SUBSERVICER, THE COMPANY OR ANY OF THEIR
AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES
UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
CLASS R CERTIFICATE
Number 99- -1 Percentage Interest: 100%
Cut-off Date: [Date] Pass-Through Rate: Variable
First Distribution Date:
[Date]
<PAGE>
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
Series _________
evidencing an ownership interest in distributions allocable to the Class R
certificates with respect to a pool of conventional one- to four-family mortgage
loans formed and sold by
CHASE FUNDING, INC.
This certifies that CHASE HOME MORTGAGE CORPORATION OF THE
SOUTHEAST is the registered owner of the ownership interest (the "Ownership
Interest") evidenced by this Certificate (obtained by dividing the Original
Denomination of this Certificate by the aggregate Original Denomination of all
Class R Certificates) in certain distributions with respect to a pool of
conventional, sub-prime mortgage loans (the "Mortgage Loans") formed and sold by
Chase Funding, Inc. (hereinafter called the "Depositor"), and certain other
property held in trust for the benefit of Certificateholders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage
Corporation (the "Master Servicer") and are secured by first mortgages on
Mortgaged Properties. The Trust Fund was created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of September 1, 1999 among the
Depositor, Advanta Mortgage Corp., USA, as Subservicer (the "Subservicer"), the
Master Servicer and Citibank, N.A., 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 Chase Funding Mortgage Loan Asset-Backed
Certificates, Series _________, Class R (the "Class R 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 Agreement such Holder is bound. Also
issued under the Agreement are Certificates designated as Mortgage Loan
Asset-Backed Certificates, Series _________, Class IA-1, Class IA-2, Class IA-3,
Class IA-4, Class IA-5 and Class IA-6 Certificates (collectively, the "Group I
Class A Certificates"), Class IIA-1 Certificates (the Group II Class A
Certificates"), Class IM-1 and Class IM-2 Certificates (together, the "Mezzanine
Group I Certificates"), Class IIM-1 and Class IIM-2 Certificates (together, the
"Mezzanine Group II Certificates"), Class IB Certificates (the "Class IB
Certificates") and Class IIB Certificates (the "Class IIB Certificates"). The
Group I Class A Certificates, Group II Class A Certificates, Mezzanine Group I
Certificates, Mezzanine Group II Certificates, Class IB Certificates and Class
IIB Certificates are collectively referred to herein as the "Certificates")
Pursuant to the terms of the Agreement, the Master Servicer
will distribute from funds in the Distribution Account the amount as described
on the reverse hereof on the 25th day of each month or, if such 25th day is not
a Business Day, the Business Day immediately following (the "Distribution
Date"), commencing on [Date]. Such distributions will be made to
<PAGE>
the Person in whose name this Certificate is registered at the close of business
on the last Business Day of the month preceding the month in which such payment
is made, or if such last day is not a Business Day, the Business Day immediately
preceding such last day.
Distributions on this Certificate will be made 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 5 Business Days prior to the first
Distribution Date for which distribution by wire transfer is to be made, and
such Holder's Certificates evidence an aggregate original principal balance of
not less than $1,000,000 or such Holder holds a 100% Percentage Interest of such
Class. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Master Servicer of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office of the Master Servicer or at such other office as may be designated by
such notice of final distribution.
The Master Servicer will maintain or cause to be maintained a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Master Servicer 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 Master Servicer,
or, if an Authenticating has been appointed under the Agreement, the
Authenticating Agent, maintained for such purpose, the Master Servicer, or, if
an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, 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 dated the date of authentication
by the Authenticating Agent. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Master Servicer of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Master Servicer, for that
purpose and specified in such notice of final distribution.
Reference is hereby made to the further provisions of this
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 has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed.
Dated: [Date] CHASE FUNDING, INC.
By:
Name: Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R
Certificates referred to
in the within-mentioned
Agreement.
THE CHASE MANHATTAN BANK
as Authenticating Agent
By:
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
SERIES _________
This Certificate is one of a duly authorized issue of
Certificates, designated as Chase Funding Mortgage Loan Asset-Backed
Certificates, Series ________, issued in [six] Classes of Group I Class A
Certificates, [one] Class of Group II Class A Certificates, [two] Classes of
Mezzanine Group I Certificates, [two] Classes of Mezzanine Group II
Certificates, [one] Class of Class IB Certificates and [one] Class of Class IIB
Certificates, each evidencing an interest in certain Distributions with respect
to a pool of conventional, sub-prime Mortgage Loans formed and sold by the
Depositor and certain other property conveyed by the Depositor to the Trustee.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Master Servicer will maintain or cause to be maintained a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Master Servicer 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 Master Servicer,
or, if an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, maintained for such purpose, the Master Servicer, or, if
an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, 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 dated the date of authentication
by the Authenticating Agent. Notwithstanding the above, the final Distribution
on this Certificate will be made after due notice by the Master Servicer of the
pendency of such Distribution and only upon presentation and surrender of this
Certificate at the office of the Master Servicer or at such other office as may
be designated by such notice of final Distribution.
<PAGE>
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee, or, or, if an Authenticating
Agent has been appointed under the Agreement, the Authenticating Agent, 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 Subservicer, the Master 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 Master Servicer, the
Subservicer, the Authenticating Agent nor the Trustee will be affected by notice
to the contrary.
The Agreement may be amended from time to time by the
Depositor, the Master Servicer, the Subservicer and the Trustee, without the
consent of any of the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions therein which may be inconsistent with the other
provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC,
or 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, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Depositor, the Subservicer, the Master Servicer and the Trustee with the consent
of the Holders of Certificates evidencing in the aggregate not less than 66 2/3%
of the Percentage Interests of each Class of Certificates affected thereby 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, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing 66 2/3% or more
of the Voting Rights of such Class or (iii) change the percentage specified in
clause (ii) of the third paragraph of Section 10.01 of the Agreement, without
the consent of the Holders of all Certificates of such Class then outstanding.
For federal income tax purposes, the Trust Fund includes two
segregated asset pools. The Depositor intends to make an election to treat each
as a "real estate mortgage investment conduit" (a "REMIC"). The Certificates,
other than the Residual Certificates, will constitute "regular interests" in the
Master REMIC. The Residual Certificates will represent the sole class of
"residual interests" in both the Master REMIC and the Subsidiary REMIC.
<PAGE>
The respective obligations and responsibilities of the
Depositor, the Subservicer, 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 the 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, on any Distribution Date on which
the aggregate Stated Principal Balances of the Mortgage Loans in such Loan Group
is equal to or less than 10% of the initial Certificate Principal Balance of the
Certificates in such Mortgage Loan Group, so long as the Master Servicer
deposits or causes to be deposited in the Distribution Account during the
Principal Prepayment Period related to such Distribution Date an amount equal to
the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan in
such Loan Group (other than in respect of REO Property), (ii) accrued interest
thereon at the applicable Mortgage Rate, (iii) the appraised value of any REO
Property in such Loan Group (up to the Stated Principal Balance of the related
Mortgage Loan), such appraisal to be conducted by an appraiser mutually agreed
upon by the Depositor and the Trustee and (iv) any unreimbursed Servicing Fees,
Advances and Servicing Advances, and the principal portion of any unreimbursed
Advances, made on the Mortgage Loans in such Loan Group prior to such
termination; provided, however, that in no event shall the trust created hereby
continue beyond the earlier of (i) 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 or
(ii) 32 years after the Closing Date.
<PAGE>
[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 Type 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.)
<PAGE>
EXHIBIT E
[RESERVED]
<PAGE>
EXHIBIT F
SCHEDULE OF MORTGAGE LOANS
<PAGE>
EXHIBIT H
FORM OF TRUSTEE CERTIFICATION
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Re: Pooling and Servicing Agreement dated as of [Date] among Chase
Funding, Inc. as depositor, Advanta Mortgage Corp. USA, as
subservicer, Chase Manhattan Mortgage Corporation, as master
servicer and Citibank, N.A., as trustee, Chase Funding, Inc.,
Chase Funding Mortgage Loan Asset-Backed Certificates, Series
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in
the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that:
(i) All documents in the Mortgage File required to be
delivered to the Trustee pursuant to Section 2.01 of the Pooling and Servicing
Agreement are in its possession;
(ii) In connection with each Mortgage Loan or Assignment
thereof as to which documentary evidence of recording was not received on the
Closing Date, it has received evidence of such recording; and
(iii) Such documents have been reviewed by it and such
documents do not contain any material omissions or defects within the meaning of
Section 2.01 or 2.02.
The Trustee further certifies that as to each Mortgage Loan,
the Trustee holds the Mortgage Note without any Responsible Officer of the
Trustee having received written notice (a) of any adverse claims, liens or
encumbrances, (b) that any Mortgage Note was overdue or has been dishonored, (c)
of evidence on the face of any Mortgage Note or Mortgage of any security
interest therein, or (d) of any defense against or claim to the Mortgage Note by
any other party.
<PAGE>
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond confirming (i) that the
Mortgage Loan number and the name of the Mortgagor in each Mortgage File conform
to the respective Mortgage Loan number and name listed on the Mortgage Loan
Schedule and (ii) the existence in each Mortgage File of each of the documents
listed in subparagraphs (i)(A) through (G), inclusive, of Section 2.01 in the
Agreement. The Trustee makes no representations or warranties as to the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage Loan or the collectibility, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
CITIBANK, N.A.,
as Trustee
By: _____________________________
Name: _______________________
Title: ______________________
<PAGE>
EXHIBIT I
FORM OF TRANSFEREE'S LETTER
CHASE FUNDING, INC., CHASE FUNDING MORTGAGE LOAN
ASSET-BACKED CERTIFICATES, SERIES ________
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Ladies and Gentlemen:
We propose to purchase Chase Funding, Inc., Chase Funding Mortgage
Loan Asset-Backed Certificates, Series ________, Class R, described in the
Prospectus Supplement, dated [Date], and Prospectus, dated [Date].
1. We certify that (a) we are not a disqualified organization and
(b) we are not purchasing such Class R Certificates on behalf of a disqualified
organization; for this purpose the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.
2. We certify that (a) we have historically paid our debts as they
became due, (b) we intend, and believe that we will be able, to continue to pay
our debts as they become due in the future, (c) we understand that, as
beneficial owner of the Class R Certificates, we may incur tax liabilities in
excess of any cash flows generated by the Class R Certificates, and (d) we
intend to pay any taxes associated with holding the Class R Certificates as they
become due.
<PAGE>
3. We acknowledge that we will be the beneficial owner of the
Class R Certificates and:1/
______ The Class R Certificates will be registered in our name.
______ The Class R Certificates will be held in the
name of our nominee,
_________________, which is not a disqualified
organization.
4. Unless Chase Funding, Inc. ("Chase Funding") has consented
to the transfer to us by executing the form of Consent affixed hereto as
Appendix B, we certify that we are a U.S. person; for this purpose the term
"U.S. person" means a citizen or resident of the United States, a corporation,
or partnership (unless, in the case of a partnership, Treasury regulations are
adopted that provide otherwise) created or organized in or under the laws of the
United States, any State thereof or the District of Columbia, including an
entity treated as a corporation or partnership for federal income tax purposes,
an estate whose income is subject to United States federal income tax regardless
of the source of its income, or a trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more such U.S. persons have the authority to control all substantial
decisions of the trust (or, to the extent provided in applicable Treasury
regulations, certain trusts in existence on August 20, 1996 which are eligible
to elect to be treated as U.S. Persons. We agree that any breach by us of this
certification shall render the transfer of any interest in the Class R
Certificates to us absolutely null and void and shall cause no rights in the
Class R Certificates to vest in us.
5. We agree that in the event that at some future time we wish
to transfer any interest in the Class R Certificates, we will transfer such
interest in the Class R Certificates only (a) to a transferee that (i) is not a
disqualified organization and is not purchasing such interest in the Class R
Certificates on behalf of a disqualified organization, (ii) is a U.S. person and
(iii) has delivered to Chase Funding a letter in the form of this letter
(including the affidavit appended hereto) and, if requested by Chase Funding, an
opinion of counsel (in a form acceptable to Chase Funding) that the proposed
transfer will not cause the interest in the Class R Certificates to be held by a
disqualified organization or a person who is not a U.S. person or (b) with the
written consent of Chase Funding.
- --------------------
1/ Check appropriate box and if necessary fill in the name of the Transferee's
nominee.
<PAGE>
6. We hereby designate Chase Manhattan Mortgage Corporation as
our fiduciary to act as the tax matters person for the Chase Funding, Inc.,
Chase Funding Mortgage Loan Asset-Backed Certificates, Series ________ REMIC.
Very truly yours,
[PURCHASER]
By:
Name:
Title:
Accepted as of __________ __, 199_
CHASE FUNDING, INC.
By:
Name:
Title:
<PAGE>
APPENDIX A
Affidavit pursuant to (i)
Section 860E(e)(4) of the
Internal Revenue Code of
1986, as amended, and (ii)
certain provisions of the
Pooling and Servicing
Agreement
Under penalties of perjury, the undersigned declares that the following is true:
(1) He or she is an officer of _________________________ (the "Transferee"),
(2) the Transferee's Employee Identification number is __________,
(3) the Transferee is not a "disqualified organization" (as defined below),
has no plan or intention of becoming a disqualified organization, and
is not acquiring any of its interest in the Chase Funding, Inc., Chase
Funding Mortgage Loan Asset-Backed Certificates, Series 1999-3, Class R
on behalf of a disqualified organization or any other entity,
(4) unless Chase Funding, Inc. ("Chase Funding") has consented to the
transfer to the Transferee by executing the form of Consent affixed as
Appendix B to the Transferee's Letter to which this Certificate is
affixed as Appendix A, the Transferee is a "U.S. person" (as defined
below),
(5) that no purpose of the transfer is to avoid or impede the assessment or
collection of tax,
(6) the Transferee has historically paid its debts as they became due,
(7) the Transferee intends, and believes that it will be able, to continue
to pay its debts as they become due in the future,
(8) the Transferee understands that, as beneficial owner of the Class R
Certificates, it may incur tax liabilities in excess of any cash flows
generated by the Class R Certificates,
(9) the Transferee intends to pay any taxes associated with holding the
Class R Certificates as they become due, and
(10) the Transferee consents to any amendment of the Pooling and Servicing
Agreement that shall be deemed necessary by Chase Funding (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the
Class R Certificates will not be owned directly or indirectly by a
disqualified organization;
<PAGE>
For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code and the term
"U.S. Person" means a citizen or resident of the United States, a corporation or
partnership (unless, in the case of a partnership, Treasury regulations are
adopted that provide otherwise) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia, including an
entity treated as a corporation or partnership for federal income tax purposes,
an estate whose income is subject to Unites States federal income tax regardless
of its source, or a trust if a court within the United States is able to
exercise primary supervision over the administration of such trust, and one or
more such U.S. Persons have the authority to control all substantial decisions
of such trust, (or, to the extent provided in applicable Treasury regulations,
certain trusts in existence on August 20, 1996 which are eligible to elect to be
treated as U.S. Persons).
---------------------------------
By:
----------------------------------
---------------------------------
Address of Investor for receipt of distribution:
Address of Investor for receipt of tax information:
(Corporate Seal)
Attest:
----------------------------------
________________________, Secretary
<PAGE>
Personally appeared before me the above-named ______________, known or
proved to me to be the same person who executed the foregoing
instrument and to be the _______ of the Investor, and acknowledged to
me that he executed the same as his free act and deed and the free act
and deed of the Investor.
Subscribed and sworn before me this day of , 19 .
Notary Public
County of ______
State of _______
My commission expires the _____day of________
By: __________________________
Name: ___________________
Title: ___________________
Dated: _____________
<PAGE>
APPENDIX B
CONSENT
_________________________ (Transferee)
_________________________
_________________________
Ladies and Gentlemen:
Chase Funding, Inc. ("Chase Funding") hereby consents to the
transfer to, and registration in the name of, the Transferee (or, if applicable,
registration in the name of such Transferee's nominee of the Chase Funding Inc.,
Chase Funding Mortgage Loan Asset-Backed Certificates, Series _______, Class R
described in the Transferee's Letter to which this Consent is appended,
notwithstanding Chase Funding's knowledge that the Transferee is not a U.S.
person (as defined in such Transferee's Letter).
CHASE FUNDING, INC.
Dated: By:
<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE FOR
CLASS R CERTIFICATES
Chase Funding, Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Citibank, N.A., as Trustee
111 Wall Street
5th Floor, Zone 1
New York, NY 10043
RE: Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed
Certificates, Series _________
Ladies and Gentlemen:
In connection with our disposition of the Class R Certificates, we
certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action that would result in, a violation of Section 5 of the Act and
(c) if we are disposing of a Class R Certificate, we have no knowledge the
Transferee is not a Permitted Transferee. All capitalized terms used herein but
not defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement dated as of September 1, 1999, among Chase Funding, Inc., as
Depositor, Advanta Mortgage Corp. USA as Subservicer, Chase Manhattan Mortgage
Corporation as Master Servicer and Citibank, N.A., as Trustee.
Very truly yours,
Name of Transferor
By:
Name:
Title
<PAGE>
EXHIBIT K
FORM OF INVESTMENT LETTER
(Accredited Investor)
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Re: Pooling and Servicing Agreement dated as of [Date] among Chase Funding,
Inc. as depositor, Advanta Mortgage Corp. USA, as subservicer, Chase
Manhattan Mortgage Corporation, as master servicer and Citibank, N.A., as
trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [Class B-]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Mortgage Loan Asset-Backed Certificates, Series
________, [Class B-] (the "Certificates"), issued pursuant to a pooling and
servicing agreement, dated as of [Date] (the "Pooling and Servicing Agreement"),
among Chase Funding, Inc. as depositor (the "Depositor"), Advanta Mortgage Corp.
USA as subservicer (the "Subservicer"), Chase Manhattan Mortgage Corporation, as
master servicer (the "Master Servicer") and Citibank, N.A., as trustee (the
"Trustee"). [The Purchaser intends to register the Transferred Certificate in
the name of ____________________, as nominee for _________________.] All terms
used and not otherwise defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have
not been registered or qualified under the Securities Act of 1933, as amended
(the "Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.
<PAGE>
2. The Certificates will bear a legend to the following effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE "1940 ACT") OR ANY STATE
SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT, DIRECTLY OR
INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR
SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION
UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING
AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE
UNLESS THE MASTER SERVICER SHALL HAVE RECEIVED, IN FORM AND
SUBSTANCE SATISFACTORY TO THE MASTER SERVICER (A) AN
INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR; AND (B)
REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE OFFERING AND
SALE OF THE CERTIFICATES.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE
DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION
LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT
THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT
PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY
CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED
FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE
ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS
FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY
GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY
12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND
SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE
PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS
CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A
PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR
COMPARABLE
<PAGE>
PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY
SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY
SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO
THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE
WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED
TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN
ASSET REGULATIONS SET FORTH IN 29 CFR ss.2510.3-101 AND TO BE
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR
THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT
CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975
OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
SUBSERVICER, THE MASTER SERVICER, THE DEPOSITOR OR ANY OF
THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING
OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE
CODE) RELATING TO THE CERTIFICATES.
3. The Purchaser is acquiring the Transferred Certificates for
its own account [for investment only]**/ and not with a view to or for sale or
other transfer in connection with any distribution of the Transferred
Certificates in any manner that would violate the Securities Act or any
applicable state securities laws, subject, nevertheless, to the understanding
that disposition of the Purchaser's property shall at all times be and remain
within its control.
4. The Purchaser (a) is a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters, and in particular in such matters related to securities
similar to the Certificates, such that it is capable of evaluating the merits
and risks of investment in the Certificates, (b) is able to bear the economic
risks of such an investment and (c) is an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Securities Act.
5. The Purchaser will not nor has it authorized nor will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
<PAGE>
advertising or in any other manner with respect to the Certificates. The
Purchaser will not sell or otherwise transfer any of the Certificates, except in
compliance with the provisions of the Pooling and Servicing Agreement.
- --------------------
**/ Not required of a broker/dealer purchaser.
6. [This paragraph may be deleted if the Purchaser provides
the Opinion of Counsel referred to in clause (ii) of Section 5.02(b) of the
Pooling and Servicing Agreement.] The Purchaser either (A) is not an employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or a plan within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")
(each, a "Plan"), and is not directly or indirectly purchasing any Certificate
on behalf of, as investment manager of, as named fiduciary of, as trustee of or
with assets of a Plan or directly or indirectly purchasing any certificates with
the assets of any insurance company separate account or of any Plan or (B) is an
insurance company and the source of funds for the purchase of the certificates
is an "insurance company general account" within the meaning of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995), and the conditions set forth in Section I and III of PTCE 95-60 are
satisfied with respect to the purchase and holding of the Certificates.
7. Prior to the sale or transfer by the Purchaser of any of
the Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit L to the Pooling and Servicing Agreement.
8. The Purchaser agrees to indemnify the Trustee, the Master
Servicer, the Subservicer and the Depositor against any liability that may
result from any misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:
Name:
Title:
<PAGE>
EXHIBIT L
FORM OF RULE 144A INVESTMENT LETTER
(Qualified Institutional Buyer)
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Chase Manhattan Mortgage Corporation
c/o The Chase Manhattan Bank
Global Trust Services
450 West 33rd Street, 15th Floor
New York, New York 10001
Re: Pooling and Servicing Agreement dated as of [Date] among Chase Funding,
Inc. as depositor, Advanta Mortgage Corp., USA, as subservicer, Chase
Manhattan Mortgage Corporation, as master servicer and Citibank, N.A., as
trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [Class B-]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Asset-Backed Certificates, Series ______, [Class
B-] (the "Certificates"), issued pursuant to a pooling and servicing agreement,
dated as of [Date] (the "Pooling and Servicing Agreement"), among Chase Funding,
Inc. as depositor (the "Depositor"), Advanta Mortgage Corp., USA, as subservicer
(the "Subservicer"), Chase Manhattan Mortgage Corporation, as master servicer
(AMaster Servicer@), and Citibank, N.A., as trustee (the "Trustee"). [The
Purchaser intends to register the Transferred Certificate in the name of
____________________, as nominee for __________________.] All terms used and not
otherwise defined herein shall have the meanings set forth in the Trust
Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
In connection with our acquisition of the above Transferred
Certificates we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as
<PAGE>
amended (the "Act"), or any state securities laws and are being transferred to
us in a transaction that is exempt from the registration requirements of the Act
and any such laws, (b) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks of
investments in the Certificates, (c) we have had the opportunity to ask
questions of and receive answers from the Depositor concerning the purchase of
the Transferred Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Transferred
Certificates, (d) we are not an employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
or a plan within the meaning of Section 4975 of the Internal Revenue Code of
1986, as amended (each, a "Plan"), nor are we directly or indirectly purchasing
any Certificate on behalf of, as investment manager of, as named fiduciary of,
as trustee of or with assets of a Plan or directly or indirectly purchasing any
certificates with the assets of any insurance company separate account or of any
Plan [or alternatively, in the case of an insurance company, is an insurance
company and the source of funds for the purchase of the certificates] is an
"insurance company general account" within the meaning of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60"), 50 Fed. Reg. 35925 (July 12, 1995), and
the conditions set forth in Section I and Section III of PTCE 95-60 are
satisfied with respect to the purchase and holding of the Certificates, (e) we
have not, nor has anyone acting on our behalf offered, transferred, pledged,
sold or otherwise disposed of the Certificates, any interest in the Certificates
or any other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Certificates, any interest in the
Certificates or any other similar security from, or otherwise approached or
negotiated with respect to the Certificates, any interest in the Certificates or
any other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken
any other action, that would constitute a distribution of the Certificates under
the Securities Act or that would render the disposition of the Certificates a
violation of Section 5 of the Securities Act or require registration pursuant
thereto, nor will act, nor has authorized or will authorize any person to act,
in such manner with respect to the Certificates, (f) we are a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act and have completed one of the forms of certification to that effect attached
hereto as Annex 1 or Annex 2. We are aware that the sale of the Transferred
Certificates to us is being made in reliance on Rule 144A. We are acquiring the
Transferred Certificates for our own account or for resale pursuant to Rule 144A
and further understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed by us, based upon
certifications of such purchaser or information we have in our possession, to be
a qualified institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.
<PAGE>
We agree to indemnify the Trustee, the Master Servicer, the Subservicer
and the Depositor against any liability that may result from any
misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:
Name:
Title:
<PAGE>
ANNEX 1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with the purchases by the Buyer, the Buyer is
a "qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $____________*/ in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
____ Corporation, etc. The Buyer is a
corporation (other than a bank,
savings and loan association or
similar institution), Massachusetts
or similar business trust,
partnership, or charitable
organization described in Section
501(c)(3) of the Internal Revenue
Code of 1986, as amended.
____ Bank. The Buyer (a) is a national
bank or banking institution
organized under the laws of any
State, territory or the District of
Columbia, the business of which is
substantially confined to banking
and is supervised by Federal, State
or territorial banking commission or
similar official or is a foreign
bank or equivalent institution, and
(b) has an audited net worth of at
least $25,000,000 as demonstrated in
its latest annual financial
statements, a copy of which is
attached hereto.
- --------------------
* Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own
and/or invest on a discretionary basis at least $10,000,000 in securities.
<PAGE>
____ Savings and Loan. The Buyer (a) is a
savings and loan association,
building and loan association,
cooperative bank, homestead
association or similar institution,
which is supervised and examined by
a State or Federal authority having
supervision over such institution or
is a foreign savings and loan
association or equivalent
institution and (b) has an audited
net worth of at least $25,000,000 as
demonstrated in its latest annual
financial statements, a copy of
which is attached hereto.
____ Broker-dealer. The Buyer is a dealer
registered pursuant to Section 15 of
the Securities Exchange Act of 1934,
as amended.
____ Insurance Company. The Buyer is an
insurance company whose primary and
predominant business activity is the
writing of insurance or the
reinsuring of risks underwritten by
insurance companies and which is
subject to supervision by the
insurance commissioner or a similar
official or agency of the State,
territory or the District of
Columbia.
____ State or Local Plan. The Buyer is a
plan established and maintained by a
State, its political subdivisions,
or any agency or instrumentality of
the State or its political
subdivisions, for the benefit of its
employees.
____ ERISA Plan. The Buyer is an employee
benefit plan within the meaning of
Title I of the Employee Retirement
Income Security Act of 1974, as
amended.
____ Investment Advisor. The Buyer is an
investment advisor registered under
the Investment Advisors Act of 1940,
as amended.
____ Small Business Investment Company.
Buyer is a small business investment
company licensed by the U.S. Small
Business Administration under
Section 301(c) or (d) of the Small
Business Investment Act of 1958, as
amended.
____ Business Development Company. Buyer
is a business development company as
defined in Section 202(a)(22) of the
Investment Advisors Act of 1940, as
amended.
3. The term "securities" as used for purposes of the
calculation of the dollar amount in paragraph 2 excludes: (i) securities of
issuers that are affiliated with the Buyer, (ii) securities
<PAGE>
that are part of an unsold allotment to or subscription by the Buyer, if the
Buyer is a dealer, (iii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph, except (i) where the
Buyer reports its securities holdings in its financial statements on the basis
of their market value, and (ii) no current information with respect to the cost
of those securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by subsidiaries
of the Buyer, but only if such subsidiaries are consolidated with the Buyer in
its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed
under the Buyer's direction. However, such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting company under the Securities Exchange Act of
1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A
and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
6. Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan as provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
By:
Name:
Title:
Date:
<PAGE>
ANNEX 2
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is
an investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
____ The Buyer owned $___________ in
securities (other than the excluded
securities referred to below) as of
the end of the Buyer's most recent
fiscal year (such amount being
calculated in accordance with Rule
144A).
____ The Buyer is part of a Family of
Investment Companies which owned in
the aggregate $__________ in
securities (other than the excluded
securities referred to below) as of
the end of the Buyer's most recent
fiscal year (such amount being
calculated in accordance with Rule
144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
By:
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
Date:
<PAGE>
EXHIBIT M
REQUEST FOR RELEASE OF DOCUMENTS
To: Citibank, N.A.
111 Wall Street
5th Floor, Zone 1
New York, NY 10043 Citibank, N.A.
[and/or its designee]
Re:
In connection with the administration of the Mortgage Loans held by
you, as Trustee, pursuant to the above-captioned Pooling and Servicing
Agreement, we request the release, and hereby acknowledge receipt, of the
Mortgage File for the Mortgage Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_______ 1. Mortgage Loan Paid in Full (Subservicer hereby certifies that
all amounts received in connection therewith have been credited
to the Collection Account)
_______ 2. Mortgage Loan Liquidated (Subservicer hereby certifies that all
proceeds of foreclosure, insurance or other liquidation have
been received and credited to the Collection Account
_______ 3. Mortgage Loan Repurchased pursuant to Section 2.03(c) of the
Pooling and Servicing Agreement
_______ 4. Mortgage Loan in Foreclosure
_______ 5. Mortgage Loan Repurchased or Substituted pursuant to the terms
of the Pooling and Servicing Agreement (Subservicer hereby
certifies that the Purchase Price or Substitution Adjustment
Amount has credited to the Collection Account)
_______ 6. Other
Reason:
By:
(authorized signer)
Address:
Date:
<PAGE>
If box 1 or 2 above is checked, and if all or part of the Mortgage File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all of the above
documents to you as Trustee [or Trustee's designee], please acknowledge your
receipt by signing in the space indicated below, and returning this form.
Trustee
Citibank, N.A.
Please acknowledge the execution of the above request by your signature and date
below:
Signature Date
Documents returned to Trustee:
Trustee Date
<PAGE>
CHASE MANHATTAN ACCEPTANCE CORPORATION,
DEPOSITOR,
CHASE MANHATTAN MORTGAGE CORPORATION,
SERVICER
and
[TRUSTEE]
TRUSTEE
POOLING AND SERVICING AGREEMENT
Dated as of [DATE]
$----------------
Multi-Class Mortgage Pass-Through Certificates
Series [ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C>
DEFINITIONS....................................................................................................
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND.......................................................................
Section 2.01. Conveyance of Mortgage Loans............................................................
Section 2.02. Acceptance by Trustee...................................................................
Section 2.03. Trust Fund; Authentication of Certificates..............................................
Section 2.04. REMIC Election..........................................................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS.....................................................................
Section 3.01. Representations and Warranties of the Depositor with respect to the
Mortgage Loans..........................................................................
Section 3.02. Representations and Warranties of the Servicer..........................................
Section 3.03. Option to Substitute....................................................................
ARTICLE IV
THE CERTIFICATES...............................................................................................
Section 4.01. The Certificates........................................................................
Section 4.02. Registration of Transfer and Exchange of Certificates...................................
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates.......................................
Section 4.04. Persons Deemed Owners...................................................................
Section 4.05. Appointment of Paying Agent; Certificate Account........................................
Section 4.06. Authenticating Agents...................................................................
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.................................................................
Section 5.01. Servicer to Service Mortgage Loans......................................................
Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers;
Enforcement of Sub-Servicer's Obligations...............................................
Section 5.03. Successor Sub-Servicers.................................................................
Section 5.04. Liability of the Servicer...............................................................
Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee or
Certificateholders......................................................................
Section 5.06. Termination of Sub-Servicing Agreement..................................................
Section 5.07. Collection of Mortgage Loan Payments....................................................
Section 5.08. Establishment of Collection Account; Deposit in Collection Account......................
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.09. Permitted Withdrawals from the Collection Account.......................................
Section 5.10. Establishment of Escrow Account; Deposits in Escrow Account.............................
Section 5.11. Permitted Withdrawals from Escrow Account...............................................
Section 5.12. Payment of Taxes, Insurance and Other Charges...........................................
Section 5.13. Transfer of Accounts....................................................................
Section 5.14. [Reserved]..............................................................................
Section 5.15. Maintenance of the Primary Insurance Policies...........................................
Section 5.16. Maintenance of Standard Hazard Policies.................................................
Section 5.17. [Reserved]..............................................................................
Section 5.18. [Reserved]..............................................................................
Section 5.19. Fidelity Bond and Errors and Omissions Insurance........................................
Section 5.20. Collections under Insurance Policies; Enforcement of Due-On-Sale
Clauses; Assumption Agreements..........................................................
Section 5.21. Income and Realization from Defaulted Mortgage Loans....................................
Section 5.22. Trustee to Cooperate; Release of Mortgage Files.........................................
Section 5.23. Servicing and Other Compensation........................................................
Section 5.24. 1934 Act Reports........................................................................
Section 5.25. Annual Statement as to Compliance.......................................................
Section 5.26. Annual Independent Public Accountants' Servicing Report.................................
Section 5.27. Access to Certain Documentation; Rights of the Depositor in Respect of
the Servicer............................................................................
Section 5.28. REMIC-Related Covenants.................................................................
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS.............................................................................
Section 6.01. Distributions...........................................................................
Section 6.02. Statements to the Certificateholders....................................................
Section 6.03. Advances by the Servicer................................................................
Section 6.04. Allocation of Realized Losses...........................................................
Section 6.05. Compensating Interest; Allocation of Certain Interest Shortfalls........................
Section 6.06. Subordination...........................................................................
Section 6.07. Determination of LIBOR..................................................................
ARTICLE VII
REPORTS TO BE PREPARED BY THE SERVICER.........................................................................
Section 7.01. Servicer Shall Provide Information as Reasonably Required..................................
Section 7.02. Federal Information Returns and Reports to Certificateholders..............................
ARTICLE VIII
THE DEPOSITOR AND THE SERVICER.................................................................................
Section 8.01. Indemnification; Third Party Claims.....................................................
Section 8.02. Merger or Consolidation of the Depositor or the Servicer................................
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 8.03. Limitation on Liability of the Depositor, the Servicer, the Trustee and
Others..................................................................................
Section 8.04. Depositor and Servicer Not to Resign....................................................
Section 8.05. Successor to the Servicer...............................................................
Section 8.06. Maintenance of Ratings..................................................................
ARTICLE IX
DEFAULT........................................................................................................
Section 9.01. Events of Default.......................................................................
Section 9.02. Waiver of Defaults......................................................................
Section 9.03. Trustee to Act; Appointment of Successor................................................
Section 9.04. Notification to Certificateholders and the Rating Agencies..............................
ARTICLE X
CONCERNING THE TRUSTEE.........................................................................................
Section 10.01. Duties of Trustee.......................................................................
Section 10.02. Certain Matters Affecting the Trustee...................................................
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans...................................
Section 10.04. Trustee May Own Certificates............................................................
Section 10.05. Fees and Expenses.......................................................................
Section 10.06. Eligibility Requirements for Trustee....................................................
Section 10.07. Resignation and Removal of the Trustee..................................................
Section 10.08. Successor Trustee.......................................................................
Section 10.09. Merger or Consolidation of Trustee......................................................
Section 10.10. Appointment of Co-Trustee or Separate Trustee...........................................
Section 10.11. Appointment of Office or Agency.........................................................
ARTICLE XI
TERMINATION....................................................................................................
Section 11.01. Termination.............................................................................
ARTICLE XII
MISCELLANEOUS PROVISIONS.......................................................................................
Section 12.01. Severability of Provisions..............................................................
Section 12.02. Limitation on Rights of Certificateholders..............................................
Section 12.03. Amendment...............................................................................
Section 12.04. Counterparts............................................................................
Section 12.05. Duration of Agreement...................................................................
Section 12.06. Governing Law...........................................................................
Section 12.07. Notices.................................................................................
</TABLE>
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EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B CONTENTS OF MORTGAGE FILE
EXHIBIT C FORMS OF CLASS A CERTIFICATES
EXHIBIT D FORM OF CLASS M CERTIFICATE
EXHIBIT E FORMS OF CLASS B CERTIFICATES
EXHIBIT F FORM OF CLASS A-R CERTIFICATE
EXHIBIT G FORM OF TRUSTEE CERTIFICATION
EXHIBIT H FORM OF INVESTMENT LETTER
EXHIBIT I FORM OF RULE 144A INVESTMENT LETTER
EXHIBIT J FORM OF SPECIAL SERVICING AGREEMENT
EXHIBIT K FORM OF CLASS A-R TRANSFER LETTER
EXHIBIT L REQUEST FOR RELEASE
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<PAGE>
This Pooling and Servicing Agreement, dated as of [DATE], is
executed among Chase Manhattan Acceptance Corporation, as depositor (together
with its permitted successors and assigns, the "Depositor"), Chase Manhattan
Mortgage Corporation, as servicer (together with its permitted successors and
assigns, the "Servicer") and [TRUSTEE], as trustee (together with its permitted
successors and assigns, the "Trustee").
In consideration of the premises and the mutual agreements
hereinafter set forth, the Depositor, the Servicer and the Trustee agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
ACCEPTED SERVICING PRACTICES: With respect to any Mortgage
Loan, those mortgage servicing practices (including collection procedures) of
prudent mortgage banking institutions which service mortgage loans of the same
type as such Mortgage Loan in the jurisdiction where the related Mortgaged
Property is located, and which are in accordance with FNMA servicing practices
and procedures, for MBS pool mortgages, as defined in the FNMA Guides including
future updates.
ADJUSTED LOCK-OUT PERCENTAGE: Equals (i) for any Distribution
Date prior to the Distribution Date in [MONTH/YEAR], 0% and (ii) for any
Distribution Date on or after the Distribution Date in [MONTH/YEAR], the
Lock-out Percentage.
ADVANCE: The aggregate of the advances made by the Servicer
with respect to a particular Distribution Date pursuant to Section 6.03.
AGGREGATE CLASS A INTEREST ACCRUAL AMOUNT: On any
Distribution Date, an amount equal to the sum of the Class A-1 Interest Accrual
Amount, the Class A-2 Interest Accrual Amount, the Class A-3 Interest Accrual
Amount, the Class A-4 Interest Accrual Amount, the Class A-5 Interest Accrual
Amount, the Class A-6 Interest Accrual Amount, the Class A-7 Interest Accrual
Amount, the Class A-R Interest Accrual Amount and the Class A-X Interest Accrual
Amount.
AGGREGATE CLASS A INTEREST SHORTFALL: On any Distribution
Date, an amount equal to the sum of the Class A-1 Shortfall, the Class A-2
Shortfall, the Class A-3 Shortfall, the Class A-4 Shortfall, the Class A-5
Shortfall, the Class A-6 Shortfall, the Class A-7 Shortfall, the Class A-R
Shortfall and the Class A-X Shortfall.
<PAGE>
AGREEMENT: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
APPRAISED VALUE: The value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.
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.
AUTHENTICATING AGENT: The meaning specified in Section 4.06.
AVAILABLE DISTRIBUTION AMOUNT: On 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 except:
(a) amounts received on particular Mortgage Loans as late
payments or other recoveries of principal or interest (including
Liquidation Proceeds, Insurance Proceeds and condemnation awards) and
respecting which the Servicer previously made an unreimbursed Advance
of such amounts;
(b) reimbursement for Nonrecoverable Advances and other
amounts permitted to be withdrawn by the Servicer pursuant to Section
5.09 from, or not required to be deposited in, the Collection Account;
(c) amounts representing the Servicing Fee with respect to
such Distribution Date;
(d) amounts representing all or part of a Monthly Payment due
(i) after the related Due Period or (ii) on or prior to the Cut-off
Date;
(e) all Repurchase Proceeds, Principal Prepayments,
Liquidation Proceeds, Insurance Proceeds and condemnation awards with
respect to 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
(f) all income from Eligible Investments held in the
Collection Account for the account of the Servicer.
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BANKRUPTCY AMOUNT: As of any date of determination, $_________
minus all Bankruptcy Losses on the Mortgage Loans, if any, previously allocated
to the Certificates in accordance with Section 6.04.
BANKRUPTCY LOSS: With respect to any Mortgage Loan, a Realized
Loss resulting from a Deficient Valuation or Debt Service Reduction.
BOOK-ENTRY CERTIFICATES: The Class A Certificates (other than
the Class A-R and Class A-X Certificates), referred to collectively.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, (b)
a legal holiday in the State of New York or (c) a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to be closed.
CARRY-OVER SUBORDINATED PRINCIPAL AMOUNT: As of any
Distribution Date, with respect to any Class of Subordinated Certificates, an
amount, if any, equal to the amount of principal distributable to such Class on
any prior Distribution Date that has not been so distributed.
CASH LIQUIDATION: Recovery of all cash proceeds by the
Servicer with respect to the liquidation of any Mortgage Loan, including
Insurance Proceeds and other payments or recoveries (whether made at one time or
over a period of time) which the Servicer deems to be finally recoverable, in
connection with the sale, assignment or satisfaction of such Mortgage Loan,
trustee's sale, foreclosure sale or otherwise, but only if title to the related
Mortgaged Property was not acquired by foreclosure or deed in lieu of
foreclosure by the Servicer pursuant to Section 5.21.
CERTIFICATE: Any Class A, Class M or Class B Certificate.
CERTIFICATE ACCOUNT: The account created and maintained
pursuant to Section 4.05.
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 Depositor, the
Servicer, any Sub-Servicer, or any of their respective affiliates shall be
disregarded 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. The Trustee shall be entitled to conclusively rely upon the
certificate of the Depositor or the Servicer as to the determination of which
Certificates are registered in the name of such affiliates.
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<PAGE>
CERTIFICATE OWNER: Any Person who is the beneficial owner of a
Book-Entry Certificate registered in the name of the Depository or its nominee.
CERTIFICATE RATE: The per annum rate of interest borne by each
Class of Certificates (other than the Class A-P Certificates), which rate shall
equal ___% with respect to the Class A-1, Class A-2, Class A-3, Class A-4, Class
A-7, Class A-R, Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class
B-5 Certificates. In the case of the Class A-5 Certificates, the Certificate
Rate shall equal _____% with respect to the [DATE] Distribution Date, and with
respect to any Distribution Date thereafter, the Certificate Rate with respect
to the Class A-5 Certificates shall equal the lesser of (i) ____% plus LIBOR and
(ii) _____%. In the case of the Class A-6 Certificates, the Certificate Rate
shall equal _______% with respect to the [DATE] Distribution Date, and with
respect to any Distribution Date thereafter, the Certificate Rate with respect
to the Class A-6 Certificates shall equal____% minus the product of (i) 3.000
and (ii) LIBOR, but not less than _____%. In the case of the Class A-X
Certificates, the Certificate Rate shall equal, with respect to any Distribution
Date, the weighted average, expressed as a percentage, of the Stripped Interest
Rate on each Mortgage Loan having a Stripped Interest Rate exceeding zero as of
the Due Date in the month immediately preceding the month in which such
Distribution Date occurs, weighted on the basis of the respective Principal
Balances of the Mortgage Loans, which Principal Balances shall be the Principal
Balances of the Mortgage Loans at the close of business on the immediately
preceding Distribution Date after giving effect to distributions thereon
allocable to principal (or, in the case of the Certificate Rate for the initial
Distribution Date, at the close of business on the Cut-off Date). With respect
to any Distribution Date, (i) interest will accrue on each Class of Certificates
(other than the Class A-5 and Class A-6 Certificates) from the first day of the
calendar month preceding the month in which such Distribution Date occurs
through the last day of the month preceding the month in which such Distribution
Date occurs and (ii) interest will accrue on the Class A-5 and Class A-6
Certificates from the 25th day of the month preceding the month in which such
Distribution Date occurs through the 24th day of the month in which such
Distribution Date occurs (except that with respect to the [DATE] Distribution
Date, interest will accrue on the Class A-5 and Class A-6 Certificates from
[DATE] through [DATE]). Interest with respect to each Class of Certificates
(other than the Class A-P Certificates) at the Certificate Rate shall be
calculated based on a year of 360 days comprised of twelve 30-day months.
CERTIFICATE REGISTER: The register maintained pursuant to
Section 4.02.
CHASE: The Chase Manhattan Bank, a New York State banking
corporation, or its successor in interest.
CLASS: Pertaining to the Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R, Class A-X,
Class M, Class B-1, Class B-2, Class B-3, Class B-4 or Class B-5 Certificates,
as the case may be.
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<PAGE>
CLASS A, CLASS M OR CLASS B: Pertaining to Class A
Certificates, Class M Certificates or Class B Certificates, as the case may be.
CLASS A-P AMOUNT: With respect to any Distribution Date, the
applicable PO Percentage of (i) all principal received on or in respect of each
Discount Mortgage Loan (exclusive of any amounts in respect of any Monthly
Payment) during the related Principal Prepayment Period and (ii) all principal
received as part of a Monthly Payment on or in respect of a Discount Mortgage
Loan during the related Due Period.
CLASS A CERTIFICATES: The Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R and Class A-X
Certificates, referred to collectively.
CLASS A-1 CERTIFICATE: Any one of the Class A-1 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-2 CERTIFICATE: Any one of the Class A-2 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-3 CERTIFICATE: Any one of the Class A-3 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-4 CERTIFICATE: Any one of the Class A-4 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-5 CERTIFICATE: Any one of the Class A-5 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-6 CERTIFICATE: Any one of the Class A-6 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-7 CERTIFICATE: Any one of the Class A-7 Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
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<PAGE>
CLASS A-P CERTIFICATE: Any one of the Class A-P Certificates,
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-R CERTIFICATE: The Class A-R Certificate executed by
the Trustee and authenticated by the Trustee, which represents the Residual
Interest, substantially in the form of the Class A-R Certificate set forth in
Exhibit F hereto.
CLASS A-X CERTIFICATE: Any one of the Class A-X Certificates
executed by the Trustee and authenticated by the Trustee, senior in right of
payment to the Class M and Class B Certificates, substantially in the form of
the Class A Certificate set forth in Exhibit C hereto.
CLASS A-P DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the amounts distributed to the Class A-P Certificates
pursuant to Sections 6.01(b)(ii) and 6.01(b)(iii).
CLASS A-1 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-1 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-1 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-1 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-2 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-2 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-2 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-2 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-3 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-3 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-3 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-3 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-4 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-4 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-4 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-4 Certificates on such Distribution
Date pursuant to Section 6.05(c).
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<PAGE>
CLASS A-5 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-5 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-5 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-5 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-6 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-6 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-6 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-6 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-7 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-7 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-7 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-7 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-R INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class A-R Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class A-R Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-R Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-X INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the Class A-X
Notional Balance minus (i) any Compensating Interest Shortfall allocated to the
Class A-X Certificates on such Distribution Date pursuant to Section 6.05(b) and
(ii) any Realized Loss Interest Shortfall allocated to the Class A-X
Certificates on such Distribution Date pursuant to Section 6.05(c).
CLASS A-X NOTIONAL BALANCE: With respect to any Distribution
Date, an amount equal to the aggregate Scheduled Principal Balance of the
Non-Discount Mortgage Loans.
CLASS A PERCENTAGE: As of any Distribution Date, the
percentage obtained by dividing the Class A Principal Balance by the Mortgage
Pool Principal Balance, but not more than 100%.
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<PAGE>
CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a)
the Class A Principal Balance for the immediately preceding Distribution Date
less (b) amounts distributed to the Class A Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class A Certificates pursuant to Section 6.04); provided that
the Class A Principal Balance on the first Distribution Date shall be the
Original Class A Principal Balance.
CLASS A-1 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-1 Interest Accrual Amount
over the amount actually distributed to the Class A-1 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(A).
CLASS A-2 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-2 Interest Accrual Amount
over the amount actually distributed to the Class A-2 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(B).
CLASS A-3 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-3 Interest Accrual Amount
over the amount actually distributed to the Class A-3 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(C).
CLASS A-4 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-4 Interest Accrual Amount
over the amount actually distributed to the Class A-4 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(D).
CLASS A-5 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-5 Interest Accrual Amount
over the amount actually distributed to the Class A-5 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(E).
CLASS A-6 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-6 Interest Accrual Amount
over the amount actually distributed to the Class A-6 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(F).
CLASS A-7 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-7 Interest Accrual Amount
over the amount actually distributed to the Class A-7 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(G).
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CLASS A-R SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-R Interest Accrual Amount
over the amount actually distributed to the Class A-R Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(H).
CLASS A-X SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class A-X Interest Accrual Amount
over the amount actually distributed to the Class A-X Certificates on such
Distribution Date pursuant to Section 6.01(b)(i)(I).
CLASS A-P SHORTFALL AMOUNT: With respect to any Distribution
Date prior to and including the Credit Support Depletion Date, to the extent of
amounts available to pay the Subordinated Optimal Principal Amount (without
regard to clause (b)(2) of the definition of such term), an amount equal to the
sum of (i) the applicable PO Percentage of any Realized Loss (other than an
Excess Loss) with respect to a Discount Mortgage Loan and (ii) the sum of
amounts, if any, by which the amounts specified in clause (i) with respect to
each prior Distribution Date exceeded the amount actually distributed in respect
thereof on such prior Distribution Date and not subsequently distributed to the
Class A-P Certificateholders.
CLASS B CERTIFICATES: The Class B-1, Class B-2, Class B-3,
Class B-4 and Class B-5 Certificates, referred to collectively.
CLASS B-1 CERTIFICATE: Any one of the Class B-1 Certificates
executed by the Trustee and authenticated by the Trustee, subordinated in right
of payment to the Class A and Class M Certificates, substantially in the form of
the Class B Certificate set forth in Exhibit E hereto.
CLASS B-2 CERTIFICATE: Any one of the Class B-2 Certificates
executed by the Trustee and authenticated by the Trustee, subordinated in right
of payment to the Class A, Class M and Class B-1 Certificates, substantially in
the form of the Class B Certificate set forth in Exhibit E hereto.
CLASS B-3 CERTIFICATE: Any one of the Class B-3 Certificates
executed by the Trustee and authenticated by the Trustee, subordinated in right
of payment to the Class A, Class M, Class B-1 and Class B-2 Certificates,
substantially in the form of the Class B Certificate set forth in Exhibit E
hereto.
CLASS B-4 CERTIFICATE: Any one of the Class B-4 Certificates
executed by the Trustee and authenticated by the Trustee, subordinated in right
of payment to the Class A, Class M, Class B-1, Class B-2 and Class B-3
Certificates, substantially in the form of the Class B Certificate set forth in
Exhibit E hereto.
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CLASS B-5 CERTIFICATE: Any one of the Class B-5 Certificates
executed by the Trustee and authenticated by the Trustee, subordinated in right
of payment to the Class A, Class M, Class B-1, Class B-2, Class B-3 and Class
B-4 Certificates, substantially in the form of the Class B Certificate set forth
in Exhibit E hereto.
CLASS B-1 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class B-1 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class B-1 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-1 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-2 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class B-2 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class B-2 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-2 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-3 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class B-3 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class B-3 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-3 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-4 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class B-4 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class B-4 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-4 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-5 INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class B-5 Certificates minus
(i) any Compensating Interest Shortfall allocated to the Class B-5 Certificates
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-5 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-1 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class B-1 Interest Accrual Amount
over the amount actually
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distributed to the Class B-1 Certificates on such Distribution Date pursuant to
Section 6.01(d)(i)(1) (A) and (B).
CLASS B-2 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class B-2 Interest Accrual Amount
over the amount actually distributed to the Class B-2 Certificates on such
Distribution Date pursuant to Section 6.01(d)(i)(2) (A) and (B).
CLASS B-3 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class B-3 Interest Accrual Amount
over the amount actually distributed to the Class B-3 Certificates on such
Distribution Date pursuant to Section 6.01(d)(i)(3) (A) and (B).
CLASS B-4 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class B-4 Interest Accrual Amount
over the amount actually distributed to the Class B-4 Certificates on such
Distribution Date pursuant to Section 6.01(d)(i)(4) (A) and (B).
CLASS B-5 SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class B-5 Interest Accrual Amount
over the amount actually distributed to the Class B-5 Certificates on such
Distribution Date pursuant to Section 6.01(d)(i)(5) (A) and (B).
CLASS B PERCENTAGE: As of any Distribution Date, the
difference between 100% and the sum of (i) the Class A Percentage and (ii) the
Class M Percentage for such Distribution Date.
CLASS B PRINCIPAL BALANCE: As of any Distribution Date, the
excess of the Mortgage Pool Principal Balance (together with the principal
portion of any Monthly Payment due but not paid with respect to which an Advance
has not been made) over the sum of (i) the Class A Principal Balance and (ii)
the Class M Principal Balance.
CLASS M CERTIFICATE: Any one of the Class M Certificates
executed by the Trustee and authenticated by the Trustee, subordinated in right
of payment to the Class A Certificates, substantially in the form of the Class M
Certificate set forth in Exhibit D hereto.
CLASS M INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of the Class M Certificates minus (i)
any Compensating Interest Shortfall allocated to the Class M Certificates on
such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class M Certificates on such Distribution
Date pursuant to Section 6.05(c).
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CLASS M PERCENTAGE: As of any Distribution Date, the
percentage obtained by dividing the Class M Principal Balance by the Mortgage
Pool Principal Balance, but not more than 100%; provided, however, that on any
Distribution Date on which the Class B Percentage equals 0%, the Class M
Percentage shall equal 100% minus the Class A Percentage.
CLASS M PRINCIPAL BALANCE: As of any Distribution Date, (a)
the Class M Principal Balance for the immediately preceding Distribution Date
less (b) amounts distributed to the Class M Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class M Certificates pursuant to Section 6.04); provided that
the Class M Principal Balance on the first Distribution Date shall be the
Original Class M Principal Balance, and provided further that if the aggregate
Outstanding Certificate Principal Balance of the Class B Certificates has been
reduced to zero, as of any Distribution Date, the Class M Principal Balance will
equal the excess of the Mortgage Pool Principal Balance (together with the
portion of any Monthly Payment due but not paid with respect to which an Advance
has not been made) over the Class A Principal Balance.
CLASS M SHORTFALL: With respect to any Distribution Date, the
amount equal to the excess, if any, of the Class M Interest Accrual Amount over
the amount actually distributed to the Class M Certificateholders on such
Distribution Date pursuant to Section 6.01(c)(i) (A) and (B).
CLOSING DATE: [DATE].
CMMC: Chase Manhattan Mortgage Corporation, a New Jersey
corporation, or its successor in interest.
CODE: The Internal Revenue Code of 1986, as amended from time
to time, and any successor statutes thereto, and applicable U.S. Department of
Treasury temporary or final regulations promulgated thereunder.
COLLECTION ACCOUNT: The account created and maintained
pursuant to Section 5.08.
COMPENSATING INTEREST: The meaning specified in Section
6.05(a).
COMPENSATING INTEREST SHORTFALL: The meaning specified in
Section 6.05(b).
CORPORATE TRUST OFFICE: The principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of execution of this instrument is located at [ADDRESS]
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CREDIT SUPPORT: With respect to each Class of Subordinated
Certificates (other than the Class B-5 Certificates), the level of credit
support supporting such Class, expressed as a percentage of the aggregate
Outstanding Certificate Principal Balance of all Classes of Certificates (other
than the Class A-P Certificates). With respect to each Distribution Date, Credit
Support for each such Class will equal in each case the percentage, rounded to
two decimal places, obtained by dividing the aggregate Outstanding Certificate
Principal Balances immediately prior to such Distribution Date of all Classes of
Subordinated Certificates having higher numerical class designations than such
Class (for this purpose, each Class of Class M Certificates shall be deemed to
have a lower numerical class designation than each Class of Class B
Certificates) by the aggregate Outstanding Certificate Principal Balance of all
Classes of Certificates (other than the Class A-P Certificates) immediately
prior to such Distribution Date.
CREDIT SUPPORT DEPLETION DATE: The first Distribution Date on
which the aggregate outstanding principal balance of the Subordinated
Certificates has been or will be reduced to zero.
CUT-OFF DATE: [DATE].
DCR: Duff & Phelps Credit Rating Co. or its successor in
interest.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, other than
such a reduction resulting from a Deficient Valuation.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
DEFINITIVE CERTIFICATES: The Certificates referred to in
Section 4.01(c).
DEPOSITOR: Chase Manhattan Acceptance Corporation, a Delaware
corporation, or its successor in interest or any successor under this Agreement
appointed as herein provided.
DEPOSITORY: The Depository Trust Company, the nominee of which
is Cede & Co.
DEPOSITORY AGREEMENT: The agreement referred to in Section
4.01(b).
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DEPOSITORY PARTICIPANT: A broker, dealer, bank or other
financial institution or other Person for whom from time to time the Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
DETERMINATION DATE: The sixteenth day of the month in which
the related Distribution Date occurs (or, if such sixteenth day is not a
Business Day, the preceding Business Day).
DISCOUNT MORTGAGE LOAN: Any Mortgage Loan having a Net
Mortgage Rate less than the Remittance Rate.
DISQUALIFIED ORGANIZATION: An organization referred to in
section 860E(e)(5) of the Code.
DISTRIBUTION DATE: The 25th day of any month, or if such 25th
day is not a Business Day, the first Business Day immediately following,
beginning with [DATE].
DUE DATE: The first day of each month, being the day of the
month 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 period
from the second day of the month preceding the month in which such Distribution
Date occurs through the first day of the month in which such Distribution Date
occurs.
ELIGIBLE ACCOUNT: An account that is (i) maintained with a
depository institution the long-term unsecured debt obligations of which are
rated by each Rating Agency in one of its two highest rating categories, or (ii)
maintained with the corporate trust department of a national bank which has a
rating of at least BBB- or A-2 by S&P, 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 limit established by the FDIC), the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
and acceptable to the Trustee and each Rating Agency, the Certificateholders
have a claim with respect to the funds in such account and 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 (v) otherwise acceptable to each Rating Agency without reduction
or withdrawal of the rating of any Class of Certificates, as evidenced by a
letter from each Rating Agency.
ELIGIBLE INVESTMENTS: One or more of the following:
(i) 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
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backed by the full faith and credit of the United States; provided that
any such obligation held as a "cash flow investment" within the meaning
of section 860G(a)(6) of the Code shall not have a remaining maturity
of more than 45 days;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than two months 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 its two highest rating categories and the
short-term debt obligations of the party agreeing to repurchase are
rated A-1 by S&P and D-1 by DCR if rated by DCR;
(iii) federal funds, certificates of deposit, time deposits
and bankers' acceptances (which shall each have an original maturity of
not more than 60 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
are rated A-1 by S&P and D-1 by DCR if rated by DCR;
(iv) 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 each Rating Agency in its highest short-term unsecured
commercial paper rating category; provided that such commercial paper
shall have a remaining maturity of not more than 45 days;
(v) units of taxable money market funds (including those for
which the Trustee or the Servicer or any affiliate thereof receives
compensation with respect to such investment) which funds have been
rated by each Rating Agency in its highest rating category or which
have been designated in writing by each Rating Agency as Eligible
Investments with respect to this definition;
(vi) other obligations or securities that are "permitted
investments" within the meaning of Section 860G(a)(5) of the Code and
acceptable to each Rating Agency rating the Certificates as an Eligible
Investment hereunder and will not result in a reduction or withdrawal
in the then current rating of any Class of Certificates, as evidenced
by a letter to such effect from each Rating Agency.
provided that no such instrument shall be an Eligible Investment if such
instrument evidences either (a) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (b) both principal and
interest payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a
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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, Standard Hazard Policy premiums and
other payments required to be escrowed by the Mortgagor with the mortgagee
pursuant to a Mortgage Loan.
EVENT OF DEFAULT: Any of the events specified in Section 9.01.
EXCEPTION REPORT: The report of the Trustee referred to in
Section 2.02.
EXCESS BANKRUPTCY LOSS: Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.
EXCESS FRAUD LOSS: Any Fraud Loss, or portion thereof, which
exceeds the then applicable Fraud Loss Amount.
EXCESS LOSSES: Excess Bankruptcy Losses, Excess Fraud Losses
and Excess Special Hazard Losses, referred to collectively.
EXCESS PROCEEDS: All amounts (net of the related 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 at its Mortgage Rate to the Due Date
immediately succeeding the date of prepayment, repurchase or liquidation, as the
case may be.
EXCESS SPECIAL HAZARD LOSS: Any Special Hazard Loss, or
portion thereof, that exceeds the then applicable Special Hazard Amount.
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 and errors and omissions
insurance to be maintained by the Servicer pursuant to Section 5.19.
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FNMA: The Federal National Mortgage Association, or any
successor organization.
FNMA GUIDES: The FNMA Sellers' Guide and the FNMA Servicers'
Guide, and all amendments or additions thereto.
FRAUD LOSS: Any Realized Loss or portion thereof sustained by
reason of a default arising from fraud, dishonesty or misrepresentation in
connection with the related Mortgage Loan, including by reason of the denial of
coverage under any related Primary Insurance Policy.
FRAUD LOSS AMOUNT: As of any date of determination after the
Cut-off Date, an amount equal to: (X) prior to the first anniversary of the
Cut-off Date,____% (initially, $___________) of the aggregate outstanding
principal balance of all of the Mortgage Loans as of the Cut-off Date minus the
aggregate amount of Fraud Loss on the Mortgage Loans allocated to the
Certificates in accordance with Section 6.04 since the Cut-off Date up to such
date of determination and (Y) from the first to the fifth anniversary of the
Cut-off Date, (1) ______% of the aggregate outstanding principal balance of all
of the Mortgage Loans as of the most recent anniversary of the Cut-off Date
minus (2) the Fraud Losses allocated to the Certificates in accordance with
Section 6.04 since the most recent anniversary of the Cut-off Date up to such
date of determination. On and after the fifth anniversary of the Cut-off Date,
the Fraud Loss Amount shall be zero.
INDIRECT PARTICIPANT: A broker, dealer, bank or other
financial institution or other Person that clears through or maintains a
custodial relationship with a Depository Participant.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan, net of costs of collecting such
proceeds and net of amounts released to the Mortgagor or applied to the
restoration of the Mortgaged Property.
INSURED EXPENSES: Expenses covered by any insurance policy.
INTEREST ACCRUAL PERIOD: With respect to any Distribution Date
and the Class A-5 and Class A-6 Certificates, the period from the 25th day of
the month preceding the month in which such Distribution Date occurs through the
24th day of the month in which such Distribution Date occurs.
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 proceeds, Insurance Proceeds,
or with respect to a disposition of a Mortgaged Property which has been acquired
by foreclosure or deed in lieu of
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foreclosure or otherwise, which represent late payments or collections of
Monthly Payments due but delinquent for a previous Due Period and not previously
recovered.
LIBOR: With respect to any Distribution Date and the
Certificate Rates on the Class A-5 and Class A-6 Certificates, LIBOR as
determined in accordance with Section 6.07.
LIBOR BUSINESS DAY: Any day other than (i) a Saturday or a
Sunday or (ii) a day on which banking institutions in the city of London,
England are required or authorized by law to be closed.
LIQUIDATED MORTGAGE LOAN: Any Mortgage Loan (a) as to which
the 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 Mortgaged Property has been acquired by foreclosure or deed
in lieu of foreclosure and a disposition (the term disposition shall include,
for purposes of a repurchase pursuant to Section 11.01, any repurchase of a
Mortgaged Property pursuant to such Section) of such Mortgaged Property has
occurred.
LIQUIDATION EXPENSES: Expenses which are incurred by the
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
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 PRINCIPAL: With respect to any Distribution Date,
the principal portion of Net Liquidation Proceeds received with respect to each
Mortgage Loan which became a Liquidated Mortgage Loan (but not in excess of the
Principal Balance thereof) during the calendar month preceding the month of such
Distribution Date, exclusive of the portion thereof attributable to the Class
A-P Amount.
LIQUIDATION PROCEEDS: Cash (including Insurance Proceeds)
received by the Servicer in connection with the liquidation of any Mortgage Loan
or Mortgaged Property acquired in respect thereof, whether through the sale or
assignment of such Mortgage Loan (other than pursuant to Section 5.21),
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 (or, (i) for purposes of Section 5.15,
at the time of determination and (ii) for purposes of a Mortgage Loan with
respect to which a conversion from adjustable rate to fixed
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rate has occurred, at the time of initial origination) and the denominator of
which is the appraised value of the related Mortgaged Property at the time of
origination 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.
LOCK-OUT LIQUIDATION AMOUNT: With respect to any Distribution
Date, the aggregate, for each Mortgage Loan which became a Liquidated Mortgage
Loan during the calendar month preceding the month of such Distribution Date, of
the lesser of (i) the Lock-out Percentage of the PO Percentage of such Mortgage
Loan and (ii) the Lock-out Percentage on any Distribution Date occurring prior
to the fifth anniversary of the first Distribution Date, and the Lock-out
Prepayment Percentage on any Distribution Date thereafter, in each case, of the
Net Liquidation Proceeds with respect to such Mortgage Loan.
LOCK-OUT PERCENTAGE: With respect to any Distribution Date,
the outstanding principal balance of the Class A-7 Certificates divided by the
aggregate outstanding principal balance of the Certificates (other than the
Class A-P Certificates), in each case immediately prior to the Distribution
Date.
LOCK-OUT PREPAYMENT PERCENTAGE: The product of (a) the
Lock-out Percentage and (b) the Step Down Percentage.
LOCK-OUT PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the sum of (i) the Adjusted Lock-out Percentage of the
principal portion of Monthly Payments, whether or not received, which were due
on the related Due Date on outstanding Mortgage Loans as of such Due Date, (ii)
the Lock-out Prepayment Percentage of the applicable Non-PO Percentage of the
principal portion of Principal Prepayments, Insurance Proceeds, condemnation
awards and other cash proceeds from sources other than Mortgagors, and
Repurchase Proceeds, in each case received during the related Principal
Prepayment Period and (iii) the Lock-out Liquidation Amount.
MODIFIED MORTGAGE LOAN: Any Mortgage Loan which the Servicer
has modified pursuant to Section 5.01.
MONTHLY PAYMENT: The minimum required monthly payment of
principal and interest due on a Mortgage Loan as specified in the Mortgage Note
for any Due Date (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.
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 securing a Mortgage Note.
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MORTGAGE FILE: As to each Mortgage Loan, the items referred to
in Exhibit B annexed hereto.
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 Depositor to the Trustee and which is subject to 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 as it may be amended in accordance with Section
3.03, setting forth the following information as to each Mortgage Loan: (i) the
Mortgage Loan identifying number; (ii) the street address of the Mortgaged
Property including the zip code; (iii) an indication of whether the Mortgaged
Property is owner-occupied; (iv) the property type of the Mortgaged Property;
(v) the original number of months to stated maturity; (vi) the number of months
remaining to stated maturity from the Cut-off Date; (vii) the original
Loan-to-Value Ratio; (viii) the original principal balance of the Mortgage Loan;
(ix) the unpaid principal balance of the Mortgage Loan as of the close of
business on the Cut-off Date; (x) the Mortgage Rate; (xi) the amount of the
current Monthly Payment; and (xii) the PO Percentage with respect to such
Mortgage Loan.
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 POOL PRINCIPAL BALANCE: As of any date of
determination, the aggregate of the Principal Balances of each Outstanding
Mortgage Loan on such date of determination less the principal portion of any
Monthly Payment due but not paid with respect to which an Advance has not been
made.
MORTGAGED PROPERTY: The property securing a Mortgage Note.
MORTGAGE RATE: With respect to each Mortgage Loan, the per
annum rate of interest borne by the Mortgage Loan, as specified in the Mortgage
Note.
MORTGAGOR: The obligor on a Mortgage Note.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
NET MORTGAGE RATE: With respect to each Mortgage Loan, a per
annum rate of interest for the applicable period equal to the Mortgage Rate less
the Servicing Fee.
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NON-DISCOUNT MORTGAGE LOANS: The Mortgage Loans having Net
Mortgage Rates in excess of the Remittance Rate.
NON-PO ALLOCATED AMOUNT: At the time of any determination, the
amount derived by (i) multiplying the Principal Balance of each Mortgage Loan on
such date of determination by the Non-PO Percentage with respect to such
Mortgage Loan and (ii) summing the results.
NON-PO CLASS A CERTIFICATES: The Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-R and Class A-X
Certificates, referred to collectively.
NON-PO CLASS A OPTIMAL PRINCIPAL AMOUNT: With respect to any
Distribution Date, the lesser of (a) the Non-PO Class A Principal Balance and
(b) the sum of:
(i) the Non-PO Class A Percentage of the applicable Non-PO
Percentage of the principal portion of all Monthly Payments, whether or
not received, which were due during the related Due Period on Mortgage
Loans which were outstanding during such Due Period;
(ii) the Non-PO Class A Prepayment Percentage of the
applicable Non-PO Percentage of all Principal Prepayments made on any
Mortgage Loan during the related Principal Prepayment Period;
(iii) with respect to each Mortgage Loan not described in (iv)
below, the Non-PO Class A Percentage of the applicable Non-PO
Percentage of the principal portion of all Insurance Proceeds,
condemnation awards and any other cash proceeds from a source other
than the applicable Mortgagor, to the extent required to be deposited
in the Collection Account pursuant to Section 5.08(iv) and (v), which
were received during the related Principal Prepayment Period, net of
related unreimbursed Servicing Advances and net of any portion thereof
which, as to any such Mortgage Loan, constitutes Late Collections that
have been the subject of an Advance on any prior Distribution Date;
(iv) with respect to each Mortgage Loan which has become a
Liquidated Mortgage Loan during the related Principal Prepayment
Period, the lesser of (A) the Non-PO Class A Percentage of applicable
Non-PO Percentage of an amount equal to the Principal Balance of such
Liquidated Mortgage Loan as of the Due Date immediately preceding the
date on which it became a Liquidated Mortgage Loan and (B) the Non-PO
Class A Prepayment Percentage of the applicable Non-PO Percentage of
the Net Liquidation Proceeds with respect to such liquidated Mortgage
Loan (net of any unreimbursed Advances);
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(v) with respect to each Mortgage Loan repurchased during the
related Principal Prepayment Period pursuant to Section 2.02, 3.01,
5.21 or 11.01, an amount equal to the Non-PO Class A Prepayment
Percentage of the applicable Non-PO Percentage of the principal portion
of the Purchase Price (net of amounts with respect to which a
distribution of principal has previously been made to the Non-PO Class
A Certificateholders); and
(vi) on or after the Credit Support Depletion Date, the excess
of the Non-PO Class A Principal Balance (calculated after giving effect
to reductions thereof on such Distribution Date with respect to the
amounts described in (i) - (v) above) over the Non-PO Allocated Amount,
if any, as of the preceding Distribution Date.
NON-PO CLASS A PERCENTAGE: As of any Distribution Date, the
fraction, expressed as a percentage (which shall never exceed 100%), the
numerator of which is the Non-PO Class A Principal Balance and the denominator
of which is the Non-PO Allocated Amount as of the immediately preceding Due
Date.
NON-PO CLASS A PREPAYMENT PERCENTAGE: As of any Distribution
Date up to and including the Step-down Date, 100%; as of any Distribution Date
during the first year thereafter, the Non-PO Class A Percentage plus 70% of the
Subordinated Percentage for such Distribution Date; as of any Distribution Date
during the second year thereafter, the Non-PO Class A Percentage plus 60% of the
Subordinated Percentage for such Distribution Date; as of any Distribution Date
during the third year thereafter, the Non-PO Class A Percentage plus 40% of the
Subordinated Percentage for such Distribution Date; as of any Distribution Date
during the fourth year thereafter, the Non-PO Class A Percentage plus 20% of the
Subordinated Percentage for such Distribution Date; and as of any Distribution
Date after the fourth year thereafter, the Non-PO Class A Percentage; provided
that if the Non-PO Class A Percentage as of any such Distribution Date is
greater than the Non-PO Class A Percentage on the first Distribution Date, the
Non-PO Class A Prepayment Percentage shall be 100%; and provided further that
whenever the Non-PO Class A Percentage equals 0%, the Non-PO Class A Prepayment
Percentage shall equal 0%.
NON-PO CLASS A PRINCIPAL BALANCE: As of any Distribution Date,
(a) the Non-PO Class A Principal Balance for the immediately preceding
Distribution Date less (b) amounts distributed (or deemed distributed) to the
Non-PO Class A Certificateholders on such preceding Distribution Date allocable
to principal (including the principal portion of Advances of the Servicer made
pursuant to Section 6.03 and Realized Losses allocated to the Non-PO Class A
Certificates pursuant to Section 6.04); provided that the Non-PO Class A
Principal Balance on the first Distribution Date shall be the Original Non-PO
Class A Principal Balance.
NON-PO CLASS A PRINCIPAL PAYMENT RULES: [Describe payment
methodology]
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NON-PO PERCENTAGE: With respect to each Mortgage Loan, the
fraction, expressed as a percentage (but not greater than 100%), the numerator
of which equals the applicable Net Mortgage Rate and the denominator of which
equals the Remittance Rate.
NONRECOVERABLE ADVANCE: Any Advance previously made or
proposed to be made in respect of a Mortgage Loan by the Servicer pursuant to
Section 6.03 which, in the good faith judgment of the Servicer, will not or, in
the case of a proposed Advance, would not, ultimately be recoverable by the
Servicer from Late Collections or otherwise. The determination by the Servicer
that it has made, or would be making, a Nonrecoverable Advance shall be
evidenced by a certificate of a Servicing Officer of the Servicer delivered to
the Trustee, any co-trustee and the Depositor and detailing the reasons for such
determination.
OFFICERS' CERTIFICATE: A certificate signed by two of the
Chairman of the Board, the Vice Chairman of the Board, the President or a Vice
President, the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries or any other duly authorized officer of the Depositor or
the Servicer, and delivered to the Trustee.
OPINION OF COUNSEL: A written opinion of counsel, who may be
counsel for the Depositor or the Servicer and who is reasonably acceptable to
the Trustee.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: With respect to any
Class of Certificates, the amount specified for such Class in Section 4.01(d).
ORIGINAL CLASS A PRINCIPAL BALANCE: $_____________
ORIGINAL CLASS M PRINCIPAL BALANCE: $_____________
ORIGINAL CLASS B PRINCIPAL BALANCE: $_____________
ORIGINAL NON-PO CLASS A PRINCIPAL
BALANCE $_____________
ORIGINAL CREDIT SUPPORT: With respect to any Class of
Subordinated Certificates (other than the Class B-5 Certificates), the level of
Credit Support indicated below:
Class M: %
Class B-1: %
Class B-2: %
Class B-3: %
Class B-4: %
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE: With respect to any
Class (other than the Class A-X Certificates) of Certificates and any
Distribution Date, the
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Original Certificate Principal Balance of such Class minus the sum of (i) any
distributions of principal made on such Class prior to such Distribution Date
and (ii) any Realized Losses allocated to such Class prior to such Distribution
Date; provided, however, that (I) with respect to the Class of Class B
Certificates then outstanding having the highest numerical class designation,
the Outstanding Certificate Principal Balance of such Class shall equal the
excess of the Mortgage Pool Principal Balance (together with the principal
portion of any Monthly Payment due but not paid with respect to which an Advance
has not been made) over the sum of the Outstanding Certificate Principal
Balances of all Classes of Certificates (other than the Class of Class B
Certificates then outstanding having the highest numerical class designation);
and (II) during such time as the Outstanding Certificate Principal Balance of
the Class B-1 Certificates equals zero, with respect to the Class M
Certificates, the Outstanding Certificate Principal Balance of such Class shall
equal the excess of the Mortgage Pool Principal Balance (together with the
principal portion of any Monthly Payment due but not paid with respect to which
an Advance has not been made) over the Class A Principal Balance.
OUTSTANDING MORTGAGE LOAN: As to any Distribution Date, a
Mortgage Loan which was not paid in full during the related or any previous
Principal Prepayment Period, which did not become a Liquidated Mortgage Loan
during the related or any previous Principal Prepayment Period and which was not
repurchased under Section 2.02, 3.01, 5.21 or 11.01 during the related or any
previous Principal Prepayment Period.
PASS-THRU ENTITY: A "Pass-Thru Entity" as defined in Section
860E(e)(6) of the Code.
PAYING AGENT: The Person appointed by the Trustee as Paying
Agent pursuant to Section 4.05.
PERCENTAGE INTEREST: As to any Certificate (other than a Class
A-X Certificate), the percentage interest evidenced thereby in distributions
required to be made hereunder, such percentage interest being equal, with
respect to any Class, 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 with respect to all Certificates, the percentage obtained by
dividing the denomination of such Certificate by the aggregate of the
denominations of all the Certificates. With respect to any Class A-X
Certificate, the percentage interest specified on the face of such Certificate.
PERSON: Any individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
PO PERCENTAGE: The PO Percentage with respect to each Mortgage
Loan as identified on the Mortgage Loan Schedule, such percentage being equal to
the fraction, expressed as a percentage (but not less than 0%), the numerator of
which equals the excess of the
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Remittance Rate over the applicable Net Mortgage Rate and the denominator of
which equals the Remittance Rate.
PRIMARY INSURANCE POLICY: Each primary policy of mortgage
guaranty insurance or any replacement policy therefor referred to in Section
5.15 hereof.
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) (or, in the case of a substitute
Mortgage Loan included in the Trust Fund pursuant to Section 3.04, the close of
business as of the date of substitution) reduced by all amounts previously
distributed to Certificateholders that are allocable to payments of principal on
such Mortgage Loan (including the principal portion of Advances of the Servicer
made pursuant to Section 6.03).
PRINCIPAL PREPAYMENT: Any payment or other recovery of
principal on a Mortgage Loan (other than Late Collections) which is received
other than as part of a Monthly Payment; provided, however, that the term
Principal Prepayment does not include Insurance Proceeds, Liquidation Proceeds,
condemnation awards or other cash proceeds from a source other than the
applicable Mortgagor.
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 such month.
PURCHASE PRICE: With respect to any Mortgage Loan required to
be purchased on any date pursuant to Section 2.02, 3.01, 5.01, 5.21 or 11.01, an
amount equal to the sum of (a) 100% of the Principal Balance thereof, (b) unpaid
accrued interest at the Mortgage Rate thereon from the Due Date on which
interest was last paid by the Mortgagor or Advanced by the Servicer to the Due
Date next following the date of repurchase and (c) the aggregate of any
unreimbursed Advances.
QUALIFIED INSURER: An insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, approved as an insurer by FNMA and
FHLMC and whose claims-paying ability is rated in the two highest rating
categories by S&P, Moody's and Fitch with respect to primary mortgage insurance
and in the two highest rating categories for general policyholder rating and
financial performance index rating by Best's with respect to hazard and flood
insurance.
RATE ADJUSTMENT DATE: The LIBOR Business Day prior to the
first day of each Interest Accrual Period after the initial Interest Accrual
Period.
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RATING AGENCY: Any nationally recognized statistical rating
organization, or its successor, that rated one or more Classes of Certificates
at the request of the Depositor at the time of the initial issuance of the
Certificates. 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 Trustee and the Servicer. References
herein to the two highest long-term debt rating categories of a Rating Agency
shall mean AA or better.
REALIZED LOSS: With respect to (i) a Liquidated Mortgage Loan,
the amount, if any, by which the unpaid Principal Balance and accrued interest
thereon at a rate equal to the Net Mortgage Rate exceeds the amount actually
recovered by the Servicer with respect thereto (net of reimbursement of Advances
and Servicing Advances) at the time such Mortgage Loan became a Liquidated
Mortgage Loan or (ii) with respect to a Mortgage Loan which is not a Liquidated
Mortgage Loan, any amount of principal that the Mortgagor is no longer legally
required to pay (except for the extinguishment of debt that results from the
exercise of remedies due to default by the Mortgagor).
REALIZED LOSS INTEREST SHORTFALL: The meaning specified in
Section 6.05(c).
RECORD DATE: The close of business of the last Business Day of
the month preceding the month of the related Distribution Date.
REFERENCE BANK RATE: As of 11:00 A.M. London time, on the day
that is one LIBOR Business Day prior to the immediately preceding Distribution
Date, the rate at which deposits are offered by the reference banks (which shall
be three major banks engaged in transactions in the London interbank market,
selected by the Servicer) to prime banks in the London interbank market for a
period of one month in amounts approximately equal to the aggregate Outstanding
Certificate Principal Balance of the Class A-5 and Class A-6 Certificates in
accordance with the following procedures. The Servicer will request the
principal London office of each of the reference banks to provide a quotation of
its rate. If at least two such quotations are provided, the rate will be the
arithmetic mean of the quotations. If on such date fewer than two quotations are
provided as requested, the rate will be the arithmetic mean of the rates quoted
by one or more major banks in New York City, selected by the Servicer as of
11:00 A.M., New York City 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 Outstanding Certificate Principal Balance of the Class A-5 and
Class-6 Certificates. In the event no such quotations can be obtained, the rate
will be LIBOR for the prior Distribution Date, or in the case of the first Rate
Adjustment Date, _________%.
RELEVANT MORTGAGE LOAN: The meaning specified in Section 5.01.
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REMIC: A "real estate mortgage investment conduit," as such
term is defined in Section 860D of the Code. References herein to "the REMIC"
shall mean the REMIC created hereunder.
REMIC PROVISIONS: Provisions of the federal income tax law
relating to REMICs which appear at Sections 860A through 860G of Part IV of
Subchapter M of Chapter 1 of Subtitle A of the Code, and related provisions, and
U.S. Department of the Treasury temporary, proposed or final regulations and
rulings promulgated thereunder, as the foregoing are in effect (or with respect
to proposed regulations, are proposed to be in effect) from time to time.
REMITTANCE RATE: ___% per annum.
REPURCHASE PROCEEDS: All proceeds of any Mortgage Loan or
property acquired in respect thereof repurchased pursuant to Section 2.02, 3.01,
5.01, 5.21 or 11.01.
RESIDUAL INTEREST: The interest in the Trust Fund represented
by amounts, if any, remaining in the Collection Account following termination of
the Trust Fund after payments to the Class A Certificateholders (other than the
Class A-R Certificateholders), the Class M Certificateholders and the Class B
Certificateholders.
RESPONSIBLE OFFICER: When used with respect to the Trustee,
any Senior Vice President, any Vice President, any Assistant Vice President, any
Senior Trust Officer, any Trust Officer or any other officer of the Trustee in
its Corporate Trust Office 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 in its Corporate Trust Office to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or its successor in interest.
SALE AGREEMENT: The Mortgage Loan Sale Agreement dated as of
[DATE] between the Depositor and CMMC.
SCHEDULED PRINCIPAL BALANCE: With respect to any Mortgage Loan
as of any Distribution Date, the unpaid principal balance of such Mortgage Loan
as specified in the amortization schedule at the time relating thereto (before
any adjustment to such schedule by reason of bankruptcy or similar proceeding or
any moratorium or similar waiver or grace period) as of the Due Date in the
month preceding the month of such Distribution Date, or as the Cut-off Date,
with respect to the first Distribution Date, after giving effect to any
previously applied prepayments, the payment of principal due on such first day
of the month and any reduction of
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the principal balance of such Mortgage Loan by a bankruptcy court, irrespective
of any delinquency in payment by the related Mortgagor.
SELLER: [CMMC].
SERVICER: [CMMC] or any successor under this Agreement as
herein provided.
SERVICING ADVANCES: All customary, reasonable and necessary
"out of pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations and which are "unanticipated expenses" of the
REMIC, as defined in the REMIC Provisions, 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 5.21.
SERVICING FEE: The amount of the monthly fee paid for the
servicing of the Mortgage Loans, equal to, as of any Distribution Date, the
total of, with respect to each Mortgage Loan, one-twelfth of ______% per annum
of the Principal Balance thereof as of the Determination Date in the preceding
month, subject to adjustment as provided in Section 6.05. The Servicing 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
that shall have come due and only at the time such Monthly Payment shall be
made. 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 (or
the interest portion of any Principal Prepayment in full) collected by the
Servicer, or as otherwise provided under Section 5.09 or 5.23.
SERVICING OFFICER: Any officer of the Servicer or any
Sub-servicer involved in, or responsible for, the administration and servicing
of the Mortgage Loans whose name appears on a written certificate listing
servicing officers furnished to the Trustee by the Servicer on or prior to the
Closing Date, and signed on behalf of the Servicer or any Sub-servicer by its
President, any Vice President or its Treasurer, as such certificate may from
time to time be amended.
SINGLE CERTIFICATE: A Certificate of any Class that evidences
the smallest permissible original denomination for such Class of Certificates as
specified in Section 4.01(d).
SPECIAL HAZARD AMOUNT: Initially, $__________. As of the first
anniversary of the Cut-off Date, the Special Hazard Amount shall be reduced, but
not increased, to the lesser of (i) the initial Special Hazard Amount less the
sum of all amounts allocated to the Subordinated Certificates in respect of
Special Hazard Losses on the Mortgage Loans during
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such year or (ii) the Adjustment Amount for such anniversary. As of each
subsequent anniversary of the Cut-off Date, the Special Hazard Amount on the
immediately preceding anniversary of the Cut-off Date less the sum of all
amounts allocated to the Subordinated Certificates in respect of Special Hazard
Losses on the Mortgage Loans during such year and (ii) the Adjustment Amount for
such anniversary. The "Adjustment Amount" with respect to each anniversary of
the Cut-off Date will be equal to the greatest of (i) ___% multiplied by the
aggregate outstanding principal balance of the Mortgage Loans, (ii) the
aggregate outstanding principal balance of the Mortgage Loans secured by
Mortgaged Properties located in the California postal zip code area in which the
highest percentage of Mortgage Loans by Principal Balance are located and (iii)
twice the outstanding principal balance of the Mortgage Loan having the largest
outstanding principal balance.
SPECIAL HAZARD LOSS: Any Realized Loss or portion thereof
resulting from direct physical loss or damage to the Mortgaged Property, which
is not insured against under the Standard Hazard Policy required to be
maintained hereunder.
STANDARD HAZARD POLICY: Each standard hazard insurance policy
or replacement therefor referred to in Section 5.16.
STARTUP DAY: The meaning specified in Section 2.04(a).
STEP-DOWN DATE: The earliest of the Distribution Date in
[MONTH/YEAR] or any succeeding Distribution Date on which the following
conditions are satisfied as of the last day of the month preceding such
Distribution Date:
(a) the aggregate outstanding Principal Balance of Outstanding
Mortgage Loans 60 days or more delinquent (including loans in
foreclosure and with respect to owned real estate) does not exceed 50%
of the aggregate Outstanding Certificate Balance of the Subordinated
Certificates as of such date; and
(b) Realized Losses through the last day of the month
preceding such Distribution Date (including Nonrecoverable Advances) do
not exceed the following thresholds:
(i) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 30% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date;
(ii) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 35% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date;
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(iii) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 40% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date;
(iv) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 45% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date; and
(v) if such Distribution Date occurs after
[MONTH/YEAR], 50% of the Subordinated Percentage of the
Mortgage Pool Principal Balance as of the Cut-off Date.
STEP DOWN PERCENTAGE: With respect to any Distribution Date,
the percentage indicated below:
Distribution Date Occurring in Step Down Percentage
------------------------------ --------------------
MONTH/DATE through MONTH DATE........................ %
STRIPPED INTEREST RATE: For each Mortgage Loan, the excess, if
any, of the Net Mortgage Rate for such Mortgage Loan over the Remittance Rate.
SUBORDINATED CERTIFICATES: The Class M and Class B
Certificates, referred to collectively.
SUBORDINATED OPTIMAL PRINCIPAL AMOUNT: With respect to any
Distribution Date, the lesser of (a) the aggregate Outstanding Certificate
Principal Balance of the Subordinated Certificates (before giving effect to any
distributions of principal on such Distribution Date) and (b)(1) the sum of: (i)
the Subordinated Percentage of the applicable Non-PO Percentage of the principal
portion of all Monthly Payments, whether or not received, which were due during
the related Due Period on Mortgage Loans which were outstanding during such Due
Period; (ii) the Subordinated Prepayment Percentage of the applicable Non-PO
Percentage of all Principal Prepayments made on any Mortgage Loan during the
related Principal Prepayment Period; (iii) with respect to each Mortgage Loan
not described in (iv) below, the Subordinated Percentage of the applicable
Non-PO Percentage of the principal portion of all Insurance Proceeds,
condemnation awards and any other cash proceeds from a source other than the
applicable Mortgagor, to the extent required to be deposited in the Collection
Account pursuant to Section 5.08(iv) and (v), which were received during the
related Principal
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Prepayment Period, net of related unreimbursed Servicing Advances and net of any
portion thereof which, as to any such Mortgage Loan, constitutes Late
Collections that have been the subject of an Advance on any prior Distribution
Date; (iv) with respect to each Mortgage Loan which has become a Liquidated
Mortgage Loan during the related Principal Prepayment Period, an amount equal to
the portion (if any) of the Net Liquidation Proceeds with respect to such
liquidated Mortgage Loan (net of any unreimbursed Advances) that was not
included in the Class A-P Amount or the Non-PO Class A Optimal Principal Amount
with respect to such Distribution Date; and (v) with respect to each Mortgage
Loan repurchased during the related Principal Prepayment Period pursuant to
Section 2.02, 3.01, 5.21 or 11.01, an amount equal to the Subordinated
Prepayment Percentage of the applicable Non-PO Percentage of the principal
portion of the Purchase Price (net of amounts with respect to which a
distribution of principal has previously been made to the Subordinated
Certificateholders) minus (2) the Class A-P Shortfall Amount with respect to
such Distribution Date.
SUBORDINATED PERCENTAGE: As of any Distribution Date, the
difference between 100% and the Non-PO Class A Percentage.
SUBORDINATED PREPAYMENT PERCENTAGE: As of any Distribution
Date, the difference between 100% and the Non-PO Class A Prepayment Percentage.
SUB-SERVICER: Any Person with whom the Servicer enters into a
Sub-Servicing Agreement.
SUB-SERVICING AGREEMENT: Any agreement between the 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 Servicer and the Depositor.
SUBSTITUTE EXCESS INTEREST: As defined in Section 3.04.
TELERATE SCREEN PAGE 3750: The display designated as page 3750
on the Dow Jones 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.
TRUST: The Trust created pursuant to this Agreement.
TRUST FUND: The corpus of the Trust consisting of (i) the
Mortgage Loans, (ii) such assets as shall from time to time be identified as
deposited in the Collection Account and 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 and (v) any proceeds of any of the foregoing.
TRUSTEE: [TRUSTEE], a ___________ and its successors and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a
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party, and any successor trustee at the time serving as successor trustee
hereunder, appointed as herein provided.
U.S. PERSON: A "United States Person" as defined in Section
7701(a)(30) of the Code.
[End of Article I]
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND
Section 2.01. Conveyance of Mortgage Loans. The Depositor, 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 Depositor in and to the Mortgage Loans, including all interest
and principal received on or with respect to the Mortgage Loans on or after the
Cut-off Date (other than Monthly Payments due on the Mortgage Loans on or before
the Cut-off Date).
In connection with such assignment, the Depositor does hereby deliver
to, and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan so assigned:
(A) (I) Original Mortgage Note (or a lost note affidavit
(including a copy of the original Mortgage Note)) or (II) original
Consolidation, Extension and Modification Agreement (or a lost note
affidavit (including a copy of the original Consolidation, Extension
and Modification Agreement), in either case endorsed, "Pay to the order
of [TRUSTEE], as trustee, without recourse."
(B) The original Mortgage (including all riders thereto) with
evidence of recording thereon, or a copy thereof certified by the
public recording office in which such mortgage has been recorded or, if
the original Mortgage has not been returned from the applicable public
recording office, a true certified copy, certified by the Seller, of
the original Mortgage together with a certificate of the Seller
certifying that the original Mortgage has been delivered for recording
in the appropriate public recording office of the jurisdiction in which
the Mortgaged Property is located.
(C) The original Assignment of Mortgage to "[TRUSTEE], as
trustee," which assignment shall be in form and substance acceptable
for recording, or a copy certified by the Seller as a true and correct
copy of the original Assignment which has been sent for recordation.
Subject to the foregoing, such assignments may, if permitted by law, be
by blanket assignments for Mortgage Loans covering Mortgaged Properties
situated within
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the same county. If the Assignment of Mortgage is in blanket form, a
copy of the Assignment of Mortgage shall be included in the related
individual Mortgage File.
(D) The original policy of title insurance, including riders
and endorsements thereto, or if the policy has not yet been issued, a
written commitment or interim binder or preliminary report of title
issued by the title insurance or escrow company.
(E) Originals of all recorded intervening Assignments of
Mortgage, or copies thereof, certified by the public recording office
in which such Assignments or Mortgage have been recorded showing a
complete chain of title from the originator to the Depositor, with
evidence of recording, thereon, or a copy thereof certified by the
public recording office in which such Assignment of Mortgage has been
recorded or, if the original Assignment of Mortgage has not been
returned from the applicable public recording office, a true certified
copy, certified by the Seller of the original Assignment of Mortgage
together with a certificate of the Seller certifying that the original
Assignment of Mortgage has been delivered for recording in the
appropriate public recording office of the jurisdiction in which the
Mortgaged Property is located.
(F) Originals, or copies thereof certified by the public
recording office in which such documents have been recorded, of each
assumption, extension, modification, written assurance or substitution
agreements, if applicable, or if the original of such document has not
been returned from the applicable public recording office, a true
certified copy, certified by the Seller, of such original document
together with certificate of Seller certifying the original of such
document has been delivered for recording in the appropriate recording
office of the jurisdiction in which the Mortgaged Property is located.
(G) If the Mortgaged Note or Mortgage or any other material
document or instrument relating to the Mortgaged Loan has been signed
by a person on behalf of the Mortgagor, the original power of attorney
or other instrument that authorized and empowered such person to sign
bearing evidence that such instrument has been recorded, if so required
in the appropriate jurisdiction where the Mortgaged Property is located
(or, in lieu thereof, a duplicate or conformed copy of such instrument,
together with a certificate of receipt from the recording office,
certifying that such copy represents a true and complete copy of the
original and that such original has been or is currently submitted to
be recorded in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located), or if the
original power of attorney or other such instrument has been delivered
for recording in the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located.
If in connection with any Mortgage Loan the Depositor cannot
deliver the Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, with evidence of recording thereon
concurrently with the execution and delivery of this
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Agreement solely because of a delay caused by the public recording office where
such Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, has been delivered for recordation, the
Depositor shall deliver or cause to be delivered to the Trustee written notice
stating that such Mortgage, Assignments of Mortgage or assumption, consolidation
or modification, as the case may be, has been delivered to the appropriate
public recording office for recordation. Thereafter, the Depositor shall deliver
or cause to be delivered to the Trustee such Mortgage, Assignments of Mortgage
or assumption, consolidation or modification, as the case may be, with evidence
of recording indicated thereon upon receipt thereof from the public recording
office.
The Servicer shall cause to be recorded in the appropriate
public recording office for real property records each Assignment of Mortgage
referred to in this Section 2.01 as soon as practicable. While each Assignment
of Mortgage to be recorded is being recorded, the Servicer shall deliver to the
Trustee a photocopy of such document. If any such Assignment of Mortgage is
returned unrecorded to the Servicer because of any defect therein, the Servicer
shall cause such defect to be cured and such document to be recorded in
accordance with this paragraph. The Depositor shall deliver or cause to be
delivered each original recorded Assignment of Mortgage and intermediate
assignment to the Trustee within 270 days of the Closing Date or shall deliver
to the Trustee on or before such date an Officer's Certificate stating that such
document 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. In any event, the Depositor shall use all reasonable efforts
to cause each such document with evidence of recording thereon to be delivered
to the Trustee within 300 days of the Closing Date.
The ownership of each Mortgage Note, the Mortgage and the
contents of the related Mortgage File is vested in the Trustee. Neither the
Depositor nor the Servicer shall take any action inconsistent with such
ownership and shall not claim any ownership interest therein. The Depositor and
the Servicer shall respond to any third party inquiries with respect to
ownership of the Mortgage Loans by stating that such ownership is held by the
Trustee on behalf of the Certificateholders. Mortgage documents relating to the
Mortgage Loans not delivered to the Trustee are and shall be held in trust by
the Servicer or any Sub-Servicer, for the benefit of the Trustee as the owner
thereof, and the 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 Servicer or such
Sub-Servicer is in a custodial capacity only. The Depositor 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. Each Mortgage
File and the mortgage documents relating to the Mortgage Loans contain
proprietary business information of the Servicer and its customers. The Trustee
and the Depositor agree that they will not use such information for business
purposes without the express written consent of the Servicer and that all such
information shall be kept strictly confidential.
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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 a
conveyance of Mortgage Loans from the Seller to the Depositor is characterized
as a pledge and not a sale, then the Depositor shall be deemed to have
transferred to the Trustee all of the Depositor's right, title and interest in,
to and under the obligations of the Seller deemed to be secured by said pledge;
and it is the intention of this Agreement that the Depositor shall also be
deemed to have granted to the Trustee a first priority security interest in all
of the Depositor's right, title, and interest in, to and under the obligations
of the Seller to the Depositor deemed to be secured by said pledge and that the
Trustee shall be deemed to be an independent custodian for purposes of
perfection of the security interest granted to the Depositor. If the conveyance
of the Mortgage Loans 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 Depositor
shall be deemed to have granted to the Trustee a first priority security
interest in all of the Depositor'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 Depositor 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), (iii), (iv) and (v) of the definition thereof and
further assigns to the Trustee for the benefit of the Certificateholders those
representations and warranties of the Seller contained in the Sale Agreement and
described in Section 3.01 hereof and the benefit of the repurchase obligations
of the Seller described in Sections 2.02 and 3.01 hereof and the obligations of
the Seller contained in the Sale Agreement to take, at the request of the
Depositor or the Trustee, all action on its part which is reasonably necessary
to ensure the enforceability of a Mortgage Loan.
Section 2.02. Acceptance by Trustee. Except as set forth in
the Exception Report delivered contemporaneously herewith (the "Exception
Report"), the Trustee acknowledges receipt of the Mortgage Note for each
Mortgage Loan and delivery of a Mortgage File (but does not acknowledge receipt
of all documents required to be included in such Mortgage File) with respect to
each Mortgage Loan and declares that it holds and will hold such documents and
any other documents constituting a part of the Mortgage Files delivered to it in
trust for the use and benefit of all present and future Certificateholders. The
Depositor will cause the Seller to repurchase any Mortgage Loans to which an
exception was taken in the Exception Report unless such exception is cured to
the satisfaction of the Trustee within 45 Business Days of the Closing Date.
The Trustee agrees, for the benefit of Certificateholders, to
review each Mortgage File delivered to it within 270 days after the Closing Date
to ascertain that all documents
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required by Section 2.01 have been executed and received, and that such
documents relate to the Mortgage Loans identified in Exhibit A that have been
conveyed to it. If the Trustee finds any document or documents constituting a
part of a Mortgage File to be missing or defective (that is, mutilated, damaged,
defaced or unexecuted) in any material respect, the Trustee shall promptly (and
in any event within no more than five Business Days) after such finding so
notify the Servicer, the Seller and the Depositor. In addition, the Trustee
shall also notify the Servicer, the Seller and the Depositor, if (a) in
examining the Mortgage Files, the documentation shows on its face (i) any
adverse claim, lien or encumbrance, (ii) that any Mortgage Note was overdue or
had been dishonored, (iii) any evidence on the face of any Mortgage Note or
Mortgage of any security interest or other right or interest therein, or (iv)
any defense against or claim to the Mortgage Note by any party or (b) the
original Mortgage with evidence of recording thereon with respect to a Mortgage
Loan is not received within 270 days of the Closing Date. The Trustee shall
request that the Seller correct or cure such omission, defect or other
irregularity, or substitute a Mortgage Loan pursuant to the provisions of
Section 3.03, within 60 days from the date the Seller was notified of such
omission or defect and, if the Seller does not correct or cure such omission or
defect within such period, that the Seller purchase such Mortgage Loan from the
Trustee within 90 days from the date the Trustee notified the Seller of such
omission, defect or other irregularity at the Purchase Price of such Mortgage
Loan. The Purchase Price for any Mortgage Loan purchased pursuant to this
Section 2.02 shall be paid to the Servicer and deposited by the Servicer in the
Collection Account promptly upon receipt, and, upon receipt by the Trustee of
written notification of such deposit signed by a Servicing Officer, the Trustee
shall promptly release to the Seller the related Mortgage File and the Trustee
shall execute and deliver such instruments of transfer or assignment, without
recourse, as shall be necessary to vest in the Seller or its designee, as the
case may be, 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 Seller to purchase, cure or
substitute 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. The
Trustee 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. The Trustee shall keep confidential the name of each Mortgagor
and shall not solicit any such Mortgagor for the purpose of refinancing the
related Mortgage Loan.
Within 280 days of the Closing Date, the Trustee shall deliver
to the Depositor and the Servicer the Trustee's Certification, substantially in
the form of Exhibit G attached hereto, setting forth the status of the Mortgage
Files as of such date.
Section 2.03. Trust Fund; Authentication of Certificates. 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. The Trustee acknowledges the assignment to it for the
benefit of the Trust Fund of the Mortgage
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Loans and has caused to be authenticated and delivered to or upon the order of
the Depositor, in exchange for the Mortgage Loans, Certificates duly
authenticated by the Trustee or, if an Authenticating Agent has been appointed
pursuant to Section 4.06, the Authenticating Agent in authorized denominations
evidencing ownership of the entire Trust Fund.
Section 2.04. REMIC Election.
(a) The Depositor hereby instructs and authorizes the Trustee
to make an appropriate election to treat the Trust Fund as a REMIC. This
Agreement shall be construed so as to carry out the intention of the parties
that the Trust Fund be treated as a REMIC at all times prior to the date on
which the Trust Fund is terminated. The Closing Date is hereby designated as the
"startup day" of the 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 the REMIC shall consist of the Class A Certificates (exclusive of the Class
A-R Certificates), the Class M Certificates and the Class B Certificates, and
the "residual interest" (within the meaning of Section 860G(a)(2) of the Code)
in the REMIC shall consist of the Residual Interest, and all such interests
shall be designated as such on the Startup Day.
(b) The principal amount of the regular interests in the REMIC
is equal to the sum of the Original Class A Principal Balance, the Original
Class M Principal Balance and the Original Class B Principal Balance.
(c) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of
the Treasury regulations, the "latest possible maturity date" by which the
Outstanding Certificate Principal Balance of each Class of Certificates
representing a regular interest in the REMIC would be reduced to zero is [DATE],
which is the Distribution Date immediately following the latest scheduled
maturity of any Mortgage Loan.
(d) The "tax matters person" with respect to the Trust Fund
for purposes of the REMIC provisions shall be the beneficial owner of the Class
A-R Certificate; provided, however, that the Holder of a Class A-R Certificate,
by its acceptance thereof, irrevocably appoints the Servicer as its agent and
attorney-in-fact to act as "tax matters person" with respect to the Trust Fund
for purposes of the REMIC provisions.
(e) It is intended that the Trust Fund shall constitute, and
that the affairs of the Trust Fund shall be conducted so as to qualify the Trust
Fund as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Servicer covenants and agrees that it shall act as agent (and the Servicer is
hereby appointed to act as agent) on behalf of the Trust Fund and the respective
Holders of the Class A-R Certificates and that in such capacity it shall:
(i) prepare and file, or cause to be prepared and
filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return (Form
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1066) and prepare and file or cause to be prepared and filed with the
Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect to
the Trust Fund, using the calendar year as the taxable year and the
accrual method of accounting, containing such information and at the
times and in the manner as may be required by the Code or state or
local tax laws, regulations, or rules, and shall furnish or cause to be
furnished to Certificateholders the schedules, statements or
information at such times and in such manner as may be required
thereby;
(ii) within thirty days of the Closing Date, shall
furnish or cause to be furnished to the Internal Revenue Service, on
Form 8811 or as otherwise may be required by the Code, the name, title,
address, and telephone number of the person that the holders of the
Certificates may contact for tax information relating thereto (and the
Servicer shall act as the representative of the Trust Fund for this
purpose), together with such additional information as may be required
by such Form, and shall update such information at the time or times in
the manner required by the Code;
(iii) make or cause to be made an election, on behalf
of the Trust Fund, to be treated as a REMIC, and make the appropriate
designations, if applicable, in accordance with this Section 2.04 on
the federal tax return of the Trust Fund for its first taxable year
(and, if necessary, under applicable state law);
(iv) prepare and forward, or cause to be prepared and
forwarded, to the Certificateholders and to the Internal Revenue
Service and, if necessary, state tax authorities, all information
returns or reports, or furnish or cause to be furnished by telephone,
mail, publication or other appropriate method such information, as and
when required to be provided to them in accordance with the REMIC
Provisions, including without limitation, the calculation of any
original issue discount;
(v) provide information necessary for the computation
of tax imposed on the transfer of the Class A-R Certificate to a
Disqualified Organization, or an agent (including a broker, nominee or
other middleman) of a Disqualified Organization, or a pass-through
entity in which a Disqualified Organization is the record holder of an
interest (the reasonable cost of computing and furnishing such
information may be charged to the Person liable for such tax);
(vi) ensure that federal, state or local income tax
or information returns shall be signed by the Trustee or such other
person as may be required to sign such returns by the Code or state or
local laws, regulations or rules; and
(vii) maintain such records relating to the Trust
Fund, as may be required by the Code and, as may be necessary to
prepare the foregoing returns, schedules, statements or information.
[End of Article II]
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS
Section 3.01. Representations and Warranties of the Depositor
with respect to the Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee
for the benefit of the Certificateholders that on the Closing Date it has
entered into the Sale Agreement with CMMC as Seller, that the Seller has made
the following representations and warranties with respect to each Mortgage Loan
in such Sale Agreement as of the Closing Date, which representations and
warranties run to and are for the benefit of the Depositor and the Trustee for
the benefit of the Certificateholders, and as to which the Depositor has
assigned to the Trustee for the benefit of the Certificateholders, pursuant to
Section 2.01 hereof, the right to cause the Seller to repurchase a Mortgage Loan
as to which there has occurred an uncured breach of representations and
warranties in accordance with the provisions of the Sale Agreement.
(a) The information set forth in the Mortgage Loan Schedule is
complete, true and correct in all material respects;
(b) The Mortgage creates a first lien or a first priority
ownership interest in an estate in fee simple in real property securing the
related Mortgage Note;
(c) All payments due prior to the Cut-off Date for such
Mortgage Loan have been made as of the Closing Date, the Mortgage Loan is not
delinquent in payment more than 30 days and has not been dishonored; to the best
of the Seller's knowledge, there are no material defaults under the terms of the
Mortgage Loan; the Seller 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; there has been no more than
one delinquency in excess of 30 days during the preceding twelve-month period;
(d) To the best of the Seller's knowledge, all taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents which previously became due and
owing have been paid, or escrow funds have been established in an amount
sufficient to pay for every such escrowed item which remains unpaid and which
has been assessed but is not yet due and payable;
(e) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by written
instruments. No Mortgagor has been released, in whole or in part, from the terms
thereof except in connection
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with an assumption agreement and which assumption agreement is part of the
Mortgage File and the terms of which are reflected in the Mortgage Loan
Schedule;
(f) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including, without
limitation, the defense of usury, nor will the operation of any of the terms of
the Mortgage Note or Mortgage, or the exercise of any right thereunder, render
the Mortgage Note or 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 no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto, and the Mortgagor was not a debtor in any
state or federal bankruptcy or insolvency proceeding at the time the Mortgage
Loan was originated;
(g) All buildings or other customarily insured improvements
upon the Mortgaged Property are insured by an insurer acceptable under the FNMA
Guides against loss by fire, hazards of extended coverage and such other hazards
as are provided for in the FNMA Guides or by FHLMC. All such standard hazard
policies are in full force and effect and on the date of origination contained a
standard mortgagee clause naming the Seller and its successors in interest and
assigns as loss payee and such clause is still in effect and all premiums due
thereon have been paid. If required by the Flood Disaster Protection Act of
1973, as amended, the Mortgage Loan is covered by a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration which policy conforms to FNMA and FHLMC requirements. The
Mortgage obligates the Mortgagor thereunder to maintain all such insurance at
the 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 the
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;
(h) 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 in all
material respects;
(i) The Mortgage has not been satisfied, canceled or
subordinated, in whole or in part, or rescinded, and the Mortgaged Property has
not been released from the lien of the Mortgage, in whole or in part nor has any
instrument been executed that would effect any such release, cancellation,
subordination or rescission;
(j) The Mortgage is a valid, subsisting, enforceable and
perfected 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 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
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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 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 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 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, enforceable and perfected first lien and first priority security
interest on the property described therein, and the Depositor has the full right
to sell and assign the same to the Trustee for the benefit of the
Certificateholders;
(k) The Mortgage Note and the related Mortgage are original
and genuine and each is the legal, valid and binding obligation of the maker
thereof, enforceable in all respects in accordance with its terms subject to
bankruptcy, insolvency and other laws of general application affecting the
rights of creditors and the Depositor has taken all action necessary to transfer
such rights of enforceability to the Trustee for the benefit of the
Certificateholders. 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 property 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;
(1) The Depositor is the sole owner of record and holder of
the Mortgage Loan and the indebtedness evidenced by the Mortgage Note, except
for the Assignments of Mortgage which have been sent for recording, and upon
recordation the Depositor will be the owner of record of the Mortgage and the
indebtedness evidenced by the Mortgage Note, and upon the sale of the Mortgage
Loan to the Trust for the benefit of the Certificateholders, the Depositor will
retain the Mortgage File or any part thereof with respect thereto not delivered
to the Trust for the benefit of the Certificateholders or its designee in trust
only for the purpose of servicing and supervising the servicing of the Mortgage
Loan. Immediately prior to the transfer and assignment to the Trust for the
benefit of the Certificateholders, the Mortgage Loan, including the Mortgage
Note and the Mortgage, were not subject to an assignment or pledge, and the
Depositor had good and marketable title to and was the sole owner thereof and
had full right to transfer and sell the Mortgage Loan to the Trustee for the
benefit of the Certificateholders free and clear of any encumbrance, equity,
lien, pledge, charge, claim or security interest and has the full right and
authority subject to no interest or participation of, or agreement with, any
other party, to sell and assign the Mortgage Loan pursuant to this Agreement and
following the sale of the Mortgagee Loan, the Trustee for the benefit of the
Certificateholders will own such Mortgage
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Loan free and clear of any encumbrance, equity, participation interest, lien,
pledge, charge, claim or security interest;
(m) The 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 (j) (1),
(2) and (3) above) the Seller, its successors and assigns, as to the first
priority lien of the Mortgage in the original principal amount of the Mortgage
Loan. Such lender's title insurance policy insures ingress and egress by or upon
the Mortgaged Property or any interest therein. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the carrier
of the required mortgage title insurance. The Seller, its successors and
assigns, are the sole insureds of such lender's title insurance policy, such
title insurance policy has been duly and validly endorsed to the Trustee for the
benefit of the Certificateholders or the assignment to the Trustee for the
benefit of the Certificateholders of the Seller'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.
No claims have been made under such lender's title insurance policy, and no
prior holder of the related Mortgage, including the Seller, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy;
(n) There is no default, breach, violation or event of
acceleration existent, 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; and neither the Seller nor any prior mortgagee has
waived any default, breach, violation or event permitting acceleration;
(o) There are no mechanics', or similar liens or claims which
have been filed for work, labor or material (and no rights are outstanding that
under law could give rise to such liens) affecting the related Mortgaged
Property which are or may be liens prior to or equal to the lien of the related
Mortgage;
(p) All improvements subject to the Mortgage which were
considered in determining the Appraised Value of the Mortgaged Property lie
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 (m) above and all improvements on the property comply with all
applicable zoning and subdivision laws and ordinances; the Mortgaged Property is
lawfully occupied under applicable law;
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(q) The Mortgage Loan complies in all material respects with
all the terms, conditions and requirements of the Seller's underwriting
standards in effect at the time of origination of such Mortgage Loan. The
Mortgage Notes and Mortgages (exclusive of any riders) are on forms generally
acceptable to FNMA or FHLMC. Monthly Payments under the Mortgage Note are due
and payable on the first day of each month. The Mortgage contains the usual and
enforceable provisions of the originator at the time of origination for the
acceleration of the payment of the unpaid principal amount of the Mortgage Loan
if the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
(r) To the best of the Seller's knowledge, the Mortgaged
Property is not subject to any material damage by waste, fire, earthquake,
windstorm, flood or other casualty. To the best of the Seller's knowledge, at
origination of the Mortgage Loan there was, and there currently is, no
proceeding pending for the total or partial condemnation of the Mortgaged
Property;
(s) 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, (l) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (2) otherwise by judicial
foreclosure. There is no 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;
(t) If the Mortgage constitutes a deed of trust, a trustee,
authorized and 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, except as may be required by local law, are
or will become payable by, the Purchaser to the trustee under the deed of trust,
except in connection with a trustee's sale or attempted sale after default by
the Mortgagor;
(u) The Mortgage File contains an appraisal of the related
Mortgaged Property signed prior to the final approval of the mortgage loan
application by an appraiser approved by the Seller who had 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 the Mortgage Loan. The appraisal is in a form acceptable to FNMA or FHLMC;
(v) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (A) in substantial
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (B) (1) organized under the
laws of such state, or (2) qualified to do business in such state, or (3)
federal savings and loan associations or national banks or a Federal Home Loan
Bank or savings bank having principal offices in such state, or (4) not doing
business in such state;
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(w) The related 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 interest of any applicable agreement or
chattel mortgage referred to above and such collateral does not serve as
security for any other obligation;
(x) The Mortgagor has received all disclosure materials
required by applicable law with respect to the making of such mortgage loans;
(y) The Mortgage Loan does not contain "graduated payment"
features;
(z) The Mortgagor is not in bankruptcy and, to the best of the
Seller's knowledge, the Mortgagor is not insolvent;
(aa) The Mortgage Loans are fixed rate mortgage loans. The
Mortgage Loans have an original term to maturity of not more than thirty (30)
years, with interest payable in arrears on the first day of each month. Each
Mortgage Note is payable in equal monthly installments of principal and interest
which is sufficient to amortize the Mortgage Loan fully by the stated maturity
date. No Mortgage Loan contains terms or provisions which would result in
negative amortization;
(bb) Each Mortgage Note, each Mortgage, each Assignment of
Mortgage and any other documents required pursuant to this Agreement to be
delivered to the Trustee on behalf of the Certificateholders or its designee, or
its assignee for each Mortgage Loan, have been, on or before the Closing Date,
delivered to the Trustee on behalf of the Certificateholders or its designee, or
its assignee;
(cc) All escrow payments have been collected in full
compliance with state and federal law and the provisions of the related Mortgage
Note and Mortgage. As to any Mortgage Loan that is the subject of an escrow,
escrow of funds is not prohibited by applicable law and has been established in
an amount sufficient to pay for every escrowed item that remains unpaid and has
been assessed but is not yet due and payable. No escrow deposits or other
charges or payments due under the Mortgage Note have been capitalized under any
Mortgage or the related Mortgage Note. Any interest required to be paid pursuant
to state, federal and local law has been properly paid and credited;
(dd) [Reserved];
(ee) In the event the Mortgage Loan has a Loan-to-Value Ratio
greater than 80%, the excess of the principal balance of the Mortgage Loan over
75% of the Appraised Value, with respect to a refinanced Mortgage Loan, or the
lesser of the Appraised Value or the purchase price of the Mortgaged Property,
with respect to a purchase money Mortgage Loan, is and will be insured as to
payment defaults by a Primary Insurance Policy issued by a Qualified Insurer.
All provisions of such Primary Insurance Policy have been and are being complied
with such policy
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is in full force and effect, and all premiums due thereunder have been paid. No
action, inaction, or event has occurred and no state of facts exists that has,
or will result in the exclusion from, denial of, or defense to coverage. Any
Mortgage Loan subject to a Primary Insurance Policy obligates the Mortgagor
thereunder to maintain the Primary Insurance Policy and to pay all premiums and
charges in connection therewith. The Mortgage Rate for the Mortgage Loan as set
forth on the Mortgage Loan Schedule is net of any such insurance premium;
(ff) The assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(gg) As to Mortgage Loans that are not secured by an interest
in a leasehold estate, the Mortgaged Property is located in the state identified
in the Mortgage Loan Schedule and consists of a single parcel of real property
with a detached single family residence erected thereon, or a two-to four-family
dwelling, or an individual condominium unit in a condominium project, or an
individual unit in an attached planned unit development or a detached planned
unit development, provided, however, that no residence or dwelling is a single
parcel of real property with a mobile home thereon. As of the date of
origination, no portion of the Mortgaged Property was used for commercial
purposes, and since the date of origination, to the best of the Seller's
knowledge, no portion of the Mortgaged Property is used for commercial purposes;
(hh) If the Mortgaged Property is a condominium unit or a
planned unit development (other than a de minimis planned unit development) such
condominium or planned unit development project meets the Seller's eligibility
requirements, as set forth in the Seller's underwriting guidelines;
(ii) To the best of the Seller's knowledge, there is no
pending action or proceeding directly involving the Mortgaged Property in which
compliance with any environmental law, rule or regulation is an issue;
(jj) The Mortgagor has not notified the Seller, and the
Depositor has no knowledge of any relief requested or allowed to the Mortgagor
under the Soldiers' and Sailors' Civil Relief Act of 1940;
(kk) No Mortgage Loan was made in connection with the
construction or rehabilitation of a Mortgaged Property or facilitating the
trade-in or exchange of a Mortgaged Property;
(ll) No action has been taken or failed to be taken by
Depositor, on or prior to the Closing Date which has resulted or will result in
an exclusion from, denial of, or defense to coverage under any Primary Insurance
Policy (including, without limitation, any exclusions, denials or defenses which
would limit or reduce the availability of the timely payment of the full amount
of the loss otherwise due thereunder to the insured) whether arising out of
actions,
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representations, errors, omissions, negligence, or fraud of the Depositor, or
for any other reason under such coverage;
(mm) The Mortgage Loan was originated by a mortgagee approved
by the Secretary of Housing and Urban Development pursuant to Sections 203 and
211 of the Act, a savings and loan association, a savings bank, a commercial
bank, credit union, insurance company or similar institution which is supervised
and examined by a federal or state authority;
(nn) Principal payments on the Mortgage Loan commenced no more
than sixty (60) days after funds were disbursed in connection with the Mortgage
Loan. The Mortgage Note is payable on the first day of each month in equal
monthly installments of principal and interest, with interest calculated and
payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated
maturity date, over an original term of not more than thirty years from
commencement of amortization; and
(oo) The Mortgage Loan is a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code (without regard to Treasury
Regulations ss. 1.860G-2(f) or any similar rule that provides that a defective
obligation is a qualified mortgage for a temporary period);
Upon discovery by any of the Depositor, the Servicer 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 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 Seller, which notice shall specify the date of discovery. Pursuant to
the Sale Agreement, the Seller shall within 90 days from the earlier of (i) the
date specified in the notice as the date of discovery of such breach or (ii) the
date the Seller otherwise discovers such breach, cure such breach, substitute a
Mortgage Loan pursuant to the provisions of Section 3.03 or, if the breach
relates to a particular Mortgage Loan, purchase such Mortgage Loan from the
Trustee at the Purchase Price. The Purchase Price for the purchased Mortgage
Loan shall be paid to the Servicer and shall be deposited by the Servicer in the
Collection Account promptly upon receipt, and, upon receipt by the Trustee of
written notification of such deposit signed by a Servicing Officer, the Trustee
shall promptly release to the Seller the related Mortgage File, and the Trustee
shall execute and deliver such instruments of transfer or assignment as may be
provided to it by the Servicer, without recourse, as shall be necessary to vest
in the Seller or its designee, as the case may be, 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 Seller to cure, substitute or purchase any Mortgage Loan as to which such a
breach has occurred shall constitute the sole remedy respecting such breach
available to Certificateholders or the Trustee on behalf of Certificateholders.
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<PAGE>
Section 3.02. Representations and Warranties of the Servicer.
The Servicer represents and warrants to, and covenants with, the Trustee for the
benefit of the Certificateholders that as of the Closing Date:
(a) The Servicer is a corporation duly chartered and validly
existing in good standing under the laws of the State of New Jersey,
and the Servicer is duly qualified or registered as a foreign
corporation in good standing in each jurisdiction in which the
ownership or lease or its properties or the conduct of its business
requires such qualification;
(b) The execution and delivery of this Agreement by the
Servicer and its performance and compliance with the terms of this
Agreement will not violate the Servicer's corporate charter or by-laws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other instrument to
which the Servicer is a party or which may be applicable to the
Servicer or any of its assets;
(c) This Agreement, assuming due authorization, execution and
delivery by the Trustee and the Depositor, constitutes a valid, legal
and binding obligation of the Servicer, enforceable against it in
accordance with the terms hereof subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally and to general principles of
equity, regardless of whether such enforcement is considered in a
proceeding in equity or at law;
(d) The Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Servicer or its
properties or might have consequences that would affect its performance
hereunder; and
(e) No litigation is pending or, to the best of the Servicer's
knowledge, threatened against the Servicer which would prohibit its
entering into this Agreement or performing its obligations under this
Agreement.
It is understood and agreed that the representations and
warranties set forth in this Section 3.02 shall survive the issuance and
delivery of the Certificates and shall be continuing as long as any Certificate
shall be outstanding or this Agreement has been terminated.
Section 3.03. Option to Substitute. If the Seller is required
to repurchase any Mortgage Loan pursuant to Section 2.02 or 3.01, the Seller
may, at its option, within two years from the Closing Date, remove such
defective Mortgage Loan from the terms of this Agreement and substitute another
mortgage loan for such defective Mortgage Loan, in lieu of repurchasing such
defective Mortgage Loan. Any substitute Mortgage Loan shall (a) have a Principal
Balance
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<PAGE>
at the time of substitution not in excess of the Principal Balance of the
removed Mortgage Loan (the amount of any difference, plus one month's interest
thereon at the Mortgage Rate borne by the removed Mortgage Loan, being paid by
the Seller and deemed to be a Principal Prepayment to be deposited by the
Servicer in the Collection Account), (b) have a Mortgage Rate not less than, and
not more than one percentage point greater than, the Mortgage Rate of the
removed Mortgage Loan (provided, however, that if the Mortgage Rate on the
substitute Mortgage Loan exceeds the Mortgage Rate on the removed Mortgage Loan,
the amount of that excess interest (the "Substitute Excess Interest") shall be
payable to the Residual Interest), (c) have a remaining term to stated maturity
not later than, and not more than one year less than, the remaining term to
stated maturity of the removed Mortgage Loan, (d) be, in the reasonable
determination of the Servicer, of the same type, quality and character
(including location of the Mortgaged Property) as the removed Mortgage Loan as
if the breach had not occurred, (e) have a Loan-to-Value Ratio at origination no
greater than that of the removed Mortgage Loan and (f) be, in the reasonable
determination of the Servicer, in material compliance with the representations
and warranties contained in the Sale Agreement and described in Section 3.01, as
of the date of substitution.
The Servicer shall amend the Mortgage Loan Schedule to reflect
the withdrawal of the removed Mortgage Loan from this Agreement and the
substitution of such substitute Mortgage Loan therefor and shall send a copy of
such amended Mortgage Loan Schedule to the Trustee. The Sale Agreement provides
that upon such amendment the Seller 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, which shall be continuing as long as
any Certificate shall be outstanding or this Agreement has not been terminated,
and the remedies for breach of any such representation or warranty shall be as
set forth in Section 3.01. Upon such amendment, the Trustee shall review the
Mortgage File delivered to it relating to the substitute Mortgage Loan, within
the time and in the manner and with the remedies specified in Section 2.02,
except that for purposes of this Section 3.03 (other than the two-year period
specified in the first sentence of this Section), such time shall be measured
from the date of the applicable substitution. In the event of such a
substitution, accrued interest on the substitute Mortgage Loan for the month in
which the substitution occurs and any Principal Prepayments made thereon during
such month shall be the property of the Trust Fund, and accrued interest for
such month on the Mortgage Loan for which the substitution is made and any
Principal Prepayments made thereon during such month shall be the property of
the Seller. The principal payment on a substitute Mortgage Loan due on the Due
Date in the month of substitution shall be the property of the Seller, and the
principal payment on the Mortgage Loan for which the substitution is made due on
such date shall be the property of the Trust Fund.
[End of Article III]
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<PAGE>
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates. (a) The Class A, Class M and
Class B Certificates shall be substantially in the forms thereof included within
Exhibits C, D, E and F and shall, on original issue, be executed by the
Depositor and authenticated by the Trustee (or, if an Authenticating Agent has
been appointed pursuant to Section 4.06, the Authenticating Agent) upon receipt
by the Trustee of the documents specified in Section 2.01, delivered to or upon
the order of the Depositor.
(b) The Depository, the Depositor, the Paying Agent and the
Trustee have entered into a Depository Agreement dated as of [DATE] (the
"Depository Agreement"). Except as provided in paragraph (c) 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 Book-Entry
Certificates may not be transferred as provided in Section 4.02 except to a
successor to the Depository; (ii) ownership and transfers of registration of the
Book-Entry Certificates on the books of the Depository shall be governed by
applicable rules established by the Depository; (iii) the Depository may collect
its usual and customary fees, charges and expenses from its Depository
Participants; (iv) the Trustee shall deal with the Depository, Depository
Participants and Indirect Participants as representatives of the Certificate
Owners of the Book-Entry Certificates for purposes of exercising the rights of
such 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 (v) 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 Participants and persons shown on the
books of such Indirect Participants as direct or indirect Certificate Owners.
The Depository Agreement provides that the Depository shall maintain book-entry
records with respect to the Certificate Owners and with respect to ownership and
transfers of such Certificates.
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 Owners. 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.
(c) If (i)(A) the Depositor advises the Depositor, the Paying
Agent or the Trustee in writing that the Depository is no longer willing or able
to properly discharge its responsibilities as Depository and (B) the Trustee,
the Paying Agent or the Depositor are unable after exercise of their reasonable
best efforts to locate a qualified successor or (ii) the Depositor at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository, the Trustee or, if a Paying Agent has been appointed
under Section 4.05,
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the Paying Agent, shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive, fully
registered Certificates (the "Definitive Certificates") to Certificate Owners
requesting the same. Upon surrender to the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, of the Book-Entry
Certificates by the Depository for registration and receipt by the Trustee or,
if a Paying Agent has been appointed under Section 4.05, the Paying Agent, of an
adequate supply of certificates from the Depositor, the Trustee or if the Paying
Agent is appointed under Section 4.05, the Paying Agent shall issue the
Definitive Certificates based on information received from the Depository.
Neither the Depositor, the Servicer, the Paying Agent 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.
(d) The Certificates shall be issuable in the minimum original
dollar denominations (and integral multiples of $1,000 in excess of such amount)
and aggregate original dollar denominations per Class as set forth in the
following table (except that one Certificate of each of [Class A-5, Class A-6,
Class A-P and Class M and each of the Class B] Certificates may be issued in a
different denomination).
<TABLE>
<CAPTION>
Aggregate Original Certificate
Minimum Principal Balance of all
Original Certificates of the CUSIP
Class Denomination Indicated Class Number
----- ------------ ------------------------------ ------
<S> <C> <C> <C> <C>
A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-P
A-R(1)
A-X(2) (2) (2)
M
B-1
B-2
B-3
B-4
B-5
</TABLE>
- ---------------
(1) The Class A-R Certificate represents the Residual Interest.
(2) The Class A-X Certificates have no Principal Balance, but accrue
interest on the Class A-X Notional Balance (initially,
$________________).
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The Certificates shall be signed by manual or facsimile
signature on behalf of the Depositor by an officer of the Depositor.
Certificates bearing the manual or facsimile signatures of individuals who were
at the time of signature officers of the Depositor shall bind the Depositor,
notwithstanding that such individuals or any of them have ceased to be an
officer 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 officer
of the Depositor 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.
Section 4.02. Registration of Transfer and Exchange of
Certificates. (a) The Trustee or, if a Paying Agent has been appointed hereunder
pursuant to Section 4.05, the Paying Agent, shall cause to be kept 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) Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Depositor shall execute and the Trustee or if an Authenticating
Agent is appointed under Section 4.06, the Authenticating Agent shall
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 Authenticating Agent.
(c) No transfer of a Class A-X, Class B-3, Class B-4 or Class
B-5 Certificate shall be made unless such transfer is made pursuant to an
effective registration statement or otherwise in accordance with 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 Depositor may
require (except with respect to the initial transfer of a Class B-3, Class B-4
or Class B-5 Certificate from Credit Suisse First Boston Corporation and except
if the transferee executes a certificate substantially in the form of Exhibit I
hereto) a written opinion of independent counsel acceptable to and in form and
substance satisfactory to 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 Trust Fund, the Trustee, the
Depositor or the Servicer, and (ii) the Depositor shall require the transferee
to execute a certification substantially in the form of Exhibit H or Exhibit I.
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<PAGE>
(d) No transfer of a Subordinated Certificate shall be made to
any employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of such plan or using the assets of such
plan. No transfer of a Subordinated Certificate shall be made unless the
Depositor shall have received either (i) a representation letter from the
transferee of such Certificate acceptable to and in form and substance
satisfactory to the Depositor, to the effect that (A) 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 using the assets of such
plan, or, alternatively, in the case of an insurance company, the assets of any
separate accounts to effect such acquisition, or alternatively, (B) the source
of funds for the purchase of such Certificate is an "insurance company general
account" within the meaning of Prohibited Transaction Class Exemption 95-60
("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth
in Section I and III of PTCE 95-60 are satisfied with respect to the purchase
and holding of such Certificate, which representation letter shall not be an
expense of the Trustee, the Depositor or the Servicer, or (ii) in the case of a
Subordinated 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 or any
other Person who is using the assets of any such plan to effect such
acquisition, an Opinion of Counsel satisfactory to the Depositor to the effect
that the purchase or holding of such Subordinated Certificate will not result in
the assets of the Trust Fund being deemed to be "plan assets" pursuant to the
Department of Labor Plan Asset Regulations set forth in 29 C.F.R. ss.2510.3-101
and subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of the Code, will not constitute or result in
a prohibited transaction within the meaning of Section 406 or Section 407 of
ERISA or Section 4975 of 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.
(e) At the option of a Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of authorized denominations of
a like Class, upon surrender of the Certificate to be exchanged at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose. Whenever the Certificate is
so surrendered for exchange, the Depositor shall execute and the Authenticating
Agent shall authenticate 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
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument of transfer in the form satisfactory to the Authenticating Agent 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 a Certificate, but the Servicer 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 such
Certificate.
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<PAGE>
(g) All Certificates surrendered for transfer or exchange
shall be destroyed by the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, in accordance with the Trustee's or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent's, standard
procedures.
(h) [Reserved].
(i) A Disqualified Organization is prohibited from acquiring
beneficial ownership of a Class A-R Certificate. Notwithstanding anything to the
contrary contained herein, unless and until the Servicer shall have received an
Opinion of Counsel, satisfactory to it in form and substance, to the effect that
the absence of the conditions contained in this Section 4.02(i) would not result
in the imposition of federal 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
A-R Certificate (including for purposes of this section any beneficial interest
therein) may be made without the express written consent of the Servicer, which
consent is to be granted by the Servicer only upon compliance with the
requirements of this Section and a copy of which written consent shall be
supplied to the Servicer. As a condition to granting its consent to a transfer
of a Class A-R Certificate, the Servicer shall require the proposed transferee
of such Certificate (including, in the case of the initial issuance of the Class
A-R Certificate, the initial Holder thereof) to execute a letter and affidavit
substantially in the form attached hereto as Exhibit K.
As a condition to the granting of the consent referred to in
this Section 4.02(i), prior to the transfer, sale, pledge, hypothecation or
other disposition of the Class A-R Certificate or any interest therein, the
Servicer shall require that the proposed transferee deliver to it (1) its
taxpayer identification number and state, under penalties of perjury that such
number is the social security or employee identification number, as the case may
be, of the transferee or provide an affidavit under penalties of perjury stating
that as of the date of such transfer such transferee is not and has no intention
of becoming a Disqualified Organization, (2) an affidavit stating (i) that such
transferee is not acquiring such Class A-R Certificate as an agent, broker,
nominee, or middleman for a Disqualified Organization, (ii) if the Residual
Interest is a "non-economic residual interest" within the meaning of Treas. Reg.
ss.1.860E-1(c)(2), (X) that no purpose of the acquisition of the Class A-R
Certificate is to avoid or impede the assessment or collection of tax, (Y) that
such transferee has historically paid its debts as they came due and will
continue to pay its debts as they come due, and (Z) that such transferee
represents that it understands that, as the holder of the non-economic residual
interest, the transferee may incur tax liabilities in excess of any cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest, and (iii) unless the Servicer
consents to the transfer of the Class A-R Certificate to a Person who is not a
U.S. Person and who has furnished a duly completed and effective Form 4224, that
it is a U.S. Person, and (3) the transferor deliver to the Servicer a written
certification that as of the date of such transfer it has no knowledge and no
reason to know that the affirmations described in clauses (1) and (2) were
false. The Servicer shall not grant the consent referred to in this Section
4.02(i) if it has actual knowledge that any statement made in the affidavit
issued pursuant to the preceding sentence is not true.
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<PAGE>
Notwithstanding any purported transfer, sale or other disposition of the Class
A-R Certificate to a Disqualified Organization, such transfer, sale or other
disposition shall be deemed to be of no legal force or effect whatsoever and
such Disqualified Organization shall not be deemed to be a Class A-R
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class A-R Certificate. If any purported
transfer shall be in violation of the provisions of this Section 4.02(i) then
the prior holder of the Class A-R Certificate shall, upon discovery that the
transfer of such Class A-R Certificate was not in fact permitted by this Section
4.02(i), be restored to all rights as a Holder thereof retroactive to the date
of the purported transfer of such Class A-R Certificate. The Trustee and the
Servicer shall be under no liability to any Person for any registration or
transfer of a Class A-R Certificate that is not permitted by this Section
4.02(i) or for making payments due on such Class A-R 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 not registered under the written certification of the Servicer as described
in this Section 4.02(i). The prior Holder shall be entitled to recover from any
purported Holder of a Class A-R Certificate that was in fact not a permitted
purported transferee under this Section 4.02(i) at the time it became a
purported Holder all payments made to such purported Holder on such Class A-R
Certificate; provided that the Servicer shall not be responsible for such
recovery. Each Class A-R Certificateholder, by the acceptance of the Class A-R
Certificate, shall be deemed for all purposes to have consented to the
provisions of this Section 4.02(i) and to any amendment to this Agreement deemed
necessary by counsel of the Trustee or the Servicer to ensure that the Class A-R
Certificate is not transferred to a Disqualified Organization and that any
transfer of such Class A-R 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 the Class A-R Certificate will cease to apply and be
void upon receipt by the Servicer of an Opinion of Counsel to the effect that
such restrictions on transfer are no longer necessary to avoid the risk of
material federal taxation to the Trust Fund or prevent the Trust Fund from
qualifying as a REMIC.
(j) The Servicer shall make available upon written request to
each Holder and each proposed transferee of a Class A-X, Class B-3, Class B-4 or
Class B-5 Certificate such information as may be required to permit the proposed
transfer to be effected pursuant to Rule 144A under the Securities Act of 1933.
Section 4.03. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Trustee or,
if a Paying Agent has been appointed under Section 4.05, the Paying Agent, or
the Trustee or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, such
security or indemnity as may be required by it to save it harmless, then, in the
absence of notice to the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, that such Certificate has been acquired by a
bona fide purchaser, the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, shall authenticate and deliver, in exchange for
or in lieu of any such mutilated,
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<PAGE>
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
or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent,
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, to the extent permitted by
law.
Section 4.04. Persons Deemed Owners. Prior to due presentation
of a Certificate of any Class for registration of transfer, the Depositor, the
Servicer, the Paying Agent and the Trustee may treat the person in whose name
any Certificate is registered on the Record Date as the owner of such
Certificate and the Percentage Interest in the distributions to which the
Certificateholders of such Class are entitled on the relevant date as the Holder
of such Certificate and the Percentage Interest represented by such Certificate
for the purpose of receiving remittances pursuant to Section 6.01 and for all
other purposes whatsoever, and neither the Depositor, the Servicer nor the
Trustee shall be affected by notice to the contrary.
Section 4.05. Appointment of Paying Agent; Certificate
Account. The Trustee may appoint a Paying Agent hereunder, which Paying Agent
shall not be Depositor, the Seller, or an affiliate of the Depositor or the
Seller unless such Paying Agent is the Corporate Trust Department of Chase. In
the event of any such appointment, on the Business Day prior to each
Distribution Date, the Servicer shall deposit or cause to be deposited with the
Paying Agent from funds on deposit in the Collection Account a sum up to the
Available Distribution Amount, such sum to be held in trust for the benefit of
Certificateholders in a segregated account (the "Certificate Account") which
shall be an Eligible Account in the name of "[TRUSTEE], as Trustee, in trust for
and for the benefit of the Certificateholders of Multi-Class Mortgage
Pass-Through Certificates, Chase Manhattan Acceptance Corporation, Series [ ] -
Certificate Account". The 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. If the Paying Agent is a party other than the Trustee,
the Trustee shall have no liability in connection with the performance or
failure of performance of the Paying Agent. The Trustee designates the Corporate
Trust Department of Chase as the initial Paying Agent. Only the Trustee may
remove the Paying Agent, and may do so at will.
If, on any Distribution Date, the Paying Agent fails to
distribute to Certificateholders the amounts then on deposit in the Certificate
Account for the purposes specified herein, the Trustee shall be obligated
promptly upon its knowledge thereof to distribute such amounts to
Certificateholders in the manner and in such amounts based upon information
provided by the Servicer; provided that in no event shall the Trustee be
obligated for purposes of
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this paragraph to distribute to Certificateholders any amounts other than those
on deposit in the Certificate Account or expend any funds not reimbursable
pursuant to Section 10.05 hereof, except as otherwise provided herein.
Notwithstanding anything in this Agreement to the contrary, the Trustee shall be
liable to the Servicer and the Certificateholders only for its negligence in
connection with the withdrawal of funds from the Certificate Account by the
Trustee and the distribution of such funds by the Trustee to Certificateholders
pursuant to this paragraph.
The Servicer shall cause each Paying Agent other than the
Trustee to execute and deliver to the Servicer and the Trustee on the Closing
Date or, if subsequently appointed, on the date of appointment, a written
instrument executed by an officer of the Paying Agent in which such Paying Agent
shall agree with the Servicer and the Trustee that 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. Authenticating Agents. (a) The Trustee may
appoint one or more Authenticating Agents (each, an "Authenticating Agent")
which shall be authorized to act on behalf of the Trustee in authenticating the
Certificates. Wherever reference is made in this Agreement to the authentication
of Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
must be an entity organized and doing business under the laws of the United
States of America or of any state, having a combined capital and surplus of at
least $15,000,000, authorized under such laws to do a trust business and subject
to supervision or examination by federal or state authorities. If the
Authenticating Agent is a party other than the Trustee, the Trustee shall have
no liability in connection with the performance or failure of performance of the
Authenticating Agent. [The Trustee hereby appoints Chase as the initial
Authenticating Agent.]
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee and the Depositor.
The Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Depositor. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance within the provisions of this Section 4.06, the Trustee may appoint a
successor Authenticating Agent, shall give written notice of such appointment to
the Depositor and shall
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mail notice of such appointment to all Holders of Certificates. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section 4.06. No Authenticating Agent shall have
responsibility or liability for any action taken by it as such at the direction
of the Trustee. Any Authenticating Agent shall be entitled to reasonable
compensation for its services and any such compensation shall be payable solely
by the Trustee, without any right of reimbursement from the Depositor, the
Servicer or the Trust Fund.
[End of Article IV]
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ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 5.01. Servicer to Service Mortgage Loans. The Servicer
shall service and administer the 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, all in accordance with Accepted
Servicing Practices. Without limiting the generality of the foregoing, the
Servicer in its own name or in the name of a Sub-Servicer shall, pursuant to a
power of attorney granted hereby by the Trustee for such purposes, when the
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 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 Mortgage Loans and with respect to
the Mortgaged Properties; provided, however, that subject to the provisions of
this paragraph, the Servicer may allow a modification with respect to a Mortgage
Loan if the Servicer would take such action in the ordinary course of its
business if it were the owner of the Mortgage Loan. The Servicer may agree to a
modification of any Mortgage Loan (the "Relevant Mortgage Loan") upon the
request of the related Mortgagor, provided that (i) the modification is in lieu
of a refinancing and the Mortgage Rate on the Relevant Mortgage Loan, as
modified, is approximately a prevailing market rate of newly-originated mortgage
loans having similar terms, (ii) the aggregate of the adjusted bases of all
Modified Mortgage Loans (including the Relevant Mortgage Loans) plus the
aggregate adjusted bases of any assets that are not qualified mortgages or
permitted investments under Section 860G(a) of the Code that are assets of the
Trust Fund established hereunder at all times on any day is less than one
percent of the aggregate of the adjusted bases of all assets of the Trust Fund
(including such Modified Mortgage Loans) on such day, and (iii) the Servicer
purchases the Relevant Mortgage Loan from the Trust Fund as described below.
Effective immediately after such modification, and, in any event, on the same
Business Day on which the modification occurs, all right, title and interest of
the Trustee in and to the Modified Mortgage Loan shall automatically be deemed
transferred and assigned to the Servicer and all benefits and burdens of
ownership thereof, including without limitation the right to accrued interest
thereon from and including the date of modification and the risk of default
thereon, shall pass to the Servicer. To confirm such transfer and assignment,
the Servicer, as servicer hereunder, as soon as practicable shall execute an
instrument of assignment of the Modified Mortgage Loan without recourse in
customary form to the Servicer in its individual capacity. The Servicer shall
deposit the Purchase Price for any Modified Mortgage Loan in the Collection
Account pursuant to Section 5.08. Upon receipt by the Trustee of written
notification of any such deposit signed by a Servicing Officer, the Trustee
shall release to the Servicer the related Mortgage File and shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary more fully to vest in the Servicer any Modified
Mortgage Loan previously transferred and assigned pursuant thereto.
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The Servicer shall furnish to the Trustee for execution and
redelivery to the Servicer or, at the request of the Servicer, a Sub-Servicer,
such documents necessary or appropriate to enable the Servicer to service and
administer the Mortgage Loans and the Trustee shall not be responsible for the
Servicer's application thereof. The Servicer agrees to remain eligible as either
a FNMA or FHLMC seller/servicer, or both, for so long as it is Servicer.
All Servicing Advances made by the Servicer in effecting the
timely payment of taxes, insurance and assessments on the properties subject to
the Mortgage Loans shall not, for the purpose of calculating monthly
distributions to Certificateholders, 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 Servicer to the
extent permitted by Sections 5.09 and 5.23.
Section 5.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers; Enforcement of Sub-Servicer's Obligations. (a) The Servicer may
enter into Sub-Servicing Agreements with Sub-Servicers for the servicing and
administration of all or part of the Mortgage Loans. References in this
Agreement to actions taken or to be taken by the Servicer in servicing the
Mortgage Loans include actions taken or to be taken by a Sub-Servicer on behalf
of the Servicer. Each Sub-Servicing Agreement will be upon such terms and
conditions as are not inconsistent with this Agreement and as the Servicer and
the Sub-Servicer have agreed. The Servicer shall notify the Trustee 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 Servicer of
such amount. The Sub-Servicer shall deposit all such funds in an Eligible
Account.
(b) As part of its servicing activities hereunder, the
Servicer, for the benefit of the Trustee and the Certificateholders, 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 Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense but shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement only to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loans or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed.
Section 5.03. Successor Sub-Servicers. The 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.
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Section 5.04. Liability of the Servicer. Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or reference
to actions taken through a Sub-Servicer or otherwise, the Servicer shall remain
obligated and liable to the Trustee and Certificateholders for the servicing and
administering 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 and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the 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 or Certificateholders. Any Sub-Servicing Agreement that may be
entered into and any 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 Servicer alone, and the
Trustee and Certificateholders 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. Termination of Sub-Servicing Agreement. If the
Servicer shall for any reason no longer be the Servicer hereunder (including by
reason of any Event of Default), the Servicer shall thereupon terminate each
Sub-Servicing Agreement that may have been entered into, and the Trustee, its
designee or the successor servicer and the Trustee shall not be deemed to have
assumed any of the Servicer's interest therein or to have replaced the Servicer
as a party to any such Sub-Servicing Agreement.
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 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
conventional mortgage loans held in its own portfolio. Any such arrangements
shall not diminish or otherwise affect the Servicer's obligation to make
Advances pursuant to Section 6.03.
Section 5.08. Establishment of Collection Account; Deposit in
Collection Account. With respect to all of the Mortgage Loans, the Servicer
shall segregate and hold all funds collected and received pursuant to a Mortgage
Loan separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Collection Accounts for the benefit of the
Certificateholders (collectively, the "Collection Account") which are Eligible
Accounts, in the form of a trust account, in the name of "[TRUSTEE], as Trustee,
in trust for and for the benefit of the Certificateholders of Multi-Class
Mortgage Pass-Through Certificates, Chase Manhattan Acceptance Corporation,
Series [ ] - Collection Account." Such Collection Account shall be established
with a commercial bank, a savings bank or a savings and loan
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association. The Servicer may invest, or cause the institution maintaining the
Collection Account to invest, moneys in the Collection 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. All income and gain realized from
any such investment shall be for the benefit of the Servicer as additional
compensation 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 (to the
extent not offset by income from other such investments) shall be deposited in
the Collection Account by the Servicer out of its own funds immediately as
realized; provided, however, that if the Trustee becomes Servicer, the Trustee
shall not be required to deposit the amount of any loss incurred prior to it
becoming Servicer.
The Servicer shall deposit or cause to be deposited in the
Collection Account on a daily basis (and not later than the second Business Day
following receipt), and retain therein:
(i) All payments which were received after the Cut-off Date on
account of principal of the Mortgage Loans (other than the principal
portion of Monthly Payments due on or before the Cut-off Date), and all
Principal Prepayments collected on or after the Cut-off Date;
(ii) All payments which were received after the Cut-off Date
on account of interest on the Mortgage Loans (net of the Servicing
Fee)(other than the interest portion of Monthly Payments due on or
before the Cut-off Date);
(iii) Net Liquidation Proceeds;
(iv) All Insurance Proceeds received by the 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 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 Servicer's normal servicing
procedures;
(vi) All Repurchase Proceeds;
(vii) All Advances made by the Servicer pursuant to Section
6.03;
(viii) All amounts representing revenues under the insurance
provided pursuant to Section 5.19 to the extent of any losses borne by
any Certificateholder;
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(ix) All revenues from any Mortgaged Property acquired by the
Servicer by foreclosure or deed in lieu of foreclosure net of any
Servicing Advances with respect to such Mortgaged Property; and
(x) Any other amounts required to be deposited therein
pursuant to this Agreement.
The Servicer shall maintain accounting records on a
loan-by-loan basis with respect to the Collection Account. The Servicer shall
give notice to the Trustee and the Depositor and each Rating Agency of any
change in the location of the Collection Account, prior to the use thereof.
Notwithstanding anything to the contrary herein, no Monthly Payment or any
portion thereof shall be permitted to remain in the Collection Account for more
than 12 months. Any Monthly Payment or any portion thereof that has remained in
the Collection Account for 12 months shall be deemed a Principal Prepayment and
distributed to Certificateholders pursuant to the provisions of this Agreement
on the Distribution Date immediately following the end of such 12 month period.
Section 5.09. Permitted Withdrawals from the Collection
Account. The Servicer may, from time to time, withdraw funds from the Collection
Account for the following purposes:
(i) to reimburse itself 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 Servicer's and the
Sub-Servicer's right to receive reimbursement pursuant to this subclause (i)
being limited to amounts received on particular Mortgage Loans which represent
Late Collections (net of the Servicing Fees) with respect to those particular
Mortgage Loans;
(ii) to pay itself the Servicing Fee;
(iii) to reimburse itself for unreimbursed Servicing Advances,
or to pay the related Sub-Servicer any unreimbursed Servicing Advances,
the Servicer's right to receive reimbursement or make payments to the
Sub-Servicer 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
Depositor for expenses incurred by and recoverable by or reimbursable
to it pursuant to Section 5.01 or 5.16;
(v) to reimburse itself (or the related Sub-Servicer) for any
Nonrecoverable Advances;
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(vi) to pay to itself (or the related Sub-Servicer) income
earned on the investment of funds deposited in the Collection Account;
(vii) to make deposits into the Certificate Account in the
amounts and in the manner provided for herein;
(viii) to make payments to itself or others pursuant to any
provision of this Agreement, and to clear and terminate the Collection
Account upon the termination of this Agreement; and
(ix) to withdraw amounts deposited in error.
Section 5.10. Establishment of Escrow Account; Deposits in
Escrow Account. With respect to those Mortgage Loans on which the Servicer or
any Sub-Servicer collects Escrow Payments, if any, the Servicer shall, and shall
cause the 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, in the form of trust 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 Servicer. The Servicer shall give notice to the Trustee of
the location of any Escrow Account, and of any change thereof, prior to the use
thereof. Nothing in this paragraph shall be deemed to require the Servicer to
collect Escrow Payments in the absence of a provision in the related Mortgage
requiring such collection.
The Servicer shall deposit, or cause to be deposited, in any
Escrow Account or Accounts on a daily basis, and retain therein, (i) 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 and (ii) all amounts representing proceeds of any hazard insurance
policy which are to be applied to the restoration or repair of any Mortgaged
Property. The 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 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 related Mortgagor and, to the extent required by law, the Servicer shall pay
interest on escrowed funds to the related 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 Servicer only
(i) to effect timely payments of ground rents, taxes, assessments, water rates,
Standard Hazard Policy premiums, or other items constituting Escrow Payments for
the related Mortgage, (ii) to reimburse the Servicer for
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any Servicing Advance made by the Servicer, with respect to 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 or under applicable law, (iv) for application
to restoration or repair of the property subject to the related Mortgage, (v) to
pay to the Servicer, or to the Mortgagor to the extent required by law, any
interest paid on the funds deposited in the Escrow Account, (vi) to clear and
terminate the Escrow Account on the termination of this Agreement or (vii) to
withdraw amounts deposited in error.
Section 5.12. Payment of Taxes, Insurance and Other Charges.
With respect to each Mortgage Loan, the Servicer shall maintain, or cause to be
maintained, accurate records reflecting any delinquencies or nonpayments with
regard to taxes, assessments and Standard Hazard Policy premiums. The Servicer
assumes full responsibility for ensuring the payment of all such bills and shall
effect 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 Servicer may transfer
the Collection Account or Escrow Account to an Eligible Account maintained with
a different depository institution from time to time.
Section 5.14. [Reserved].
Section 5.15. Maintenance of the Primary Insurance Policies.
The Servicer shall not take, or permit any Sub-Servicer to take, any action
which would result in non-coverage under any applicable Primary Insurance Policy
of any loss which, but for the actions of the Servicer or Sub-Servicer, would
have been covered thereunder. Except as otherwise required by applicable law, to
the extent coverage is available and until the Loan-to-Value Ratio of the
related Mortgage Loan is reduced to 80%, the Servicer shall keep or cause to be
kept in full force and effect each such Primary Insurance Policy in an amount
equal to the amount by which the unpaid principal balance of the related
Mortgage Loan exceeds 75% of the value (as described in the definition of
Loan-to-Value Ratio) of the related Mortgaged Property. The Servicer shall not
cancel or refuse to renew any such Primary Insurance Policy or consent to any
Sub-Servicer canceling or refusing to renew any such Primary Insurance Policy
applicable to a Mortgage Loan subserviced by it, that is in effect at the date
of the initial issuance of the Certificates and is required to be kept in force
hereunder unless the replacement Primary Insurance Policy for such canceled or
non-renewed policy is maintained with an insurer whose claims-paying ability is
rated at least as high as the original insurer or is acceptable to each Rating
Agency as confirmed in writing by each such Rating Agency, unless otherwise
required by law.
Section 5.16. Maintenance of Standard Hazard Policies. (a) The
Servicer shall cause to be maintained for each Mortgage Loan a Standard Hazard
Policy with extended
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coverage as is prudent in the area where the Mortgaged Property is located in an
amount which is equal to the greater of (i) the lesser of (A) 100% of the
maximum insurable value of the improvements securing such Mortgage Loan or (B)
the principal balance owing on such Mortgage Loan, or (ii) such amount required
to prevent the Mortgagor or mortgagee from becoming a co-insurer. 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 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 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 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 Servicer's normal servicing procedures)
shall be deposited, subject to applicable law, in the Collection Account. It is
understood and agreed that no earthquake or other additional insurance need be
required by the 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 Servicer or
its designee. Any such Standard Hazard Policies or 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 Servicer shall be obligated, in the
case of blanket insurance policies, to deposit in the Collection 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 Servicer
shall not interfere with the Mortgagor's freedom of choice in selecting either
his insurance carrier or agent; provided, however, that the Servicer shall not
accept any such insurance policies from insurance companies unless such
companies are acceptable insurers in the discretion of the Servicer.
(b) Any cost incurred by the 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 Servicer from the Mortgagor or out of Insurance Proceeds or Liquidation
Proceeds or to the extent permitted by Section 5.09.
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Section 5.17. [Reserved].
Section 5.18. [Reserved]
Section 5.19. Fidelity Bond and Errors and Omissions
Insurance. 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 on
behalf of the Servicer 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 shall protect and insure
the Servicer against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such persons and shall be maintained
at a level acceptable to FNMA. No provision of this Section 5.19 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. Upon
request of the Trustee, the Servicer shall cause to be delivered to the Trustee
a certification evidencing coverage under such fidelity bond and insurance
policy. Promptly upon receipt of any notice from the surety or the insurer that
such fidelity bond or insurance policy has been terminated or modified in a
materially adverse manner, the Servicer shall notify the Trustee and each Rating
Agency 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
Servicer agrees to present, on behalf of itself, the Trustee and the
Certificateholders, 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
Servicer shall deposit Insurance Proceeds in the Collection Account.
(b) When any Mortgaged Property is conveyed by the Mortgagor,
the Servicer shall enforce any due-on-sale clause contained in any Mortgage Note
or Mortgage, to the extent permitted by such Mortgage Note or Mortgage,
applicable law and governmental regulations. Subject to the foregoing, the
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 Servicer
shall apply such underwriting standards and follow such practices 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 Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any conveyance by
the Mortgagor of the Mortgaged Property or any assumption of a Mortgage Loan by
operation of law which the Servicer in good faith determines it may be
restricted by law from preventing, for any reason whatsoever.
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(c) Subject to the Servicer's duty to enforce any due-on-sale
clause to the effect 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 Servicer shall so notify the Trustee by
forwarding to the Trustee the original copy of such assumption or substitution
agreement, which copy shall be added by the Trustee to the related Mortgage File
and shall, for all purposes, be considered a part of such Mortgage File to the
same extent as all other documents and instruments constituting a part thereof.
In connection with any such assumption, modification agreement or substitution
agreement, the interest rate of the related Mortgage Note shall not be changed,
the principal amount of the Mortgage Note shall not be increased or decreased
and the maturity of the Mortgage Note shall not be extended, nor shall it be
shortened by more than one year. Any fee collected by the Servicer for entering
into an assumption or substitution of liability agreement with respect to such
Mortgage Loan shall be retained by the Servicer as additional servicing
compensation.
Section 5.21. Income and Realization from Defaulted Mortgage
Loans. The Servicer, on behalf of the Trustee, 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. The Servicer shall sell
such property prior to the close of the third calendar year beginning after the
year in which such foreclosure or conversion occurs 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 Servicer shall follow such practices and procedures as
it shall deem necessary or advisable, as shall be normal and usual in its
general mortgage servicing activities, including its management of foreclosed
properties for a temporary period as contemplated herein. The foregoing is
subject to the provisions of Section 5.28 of this Agreement and to the proviso
that the 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 Certificateholders
after reimbursement to itself for such expenses (respecting which it shall have
priority for purposes of withdrawals from the Collection Account pursuant to
Section 5.09). The Servicer shall be permitted to earn income with respect to
any Mortgaged Properties, provided such income does not constitute "net income
from foreclosure property" within the meaning of Section 860G(c) of the Code.
The income earned from the management of such Mortgaged Properties, net of
reimbursement to the Servicer for expenses (including any taxes) incurred 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
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Notes and shall be deposited into the Collection Account. To the extent the
income received is in excess of the amount attributable to amortizing principal
and accrued interest at the Net Mortgage Rate on the related Mortgage Loan, such
excess shall be deposited in the Collection Account.
The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resources Conservation and Recovery Act of 1976, or other federal,
state or local environmental legislation, on a Mortgaged Property in determining
whether to foreclose upon or otherwise comparably convert the ownership of such
property. To the extent that the Servicer has actual knowledge of any such
substance or waste, it shall consult with the Trustee regarding the appropriate
course of action. The Servicer shall not institute foreclosure actions with
respect to a property containing substance or waste as described above if it
reasonably believes that such action would not be consistent with its servicing
standards, and in no event shall the Servicer manage, operate or take any other
action with respect thereto which the Servicer in good faith believes will
result in "clean-up" or other liability under applicable law. The net income
from the rental or sale of a REO Property shall be deposited in the Collection
Account within two (2) Business Days after receipt thereof by the Servicer.
The Servicer may enter into a special servicing agreement with
an unaffiliated holder of 100% Percentage Interest of a Class B Certificate or a
holder of a class of securities representing interests in such Class B
Certificate and/or other subordinate mortgage pass-through certificates, such
agreement to be (i) substantially in the form of Exhibit J hereto or (ii)
subject to each Rating Agency's acknowledgment that the ratings of the
Certificates in effect immediately prior to the entering into of such agreement
would not be qualified, downgraded or withdrawn and the Certificates wold not be
placed on credit review status (except for possible upgrading) as a result of
such agreement. Any such agreement may contain provisions whereby such holder
may instruct the Servicer to commence or delay foreclosure proceedings with
respect to delinquent Mortgage Loans and will contain provisions for the deposit
of cash by the holder that would be available for distribution to
Certificateholders if Liquidation Proceeds are less than they otherwise may have
been had the Servicer acted in accordance with its normal procedures.
Section 5.22. Trustee to Cooperate; Release of Mortgage Files.
(a) Upon becoming aware of the payment in full of any Mortgage Loan, or upon the
receipt by the Servicer of a notification that payment in full will be made in a
manner customary for such purposes, the Servicer shall immediately notify the
Trustee (if the Trustee holds the related Mortgage File) by a certification
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection 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, within five
Business Days the Trustee shall release the related Mortgage File to the
Servicer and execute and deliver to the Servicer the request for reconveyance,
deed of
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reconveyance or release or satisfaction of mortgage or such other instruments
releasing the lien of the Mortgage as have been provided by the Servicer to the
Trustee, together with the Mortgage Note with written evidence of cancellation
thereon, and the Trustee shall have no further responsibility with respect to
said Mortgage File. Upon any such payment in full, or the receipt of such
notification, the 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, which
assignment of deed of trust, except as otherwise provided by any applicable law,
shall be recorded by the Servicer in the appropriate land records in the
jurisdiction in which the assignment of deed of trust is recorded, or, as the
case may be, to procure from the Trustee an instrument of satisfaction or, if
the Mortgagor so requests, an assignment without recourse, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
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 Collection Account or to the Trustee.
(b) From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, the Servicer shall deliver to the Trustee a
certificate of a Servicing Officer requesting that possession of the Mortgage
File be released to the 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 Servicer shall require
that the Trustee release the Mortgage File, and, within five Business Days, the
Trustee shall deliver the Mortgage File or any document therein to the Servicer.
The Servicer shall cause each Mortgage File so released to be returned to the
Trustee when the need therefor by the 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 Collection Account or (ii) the
Mortgage File 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 Servicer has delivered to the Trustee a
certificate of a Servicing Officer in the form of Exhibit L hereto certifying as
to the name and address of the Person to which such Mortgage File was delivered
and the purpose or purposes of such delivery.
(c) Upon written request of the Servicer, the Trustee shall
execute and deliver to the Servicer any court pleadings, requests for trustee's
sale or other documents prepared by and delivered by the Servicer to the Trustee
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 Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that such 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
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the insurance policies required under this Agreement or invalidate or otherwise
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 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 for on a Mortgage
Loan-by-Mortgage Loan basis.
Additional servicing compensation in the form of assumption
fees, prepayment fees and late payment charges shall be retained by the
Servicer, to the extent permitted by applicable law. The 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 any
Sub-Servicer) and shall not be entitled to reimbursement therefor except as
specifically provided in Sections 5.09 and 5.21.
Section 5.24. 1934 Act Reports. (a) The Servicer shall, on
behalf of the Trust, make all filings ("Periodic Reports") required to be made
by the Depositor or the Trust (other than the filings relating to the closing of
this transaction) with respect to the Class A Certificates, the Class M
Certificates, the Class B-1 Certificates and the Class B-2 Certificates pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder.
(b) Within 30 days after the beginning of the first fiscal
year during which the Trust's obligation to file Periodic Reports pursuant to
the Exchange Act shall have been suspended, the Servicer shall prepare, or cause
to be prepared, a notice on Commission Form 15 ("Form 15") and is hereby
authorized to and shall execute such Form 15 on the Trust's behalf; provided,
however, that the Servicer shall be under no obligation to prepare such notice
if the number of Certificateholders exceeds 300. The Servicer shall file any
notice on Form 15 with the Commission in accordance with the provisions of Rule
15d-6 under the Exchange Act.
Section 5.25. Annual Statement as to Compliance.
The Servicer will deliver to the Depositor and the Trustee on
or before April 15 of each year, beginning with April 15 in the year which
begins not less than three months after the Closing Date, an Officers'
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, (ii) to the
best of such officer's knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof
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and (iii) to the best of such officer's knowledge, each Sub-Servicer has
fulfilled its obligations under its Sub-Servicing Agreement in all material
respects, or if there has been a material default in the fulfillment of such
obligations, specifying such default known to such officers and the nature and
status thereof. Copies of such statement shall be provided to each Rating Agency
by the Servicer. Copies of such statement shall also be provided by the Servicer
to any Certificateholder upon request. If the Servicer shall fail to provide
such copies and a Responsible Officer of the Trustee is aware that the Servicer
has not so provided copies, the Trustee shall provide such copies at the
Servicer's expense if the Trustee has received such statement.
Section 5.26. Annual Independent Public Accountants' Servicing
Report. On or before April 15 of each year, beginning with April 15 in the year
which begins not less than three months after the Closing 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 and the Trustee to the effect that such firm has
examined certain documents and records relating to the servicing of the Mortgage
Loans and that, on the basis of such examination conducted substantially in
compliance with the Uniform Single Audit Program for Mortgage Bankers, such
servicing has been conducted in compliance with the manner of servicing set
forth in pooling and servicing agreements substantially similar to this
Agreement, except for (i) such exceptions as such firm shall believe to be
immaterial and (ii) such other exceptions as shall be set forth in such
statement. Copies of such statement shall be provided to each Rating Agency,
and, upon request, to the Certificateholders, by the Servicer, or by the Trustee
at the Servicer's expense if the Trustee has received such statement and the
Servicer shall fail to provide such copies and the Trustee is aware that the
Servicer has not so provided copies.
Section 5.27. Access to Certain Documentation; Rights of the
Depositor in Respect of the Servicer. The Servicer shall provide access to the
Trustee, Certificateholders which are savings and loan associations, banks or
insurance companies or examiners of any federal or state banking or insurance
regulatory authority to the documentation regarding the Mortgage Loans if so
required by applicable regulations of any 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
Servicer designated by it. The Depositor may, but is not obligated to, enforce
the obligations of the Servicer under this Agreement and may, but is not
obligated to, appoint and cause a designee to perform, any defaulted obligations
of the Servicer hereunder or exercise the rights of the Servicer hereunder;
provided that the Servicer shall not be relieved of any of its obligations
hereunder by virtue of the appointment of a designee by the Depositor or its
designee. The Depositor shall not assume any responsibility or liability for any
action or failure to take action by the Servicer and is not obligated to
supervise the performance of the Servicer under this Agreement or otherwise.
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Section 5.28. REMIC-Related Covenants. For as long as the
Trust Fund shall exist, the Servicer and the Trustee shall act in accordance
herewith to assure continuing treatment of the Trust Fund as a REMIC. In
particular:
(a) The Servicer shall not create, or permit the creation of,
any "interests" in the REMIC within the meaning of Section 860G(a) of the Code
other than the "regular interests" in the REMIC designated as such in Section
2.04(a) and the Residual Interest;
(b) As of all times as may be required by the Code, the
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
Servicer and the Trustee, upon the direction of the Servicer, also will maintain
records that are sufficient to indicate the Trust Fund's compliance with
applicable requirements of the Code (and applicable Proposed, Temporary or final
Treasury Regulations) relating to the assets held by the Trust Fund. Further,
the Servicer shall not permit and the Trustee shall not accept the transfer or
substitution of any Mortgage Loan other than pursuant to Section 3.03, 5.01 or
5.21 of this Agreement, and the Servicer shall, in any case, not permit
substitution later than two years from the Closing Date unless the Servicer and
the Trustee have received an Opinion of Counsel, which will not be an expense of
the Trust Fund, 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 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 pursuant to this Agreement
or the Trustee has received an Opinion of Counsel, which will not be an expense
of the Trust Fund or the Trustee, to the effect that such sale (i) is pursuant
to 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 that results
in the realization of a material amount of gain or loss for federal income tax
purposes;
(e) The Trustee shall not accept any contribution to the Trust
Fund after the Startup Day without an Opinion of Counsel (which shall not be an
expense of the Trustee) that such contribution is included within the exceptions
provided in Section 860G(d)(2) of the Code and, therefore, will not be subject
to the tax imposed by Section 860G(d)(1) of the Code; and
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(f) Notwithstanding anything to the contrary in this
Agreement, the Servicer and the Trustee, at the direction of the Servicer, shall
take any other action or refuse to take any action otherwise required (including
adjusting the Purchase Price for any Mortgage Loan) where the Servicer deems
such action or inaction reasonably necessary to ensure the REMIC status of the
Trust Fund under the Code and applicable regulations or to avoid the imposition
of any material tax liability on the Trust Fund that will affect amounts
distributable to the Certificateholders.
(g) In the event that any applicable federal, state or local
tax, including interest, penalties or assessments, additional amounts or
additions to tax, is imposed on the Trust Fund, such tax shall be treated in the
same manner as a Realized Loss and shall be charged against amounts otherwise
distributable to the Holders of the Certificates, except as provided in the last
sentence of this Section 5.28 (g). The Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent shall withdraw from the
Collection Account sufficient funds to pay or provide for the payment of, and to
actually pay, such tax as is estimated to be legally owed by (but such
authorization shall not prevent the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent from contesting, at the expense
of the Trust Fund (other than as a consequence of a breach of its obligations
under this Agreement), any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent is hereby authorized to and shall segregate, into a
separate non-interest bearing account, the net income from any "prohibited
transaction" under Code Section 860F(a), the amount of any taxable contribution
to the Trust Fund after the Startup Day that is subject to tax under Code
Section 860G(d), and 35% of any estimated "net income from foreclosure property"
under Section 860G(c) and use such income or amount, to the extent necessary, to
pay such tax. To the extent that any such tax is paid to the Internal Revenue
Service or applicable state or local tax authorities, the Trustee or a Paying
Agent has been appointed under Section 4.05, the Paying Agent shall retain an
equal amount from future amounts otherwise distributable to the Holder of the
Class A-R Certificate and shall distribute such retained amounts to the Holders
of the other Classes of Certificates, to the extent they remain outstanding,
until they are fully reimbursed for any amount of such taxes previously charged
to the then Holder of the Class R Certificate. Neither the Trustee nor the
Servicer shall be responsible for any taxes imposed on the Trust Fund except to
the extent such taxes arise as a consequence of a breach of their respective
obligations under this Agreement.
[End of Article V]
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ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01. Distributions. (a) On each Distribution Date,
the Paying Agent shall apply an amount equal to the Available Distribution
Amount in the following order of priority:
(i) to the Non-PO Class A Certificateholders, all
distributable amounts up to the sum of (A) the Aggregate Class A
Interest Accrual Amount and (B) the Aggregate Class A Interest
Shortfall;
(ii) the balance, if any, of the Available Distribution Amount
shall be allocated, first, pro rata (in accordance with the maximum
amounts distributable in accordance with this clause (ii)) between (A)
the Non-PO Class A Certificateholders, the amounts distributable
pursuant to (b)(ii)(A) below, up to the Non-PO Class A Optimal
Principal Amount and (B) the Class A-P Certificateholders, the Class
A-P Amount, in accordance with (b)(ii)(B) below and second, to the
Class A-P Certificateholders, the Class A-P Shortfall Amount, in
accordance with (b)(iii) below;
(iii) to the Class M Certificateholders, the balance, if any,
of the Available Distribution Amount after making the distributions
provided for in paragraphs (i) and (ii) above, in accordance with, and
up to the amount calculated pursuant to, Section 6.01(c) below;
(iv) to the Class B Certificateholders, the balance, if any,
of the Available Distribution Amount after making the distributions
provided for in paragraphs (i) through (iii) above, in accordance with,
and up to the amounts calculated pursuant to, Section 6.01(d) below;
and
(v) to the Class A-R Certificateholders the balance, if any,
of the Available Distribution Amount remaining after the distributions
provided for in paragraphs (i) through (iv) above.
(b) Amounts payable to the Class A Certificateholders on any
Distribution Date shall be distributed as follows:
(i) to the extent the amount available for distribution
pursuant to (a)(i) is sufficient:
(A) to the Class A-1 Certificateholders, (1) the
Class A-1 Interest Accrual Amount plus (2) the Class A-1
Shortfall from the preceding Distribution Date;
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(B) to the Class A-2 Certificateholders, (1) the
Class A-2 Interest Accrual Amount plus (2) the Class A-2
Shortfall from the preceding Distribution Date;
(C) to the Class A-3 Certificateholders, (1) the
Class A-3 Interest Accrual Amount plus (2) the Class A-3
Shortfall from the preceding Distribution Date;
(D) to the Class A-4 Certificateholders, (1) the
Class A-4 Interest Accrual Amount plus (2) the Class A-4
Shortfall from the preceding Distribution Date;
(E) to the Class A-5 Certificateholders, (1) the
Class A-5 Interest Accrual Amount plus (2) the Class A-5
Shortfall from the preceding Distribution Date;
(F) to the Class A-6 Certificateholders, (1) the
Class A-6 Interest Accrual Amount plus (2) the Class A-6
Shortfall from the preceding Distribution Date;
(G) to the Class A-7 Certificateholders, (1) the
Class A-7 Interest Accrual Amount plus (2) the Class A-7
Shortfall from the preceding Distribution Date;
(H) to the Class A-R Certificateholder, (1) the Class
A-R Interest Accrual Amount plus (2) the Class A-R Shortfall
from the preceding Distribution Date; and
(I) to the Class A-X Certificateholders, (1) the
Class A-X Interest Accrual Amount plus (2) the Class A-X
Shortfall from the preceding Distribution Date;
(ii) concurrently, (A) to the Non-PO Class A
Certificateholders, up to the Non-PO Class A Optimal Principal Amount,
allocated among the Non-PO Class A Certificates in accordance with the
Non-PO Class A Principal Payment Rules and (B) to the Class A-P
Certificateholders, the Class A-P Amount;
(iii) to the Class A-P Certificateholders, the Class A-P
Shortfall Amount; provided, however, that any amounts distributed
pursuant to this Section 6.01(b)(iii) shall not cause a further
reduction in the Outstanding Certificate Principal Balance of the Class
A-P Certificates.
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(iv) If the Available Distribution Amount is insufficient to
make the distributions set forth in (b)(i) above, the Paying Agent
shall distribute the Available Distribution Amount to the Non-PO Class
A Certificateholders pro rata in accordance with the amounts otherwise
distributable to them pursuant to (b)(i)(A)-(I) above.
(c) Amounts payable on any Distribution Date to the Class M
Certificateholders shall be distributed up to an amount equal to (A) the Class M
Interest Accrual Amount plus (B) the Class M Shortfall from the preceding
Distribution Date plus (C) the portion of the Subordinated Optimal Principal
Amount allocable (pursuant to Section 6.01(e)) to the Class M Certificates plus
(D) any Carry-over Subordinated Principal Amounts with respect to the Class M
Certificates.
(d) Amounts payable on any Distribution Date to the Class B
Certificateholders pursuant to Section 6.01(a)(iv) shall be distributed in the
following priority:
(1) first, to the Class B-1 Certificateholders, up to an
amount equal to (A) the Class B-1 Interest Accrual Amount plus (B) the Class B-1
Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if
any, of the Subordinated Optimal Principal Amount allocable to the Class B-1
Certificates in accordance with Section 6.01(e) plus (D) any Carry-over
Subordinated Principal Amounts with respect to the Class B-1 Certificates plus
(E) any portion of the Subordinated Optimal Principal Amount allocated to the
Class M Certificates in excess of the Outstanding Certificate Principal Balance
of such Class;
(2) second, to the Class B-2 Certificateholders, up to an
amount equal to (A) the Class B-2 Interest Accrual Amount plus (B) the Class B-2
Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if
any, of the Subordinated Optimal Principal Amount allocable to the Class B-2
Certificates in accordance with Section 6.01(e) plus (D) any Carry-over
Subordinated Principal Amounts with respect to the Class B-2 Certificates plus
(E) any portion of the Subordinated Optimal Principal Amount allocated to the
Class B-1 Certificates in excess of the Outstanding Certificate Principal
Balance of such Class;
(3) third, to the Class B-3 Certificateholders, up to an
amount equal to (A) the Class B-3 Interest Accrual Amount plus (B) the Class B-3
Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if
any, of the Subordinated Optimal Principal Amount allocable to the Class B-3
Certificates in accordance with Section 6.01(e) plus (D) any Carry-over
Subordinated Principal Amounts with respect to the Class B-3 Certificates plus
(E) any portion of the Subordinated Optimal Principal Amount allocated to the
Class B-2 Certificates in excess of the Outstanding Certificate Principal
Balance of such Class;
(4) fourth, to the Class B-4 Certificateholders, up to an
amount equal to (A) the Class B-4 Interest Accrual Amount plus (B) the Class B-4
Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if
any, of the Subordinated Optimal Principal Amount allocable to the Class B-4
Certificates in accordance with Section 6.01(e) plus (D) any
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Carry-over Subordinated Principal Amounts with respect to the Class B-4
Certificates plus (E) any portion of the Subordinated Optimal Principal Amount
allocated to the Class B-3 Certificates in excess of the Outstanding Certificate
Principal Balance of such Class; and
(5) fifth, to the Class B-5 Certificateholders, up to an
amount equal to (A) the Class B-5 Interest Accrual Amount plus (B) the Class B-5
Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if
any, of the Subordinated Optimal Principal Amount allocable to the Class B-5
Certificates in accordance with Section 6.01(e) plus (D) any Carry-over
Subordinated Principal Amounts with respect to the Class B-5 Certificates plus
(E) any portion of the Subordinated Optimal Principal Amount allocated to the
Class B-4 Certificates in excess of the Outstanding Certificate Principal
Balance of such Class.
(e) On each Distribution Date, the Subordinated Optimal
Principal Amount shall be allocated among the Classes of Subordinated
Certificates entitled, pursuant to the next succeeding sentence, to an
allocation of principal on such Distribution Date, pro rata based upon the
Outstanding Certificate Principal Balances of all such Classes so entitled. With
respect to the Subordinated Certificates, on each Distribution Date, principal
shall be distributable to (1) any Class of Subordinated Certificates which has
current Credit Support (before giving effect to any distribution of principal
and any Realized Losses allocable on such Distribution Date) greater than or
equal to the Original Credit Support for such Class; (2) the Class having the
lowest numerical class designation of any outstanding Class of Subordinated
Certificates which does not meet the criteria in (1) above; and (3) the Class
B-5 Certificates if all other outstanding Classes of Subordinated Certificates
meet the criteria in (1) above or if no other Class of Subordinated Certificates
is outstanding; provided, however, that no Class of Subordinated Certificates
shall receive any distributions of principal if any Class of Subordinated
Certificates having a lower numerical class designation than such Class fails to
meet the criteria in (1) above. For purposes of this paragraph, the Class M
Certificates shall be deemed to have a lower numerical class designation than
each Class of Class B Certificates.
(f) The Servicer shall make all calculations necessary to make
the distributions described in this Section 6.01. All distributions made to
Certificateholders of any Class on each Distribution Date will be made to the
Certificateholders of the respective Class of record on the next preceding
Record Date, except that the final distribution with respect to each Class shall
be made as provided in the forms of Certificates. All distributions made to
Certificateholders shall be based on the Percentage Interest of the Class
represented by their respective Certificates, and shall be made either by
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 Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, in writing at least 10
Business Days prior to the first Distribution Date for which distribution by
wire transfer is to be made and such Holder's Certificates of such Class in the
aggregate evidence an original denomination of not less than $5,000,000 or such
Holder holds a 100% Percentage Interest of such Class or, if not, by check
mailed to the address of the Person entitled thereto as it appears on the
Certificate Register,
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except that the final distribution in retirement of the Certificates will be
made only upon presentation and surrender of the Certificates at the office
specified in the final Distribution Notice. If on any Determination Date, the
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, the Trustee or if a Paying Agent has been appointed under Section 4.05,
the Paying Agent shall promptly send the final distribution notice to each
Certificateholder specifying the manner in which the final distribution will be
made.
Section 6.02. Statements to the Certificateholders. (a) Not
later than the second Business Day prior to each Distribution Date, the Servicer
shall send to the Paying Agent and the Trustee the relevant information for
purposes of this Section 6.02. Not later than each Distribution Date, the Paying
Agent shall send to each Certificateholder, the Depositor, the Trustee (if other
than the Paying Agent), the Servicer, any co-trustee, and each Rating Agency a
statement setting forth the following information, after giving effect to the
distributions to be made by the Paying Agent pursuant to Section 6.01 on or as
of such Distribution Date:
(i) with respect to each Class of Certificates the amount of
such distribution to Holders of such Class allocable to principal;
(ii) with respect to each Class of Certificates the amount of
such distribution to Holders of such Class allocable to interest;
(iii) the aggregate amount of any Principal Prepayments and
Repurchase Proceeds included in the distributions to
Certificateholders;
(iv) the aggregate amount of any Advances by the Servicer
pursuant to Section 6.03;
(v) the number of Outstanding Mortgage Loans and the Mortgage
Pool Principal Balance as of the close of business as of the end of the
related Principal Prepayment Period;
(vi) the related amount of the Servicing Fees (as adjusted
pursuant to Section 6.05) retained or withdrawn from the Collection
Account by the Servicer;
(vii) the number and aggregate principal amounts of Mortgage
Loans (A) delinquent (1) one Monthly Payment, (2) two Monthly Payments
and (3) three or more Monthly Payments and (B) in foreclosure, in each
case, as of the end of the related Principal Prepayment Period;
(viii) the number and the principal balance of Mortgage Loans
with respect to any real estate acquired through foreclosure or grant
of a deed in lieu of foreclosure;
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(ix) the aggregate amount of all Advances recovered during the
related Due Period;
(x) with respect to the following Distribution Date, the Class
A Percentage, the Class M Percentage, the Class B Percentage, the Class
A Principal Balance, the Class M Principal Balance, the Class B
Principal Balance, the Non-PO Class A Percentage, the Non-PO Class A
Prepayment Percentage, and the level of Credit Support, if any, with
respect to each class of Subordinated Certificates;
(xi) the aggregate amount of Realized Losses during the
related Due Period and the aggregate amount of Realized Losses since
the Cut-off Date;
(xii) the allocation to each Class of Certificates of any
Realized Losses during the related Due Period;
(xiii) the Outstanding Certificate Principal Balance of each
Class of Certificates after giving effect to the distributions to each
Class on such Distribution Date; and
(xiv) the amount of any Compensating Interest Shortfalls on
such Distribution Date.
The Paying Agent's responsibility for sending the above
information to the Certificateholders is limited to the availability, timeliness
and accuracy of the information derived from the Servicer.
Upon reasonable advance notice in writing if required by
federal regulation, the Servicer will provide to each Certificateholder which is
a savings and loan association, bank or insurance company certain reports and
access during business hours to information and documentation regarding the
Mortgage Loans sufficient to permit such Certificateholder to comply with
applicable regulations of regulatory authorities with respect to investment in
the Certificates; provided, that the Servicer shall be entitled to be reimbursed
by each such Certificateholder for the Servicer's actual expenses incurred in
providing such reports and access.
(b) The Servicer shall cause to be prepared, and the Servicer
or the Trustee, as required by applicable law, shall file, any and all tax
returns, information statements or other filings required to be delivered to
Certificateholders and any governmental taxing authority pursuant to any
applicable law with respect to the Trust Fund and the transactions contemplated
hereby (the Servicer or the Trustee may, at its option but with the consent of
the other, which consent shall not be unreasonably withheld, appoint an
organization which regularly engages in the preparation and filing of such
documents on a continuous basis for profit and which represents itself to be
expert in such matters) and the Servicer shall maintain a record of the
information necessary for the application of Section 860E(e) of the Code and
shall make such information available as required by Section 860D(a)(6) of the
Code; provided, however, that the
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Servicer shall notify the Trustee of the Trustee's obligation to make any such
filings and that any fees of the organization appointed as provided above shall
be paid by the Servicer; and provided further that if an organization is
employed, as described above, to prepare and file any such filings, neither the
Trustee nor the Servicer shall be liable for any errors by such organization.
Section 6.03. Advances by the Servicer. If, on any
Determination Date, the Servicer determines that any Monthly Payments due on the
immediately preceding Due Date have not been received, the Servicer shall,
unless it determines in its sole discretion that such amounts will not be
recoverable from Late Collections, Liquidation Proceeds or otherwise, make an
Advance on or before the related Distribution 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 Payments that would have been
due on Mortgage Loans which have been foreclosed or otherwise terminated and in
connection with which the Servicer acquired and continues to own the Mortgaged
Properties on behalf of the Certificateholders. If the Servicer makes an
Advance, it shall on or prior to such Distribution Date either (i) deposit in
the Collection Account an amount equal to such Advance, (ii) cause to be made an
appropriate entry in the records of the Collection Account that funds in such
account being held for future distribution or withdrawal have been, as permitted
by this Section 6.03, used by the Servicer to make such Advance or (iii) make
Advances in the form of any combination of clauses (i) and (ii) aggregating the
amount of such Advance. Any funds being held in the Collection Account for
future distribution to Certificateholders and so used pursuant to clause (ii) or
(iii) above shall be replaced by the Servicer from its own funds by deposit into
the Collection Account on or before any subsequent Distribution Date to the
extent that funds in the Collection Account on such Distribution Date shall be
less than the amount of payments required to be made to Certificateholders on
such Distribution Date. Any such Advance shall be included with the distribution
to the Certificateholders on the related Distribution Date. If the Servicer
determines not to make a Nonrecoverable Advance, it shall on the related
Determination Date furnish to the Trustee, any co-trustee, and each Rating
Agency notice of such determination. The Servicer shall be entitled to be
reimbursed from the Collection Account for all Advances and Nonrecoverable
Advances as provided in Section 5.09.
Section 6.04. Allocation of Realized Losses. (a) Prior to each
Determination Date, the Servicer shall determine (i) the total amount of
Realized Losses, if any, incurred during the related Principal Prepayment
Period; (ii) whether and to what extent such Realized Losses constitute Excess
Losses; and (iii) the respective portions of such Realized Losses allocable to
interest and to principal.
(b) The principal portion of any Realized Losses other than
Excess Losses shall be allocated as follows: first, to the Class B-5
Certificates until the Outstanding Certificate Principal Balance of the Class
B-5 Certificates has been reduced to zero; second, to the Class B-4 Certificates
until the Outstanding Certificate Principal Balance of the Class B-4
Certificates has
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been reduced to zero; third, to Class B-3 Certificates until the Outstanding
Certificate Principal Balance of the Class B-3 Certificates has been reduced to
zero; fourth, to the Class B-2 Certificates until the Outstanding Certificate
Principal Balance of the Class B-2 Certificates has been reduced to zero; fifth,
to the Class B-1 Certificates until the Outstanding Certificate Principal
Balance of the Class B-1 Certificates has been reduced to zero; sixth, to the
Class M Certificates until the Outstanding Certificate Principal Balance of the
Class M Certificates has been reduced to zero; and seventh, to the Non-PO Class
A Certificates on a pro rata basis until the Outstanding Certificate Principal
Balance of the Non-PO Class A Certificates has been reduced to zero; provided,
however, that if a Realized Loss occurs with respect to a Discount Mortgage Loan
(A) the amount of such Realized Loss equal to the product of (i) the amount of
such Realized Loss and (ii) the PO Percentage with respect to such Discount
Mortgage Loan will be allocated to the Class A-P Certificates and (B) the
remainder of such Realized Loss will be allocated as described above. The
principal portion of any Excess Losses shall be allocated among all Classes of
Certificates on a pro rata basis; provided, however, that the applicable PO
Percentage of any Excess Losses on the Discount Mortgage Loans shall be
allocated to the Class A-P Certificates.
(c) As used herein, an allocation of a Realized Loss on a "pro
rata basis" among two or more specified Classes of Certificates means an
allocation on a pro rata basis, among the various Classes so specified, to each
such Class of Certificates on the basis of their then Outstanding Certificate
Principal Balances, prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.
(d) In the event that a recovery is made with respect to any
Realized Loss, the amount of such recovery shall be distributed on the next
Distribution Date first to the Class A Certificateholders, up to the amount to
which such Realized Loss was allocated to the Class A Certificateholders; second
to the Class M Certificateholders, up to the amount to which such Realized Loss
was allocated to the Class M Certificateholders; third to the Class B-1
Certificateholders, up to the amount to which such Realized Loss was allocated
to the Class B-1 Certificateholders; fourth to the Class B-2 Certificateholders,
up to the amount to which such Realized Loss was allocated to the Class B-2
Certificateholders; fifth to the Class B-3 Certificateholders, up to the amount
to which such Realized Loss was allocated to the Class B-3 Certificateholders;
sixth to the Class B-4 Certificateholders, up to the amount to which such
Realized Loss was allocated to the Class B-4 Certificateholders; and seventh to
the Class B-5 Certificateholders, up to the amount to which such Realized Loss
was allocated to the Class B-5 Certificateholders.
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Section 6.05. Compensating Interest; Allocation of Certain
Interest Shortfalls.
(a) Upon a Principal Prepayment of a Mortgage Loan, the
Servicer shall deposit into the Collection Account from its own funds, as a
reduction of its servicing compensation hereunder, an amount, if any, by which
the amount of the interest that would otherwise accrue with respect to such
Mortgage Loan from the date of prepayment to the Due Date in the related Due
Period at the Net Mortgage Rate exceeds the amount of the interest (adjusted to
the Net Mortgage Rate) collected from the Mortgagor with respect to such period
(such amount, "Compensating Interest"); provided, however, that with respect to
any Distribution Date, the Servicer's obligation to deposit any such amount is
limited to an amount equal to the product of (i) one-twelfth of 0.125% and (ii)
the aggregate Scheduled Principal Balance of the Mortgage loans with respect to
such Distribution Date.
(b) On any Distribution Date, the excess, if any, of (X)
Compensating Interest with respect to such Distribution Date over (Y) the amount
deposited in the Collection Account pursuant to (a) above for such Distribution
Date shall equal the "Compensating Interest Shortfall" with respect to such
Distribution Date. On any Distribution Date, the Compensating Interest Shortfall
shall be allocated pro rata among the outstanding Classes of Class A, Class M
and Class B Certificates based on the amount of interest to which each such
Class would otherwise be paid on such Distribution Date had there been no such
Compensating Interest Shortfall.
(c) The interest portion of any Realized Losses ("Realized
Loss Interest Shortfall") shall be allocated as follows: first, to the Class B-5
Certificates, second, to the Class B-4 Certificates, third, to the Class B-3
Certificates, fourth, to the Class B-2 Certificates, fifth, to the Class B-1
Certificates, sixth, to the Class M Certificates, in each case until the
Outstanding Certificate Principal Balance thereof has been reduced to zero, and
seventh, the remainder thereof shall be allocated to the Non-PO Class A
Certificates pro rata among the outstanding Classes of Non-PO Class A
Certificates based on the amount of interest to which each such Class would
otherwise be paid on such Distribution Date had there been no such Realized Loss
Interest Shortfall.
Section 6.06. Subordination. The rights of the Class B
Certificateholders to receive distributions in respect of the Class B
Certificates on any Distribution Date shall be subordinated to the rights of the
Class A and Class M Certificateholders to receive distributions in respect of
the Class A and Class M Certificates. The rights of the Class M
Certificateholders to receive distributions in respect of the Class M
Certificates on any Distribution Date shall be subordinated to the rights of the
Class A Certificateholders to receive distributions in respect of the Class A
Certificates. The rights of the Class B-1 Certificateholders to receive
distributions in respect of the Class B-1 Certificates on any Distribution Date
shall be subordinate to the rights of the Class A and Class M Certificateholders
to receive distributions in respect of such Class A and Class M Certificates.
Each Class of Class B Certificates (other than the Class B-1 Certificates) is
subordinated to the Class A Certificates, the Class M Certificates and each
Class
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of Class B Certificates having a lower numerical class designation than such
Class of Class B Certificates. The rights of the Servicer, as servicer, to
receive funds from the Collection Account, pursuant to Section 5.09, on account
of the Servicing Fee (except as provided in Section 6.05) in respect of each
Mortgage Loan, assumption fees, late payment charges and other mortgagor
charges, reimbursement of Advances and expenses or otherwise, shall not be
subordinated to the rights of the Class A, Class M or Class B
Certificateholders. Amounts held by the Servicer or the Trustee for future
distribution to the Class M or Class B Certificateholders, including, without
limitation, in the Collection Account, shall not be distributed in respect of
the Class M or Class B Certificates except in accordance with the terms of this
Agreement. The Class B Certificateholders are deemed to have granted a security
interest in such amounts to the Class A and Class M Certificateholders to secure
the rights of the Class A and Class M Certificateholders to receive
distributions in priority over the Class B Certificateholders. The Class M
Certificateholders are deemed to have granted a security interest in such
amounts to the Class A Certificateholders to secure the rights of the Class A
Certificateholders to receive distributions in priority over the Class A
Certificateholders.
Section 6.07. Determination of LIBOR.
LIBOR applicable to the calculation of the Certificate Rates
on the Class A-5 and Class A-6 Certificates for any Interest Accrual Period
(other than the initial Interest Accrual Period) will be determined by the
Servicer on each Rate Adjustment Date as follows:
For any Interest Accrual Period other than the first Interest
Accrual 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, England time,
on the LIBOR Business Day prior to the first day of such Interest Accrual
Period. For the first Interest Accrual Period, LIBOR shall equal _________% with
respect to the Class A-5 and Class A-6 Certificates. 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
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 Distribution Date.
The establishment of LIBOR by the Servicer on any Rate
Adjustment Date on the Servicer's subsequent calculation of the Certificate
Rates applicable to the Class A-5 and Class A-6 Certificates for the relevant
Interest Accrual Period, in the absence of manifest error, will be final and
binding.
[End of Article VI]
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ARTICLE VII
REPORTS TO BE PREPARED BY THE SERVICER
Section 7.01. Servicer Shall Provide Information as Reasonably
Required. The Servicer shall furnish to the Trustee, 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 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 directions as the Trustee may
reasonably require.
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 Servicer shall maintain or cause the
maintenance of the books of the Trust Fund on the accrual method of accounting.
(b) The Servicer shall prepare and file or cause to be filed
with the Internal Revenue Service federal tax or information returns with
respect to the Trust Fund and the Certificates containing such information and
at the times and in the manner as may be required by the Code or applicable
Treasury regulations, and shall furnish to each Certificateholder at any time
during the calendar year for which such returns or reports are made such
statements or information at the times and in the manner as may be required
thereby. Without limitation on any other requirement of this Section 7.02, the
Servicer shall make available the information necessary for the application of
Section 860E(e) of the Code within 60 days of such request. With respect to the
Class A-R Certificate, the Servicer shall provide such information or cause such
information to be provided to (i) the Internal Revenue Service, (ii) the
transferor of a Class A-R Certificate to a Disqualified Organization and (iii) a
Pass-Thru Entity that holds a Class A-R Certificate with one or more record
holders that are Disqualified Organizations. The Servicer also shall provide or
cause to be provided promptly the above described computation and information
relating to the tax on transfers to Disqualified Organizations or holdings by
Pass-Thru Entities within 60 days after becoming aware of the transfer to a
Disqualified Organization or Pass-Thru Entity with one or more Disqualified
Organization owners, as the case may be. In addition, except as may be provided
in Treasury Regulations, any person holding an interest in a Pass-Thru Entity as
a nominee for another will, with respect to such interest, be treated as a
Pass-Thru Entity. In connection with the foregoing, the Servicer shall provide
the name, address and telephone number of the person who can be contacted to
obtain information required to be reported to the holders of regular interests
in the REMIC (the "REMIC Reporting Agent") as required by IRS Form 8811. The
Trustee hereby designates [NAME] to serve as the REMIC Reporting Agent. The
Servicer shall indicate the election to treat the Trust Fund as a REMIC (which
election shall apply to the taxable period ending [DATE] and each calendar year
thereafter) in such manner as the Code or applicable Treasury regulations may
prescribe. The Trustee shall sign all tax information returns filed pursuant to
this Section 7.02 and any other
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returns as may be required by the Code, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Servicer. The Servicer is hereby designated as the "tax matters
person" (within the meaning of Treas. Reg. ss.1.860F-4(d)) for the Trust Fund.
Any Holder of a Class A-R Certificate will by acceptance thereof so appoint the
Servicer as agent and attorney-in-fact for the purpose of acting as tax matters
person. In the event that the Code or applicable Treasury Regulations prohibit
the Trustee from signing tax or information returns or other statements, or the
Servicer from acting as tax matters person (as an agent or otherwise), the
Trustee or the Servicer, as the case may be, 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 Holder of a Class A-R Certificate to sign such returns or act
as tax matters person. Each Holder of a Class A-R Certificate shall be bound by
this Section 7.02 by virtue of its acceptance of a Class A-R Certificate.
[End of Article VII]
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ARTICLE VIII
THE DEPOSITOR AND THE SERVICER
Section 8.01. Indemnification; Third Party Claims. The
Servicer agrees to indemnify the Depositor and the Trustee and hold the
Depositor and the Trustee, their officers, directors, employees and agents
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 Depositor or the Trustee may sustain in any way related to failure of
the 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 with respect to acts of a prior Servicer. The Servicer shall
immediately notify the Depositor and the Trustee if a claim is made by a third
party with respect to this Agreement or the Mortgage Loans, assume (with the
consent of the Depositor 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 Depositor or the Trustee in respect of such claim. This right to
indemnification shall survive the termination of this Agreement.
Section 8.02. Merger or Consolidation of the Depositor or the
Servicer. The Depositor and the 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 Servicer will not sell all
or substantially all of its assets without the prior written consent of the
Depositor and the Trustee.
Any person into which the Depositor or the Servicer may be
merged or consolidated, or to whom the Depositor or the Servicer has sold
substantially all of its assets, or any corporation resulting from any merger,
conversion or consolidation to which the Depositor or the Servicer shall be a
party, or any Person succeeding to the business of the Depositor or the
Servicer, shall be the successor of the Depositor or the Servicer 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 8.05 with respect to the qualifications of a
successor to the Servicer.
Notwithstanding anything else in this Section 8.02 and Section
8.04 to the contrary, the 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 in advance in writing by
the Trustee and the Depositor, is willing to service the Mortgage Loans 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
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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 each Rating Agency's rating of any of the Classes of
Certificates that have been rated in effect immediately prior to such assignment
and delegation will not be qualified or reduced or withdrawn as a result of such
assignment and delegation. In the case of any such assignment and delegation,
the Servicer shall be released from its obligations as Servicer under this
Agreement, except that the Servicer shall remain liable for all liabilities and
obligations incurred by it as Servicer hereunder prior to the satisfaction of
the conditions to such assignment and delegation set forth in the next preceding
sentence.
Section 8.03. Limitation on Liability of the Depositor, the
Servicer, the Trustee and Others. Neither the Depositor, the Servicer nor any of
the directors, officers, employees or agents of the Depositor or the Servicer
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 the Servicer against any
breach of warranties or representations made herein, or failure to perform its
obligations in strict 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 Depositor, the Servicer, the Trustee, and any director,
officer, employee or agent of the Depositor, the 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 matters arising hereunder. Neither the
Depositor, the Trustee nor the Servicer shall be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
respective duties to service the Mortgage Loans in accordance with this
Agreement and which in its opinion may cause it to incur any expenses or
liability; provided, however, that the Depositor, the Trustee or the Servicer
may in its discretion (and, in the case of the Depositor or the Servicer, with
the consent of the Trustee, which consent shall not be unreasonably withheld)
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto. 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 Collection
Account and the Depositor, the Servicer or the Trustee shall be entitled to be
reimbursed therefor out of the Collection Account as provided by Section 4.06;
provided that no such right of reimbursement shall exist with respect to the
Servicer when such claim relates to the failure of the Servicer to service the
Mortgage Loans in strict compliance with the terms of this Agreement or to a
breach of a representation or warranty made by the Servicer hereunder.
Section 8.04. Depositor and Servicer Not to Resign. Except as
described in Section 8.02, neither the Depositor nor the Servicer shall assign
this Agreement or resign from the obligations and duties hereby imposed on it
except by mutual consent of the Depositor, the Servicer and all of the
Certificateholders unless the determination is made that its duties hereunder
are no longer permissible under applicable law and such incapacity cannot be
cured by the Depositor or the Servicer. Any such determination permitting the
resignation of the
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Depositor or the Servicer shall be evidenced by an opinion of independent
counsel to such effect delivered to the Trustee which opinion of counsel shall
be in form and substance acceptable to the Trustee. Upon any such assignment or
resignation, the Depositor or the Servicer, as appropriate, shall send notice to
all Certificateholders of the effect of such assignment or resignation upon the
then current rating of the Class of Certificates by each Rating Agency whose
rating on such Class is then in effect. No such resignation shall become
effective until a successor shall have assumed the Depositor's or the 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 Servicer. In connection with
the termination of the 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 Servicer's responsibilities, rights, duties and obligations as
Servicer (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
nor to effectuate repurchases or substitutions of Mortgage Loans pursuant to
Section 2.02 and except that the Trustee makes no representations and warranties
pursuant to Sections 3.01 and 3.02). Prior to the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement, the Trustee may
appoint a successor having a net worth of not less than $15,000,000 and which is
a FNMA or FHLMC approved seller/servicer in good standing and which shall
succeed to all rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement, except as aforesaid, if the
Trustee receives a letter from each Rating Agency that such appointment would
not result in a reduction or withdrawal of the current rating of any Class of
Certificates that is rated by a Rating Agency. Any co-trustee appointed pursuant
to Section 10.10 for purposes of this Section 8.05 shall have an obligation to
make Advances pursuant to Section 6.03 during such time as the Trustee is the
Servicer, which obligation shall be joint and several with that of the Trustee
as Servicer. If the Trustee has become the successor to the 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 $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in
good standing as the successor to the Servicer hereunder in the assumption of
all of the responsibilities, duties or liabilities of the 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. If the Servicer's duties, responsibilities and liabilities
under this Agreement should be terminated pursuant to Section 8.02, 8.04 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, and shall take no action
whatsoever that might impair or prejudice the rights or financial condition of
its successor or the
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Trust Fund. The resignation or removal of the Servicer pursuant to Section 8.02,
8.04 or 9.01 shall not become effective until a successor shall be appointed
pursuant to this Section and shall in no event relieve the Servicer of liability
for breach of the representations and warranties made pursuant to Section 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 termination or resignation of the
Servicer or this Agreement pursuant to Section 8.02, 8.04, 9.01 or 11.01 shall
not affect any claims that the Trustee may have against the Servicer for events
or actions taken or not taken by the Servicer arising prior to any such
termination or resignation.
The Servicer shall timely deliver to the successor the funds
that were, or were required to be, in the Collection Account and the Escrow
Account, if any, and all Mortgage Files and related documents, statements and
recordkeeping 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 may
reasonably 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.
Upon a successor's acceptance of appointment as such, the
Servicer shall notify, in writing, the Trustee, the Certificateholders and each
Rating Agency of such appointment.
Section 8.06. Maintenance of Ratings. The Servicer shall
cooperate with the Depositor and take any action that may be reasonably
necessary to maintain the current rating or ratings on the Certificates.
[End of Article VIII]
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ARTICLE IX
DEFAULT
Section 9.01. Events of Default. If one or more of the
following Events of Default shall occur and be continuing, that is to say:
(i) any failure by the Servicer to remit any payment required
to be made or distributed under the terms of this Agreement which
continues unremedied for a period of three Business 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 of any Class evidencing, as to such Class,
Percentage Interests aggregating not less than 25%; or
(ii) a breach by the Servicer in a material respect of any
representation or warranty set forth in Section 3.02, or 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 breach or
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 of any Class
evidencing, as to such Class, Percentage Interests aggregating not less
than 25%; or
(iii) the Servicer shall notify the Trustee in writing that it
is unable to make an Advance required to be made in accordance with
Section 6.03; or;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force undischarged or unstayed for a period of 60 days; or
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property; or
(vi) 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.
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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 and each
Rating Agency of such Event of Default. The Trustee may, and at the written
direction of the Holders of Certificates evidencing Percentage Interests
aggregating more than 50%, shall, by notice in writing to the Servicer,
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof. 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 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 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 Servicer's sole
expense. The Servicer agrees to cooperate with the Trustee and any co-trustee in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to such successor for
administration by it of all cash amounts which shall at the time be credited or
should have been credited by the Servicer to the Collection Account or Escrow
Account or thereafter received with respect to the Mortgage Loans. 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 distribution
on any of the Certificates may only be waived by the holders of a majority of
the Percentage Interests of 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 to the extent provided in Section 8.05.
Section 9.04. Notification to Certificateholders and the
Rating Agencies.
(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.
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(b) Within 60 days of a Responsible Officer of the Trustee
having received written notice 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 shall have been cured or waived.
[End of Article IX]
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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.
No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, and, if the Trustee is acting as
the successor 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 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 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, as to such Class, Percentage
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:
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(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 advice or
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 advice or 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 such man's own affairs;
(d) Neither the Trustee nor any of its directors, officers,
employees or agents shall be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it or any of
them to be authorized or within the discretion or rights or powers
conferred upon the Trustee by this Agreement;
(e) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by Holders of Certificates of any Class evidencing, as to such Class,
Percentage Interests aggregating not less than 25% (in the case of
conflicting requests by two or more 25% or greater Percentage
Interests, the Trustee shall act in accordance with the first such
request); 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
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shall have occurred and is continuing, and otherwise by the
Certificateholder requesting the investigation;
(f) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, subcontractors or attorneys; and
(g) Nothing in this Agreement shall be construed to require
the Trustee (acting in its capacity as Trustee) to expend its own
funds.
Section 10.03. Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein and in the Certificates (other than the
authentication of the Certificates by an authorized signatory of the Trustee)
shall be taken as the statements of the Depositor or the Servicer, as the case
may be, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations or warranties as to the validity or sufficiency
of this Agreement or of the Certificates (except that (except as set forth
herein) the Certificates shall be duly and validly executed and authenticated by
it) or of any Mortgage Loan or related document. The Trustee shall not be
accountable for the use or application by the Depositor or the Servicer of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Depositor or the Servicer. The Trustee, in its capacity as trustee hereunder,
shall have no responsibility for the timeliness or the amount of payments made
by the Paying Agent to the Certificateholders.
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. Fees and Expenses. The 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 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) except any such expense, disbursement or advance as may arise
from its negligence or bad faith. Notwithstanding anything to the contrary in
this Agreement, this Section shall survive the termination of this Agreement.
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Section 10.06. Eligibility Requirements for Trustee. The
Trustee hereunder shall at all times be an entity having its principal office in
a state and city acceptable to the Depositor 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 $50,000,000 and subject to supervision or examination by
federal or state authority. The Trustee shall not be an affiliate of either
Seller or the Depositor. If such entity 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, and any co-trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Depositor, the
Servicer and each Rating Agency. Upon receiving such notice of resignation, the
Depositor shall promptly appoint a successor trustee or co-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 any of
the Classes of Certificates that have been rated. 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 Certificates evidencing in the aggregate more
than 50% of Percentage Interest 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 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 or any resignation
of any co-trustee and appointment of a successor trustee or co-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, or upon
acceptance of appointment by a co-trustee, as applicable, unless with
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respect to a co-trustee, the Trustee receives written notice from each Rating
Agency that the failure to appoint a successor co-trustee would not result in a
withdrawal or reduction of the rating of any of the Classes of Certificates that
have been rated, in which case the resignation of any co-trustee shall be
effective upon receipt of such written notice. Any co-trustee may not be removed
unless the Depositor and the Trustee each receive written notice from each
Rating Agency that such removal would not result in a withdrawal or reduction of
the rating of any of the Classes of Certificates that have been rated, in which
case the removal of any co-trustee shall be effective upon receipt of such
written notice.
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 deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Depositor, the Servicer and the predecessor trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for more fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 10.06. Prior to the appointment of
any successor trustee becoming effective, the Depositor shall have received from
each Rating Agency written confirmation that such appointment would not result
in a reduction of the rating of the Class A or Class M Certificates.
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 Holders of Certificates at their addresses as
shown in the Certificate Register, to the Servicer, any Sub-Servicer and to each
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 entity
into which the Trustee may be merged or converted or with which it may be
consolidated or any entity resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any entity 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.
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Section 10.10. Appointment of Co-Trustee or Separate Trustee.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the same
may at the time be located, the Depositor and the Trustee acting jointly shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee 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 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 Holders of
Certificates 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 and severally, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed (whether as
Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall
be incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
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.
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]
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ARTICLE XI
TERMINATION
Section 11.01. Termination. The respective obligations and
responsibilities of the Depositor, the Servicer (except the duty to pay the
Trustee's fees and expenses and indemnification hereunder) 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 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; or (ii) at the
option of the Servicer, on any Distribution Date which occurs in the month next
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, so long as the Servicer
deposits or causes to be deposited in the Collection Account during the
Principal Prepayment Period related to such Distribution Date (and provides
notice to the Trustee of its intention to so deposit on or before the 20th day
of such Principal Prepayment Period) an amount equal to the Purchase Price for
each Outstanding Mortgage Loan, less any unreimbursed Advances made with respect
to any Mortgage Loan (which amount shall offset completely any unreimbursed
Advances for which the Servicer is otherwise entitled to reimbursement), and,
with respect to all property acquired in respect of any Mortgage Loan remaining
in the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to any Mortgage Loan with
respect to which property has been acquired; 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. Notwithstanding the foregoing, a termination may be effected by the
making of such optional repurchases only if the termination of the Trust Fund
satisfies the requirement for a "qualified liquidation" of the Trust Fund within
the meaning of Section 860F(a)(4) of the Code and that the purchases of the
Outstanding Mortgage Loans pursuant to the Section 11.01 will not constitute
"prohibited transactions" within the meaning of Section 860F(a)(2) of the Code.
Notice of any termination, specifying the Distribution Date
upon which all Certificateholders may surrender their Certificates to the
Trustee or, if a Paying Agent has been appointed pursuant to Section 4.05, the
Paying Agent for payment and cancellation, shall be given promptly by the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, (upon direction by the Depositor 10 days prior to the date such notice is
to be mailed) by signed letter to Certificateholders and each 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 or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, therein designated and (ii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon
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presentation and surrender of the Certificates at the office or agency of the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, therein specified. The Servicer shall indicate the date of adoption of
the plan of qualified liquidation in a statement attached to the final federal
income tax return of the Trust Fund. After giving such notice, the Trustee or if
a Paying Agent has been appointed under Section 4.05, the Paying Agent shall not
register the transfer or exchange of any Certificates. If such notice is given
in connection with the Servicer's election to purchase the Outstanding Mortgage
Loans, the Servicer shall deposit in the Collection Account after adoption of
the plan during the applicable Principal Prepayment Period an amount equal to
the purchase price as determined as provided in clause (ii) of the preceding
paragraph 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 or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, shall notify the Servicer and
the Servicer shall cause to be distributed 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 Servicer elected to so purchase, the
purchase price determined as provided in clause (ii) of the preceding paragraph.
Following such final deposit the Trustee shall promptly release to the 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, at the close of the 90 day period beginning
after the written notice is given, each remaining Certificateholder will be
credited with an amount that would have been otherwise distributed to such
Certificateholder, and the Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, 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 or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, 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.
[End of Article XI]
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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, 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 of any Class evidencing in the aggregate not less than 25% of the
Percentage Interests of such Class shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder (in the case of conflicting requests by two or more 25% or greater
Percentage Interests, the Trustee shall act in accordance with the first such
request) 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
expressly covenanted by each Certificateholder 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 Certificateholders of such Class
or all Classes, as the case may be.
101
<PAGE>
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 Depositor, the Servicer and the Trustee, without the consent
of any of the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein, to ensure continuing treatment of the Trust Fund as a REMIC
to avoid or minimize the risk of imposition of any tax on the Trust Fund
pursuant to the Code, or 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, provided that such actions
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder of a Class having an
Outstanding Certificate Principal Balance of greater than zero or cause the
Trust Fund to fail to qualify as a REMIC.
This 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 evidencing in the aggregate not less than 66-2/3% of the Percentage
Interest of each Class of Certificates having an Outstanding Certificate
Principal Balance greater than zero and affected thereby 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, (ii) reduce
the aforesaid percentage of Certificates of any class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01, without the
consent of the Holders of all Certificates of such Class then outstanding.
Promptly after the execution of any such amendment the Trustee
shall furnish written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.
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.
Section 12.04. Counterparts. 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.
102
<PAGE>
Section 12.05. Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 12.06. 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 12.07. 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 first class or registered
mail, postage prepaid, to (i) in the case of the Depositor, Chase Manhattan
Acceptance Corporation, 300 Tice Boulevard, 3rd Floor North, Woodcliff Lake, New
Jersey 07675, Attention: Structured Finance, (ii) in the case of the Servicer,
Chase Manhattan Mortgage Corporation, 3415 Vision Drive, Columbus, Ohio 43219,
Attention: Investor Accounting (with a copy to Chase Manhattan Mortgage
Corporation, 343 Thornall Street, Edison, New Jersey 08837, Attention:
Structured Finance), (iii) in the case of the Trustee, [TRUSTEE], [ADDRESS],
Attention: Corporate Trust Department, (iv) in the case of [Rating Agency],
[ADDRESS], (v) in the case of [Rating Agency], [ADDRESS], and (vi) 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.
[End of Article XII]
103
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
CHASE MORTGAGE FINANCE
CORPORATION
By:________________________________
Name:
Title:
CHASE MANHATTAN MORTGAGE
CORPORATION
By:________________________________
Name:
Title:
[TRUSTEE],
as Trustee
By:________________________________
Name:
Title:
104
<PAGE>
EXHIBIT A
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT B
CONTENTS OF MORTGAGE FILE
(A) (I) Original Mortgage Note (or a lost note affidavit
(including a copy of the original Mortgage Note)) or (II) original
Consolidation, Extension and Modification Agreement (or a lost note affidavit
(including a copy of the original Consolidation, Extension and Modification
Agreement), in either case endorsed, "Pay to the order of [TRUSTEE], as trustee,
without recourse."
(B) The original Mortgage (including all riders thereto) with
evidence of recording thereon, or a copy thereof certified by the public
recording office in which such mortgage has been recorded or, if the original
Mortgage has not been returned from the applicable public recording office, a
true certified copy, certified by the Seller, of the original Mortgage together
with a certificate of the Seller certifying that the original Mortgage has been
delivered for recording in the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located.
(C) The original Assignment of Mortgage to "[TRUSTEE], as
trustee," which assignment shall be in form and substance acceptable for
recording, or a copy certified by the Seller as a true and correct copy of the
original Assignment which has been sent for recordation. Subject to the
foregoing, such assignments may, if permitted by law, be by 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 related individual Mortgage
File.
(D) The original policy of title insurance, including riders
and endorsements thereto, or if the policy has not yet been issued, a written
commitment or interim binder or preliminary report of title issued by the title
insurance or escrow company.
(E) Originals of all recorded intervening Assignments of
Mortgage, or copies thereof, certified by the public recording office in which
such Assignments or Mortgage have been recorded showing a complete chain of
title from the originator to the Depositor, with evidence of recording, thereon,
or a copy thereof certified by the public recording office in which such
Assignment of Mortgage has been recorded or, if the original Assignment of
Mortgage has not been returned from the applicable public recording office, a
true certified copy, certified by the Seller of the original Assignment of
Mortgage together with a certificate of the Seller certifying that the original
Assignment of Mortgage has been delivered for recording in the appropriate
public recording office of the jurisdiction in which the Mortgaged Property is
located.
<PAGE>
(F) Originals, or copies thereof certified by the public
recording office in which such documents have been recorded, of each assumption,
extension, modification, written assurance or substitution agreements, if
applicable, or if the original of such document has not been returned from the
applicable public recording office, a true certified copy, certified by the
Seller, of such original document together with certificate of Seller certifying
the original of such document has been delivered for recording in the
appropriate recording office of the jurisdiction in which the Mortgaged Property
is located.
(G) If the Mortgaged Note or Mortgage or any other material
document or instrument relating to the Mortgaged Loan has been signed by a
person on behalf of the Mortgagor, the original power of attorney or other
instrument that authorized and empowered such person to sign bearing evidence
that such instrument has been recorded, if so required in the appropriate
jurisdiction where the Mortgaged Property is located (or, in lieu thereof, a
duplicate or conformed copy of such instrument, together with a certificate of
receipt from the recording office, certifying that such copy represents a true
and complete copy of the original and that such original has been or is
currently submitted to be recorded in the appropriate governmental recording
office of the jurisdiction where the Mortgaged Property is located), or if the
original power of attorney or other such instrument has been delivered for
recording in the appropriate public recording office of the jurisdiction in
which the Mortgaged Property is located.
<PAGE>
EXHIBIT C
FORMS OF CLASS A CERTIFICATES
<PAGE>
SOLELY FOR 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 OF 1986, AS
AMENDED.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN Chase
Manhattan Acceptance Corporation, THE SERVICER OR THE TRUSTEE REFERRED TO BELOW
OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST
REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED
BY Chase Manhattan Acceptance Corporation, CHASE MANHATTAN MORTGAGE CORPORATION,
THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ] CLASS A-1
Number 98-[ ]-A-1 Original Denomination:
$--------------
Cut-off Date: [DATE] Final Scheduled Distribution
Date: __________________
First Distribution Date:
[DATE] Approximate Aggregate Original
Denomination of all Class A-1
Certificate Rate: ___% Certificates: $______________
evidencing an interest in distributions allocable to the Class A-1 Certificates
with respect to a pool of conventional one- to four-family mortgage loans formed
and sold by
Chase Manhattan Acceptance Corporation CUSIP: ______________
<PAGE>
Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trustee 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.
This certifies that Cede & Co. is the registered owner of the
ownership interest evidenced by this Certificate (obtained by dividing the
Original Denomination of this Certificate by the aggregate Original Denomination
of all Class A-1 Certificates) in certain monthly distributions with respect to
a pool (the "Mortgage Pool") of conventional one- to four-family adjustable rate
mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan
Acceptance Corporation (the "Company"), which Mortgage Loans are secured by
Mortgaged Properties, and in certain other property held in trust for the
benefit of the Certificate holders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (in such
capacity, the "Servicer"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of [DATE] (the "Agreement") among the Company, the
Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not defined
herein, the capitalized terms used herein shall have the meanings assigned in
the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], 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 Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class M (the "Class M Certificates") and Class B (the "Class B
Certificates"). The Class A Certificates, the Class M Certificates and the Class
B Certificates are collectively referred to as the "Certificates".
Pursuant to the terms of the Agreement, the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, will
distribute from funds in the Certificate Account the amount as described on the
reverse hereof on the 25th day of each month or, if such 25th day is not a
Business Day, the Business Day immediately following (the "Distribution Date"),
commencing on [DATE]. Such distributions will be made to the Person in whose
name this Certificate is registered at the close of business on the last
Business Day of the month preceding the month in which such payment is made, or
if such last day is not a Business Day, the Business Day immediately preceding
such last day (the "Record Date").
Distributions on this Certificate will be made either by check
mailed to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate
<PAGE>
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 10 Business Days prior to the first Distribution Date for
which distribution by wire transfer is to be made, and such Holder's
Certificates evidence an aggregate original principal balance of not less than
$5,000,000 or such Holder holds a 100% Percentage Interest of such Class.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office of the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, or agency appointed by the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, for the purpose and specified in
such notice of final distribution.
Reference is hereby made to the further provisions of this
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 has been
executed by the Authenticating Agent, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to
be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By:_______________________
Certificate of Authentication
This is one of the Class A-1 Certificates
referred to in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: __________________________
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], issued in ten Classes of Class A Certificates, one Class of Class M
Certificates and five Classes of Class B Certificates, each evidencing an
interest in certain distributions with respect to a pool of adjustable rate one-
to four-family first Mortgage Loans formed and sold by the Company and certain
other property conveyed by the Company to the Trustee. The Class A Certificates
evidence in the aggregate the Class A Percentage of distributions relating to
repayments of principal and interest on such Mortgage Loans. The Class M
Certificates evidence in the aggregate the Class M Percentage of distributions
relating to repayments of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the
Principal Balance of this Certificate will be different from the Original
Denomination shown above. Anyone acquiring this Certificate may ascertain its
current Principal Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee (or any Paying Agent, as the case
may be) 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 or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, 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 dated the date of authentication
by the Authenticating Agent.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, may require payment of a sum
sufficient to cover any tax or governmental charge
<PAGE>
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 Servicer, the Paying Agent 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 Servicer, the Paying
Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company,
the Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with the other provisions therein,
to ensure continuing treatment of the Trust Fund as a REMIC, or 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, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Company, the Servicer and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage
Interests of each Class of Certificates affected thereby 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, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
The respective obligations and responsibilities of the
Company, 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 Mortgage Loan or the disposition of all property
acquired upon the 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 Servicer, on any Distribution Date which occurs in the month following a Due
Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage
Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date, so long as the Servicer deposits or causes to be
deposited in the Collection Account during the Principal Prepayment Period
related to such Distribution Date an amount equal to the Purchase Price for each
Mortgage Loan, less any unreimbursed Advances made with respect to any 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 fair market value of such
property, as determined by an appraisal to be conducted by an appraiser selected
by the Trustee, less unreimbursed Advances made with respect to the Mortgage
Loan with respect to which property has been acquired; provided, however, that
in no event shall the trust created hereby continue beyond the earlier of (i) 32
years
<PAGE>
after the Closing Date and (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James's, 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 Type 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.)
<PAGE>
EXHIBIT D
FORM OF CLASS M CERTIFICATE
THIS CLASS M CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
SOLELY FOR 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 OF 1986, AS
AMENDED.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE COMPANY SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
<PAGE>
SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY
(INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE)
RELATING TO THE CERTIFICATES.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
Chase Manhattan Acceptance Corporation, THE SERVICER OR THE TRUSTEE REFERRED
TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER
THIS CERTIFICATE, THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY Chase Manhattan
Acceptance Corporation, CHASE MANHATTAN MORTGAGE CORPORATION, THE TRUSTEE OR BY
ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ], CLASS M
Number 98-[ ]-M-1 Original Denomination
$_____________________
Cut-off Date: [DATE] Final Scheduled Distribution
Date: _________________
First Distribution Date:
[DATE] Approximate Aggregate Original
Denomination of all Class M
Certificate Rate: ___% Certificates: $_______________
evidencing an interest in distributions allocable to the Class M Certificates
with respect to a pool of conventional one- to four-family mortgage loans formed
and sold by
Chase Manhattan Acceptance Corporation CUSIP: ____________
This certifies that _______________________________ is the
registered owner of the ownership interest evidenced by this Certificate
(obtained by dividing the Original Denomination of this Certificate by the
aggregate Original Denomination of all Class M Certificates) in certain monthly
distributions with respect to a pool (the "Mortgage Pool") of conventional one-
to four-family adjustable rate mortgage loans (the "Mortgage Loans") formed and
sold by Chase Manhattan Acceptance Corporation (the "Company"), which Mortgage
Loans are secured by Mortgaged Properties, and in certain other property held in
trust for the benefit of the Certificate holders (collectively, the "Trust
Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation
(in such capacity, the "Servicer"). The Trust Fund was created pursuant to a
Pooling and Servicing Agreement dated as of [DATE] (the "Agreement") among the
Company, the Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not defined herein, the capitalized terms used herein shall have the meanings
assigned in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class M (the "Class M 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 Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class A (the "Class A Certificates") and Class B (the "Class B
Certificates"). The Class A Certificates are senior to, and the Class B
Certificates are subordinate to, the Class M Certificates in right of payment to
the extent described herein and in the Agreement. The Class A Certificates,
Class M Certificates and Class B Certificates are collectively referred to as
the "Certificates".
<PAGE>
Pursuant to the terms of the Agreement, the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, will
distribute from funds in the Certificate Account the amount as described on the
reverse hereof on the 25th day of each month or, if such 25th day is not a
Business Day, the Business Day immediately following (the "Distribution Date"),
commencing on [DATE]. Such distributions will be made to the Person in whose
name this Certificate is registered at the close of business on the last
Business Day of the month preceding the month in which such payment is made, or
if such last day is not a Business Day, the Business Day immediately preceding
such last day (the "Record Date").
Distributions on this Certificate will be made 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 10 Business Days prior to
the first Distribution Date for which distribution by wire transfer is to be
made, and such Holder's Certificates evidence an aggregate original principal
balance of not less than $5,000,000 or such Holder holds a 100% Percentage
Interest of such Class. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office of the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, or agency appointed by the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, for the purpose and specified in such notice of final distribution.
Reference is hereby made to the further provisions of this
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 has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to
be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By: ___________________________
Certificate of Authentication
This is one of the Class M Certificates
referred to in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: _____________________________
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], issued in ten Classes of Class A Certificates, one Class of Class M
Certificates and five Classes of Class B Certificates, each evidencing an
interest in certain distributions with respect to a pool of adjustable rate one-
to four-family first Mortgage Loans formed and sold by the Company and certain
other property conveyed by the Company to the Trustee. The Class A Certificates
evidence in the aggregate the Class A Percentage of distributions relating to
repayments of principal and interest on such Mortgage Loans. The Class M
Certificates evidence in the aggregate the Class M Percentage of distributions
relating to repayments of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the
Principal Balance of this Certificate will be different from the Original
Denomination shown above. Anyone acquiring this Certificate may ascertain its
current Principal Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee (or any Paying Agent, as the case
may be) 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 or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, 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 dated the date of authentication
by the Authenticating Agent.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, 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
Servicer and the Trustee may treat the person in whose name any Certificate is
registered as the owner of such
<PAGE>
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 Servicer, the Paying
Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company,
the Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with the other provisions therein,
to ensure continuing treatment of the Trust Fund as a REMIC, or 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, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Company, the Servicer and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage
Interests of each Class of Certificates affected thereby 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, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
The respective obligations and responsibilities of the
Company, 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 Mortgage Loan or the disposition of all property
acquired upon the 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 Servicer, on any Distribution Date which occurs in the month following a Due
Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage
Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date, so long as the Servicer deposits or causes to be
deposited in the Collection Account during the Principal Prepayment Period
related to such Distribution Date an amount equal to the Purchase Price for each
Mortgage Loan, less any unreimbursed Advances made with respect to any 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 fair market value of such
property, as determined by an appraisal to be conducted by an appraiser selected
by the Trustee, less unreimbursed Advances made with respect to the Mortgage
Loan with respect to which property has been acquired; provided, however, that
in no event shall the trust created hereby continue beyond the earlier of (i) 32
years after the Closing Date and (ii) the expiration of 21 years from the death
of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
<PAGE>
[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 Type 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.)
<PAGE>
EXHIBIT E
FORMS OF CLASS B CERTIFICATES
THIS CLASS B-1 CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
CLASS A CERTIFICATES AND THE CLASS M CERTIFICATES AS DESCRIBED IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
SOLELY FOR 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 OF 1986, AS AMENDED.
THIS CLASS B-1 CERTIFICATE HAS NOT BEEN AND WILL NOT BE 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 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 POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
CLASS B-1 CERTIFICATE
Original Denomination
$___________________
Aggregate Original Principal
Balance of all Class B-1
Certificates: $____________
Cut-off Date: [DATE] Number 98-[ ]-B-1-1
First Distribution Date:
[DATE]
Certificate Rate: ___%
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
<PAGE>
evidencing an ownership interest in distributions allocable to a
pool of conventional one- to four-family mortgage loans formed
and sold by
Chase Manhattan Acceptance Corporation
This Certificate does not represent an obligation of or
interest in Chase Manhattan Acceptance Corporation ("CMAC" or the "Depositor"),
the Servicer or the Trustee referred to below or any of their affiliates.
Neither this Certificate, the REMIC regular interest represented hereby nor the
underlying Mortgage Loans are guaranteed or insured by CMAC, Chase Manhattan
Mortgage Corporation, the Trustee or by any of their affiliates or by any
governmental agency or instrumentality.
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY
INQUIRY OF THE TRUSTEE.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE COMPANY SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY
<PAGE>
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF
THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND
WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR
AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES
UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
This certifies that _____________________________ is the
registered owner of the ownership interest (the "Ownership Interest") evidenced
by this Certificate (obtained by dividing the Original Denomination of this
Certificate by the aggregate Original Denomination of all Class B-1
Certificates) in certain distributions with respect to a pool of conventional
one-to four-family first mortgage loans (the "Mortgage Loans") formed and sold
by Chase Manhattan Acceptance Corporation (hereinafter called the "Depositor"),
and certain other property held in trust for the benefit of Certificate holders
(collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase
Manhattan Mortgage Corporation (the "Servicer") and are secured by first
mortgages on Mortgaged Properties. The Trust Fund was created pursuant to a
Pooling and Servicing Agreement (the "Agreement"), dated as of [DATE] among the
Depositor, the Servicer and [TRUSTEE], 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 Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class B-1 (the "Class B-1 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 Agreement such Holder is bound.
Distributions on this Certificate will be made 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 10 Business Days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
and such Holder's Certificates evidence an aggregate original principal balance
of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of
such Class.
The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates on any Distribution Date
are subordinated to the rights of the Class A and Class M Certificateholders and
the holders of any Class or Classes of Class B Certificates having a lower
numerical class designation to receive distributions in respect of the Class A
and Class M Certificates and such Class B Certificates to the extent, and only
to the extent, set forth in the Agreement. Amounts properly distributed to the
Class B Certificateholders pursuant to the
<PAGE>
Agreement will be deemed released from the Trust Fund, and the Class B
Certificateholders will not in any event be required to refund any such
distributed amounts. 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 New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, 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 or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose, the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, 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 dated the date of authentication by the Authenticating Agent.
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, the Paying Agent and the Trustee may treat the person in whose name
any Certificate is registered as the owner of such Certificate and the Ownership
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, to cure any ambiguity, to correct or supplement any
provisions therein, which may be inconsistent with any other provisions therein,
to ensure continuing treatment of the Trust Fund or its assets as a REMIC and to
avoid the imposition of certain tax liabilities, or 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, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
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 evidencing in the aggregate not less than 66% of the Percentage
Interest of each Class of Certificates affected thereby 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
<PAGE>
manner the amount of, or delay the timing of, payments received on the Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage
of Certificates of any Class the Holders of which are required to consent to any
such amendment or (iii) change the percentage specified in clause (ii) of the
first paragraph of Section 11.01 of the Agreement, without the consent of the
Holders of all Certificates of such Class then outstanding.
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 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
Servicer, on any Distribution Date which occurs in the month next following a
Due Date on which the aggregate unpaid Principal Balance of the Outstanding
Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the
Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes
to be deposited in the Collection Account during the Principal Prepayment Period
related to such Distribution Date an amount equal to the Purchase Price for each
Mortgage Loan, less any unreimbursed Advances made with respect to any 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 fair market value of such
property, as determined by an appraisal to be conducted by an appraiser selected
by the Trustee, less unreimbursed Advances made with respect to the Mortgage
Loan with respect to which property has been acquired; provided, however, that
in no event shall the trust created hereby continue beyond the earlier of (i) 32
years after the Closing Date and (ii) the expiration of 21 years from the death
of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate
to be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By: __________________________
Authorized Officer
This is one of the Class B-1
Certificates referred to
in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: ________________________
Authorized Signatory
<PAGE>
[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 Type 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.)
<PAGE>
EXHIBIT F
FORM OF CLASS A-R CERTIFICATE
AS MORE FULLY PROVIDED BY SECTION 4.02(i) OF THE AGREEMENT, CERTAIN
SPECIFIED ENTITIES INCLUDING (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 CHAPTER 1 OF SUBTITLE A OF
THE CODE AND (EXCEPT IN THE CASE OF FHLMC) A MAJORITY OF WHOSE BOARD OF
DIRECTORS IS NOT SELECTED BY THE UNITED STATES, OR ANY STATE OR
POLITICAL SUBDIVISION THEREOF), (B) ANY ORGANIZATION THAT IS EXEMPT
FROM 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", (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)
AND (D) CERTAIN FOREIGN PERSONS ARE PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF A CLASS A-R CERTIFICATE.
CLASS A-R CERTIFICATE
Cut-off Date: [DATE] Original Denomination
$-------
First Distribution Date: Aggregate Original Principal
[DATE] Balance of all Class A-R
Certificates: $________
Cut-off Date: [DATE] Number 98-[ ]-A-R-1
Certificate Rate: ___%
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
evidencing an ownership interest in distributions allocable to
the Residual Interest Certificates with respect to a pool of
conventional one- to four-family first mortgage loans formed
and sold by
Chase Manhattan Acceptance Corporation
<PAGE>
This Certificate does not represent an obligation of or
interest in Chase Manhattan Acceptance Corporation, the 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 Chase Manhattan
Acceptance Corporation, Chase Manhattan Mortgage Corporation, the Trustee or by
any of their affiliates or by any governmental agency or instrumentality.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE DEPOSITOR SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY
(INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE)
RELATING TO THE CERTIFICATES.
<PAGE>
This certifies that ____________________ is the registered
owner of an undivided interest in certain monthly distributions with respect to
a pool (the "Mortgage Pool) of conventional one- to four-family first mortgage
loans (the "Mortgage Loans") formed and sold by Chase Manhattan Acceptance
Corporation (hereinafter called the "Depositor", 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 Chase Manhattan Mortgage
Corporation (the "Servicer") and are secured by first mortgages on Mortgaged
Properties. The Trust Fund was created pursuant to a Pooling and Servicing
Agreement (the "Agreement") dated as of [DATE] among the Depositor, the Servicer
and [TRUSTEE], 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 Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class A-R (the "Class A-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 Agreement such Holder is bound. All payments made under
this Certificate will be made in accordance with the terms of the Agreement.
Also issued under the Agreement are Certificates designated as Multi-Class
Mortgage Pass-Through Certificates Series [ ], Class A, Class M, Class B-1,
Class B-2, Class B-3, Class B-4 and Class B-5 Certificates. The Class A
Certificates, the Class M Certificates, the Class B Certificates and the Class
A-R Certificates are collectively referred to as the "Certificates".
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 or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, for that purpose and specified in such notice of final
distribution.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, 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 or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, 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 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
<PAGE>
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, the Paying Agent and the
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the Ownership 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, the
Paying Agent 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, to cure any ambiguity, to correct or supplement any
provisions therein, which may be inconsistent with any other provisions therein,
to ensure continuing treatment of the Trust Fund or its assets as a REMIC and to
avoid the imposition of certain tax liabilities, or 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, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
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 evidencing in the aggregate not less than 66-2/3% of the Percentage
Interest of each Class of Certificates affected thereby 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 the Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
An election will be made to treat the Trust Fund as a REMIC
for federal income tax purposes. The Class A Certificates, the Class M
Certificates, the Class B Certificates will represent regular interests in the
REMIC. The Class A-R Certificate constitutes the Residual Interest in the REMIC.
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 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
Servicer, on any Distribution Date which occurs in the month next 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, so long as the Servicer
<PAGE>
deposits or causes to be deposited in the Collection Account during the
Principal Prepayment Period related to such Distribution Date an amount equal to
the Purchase Price for each Mortgage Loan, less unreimbursed Advances made with
respect to any 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
fair market value of such property, as determined by an appraisal to be
conducted by an appraiser selected by the Trustee, less any Advances made with
respect to the Mortgage Loan with respect to which property has been acquired;
provided, however, that in no event shall the trust created hereby continue
beyond the earlier of (i) 32 years after the Closing Date and (ii) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St.
James's, living on the date hereof.
IN WITNESS WHEREOF, the Depositor has caused this Certificate
to be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By: __________________________
Authorized Officer
This is the Class A-R
Certificate referred to
in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: ________________________
Authorized Signatory
<PAGE>
[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 Type 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.)
<PAGE>
EXHIBIT G
FORM OF TRUSTEE CERTIFICATION
[DATE]
Chase Manhattan Acceptance Corporation
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Re: Pooling and Servicing Agreement dated as of [DATE] among
Chase Manhattan Acceptance Corporation, Chase Manhattan
Mortgage Corporation as servicer and [TRUSTEE], as trustee,
Multi-Class Mortgage Pass-Through Certificates, Series [ ]
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in
the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that:
(i) All documents in the Mortgage File required to be
delivered to the Trustee pursuant to Section 2.01 of the Pooling and Servicing
Agreement are in its possession;
(ii) In connection with each Mortgage Loan or Assignment
thereof as to which documentary evidence of recording was not received on the
Closing Date, it has received evidence of such recording; and
(iii) Such documents have been reviewed by it and such
documents do not contain any material omissions or defects within the meaning of
Section 2.01 or 2.02.
The Trustee further certifies that as to each Mortgage Loan,
the Trustee holds the Mortgage Note without any Responsible Officer of the
Trustee having received written notice (a) of any adverse claims, liens or
encumbrances, (b) that any Mortgage Note was overdue or has been dishonored, (c)
of evidence on the face of any Mortgage Note or Mortgage of any security
interest therein, or (d) of any defense against or claim to the Mortgage Note by
any other party.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond confirming (i) that the
Mortgage Loan number and the name of the Mortgagor in each Mortgage File conform
to the respective Mortgage Loan number and name
<PAGE>
listed on the Mortgage Loan Schedule and (ii) the existence in each Mortgage
File of each of the documents listed in subparagraphs (i)(A) through (G),
inclusive, of Section 2.01 in the Agreement. The Trustee makes no
representations or warranties as to the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
Loan or the collectibility, insurability, effectiveness or suitability of any
such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
[TRUSTEE],
as Trustee
By: ______________________________
Name: _______________________
Title: ________________________
<PAGE>
EXHIBIT H
FORM OF INVESTMENT LETTER
(Accredited Investor)
[DATE]
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
Re: Chase Manhattan Acceptance Corporation
Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B- ]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
_________________________ (the "Transferor") $_______ by original principal
balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B- ] (the "Certificates"), issued pursuant to a
pooling and servicing agreement, dated as of [DATE] (the "Pooling and Servicing
Agreement"), among Chase Manhattan Acceptance Corporation (the "Depositor"),
Chase Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and
[TRUSTEE], as trustee (the "Trustee"). [The Purchaser intends to register the
Transferred Certificate in the name of ____________________, as nominee for
__________________.] All terms used and not otherwise defined herein shall have
the meanings set forth in the Pooling and Servicing Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have
not been registered or qualified under the Securities Act of 1933, as amended
(the "Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.
<PAGE>
2. The Certificates will bear a legend to the following
effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE "1940 ACT") OR ANY STATE
SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT, DIRECTLY OR
INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR
SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION
UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER
PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING
AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE
UNLESS THE TRUSTEE SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE
SATISFACTORY TO THE SERVICER AND THE TRUSTEE (A) AN INVESTMENT
LETTER FROM THE PROSPECTIVE INVESTOR; AND (B) REPRESENTATIONS
FROM THE TRANSFEROR REGARDING THE OFFERING AND SALE OF THE
CERTIFICATES.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE
DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION
LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT
THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT
PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY
CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED
FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE
ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS
FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY
GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY
12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND
SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE
PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS
CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A
PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR
COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A
TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN
<PAGE>
OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING
OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST
FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29
C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED
TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE
CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE
COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR
LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR
SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
3. The Purchaser is acquiring the Transferred Certificates for
its own account [for investment only]*/ and not with a view to or for sale or
other transfer in connection with any distribution of the Transferred
Certificates in any manner that would violate the Securities Act or any
applicable state securities laws, subject, nevertheless, to the understanding
that disposition of the Purchaser's property shall at all times be and remain
within its control.
4. The Purchaser (a) is a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters, and in particular in such matters related to securities
similar to the Certificates, such that it is capable of evaluating the merits
and risks of investment in the Certificates, (b) is able to bear the economic
risks of such an investment and (c) is an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Securities Act.
5. The Purchaser will not nor has it authorized nor will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
advertising or in
- --------
*/ Not required of a broker/dealer purchaser.
<PAGE>
any other manner with respect to the Certificates. The Purchaser will not sell
or otherwise transfer any of the Certificates, except in compliance with the
provisions of the Pooling and Servicing Agreement.
6. [This paragraph may be deleted if the Purchaser provides
the Opinion of Counsel referred to in clause (ii) of Section 4.02(d) of the
Pooling and Servicing Agreement.] The Purchaser either (A) is not an employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or a plan within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")
(each, a "Plan"), and is not directly or indirectly purchasing any Certificate
on behalf of, as investment manager of, as named fiduciary of, as trustee of or
with assets of a Plan or directly or indirectly purchasing any certificates with
the assets of any insurance company separate account or of any Plan or (B) is an
insurance company and the source of funds for the purchase of the certificates
is an "insurance company general account" within the meaning of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995), and the conditions set forth in Section I and III of PTCE 95-60 are
satisfied with respect to the purchase and holding of the Certificates.
7. Prior to the sale or transfer by the Purchaser of any of
the Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit I to the Pooling and Servicing Agreement.
8. The Purchaser agrees to indemnify the Trustee, the Servicer
and the Depositor against any liability that may result from any
misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:________________________
Name:
Title:
<PAGE>
EXHIBIT I
FORM OF RULE 144A INVESTMENT LETTER
(Qualified Institutional Buyer)
[DATE]
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
The Chase Manhattan Bank
Global Trust Services
15th Floor
450 West 33rd Street
New York, NY 10001
Re: Chase Manhattan Acceptance Corporation,
Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B- ]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
_________________________ (the "Transferor") $_______ by original principal
balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B-] (the "Certificates"), issued pursuant to a
pooling and servicing agreement, dated as of [DATE] (the "Pooling and Servicing
Agreement"), among Chase Manhattan Acceptance Corporation (the "Depositor"),
Chase Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and
[TRUSTEE], as trustee (the "Trustee"). [The Purchaser intends to register the
Transferred Certificate in the name of ____________________, as nominee for
__________________.] All terms used and not otherwise defined herein shall have
the meanings set forth in the Trust Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
In connection with our acquisition of the above Transferred
Certificates we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of
<PAGE>
Chase Manhattan Mortgage Corporation
[TRUSTEE]
[DATE]
Page 2
1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we have such knowledge and
experience in financial and business matters that we are capable of evaluating
the merits and risks of investments in the Certificates, (c) we have had the
opportunity to ask questions of and receive answers from the Depositor
concerning the purchase of the Transferred Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Transferred Certificates, (d) we are not an employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, or a plan within the meaning of Section 4975 of the
Internal Revenue Code of 1986, as amended (each, a "Plan"), nor are we directly
or indirectly purchasing any Certificate on behalf of, as investment manager of,
as named fiduciary of, as trustee of or with assets of a Plan or directly or
indirectly purchasing any certificates with the assets of any insurance company
separate account or of any Plan [or alternatively, in the case of an insurance
company, is an insurance company and the source of funds for the purchase of the
certificates] is an "insurance company general account" within the meaning of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 50 Fed. Reg. 35925
(July 12, 1995), and the conditions set forth in Section I and Section III of
PTCE 95-60 are satisfied with respect to the purchase and holding of the
Certificates, (e) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Securities Act or that would render
the disposition of the Certificates a violation of Section 5 of the Securities
Act or require registration pursuant thereto, nor will act, nor has authorized
or will authorize any person to act, in such manner with respect to the
Certificates, (f) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act and have completed one of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale of the Transferred Certificates to us is being made in
reliance on Rule 144A. We are acquiring the Transferred Certificates for our own
account or for resale pursuant to Rule 144A and further understand that such
Certificates may be resold, pledged or transferred only (i) to a person
reasonably believed by us, based upon certifications of such purchaser or
information we have in our possession, to be a qualified institutional buyer
that purchases for its own account or
<PAGE>
Chase Manhattan Mortgage Corporation
[TRUSTEE]
[DATE]
Page 3
for the account of a qualified institutional buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.
We agree to indemnify the Trustee, the Servicer and the Depositor
against any liability that may result from any misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:_____________________
Name:
Title:
<PAGE>
ANNEX 1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with the purchases by the Buyer, the Buyer is
a "qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $____________*/ in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
____ Corporation, etc. The Buyer is a corporation (other
than a bank, savings and loan association or similar
institution), Massachusetts or similar business
trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended.
____ Bank. The Buyer (a) is a national bank or banking
institution organized under the laws of any State,
territory or the District of Columbia, the business
of which is substantially confined to banking and is
supervised by Federal, State or territorial banking
commission or similar official or is a foreign bank
or equivalent institution, and (b) has an audited net
worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which
is attached hereto.
____ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association,
cooperative bank, homestead association or similar
institution, which is supervised and examined by a
State or Federal authority having supervision over
such institution or is a foreign savings and loan
association or equivalent institution and (b) has an
audited net
- --------
* Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
<PAGE>
worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which
is attached hereto.
____ Broker-dealer. The Buyer is a dealer registered
pursuant to Section 15 of the Securities Exchange Act
of 1934, as amended.
____ Insurance Company. The Buyer is an insurance company
whose primary and predominant business activity is
the writing of insurance or the reinsuring of risks
underwritten by insurance companies and which is
subject to supervision by the insurance commissioner
or a similar official or agency of the State,
territory or the District of Columbia.
____ State or Local Plan. The Buyer is a plan established
and maintained by a State, its political
subdivisions, or any agency or instrumentality of the
State or its political subdivisions, for the benefit
of its employees.
____ ERISA Plan. The Buyer is an employee benefit plan
within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
____ Investment Advisor. The Buyer is an investment
advisor registered under the Investment Advisors Act
of 1940, as amended.
____ Small Business Investment Company. Buyer is a small
business investment company licensed by the U.S.
Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958, as
amended.
____ Business Development Company. Buyer is a business
development company as defined in Section 202(a)(22)
of the Investment Advisors Act of 1940, as amended.
3. The term "securities" as used for purposes of the
calculation of the dollar amount in paragraph 2 excludes: (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph,
<PAGE>
except (i) where the Buyer reports its securities holdings in its financial
statements on the basis of their market value, and (ii) no current information
with respect to the cost of those securities has been published. If clause (ii)
in the preceding sentence applies, the securities may be valued at market.
Further, in determining such aggregate amount, the Buyer may have included
securities owned by subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared in accordance
with generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Buyer's direction. However, such securities
were not included if the Buyer is a majority-owned, consolidated subsidiary of
another enterprise and the Buyer is not itself a reporting company under the
Securities Exchange Act of 1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A
and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
6. Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan as provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
By:____________________
Name:
Title:
Date:__________________
<PAGE>
ANNEX 2
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is
an investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
____ The Buyer owned $___________ in securities (other
than the excluded securities referred to below) as of
the end of the Buyer's most recent fiscal year (such
amount being calculated in accordance with Rule
144A).
____ The Buyer is part of a Family of Investment Companies
which owned in the aggregate $__________ in
securities (other than the excluded securities
referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
By:_______________________
Name:
Title:
IF AN ADVISER:
_________________________________
Print Name of Buyer
Date:_____________________
<PAGE>
EXHIBIT J
FORM OF SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT
This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the
"Agreement") is made and entered into as of [DATE], between Chase Manhattan
Mortgage Corporation, (the "Company") and _____________________ (the
"Purchaser").
PRELIMINARY STATEMENT
__________________ (the "Owner") is the holder of the entire
interest in Chase Manhattan Acceptance Corporation Multi-Class Mortgage
Pass-Through Certificates, Series [ ], Class B-5 (the "Class B-5 Certificates").
The Class B-5 Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") among Chase Manhattan
Acceptance Corporation, (the "Company"), Chase Manhattan Mortgage Corporation as
servicer thereunder (the "Servicer") and [TRUSTEE], as trustee (the "Trustee").
The Owner intends to resell all of the Class B-5 Certificates
directly to the Purchaser on or promptly after the date hereof.
In connection with such sale, the parties hereto have agreed
that the Company, as Servicer, will engage in certain special servicing
procedures relating to foreclosures for benefit of the Purchaser, and that the
Purchaser will deposit funds in a collateral fund to cover any losses
attributable to such procedures as well as all advances and costs in connection
therewith, as set forth herein.
In consideration of the mutual agreements herein contained,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Purchaser agree to the following:
ARTICLE I.
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
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 are required
or authorized by law or executive order to be closed.
<PAGE>
Collateral Fund: The fund established and maintained pursuant
to Section 3.01 hereof.
Collateral Fund Permitted Investments: Either: (i) obligations
of, or obligations fully guaranteed as to principal and interest by, the United
States, or any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States, (ii) a money market
fund rated in the highest rating category by a nationally recognized rating
agency selected by the Company, (iii) cash, (iv) mortgage pass-through
certificates issued or guaranteed by GNMA, FNMA or FHLMC, (v) commercial paper
(including both non-interest bearing discount obligations and interest bearing
obligations payable on demand or on a specified date), the issuer of which may
be an affiliate of the Company, having at the time of such investment a rating
of at least A-1 by Standard and Poor's Corporation ("S&P") or at least D-1 by
Duff & Phelps Credit Rating Co. ("DCR") and (vi) demand and time deposits in,
certificates of deposit of, any depository institution or trust company (which
may be an affiliate of the Company) incorporated under the laws of the United
States of America or any state thereof and subject to supervision and
examination by federal and/or state banking authorities, so long as at the time
of such investment either (x) the long-term debt obligations of such depository
institution or trust company have a rating of at least AA by S&P or DCR or (y)
the certificate of deposit or other unsecured short-term debt obligations of
such depository institution or trust company have a rating of at least D-1 by
DCR or A-1 by S&P and, for each of the preceding clauses (i), (iv), (v) and
(vi), the maturity thereof shall be not later than the earlier to occur of (A)
30 days from the date of the related investment and (B) the next succeeding
Distribution Date.
Commencement of Foreclosure: The first official action
required under local law in order to commence foreclosure proceedings or to
schedule a trustee's sale under a deed of trust, including (i) in the case of a
mortgage, any filing or service of process necessary to commence an action to
foreclose, or (ii) in the case of a deed of trust, the posting, publishing,
filing or delivery of a notice of sale, but not including in either case (x) any
notice of default, notice of intent to foreclose or sell or any other action
prerequisite to the actions specified in (i) or (ii) above and upon the consent
of the Purchaser which will be deemed given unless expressly withheld within two
Business Days of notification, (y) the acceptance of a deed-in-lieu of
foreclosure (whether in connection with a sale of the related property or
otherwise) or (z) initiation and completion of a short pay-off.
Current Appraisal: With respect to any Mortgage Loan as to
which the Purchaser has made an Election to Delay Foreclosure, an appraisal of
the related Mortgaged Property obtained by the Purchaser at its expense from an
appraiser (which shall not be an affiliate of the Purchaser) acceptable to the
Company as nearly contemporaneously as practicable to the time of the
Purchaser's election, prepared based on the Company's customary requirements for
such appraisals.
<PAGE>
Election to Delay Foreclosure: Any election by the Purchaser
to delay the Commencement of Foreclosure, made in accordance with Section
2.02(b).
Election to Foreclose: Any election by the Purchaser to
proceed with the Commencement of Foreclosure, made in accordance with Section
2.03(a).
Required Collateral Fund Balance: As of any date of
determination, an amount equal to the aggregate of all amounts previously
required to be deposited in the Collateral Fund pursuant to Section 2.02(d)
(after adjustment for all withdrawals and deposits pursuant to Section 2.02(e))
and Section 2.03(b) (after adjustment for all withdrawals and deposits pursuant
to Section 2.03(c)) and Section 3.02 to be reduced by all withdrawals therefrom
pursuant to Section 2.02(g) and Section 2.03(d).
Section 1.02. Definitions Incorporated by Reference.
All capitalized terms not otherwise defined in this Agreement
shall have the meanings assigned in the Pooling and Servicing Agreement.
ARTICLE II.
SPECIAL SERVICING PROCEDURES
Section 2.01. Reports and Notices.
(a) In connection with the performance of its duties
under the Pooling and Servicing Agreement relating to the realization upon
defaulted Mortgage Loans, the Company, as Servicer, shall provide to the
Purchaser the following notices and reports:
(i) Within five Business Days after each Distribution
Date (or included in or with the monthly statement to
Certificateholders pursuant to the Pooling and Servicing Agreement),
the Company shall provide to the Purchaser a report indicating for the
Trust the number of Mortgage Loans that are (A) thirty days, (B) sixty
days, (C) ninety days or more delinquent or (D) in foreclosure, and
indicating for each such Mortgage Loan the outstanding principal
balance.
(ii) Prior to the Commencement of Foreclosure in
connection with any Mortgage Loan, the Company shall provide the
Purchaser with a notice (sent by telecopier) of such proposed and
imminent foreclosure, stating the loan number and the aggregate amount
owing under the Mortgage Loan.
(b) If requested by the Purchaser, the Company shall
make its servicing personnel available (during their normal business hours) to
respond to reasonable
<PAGE>
inquiries by the Purchaser in connection with any Mortgage Loan identified in a
report under subsection (a)(i)(B), (a)(i)(C), (a)(i)(D) or (a)(ii) which has
been given to the Purchaser; provided, that (1) the Company shall only be
required to provide information that is readily accessible to its servicing
personnel and is non-confidential and (2) the Company shall not be required to
provide any written information under this subsection.
(c) In addition to the foregoing, the Company shall
provide to the Purchaser such information as the Purchaser may reasonably
request concerning each Mortgage Loan that is at least sixty days delinquent and
each Mortgage Loan which has become real estate owned, through the final
liquidation thereof; provided that the Company shall only be required to provide
information that is readily accessible to its servicing personnel and is
non-confidential.
(d) With respect to all Mortgage Loans which are
serviced at any time by the Company through a Subservicer, the Company shall be
entitled to rely for all purposes hereunder, including for purposes of
fulfilling its reporting obligations under this Section 2.01 on the accuracy and
completeness of any information provided to it by the applicable Subservicer.
Section 2.02. Purchaser's Election to Delay Foreclosure
Proceedings.
(a) The Purchaser directs the Company that in the
event that the Company does not receive written notice of the Purchaser's
election pursuant to subsection (b) below within 24 hours (exclusive of any
intervening non-Business Days) of transmission of the notice provided by the
Company under Section 2.01(a)(ii), subject to extension as set forth in Section
2.02(b), the Company shall proceed with the Commencement of Foreclosure in
respect of such Mortgage Loan in accordance with its normal foreclosure policies
without further notice to the Purchaser. Any foreclosure that has been initiated
may be discontinued (i) without notice to the Purchaser, if the Mortgage Loan
has been brought current or if a refinancing or prepayment occurs with respect
to the Mortgage Loan (including by means of a short payoff approved by the
Company) (ii) with notice to the Purchaser if the Company has reached the terms
of a forbearance agreement with the borrower. In such latter case the Company
may complete such forbearance agreement unless instructed otherwise by the
Purchaser within one Business Day of notification.
(b) In connection with any Mortgage Loan with respect
to which a notice under Section 2.01(a)(ii) has been given to the Purchaser, the
Purchaser may elect, for reasonable cause as determined by the Purchaser, to
instruct the Company to delay the Commencement of Foreclosure until such term as
the Purchaser determines that the Company may proceed with the Commencement of
Foreclosure. Such election must be evidenced by written notice received within
24 hours (exclusive of any intervening non-Business Days) of transmission of the
notice provided by the Company under Section 2.01(a)(ii). Such 24 hour period
shall be extended for no longer than an additional four Business Days after the
receipt of the information if the Purchaser requests additional information
related to such foreclosure; provided, however that the Purchaser will have at
least one Business Day to respond to any
<PAGE>
requested additional information. Any such additional information shall (i) not
be confidential in nature and (ii) be obtainable by the Company from existing
reports, certificates or statements or otherwise be readily accessible to its
servicing personnel. The Purchaser agrees that it has no right to deal with the
mortgagor. If the Company's normal foreclosure policy includes acceptance of a
deed-in-lieu of foreclosure or short payoff, the Purchaser will be notified and
given one Business Day to respond.
(c) With respect to any Mortgage Loan as to which the
Purchaser has made an Election to Delay Foreclosure, the Purchaser shall obtain
a Current Appraisal as soon as practicable, and shall provide the Company with a
copy of such Current Appraisal.
(d) Within two Business Days of making any Election
to Delay Foreclosure, the Purchaser shall remit by wire transfer to the Company,
for deposit in the Collateral Fund, an amount, as calculated by the Company,
equal to the sum of (i) 125% of the greater of the outstanding Principal Balance
of the Mortgage Loan and the value shown in the Current Appraisal referred to in
subsection (c) above (or, if such Current Appraisal has not yet been obtained,
the Company's estimate thereof, in which case the required deposit under this
subsection shall be adjusted upon obtaining of such Current Appraisal), and (ii)
three months' interest on the Mortgage Loan at the applicable Mortgage Rate. If
any Election to Delay Foreclosure extends for a period in excess of three months
(such excess period being referred to herein as the "Excess Period"), the
Purchaser shall remit by wire transfer in advance to the Company for deposit in
the Collateral Fund the amount, as calculated by the Company, equal to interest
on the Mortgage Loan at the applicable Mortgage Rate for the Excess Period. The
terms of this Agreement shall no longer apply to the servicing of any Mortgage
Loan upon the failure of the Purchaser to deposit the above amounts relating to
the Mortgage Loan within two Business Days of the Election to Delay Foreclosure.
(e) With respect to any Mortgage Loan as to which the
Purchaser has made an Election to Delay Foreclosure, the Company may withdraw
from the Collateral Fund from time to time amounts necessary to reimburse the
Company for all Advances and Liquidation Expenses thereafter made by the Company
as Servicer in accordance with the Pooling and Servicing Agreement. To the
extent that the amount of any such Liquidation Expense is determined by the
Company based on estimated costs, and the actual costs are subsequently
determined to be higher, the Company may withdraw the additional amount from the
Collateral Fund. In the event that the Mortgage Loan is brought current by the
Mortgagor and the foreclosure action is discontinued, the amounts so withdrawn
from the Collateral Fund shall be redeposited therein as and to the extent that
reimbursement therefor from amounts paid by the Mortgagor is not prohibited
pursuant to the Pooling and Servicing Agreement. Except as provided in the
preceding sentence, amounts withdrawn from the Collateral Fund to cover Advances
and Liquidation Expenses shall not be redeposited therein or otherwise
reimbursed to the Purchaser. If and when any such Mortgage Loan is brought
current by the Mortgagor, all amounts remaining in the Collateral Fund in
respect of such Mortgage Loan (after adjustment for all withdrawals and deposits
pursuant to this subsection) shall be released to the Purchaser.
<PAGE>
(f) With respect to any Mortgage Loan as to which the
Purchaser has made an Election to Delay Foreclosure, the Company shall continue
to service the Mortgage Loan in accordance with its customary procedures (other
than the delay in Commencement of Foreclosure as provided herein). If and when
the Purchaser shall notify the Company that it believes that it is appropriate
to do so, the Company shall proceed with the Commencement of Foreclosure. In any
event, if the Mortgage Loan is not brought current by the mortgagor by the time
the loan becomes 6 months delinquent, the Purchaser's election shall no longer
be effective and at the Purchaser's option, either (i) the Purchaser shall
purchase the Mortgage Loan from the Trust Fund at a purchase price equal to the
fair market value as shown on the Current Appraisal, to be paid by (x) applying
any balance in the Collateral Fund to such purchase price, and (y) to the extent
of any deficiency, by wire transfer of immediately available funds to the
Company or Trustee; or (ii) the Company shall proceed with the Commencement of
Foreclosure.
(g) Upon the occurrence of a liquidation with respect
to any Mortgage Loan as to which the Purchaser made an Election to Delay
Foreclosure and as to which the Company proceeded with the Commencement of
Foreclosure in accordance with subsection (f) above, the Company shall calculate
the amount, if any, by which the value shown on the Current Appraisal obtained
under subsection (c) exceeds the actual sales price obtained for the related
Mortgaged Property (net of Liquidation Expenses and accrued interest related to
the extended foreclosure period), and the Company shall withdraw the amount of
such excess from the Collateral Fund, shall remit the same to the Trust Fund and
in its capacity as Servicer shall apply such amount as additional Liquidation
Proceeds pursuant to the Pooling and Servicing Agreement. After making such
withdrawal, all amounts remaining in the Collateral Fund in respect of such
Mortgage Loan (after adjustment for all withdrawals and deposits pursuant to
subsection (e)) shall be released to the Purchaser.
Section 2.03. Purchaser's Election to Commence Foreclosure
Proceedings.
(a) In connection with any Mortgage Loan identified
in a report under Section 2.01(a)(i)(B), the Purchaser may elect, for reasonable
cause as determined by the Purchaser, to instruct the Company to proceed with
the Commencement of Foreclosure as soon as practicable. Such election must be
evidenced by written notice received by the Company by 5:00 p.m., New York City
time, on the third Business Day following the delivery of such report under
Section 2.01(a)(i).
(b) Within two Business Days of making any Election
to Foreclose, the Purchaser shall remit to the Company, for deposit in the
Collateral Fund, an amount, as calculated by the Company, equal to 125% of the
current Principal Balance of the Mortgage Loan and three months' interest on the
Mortgage Loan at the applicable Mortgage Rate. If and when any such Mortgage
Loan is brought current by the Mortgagor, all amounts in the Collateral Fund in
respect of such Mortgage Loan shall be released to the Purchaser. The terms of
this Agreement shall no longer apply to the servicing of any Mortgage Loan upon
the failure of the
<PAGE>
Purchaser to deposit the above amounts relating to the Mortgage Loans within two
Business Days at the Election to Foreclose.
(c) With respect to any Mortgage Loan as to which the
Purchaser has made an Election to Foreclose, the Company shall continue to
service the Mortgage Loan in accordance with its customary procedures (other
than to proceed with the Commencement of Foreclosure as provided herein). In
connection therewith, the Company shall have the same rights to make withdrawals
for Advances and Liquidation Expenses from the Collateral Fund as are provided
under Section 2.02(e), and the Company shall make reimbursements thereto to the
limited extent provided under such subsection. The Company shall not be required
to proceed with the Commencement of Foreclosure if (i) the same is stayed as a
result of the Mortgagor's bankruptcy or is otherwise barred by applicable law,
or to the extent that all legal conditions precedent thereto have not yet been
complied with or (ii) the Company believes there is a breach of representation
or warranties by the Company, which may result in a repurchase or substitution
of such Mortgage Loan, or (iii) the Company reasonably believes the Mortgaged
Property may be contaminated with or affected by hazardous wastes or hazardous
substances (and the Company supplies the Purchaser with information supporting
such belief). The Company will repurchase or substitute a Mortgage Loan pursuant
to the preceding clause (ii) within the time period specified in the Pooling and
Servicing Agreement. Any foreclosure that has been initiated may be discontinued
(i) without notice to the Purchaser if the Mortgage Loan has been brought
current or if a refinancing or prepayment occurs with respect to the Mortgage
Loan (including by means of a short payoff approved by the Company), or (ii)
with notice to the Purchaser if the Company has reached the terms of a
forbearance agreement unless instructed otherwise by the Purchaser within two
Business Days of notification.
(d) Upon the occurrence of a liquidation with respect
to any Mortgage Loan as to which the Purchaser made an Election to Foreclose and
as to which the Company proceeded with the Commencement of Foreclosure in
accordance with subsection (c) above, the Company shall calculate the amount, if
any, by which the Principal Balance of the Mortgage Loan at the time of
liquidation (plus all unreimbursed Advances and Liquidation Expenses in
connection therewith other than those paid from the Collateral Fund) exceeds the
actual sales price obtained for the related Mortgaged Property, and the Company
shall withdraw the amount of such excess from the Collateral Fund, shall remit
the same to the Trust Fund and in its capacity as Servicer shall apply such
amount as additional Liquidation Proceeds pursuant to the Pooling and Servicing
Agreement. After making such withdrawal, all amounts remaining in the Collateral
Fund (after adjustment for all withdrawals and deposits pursuant to subsection
(c)) in respect of such Mortgage Loan shall be released to the Purchaser.
Section 2.04. Termination.
(a) With respect to all Mortgage Loans included in the Trust
Fund, the Purchaser's rights to make any Election to Delay Foreclosure or any
Election to Foreclose and the Company's obligations under Section 2.01 shall
terminate (i) at such time as the Certificate
<PAGE>
Principal Balance of the Class B-5 Certificates has been reduced to zero, (ii)
if the greater of (x) 43% (or such lower or higher percentages that represents
the Company's actual historical loss experience with respect to the Mortgage
Loans in the related pool) of the aggregate principal balance of all Mortgage
Loans that are in foreclosure or are more than 90 days delinquent on a
contractual basis and REO properties or if the aggregate amount that the Company
estimates will be required to be withdrawn from the Collateral Fund with respect
to Mortgage Loans as to which the Purchaser has made an Election to Delay
Foreclosure or an Election to Foreclose exceeds (z) the Outstanding Certificate
Principal Balance of the Class B-5 Certificates, or (iii) upon any transfer by
the Purchaser of any interest (other than the minority interest therein, but
only if the transferee provides written acknowledgment to the Company of the
Purchaser's right hereunder and that such transferee will have no rights
hereunder) in the Class B-5 Certificates (whether or not such transfer is
registered under the Pooling and Servicing Agreement), including any such
transfer in connection with a termination of the Trust Fund. Except as set forth
above, this Agreement and the respective rights, obligations and
responsibilities of the Purchaser and the Company hereunder shall terminate upon
the later to occur of (i) the final liquidation of the last Mortgage Loan as to
which the Purchaser made any Election to Delay Foreclosure or any Election to
Foreclose and the withdrawal of all remaining amounts in the Collateral Fund as
provided herein and (ii) ten (10) Business Day's notice.
(b) Purchaser's rights pursuant to Section 2.02 or 2.03 of
this Agreement shall terminate with respect to a Mortgage loan as to which the
Purchaser has exercised its rights under Section 2.02 or 2.03 hereof, upon
Purchaser's failure to deposit any amounts required pursuant to Section 2.02(d)
or 2.03(b).
(c) Neither the Servicer nor any of its directors, officers,
employees or agents shall be under any liability 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 Servicer or any such Person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Servicer and any director, officer,
employee or agent thereof may rely in good faith on any document of any kind
prima facie properly executed and submitted by an Person respecting any matters
arising hereunder.
ARTICLE III.
COLLATERAL FUND; SECURITY INTEREST
Section 3.01. Collateral Fund.
Upon receipt from the Purchaser of the initial amount required
to be deposited in the Collateral Fund pursuant to Article 11, the Company shall
establish and maintain with itself
<PAGE>
as a segregated account on its books and records an account (the "Collateral
Fund"), entitled "Chase Manhattan Mortgage Corporation, as Servicer, for the
benefit of registered holders of Chase Manhattan Acceptance Corporation
Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class B-5." Amounts
in the Collateral Fund shall continue to be the property of the Purchaser,
subject to the first priority security interest granted hereunder for the
benefit of the Certificate holders, until withdrawn from the Collateral Fund
pursuant to Section 2.02 or 2.03 hereof.
Upon the termination of this Agreement and the liquidation of
all Mortgage Loans as to which the Purchaser has made any Election to Delay
Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof, the
Company shall distribute to the Purchaser all amounts remaining in the
Collateral Fund together with any investment earnings thereon.
The Collateral Fund shall be an "outside reserve fund" within
the meaning of the REMIC Provisions, beneficially owned by the Purchaser. In no
event shall the Purchaser (i) take or cause the Trustee or the Company to take
any action that could cause any REMIC established under the Trust Agreement to
fail to qualify as a REMIC or cause the imposition on any such REMIC of any
"prohibited transaction" or "prohibited contribution" taxes or (ii) cause the
Trustee or the Company to fail to take any action necessary to maintain the
status of any such REMIC as a REMIC.
Section 3.02. Collateral Fund Permitted Investments.
The Company shall, at the written direction of the Purchaser
invest the funds in the Collateral Fund in Collateral Fund Permitted
Investments. Such direction shall not be changed more frequently than quarterly.
In the absence of any direction, the Company shall select such investments in
accordance with the definition of Collateral Fund Permitted Investments in its
discretion.
All income and gain realized from any investment as well as
any interest earned on deposits in the Collateral Fund (net of any losses on
such investments) and any payments of principal made in respect of any
Collateral Fund Permitted Investment shall be deposited in the Collateral Fund
upon receipt. All costs and realized losses associated with the purchase and
sale of Collateral Fund Permitted Investments shall be borne by the Purchaser
and the amount of net realized losses shall be deposited by the Purchaser in the
Collateral Fund. The Company shall periodically (but not more frequently than
monthly) distribute to the Purchaser upon request an amount of cash, to the
extent cash is available therefor in the Collateral Fund, equal to the amount by
which the balance of the Collateral Fund, after giving effect to all other
distributions to be made from the Collateral Fund on such date, exceeds the
Required Collateral Fund Balance. Any amounts so distributed shall be released
from the lien and security interest of this Agreement.
Section 3.03. Grant of Security Interest.
<PAGE>
The Purchaser grants to the Company and the Trustee for the
benefit of the Certificateholders a security interest in and lien on all of the
Purchaser's right, title and interest, whether now owned or hereafter acquired,
in and to: (1) the Collateral Fund, (2) all amounts deposited in the Collateral
Fund and Collateral Fund Permitted Investments in which such amounts are
invested (and the distributions and proceeds of such investments) and (3) all
cash and non-cash proceeds of any of the foregoing, including proceeds of the
voluntary or involuntary conversion thereof (all of the foregoing collectively,
the "Collateral").
The Purchaser acknowledges the lien on and security interest
in the Collateral for the benefit of the Certificateholders. The Purchaser shall
take all actions requested by the Company or the Trustee as may be reasonably
necessary to perfect the security interest created under this Agreement in the
Collateral and cause it to be prior to all other security interests and liens,
including the execution and delivery to the Company for filing of appropriate
financing statements in accordance with applicable law. The Company shall file
appropriate continuation statements, or appoint an agent on its behalf to file
such statements, in accordance with applicable law.
Section 3.04. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Fund at
any time are insufficient to cover any withdrawals therefrom that the Company or
the Trustee is then entitled to make hereunder, the Purchaser shall be obligated
to pay such amounts to the Company or the Trustee immediately upon demand. Such
obligation shall constitute a general corporate obligation of the Purchaser.
ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section 4.01. Amendment.
This Agreement may be amended from time to time by the Company
and the Purchaser by written agreement signed by the Company and the Purchaser.
Section 4.02. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 4.03. Governing Law.
<PAGE>
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 4.04. Notices.
All demands, notices and direction hereunder shall be in
writing or by telecopy and shall be deemed effective upon receipt to:
(a) in the case of the Company,
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
or such other address as may hereafter be furnished in writing by the Company,
or
(b) in the case of the Purchaser, with respect
to notices pursuant to Section 2.01,
[PURCHASER]
[ADDRESS]
Attn: ________________
Phone: _______________
Fax: ________________
with respect to all other notices pursuant
to this Agreement,
---------------------------
[ADDRESS]
Attn: _________________
Phone: ________________
Fax: _________________
or such other address as may hereafter be furnished in writing by the Purchaser.
Section 4.05. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever, including
regulatory, 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.
<PAGE>
Section 4.06. Successors and Assigns.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto, and all such provisions shall inure to the benefit of the
Certificateholders; provided, however, that the rights under this Agreement
cannot be assigned by the Purchaser without the consent of the Company.
Section 4.07. Article and Section Headings.
The article and section headings herein are for convenience of
reference only, and shall not limit or otherwise affect the meaning hereof.
Section 4.08. Confidentiality.
The Purchaser agrees that all information supplied by or on
behalf of the Company pursuant to Sections 2.01 or 2.02, including individual
account information, is the property of the Company and the Purchaser agrees to
hold such information confidential and not to disclose such information.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser 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.
CHASE MANHATTAN MORTGAGE
CORPORATION
By:_____________________
Name:___________________
Title:__________________
______________________
By:_____________________
Name:___________________
Title:__________________
<PAGE>
EXHIBIT K
FORM OF TRANSFEREE'S LETTER
Chase Manhattan Acceptance Corporation Series [ ]
[DATE]
Chase Manhattan Acceptance Corporation
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Ladies and Gentlemen:
We propose to purchase Chase Manhattan Acceptance
Corporation's Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class
A-R, described in the Prospectus Supplement, dated [DATE], and Prospectus, dated
[DATE].
1. We certify that (a) we are not a disqualified organization
and (b) we are not purchasing such Class A-R Certificates on behalf of a
disqualified organization; for this purpose the term "disqualified organization"
means the United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.
2. We certify that (a) we have historically paid our debts as
they became due, (b) we intend, and believe that we will be able, to continue to
pay our debts as they become due in the future, (c) we understand that, as
beneficial owner of the Class A-R Certificates, we may incur tax liabilities in
excess of any cash flows generated by the Class A-R Certificates, and (d) we
intend to pay any taxes associated with holding the Class A-R Certificates as
they become due.
3. We acknowledge that we will be the beneficial owner of the
Class A-R Certificates and:*/
- --------
*/ Check appropriate box and if necessary fill in the name of the Transferee's
nominee.
<PAGE>
______ The Class A-R Certificates will be
registered in our name.
______ The Class A-R Certificates will be held in
the name of our nominee,
____________________, which is not a
disqualified organization.
4. Unless Chase Manhattan Acceptance Corporation ("CMAC") has
consented to the transfer to us by executing the form of Consent affixed hereto
as Appendix B, we certify that we are a U.S. person; for this purpose the term
"U.S. person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or any
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all sunstantial decisions of the
trust. We agree that any breach by us of this certification shall render the
transfer of any interest in the Class A-R Certificates to us absolutely null and
void and shall cause no rights in the Class A-R Certificates to vest in us.
5. We agree that in the event that at some future time we wish
to transfer any interest in the Class A-R Certificates, we will transfer such
interest in the Class A-R Certificates only (a) to a transferee that (i) is not
a disqualified organization and is not purchasing such interest in the Class A-R
Certificates on behalf of a disqualified organization, (ii) is a U.S. person and
(iii) has delivered to CMAC a letter in the form of this letter (including the
affidavit appended hereto) and, if requested by CMAC, an opinion of counsel (in
a form acceptable to CMAC) that the proposed transfer will not cause the
interest in the Class A-R Certificates to be held by a disqualified organization
or a person who is not a U.S. person or (b) with the written consent of CMAC.
6. We hereby designate Chase Manhattan Mortgage Corporation as
our fiduciary to act as the tax matters person for the Series [ ] REMIC.
Very truly yours,
[PURCHASER]
By: ________________________
Name:
Title:
Accepted as of __________ __, 199_
Chase Manhattan Acceptance Corporation
By: _________________________________
Name:
Title:
<PAGE>
APPENDIX A
Affidavit pursuant to (i) Section
860E(e)(4) of the Internal Revenue
Code of 1986, as amended, and (ii)
certain provisions of the Pooling
and Servicing Agreement
Under penalties of perjury, the undersigned declares that the following
is true:
(1) He or she is an officer of ____________________________ (the
"Transferee"),
(2) the Transferee's Employee Identification number is __________,
(3) the Transferee is not a "disqualified organization" (as
defined below), has no plan or intention of becoming a
disqualified organization, and is not acquiring any of its
interest in the Chase Manhattan Acceptance Corporation,
Multiclass Mortgage Pass-Through Certificates, Series [ ],
Class A-R on behalf of a disqualified organization or any
other entity,
(4) unless Chase Manhattan Acceptance Corporation ("CMAC") has
consented to the transfer to the Transferee by executing the
form of Consent affixed as Appendix B to the Transferee's
Letter to which this Certificate is affixed as Appendix A, the
Transferee is a "U.S. person" (as defined below),
(5) that no purpose of the transfer is to avoid or impede the
assessment or collection of tax,
(6) the Transferee has historically paid its debts as they became
due,
(7) the Transferee intends, and believes that it will be able, to
continue to pay its debts as they become due in the future,
(8) the Transferee understands that, as beneficial owner of the
Class A-R Certificates, it may incur tax liabilities in excess
of any cash flows generated by the Class A-R Certificates,
(9) the Transferee intends to pay any taxes associated with
holding the Class A-R Certificates as they become due, and
(10) The Transferee consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by CMAC
(upon advice of counsel) to constitute a reasonable
arrangement to ensure that the Class A-R Certificates will not
be owned directly or indirectly by a disqualified
organization;
<PAGE>
For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code and the term
"U.S. person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or any
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all sunstantial decisions of the trust
_______________________________
By:____________________
_______________________________
Address of Investor for receipt of distribution:
Address of Investor for receipt of tax information:
(Corporate Seal)
Attest:
_____________________
________________________, Secretary
<PAGE>
Personally appeared before me the above-named ______________, known or
proved to me to be the same person who executed the foregoing
instrument and to be the _______ of the Investor, and acknowledged to
me that he executed the same as his free act and deed and the free act
and deed of the Investor.
Subscribed and sworn before me this _______ day of ______
_______, 19__.
____________________
Notary Public
County of ______
State of _______
My commission expires the __________ day of _______
By: __________________________
Name: ___________________
Title: ____________________
Dated: _____________
<PAGE>
APPENDIX B
CONSENT
_________________________ (Transferee)
_________________________
_________________________
Ladies and Gentlemen:
Chase Manhattan Acceptance Corporation ("CMAC") hereby
consents to the transfer to, and registration in the name of, the Transferee
(or, if applicable, registration in the name of such Transferee's nominee of the
Multiclass Mortgage Pass-Through Certificates, Series [ ], Class A-R described
in the Transferee's Letter to which this Consent is appended, notwithstanding
CMAC's knowledge that the Transferee is not a U.S. person (as defined in such
Transferee's Letter).
Chase Manhattan Acceptance Corporation
Dated: _______________ By: __________________________________
<PAGE>
EXHIBIT L
REQUEST FOR RELEASE OF DOCUMENTS
To: [TRUSTEE]
[ADDRESS]
Re:
In connection with the administration of the Mortgage Loans held by
you, as Trustee, pursuant to the above-captioned Pooling and Servicing
Agreement, we request the release, and hereby acknowledge receipt, of the
Mortgage File for the Mortgage Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_______ 1. Mortgage Paid in Full
_______ 2. Foreclosure
_______ 3. Substitution
_______ 4. Other Liquidation
_______ 5. Nonliquidation Reason: __________________________
By: _____________________________
(authorized signer)
Issuer: __________________________
Address: __________________________
__________________________
Date: _____________________________
Trustee
[TRUSTEE]
Please acknowledge the execution of the above request by your signature and date
below:
____________________________ _________________
Signature Date
Documents returned to Trustee:
____________________________ _________________
Trustee Date
<PAGE>
October 19, 1999
Chase Funding, Inc.
Chase Manhattan Acceptance Corporation
343 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
We have acted as counsel to Chase Funding, Inc., a New York corporation, and
Chase Manhattan Acceptance Corporation, a Delaware corporation, (each, a
"Seller") in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed on October 18, 1999 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act") in respect of Mortgage Pass-Through Certificates ("Certificates") which
the Sellers plan to offer in series, each series to be issued under a separate
pooling and servicing agreement (a "Pooling and Servicing Agreement"), in all
material respects relevant hereto substantially in the form of Exhibit 4.1 to
the Registration Statement, among a Seller, Chase Manhattan Mortgage Corporation
or another servicer to be identified in the prospectus supplement for such
series of Certificates (the "Servicer" for such series), and a bank, trust
company or other entity with trust powers, to be identified in the prospectus
supplement for such series of Certificates, as trustee (the "Trustee" for such
series).
We have examined originals or copies certified or otherwise identified to our
satisfaction of such documents and records of each Seller, and such public
documents and records, as we have deemed necessary as a basis for the opinions
hereinafter expressed.
Based on the foregoing and having regard for such legal considerations as we
have deemed relevant, we are of the opinion that:
1. When, in respect of a series of Certificates, a Pooling and Servicing
Agreement has been duly authorized by all necessary action and duly executed and
delivered by a Seller, the Servicer and the Trustee for such series, such
Pooling and Servicing Agreement will be a legal and valid obligation of such
Seller; and
<PAGE>
Chase Funding, Inc.
Chase Manhattan Acceptance Corporation
October 19, 1999
Page 2
2. When a Pooling and Servicing Agreement for a series of Certificates has been
duly authorized by all necessary action and duly executed and delivered by a
Seller, the Servicer and the Trustee for such series, and when the certificates
of such series of Certificates have been duly executed, countersigned, issued
and sold as contemplated in the Registration Statement and the prospectus
delivered pursuant to Section 5 of the Act in connection therewith, such
Certificates will be legally and validly issued, fully paid and nonassessable,
and the holders of such Certificates will be entitled to the benefits of such
Pooling and Servicing Agreement.
The form of Pooling and Servicing Agreement indicates that it is governed by the
laws of the State of New York. We express no opinion as to the law of any
jurisdiction other than the law of the State of New York, the General
Corporation Law of the State of Delaware and the federal law 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 in the Registration
Statement and the related prospectus under the heading "Legal Matters", without
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,
MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
October 19, 1998
Chase Funding, Inc.
Chase Manhattan Acceptance Corporation
343 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
We have acted as counsel to Chase Funding, Inc., a New York corporation, and
Chase Manhattan Acceptance Corporation, a Delaware corporation, (each, a
"Seller") in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission on
October 18, 1999, pursuant to the Securities Act of 1933, as amended (the "Act")
in respect of Mortgage Pass-Through Certificates ("Certificates") that the
Sellers plan to offer in series. We hereby confirm that the discussion of
federal income tax consequences appearing in the Prospectus under the heading
"Federal Income Tax Consequences" and in the Prospectus Supplement under the
headings "Terms of the Certificates -- Federal Income Tax Consequences" and
"Federal Income Tax Consequences" is our opinion as to the material federal
income tax consequences of purchasing, owning and disposing of Certificates and
we adopt it as such.
Our opinion is based upon existing federal income tax laws, regulations,
administrative pronouncements and judicial decisions. All such authorities are
subject to change, either prospectively or retroactively. No assurance can be
provided as to the effect of any such change upon our opinion. In addition, our
opinion is based on the facts and circumstances set forth in the Prospectus and
the Prospectus Supplement and in the other documents reviewed by us. Our opinion
as to the matters set forth herein could change with respect to a particular
Series of Certificates as a result of changes in facts and circumstances,
changes in the terms of the documents reviewed by us, or changes in the law
subsequent to the date hereof. As the Registration Statement contemplates Series
of Certificates with numerous different characteristics, the particular
characteristics of each Series of Certificates must be considered in determining
the applicability of this opinion to a particular Series of Certificates. The
opinion contained in each Prospectus Supplement and Prospectus prepared pursuant
to the Registration Statement is, accordingly, deemed to be incorporated herein.
<PAGE>
Chase Funding, Inc.
Chase Manhattan Acceptance Finance Corporation
October 19, 1999
Page 2
The opinion set forth herein has no binding effect on the Internal Revenue
Service or any court. No assurance can be given that, if the matter were
contested, a court would agree with the opinion set forth herein.
In giving the foregoing opinion, we express no opinion other than as to the
federal income tax law.
We hereby consent to the filing of this letter as an Exhibit to the Registration
Statement and to the reference to this firm in the Registration Statement under
the heading "Federal Income Tax Consequences", without admitting that we are
"experts" within the meaning of the Act or the rules and regulations of the
Securities and Exchange Commission issued thereunder.
Very truly yours,
MORGAN, LEWIS & BOCKIUS LLP
