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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
Reported): September 29, 1998
LEHMAN ABS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 333-39649 13-3447441
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
Three World Financial Center
200 Vesey Street
New York, New York 10285
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 526-7000.
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Item 5. Other Events.
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The registrant registered issuances of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended, by a Registration Statement on Form S-3 (Registration File No.
333-39649) (the "Registration Statement"). Pursuant to the Registration
Statement, the Registrant issued $240,000,000 in aggregate principal amount of
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7
Certificates of the Centex Home Equity Loan Trust 1998-3 on September 29,
1998. This Current Report on Form 8-K is being submitted to file a copy of the
Pooling and Servicing Agreement (as defined below) executed in connection with
the issuance of the Certificates (as defined below).
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), attached hereto as Exhibit
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4.1, dated as of September 1, 1998, among Lehman ABS Corporation, as depositor
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(the "Depositor"), Norwest Bank Minnesota, National Association, as trustee
(the "Trustee"), and Centex Credit Corporation d/b/a Centex Home Equity
Corporation, as seller and servicer (the "Seller and Servicer"). The
"Certificates" consist of the following classes: Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class A-7 and Class R. The Certificates
evidence all the beneficial ownership interest in a trust fund that consists
primarily of a pool of fixed-rate and adjustable-rate, home equity loans with
an aggregate outstanding principal balance of $239,998,703.52 as of September
1, 1998, together with certain other assets. Capitalized terms used herein and
not otherwise defined shall have the meanings assigned to them in the Pooling
and Servicing Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
4.1 Pooling and Servicing Agreement, dated as of September 1, 1998,
among Lehman ABS Corporation, as Depositor, Norwest Bank
Minnesota, National Association, as Trustee, and Centex Credit
Corporation d/b/a Centex Home Equity Corporation, as Seller and
Servicer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEHMAN ABS CORPORATION
By: /s/ Samir A. Tabet
-----------------------------
Name: Samir A. Tabet
Title: Senior Vice President
Dated: October 9, 1998
EXHIBIT INDEX
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Exhibit Page
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4.1 Pooling and Servicing Agreement, dated as of September 1, 1998,
among Lehman ABS Corporation, as Depositor, Norwest Bank
Minnesota, National Association, as Trustee, and Centex Credit
Corporation d/b/a Centex Home Equity Corporation, as Seller and
Servicer.
EXECUTION
POOLING AND SERVICING AGREEMENT
Relating to
CENTEX HOME EQUITY LOAN TRUST 1998-3
Among
LEHMAN ABS CORPORATION
as Depositor,
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION,
as Seller,
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION,
as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
Dated as of September 1, 1998
Table of Contents
Page
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01. Definitions.....................................................2
Section 1.02. Use of Words and Phrases.......................................32
Section 1.03. Captions; Table of Contents....................................32
Section 1.04. Opinions.......................................................32
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.01. Establishment of the Trust.....................................33
Section 2.02. Office........................................................ 33
Section 2.03. Purposes and Powers............................................33
Section 2.04. Appointment of the Trustee; Declaration of Trust...............33
Section 2.05. Expenses of the Trust..........................................33
Section 2.06. Ownership of the Trust.........................................34
Section 2.07. Situs of the Trust.............................................34
Section 2.08. Miscellaneous REMIC Provisions.................................34
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR, THE
SERVICER AND THE SELLER; COVENANT OF SELLER TO CONVEY HOME EQUITY LOANS
Section 3.01. Representations and Warranties of the Depositor................36
Section 3.02. Representations and Warranties of the Servicer.................36
Section 3.03. Representations and Warranties of the Seller...................39
Section 3.04. Covenants of Seller to Take Certain Actions with Respect
to the Home Equity Loans in Certain Situations.................42
Section 3.05. Conveyance of the Home Equity Loans and Qualified
Replacement Mortgages..........................................51
Section 3.06. Acceptance by Trustee; Certain Substitutions of Home Equity
Loans; Certification by Trustee................................55
Section 3.07. [Reserved].....................................................57
Section 3.08. Custodian......................................................57
Section 3.09. Cooperation Procedures.........................................57
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.01. Issuance of Certificates.......................................59
Section 4.02. Sale of Certificates...........................................59
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.01. Terms..........................................................60
Section 5.02. Forms..........................................................60
Section 5.03. Execution, Authentication and Delivery.........................60
Section 5.04. Registration and Transfer of Certificates......................61
Section 5.05. Mutilated, Destroyed, Lost or Stolen Certificates..............63
Section 5.06. Persons Deemed Owners..........................................64
Section 5.07. Cancellation...................................................64
Section 5.08. Limitation on Transfer of Ownership Rights.....................64
Section 5.09. Assignment of Rights...........................................66
ARTICLE VI
COVENANTS
Section 6.01. Distributions..................................................67
Section 6.02. Money for Distributions to be Held in Trust; Withholding.......67
Section 6.03. Protection of Trust Estate.....................................68
Section 6.04. Performance of Obligations.....................................69
Section 6.05. Negative Covenants.............................................69
Section 6.06. No Other Powers................................................70
Section 6.07. Limitation of Suits............................................70
Section 6.08. Unconditional Rights of Owners to Receive Distributions........71
Section 6.09. Rights and Remedies Cumulative.................................71
Section 6.10. Delay or Omission Not Waiver...................................71
Section 6.11. Control by Owners..............................................71
Section 6.12. Indemnification by the Seller..................................72
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.01. Collection of Money............................................73
Section 7.02. Establishment of Accounts......................................73
Section 7.03. Flow of Funds..................................................74
Section 7.04. [Reserved].....................................................78
Section 7.05. Investment of Accounts.........................................78
Section 7.06. Payment of Trust Expenses......................................79
Section 7.07. Eligible Investments...........................................79
Section 7.08. Accounting and Directions by Trustee...........................81
Section 7.09. Reports by Trustee to Owners and Certificate Insurer...........82
Section 7.10. Reports by Trustee.............................................84
ARTICLE VIII
SERVICING AND ADMINISTRATION OF HOME EQUITY LOANS
Section 8.01. Servicer and Sub-Servicers.....................................86
Section 8.02. Collection of Certain Home Equity Loan Payments................87
Section 8.03. Sub-Servicing Agreements Between Servicer and Sub-Servicers....87
Section 8.04. Successor Sub-Servicers........................................88
Section 8.05. Liability of Servicer; Indemnification.........................88
Section 8.06. No Contractual Relationship Between Sub-Servicer, Trustee
or the Owners..................................................89
Section 8.07. Assumption or Termination of Sub-Servicing Agreement by
Trustee........................................................89
Section 8.08. Principal and Interest Account.................................89
Section 8.09. Delinquency Advances and Servicing Advances....................91
Section 8.10. Compensating Interest; Repurchase of Home Equity Loans.........92
Section 8.11. Maintenance of Insurance.......................................93
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements....94
Section 8.13. Realization Upon Defaulted Home Equity Loans; Workout of
Home Equity Loans..............................................95
Section 8.14. Trustee to Cooperate; Release of Files.........................96
Section 8.15. Servicing Compensation.........................................98
Section 8.16. Annual Statement as to Compliance..............................98
Section 8.17. Annual Independent Certified Public Accountants' Reports.......98
Section 8.18. Access to Certain Documentation and Information Regarding
the Home Equity Loans..........................................99
Section 8.19. Assignment of Agreement........................................99
Section 8.20. Removal of Servicer; Retention of Servicer; Resignation of
Servicer.......................................................99
Section 8.21. Inspections by Certificate Insurer; Errors and Omissions
Insurance.....................................................103
Section 8.22. Additional Servicing Responsibilities for Second Mortgage
Loans.........................................................104
Section 8.23. The Group II Home Equity Loans................................104
Section 8.24. Merger, Conversion, Consolidation or Succession to Business
of Servicer...................................................104
Section 8.25. Notices of Material Events....................................105
Section 8.26. Indemnification by the Servicer...............................106
ARTICLE IX
TERMINATION OF TRUST
Section 9.01. Termination of Trust..........................................107
Section 9.02. Termination Upon Option of the Servicer.......................107
Section 9.03. Termination Upon Loss of REMIC Status.........................108
Section 9.04. Disposition of Proceeds.......................................109
Section 9.05. Netting of Amounts............................................110
ARTICLE X
THE TRUSTEE
Section 10.01. Certain Duties and Responsibilities..........................111
Section 10.02. Removal of Trustee for Cause.................................113
Section 10.03. Certain Rights of the Trustee................................114
Section 10.04. Not Responsible for Recitals or Issuance of Certificates.....116
Section 10.05. May Hold Certificates........................................116
Section 10.06. Money Held in Trust..........................................116
Section 10.07. Compensation and Reimbursement...............................116
Section 10.08. Corporate Trustee Required; Eligibility......................117
Section 10.09. Resignation and Removal; Appointment of Successor............117
Section 10.10. Acceptance of Appointment by Successor Trustee...............119
Section 10.11. Merger, Conversion, Consolidation or Succession to Business
of the Trustee...............................................119
Section 10.12. Reporting; Withholding.......................................119
Section 10.13. Liability of the Trustee.....................................120
Section 10.14. Appointment of Co-Trustee or Separate Trustee................120
Section 10.15. Appointment of Custodians....................................122
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions.........................123
Section 11.02. Form of Documents Delivered to the Trustee...................123
Section 11.03. Acts of Owners...............................................124
Section 11.04. Notices, etc.................................................125
Section 11.05. Notices and Reports to Owners; Waiver of Notices.............125
Section 11.06. Rules by Trustee.............................................125
Section 11.07. Successors and Assigns.......................................126
Section 11.08. Severability.................................................126
Section 11.09. Benefits of Agreement........................................126
Section 11.10. Legal Holidays...............................................126
Section 11.11. Governing Law; Submission to Jurisdiction....................126
Section 11.12. Counterparts.................................................127
Section 11.13. Usury........................................................127
Section 11.14. Amendment....................................................128
Section 11.15. Paying Agent; Appointment and Acceptance of Duties...........128
Section 11.16. REMIC Status.................................................129
Section 11.17. Additional Limitation on Action and Imposition of Tax........131
Section 11.18. Appointment of Tax Matters Person............................131
Section 11.19. The Certificate Insurer......................................132
Section 11.20. Reserved.....................................................132
Section 11.21. Third Party Rights...........................................132
Section 11.22. Notices......................................................132
Section 11.23. Rule 144A Information........................................134
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.01. Trust Estate and Accounts Held for Benefit of the Certificate
Insurer......................................................135
Section 12.02. Claims Upon the Policy; Policy Payments Account..............135
Section 12.03. Effect of Payments by the Certificate Insurer; Subrogation...136
Section 12.04. Notices to the Certificate Insurer...........................137
Section 12.05. Third-Party Beneficiary......................................137
Section 12.06. Rights to the Certificate Insurer To Exercise Rights of
Owners.......................................................137
Section 12.07. Trustee to Hold the Certificate Insurance Policy.............137
Section 12.08. Trustee To Act Solely with Consent of the Certificate
Insurer......................................................137
SCHEDULE I-A SCHEDULE OF THE GROUP I HOME EQUITY LOANS
SCHEDULE I-B SCHEDULE OF THE GROUP II HOME EQUITY LOANS
EXHIBIT A-1 FORM OF CLASS A-1 CERTIFICATE
EXHIBIT A-2 FORM OF CLASS A-2 CERTIFICATE
EXHIBIT A-3 FORM OF CLASS A-3 CERTIFICATE
EXHIBIT A-4 FORM OF CLASS A-4 CERTIFICATE
EXHIBIT A-5 FORM OF CLASS A-5 CERTIFICATE
EXHIBIT A-6 FORM OF CLASS A-6 CERTIFICATE
EXHIBIT A-7 FORM OF CLASS A-7 CERTIFICATE
EXHIBIT B RESERVED
EXHIBIT C FORM OF CLASS R CERTIFICATE
EXHIBIT D [RESERVED]
EXHIBIT E FORM OF CERTIFICATE RE: HOME EQUITY LOANS PREPAID IN FULL
AFTER CUT-OFF DATE
EXHIBIT F FORM OF CUSTODIAN'S RECEIPT
EXHIBIT G FORM OF POOL CERTIFICATION
EXHIBIT H FORM OF DELIVERY ORDER
EXHIBIT I FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
EXHIBIT J-1 FORM OF CERTIFICATE REGARDING TRANSFER (ACCREDITED INVESTOR)
EXHIBIT J-2 FORM OF CERTIFICATE OF TRANSFER (RULE 144A)
EXHIBIT K HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
EXHIBIT L DEFINITION OF GROUP II SPECIFIED SUBORDINATED AMOUNT
EXHIBIT M DEFINITION OF GROUP I SPECIFIED SUBORDINATED AMOUNT
EXHIBIT N FORM OF LETTER REGARDING REPORTING OBLIGATIONS UNDER THE
SECURITIES EXCHANGE ACT OF 1934
POOLING AND SERVICING AGREEMENT, relating to CENTEX HOME EQUITY LOAN
TRUST 1998-3, dated as of September 1, 1998 by and among LEHMAN ABS
CORPORATION, a Delaware corporation, in its capacity as Depositor (the
"Depositor"), CENTEX CREDIT CORPORATION d/b/a CENTEX HOME EQUITY CORPORATION, a
Nevada corporation in its capacities as the Seller (in such capacity, the
"Seller") and as the Servicer (in such capacity, the "Servicer") and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, in its capacity as the trustee (the
"Trustee").
WHEREAS, the Seller wishes to establish a trust and two subtrusts and
provide for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Home Equity Loans,
which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed
and authenticated by the Trustee valid instruments, and to make this Agreement
a valid agreement, in accordance with their and its terms, have been done;
WHEREAS, Norwest Bank Minnesota, National Association, is willing to
serve in the capacity of Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc. (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Depositor, the Seller, the Servicer, and the
Trustee hereby agree as follows:
CONVEYANCE
To provide for the distribution of the principal of and/or interest
on the Class A Certificates and the Class R Certificates in accordance with
their terms, all of the sums distributable under this Agreement with respect to
the Certificates and the performance of the covenants contained in this
Agreement, the Depositor hereby bargains, sells, conveys, assigns and transfers
to the Trustee, in trust, without recourse and for the exclusive benefit of the
Owners of the Certificates and the Certificate Insurer, all of the its right,
title and interest in and to any and all benefits accruing from (a) the Home
Equity Loans (other than any principal payments received and interest payments
due thereon prior to September 1, 1998) listed in Schedules I-A and I-B to this
Agreement which the Depositor is causing to be delivered to the Custodian on
behalf of the Trustee herewith (and all substitutions for such Home Equity
Loans as provided by Sections 3.03, 3.04 and 3.06), together with the related
Home Equity Loan documents and the Depositor's interest in any Property, and
all payments thereon and proceeds of the conversion, voluntary or involuntary,
of the foregoing; (b) such amounts as may be held by the Trustee in the
Certificate Account, together with investment earnings on such amounts and such
amounts as may be held in the name of the Trustee in the Principal and Interest
Account, if any, exclusive of investment earnings thereon (except as otherwise
provided herein), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified herein ((a)-(d) above shall be collectively referred
to herein as the "Trust Estate"). In addition to the foregoing, the Seller
shall cause the Certificate Insurer to deliver a Certificate Insurance Policy
to the Trustee for the benefit of the Owners of the Class A Certificates.
The Trustee acknowledges such sale, accepts the trusts hereunder in
accordance with the provisions hereof and the Trustee agrees to perform the
duties herein to the best of its ability to the end that the interests of the
Owners may be adequately and effectively protected.
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01. Definitions.
For all purposes of this Agreement, the following terms shall have
the meanings set forth below, unless the context clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.02 or
8.08 hereof.
"Accrual Period": With respect to the Class A Certificates (other
than the Class A-7 Certificates) and any Payment Date, the calendar month
immediately preceding the month in which the Payment Date occurs. A "calendar
month" shall be deemed to be 30 days. With respect to the Class A-7
Certificates and any Payment Date, the period commencing on the immediately
preceding Payment Date (or the Startup Day in the case of the first Payment
Date) to and including the day prior to the current Payment Date. All
calculations of interest on the Class A Certificates (other than the Class A-7
Certificates) will be made on the basis of a 360-day year assumed to consist of
twelve 30-day months. Calculations of interest on the Class A-7 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.
"Adjusted Pass-Through Rate": As of any date of determination
thereof, a rate equal to the sum of (a) the Weighted Average Pass-Through Rate
and (b) any portion of the Premium Amount (calculated as a percentage of the
outstanding principal amount of Certificates) and the Trustee Fee (calculated
as a percentage of the outstanding Loan Balances as of the first day of the
related Remittance Period) in each case then accrued and outstanding.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement, as it may be
amended from time to time, including the Exhibits and Schedules hereto.
"Annual Loss Percentage (Rolling Twelve Month)": As of any date of
determination thereof, a fraction, expressed as a percentage, the numerator of
which is the aggregate of the Realized Losses as of the last day of the
calendar month of each Remittance Period for the twelve immediately preceding
Remittance Periods and the denominator of which is the aggregate of the Loan
Balances as of the first day of the first such Remittance Period.
"Appraised Value": The appraised value of any Property based upon the
appraisal made at the time of the origination of the related Home Equity Loan,
or, in the case of a Home Equity Loan which is a purchase money mortgage, the
sales price of the Property at such time of origination, if such sales price is
less than such appraised value.
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to this
Agreement, and whose action is binding upon, such Person; with respect to the
Depositor, the Seller and the Servicer, initially including those individuals
whose names appear on the lists of Authorized Officers delivered at the
Closing; with respect to the Trustee, any officer assigned to the Corporate
Trust Department (or any successor thereto), including any Vice President,
Assistant Vice President, 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 having
direct responsibility for the administration of this Agreement.
"Available Funds": The Group I Available Funds or the Group II
Available Funds, as the case may be.
"Available Funds Shortfall": The Group I Available Funds Shortfall or
the Group II Available Funds Shortfall, as the case may be.
"Business Day": Any day other than a Saturday, Sunday or a day on
which commercial banking institutions in The City of New York, Dallas, Texas,
the State of Maryland, the city in which the Corporate Trust Office is located
or the city in which the Certificate Insurer is located are authorized or
obligated by law or executive order to be closed.
"Carry-Forward Amount": With respect to any Class of the Class A
Certificates and any Payment Date, the sum of (x) the amount, if any, by which
(i) the Current Interest for such Class for the immediately preceding Payment
Date exceeded (ii) the amount of the actual distribution made to the Owners of
such Class of Class A Certificates on such immediately preceding Payment Date
pursuant to Section 7.03(b)(iii) hereof plus (y) 30 days' interest on such
excess at the Pass-Through Rate for the related Class of Class A Certificates.
"Certificate": Any one of the Class A Certificates or the Class R
Certificates, each representing the interests and the rights described in this
Agreement.
"Certificate Account": The segregated certificate account established
in accordance with Section 7.02(a) hereof and maintained at the Corporate Trust
Office entitled "Norwest Bank Minnesota, National Association, as Trustee on
behalf of the Owners of the Centex Home Equity Loan Trust 1998-3, Home Equity
Loan Pass-Through Certificates." The Certificate Account shall be an Eligible
Account.
"Certificate Insurance Policy": The Financial Guaranty Insurance
Policy (number: 50722-N) dated September 29, 1998 with respect to the Class A
Certificates and all endorsements thereto, issued by the Certificate Insurer
for the benefit of the Owners of the Class A Certificates.
"Certificate Insurer": Financial Security Assurance Inc., a stock
insurance company organized under the laws of the State of New York and any
successor thereto.
"Certificate Insurer Default": The existence and continuance of any
of the following:
(a) the Certificate Insurer fails to make a payment required under
either of the Certificate Insurance Policy in accordance with its terms; or
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the benefit
of its creditors or (iii) had an order for relief entered against it under the
United States Bankruptcy Code, the New York State Insurance law or any other
similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization that is final and nonappealable;
or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
trustee, agent or receiver for the Certificate Insurer or for all or any
material portion of its property or (ii) authorizing the taking of possession
by a custodian, trustee, agent, or receiver of the Certificate Insurer of all
or any material portion of its property.
"Certificate Principal Balance": As of the Startup Day as to each of
the following Classes of Class A Certificates, the Certificate Principal
Balances thereof, as follows:
Class A-l Certificates - $63,993,000
Class A-2 Certificates - $10,531,000
Class A-3 Certificates - $32,755,000
Class A-4 Certificates - $20,304,000
Class A-5 Certificates - $18,906,000
Class A-6 Certificates - $16,276,000
Class A-7 Certificates - $77,235,000
As of any day after the Startup Day, the Class A-1 Certificate
Principal Balance, the Class A-2 Certificate Principal Balance, the Class A-3
Certificate Principal Balance, the Class A-4 Certificate Principal Balance, the
Class A-5 Certificate Principal Balance, the Class A-6 Certificate Principal
Balance and the Class A-7 Certificate Principal Balance.
The Class R Certificates do not have a Certificate Principal Balance.
"Civil Relief Interest Shortfalls": With respect to any Remittance
Period, for any Home Equity Loans as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Remittance
Period as a result of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, the amount, if any, by which (i) interest collectible on such Home
Equity Loans during the most recently ended Remittance Period is less than (ii)
interest accrued thereon for such Remittance Period pursuant to the Note at the
related Coupon Rate.
"Class": Any Class of the Class A Certificates or the Class R
Certificates.
"Class A Certificate": Any one of the Fixed Rate Certificates or the
Class A-7 Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A Certificates less the aggregate of all amounts actually distributed on
account of the related Principal Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A Certificate Principal
Balance shall not be reduced by any principal amount paid to the Owner thereof
from Insured Payments.
"Class A Certificate Termination Date": With respect to the Class A-l
Certificates, the Class A-l Certificate Termination Date, with respect to the
Class A-2 Certificates, the Class A-2 Certificate Termination Date, with
respect to the Class A-3 Certificates, the Class A-3 Certificate Termination
Date, with respect to the Class A-4 Certificates, the Class A-4 Certificate
Termination Date, with respect to the Class A-5 Certificates, the Class A-5
Certificate Termination Date, with respect to the Class A-6 Certificates, the
Class A-6 Certificate Termination Date, with respect to the Class A-7
Certificates, the Class A-7 Certificate Termination Date.
"Class A Distribution Amount": The sum of Group I Distribution Amount
and the Class A-7 Distribution Amount.
"Class A-1 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-l Certificate, substantially in the form annexed
hereto as Exhibit A-1 authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC Provisions .
"Class A-l Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-l Certificates less the aggregate of all amounts actually distributed
with respect to the Class A-l Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for the purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A-l Certificate Principal
Balance shall not be reduced by any principal amounts paid to the Owners
thereof from Insured Payments.
"Class A-l Certificate Termination Date": The Payment Date on which
the Class A-l Certificate Principal Balance is reduced to zero.
"Class A-l Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) 30 days' interest accrued on the Class A-l
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-l Pass-Through Rate and (ii) any prior
unpaid Carry Forward Amount, if any, with respect to the Class A-l
Certificates; provided, however, the amount described in clause (i) will be
reduced by the Class A-l Certificates' pro rata share of any Civil Relief
Interest Shortfalls relating to Home Equity Loans in Group I.
"Class A-l Distribution Amount": With respect to any Payment Date,
the sum of (x) the Class A-l Current Interest and (y) the Group I Principal
Distribution Amount payable to the Owners of the Class A-1 Certificates
pursuant to Section 7.03(b)(iii)(B)(II)(i) for such Payment Date.
"Class A-1 Pass-Through Rate": 6.29% per annum.
"Class A-2 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-2 Certificate, substantially in the form annexed
hereto as Exhibit A-2, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC provisions.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-2 Certificates less the aggregate of all amounts actually distributed
with respect to the Class A-2 Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for the purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A-2 Certificate Principal
Balance shall not be reduced by any principal amounts paid to the Owners
thereof from the Insured Payments.
"Class A-2 Certificate Termination Date": The Payment Date on which
the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) 30 days' interest accrued on the Class A-2
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-2 Pass-Through Rate and (ii) any prior
unpaid Carry-Forward Amount, if any, with respect to the Class A-2
Certificates; provided, however, the amount described in clause (i) will be
reduced by the Class A-2 Certificates' pro rata share of any Civil Relief
Interest Shortfalls relating to Home Equity Loans in Group I.
"Class A-2 Distribution Amount": With respect to any Payment Date,
the sum of (x) Class A-2 Current Interest and (y) the Group I Principal
Distribution Amount payable to the Owners of the Class A-2 Certificates
pursuant to Section 7.03(b)(iii)(B)(II)(ii) for such Payment Date.
"Class A-2 Pass-Through Rate": 5.93% per annum.
"Class A-3 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-3 Certificate, substantially in the form annexed
hereto as Exhibit A-3 authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC provisions.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-3 Certificates less the aggregate of all amounts actually distributed
with respect to the Class A-3 Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for the purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A-3 Certificate Principal
Balance shall not be reduced by any principal amounts paid to the Owners
thereof from the Insured Payments.
"Class A-3 Certificate Termination Date": The Payment Date on which
the Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) 30 days' interest accrued on the Class A-3
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-3 Pass-Through Rate and (ii) any prior
unpaid Carry-Forward Amount, if any, with respect to the Class A-3
Certificates; provided, however, the amount described in clause (i) will be
reduced by the Class A-3 Certificates' pro rata share of any Civil Relief
Interest Shortfalls relating to Home Equity Loans in Group I.
"Class A-3 Distribution Amount": With respect to any Payment Date,
the sum of (x) Class A-3 Current Interest and (y) the Group I Principal
Distribution Amount payable to the Owners of the Class A-3 Certificates
pursuant to Section 7.03(b)(iii)(B)(II)(iii) for such Payment Date.
"Class A-3 Pass-Through Rate": 5.91% per annum.
"Class A-4 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-4 Certificate, substantially in the form annexed
hereto as Exhibit A-4 authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC provisions.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-4 Certificates less the aggregate of all amounts actually distributed
with respect to the Class A-4 Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for the purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A-4 Certificate Principal
Balance shall not be reduced by any principal amounts paid to the Owners
thereof from the Insured Payments.
"Class A-4 Certificate Termination Date": The Payment Date on which
the Class A-4 Certificate Principal Balance is reduced to zero.
"Class A-4 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) 30 days' interest accrued on the Class A-4
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-4 Pass-Through Rate and (ii) any prior
unpaid Carry-Forward Amount, if any, with respect to the Class A-4
Certificates; provided, however, the amount described in clause (i) will be
reduced by the Class A-4 Certificates' pro rata share of any Civil Relief
Interest Shortfalls relating to Home Equity Loans in Group I.
"Class A-4 Distribution Amount": With respect to any Payment Date,
the sum of (x) Class A-4 Current Interest and (y) the Group I Principal
Distribution Amount payable to the Owners of the Class A-4 Certificates
pursuant to Section 7.03(b)(iii)(B)(II)(iv) for such Payment Date.
"Class A-4 Pass-Through Rate" 6.15% per annum.
"Class A-5 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-5 Certificate, substantially in the form annexed
hereto as Exhibit A-5 authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC provisions.
"Class A-5 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-5 Certificates less the aggregate of all amounts actually distributed
with respect to the Class A-5 Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for the purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A-5 Certificate Principal
Balance shall not be reduced by any principal amounts paid to the Owners
thereof from the Insured Payments.
"Class A-5 Certificate Termination Date": The Payment Date on which
the Class A-5 Certificate Principal Balance is reduced to zero.
"Class A-5 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) 30 days' interest accrued on the Class A-5
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-5 Pass-Through Rate and (ii) any prior
unpaid Carry-Forward Amount, if any, with respect to the Class A-5
Certificates; provided, however, the amount described in clause (i) will be
reduced by the Class A-5 Certificates' pro rata share of any Civil Relief
Interest Shortfalls relating to Home Equity Loans in Group I.
"Class A-5 Distribution Amount": With respect to any Payment Date,
the sum of (x) Class A-5 Current Interest and (y) the Group I Principal
Distribution Amount payable to the Owners of the Class A-5 Certificates
pursuant to Section 7.03(b)(iii)(B)(II)(v) for such Payment Date.
"Class A-5 Pass Through Rate" 6.58% per annum.
"Class A-6 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-6 Certificate, substantially in the form annexed
hereto as Exhibit A-6 authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC provisions.
"Class A-6 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-6 Certificates less the aggregate of all amounts actually distributed
with respect to the Class A-6 Distribution Amount pursuant to Section
7.03(b)(iii) hereof with respect to principal thereon on all prior Payment
Dates; provided, however, that solely for the purposes of determining the
Certificate Insurer's rights, as subrogee, the Class A-6 Certificate Principal
Balance shall not be reduced by any principal amounts paid to the Owners
thereof from Insured Payments.
"Class A-6 Certificate Termination Date": The Payment Date on which
the Class A-6 Certificate Principal Balance is reduced to zero.
"Class A-6 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) 30 days' interest accrued on the Class A-6
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-6 Pass-Through Rate and (ii) any prior
unpaid Carry-Forward Amount, if any, with respect to the Class A-6
Certificates; provided, however, the amount described in clause (i) will be
reduced by the Class A-6 Certificates' pro rata share of any Civil Relief
Interest Shortfalls relating to Home Equity Loans in Group I.
"Class A-6 Distribution Amount": With respect to any Payment Date,
the sum of (x) Class A-6 Current Interest, (y) the Class A-6 Lockout
Distribution Amount payable to the owners of the Class A-6 Certificates
pursuant to Section 7.03(b)(iii)(B)(I) and (z) the Group I Principal
Distribution Amount payable to the Owners of the Class A-6 Certificates
pursuant to Section 7.03(b)(iii)(B)(II)(vi) for such Payment Date.
"Class A-6 Lockout Distribution Amount": For any Payment Date, the
product of (i) the applicable Class A-6 Lockout Percentage for such Payment
Date and (ii) the Class A-6 Lockout Pro Rata Distribution Amount for such
Payment Date; provided, that the Class A-6 Lockout Distribution Amount shall
not exceed the Class A-6 Certificate Principal Balance.
"Class A-6 Lockout Percentage": For each Payment Date, the percentage
set forth below:
Class A-6
Payment Date Lockout Percentage
------------ ------------------
October 1998 - September 2001 0%
October 2001 - September 2003 45%
October 2003 - September 2004 80%
October 2004 - September 2005 100%
October 2005 and thereafter 300%
"Class A-6 Lockout Pro Rata Distribution Amount": For any Payment
Date, an amount equal to the product of (x) a fraction, the numerator of which
is the Class A-6 Certificate Principal Balance immediately prior to such
Payment Date and the denominator of which is the aggregate of Certificate
Principal Balances of the Group I Certificates immediately prior to such
Payment Date and (y) the Group I Principal Distribution Amount for such Payment
Date.
"Class A-6 Pass-Through Rate": 6.04% per annum.
"Class A-7 Available Funds Cap Rate": With respect to any Accrual
Period and any Payment Date, a rate per annum equal to the fraction, expressed
as a percentage, the numerator of which is (i) an amount equal to (A) the
weighted average of the Net Coupon Rates of the Home Equity Loans in Group II
(by outstanding principal balance) at the beginning of the related Remittance
Period, times the aggregate Loan Balance of the Home Equity Loans in Group II
as of the beginning of the Remittance Period minus (B) the Premium Amount for
Group II for such Payment Date, and the denominator of which is (ii) the
outstanding Class A-7 Certificate Principal Balance at the beginning of such
Accrual Period such rate, as calculated on the basis of a 360 day year and the
actual number of days elapsed in the related Accrual Period.
"Class A-7 Certificate": Any one of the Certificates designated on
the face thereof as a Class A-7 Certificate, substantially in the form annexed
hereto as Exhibit A-7 authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and each evidencing an interest
designated as a "regular interest" in the REMIC created hereunder for purposes
of the REMIC provisions.
"Class A-7 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-7 Certificates less the aggregate of all amounts actually distributed
with respect to the Group II Principal Distribution Amount pursuant to Section
7.03(b)(iii)(C) hereof on all prior Payment Dates; provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-7 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"Class A-7 Certificate Termination Date": The Payment Date on which
the Class A-7 Certificate Principal Balance is reduced to zero.
"Class A-7 Certificateholders' Interest Index Carryover": With
respect to any Accrual Period and any related Payment Date, an amount equal to
the excess, if any, of (i) the amount of interest the Class A-7 Certificates
would otherwise be entitled to receive on such Payment Date had such rate been
calculated at the Class A-7 Formula Rate for such Payment Date over (ii) the
amount of interest payable on the Class A-7 Certificates at the Class A-7
Available Funds Cap Rate for such Payment Date (plus interest on such excess at
the Class A-7 Formula Rate).
"Class A-7 Current Interest": With respect to any Payment Date, an
amount equal to the sum of (i) the amount of interest accrued on the Class A-7
Certificate Principal Balance immediately prior to such Payment Date during the
related Accrual Period at the Class A-7 Pass-Through Rate and (ii) any prior
unpaid Carry-Forward Amount, if any, with respect to the Class A-7
Certificates; provided, however, the amount described in clause (i) will be
reduced by the amount of any Civil Relief Interest Shortfalls relating to Home
Equity Loans in Group II.
"Class A-7 Distribution Amount": With respect to any Payment Date,
the sum of (x) Class A-7 Current Interest and (y) the Group II Principal
Distribution Amount payable to the Owners of the Class A-7 Certificates
pursuant to Section 7.03(b)(iii)(C) for such Payment Date.
"Class A-7 Formula Rate": For any Payment Date, the lesser of (A) the
sum of (1) LIBOR and (2) in any month up to and including the month in which
the Clean-Up Call Date occurs, 0.25% per annum (or for any month following the
month in which the Clean-Up Call Date occurs, 0.50% per annum) and (B) 14.5%
per annum.
"Class A-7 Pass-Through Rate": For any Payment Date, the lesser of
(A) the Class A-7 Formula Rate and (B) the Class A-7 Available Funds Cap for
such Payment Date.
"Class R Certificate": Any one of the Certificates designated on the
face thereof as a Class R Certificate, substantially in the form annexed hereto
as Exhibit C, authenticated and delivered by the Trustee, representing the
right to distributions as set forth herein, and evidencing an interest
designated as the "residual interest" in the REMIC created hereunder for the
purposes of the REMIC Provisions.
"Clean-Up Call Date": The first Monthly Remittance Date on which the
aggregate outstanding principal balances of the Home Equity Loans as of the
close of business on the last day of the immediately preceding Remittance
Period has declined to 10% or less of the aggregate Loan Balance of all Home
Equity Loans as of the Cut-Off Date.
"Closing": As defined in Section 4.02 hereof.
"Code": The Internal Revenue Code of 1986, as amended.
"Compensating Interest": As defined in Section 8.10(a) hereof.
"Corporate Trust Office": The principal office of the Trustee at
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070 or the
principal office of any successor Trustee hereunder.
"Coupon Rate": The rate of interest borne by each Note from time to
time.
"Cram Down Loss": With respect to a Home Equity Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Loan Balance of such Home Equity Loan, the amount of such
reduction. A "Cram Down Loss" shall be deemed to have occurred on the date of
issuance of such order.
"Cumulative Loss Percentage": As of any date of determination
thereof, the aggregate of all Realized Losses since the Startup Day as a
percentage of the aggregate Loan Balance of all Home Equity Loans as of the
Cut-Off Date.
"Current Interest": With respect to any Payment Date, the sum of (a)
the Class A-1 Current Interest, (b) the Class A-2 Current Interest, (c) the
Class A-3 Current Interest, (d) the Class A-4 Current Interest, (e) the Class
A-5 Current Interest, (f) the Class A-6 Current Interest and (g) the Class A-7
Current Interest for such Payment Date.
"Custodial Agreement": The Custodial Agreement dated as of September
1, 1998 among the Custodian and the Trustee.
"Custodian": First Chicago National Processing, as Custodian on
behalf of the Trustee pursuant to the Custodial Agreement and any successor
Custodian.
"Cut-Off Date": September 1, 1998.
"Daily Collections": As defined in Section 8.08(c) hereof.
"Delinquency Advance": As defined in Section 8.09(a) hereof.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due
thereon is not made by the Mortgagor by the close of business on the related
Due Date. A Home Equity 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.
"Delivery Order": The delivery order in the form set forth as Exhibit
H hereto and delivered by the Depositor to the Trustee on the Startup Day
pursuant to Section 4.01 hereof.
"Depositor": Lehman ABS Corporation, a Delaware corporation, or any
successor thereto.
"Depository": The Depository Trust Company, 7 Hanover Square, New
York, New York, 10004, and any successor Depository named herein.
"Designated Depository Institution": With respect to the Principal
and Interest Account, a trust account maintained by the trust department of a
federal or state chartered depository institution acceptable to the Certificate
Insurer, acting in its fiduciary capacity, having combined capital and surplus
of at least $100,000,000; provided, however, that if the Principal and Interest
Account is not maintained with the Trustee, (i) such institution shall have a
long-term debt rating of at least "A" by Standard & Poor's and "A2" by Moody's
and (ii) the Servicer shall provide the Trustee and the Certificate Insurer
with a statement, which the Trustee will send to the Owners, identifying the
location and account information of the Principal and Interest Account upon a
change in the location of such account.
"Determination Date": The 15th day of each month, or if such day is
not a Business Day, on the preceding Business Day, commencing in October 1998.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds Class A Certificates
from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall have
the meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Due Date": With respect to any Home Equity Loan, the date on which
the Monthly Payment with respect to such Home Equity Loan is required to be
paid pursuant to the related Note exclusive of any days of grace.
"Eligible Account": Either (A) a segregated account or accounts
maintained with an institution whose deposits are insured by the FDIC, the
unsecured and uncollateralized long term date obligations of which institution
shall be rated AA or higher by S&P and Aa2 or higher by Moody's and in the
highest short term rating category by each of 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 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 each of the Rating Agencies or (B) a segregated trust
account or accounts maintained with the trust department of a federal or state
chartered depository institution acceptable to each Rating Agency and the
Certificate Insurer, having capital and surplus of not less than $100,000,000,
acting in its fiduciary capacity.
"Eligible Investments": Those investments so designated pursuant to
Section 7.07 hereof.
"Excess Subordinated Amount": With respect to either Home Equity Loan
Group and Payment Date, the excess, if any, of (x) the Subordinated Amount that
would apply to such Home Equity Loan Group on such Payment Date after taking
into account the payment of the related Principal Distribution Amount on such
Payment Date (except for any distributions of related Subordination Reduction
Amounts on such Payment Date), over (y) the related Specified Subordinated
Amount for such Payment Date.
"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Custodian on behalf of the
Trustee pursuant to Section 3.05(b) hereof pertaining to a particular Home
Equity Loan and any additional documents required to be added to the File
pursuant to this Agreement.
"Final Certification": As defined in Section 3.06(c) hereof.
"Final Determination": As defined in Section 9.03(a) hereof.
"Final Recovery Determination": With respect to any defaulted Home
Equity Loan or REO Property (other than a Home Equity Loan purchased by the
Seller, the Depositor or the Servicer), a determination made by the Servicer
that all recoveries which the Servicer, in its reasonable business judgment
expects to be finally recoverable in respect thereof have been so recovered or
that the Servicer believes in its reasonable business judgment the cost of
obtaining any additional recoveries therefrom would exceed the amount of such
recoveries. The Servicer shall maintain records of each Final Recovery
Determination.
"Final Scheduled Payment Date": As set out in Section 2.08(a) hereof.
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Fixed Rate Certificates": Any one of the Class A-l Certificates,
Class A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class
A-5 Certificates and Class A-6 Certificates.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor
thereof.
"FNMA Guide": FNMA's Servicing Guide, as the same may be amended by
FNMA from time to time, and the Servicer shall elect to apply such amendments
in accordance with Section 8.01 hereof.
"Group I": With respect to the Home Equity Loans, the pool of Home
Equity Loans identified in the related Schedule of Home Equity Loans as having
been assigned to Group I in Schedule I-A hereto, including any Qualified
Replacement Mortgage delivered in replacement thereof. With respect to the
Certificates, the Fixed Rate Certificates.
"Group I Available Funds": As defined in Section 7.02(b) hereof.
"Group I Available Funds Shortfall": As defined in Section
7.03(b)(ii)(A).
"Group I Distribution Amount": The sum of the Class A-1 Distribution
Amount, Class A-2 Distribution Amount, Class A-3 Distribution Amount, Class A-4
Distribution Amount, Class A-5 Distribution Amount and Class A-6 Distribution
Amount.
"Group I Interest Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) all interest due during the related
Remittance Period with respect to the Home Equity Loans in Group I (net of the
Group I Servicing Fees), (ii) all Compensating Interest paid by the Servicer on
such Monthly Remittance Date with respect to Group I and (iii) the portions of
the Loan Purchase Prices and the Substitution Amount relating to interest on
the Home Equity Loans in Group I paid by the Seller or Servicer on or prior to
such Monthly Remittance Date and (iv) the interest portion of all Net
Liquidation Proceeds actually collected by the Servicer with respect to such
Home Equity Loans in Group I during the related Remittance Period.
"Group I Monthly Remittance Amount": As of any Monthly Remittance
Date, the sum of (i) the Group I Interest Remittance Amount for such Monthly
Remittance Date and (ii) the Group I Principal Remittance Amount for such
Monthly Remittance Date.
"Group I Principal Distribution Amount": With respect to the Fixed
Rate Certificates for any Payment Date, the lesser of:
(a) the Group I Total Available Funds plus any Insured Payment with
respect to the Fixed Rate Certificates minus the sum of the related Current
Interest with respect to the Fixed Rate Certificates, the related Premium
Amount and the related Trustee Fee allocable to Group I for such Payment Date;
and
(b) the excess, if any, of (i) the sum of (without duplication):
(A) the principal portion of all scheduled monthly
payments on the Home Equity Loans in Group I due on or prior to
the related Due Date thereof actually received by the Servicer
during the related Remittance Period, and any Prepayments made by
the Mortgagors and actually received by the Servicer during the
related Remittance Period,
(B) the outstanding principal balance of each Home Equity
Loan in Group I that was repurchased by the Seller or purchased by
the Servicer on or prior to the related Monthly Remittance Date,
(C) any Substitution Amounts delivered by the Seller on
the related Monthly Remittance Date in connection with a
substitution of a Home Equity Loan in Group I (to the extent such
Substitution Amounts relate to principal),
(D) all Net Liquidation Proceeds actually collected by the
Servicer with respect to the Home Equity Loans in Group I during
the related Remittance Period (to the extent such Net Liquidation
Proceeds relate to principal),
(E) the amount of any Subordination Deficit with respect
to Group I for such Payment Date,
(F) the principal portion of the proceeds received by the
Trustee with respect to Group I from any termination of the Trust
(to the extent such proceeds related to principal), and
(G) the amount of any Subordination Increase Amount with
respect to Group I for such Payment Date, to the extent of any
Total Monthly Excess Cashflow available for such purpose,
over
(ii) the amount of any Subordination Reduction Amount with respect to
Group I for such Payment Date.
"Group I Principal Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) the principal actually collected by
the Servicer with respect to Home Equity Loans in Group I during the related
Remittance Period, (ii) the outstanding principal balance of each such Home
Equity Loan in Group I that was purchased from the Trustee on or prior to such
Monthly Remittance Date, to the extent such outstanding principal balance was
actually deposited in the Principal and Interest Account, (iii) any
Substitution Amounts relating to principal delivered by the Seller in
connection with a substitution of a Home Equity Loan in Group I, to the extent
such Substitution Amounts were actually deposited in the Principal and Interest
Account on or prior to such Monthly Remittance Date, (iv) the principal portion
of all Net Liquidation Proceeds actually collected by the Servicer with respect
to such Home Equity Loans in Group I during the related Remittance Period (to
the extent such Net Liquidation Proceeds related to principal) and (v) the
amount of investment losses required to be deposited pursuant to Section
8.08(b).
"Group I Servicing Fee": With respect to any Home Equity Loan in
Group I and each Remittance Period, an amount retained by the Servicer as
compensation for servicing and administration duties relating to such Home
Equity Loan pursuant to Section 8.15 and equal to one month's interest at 0.50%
per annum of the then outstanding principal balance of such Home Equity Loan as
of the first day of each Remittance Period payable on a monthly basis;
provided, however, that if a successor Servicer is appointed pursuant to
Section 8.20 hereof, the Group I Servicing Fee shall be the amount as agreed
upon by the Trustee, the Certificate Insurer and the successor Servicer, and
the per annum rate at which the Group I Servicing Fee is calculated shall not
exceed 0.50% per annum.
"Group I Specified Subordinated Amount": As defined in Exhibit M.
"Group I Subordinated Amount": As of any Payment Date, the excess, if
any, of (x) the aggregate Loan Balances of the Home Equity Loans in Group I as
of the close of business on the last day of the immediately proceeding
Remittance Period over (y) the aggregate of Certificate Principal Balances of
the Fixed Rate Certificates for such Payment Date (after taking into account
the payment of the Group I Principal Distribution Amount thereon (except for
any Subordination Reduction Amount relating to the Group I and Subordination
Increase Amount relating to Group I) on such Payment Date).
"Group I Total Available Funds": As defined in Section 7.02(b)
hereof.
"Group I Total Monthly Excess Spread": With respect to Group I and
any Payment Date, the excess of (i) the aggregate of all interest which is
collected on the Home Equity Loans in Group I during the related Remittance
Period (net of the Servicing Fee and the Trustee Fee with respect to Group I
and net of any reimbursement for Nonrecoverable Advances) plus the sum of (x)
any Delinquency Advances and (y) Compensating Interest paid by the Servicer
with respect to Group I for such Remittance Period over (ii) the sum of the
Current Interest on the Fixed Rate Certificates and the Premium Amount relating
to Group I for such Payment Date.
"Group II": With respect to the Home Equity Loans, the pool of Home
Equity Loans identified in the related Schedule of Home Equity Loans as having
been assigned to Group II in Schedule I-B hereto, including any Qualified
Replacement Mortgage delivered in replacement thereof. With respect to the
Certificates, the Class A-7 Certificates.
"Group II Available Funds": As defined in Section 7.02(c) hereof.
"Group II Available Funds Shortfall": As defined in Section
7.03(b)(ii)(A).
"Group II Interest Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) all interest due during the related
Remittance Period with respect to the Home Equity Loans in Group II (net of the
Group II Servicing Fee), (ii) all Compensating Interest paid by the Servicer on
such Monthly Remittance Date with respect to Group II and (iii) the portion of
the Loan Purchase Prices and Substitution Amount relating to interest on the
Home Equity Loans in Group II paid by the Seller or the Servicer on or prior to
such Monthly Remittance Date and (iv) the interest portion of all Net
Liquidation Proceeds actually collected by the Servicer with respect to the
Home Equity Loans in Group II during the related Remittance Period.
"Group II Monthly Remittance Amount": As of any Monthly Remittance
Date, the sum of (i) the Group II Interest Remittance Amount for such Monthly
Remittance Date and (ii) the Group II Principal Remittance Amount for such
Monthly Remittance Date.
"Group II Principal Distribution Amount": With respect to the Class
A-7 Certificates for any Payment Date, the lesser of:
(a) the Group II Total Available Funds plus any Insured Payment with
respect to the Class A-7 Certificates minus the sum of the Class A-7 Current
Interest, the related Premium Amount and the related Trustee Fee allocable to
Group II for such Payment Date; and
(b) the excess, if any, of (i) the sum of (without duplication):
(A) the principal portion of all scheduled monthly
payments on the Home Equity Loans in Group II due on or
prior to the related Due Date thereof actually received by
the Servicer during the related Remittance Period, and any
Prepayments made by the Mortgagors and actually received by
the Servicer during the related Remittance Period,
(B) the outstanding principal balance of each Home
Equity Loan in Group II that was repurchased by the Seller
or purchased by the Servicer on or prior to the related
Monthly Remittance Date,
(C) any Substitution Amounts delivered by the
Seller on the related Monthly Remittance Date in connection
with a substitution of a Home Equity Loan in Group II (to
the extent such Substitution Amounts relate to principal),
(D) all Net Liquidation Proceeds actually collected
by the Servicer with respect to the Home Equity Loans in
Group II during the related Remittance Period (to the extent
such Net Liquidation Proceeds relate to principal),
(E) the amount of any Subordination Deficit with
respect to Group II for such Payment Date,
(F) the principal portion of the proceeds received
by the Trustee with respect to Group II from any termination
of the Trust (to the extent such proceeds related to
principal), and
(G) the amount of any Subordination Increase Amount
with respect to Group II for such Payment Date, to the
extent of any Total Monthly Excess Cashflow available for
such purpose, over
(ii) the amount of any Subordination Reduction Amount with respect to
Group II for such Payment Date.
"Group II Principal Remittance Amount": As of any Monthly Remittance
Date, the sum, without duplication, of (i) the principal with respect to Home
Equity Loans in Group II due actually collected by the Servicer during the
related Remittance Period, (ii) the outstanding principal balance of each such
Home Equity Loan in Group II that was purchased from the Trustee on or prior to
such Monthly Remittance Date, to the extent such outstanding principal balance
was actually deposited in the Principal and Interest Account, (iii) any
Substitution Amounts relating to principal delivered by the Seller in
connection with a substitution of a Home Equity Loan in Group II, to the extent
such Substitution Amounts were actually deposited in the Principal and Interest
Account on or prior to such Monthly Remittance Date, (iv) the principal portion
of all Net Liquidation Proceeds actually collected by the Servicer with respect
to such Home Equity Loans in Group II during the related Remittance Period (to
the extent such Net Liquidation Proceeds related to principal) and (v) the
amount of investment losses to be deposited pursuant to Section 8.08(b).
"Group II Servicing Fee": With respect to any Home Equity Loan in
Group II, an amount retained by the Servicer as compensation for servicing and
administration duties relating to such Home Equity Loan pursuant to Section
8.15 and equal to one month's interest at 0.50% per annum of the then
outstanding principal balance of such Home Equity Loan as of the first day of
each Remittance Period payable on a monthly basis, provided, however, that if a
successor Servicer is appointed pursuant to Section 8.20 hereof, the Group II
Servicing Fee shall be such amount as agreed upon by the Trustee, the
Certificate Insurer and the successor Servicer, and the per annum rate at which
the Group II Servicing Fee is calculated shall not to exceed 0.50% per annum.
"Group II Specified Subordinated Amount": As defined in Exhibit L.
"Group II Subordinated Amount": As of any Payment Date, the excess,
if any, of (x) the aggregate Loan Balances of the Home Equity Loans in Group II
as of the close of business on the last day of the immediately proceeding
Remittance Period over (y) the Class A-7 Certificate Principal Balance for such
Payment Date (after taking into account the payment of the Group II Principal
Distribution Amount thereon (except for any Subordination Reduction Amount
relating to Group II or Subordination Increase Amount relating to the Group II)
on such Payment Date).
"Group II Total Available Funds": As defined in Section 7.02(c)
hereof.
"Group II Total Monthly Excess Spread": With respect to Group II and
any Payment Date, the excess of (i) the aggregate of all interest which is
collected on the Home Equity Loans in Group II during the related Remittance
Period (net of the Servicing Fee and the Trustee Fee with respect to Group II
and net of any reimbursement for Nonrecoverable Advances) plus the sum of (x)
any Delinquency Advances and (y) Compensating Interest paid by the Servicer
with respect to Group II for such Remittance Period over (ii) the sum of the
Class A-7 Current Interest and the Premium Amount relating to Group II for such
Payment Date.
"Highest Lawful Rate": As defined in Section 11.13 hereof.
"Home Equity Loan Group" or "Group": Group I or Group II, as the case
may be. References herein to the related Class of Class A Certificates, when
used with respect to a Home Equity Loan Group, shall mean (A) in the case of
Group I, the Fixed Rate Certificates and (B) in the case of Group II, the Class
A-7 Certificates.
"Home Equity Loans": Such home equity loans transferred and assigned
to the Trust pursuant to Section 3.05(a) and 3.07(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Home Equity Loans originally so held being identified in the Schedules of Home
Equity Loans. The term "Home Equity Loan" includes the terms "First Mortgage
Loan" and "Second Mortgage Loan." The term "Home Equity Loan" includes any Home
Equity Loan which is Delinquent, which relates to a foreclosure or which
relates to a Property which is REO Property prior to such REO Property's
disposition by the Trust. Any home equity loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and
assigned to the Trust by the Depositor, in fact was not transferred and
assigned to the Trust for any reason whatsoever, including, without limitation,
the incorrectness of the statement set forth in Section 3.04(b)(x) hereof with
respect to such home equity loan, shall nevertheless be considered a "Home
Equity Loan" for all purposes of this Agreement.
"Indemnification Agreement": The Indemnification Agreement dated as
of September 29, 1998 among the Certificate Insurer, the Seller and the
Underwriters.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in a Class A Certificate.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as
of September 29, 1998, among the Depositor, the Seller, the Servicer, and the
Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Home Equity Loan plus any amount remitted under
Section 8.11 hereof.
"Insured Payment": As defined in the Certificate Insurance Policy.
"Interest Remittance Amount": The sum of the Group I Interest
Remittance Amount and the Group II Interest Remittance Amount.
"Late Payment Rate": As defined in the Insurance Agreement.
"LIBOR": With respect to any Accrual Period for the Class A-7
Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the rates at
which one-month U.S. dollar deposits are offered by the Reference Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the
London interbank market. In such event, the Trustee 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 for that date will
be the arithmetic mean of the quotations (rounded upwards if necessary to the
nearest whole multiple of 1/16%). If fewer than two quotations are provided as
requested, the rate for that date will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m. (New York City time) on such date for one-month U.S.
dollar loan to leading European banks.
"LIBOR Determination Date": With respect to any Accrual Period for
the Class A-7 Certificates, the second London Business Day preceding the
commencement of such Accrual Period.
"Liquidated Loan": A Home Equity Loan as to which a Final Recovery
Determination has been made.
"Liquidation Proceeds": With respect to any Liquidated Loan, all
amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Home Equity Loan and as of any
date of determination, the actual outstanding principal balance thereof on the
Cut-Off Date with respect to the Home Equity Loans or relevant Replacement
Cut-Off Date with respect to the Qualified Replacement Mortgages excluding
payments of principal due prior to the Cut-Off Date or Replacement Cut-Off
Date, as the case may be, whether or not received, less any principal payments
relating to such Home Equity Loan included in previous Monthly Remittance
Amounts, provided, however, that the Loan Balance for any Home Equity Loan that
has become a Liquidated Loan shall be zero as of the first day of the
Remittance Period following the Remittance Period in which such Home Equity
Loan becomes a Liquidated Loan, and at all times thereafter.
"Loan Purchase Agreement": The Mortgage Loan Purchase Agreement dated
as of September 1, 1998 between the Seller and the Depositor, as it may be
amended from time to time.
"Loan Purchase Price": With respect to any Home Equity Loan purchased
from the Trust on or prior to a Monthly Remittance Date pursuant to Section
3.03, 3.04, 3.06(b) or 8.10(b) hereof, an amount equal to the outstanding
principal balance of such Home Equity Loan as of the date of purchase (assuming
that the Monthly Remittance Amount remitted by the Servicer on such Monthly
Remittance Date has already been remitted), plus all accrued and unpaid
interest on such Home Equity Loan at the Coupon Rate to but not including the
date of such purchase together with (without duplication) the aggregate amounts
of (i) all unreimbursed Delinquency Advances and Servicing Advances theretofore
made with respect to such Home Equity Loan, (ii) all Delinquency Advances which
the Servicer has theretofore failed to remit with respect to such Home Equity
Loan and (iii) all reimbursed Delinquency Advances and Servicing Advances to
the extent that reimbursement is not made from the Mortgagor.
"Loan-to-Value Ratio": As of any particular date (i) with respect to
any First Mortgage Loan, the percentage obtained by dividing the Appraised
Value into the original principal balance of the Note relating to such First
Mortgage Loan and (ii) with respect to any Second Mortgage Loan, the percentage
obtained by dividing the Appraised Value as of the date of origination of such
Second Mortgage Loan into an amount equal to the sum of (a) the remaining
principal balance of the Senior Lien note relating to such First Mortgage Loan
as of the date of origination of the related Second Mortgage Loan and (b) the
original principal balance of the Note relating to such Second Mortgage Loan.
"London Business Day": Any day on which dealings in deposits of
United States dollars are transacted in the London interbank market.
"Maximum Rate": With respect to any Home Equity Loan in Group II,
means the maximum rate at which interest may accrue on such Home Equity Loan.
"Minimum Spread": Shall be a percentage per annum equal to 0% for
Payment Dates which occur prior to October 1999 and equal to 0.50% for Payment
Dates which occur in October 1999 or thereafter.
"Monthly Payment": With respect to any Home Equity Loan and any
Remittance Period, the payment of principal, if any, and interest due on the
Due Date in such Remittance Period pursuant to the related Note.
"Monthly Remittance Amount": The sum of the Group I Monthly
Remittance Amount and the Group II Monthly Remittance Amount.
"Monthly Remittance Date": The 18th day of each month, or if such day
is not a Business Day, on the preceding Business Day, commencing in October
1998.
"Moody's": Moody's Investors Service Inc. or any successor thereto.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first or second lien on an estate in fee simple interest in real property
securing a Note.
"Mortgagor": The obligor on a Note.
"Net Coupon Rate": With respect to any Home Equity Loan in Group II,
means a rate per annum equal to the Coupon Rate of such Home Equity Loan minus
the sum of (i) the rate at which the Servicing Fee accrues, (ii) the rate at
which the Trustee Fee accrues, and (iii) the Minimum Spread.
"Net Maximum Rate": With respect to any Home Equity Loan in Group II,
a rate per annum equal to the Maximum Rate of such Home Equity Loan minus the
sum of (i) the rate at which the Servicing Fee accrues, (ii) the rate at which
the Trustee Fee accrues, and (iii) the Minimum Spread.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of expenses incurred by the Servicer (including unreimbursed
Servicing Advances) in connection with the liquidation of such Home Equity Loan
and unreimbursed Delinquency Advances relating to such Home Equity Loan. In no
event shall Net Liquidation Proceeds with respect to any Liquidated Loan be
less than zero.
"90-Day Delinquent Loan": With respect to any Determination Date, all
REO Properties and each Home Equity Loan, with respect to which any portion of
a Monthly Payment is, as of the last day of the prior Remittance Period, three
months (calculated from Due Date with respect to such Home Equity Loan to Due
Date) or more past due (without giving effect to any grace period).
"90+ Delinquency Percentage (Rolling Six Month)": With respect to any
Determination Date, the average of the percentage equivalents of the fractions
determined for each of the six immediately preceding Remittance Periods (or
such fewer number of Remittance Periods since the Cut-Off Date, in the case of
the first six Determination Dates) the numerator of each of which is equal to
the sum of (without duplication) (i) the aggregate Loan Balance of 90-Day
Delinquent Loans, (ii) the aggregate outstanding principal balance of Home
Equity Loans in foreclosure and (iii) the aggregate outstanding principal
balance of Home Equity Loans relating to REO Properties as of the end of such
Remittance Period and the denominator of which is the Loan Balance of all of
the Home Equity Loans as of the end of such Remittance Period.
"Nonrecoverable Advance" means with respect to any Home Equity Loan
for which a Final Recovery Determination has been made, any Delinquency Advance
previously made and not reimbursed from proceeds on the related Home Equity
Loan or under Section 7.03(b)(iii)(F) hereof which the Servicer has determined,
in good faith business judgment, as evidenced by an Officer's Certificate
delivered to the Certificate Insurer and the Trustee no later than the Business
Day following such determination, would not be ultimately recovered.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Home Equity Loan.
"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Trustee
and the Certificate Insurer.
"Operative Documents": Collectively, this Agreement, the Loan
Purchase Agreement, the Certificate Insurance Policy, the Certificates, the
Custodial Agreement, the Indemnification Agreement and the Insurance Agreement.
"Opinion of Counsel": A written Opinion of Counsel acceptable, in
form and substance, to the Trustee and the Certificate Insurer and delivered to
the Trustee and the Certificate Insurer.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Home Equity Loans as of the Cut-Off Date, which is $239,998,703.52.
"Outstanding": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore cancelled by the Registrar or
delivered to the Registrar for cancellation;
(ii) Certificates or portions thereof for which full and
final payment of money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent in
trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to
this Agreement, unless proof satisfactory to the Trustee is
presented that any such Certificates are held by a bona fide
purchaser;
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as
provided for in Section 5.05 hereof; and
(v) Certificates as to which the Trustee has made the final
distribution thereon, whether or not such Certificate is ever
returned to the Trustee.
"Owner": The Person in whose name a Certificate is registered in the
Register, and the Certificate Insurer, to the extent described in Section 12.06
hereof.
"Pass-Through Rate": Means either the Class A-1 Pass-Through Rate,
the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the Class A-4
Pass-Through Rate, the Class A-5 Pass-Through Rate, the Class A-6 Pass-Through
Rate or the Class A-7 Pass-Through Rate.
"Paying Agent": Initially, the Trustee, and thereafter, the Trustee
or any other Person that meets the eligibility standards for the Paying Agent
specified in Section 11.15 hereof and is authorized by the Trustee and the
Depositor to make payments on the Certificates on behalf of the Trustee.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 25th day of each month or if
such day is not a Business Day, the next Business Day thereafter, commencing in
the month following the Startup Day. The first Payment Date will be October 26,
1998.
"Percentage Interest": With respect to a Class of Class A
Certificates, a fraction, expressed as a decimal, the numerator of which is the
initial Class A Certificate Principal Balance represented by such Class A
Certificate and the denominator of which is the aggregate initial Class A
Certificate Principal Balance represented by all the Class A Certificates of
such Class. With respect to the Class R Certificates, the portion of the Class
evidenced thereby, expressed as a percentage, as stated on the face of such
Certificate, all of which shall total 100% with respect to the related Class.
"Person": Any individual, corporation, limited partnership, limited
liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Policy Payments Account": The policy payments account maintained by
the Trustee pursuant to Section 12.02(b) hereof. The Policy Payments Account
shall be an Eligible Account.
"Premium Amount": As defined in the letter dated the Startup Date
from the Certificate Insurer to the Seller setting forth the arrangement for
the premium on the Certificate Insurance Policy and certain related expense
arrangements.
"Prepayment": Any payment of principal of a Home Equity Loan which is
received by the Servicer in advance of the scheduled due date for the payment
of such principal and which is not accompanied by an amount of interest
representing the full amount of scheduled interest due on any Due Date in any
month or months subsequent to the month of prepayment, Substitution Amounts,
the portion of the purchase price of any Home Equity Loan purchased from the
Trust pursuant to Section 3.03, 3.04, 3.06(b) or 8.10(b) hereof representing
principal and the proceeds of any Insurance Policy which are to be applied as a
payment of principal on the related Home Equity Loan shall be deemed to be
Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Home Equity Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal Distribution Amount": The Group I Principal Distribution
Amount or the Group II Principal Distribution Amount.
"Principal and Interest Account": The principal and interest account
created by the Servicer pursuant to Section 8.08(a) hereof. The Principal and
Interest Account shall be an Eligible Account.
"Principal Remittance Amount": The Group I Principal Remittance
Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": "Prohibited Transaction" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(2) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Property": The underlying property securing a Home Equity Loan.
"Prospectus": The Depositor's Prospectus dated December 15, 1997
constituting part of the Registration Statement.
"Prospectus Supplement": The Centex Home Equity Loan Trust 1998-3
Prospectus Supplement dated September 17, 1998 to the Prospectus.
"Purchase Option Period": As defined in Section 9.03(a) hereof.
"Qualified Liquidation": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Qualified Mortgage": The meaning set forth from time to time in the
definition thereof at Section 860G(a)(3) of the Code (or any successor statute
thereto) and applicable to the Trust.
"Qualified Replacement Mortgage": A Home Equity Loan substituted for
another pursuant to Section 3.03, 3.04 and 3.06(b) hereof, which (i) has a
Coupon Rate at least equal to the Coupon Rate of the Home Equity Loan being
replaced; (ii) is of the same or better property type or is a single family
dwelling and the same or better occupancy status or is a primary residence as
the Home Equity Loan being replaced, (iii) shall mature no later than the Final
Scheduled Payment Date with respect to the related Home Equity Loan Group, (iv)
has a Loan-to-Value Ratio as of the Replacement Cut-Off Date no higher than the
Loan-to-Value Ratio of the replaced Home Equity Loan at such time, (v) shall be
of the same or higher credit quality classification (determined in accordance
with the Seller's credit underwriting guidelines set forth in the Seller's
underwriting manual) as the Home Equity Loan which such Qualified Replacement
Mortgage replaces, (vi) shall be a First Mortgage Loan if the Home Equity Loan
which such Qualified Replacement Mortgage replaces was a First Mortgage Loan
and shall be a First Mortgage Loan or Second Mortgage Loan if the Home Equity
Loan which such Qualified Replacement Mortgage replaces was a Second Mortgage
Loan, (vii) has an outstanding principal balance as of the related Replacement
Cut-Off Date equal to or less than the outstanding principal balance of the
replaced Home Equity Loan as of such Replacement Cut-Off Date, (viii) shall not
provide for a "balloon" payment if the related Home Equity Loan did not provide
for a "balloon" payment (and if such related Home Equity Loan provided for a
"balloon" payment, such Qualified Replacement Mortgage shall have an original
maturity of not less than the original maturity of such related Home Equity
Loan), (ix) shall be a fixed rate Home Equity Loan if the Home Equity Loan
being replaced is in Group I or an adjustable rate Home Equity Loan if the Home
Equity Loan being replaced is in Group II, (x) satisfies the criteria set forth
from time to time in the definition thereof at Section 860G(a)(4) of the Code
(or any successor statute thereto) and applicable to the Trust, (xi) satisfies
the representations and warranties set forth in Section 3.04(b) hereof, (xii)
shall not be 30 days or more delinquent and (xiii) if such Home Equity Loan
being replaced is in the Group II, shall adjust based on the same index, have
no lower margin, have the same interval between adjustment dates and have a
maximum Coupon Rate no lower than, and a minimum Coupon Rate no lower than the
Home Equity Loan being replaced. In the event that one or more home equity
loans are proposed to be substituted for one or more Home Equity Loans, the
Certificate Insurer may allow the foregoing tests to be met on a weighted
average basis or other aggregate basis acceptable to the Certificate Insurer,
as evidenced by a written approval delivered to the Trustee by the Certificate
Insurer, except that the requirements of clauses (i), (iii), (iv), (ix), (x),
(xi) and (xii) hereof must be satisfied as to each Qualified Replacement
Mortgage.
"Rating Agencies": Collectively, Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan (or, in the case of a Cram
Down Loss a Home Equity Loan that is not a Liquidated Loan), the amount (not
less than zero), if any, by which (A) the sum of (x) the Loan Balance thereof
as of the date of liquidation, (y) the amount of accrued but unpaid interest
thereon and (z) the amount of any Cram Down Loss with respect thereto is in
excess of (B) the Net Liquidation Proceeds, if any, realized thereon applied in
reduction of such Loan Balance.
"Record Date": With respect to the Fixed Rate Certificates and each
Payment Date, the last Business Day of the calendar month immediately preceding
the calendar month in which such Payment Date occurs and with respect to the
Class A-7 Certificates, the Business Day immediately preceding such Payment
Date. Notwithstanding the foregoing, on any Payment Date on which Definitive
Certificates have been issued for the Class A-7 Certificates, the "Record Date"
for the Class A-7 Certificates shall be the last Business Day of the calendar
month immediately preceding the calendar month in which such Payment Date
occurs.
"Reference Banks": Bankers Trust Company, Barclays Bank PLC, The Bank
of Tokyo and National Westminster Bank PLC, provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Seller 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 Seller or any affiliate thereof, (iii) whose quotations
appear on Telerate Page 3750 on the relevant LIBOR Determination Date and (iv)
which have been designated as such by the Seller.
"Register": The register maintained by the Registrar in accordance
with Section 5.04 hereof, in which the names of the Owners are set forth.
"Registrar": The Trustee, acting in its capacity as Registrar
appointed pursuant to Section 5.04 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission (Registration Number
333-39649), including all amendments thereto and including the Prospectus and
Prospectus Supplement relating to the Class A Certificates.
"Reimbursement Amount": With respect to each Home Equity Loan Group
and any Payment Date, the sum of (x)(i) all Insured Payments previously paid to
the Trustee by the Certificate Insurer and not previously repaid to the
Certificate Insurer pursuant to Section 7.03(b)(iii) hereof plus (ii) interest
accrued on each such Insured Payment not previously repaid calculated at the
Late Payment Rate and (y)(i) any amounts then due and owing to the Certificate
Insurer under the Insurance Agreement (including, without limitation, any
unpaid Premium Amount relating to such Payment Date or an earlier Payment Date)
plus (ii) interest on such amounts at the Late Payment Rate. The Certificate
Insurer shall notify the Trustee, the Depositor and the Seller in writing of
the amount of any Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Estate": The segregated pool of assets referred to as the
Trust Estate constituting the REMIC created hereunder.
"REMIC Opinion": As defined in Section 3.03 hereof.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and regulations and revenue rulings promulgated thereunder, as the foregoing
may be in effect from time to time.
"Remittance Period": With respect to each Monthly Remittance Date,
the calendar month immediately preceding such Monthly Remittance Date.
"REO Property": A Property acquired by the Servicer on behalf of the
Trust through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Home Equity Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"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 Register under the nominee name of the
Depository.
"Residual Net Monthly Excess Cashflow": With respect to any Payment
Date, the aggregate Total Monthly Excess Cashflow, if any, remaining after the
making of all applications, transfers and disbursements described in Sections
7.03(b)(i), 7.03(b)(ii) and 7.03(b)(iii) hereof.
"Schedule of Home Equity Loans": The schedules of Home Equity Loans
with respect to the Home Equity Loans listing each Home Equity Loan to be
conveyed on the Startup Day. Such Schedule of Home Equity Loans shall identify
each Home Equity Loan by the Servicer's loan number, borrower's name and
address (including the state and zip code) of the Property and shall set forth
as to each Home Equity Loan the lien status thereof, the Loan-to-Value Ratio
and the Loan Balance as of the Cut-Off Date, the Coupon Rate thereof, the
original Loan Balance thereof, the current scheduled monthly payment of
principal and interest and the maturity date of the related Note, the property
type, occupancy status, Appraised Value and the original term-to-maturity
thereof and whether or not such Home Equity Loan (including related Note) has
been modified and in the case of the adjustable rate Group II Home Equity
Loans, the Maximum Rate, the minimum rate at which the interest may accrue and
the next adjustment date.
"Scheduled Principal Payment": As of any date of calculation, with
respect to a Home Equity Loan, the then stated scheduled monthly installment of
principal payable thereunder which, if timely paid, would result in the full
amortization of principal over the term thereof (or, in the case of a "balloon"
Note, the term to the nominal maturity date for amortization purposes, without
regard to the actual maturity date), without taking into account any Prepayment
made on such Home Equity Loan during the then-current Remittance Period.
"Second Mortgage Loan": A Home Equity Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": Centex Credit Corporation d/b/a Centex Home Equity
Corporation, a Nevada corporation.
"Senior Lien": With respect to any Second Mortgage Loan, the home
equity loan relating to the corresponding Property having a first priority
lien.
"Servicer": Centex Credit Corporation d/b/a Centex Home Equity
Corporation, a Nevada corporation, and its pertained successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by or
under common control with the Servicer and (ii) which is qualified to service
residential home equity loans.
"Servicer Loss Test": The Servicer Loss Test for any period set out
below is satisfied, if the Cumulative Loss Percentage for such period does not
exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ----------
October 1998 - September 1999 1.65%
October 1999 - September 2000 2.30
October 2000 - September 2001 3.20
October 2001 - September 2002 4.10
October 2002 - September 2003 4.95
October 2003 and thereafter 6.25
"Servicer Termination Event": As defined in Section 8.20(a) hereof.
"Servicer Termination Test": The Servicer Termination Test is
satisfied for any date of determination thereof, if (w) the Servicer's Tangible
Net Worth is at least $15,000,000, (x) the 90+ Delinquency Percentage (Rolling
Six Month) is less than 15%, (y) the Servicer Loss Test is satisfied and (z)
the Annual Loss Percentage (Rolling Twelve Month) for the twelve month period
immediately preceding the date of determination thereof is not greater than
1.90%.
"Servicing Advance": As defined in Section 8.09(b) and Section
8.13(a) hereof.
"Servicing Fee": The Group I Servicing Fee or the Group II Servicing
Fee, as the context may require.
"Specified Subordinated Amount": The Group I Specified Subordinated
Amount or the Group II Specified Subordinated Amount.
"Standard & Poor's": Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies or any successor thereto.
"Startup Day": September 29, 1998.
"Subordinated Amount": The Group I Subordinated Amount or the Group
II Subordinated Amount, as the case may be.
"Subordination Deficiency Amount": With respect to either Home Equity
Loan Group and Payment Date, the excess, if any, of (i) the Specified
Subordinated Amount applicable to such Home Equity Loan Group and Payment Date
over (ii) the Subordinated Amount applicable to such Home Equity Loan Group and
Payment Date prior to taking into account the payment of any related
Subordination Increase Amounts on such Payment Date.
"Subordination Deficit": With respect to either Home Equity Loan
Group and Payment Date, the amount, if any, by which (x) the related aggregate
of the Certificate Principal Balances with respect to such Group, after taking
into account the payment of the related Class A Distribution Amount with
respect to such Group on such Payment Date (without regard to any Insured
Payment to be made on such Payment Date and except for any Subordination
Deficit with respect to such Group), exceeds (y) the aggregate Loan Balances of
the Home Equity Loans in such Home Equity Loan Group as of the close of
business on the last day of the related Remittance Period.
"Subordination Increase Amount": With respect to any Home Equity Loan
Group and Payment Date, the lesser of (i) the related Subordination Deficiency
Amount as of such Payment Date (after taking into account the payment of the
related Class A Distribution Amount on such Payment Date (except for any
Subordination Increase Amount with respect to such Group)) and (ii) the
aggregate amount of Total Monthly Excess Cashflow allocated to such Home Equity
Loan Group pursuant to Section 7.03(b)(ii)(E) or (G) on such Payment Date.
"Subordination Reduction Amount": With respect to any Home Equity
Loan Group and Payment Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Home Equity Loan Group and Payment Date and (y)
the Principal Remittance Amount with respect to such Group for the related
Remittance Period.
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.03 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain
Home Equity Loans as permitted by Section 8.03.
"Substitution Amount": As defined in Section 3.03 hereof.
"Tangible Net Worth": Shall mean the difference between: (A) the
tangible assets of the Seller or Servicer, as applicable, and its affiliates
and subsidiaries calculated in accordance with GAAP, as reduced by adequate
reserves in each case where a reserve is appropriate; and (B) all indebtedness,
including subordinated debt, of the Seller or Servicer, as applicable, and its
affiliates and subsidiaries; provided, however, that (i) intangible assets such
as patents, trademarks, trade names, copyrights, licenses, good will,
organization costs, advances or loans to, or receivables from directors,
officers, employees or affiliates, prepaid assets, amounts relating to
covenants not to compete, pension assets, deferred charges or treasury stock of
any securities unless the same are readily marketable in the United States of
America or are entitled to be used as a credit against federal income tax
liabilities, shall not be included in the calculation of (A) above, (ii)
securities included as tangible assets shall be valued at their current market
price or costs, whichever is lower and (iii) any write-up in book value of any
assets shall not be taken into account.
"Tax Matters Person": The Person designated pursuant to Section 11.18
hereof to act as the Tax Matters Person under the Code.
"Tax Matters Person Residual Interest": The 0.001% interest in the
Class R Certificates which shall be issued to and held by Norwest Bank
Minnesota, National Association throughout the term hereof unless another
person shall accept an assignment of such interest and the designation of Tax
Matters Person pursuant to Section 11.18 hereof.
"Telerate Page 3750": The display designated as page "3750" on the
Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).
"Termination Notice": As defined in Section 9.03(a) hereof.
"Termination Price": Means, with respect to Sections 9.02 and 9.03
hereof, and on any date of determination thereof, an amount equal to the sum of
(w) the greater of (i) 100% of the aggregate outstanding principal balances of
the Home Equity Loans as of such date of determination less amounts remitted to
the Principal and Interest Account representing collections of principal on the
Home Equity Loans during the current Remittance Period, and (ii) the greater of
(A) the outstanding Class A Certificate Principal Balance and (B) the fair
market value of such Home Equity Loans (disregarding accrued interest), (x) one
month's interest on such amount (calculated at the Adjusted Pass-Through Rate),
(y) all Reimbursement Amounts and (z) the sum of the aggregate amount of any
unreimbursed Delinquency Advances, Servicing Advances, Compensating Interest
and any Delinquency Advances which the Servicer has theretofore failed to
remit.
"Total Available Funds": The Group I Total Available Funds or the
Group II Total Available Funds.
"Total Monthly Excess Cashflow": As defined in Section 7.03(b)(ii)
hereof.
"Total Monthly Excess Spread": The Group I Total Monthly Excess
Spread and the Group II Total Monthly Excess Spread.
"Trust": Centex Home Equity Loan Trust 1998-3, the trust created
under this Agreement which shall be comprised of two sub-trusts; one for Group
II and any Trust assets allocable to such Group II and the other for Group I
and any Trust assets allocable to such Group I.
"Trust Estate": As defined in the conveyance clause under this
Agreement.
"Trustee": Norwest Bank Minnesota, National Association, the
Corporate Trust Department of which is located on the date of execution of this
Agreement at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479,
not in its individual capacity but solely as Trustee under this Agreement, and
any successor hereunder.
"Trustee Fee": With respect to each Home Equity Loan Group, the fee
payable monthly to the Trustee on each Payment Date in an amount equal to
0.005% per annum, on the sum of the outstanding aggregate Loan Balances of the
Home Equity Loans in such Home Equity Loan Group as of the first day of the
related Remittance Period.
"Trustee Reimbursable Expenses": Any amounts payable pursuant to
Section 11.16(a)(v) and Section 11.16(g) and pursuant to the second sentence of
Section 10.07.
"Underwriters": Lehman Brothers Inc. and Prudential Securities
Incorporated.
"Unpaid Class A-7 Certificateholders' Interest Index Carryover": With
respect to any Payment Date, any unpaid Class A-7 Certificateholders' Interest
Index Carryover from prior Payment Dates plus any accrued interest thereon at
the percentage at which the Class A-7 Pass-Through Rate (calculated without
regard to clause (ii) of the definition thereof) accrues.
"Weighted Average Pass-Through Rate": As to the Class A Certificates
and any Payment Date, the weighted average of the Class A-l Pass-Through Rate,
the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the Class A-4
Pass-Through Rate, the Class A-5 Pass-Through Rate, the Class A-6 Pass-Through
Rate and the Class A-7 Pass-Through Rate, weighted by, respectively, the Class
A-l Certificate Principal Balance, the Class A-2 Certificate Principal Balance,
the Class A-3 Certificate Principal Balance, the Class A-4 Certificate
Principal Balance, the Class A-5 Certificate Principal Balance, the Class A-6
Certificate Principal Balance and the Class A-7 Certificate Principal Balance
as of such Payment Date prior to taking into account any distributions to be
made on such Payment Date.
Section 1.02. Use of Words and Phrases.
"Herein," "hereby," "hereunder," "hereof," "hereinbefore,"
"hereinafter" and other equivalent words refer to this Agreement as a whole and
not solely to the particular section of this Agreement in which any such word
is used. The definitions set forth in Section 1.01 hereof include both the
singular and the plural. Whenever used in this Agreement, any pronoun shall be
deemed to include both singular and plural and to cover all genders.
Section 1.03. Captions; Table of Contents.
The captions or headings in this Agreement and the Table of Contents
are for convenience only and in no way define, limit or describe the scope and
intent of any provisions of this Agreement.
Section 1.04. Opinions.
Each opinion with respect to the validity, binding nature and
enforceability of documents or Certificates may be qualified to the extent that
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the of creditors' rights generally
and by general principles of equity (whether considered in a proceeding or
action in equity or at law) and may state that no opinion is expressed on the
availability of the remedy of specific enforcement, injunctive relief or any
other equitable remedy. Any opinion required to be furnished by any Person
hereunder must be delivered by counsel upon whose opinion the addressee of such
opinion may reasonably rely, and such opinion may state that it is given in
reasonable reliance upon an opinion of another, a copy of which must be
attached, concerning the laws of a foreign jurisdiction. Any opinion delivered
hereunder shall be addressed to the Rating Agencies, the Certificate Insurer
and the Trustee.
END OF ARTICLE I
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.01. Establishment of the Trust.
The parties hereto do hereby create and establish, pursuant to the
laws of the State of New York and this Agreement, the Trust, which, for
convenience, shall be known as "Centex Home Equity Loan Trust 1998-3" and which
shall contain two subtrusts.
Section 2.02. Office.
The office of the Trust shall be in care of the Trustee, addressed to
Norwest Bank Minnesota, National Association, Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479, or at such other address as the Trustee
may designate by notice to the Depositor, the Seller, the Servicer, the Owners
and the Certificate Insurer.
Section 2.03. Purposes and Powers.
The purpose of the Trust is to engage in the following activities and
only such activities: (i) the issuance of the Certificates and the acquiring,
owning and holding of Home Equity Loans and the Trust Estate in connection
therewith; (ii) activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith,
including the investment of moneys in accordance with this Agreement; and (iii)
such other activities as may be required in connection with conservation of the
Trust Estate and distributions to the Owners; provided, however, that nothing
contained herein shall permit the Trustee to take any action which would
adversely affect the status of the REMIC Estate as a REMIC.
Section 2.04. Appointment of the Trustee; Declaration of Trust.
The Depositor hereby appoint the Trustee as trustee of the Trust
effective as of the Startup Day, to have all the rights, powers and duties set
forth herein. The Trustee hereby acknowledges and accepts such appointment,
represents and warrants its eligibility as of the Startup Day to serve as
Trustee pursuant to Section 10.08 hereof and declares that it will hold the
Trust Estate in trust upon and subject to the conditions set forth herein for
the benefit of the Owners and the Certificate Insurer.
Section 2.05. Expenses of the Trust.
All expenses of the Trust, including (i) the fees and reimbursable
expenses of the Trustee in connection with the performance of its duties
hereunder, (including, but not limited to, any portion of the Trustee Fee and
Trustee Reimbursable Expenses not paid pursuant to Sections 7.03(b)(i)(A) and
7.03(b)(iii)(G), respectively, hereof) and (ii) to the extent not set forth
herein, any other expenses of the Trustee that have been reviewed and approved
by the Seller, which review shall not be required in connection with the
enforcement of a remedy by the Trustee resulting from a default under this
Agreement shall be paid directly by the Seller. Failure by the Seller to pay
any such fees or other expenses shall not relieve the Trustee of its
obligations hereunder.
Section 2.06. Ownership of the Trust.
On the Startup Day the ownership interests in the Trust shall be
transferred as set forth in Section 4.02 hereof, such transfer to be evidenced
by sale of the Certificates as described therein. Thereafter, transfer of any
ownership interest shall be governed by Sections 5.04 and 5.08 hereof.
Section 2.07. Situs of the Trust.
It is the intention of the parties hereto that the Trust constitute a
trust under the laws of the State of New York. The Trust will be created in the
State of New York. The Trust's only office will be at the office of the Trustee
as set forth in Section 2.02 hereof.
Section 2.08. Miscellaneous REMIC Provisions.
(a) The beneficial ownership interest in the REMIC created hereunder
shall be evidenced by the interests having the following characteristics and
terms as follows, including for federal income tax purposes the months in which
the Final Scheduled Payment Dates occur:
Initial Certificate Final Scheduled
Class Designation Principal Balance Payment Date
Class A-1 $63,993,000 July 2017
Class A-2 $10,531,000 September 2019
Class A-3 $32,755,000 December 2024
Class A-4 $20,304,000 January 2027
Class A-5 $18,906,000 October 2029
Class A-6 $16,276,000 October 2029
Class A-7 $77,235,000 October 2029
R (1) October 2029
----------------
(1)Class R does not have a Certificate Principal Balance
(b) The Depositor hereby designates the Class A-l, Class A-2, Class
A-3, Class A-4, Class A-5 Certificates, Class A-6 Certificates and Class A-7
Certificates as "regular interests," and the Class R Certificates as the single
class of "residual interests" in the REMIC created hereunder for purposes of
the REMIC Provisions.
(c) The Startup Day is hereby designated as the "startup day" of the
REMIC created hereunder within the meaning of Section 860G(a)(9) of the Code.
(d) The Owner of the Tax Matters Person Residual Interest in the REMIC
created hereunder is hereby designated as "tax matters person" as defined in the
REMIC Provisions with respect to the REMIC.
(e) The Trust and the REMIC created hereunder shall, for federal
income tax purposes, maintain books on a calendar year basis and report income
on an accrual basis.
(f) The Trustee shall cause the REMIC created hereunder to elect to be
treated as a REMIC under Section 860D of the Code. Any inconsistencies or
ambiguities in this Agreement or in the administration of the Trust shall be
resolved in a manner that preserves the validity of such election to be treated
as a REMIC. The Trustee shall report all expenses of the Trust Estate to the
REMIC created hereunder.
(g) For all federal tax law purposes, amounts transferred by the
Trustee to the Owners of the Class R Certificates shall be treated as
distributions by the REMIC created hereunder.
(h) The Trustee shall provide to the Internal Revenue Service and to
the person described in Section 860(E)(e)(3) and (6) of the Code the information
described in Treasury Regulation Section 1.860D-l(b)(5)(ii), or any successor
regulation thereto with respect to the REMIC created hereunder. Such information
will be provided in the manner described in Treasury Regulation Section
1.860E-2(a)(5), or any successor regulation thereto.
END OF ARTICLE II
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR,
THE SERVICER AND THE SELLER; COVENANT OF SELLER TO CONVEY HOME EQUITY LOANS
Section 3.01. Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the
Trustee and the Certificate Insurer that as of the Startup Day:
(i) This Agreement constitutes a legal, valid and binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity);
(ii) Immediately prior to the sale and assignment by the
Depositor to the Trustee on behalf of the Trust of each Mortgage
Loan, the Depositor had good and equitable title to each Mortgage
Loan (insofar as such title was conveyed to it by the Seller) subject
to no prior lien, claim, participation interest, mortgage, security
interest, pledge, charge or other encumbrance or other interest of
any nature;
(iii) As of the Startup Date, the Depositor has transferred all
right, title and interest in the Mortgage Loans to the Trustee on
behalf of the Trust; and
(iv) The Depositor has not transferred the Mortgage Loans to the
Trustee on behalf of the Trust with any intent to hinder, delay or
defraud any of its creditors.
Section 3.02. Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the
Depositor, the Trustee, the Certificate Insurer and the Owners that as of the
Startup Day:
(a) The Servicer is a corporation duly formed and validly existing
under the laws governing its creation and existence, is in compliance with the
laws of each state in which any Property is located to the extent necessary to
enable it to perform its obligations hereunder and is in good standing in each
jurisdiction in which the nature of its business, or the properties owned or
leased by it make such qualification necessary. The Servicer has all requisite
corporate power and authority to own and operate its or their properties, to
carry out its or their business as presently conducted and as proposed to be
conducted and to enter into and discharge its or their obligations under this
Agreement and the other Operative Documents to which the Servicer is a party.
(b) The execution and delivery of this Agreement and any other
Operative Document to which it is a party by the Servicer and its performance
and compliance with the terms hereof and thereof have been duly authorized by
all necessary action on the part of the Servicer and will not violate the
Servicer's Certificate of Incorporation 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 by which the Servicer is
bound or violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Servicer or any of its properties.
(c) This Agreement and the Operative Documents which the Servicer is a
party, assuming due authorization, execution and delivery by the other parties
hereto and thereto, each constitutes a valid, legal and binding obligation of
the Servicer, enforceable against it in accordance with the terms hereof and
thereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The 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 might have consequences that would materially and
adversely affect the condition (financial or otherwise) or operations of the
Servicer or its properties or might have consequences that would materially and
adversely affect its performance hereunder or under the other Operative
Documents to which the Servicer is a party.
(e) No litigation, proceeding or investigation is pending with respect
to which the Servicer has received service of process or, to the best of the
Servicer's knowledge, threatened against the Servicer which litigation,
proceeding or investigation might have consequences that would prohibit its
entering into this Agreement or any other Operative Document or that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Servicer or its properties or might have consequences that
would materially and adversely affect the validity or the enforceability of the
Home Equity Loans or its performance hereunder and the other Operative Documents
to which the Servicer is a party.
(f) The statements contained in the Registration Statement which
describe the Servicer or matters or activities for which the Servicer is
responsible in accordance with the Operative Documents or which are attributed
to the Servicer therein are true and correct in all material respects, and the
Registration Statement does not, contain any untrue statement of a material fact
with respect to the Servicer or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein with
respect to the Servicer not misleading.
(g) The Servicing Fee is a "current (normal) servicing fee rate" as
that term is used in Statement of Financial Accounting Standards No. 65 issued
by the Financial Accounting Standards Board. Neither the Servicer nor any
affiliate thereof will report on any financial statements any part of the
Servicing Fee as an adjustment to the sales price of the Home Equity Loans.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Servicer makes no such representation or warranty),
that are necessary or advisable in connection with the execution and delivery by
the Servicer of the Operative Documents to which it is a party, have been duly
taken, given or obtained, as the case may be, are in full force and effect on
the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and the other Operative Documents on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement and such of
the other Operative Documents to which it is a party.
(i) The collection practices used by the Servicer with respect to the
Home Equity Loans have been, in all material respects, legal, proper, prudent
and customary in the home equity mortgage servicing business.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer.
(k) The Servicer is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Servicer or legal
documents associated with the transaction contemplated by this Agreement.
(l) There are no Sub-Servicers as of the Startup Day.
(m) The Servicer covenants that it will terminate any Sub-Servicer
within ninety (90) days after being directed by the Certificate Insurer to do
so.
(n) The Servicer represents and warrants that its computer and other
systems used in servicing the Home Equity Loans currently are capable of
operating in a manner so that on and after January 1, 2000 (i) the Servicer can
service the Home Equity Loans in accordance with the terms of this Agreement and
(ii) the Servicer can operate its business in the same manner as it is operating
on the date hereof.
It is understood and agreed that the representations and warranties
set forth in this Section 3.02 shall survive delivery of the Home Equity Loans
to the Trustee.
Upon discovery by any of the Depositor, the Seller, the Servicer, the
Custodian, any Sub-Servicer, the Certificate Insurer, any Owner or the Trustee
(each, for purposes of this paragraph, a party) of a breach of any of the
representations and warranties set forth in this Section 3.02 which materially
and adversely affects the interests of the Owners or of the Certificate
Insurer, the party discovering such breach shall give prompt written notice to
the other parties. As promptly as practicable, but in any event, within 60 days
of its discovery or its receipt of notice of breach, the Servicer shall cure
such breach in all material respects and, upon the Servicer's continued failure
to cure such breach, may thereafter be removed by the Certificate Insurer or by
the Trustee with the written consent of the Certificate Insurer pursuant to
Section 8.20 hereof; provided, however, that if the Servicer can establish to
the reasonable satisfaction of the Certificate Insurer that it is diligently
pursuing remedial action, then the cure period may be extended for an
additional 90 days with the written approval of the Certificate Insurer.
Section 3.03. Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the
Depositor, the Trustee, the Certificate Insurer and the Owners that as of the
Startup Day:
(a) The Seller is a corporation duly formed and validly existing
under the laws governing its creation and existence, is in compliance with the
laws of each state in which any Property or the Seller is located or doing
business and is in good standing in each jurisdiction in which the nature of
its business, or the properties owned or leased by it make such qualification
necessary. The Seller has all requisite authority to own and operate its
properties, to carry out its business as presently conducted and as proposed to
be conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller and its performance
and compliance with the terms of this Agreement and the other Operative
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of the Seller and will not violate the Seller's
Charter or Bylaws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in a
breach of, any material contract, agreement or other instrument to which the
Seller is a party or by which the Seller is bound or violate any statute or any
order, rule or regulation of any court, governmental agency or body or other
tribunal having jurisdiction over the Seller or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Seller is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Seller, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Seller 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 could materially and adversely
affect the condition (financial or other) or operations of the Seller or its
properties or the consequences of which could materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Seller is a party.
(e) No litigation, proceeding or investigation is pending with
respect to which the Seller has received service of process or, to the best of
the Seller's knowledge, threatened against the Seller which litigation,
proceeding or investigation might have consequences that would prohibit its
entering into this Agreement or any other Operative Documents to which it is a
party or that would materially and adversely affect the condition (financial or
otherwise) or operations of the Seller or its properties or might have
consequences that would materially and adversely affect the validity or
enforceability of the Home Equity Loans or the Seller's performance hereunder
and under the other Operative Documents to which the Seller is a party.
(f) The statements contained in the Registration Statement which
describe the Seller or matters or activities for which the Seller is
responsible in accordance with the Operative Documents or which are attributed
to the Seller therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Seller or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
with respect to the Seller not misleading.
(g) Upon the receipt of each Home Equity Loan (including the related
Note) and other items of the Trust Estate by the Trustee under this Agreement,
the Trust will have good title to such Home Equity Loan (including the related
Note) and such other items of the Trust Estate free and clear of any lien,
charge, mortgage, encumbrance or rights of others, except as set forth in
Section 3.04 (b) (ix) (other than liens which will be simultaneously released).
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Seller makes no such representation or warranty),
that are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Seller of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents on the part of the Seller and the performance by the Seller
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The origination practices used by the Seller with respect to the
Home Equity Loans have been, in all material respects, legal, proper, prudent
and customary in the mortgage lending business.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Seller.
(k) Neither the Trustee nor the Seller has any obligation to register
the Trust and the Trust has no obligation to register as an investment company
under the Investment Company Act of 1940, as amended.
(l) The Seller is not insolvent, nor will it be made insolvent by the
transfer of the Home Equity Loans, nor is the Seller aware of any pending
insolvency.
(m) The Seller received fair consideration and reasonably equivalent
value in exchange for the sale of the interests in the Home Equity Loans.
(n) The Seller did not sell any interest in any Home Equity Loan with
any intent to hinder, delay or defraud any of its creditors.
(o) No material adverse change affecting any security for the Class A
Certificates has occurred prior to delivery of and payment for the Class A
Certificates.
(p) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Seller or legal
documents associated with the transaction contemplated by this Agreement.
(q) To the best knowledge of the Seller, there has been no material
adverse change in any information submitted by the Seller in writing to the
Certificate Insurer with respect to the transactions contemplated by this
Agreement (unless such information was subsequently supplemented in writing to
the Certificate Insurer).
(r) The sale, transfer, assignment and conveyance of Home Equity
Loans by the Seller pursuant to the Loan Purchase Agreement is not subject to
and will not result in any tax, fee or governmental charge payable by the
Seller, the Depositor or the Trustee to any federal, state or local government
("Transfer Taxes") other than Transfer Taxes which have or will be paid by the
Seller as due. The Seller shall pay, and otherwise indemnify and hold the
Certificate Insurer harmless, on an after-tax basis, from and against any and
all such Transfer Taxes (it being understood that the Certificate Insurer shall
have no obligation to pay such Transfer Taxes).
(s) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Seller contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
It is understood and agreed that the representations and warranties
set forth in this Section 3.03 shall survive delivery of the respective Home
Equity Loans to the Trustee.
Upon discovery by any of the Depositor, the Servicer, the Custodian,
any Sub-Servicer, any Owner, the Seller, the Certificate Insurer or the Trustee
(each, for purposes of this paragraph, a "party") of a breach of any of the
representations and warranties set forth in this Section 3.03 which materially
and adversely affects the interests of the Owners or the interests of the
Certificate Insurer, the party discovering such breach shall give prompt
written notice to the other parties. The Seller hereby covenants and agrees
that within 60 days of its discovery or its receipt of notice of breach, it
shall cure such breach in all material respects or, with respect to a breach of
clause (g) above, the Seller may (or may cause an affiliate of the Seller to)
on or prior to the second Monthly Remittance Date next succeeding such
discovery or receipt of notice (i) substitute in lieu of any Home Equity Loan
not in compliance with clause (g) a Qualified Replacement Mortgage and, if the
outstanding principal amount of such Qualified Replacement Mortgage as of the
applicable Replacement Cut-Off Date is less than the outstanding principal
balance of such Home Equity Loan as of such Replacement Cut-Off Date, deliver
an amount (a "Substitution Amount") equal to such difference together with the
aggregate amount of (A) all Delinquency Advances and Servicing Advances
theretofore made with respect to such Home Equity Loan and (B) all accrued and
unpaid interest with respect to such Home Equity Loan to the Servicer for
deposit in the Principal and Interest Account or (ii) purchase such Home Equity
Loan from the Trust at the Loan Purchase Price, which purchase price shall be
delivered to the Servicer for deposit in the Principal and Interest Account.
Notwithstanding any provision of this Agreement to the contrary, with respect
to any Home Equity Loan which is not in default or as to which no default is
imminent, no repurchase or substitution pursuant to Section 3.03, 3.04 or 3.06
shall be made unless the Seller obtains for the Trustee and the Certificate
Insurer at the Seller's expense an Opinion of Counsel experienced in federal
income tax matters to the effect that such a repurchase or substitution would
not constitute a Prohibited Transaction for the Trust or the REMIC created
hereunder or otherwise subject the Trust or the REMIC created hereunder to tax
and would not jeopardize the status of the REMIC created hereunder as a REMIC
(a "REMIC Opinion") addressed to the Trustee and the Certificate Insurer and
acceptable to the Certificate Insurer and the Trustee. The Seller shall also
deliver an Officer's Certificate to the Trustee and the Certificate Insurer
concurrently with the delivery of a Qualified Replacement Mortgage pursuant to
Sections 3.03, 3.04 and 3.06(b) stating that such Home Equity Loan meets the
requirements of the definition of a Qualified Replacement Mortgage and that all
other conditions to the substitution thereof have been satisfied. Any Home
Equity Loan as to which repurchase or substitution was delayed pursuant to this
Section shall be repurchased or substituted for (subject to compliance with
Section 3.03, 3.04 or 3.06(b), as the case may be) upon the earlier of (a) the
occurrence of a default or imminent default with respect to such Home Equity
Loan and (b) receipt by the Trustee and the Certificate Insurer of a REMIC
Opinion.
Section 3.04. Covenants of Seller to Take Certain Actions with
Respect to the Home Equity Loans in Certain Situations.
(a) Upon the discovery by the Depositor, the Seller, the Servicer,
the Certificate Insurer, any Sub-Servicer, any Owner, the Custodian or the
Trustee that the representations and warranties set forth in clause (b) below
were untrue in any material respect, without regard to any limitation set forth
therein concerning the knowledge of the Seller as to the facts stated therein
as of the Startup Day (or in the case of a Qualified Replacement Mortgage, as
of the respective replacement date) with the result that the interests of the
Owners or of the Certificate Insurer in the related Home Equity Loan, are or
may be, materially and adversely affected, the party discovering such breach
shall give prompt written notice to the other parties. Upon the earliest to
occur of the Seller's discovery, its receipt of notice of breach from any one
of the other parties or such time as a situation resulting from an existing
statement which is untrue materially and adversely affects the interests of the
Owners or of the Certificate Insurer, without regard to any limitation set
forth therein concerning the knowledge of the Seller as to the facts stated
therein, the Seller hereby covenants and warrants that it shall promptly cure
such breach in all material respects or subject to the last three sentences of
Section 3.03 it shall on or before the second Monthly Remittance Date next
succeeding such discovery, receipt of notice or such time (i) substitute in
lieu of each Home Equity Loan which has given rise to the requirement for
action by the Seller a Qualified Replacement Mortgage and deliver the
Substitution Amount to the Servicer for deposit in the Principal and Interest
Account or (ii) purchase such Home Equity Loan from the Trust at a purchase
price equal to the Loan Purchase Price thereof, which purchase price shall be
delivered to the Servicer for deposit in the Principal and Interest Account;
provided, however, that if the Seller can establish to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing remedial
action, the period of time in which the Seller must substitute a Qualified
Replacement Mortgage or purchase such Home Equity Loan may be extended with the
written approval of the Certificate Insurer. It is understood and agreed that
the obligation of the Seller so to substitute or purchase any Home Equity Loan
as to which such a statement set forth below is untrue in any material respect
and has not been remedied shall constitute the sole remedy respecting a
discovery of any such statement which is untrue in any material respect in this
Section 3.04 available to the Owners and the Trustee on behalf of the Owners.
(b) The Seller hereby represents, warrants and covenants to the
Trustee, the Depositor, the Servicer, the Certificate Insurer and the Owners
that as of the Startup Day:
(i) The information with respect to each Home Equity Loan set
forth in the Schedule of Home Equity Loans is true and correct as of
the Cut-Off Date;
(ii) All the original or certified documentation set forth in
Section 3.05 (including all material documents related thereto) with
respect to each Home Equity Loan has been or will be delivered to the
Custodian on behalf of the Trustee on the Startup Day or as otherwise
provided in Section 3.05. To the Seller's best knowledge, no
documentation contains any untrue statement of a material fact or
omits to state a fact necessary to make the statements contained
therein not misleading.
(iii) Each Home Equity Loan being transferred to the Trust is a
Qualified Mortgage and is a Mortgage;
(iv) Each Property is a fee simple estate in a single parcel of
real property improved by a single (one-to-four) family residential
dwelling (except for 292 and 118 Home Equity Loans in Group I and
Group II, respectively, in the amount of $17,755,391.85 and
$12,520,217.74, respectively, that are condominiums, townhouses,
manufactured housing, cooperative or PUDs), provided that no more
than 2.54% and 0.88%, respectively, of the Properties are secured by
manufactured homes, each of which is considered to be real property
under the applicable local law;
(v) As of the Cut-Off Date or Replacement Cut-Off Date, as
applicable, no Home Equity Loan has a combined Loan-to-Value Ratio in
excess of 90.49%;
(vi) Each Home Equity Loan is being serviced by the Servicer in
accordance with the terms of this Agreement;
(vii) The Note related to each Home Equity Loan in Group I bears
a current Coupon Rate of at least 7.000% per annum and the Note
related to each Home Equity Loan in Group II bears a current Coupon
Rate of at least 7.850%;
(viii) Each Note with respect to the Home Equity Loans will
provide for a schedule of substantially level and equal Monthly
Payments (or periodic rate adjustments in the case of the
adjustable-rate Home Equity Loans in Group II), which are sufficient
to amortize fully the principal balance of such Note on or before its
maturity date, except for Home Equity Loans representing 1.19% of the
aggregate Loan Balance of the Home Equity Loans in Group I as of the
Cut-Off Date which may provide for a "balloon" payment due at the end
of the 15th year and no Home Equity Loan is a graduated payment loan;
(ix) As of the Startup Day, each Mortgage is a valid and
enforceable first or second lien of record (or is in the process of
being recorded) on the Property subject in the case of any Second
Mortgage Loan only to a Senior Lien on such Property and subject in
all cases to the exceptions to title set forth in the title insurance
policy or attorney's opinion of title, with respect to the related
Home Equity Loan, which exceptions are generally acceptable to
banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar
properties are commonly subject and which do not individually, or in
the aggregate, materially and adversely affect the benefits of the
security intended to be provided by such Mortgage;
(x) Immediately prior to the transfer and assignment of the Home
Equity Loans by the Seller to the Depositor and by the Depositor to
the Trustee herein contemplated, the Seller and the Depositor, as the
case may be, held good and indefeasible title to, and was the sole
owner of, each Home Equity Loan (including the related Note) conveyed
by the Seller subject to no liens, charges, mortgages, encumbrances
or rights of others except as set forth in clause (ix) or other liens
which will be released simultaneously with such transfer and
assignment; and immediately upon the transfer and assignment herein
contemplated, the Trustee will hold good and indefeasible title to,
and be the sole owner of, each Home Equity Loan subject to no liens,
charges, mortgages, encumbrances or rights of others except as set
forth in paragraph (ix) or other liens which will be released
simultaneously with such transfer and assignment;
(xi) As of the Cut-Off Date, no Home Equity Loan is more than 30
days Delinquent;
(xii) There is no delinquent tax or assessment lien on any
Property, and each Property is free of substantial damage and is in
good repair;
(xiii) There is no valid and enforceable right of offset, claim,
defense or counterclaim to any Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Note nor has any such claim, defense, offset or
counterclaim been asserted;
(xiv) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to,
or equal with, the lien of the related Mortgage except those which
are insured against by any title insurance policy referred to in
paragraph (xvi) below;
(xv) Each Home Equity Loan at the time it was made complied in
all material respects with applicable state and federal laws and
regulations, including, without limitation, the federal
Truth-in-Lending Act (as amended by the Riegle Community Development
and Regulatory Improvement Act of 1994) and other consumer protection
laws, usury, equal credit opportunity, disclosure and recording laws;
(xvi) With respect to each Home Equity Loan either (a) if a
title insurance policy is not available in the applicable state, an
attorney's opinion of title has been obtained but no title policy has
been obtained, or (b) a lender's title insurance policy, issued in
standard American Land Title Association form by a title insurance
company authorized to transact business in the state in which the
related Property is situated, in an amount at least equal to the
original balance of such Home Equity Loan together, in the case of a
Second Mortgage Loan, with the then-original principal amount of the
mortgage note relating to the Senior Lien, insuring the mortgagee's
interest under the related Home Equity Loan as the holder of a valid
first or second mortgage lien of record on the real Property
described in the related Mortgage, as the case may be, subject only
to exceptions of the character referred to in paragraph (ix) above,
was effective on the date of the origination of such Home Equity
Loan, and, as of the Startup Day, such policy is valid and thereafter
such policy shall continue in full force and effect;
(xvii) The improvements upon each Property are covered by a
valid and existing hazard insurance policy with a carrier generally
acceptable to the Servicer that provides for fire and extended
coverage representing coverage not less than the least of (A) the
outstanding principal balance of the related Home Equity Loan
(together, in the case of a Second Mortgage Loan, with the
outstanding principal balance of the Senior Lien), (B) the minimum
amount required to compensate for damage or loss on a replacement
cost basis or (C) the full insurable value of the Property;
(xviii) If any Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Property with a
carrier generally acceptable to the Servicer in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Home Equity Loan (together, in the
case of a Second Mortgage Loan, with the outstanding principal
balance of the Senior Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the Flood
Disaster Protection Act of 1973;
(xix) Each Mortgage and Note are the legal, valid and binding
obligation of the maker thereof and are enforceable in accordance
with their terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether considered in a proceeding or
action in equity or at law), and all parties to each Home Equity Loan
had full legal capacity to execute all documents relating to such
Home Equity Loan and convey the estate therein purported to be
conveyed;
(xx) The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and
remedies of the Trustee in any Insurance Policies applicable to any
Home Equity Loans delivered by the Seller including, without
limitation, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured,
joint loss payee and mortgagee rights in favor of the Trustee;
(xxi) As of the Startup Day, no more than 0.70% of the aggregate
Loan Balance of the Home Equity Loans in either Home Equity Loan
Group will be secured by Properties located within any single zip
code area;
(xxii) Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original
Mortgage have been delivered for recordation or have been recorded in
the appropriate jurisdictions wherein such recordation is necessary
to perfect the lien thereof as against creditors of or purchasers
from the Seller (or, subject to Section 3.05 hereof, are in the
process of being recorded); each Mortgage and assignment of Mortgage
is in recordable form and is acceptable for recording under the laws
of the jurisdiction in which the property securing such Mortgage is
located;
(xxiii) The terms of each Note and each 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 interest of the Owners and the Certificate Insurer and which has
been delivered to the Trustee. The substance of any such waiver,
alteration or modification is reflected on the related Schedule of
Home Equity Loans;
(xxiv) The proceeds of each Home Equity Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. 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.
All costs, fees and expenses incurred in making or closing or
recording such Home Equity Loans were paid and the Mortgagor is not
entitled to any refund of any amounts paid or due under the related
Note or Mortgage;
(xxv) The related Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxvi) No Home Equity Loan has a shared appreciation feature, or
other contingent interest feature;
(xxvii) Each Property is located in the state identified in the
respective Schedule of Home Equity Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxviii) Each Mortgage contains a provision for the acceleration
of the payment of the unpaid principal balance of the related Home
Equity Loan in the event the related Property is sold without the
prior consent of the mortgagee thereunder;
(xxix) Any advances made after the date of origination of a Home
Equity Loan but prior to the Cut-Off Date have been consolidated with
the outstanding principal amount secured by the related Mortgage, and
the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the respective
Schedule of Home Equity Loans. The consolidated principal amount does
not exceed the original principal amount of the related Home Equity
Loan. No Note permits or obligates the Servicer to make future
advances to the related Mortgagor at the option of the Mortgagor;
(xxx) There is no proceeding pending or threatened for the total
or partial condemnation of any Property, nor is such a proceeding
currently occurring, and each Property is undamaged by waste, fire,
water, flood, earthquake, earth movement or other casualty;
(xxxi) All of the improvements which were included for the
purposes of determining the Appraised Value of any Property lie
wholly within the boundaries and building restriction lines of such
Property, and no improvements on adjoining properties encroach upon
such Property, and are stated in the title insurance policy and
affirmatively insured;
(xxxii) No improvement located on or being part of any Property
is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of each 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 and such Property is lawfully occupied under the
applicable law;
(xxxiii) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by the Owners or the Trust to the trustee under the deed of
trust, except in connection with a trustee's sale after default by
the related Mortgagor;
(xxxiv) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Property of the
benefits of the security, 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 other
than any applicable Mortgagor redemption rights available to the
related Mortgagor which would materially interfere with the right to
sell the related Property at a trustee's sale or the right to
foreclose the related Mortgage;
(xxxv) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related 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 Servicer
nor the Seller has waived any default, breach, violation or event of
acceleration or advanced funds, directly or indirectly for the
payment of any amount required under any Home Equity Loan;
(xxxvi) No instrument of release or waiver has been executed in
connection with any Home Equity Loan, and no Mortgagor has been
released, in whole or in part, except in connection with an
assumption agreement which has been approved by the primary mortgage
guaranty insurer, if any, and which has been delivered to the
Trustee;
(xxxvii) [Reserved]
(xxxviii) Each Home Equity Loan was underwritten in accordance
with the credit underwriting guidelines of the Seller as set forth in
the Seller's Policies and Procedures Manual, as in effect on the date
hereof and such Manual conforms in all material respects to the
description thereof set forth in the Prospectus Supplement;
(xxxix) Each Home Equity Loan was originated based upon a full
appraisal, which included an interior inspection of the subject
property;
(xl) The Home Equity Loans were not selected for inclusion in
the Trust by the Seller on any basis intended to adversely affect the
Trust or the Certificate Insurer;
(xli) No more than 4.86% and 3.83% of the aggregate Loan Balance
of the Home Equity Loans in Group I and Group II, respectively, are
secured by Properties that are non-owner occupied Properties (i.e.,
investor-owned and vacation);
(xlii) The Seller has no actual knowledge that there exist any
hazardous substances, hazardous wastes or solid wastes, as such terms
are defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation on
any Property, and no violations of any local, state or federal
environmental law, rule or regulation exist with respect to any
Property;
(xliii) The Seller (and the originator, if not the Seller) was
properly licensed or otherwise authorized, to the extent required by
applicable law, to originate or purchase each Home Equity Loan; and
the consummation of the transactions herein contemplated, including,
without limitation, the receipt of interest by the Owners and the
ownership of the Home Equity Loans by the Trustee as trustee of the
Trust will not involve the violation of such laws;
(xliv) With respect to each Property subject to a ground lease
(i) the current ground lessor has been identified and all ground
rents which have previously become due and owing have been paid; (ii)
the ground lease term extends, or is automatically renewable, for at
least five years beyond the maturity date of the related Home Equity
Loan; (iii) the ground lease has been duly executed and recorded;
(iv) the amount of the ground rent and any increases therein are
clearly identified in the lease and are for predetermined amounts at
predetermined times; (v) the ground rent payment is included in the
borrower's monthly payment as an expense item in determining the
qualification of the borrower for such Home Equity Loan; (vi) the
Trust has the right to cure defaults on the ground lease; and (vii)
the terms and conditions of the leasehold do not prevent the free and
absolute marketability of the Property. As of the Cut-Off Date, the
Loan Balance of the Home Equity Loans with related Properties subject
to ground leases does not exceed 1% of the Original Aggregate Loan
Balance;
(xlv) As of the Startup Day, with respect to any Second Mortgage
Loan, the Seller has not received a notice of default of any Senior
Lien secured by any Property which has not been cured by a party
other than the Seller;
(xlvi) No Home Equity Loan is subject to a rate reduction
pursuant to a buydown program;
(xlvii) Reserved;
(xlviii) The Coupon Rate on each Home Equity Loan is calculated
on the basis of a year of 360 days with twelve 30-day months;
(xlix) Each Home Equity Loan was originated by the Seller or its
affiliate;
(l) Neither the operation of any of the terms of each Note and
each Mortgage nor the exercise of any right thereunder will render
either the Note or the Mortgage unenforceable, in whole or in part,
nor subject it to any right of rescission, claim set-off,
counterclaim or defense, including, without limitation, the defense
of usury;
(li) Any adjustment to the Coupon Rate on an adjustable-rate
Home Equity Loan in Group II has been legal, proper and in accordance
with the terms of the related Note; and
(lii) No Home Equity Loan in Group II is subject to negative
amortization.
(liii) As of the Cut-Off Date, the FTC holder regulation
provided in 16 C.F.R. Part 433 applies to none of the Home Equity
Loans.
(liv) As of the Cut-Off Date with respect to the Home Equity
Loans and the Replacement Cut-Off Date with respect to the Qualified
Replacement Mortgages, a portion of the Home Equity Loans are
"mortgages" as defined in 15 U.S.C. 1602(aa), and with respect to
each such Home Equity Loan, no Mortgagor has or will have a claim or
defense under such Home Equity Loan.
(lv) To the knowledge of the Seller, there does not exist any
circumstances or conditions with respect to the Mortgage, the
Property, the Mortgagor or the Mortgagor's credit standing that
reasonably can be expected to cause private institutional investors
to regard the related Home Equity Loan as an unacceptable investment,
cause the Home Equity Loan to become delinquent, or adversely affect
the value or marketability of the Home Equity Loan.
(lvi) The rights with respect to each Home Equity Loan are
assignable by the Seller without the consent of any Person other than
consents which will have been obtained on or before the Startup Day.
(lvii) The Seller has duly fulfilled all obligations to be
fulfilled on the lender's part under or in connection with the
origination, acquisition and assignment of the Home Equity Loans and
the related Mortgage and Note, and has done nothing to impair the
rights of the Trustee, the Certificate Insurer or the Owners in
payments with respect thereto.
(lviii) To the Seller's knowledge, the documents, instruments
and agreements submitted by each Mortgagor for loan underwriting were
not falsified and contain no untrue statement of a material fact and
do not omit to state a material fact required to be stated therein or
necessary to make the information and statements contained therein
not misleading.
(lix) No Home Equity Loan matures later than September 30, 2028.
(lx) The first date on which the applicable Mortgagor must make
a payment on each Home Equity Loan is due no later than September 1,
1998, except with respect to 332 Home Equity Loans, which represent
10.00% of the Original Aggregate Loan Balance as of the Cut-Off Date,
that provide for a first payment in October 1, 1998.
(lxi) With respect to each Home Equity Loan that is a Second
Mortgage Loan:
(a) The related Senior Lien does not provide for negative
amortization.
(b) The Seller has not received, and is not aware of, a
notice of default of any Senior Lien which has not been cured.
(c) To the best of the knowledge of the Seller, no funds
provided to the Mortgagor from a Second Mortgage Loan were
concurrently used as a down payment for the Senior Lien.
(c) In the event that any such repurchase pursuant to this
Section results in a prohibited transaction tax as specified in
the REMIC Opinion delivered pursuant to Section 3.03, the
Trustee shall immediately notify the Seller in writing thereof
and the Seller will, within 10 days of receiving notice thereof
from the Trustee, deposit the amount due from the Trust with the
Trustee for the payment thereof, including any interest and
penalties, in immediately available funds. In the event that any
Qualified Replacement Mortgage is delivered by the Seller to the
Trust pursuant to Section 3.03, Section 3.04 or Section 3.06
hereof, the Seller shall be obligated to take the actions
described in Section 3.04(a) with respect to such Qualified
Replacement Mortgage upon the discovery by any of the Owners,
the Seller, the Servicer, the Certificate Insurer, any
Sub-Servicer, the Custodian or the Trustee that the statements
set forth in subsection (b) above are untrue in any material
respect, without regard to any limitation set forth therein
concerning the knowledge of the Seller as to facts stated
therein, on the date such Qualified Replacement Mortgage is
conveyed to the Trust such that the interests of the Owners or
the Certificate Insurer in the related Qualified Replacement
Mortgage are, or may be, materially and adversely affected;
provided, however, that for the purposes of this subsection (c)
the statements in subsection (b) above referring to items "as of
the Cut-Off Date" or "as of the Startup Day" shall be deemed to
refer to such items as of the date such Qualified Replacement
Mortgage is conveyed to the Trust. Notwithstanding the fact that
a representation contained in subsection (b) above may be
limited to the Seller's knowledge, such limitation shall not
relieve the Seller of its repurchase obligation under this
Section and Section 3.05 hereof.
(d) It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.04 shall
survive delivery of the respective Home Equity Loans (including
Qualified Replacement Mortgage) to the Trustee or the Custodian,
on behalf of the Trustee.
(e) The Trustee shall have no duty to conduct any
affirmative investigation other than as specifically set forth
in this Agreement as to the occurrence of any condition
requiring the repurchase or substitution of any Home Equity Loan
pursuant to this Article III or the eligibility of any Home
Equity Loan for the purpose of this Agreement.
Section 3.05. Conveyance of the Home Equity Loans and Qualified
Replacement Mortgages.
(a) On the Startup Day the Depositor, concurrently with the execution
and delivery hereof, transfers, assigns, sets over and otherwise conveys
without recourse, to the Trustee for the benefit of the Owners and the
Certificate Insurer, all of the Depositor's respective right, title and
interest in and to the Home Equity Loans (other than payments of principal
received and interest due on the Home Equity Loans before the Cut-Off Date).
The transfer by the Seller and the Depositor of the Home Equity Loans set forth
on the Schedule of Home Equity Loans to the Trustee is absolute and is intended
by the Owners and all parties hereto to be treated as a sale by the Seller and
the Depositor. On the Startup Day, the Depositor will also deposit $1,296.48
into the Certificate Account, $1,091.04 of which will be allocable to Group I
and $205.44 of which will be allocable to Group II.
In the event that either such conveyance is deemed to be a loan, the
parties intend that the Seller shall be deemed to have granted to the Depositor
and the Depositor shall be deemed to have granted to the Trustee a security
interest in the Trust Estate, and that this Agreement shall constitute a
security agreement under applicable law.
(b) In connection with the transfer and assignment of the Home Equity
Loans the Seller agrees to:
(i) deliver without recourse to the Custodian, on behalf of the
Trustee, on the Startup Day with respect to each Home Equity Loan,
(A) the original Notes endorsed in blank or to the order of the
Trustee ("Pay to the order of Norwest Bank Minnesota, National
Association, as Trustee for Centex Home Equity Loan Trust 1998-3,
without recourse") and signed by manual signature of the Seller, (B)
(I) if the original title insurance policy is not available, the
original title insurance commitment or a copy thereof certified as a
true copy by the closing agent or the Seller, and when available, the
original title insurance policy or a copy certified by the issuer of
the title insurance policy or (II) if title insurance is not
available in the applicable state, the attorney's opinion of title,
(C) originals or copies of all intervening assignments certified as
true copies by the closing agent or the Seller, showing a complete
chain of title from origination to the Trustee, if any, including
warehousing assignments, if recorded, (D) originals of all assumption
and modification agreements, if any, (E) either: (1) the original
Mortgage, with evidence of recording thereon (if such original
Mortgage has been returned to the Seller from the applicable
recording office) or a copy of the Mortgage certified as a true copy
by the closing attorney or an Authorized Officer of the Seller, or
(2) a copy of the Mortgage certified by the public recording office
in those instances where the original recorded Mortgage has been lost
and (F) the original assignments of Mortgages (as described in clause
(b)(ii)) in recordable form and acceptable for recording in the state
or other jurisdiction where the Property is located.
(ii) cause, within 60 days following the Startup Day with
respect to the Home Equity Loans, assignments of the Mortgages to
"Norwest Bank Minnesota, National Association, as Trustee of Centex
Home Equity Loan Trust 1998-3 under the Pooling and Servicing
Agreement dated as of September 1, 1998" to be submitted for
recording in the appropriate jurisdictions; provided, further, that
the Seller shall not be required to record an assignment of a
Mortgage if the Seller furnishes to the Trustee and the Certificate
Insurer, on or before the Startup Day, at the Seller's expense, an
Opinion of Counsel with respect to the relevant jurisdiction that
such recording is not necessary to perfect the Trustee's interest in
the related Home Equity Loans (in form and substance satisfactory to
the Trustee, the Certificate Insurer and the Rating Agencies);
provided further, however, notwithstanding the delivery of any legal
opinions, each assignment of Mortgage shall be recorded by the
Trustee or the Custodian on behalf of the Trustee upon the earliest
to occur of: (i) reasonable direction by the Certificate Insurer,
(ii) the occurrence of a Servicer Termination Event, or (iii) the
occurrence of a bankruptcy, insolvency or foreclosure relating to the
Seller;
(iii) deliver the title insurance policy or title searches, the
original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments
(other than unrecorded warehouse assignments), to the Custodian, on
behalf of the Trustee, within 15 days of receipt thereof by the
Seller (but in any event, with respect to any Mortgage as to which
original recording information has been made available to the Seller,
within one year after the Startup Day); and
(iv) furnish to the Trustee, the Certificate Insurer and the
Rating Agencies at the Seller's expense, an Opinion of Counsel with
respect to the sale and perfection of the Home Equity Loans delivered
to the Trust in form and substance satisfactory to the Certificate
Insurer.
In instances where the original recorded Mortgage cannot be delivered
by the Seller to the Custodian on behalf of the Trustee prior to or
concurrently with the execution and delivery of this Agreement due to a delay
in connection with recording, the Seller may in lieu of delivering such
original recorded Mortgage, deliver to the Custodian on behalf of the Trustee a
copy thereof, provided that the Seller certifies that the original Mortgage has
been delivered to a title insurance company for recordation after receipt of
its policy of title insurance or binder therefor. In all such instances, the
Seller will deliver or cause to be delivered the original recorded Mortgage to
the Custodian on behalf of the Trustee promptly upon receipt of the original
recorded Mortgage but in no event later than one year after the Startup Date.
The Seller hereby confirms to the Trustee that it has made the
appropriate entries in its general accounting records, to indicate that such
Home Equity Loans have been transferred to the Trustee and constitute part of
the Trust in accordance with the terms of the trust created hereunder.
Notwithstanding anything to the contrary contained in this Section
3.05, in those instances where the public recording office retains the original
Mortgage, the assignment of a Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Depositor and Seller shall be deemed
to have satisfied its obligations hereunder upon delivery to the Custodian, on
behalf of the Trustee of a copy of such Mortgage, such assignment or
assignments of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
Not later than ten days following the end of the 60-day period
referred in clause (b)(ii) above, the Seller shall deliver to the Custodian, on
behalf of the Trustee, a list of all Mortgages for which no Mortgage assignment
has yet been submitted for recording by the Seller, which list shall state the
reason why the Seller has not yet submitted such Mortgage assignments for
recording. With respect to any Mortgage assignment disclosed on such list as
not yet submitted for recording for a reason other than a lack of original
recording information, the Custodian, on behalf of the Trustee, shall make an
immediate demand on the Seller to prepare such Mortgage assignments, and shall
inform the Certificate Insurer, in writing, of the Seller's failure to prepare
such Mortgage assignments. Thereafter, the Custodian, on behalf of the Trustee,
shall cooperate in executing any documents prepared by the Certificate Insurer
and submitted to the Custodian, on behalf of the Trustee in connection with
this provision. Following the expiration of the 60-day period referred to in
clause (b)(ii) above, the Seller shall promptly prepare a Mortgage assignment
for any Mortgage for which original recording information is subsequently
received by the Seller, and shall promptly deliver a copy of such Mortgage
assignment to the Custodian, on behalf of the Trustee. The Seller agrees that
it will follow its normal servicing procedures and attempt to obtain the
original recording information necessary to complete a Mortgage assignment. In
the event that the Seller is unable to obtain such recording information with
respect to any Mortgage prior to the end of the 18th calendar month following
the Startup Day with respect to the Home Equity Loans and has not provided to
the Custodian, on behalf of the Trustee a Mortgage assignment with evidence of
recording thereon relating to the assignment of such Mortgage to the Trustee,
the Custodian, on behalf of the Trustee shall notify the Seller of the Seller's
obligation to provide a completed assignment (with evidence of recording
thereon) on or before the end of the 20th calendar month following the Startup
Day with respect to the Home Equity Loans. A copy of such notice shall be sent
by the Custodian, on behalf of the Trustee to the Certificate Insurer. If no
such completed assignment (with evidence of recording thereon) is provided
before the end of such 20th calendar month, the related Home Equity Loan shall
be deemed to have breached the representation contained in clause (xxii) of
Section 3.04(b) hereof; provided, however, that if as of the end of such 20th
calendar month the Seller demonstrates to the satisfaction of the Certificate
Insurer that it is exercising its best efforts to obtain such completed
assignment and, during each month thereafter until such completed assignment is
delivered to the Custodian, on behalf of the Trustee, the Seller continues to
demonstrate to the satisfaction of the Certificate Insurer that it is
exercising its best efforts to obtain such completed assignment, the related
Home Equity Loan will not be deemed to have breached such representation. The
requirement to deliver a completed assignment with evidence of recording
thereon will be deemed satisfied upon delivery of a copy of the completed
assignment certified by the applicable public recording office.
Copies of all Mortgage assignments received by the Custodian on
behalf of the Trustee shall be retained in the related File.
All recording required pursuant to this Section 3.05 shall be
accomplished at the expense of the Seller.
(c) In the case of Home Equity Loans which have been prepaid in full
on or after the Cut-Off Date and prior to the Startup Day, the Seller, in lieu
of the foregoing, will deliver within six (6) days after the Startup Day to the
Trustee a certification of an Authorized Officer in the form set forth in
Exhibit E.
(d) The Seller shall transfer, assign, set over and otherwise convey
without recourse, to the Trustee all right, title and interest of the Seller in
and to any Qualified Replacement Mortgage delivered to the Custodian, on behalf
of the Trustee on behalf of the Trust by the Seller pursuant to Section 3.03,
3.04 or 3.06 hereof and all its right, title and interest to principal and
interest due on such Qualified Replacement Mortgage on and after the applicable
Replacement Cut-Off Date; provided, however, that the Seller shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such Qualified Replacement Mortgage prior to the applicable
Replacement Cut-Off Date.
(e) As to each Home Equity Loan released from the Trust in connection
with a repurchase or the conveyance of a Qualified Replacement Mortgage
therefor, the Trustee will transfer, assign, set over and otherwise convey
without recourse or representation, on the Seller's order, all of its right,
title and interest in and to such released Home Equity Loan and all the Trust's
right, title and interest to principal and interest due on such released Home
Equity Loan after the applicable Replacement Cut-Off Date, as the case may be;
provided, however, that the Trust shall reserve and or and retain all right,
title and interest in and to payments of principal and interest due on such
released Home Equity Loan prior to such repurchase or the applicable
Replacement Cut-Off Date, as the case may be.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Seller agrees
to (i) deliver without recourse to the Custodian, on behalf of the Trustee on
the date of delivery of such Qualified Replacement Mortgage the original Note
relating thereto, endorsed in blank or to the order of the Trustee, (ii) cause
promptly to be recorded an assignment in the appropriate jurisdictions, (iii)
deliver the original Qualified Replacement Mortgage and such recorded
assignment, together with original or duly certified copies of any and all
prior assignments, to the Custodian, on behalf of the Trustee within 15 days of
receipt thereof by the Seller (but in any event within 120 days after the date
of conveyance of such Qualified Replacement Mortgage) and (iv) deliver the
title insurance policy, or where no such policy is required to be provided
under Section 3.05(b)(i)(B), the other evidence of title required in Section
3.05(b)(i)(B).
(g) As to each Home Equity Loan released from the Trust in connection
with a repurchase or the conveyance of a Qualified Replacement Mortgage the
Custodian, on behalf of the Trustee shall deliver on the date of such
repurchase or conveyance of such Qualified Replacement Mortgage and on the
order of the Seller (i) the original Note relating thereto, endorsed without
recourse or representation, in blank or to the order of, to the Seller, (ii)
the original Mortgage so released and all assignments relating thereto and
(iii) such other documents as constituted the File with respect thereto.
(h) If a Mortgage assignment is lost during the process of recording,
or is returned from the recorder's office unrecorded due to a defect therein,
the Seller shall prepare a substitute assignment or cure such defect, as the
case may be, and thereafter cause each such assignment to be duly recorded.
Section 3.06. Acceptance by Trustee; Certain Substitutions of Home
Equity Loans; Certification by Trustee.
(a) The Trustee agrees to execute and deliver and to cause the
Custodian to execute and deliver on the Startup Day an acknowledgment of
receipt of the items delivered by the Seller in the forms attached as Exhibit F
hereto, and declares through the Custodian that it will hold such documents and
any amendments, replacement or supplements thereto, as well as any other assets
included in the definition of Trust Estate and delivered to the Custodian, on
behalf of the Trustee, as Trustee in trust upon and subject to the conditions
set forth herein for the benefit of the Owners and the Certificate Insurer. The
Trustee agrees, for the benefit of the Owners and the Certificate Insurer, to
cause the Custodian to review such items within 45 days after the Startup Day
(or, with respect to any document delivered after the Startup Day, within 45
days of receipt and with respect to any Qualified Replacement Mortgage, within
45 days after the assignment thereof) and to deliver to the Depositor, the
Seller, the Servicer and the Certificate Insurer a certification in the form
attached hereto as Exhibit G (a "Pool Certification") to the effect that, as to
each Home Equity Loan listed in the Schedule of Home Equity Loans (other than
any Home Equity Loan paid in full or any Home Equity Loan specifically
identified in such Pool Certification as not covered by such Pool
Certification), (i) all documents required to be delivered to it pursuant to
Section 3.05(b)(i) of this Agreement have been executed and are in its
possession and that the Notes have been endorsed as set forth in Section
3.05(b)(i) hereof, (ii) such documents have been reviewed by it and have not
been mutilated, damaged or torn and relate to such Home Equity Loan and (iii)
based on its examination and only as to the foregoing documents, the
information set forth on the Schedule of Home Equity Loans accurately reflects
the information set forth in the File. The Trustee shall have no responsibility
for reviewing any File except as expressly provided in this subsection 3.06(a).
Without limiting the effect of the preceding sentence, in reviewing any File,
the Trustee shall have no responsibility for determining whether any document
is valid and binding, whether the text of any assignment is in proper form
(except to determine if the Trustee is the assignee), whether any document has
been recorded in accordance with the requirements of any applicable
jurisdiction or whether a blanket assignment is permitted in any applicable
jurisdiction, but shall only be required to determine whether a document has
been executed, that it appears to be what it purports to be, and, where
applicable, that it purports to be recorded. The Trustee shall be under no duty
or obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable,
or appropriate for the represented purpose or that they are other than what
they purport to be on their face, nor shall the Trustee be under any duty to
determine independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Home Equity Loan.
(b) If the Custodian, on behalf of the Trustee during such 45-day
period finds any document constituting a part of a File which is not executed,
has not been received, or is unrelated to the Home Equity Loans identified in
the Schedule of Home Equity Loans, or that any Home Equity Loan does not
conform to the description thereof as set forth in the Schedule of Home Equity
Loans, the Custodian, on behalf of the Trustee shall promptly so notify the
Depositor, the Seller, the Owners and the Certificate Insurer. In performing
any such review, the Custodian, on behalf of 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 review of the items
delivered by the Seller pursuant to Section 3.05(b)(i) is limited solely to
confirming that the documents listed in Section 3.05(b)(i) have been executed
and received, relate to the Files identified in the Schedule of Home Equity
Loans and conform to the description thereof in the Schedule of Home Equity
Loans. The Seller agrees to use reasonable efforts to remedy a material defect
in a document constituting part of a File of which it is so notified by the
Custodian, on behalf of the Trustee. If, however, within 90 days after such
notice to it respecting such defect the Seller has not remedied the defect and
the defect materially and adversely affects the interest in the related Home
Equity Loan of the Owners or the Certificate Insurer, the Seller will (or will
cause an affiliate of the Seller to) on the next succeeding Monthly Remittance
Date (i) substitute in lieu of such Home Equity Loan a Qualified Replacement
Mortgage and deliver the Substitution Amount to the Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Home Equity Loan at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Servicer for deposit in the Principal and Interest
Account. In connection with any proposed purchase or substitution of a Home
Equity Loan, the Seller shall cause at the Seller's expense to be delivered to
the Trustee and to the Certificate Insurer an Opinion of Counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the Trust or would
jeopardize the status of the Trust as a REMIC, and the Seller shall only be
required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the Trust or would not jeopardize the
status of the Trust as a REMIC. Any required purchase or substitution, if
delayed by the absence of such opinion, shall nonetheless occur upon the
earlier of (i) the occurrence of a default or imminent default with respect to
the Home Equity Loan or (ii) the delivery of such opinion.
(c) In addition to the foregoing, the Custodian, on behalf of the
Trustee also agrees to make a review during the 12th month after the Startup
Day indicating the current status of the exceptions previously indicated on the
Pool Certification (the "Final Certification"). After delivery of the Final
Certification, the Custodian, on behalf of the Trustee and the Servicer shall
provide to the Certificate Insurer no less frequently than monthly updated
certifications indicating the then current status of exceptions, until all such
exceptions have been eliminated.
Section 3.07. [Reserved]
Section 3.08. Custodian.
Notwithstanding anything to the contrary in this Agreement, the
parties hereto acknowledge that the functions of the Trustee with respect to
the custody, acceptance, inspection and release of the Files pursuant to
Sections 3.05, 3.06, 3.07 and 8.14 and the related Pool Certification and Final
Certification shall be performed by the Custodian on the Trustee's behalf
pursuant to the Custodial Agreement; provided, however, the Trustee shall
remain primarily liable for such obligations. The fees and expenses of the
Custodian will be paid by the Servicer.
If, pursuant to Section 4.12 of the Custodial Agreement, the Custodian
shall request written instructions from the Trustee, the Trustee hereby agrees
to promptly provide such instructions.
Section 3.09. Cooperation Procedures. (a) The Seller shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Custodian, on behalf of the Trustee, provide the Trustee with information set
forth in the Schedules of Home Equity Loans with respect to such Qualified
Replacement Mortgage.
(b) The Seller, the Depositor, the Servicer and the Trustee covenant
to provide each other with all data and information required to be provided by
them hereunder at the times required hereunder, and additionally covenant
reasonably to cooperate with each other in providing any additional information
required to be obtained by any of them in connection with their respective
duties hereunder.
(c) The Servicer shall maintain such accurate and complete accounts,
records and computer systems pertaining to each File as shall enable it and the
Trustee to comply with this Agreement. In performing its recordkeeping duties
the Servicer shall act in accordance with the servicing standards set forth in
this Agreement. The Servicer shall conduct, or cause to be conducted, periodic
audits of its accounts, records and computer systems as set forth in Section
8.16 and 8.17 hereof. The Servicer shall promptly report to the Trustee any
failure on its part to maintain its accounts, records and computer systems
herein provided and promptly take appropriate action to remedy any such
failure.
(d) The Seller further confirms to the Trustee that it has caused the
portions of the electronic ledger relating to the Home Equity Loans to be
clearly and unambiguously marked to indicate that such Home Equity Loans have
been sold, transferred, assigned and conveyed through the Depositor to the
Trustee and constitute part of the Trust Estate in accordance with the terms of
the trust created hereunder and that the Seller will treat the transaction
contemplated by such sale, transfer, assignment and conveyance as a sale for
accounting purposes.
Notwithstanding anything to the contrary in this Agreement, the
parties hereto acknowledge that the functions of the Trustee with respect to
the custody, acceptance, inspection and release of the Files pursuant to
Sections 3.05, 3.06, 3.08 and 8.14 and the related Pool Certification and Final
Certification shall be performed by the Custodian pursuant to the Custodial
Agreement. The fees and expenses of the Custodian will be paid by the Servicer.
END OF ARTICLE III
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.01. Issuance of Certificates.
On the Startup Day, upon the Trustee's receipt from the Depositor of
an executed Delivery Order in the form set forth as Exhibit H hereto, the
Trustee shall authenticate and deliver the Certificates on behalf of the Trust.
Section 4.02. Sale of Certificates.
At 11 a.m. New York City time on the Startup Day, at the offices of
Brown & Wood LLP, One World Trade Center, New York, New York 10048 (or at such
other location acceptable to the Seller), the Seller will sell and convey the
Home Equity Loans and the money, instruments and other property related thereto
to the Depositor and the Depositor will convey the Home Equity Loans and the
money, instruments and other property related thereto to the Trustee, and the
Trustee will deliver (i) to the Underwriters (as designee of the Depositor),
the Class A Certificates with an aggregate Percentage Interest in each Class
equal to 100% registered in the name of Cede & Co. or in such other names as
the Underwriters shall direct, against payment to the Depositor of the purchase
price thereof by wire transfer of immediately available funds to the Trustee as
designee of the Depositor and (ii) to the respective registered owners thereof
(as designees of the Depositor), Class R Certificates with a Percentage
Interest equal to 99.999%, registered in the name of the initial purchasers
thereof and a Class R Certificate with a Percentage Interest equal to 0.001%,
registered in the name of the Tax Matters Person (all such events shall be
referred to herein as the "Closing").
Upon the Trustee's receipt of the entire net proceeds of the sale of
the Class A Certificates, the Trustee on behalf of the Depositor shall remit
the entire balance of such net proceeds in accordance with instructions
delivered by the Depositor.
END OF ARTICLE IV
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.01. Terms.
(a) The Certificates are pass-through securities having the rights
described therein and herein. Notwithstanding references herein or therein with
respect to the Certificates as to "principal" and "interest" thereof, no debt
of any Person is represented thereby, nor are the Certificates or the
underlying Notes guaranteed by any Person (except that the Notes may be
recourse to the Mortgagors thereof to the extent permitted by law and the terms
of the related Note and except for the rights of the Trustee on behalf of the
Owners of the Class A Certificates with respect to the Certificate Insurance
Policy). The Class A Certificates are payable solely from payments received on
or with respect to the Home Equity Loans (net of the Servicing Fees, Trustee
Fees, and Premium Amounts), moneys in the Principal and Interest Account,
except as otherwise provided herein, and moneys initially deposited into the
Certificate Account in respect of loans that will not accrue a full 30 days
interest for the first Payment Date, from earnings on moneys and the proceeds
of property held as a part of the Trust Estate and, upon the occurrence of
certain events, from Insured Payments. Each Certificate entitles the Owner
thereof to receive monthly on each Payment Date, in order of priority of
distributions with respect to such Class of Certificates as set forth in
Section 7.03, a specified portion of such payments with respect to the Home
Equity Loans, certain related Insured Payments, pro rata in accordance with
such Owner's Percentage Interest.
(b) Each Owner is required, and hereby agrees, to return to the
Trustee, any Certificate prior to the Trustee making the final distribution due
thereon. Any such Certificate as to which the Trustee has made the final
distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement.
Section 5.02. Forms.
The Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates, the Class A-5 Certificates, the Class
A-6 Certificates and the Class A-7 Certificates and the Class R Certificates
shall be in substantially the forms set forth in Exhibits A-1, A-2, A-3, A-4,
A-5, A-6, A-7 and C hereof, respectively.
Section 5.03. Execution, Authentication and Delivery.
Each Certificate shall be executed on behalf of the Trust, by the
manual signature of one of the Trustee's Authorized Officers. In addition, each
Certificate shall be authenticated by the manual signature of one of the
Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were at
any time the proper officers of the Trustee shall, upon proper authentication
by the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.02 hereof.
Subsequently issued Certificates will be dated as of the issuance of the
Certificate.
No Certificate shall be valid until executed and authenticated as set
forth above.
Section 5.04. Registration and Transfer of Certificates.
(a) The Trustee shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby initially appointed Registrar
for the purpose of registering Certificates and transfers of Certificates as
herein provided. The Certificate Insurer, the Owners and the Trustee shall have
the right to inspect the Register during the Trustee's normal hours and to
obtain copies thereof, and the Trustee shall have the right to rely upon a
certificate executed on behalf of the Registrar by an Authorized Officer
thereof as to the names and addresses of the Owners of the Certificates and the
principal amounts and numbers of such Certificates.
If a Person other than the Trustee is appointed as Registrar by the
Owners of a majority of the aggregate Percentage Interests represented by the
Class A Certificates then Outstanding with the consent of the Certificate
Insurer or if there are no longer any Class A Certificates then outstanding, by
such majority of the Percentage Interests represented by the Class R
Certificates, such Owners shall give the Trustee, the Certificate Insurer and
the Owners prompt written notice of the appointment of such Registrar and of
the location, and any change in the location, of the Register. In connection
with any such appointment the reasonable fees of the Registrar shall be paid,
as expenses of the Trust, pursuant to Section 7.06 hereof.
(b) Subject to the provisions of Section 5.08 hereof, upon surrender
for registration of transfer of any Certificate at the office designated as the
location of the Register, upon the direction of the Registrar, the Trustee
shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates of a like Class and in
the aggregate outstanding principal amount or Percentage Interest of the
Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by
such Owner may be exchanged for other Certificates authorized of like Class and
tenor and a like aggregate outstanding principal amount or Percentage Interest
and bearing numbers not contemporaneously outstanding, upon surrender of the
Certificates to be exchanged at the office designated as the location of the
Register. Whenever any Certificate is so surrendered for exchange, upon the
direction of the Registrar, the Trustee shall execute, authenticate and deliver
the Certificate or Certificates which the Owner making the exchange is entitled
to receive.
(d) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement
as the Certificates surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by
the Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration
of transfer or exchange of Certificates, but the Registrar or Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer
or exchange shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered so as
to participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Class A Certificates shall, except as otherwise provided
in Subsection (h), be initially issued in the form of a single fully registered
Class A Certificate of such Class. Upon initial issuance, the ownership of each
such Class A Certificate shall be registered in the Register in the name of
Cede & Co., or any successor thereto, as nominee for the Depository.
On the Startup Day, the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class A-7 Certificates shall be issued in
denominations of $1,000 and integral multiples of $1 in excess thereof.
The Depositor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository in the form provided to
the Trustee by the Depositor.
With respect to the Class A Certificates registered in the Register
in the name of Cede & Co., as nominee of the Depository, the Depositor, the
Servicer, the Seller, the Certificate Insurer and the Trustee shall have no
responsibility or obligation to Direct or Indirect Participants or beneficial
owners for which the Depository holds Class A Certificates from time to time as
a Depository. Without limiting the immediately preceding sentence, the
Depositor, the Servicer, the Seller, the Certificate Insurer and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect
Participant with respect to the ownership interest in the Class A Certificates,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a registered Owner of a Class A Certificate as shown in the
Register, of any notice with respect to the Class A Certificates or (iii) the
payment to any Direct or Indirect Participant or any other Person, other than a
registered Owner of a Class A Certificate as shown in the Register, of any
amount with respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a registered Owner of a Class A Certificate
as shown in the Register shall receive a certificate evidencing such Class A
Certificate.
Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the registered Owners
of Class A Certificates appearing as registered Owners in the registration
books maintained by the Trustee at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) In the event that (i) the Depository or the Depositor
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Seller or the Trustee is unable to
locate a qualified successor or (ii) the Depositor at its sole option elects to
terminate the book-entry system through the Depository, the Class A
Certificates shall no longer be restricted to being registered in the Register
in the name of Cede & Co. (or a successor nominee) as nominee of the Depository
or (iii) after the occurrence of a Servicer Termination Event, the beneficial
owners of each Class of Class A Certificates representing Percentage Interests
aggregating not less than 51% advises the Trustee and Depositary through the
Direct or Indirect Participants in writing that the continuation of a
book-entry system through the Depositary to the exclusion of definitive, fully
registered certificates (the "Definitive Certificates") to Owners is no longer
in the best interests of the Owners. In the case of (i) and (ii) above, the
Seller may determine that the Class A Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Seller and at the Seller's expense, or such
depository's agent or designee but, if the Seller does not select such
alternative global book-entry system and in the case of (iii) above, then the
Class A Certificates may be registered in whatever name or names registered
Owners of Class A Certificates transferring Class A Certificates shall
designate, in accordance with the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede
& Co., as nominee of the Depository, all distributions of principal or interest
on such Class A Certificates and all notices with respect to such Class A
Certificates shall be made and given, respectively, in the manner provided in
the Representation Letter.
Section 5.05. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) in the case of any mutilated Certificate,
such mutilated Certificate shall first be surrendered to the Trustee, and in
the case of any destroyed, lost or stolen Certificate, there shall be first
delivered to the Trustee such security or indemnity as may be reasonably
required by it to hold the Trustee and the Certificate Insurer harmless
(provided, that with respect to an Owner which is an institutional investor, a
letter of indemnity furnished by it shall be sufficient for this purpose),
then, in the absence of notice to the Trustee or the Registrar that such
Certificate has been acquired by a bona fide purchaser, the Seller shall
execute and 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 Class, tenor and aggregate principal amount, bearing a
number not contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Registrar or Trustee may require the payment from the transferor or transferee
of the related Certificate of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange for
or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.06. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any
Certificate, the Certificate Insurer, the Trustee and any agent of the Trustee
may treat the Person in whose name any Certificate is registered as the Owner
of such Certificate for the purpose of receiving distributions with respect to
such Certificate and for all other purposes whatsoever, and neither the
Certificate Insurer, the Trustee nor any agent of the Trustee shall be affected
by notice to the contrary.
Section 5.07. Cancellation.
All Certificates surrendered for registration of transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. No Certificate shall be
authenticated in lieu of or in exchange for any Certificate canceled as
provided in this Section, except as expressly permitted by this Agreement. All
canceled Certificates may be held by the Trustee in accordance with its
standard retention policy.
Section 5.08. Limitation on Transfer of Ownership Rights.
(a) No sale or other transfer of record or beneficial ownership of a
Class R Certificate (whether pursuant to a purchase, a transfer resulting from
a default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or an agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate (whether pursuant
to a purchase, a transfer resulting from a default under a secured lending
agreement or otherwise) to a Disqualified Organization shall be deemed to be of
no legal force or effect whatsoever and such transferee shall not be deemed to
be an Owner for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class R Certificate. Furthermore, in no event
shall the Trustee accept surrender for transfer, registration of transfer, or
register the transfer, of any Class R Certificate nor authenticate and make
available any new Class R Certificate unless the Trustee has received an
affidavit from the proposed transferee in the form attached hereto as Exhibit
I. Each holder of a Class R Certificate by his acceptance thereof, shall be
deemed for all purposes to have consented to the provisions of this Section
5.08(a).
(b) No other sale or other transfer of record or beneficial ownership
of a Class R Certificate shall be made unless such transfer is exempt from the
registration requirements of the Securities Act, and any applicable state
securities laws or is made in accordance with said Securities Act and laws. In
the event of any such a transfer: (i) in the case of transfers for which an
investment letter in the form of Exhibit J-1 is provided by the transferee to
the Trustee and the Certificate Insurer, the Trustee or the Depositor shall
require a written Opinion of Counsel acceptable to and in form and substance
satisfactory to the Depositor, the Trustee and the Certificate Insurer to the
effect that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from said Securities Act and laws
or is being made pursuant to said Securities Act and laws, which Opinion of
Counsel shall not be an expense of the Depositor, the Trustee, the Trust Estate
or the Certificate Insurer; and (ii) in the case of transfers for which an
investment letter in the form of Exhibit J-1 or J-2 is provided, the investment
letter shall not be an expense of the Depositor, the Trustee, the Trust Estate
or the Certificate Insurer. The Owner of a Class R Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Certificate Insurer, the Depositor and the Seller against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(c) No transfer of a Class R Certificate shall be made unless the
Trustee shall have received either: (i) a representation letter from the
transferee of such Class R Certificate, acceptable to and in form and substance
satisfactory to the Trustee and the Certificate Insurer (which may be combined
with the investment letter required by subsection (b) above), to the effect
that such transferee is not an employee benefit plan subject to Section 406 of
ERISA nor a plan or other arrangement subject to Section 406 of ERISA nor a
plan or other arrangement subject to Section 4975 of the Code (collectively, a
"Plan"), nor is acting on behalf of any Plan nor using the assets of any Plan
to effect such transfer or (ii) in the event that any Class R Certificate is
purchased by a Plan, or by a person or entity acting on behalf of any Plan or
using the assets of any Plan to effect such transfer (including the assets of
any Plan held in an insurance company separate or general account), an Opinion
of Counsel, acceptable to and in form and substance satisfactory to the Trustee
and the Certificate Insurer, which Opinion of Counsel shall not be at the
expense of either the Trustee, the Certificate Insurer or the Trust, to the
effect that the purchase or holding of any Class R Certificates will not result
in the assets of the Trust being deemed to be "plan assets," will not cause the
Trust to be subject to the fiduciary requirements and prohibited transaction
provisions of ERISA and the Code, and will not subject the Trustee to any
obligation or liability in addition to those expressly undertaken under this
Agreement. Notwithstanding anything else to the contrary herein, any purported
transfer of a Certificate to or on behalf of any Plan without the delivery to
the Trustee and the Certificate Insurer of an Opinion of Counsel as described
above shall be null and void and of no effect.
(d) No sale or other transfer of any Class A Certificate may be made
to the Depositor, the Seller, the Servicer or any of their respective
Affiliates (other than in the case of the Depositor, Lehman Brothers Inc.).
(e) No sale or other transfer of any Class R Certificate shall be
made to the Seller.
(f) Notwithstanding anything to the contrary contained in this
Section 5.08, the Class R Certificates may be transferred to CHEC Residual
Corporation, a Nevada corporation and wholly-owned subsidiary of the Seller,
without regard to Sections 5.08(b), (c) or (e) above.
Section 5.09. Assignment of Rights.
Other than with respect to any Class R Certificates (unless the
Trustee shall have received a satisfactory Opinion of Counsel to the effect
that such action with respect to a Class R Certificate will not have an adverse
effect on the status of the REMIC as a "REMIC") an Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.04 and Section 5.08 hereof.
END OF ARTICLE V
ARTICLE VI
COVENANTS
Section 6.01. Distributions.
On each Payment Date, the Trustee will withdraw amounts from the
Certificate Account and make the distributions with respect to the Certificates
in accordance with the terms of the Certificates and this Agreement. Such
distributions shall be made (i) in the case of the Class A Certificates
registered in the name of the Depository, by wire transfer to the Depository or
(ii) by check or draft mailed on each Payment Date or (iii) if requested by any
Owner (other than the Depository) of (A) a Class A Certificate having an
original principal balance of not less than $1,000,000 or (B) a Class R
Certificate having a Percentage Interest of not less than 10% in writing not
later than one Business Day prior to the applicable Record Date (which request
does not have to be repeated unless it has been withdrawn), to such Owner by
wire transfer to an account within the United States designated no later than
five Business Days prior to the related Record Date, made on each Payment Date,
in each case to each Owner of record on the immediately preceding Record Date.
Section 6.02. Money for Distributions to be Held in Trust;
Withholding.
(a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account or from Insured Payments shall be made by and on behalf of the Trustee
or by a Paying Agent, and no amounts so withdrawn from the Certificate Account
for payments of Certificates and no Insured Payment shall be paid over to the
Trustee except as provided in this Section.
(b) If the Seller has appointed a Paying Agent pursuant to Section
11.15 hereof, the Trustee will, on the Business Day immediately preceding each
Payment Date, deposit with such Paying Agent in immediately available funds an
aggregate sum sufficient to pay the amounts then becoming due (to the extent
funds are then available for such purpose in the Certificate Account for the
Class to which such amounts are due) such sum to be held in trust for the
benefit of the Owners entitled thereto.
(c) The Seller may at any time direct any Paying Agent to pay to the
Trustee all sums held in trust by such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
(d) The Seller shall require the Paying Agent, including the Trustee
on behalf of the Trust to comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any
distributions made by it to any Owner of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith.
(e) Any money held by the Trustee or a Paying Agent in trust for the
payment of any amount due with respect to any Class A Certificate remaining
unclaimed by the Owner of such Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first to the
Certificate Insurer on account of any Reimbursement Amount and second to the
Owners of the Class R Certificates; and the Owner of such Class A Certificate
shall thereafter, as an unsecured general creditor, look only to the Owners of
the Class R Certificates and not to the Certificate Insurer for payment thereof
(but only to the extent of the amounts so paid to the Owners of the Class R
Certificates) and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee or such Paying Agent before being required to make any such payment,
may at the expense of the Trust cause to be published once, in the eastern
edition of The Wall Street Journal, notice that such money remains unclaimed
and that, after a date specified therein, which shall be not fewer than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be paid to the Certificate Insurer on account of any
Reimbursement Amount or to the Owners of the Class R Certificates. The Trustee
shall, at the direction of the Seller, also adopt and employ, at the expense of
the Seller, any other reasonable means of notification of such payment
(including but not limited to mailing notice of such payment to Owners whose
right to or interest in moneys due and payable but not claimed is determinable
from the records of the Registrar, the Trustee or any Paying Agent, at the last
address of record for each such Owner).
Section 6.03. Protection of Trust Estate.
(a) The Trustee will hold the Trust Estate in trust for the benefit
of the Owners and the Certificate Insurer and, upon request of the Certificate
Insurer or, with the consent of the Certificate Insurer, at the request of the
Depositor, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 11.14 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such request from the Depositor (with the consent of the Certificate Insurer)
or the Certificate Insurer, to:
(i) more effectively hold in trust all or any portion of the
Trust Estate;
(ii) perfect, publish notice of, or protect the validity of any
grant made or to be made by this Agreement;
(iii) enforce any of the Home Equity Loans; or
(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee, and the ownership interests of the Owners
represented thereby, in such Trust Estate against the claims of all
Persons and parties.
To the extent not covered by the indemnity or other security
contemplated by 10.01(e) and 10.01(g), the Trustee shall be reimbursed for any
costs or expenses associated with this section pursuant to Section
7.03(b)(iii)(G) hereof.
(b) The Trustee shall have the power to enforce, and shall enforce
the obligations and rights of the other parties to this Agreement, and of the
Certificate Insurer or the Owners, by action, suit or proceeding at law or
equity, and shall also have the power to enjoin, by action or suit in equity,
any acts or occurrences which may be unlawful or in violation of the rights of
the Certificate Insurer or the Owners as such rights are set forth in this
Agreement; provided, however, that nothing in this Section shall require any
action by the Trustee unless the Trustee shall first (i) have been furnished
indemnity satisfactory to it and (ii) when required by this Agreement, have
been requested by the Certificate Insurer or the Owners of a majority of the
Percentage Interests represented by the Class A Certificates then Outstanding
with the consent of the Certificate Insurer (unless a Certificate Insurer
Default under clause (a) of the definition thereof has occurred and is
continuing) or, if there are no longer any Class A Certificates then
outstanding, by such majority of the Percentage Interests represented by the
Class R Certificates; provided, further, however, that if there is a dispute
with respect to payments under the Certificate Insurance Policy the Trustee's
first responsibility is to the Owners.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties, or adversely affect its rights and
immunities hereunder.
Section 6.04. Performance of Obligations.
The Trustee will not take any action that would release any Person
from any of such Person's covenants or obligations under any instrument or
document relating to the Certificates or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder pursuant to Section 10.03(g); provided, that
the Trustee shall remain liable for the performance of any such duties
notwithstanding any such contractual arrangement.
Section 6.05. Negative Covenants.
The Trustee will not:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than
amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Owner by reason of the
payment of any taxes levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty, on behalf of the Trust, any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust in whole or in part, except
pursuant to Article IX hereof; or
(v) (A) permit the validity or effectiveness of this Agreement
to be impaired, or permit any Person to be released from any
covenant or obligation with respect to the Trust or to the
Certificates under this Agreement, except as may be expressly
permitted hereby or (B) permit any lien, charge, adverse claim,
security interest, mortgage or other encumbrance to be created on or
extend to or otherwise arise upon or burden the Trust Estate or any
part thereof or any interest therein or the proceeds thereof.
Section 6.06. No Other Powers.
The Trustee will not permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.03
hereof.
Section 6.07. Limitation of Suits.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Agreement or the Certificate Insurance
Policy, or for the appointment of a receiver or trustee of the Trust, or for
any other remedy with respect to an event of default hereunder, unless:
(1) such Owner has previously given written notice to the Seller and
the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the Class A Certificates then Outstanding or, if
there are no Class A Certificates then Outstanding, by a
majority of the Percentage Interests represented by the Class R
Certificates, shall have made written request to the Trustee to
institute such proceeding in its own name as Trustee
establishing the Trust;
(3) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceeding;
(5) as long as any Class A Certificates are Outstanding or any
Reimbursement Amounts are owed to the Certificate Insurer, the
Certificate Insurer has consented in writing thereto (unless a
Certificate Insurer Default as defined in clause (a) of the
definition thereof has occurred and is continuing); and
(6) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Owners of
a majority of the Percentage Interests represented by the Class
A Certificates or, if there are no Class A Certificates then
Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates; it being understood and
intended that no one or more Owners shall have any right in any
manner whatever by virtue of, or by availing themselves of, any
provision of this Agreement to affect, disturb or prejudice the
rights of any other Owner of the same Class or to obtain or to
seek to obtain priority or preference over any other Owner of
the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and
ratable benefit of all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Owners, each representing
less than a majority of the applicable Class of Certificates and each
conforming to paragraphs (1)-(6) of this Section 6.07, the Certificate Insurer
in its sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provision of this Agreement.
Section 6.08. Unconditional Rights of Owners to Receive
Distributions.
Notwithstanding any other provision in this Agreement, the Owner of
any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.09. Rights and Remedies Cumulative.
Except as otherwise provided herein, no right or remedy herein
conferred upon or reserved to the Trustee, the Certificate Insurer or to the
Owners is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. Except as otherwise provided herein,
the assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver.
No delay of the Trustee, the Certificate Insurer or any Owner of any
Certificate to exercise any right or remedy under this Agreement shall impair
any such right or remedy or constitute a waiver of such right or remedy. Every
right and remedy given by this Article VI or by law to the Trustee, the
Certificate Insurer or to the Owners may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee, the Certificate Insurer, or
by the Owners, as the case may be.
Section 6.11. Control by Owners.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then Outstanding with the
consent of the Certificate Insurer or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.03 and
Section 8.20 hereof, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory
to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, as the case may be, which is not inconsistent with such
direction (and which does not require Certificate Insurer
consent or direction pursuant to the terms of this Agreement);
provided, however, that the Trustee need not take any action
which it determines might involve it in liability or may be
unjustly prejudicial to the Owners not so directing.
Section 6.12. Indemnification by the Seller.
The Seller agrees to indemnify and hold the Trustee, the Depositor,
the Certificate Insurer and each Owner 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 Trustee, the Depositor, the
Certificate Insurer and any Owner sustain in any way related to the failure of
Seller to perform its duties in compliance with the terms of this Agreement.
The Seller shall immediately notify the Trustee, the Depositor, the Certificate
Insurer and each Owner if a claim is made by a third party that the Servicer
has failed to perform its obligations to service and administer the Home Equity
Loans in compliance with the terms of this Agreement, and the Seller shall
assume (with the consent of the Trustee) the defense of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Depositor, the Servicer, the Seller, the Trustee, the Certificate
Insurer and/or Owner in respect of such claim. The Trustee shall, in accordance
with instructions received from the Seller, reimburse the Seller only from
amounts otherwise distributable on the Class R Certificates for all amounts
advanced by it pursuant to the preceding sentence, except when a final
nonappealable adjudication determines that the claim relates directly to the
failure of the Seller to perform its duties in compliance with the terms of
this Agreement. The provisions of this Section 6.12 shall survive the
termination of this Agreement and the payment of the outstanding Certificates.
END OF ARTICLE VI
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.01. Collection of Money.
Except as otherwise expressly provided herein, the Trustee shall
demand payment or delivery of all money and other property payable to or
receivable by the Trustee pursuant to this Agreement or the Certificate
Insurance Policy, including (a) all payments due on the Home Equity Loans in
accordance with the respective terms and conditions of such Home Equity Loans
and required to be paid over to the Trustee by the Servicer or by any
Sub-Servicer and (b) Insured Payments. The Trustee shall hold all such money
and property received by it as part of the Trust Estate and shall apply it as
provided in this Agreement.
Section 7.02. Establishment of Accounts.
(a) The Depositor shall cause to be established on the Startup Day,
and the Trustee shall maintain, at the Corporate Trust Office, the Certificate
Account as an Eligible Account to be held by the Trustee in the name of the
Trust on behalf of the Owners of the Certificates and the Certificate Insurer.
(b) On each Determination Date the Trustee shall determine (subject
to the terms of Section 10.03(j) hereof, based solely on information provided
to it in writing by the Servicer) with respect to the immediately following
Payment Date, the amounts that are expected to be on deposit in the Certificate
Account as of such date on such Payment Date with respect to Group I
(disregarding the amounts of any Insured Payments) and equal to the sum of (x)
such amounts on deposit therein excluding the amount of any Total Monthly
Excess Cashflow from Group I included in such amounts plus (y) any amounts of
related Total Monthly Excess Cashflow from either Group to be applied on such
Payment Date to the Fixed Rate Certificates. The amount described in clause (x)
of the preceding sentence with respect to each Payment Date is the "Group I
Available Funds" and the sum of the amounts described in clauses (x) and (y) of
the preceding sentence with respect to each Payment Date is the "Group I Total
Available Funds."
(c) On each Determination Date the Trustee shall determine (subject
to the terms of Section 10.03(j) hereof, based solely on information provided
to it in writing by the Servicer) with respect to the immediately following
Payment Date, the amounts that are expected to be on deposit in the Certificate
Account as of such date on such Payment Date with respect to Group II
(disregarding the amounts of any Insured Payments) and equal to the sum of (x)
such amounts on deposit therein excluding the amount of any Total Monthly
Excess Cashflow for Group II included in such amounts plus (y) any amounts of
related Total Monthly Excess Cashflow from either Group to be applied on such
Payment Date to the Class A-7 Certificates. The amount described in clause (x)
of the preceding sentence with respect to each Payment Date is the "Group II
Available Funds" and the sum of the amounts described in clauses (x) and (y) of
the preceding sentence with respect to each Payment Date is the "Group II Total
Available Funds."
Section 7.03. Flow of Funds.
(a) (i) The Trustee shall deposit in the Certificate Account without
duplication, upon receipt, with respect to Group I, the proceeds of any
liquidation of the assets of the Trust insofar as such assets relate to Group
I, all remittances made to the Trustee pursuant to Section 8.08(d)(ii) with
respect to Group I and the Group I Monthly Remittance Amount remitted by the
Servicer.
(ii) The Trustee shall deposit in the Certificate Account without
duplication, upon receipt, with respect to Group II, the proceeds of any
liquidation of the assets of the Trust insofar as such assets relate to Group
II, all remittances made to the Trustee pursuant to Section 8.08(d)(ii) with
respect to Group II and the Group II Monthly Remittance Amount remitted by the
Servicer.
(b) Subject to the provisions of clause (c) below on each Payment
Date, the Trustee shall make the following allocations disbursements and
transfers (based solely on information provided by the Servicer in writing),
for each Home Equity Loan Group from amounts deposited in the Certificate
Account pursuant to subsection (a) and (e) for the related Home Equity Loan
Group 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) first, on each Payment Date from amounts then on deposit in the
Certificate Account for the related Home Equity Loan Group, (A)
the Trustee Fee allocable to the related Home Equity Loan Group
shall be paid to the Trustee and (B) provided that no
Certificate Insurer Default as defined in clause (a) of the
definition thereof has occurred and is continuing, the Premium
Amount for the related Classes of Class A Certificates for such
Payment Date shall be paid to the Certificate Insurer;
(ii) second, on each Payment Date, the Trustee shall allocate an
amount equal to the sum of (x) the Total Monthly Excess Spread
with respect to the related Home Equity Loan Group and Payment
Date plus (y) any Subordination Reduction Amount with respect to
the related Home Equity Loan Group and Payment Date (such sum
being the "Total Monthly Excess Cashflow" for the related Home
Equity Loan Group and Payment Date) to the related Classes of
Class A Certificates in the following order of priority:
(A) first, such Total Monthly Excess Cashflow with respect to
each Group shall be allocated to the payment of the related
Class A Distribution Amount pursuant to clause (b)(iii)
below (excluding any related Subordination Increase Amount)
in an amount equal to the amount, if any, by which (x) the
related Class A Distribution Amount (excluding any related
Subordination Increase Amount) exceeds (y) the Available
Funds with respect to such Home Equity Loan Group (net of
the related Trustee Fee and the related Premium Amount) and
shall be paid as part of the Class A Distribution Amount,
first pursuant to clause (b)(iii)(A) below, and then as
applicable pursuant to clause (b)(iii)(B) or (C) below (the
amount of such difference being the "Group I Available
Funds Shortfall" with respect to Group I and the "Group II
Available Funds Shortfall" with respect to Group II);
(B) second, any portion of the Total Monthly Excess Cashflow
with respect to such Home Equity Loan Group remaining after
the allocation described in clause (b)(ii)(A) above shall
be allocated against any Available Funds Shortfall with
respect to the other Home Equity Loan Group;
(C) third, provided that no Certificate Insurer Default as
defined in clause (a) of the definition thereof has
occurred and is continuing, any portion of the Total
Monthly Excess Cashflow with respect to a Home Equity Loan
Group remaining after the allocations described in clauses
(b)(ii)(A) and (B) above shall be paid to the Certificate
Insurer in respect of amounts owed on account of any
Reimbursement Amount with respect to the related Classes of
Class A Certificates;
(D) fourth, provided that no Certificate Insurer Default as
defined in clause (a) of the definition thereof has
occurred and is continuing, any portion of the Total
Monthly Excess Cashflow with respect to a Home Equity Loan
Group remaining after the allocations described in clauses
(b)(ii)(A), (B) and (C) above shall be paid to the
Certificate Insurer in respect of any Reimbursement Amount
with respect to the unrelated Classes of Class A
Certificates;
(E) fifth, any portion of the Total Monthly Excess Cashflow
with respect to a Home Equity Loan Group remaining after
the allocation described in clauses (b)(ii)(A), (B), (C)
and (D) above shall be used to reduce to zero, through the
payment to the Owners of the related Classes of Class A
Certificates of a Subordination Increase Amount included in
the related Principal Distribution Amount, which shall be
paid pursuant to clause (b)(iii)(B) or (C) below, any
Subordination Deficiency Amount with respect to the related
Home Equity Loan Group as of such Payment Date;
(F) sixth, if a Certificate Insurer Default, as defined in
clause (a) of the definition thereof has occurred and is
continuing, then any portion of the Total Monthly Excess
Cashflow with respect to a Home Equity Loan Group remaining
after the allocations described in clauses (b)(ii)(A), (B),
(C), (D) and (E) above shall be paid to the Certificate
Insurer in respect of amounts owed on account of any
Reimbursement Amount with respect to the related Classes of
Class A Certificates;
(G) seventh, any portion of the Total Monthly Excess Cashflow
remaining after the allocation described in clauses
(b)(ii)(A), (B), (C), (D), (E) and (F) above shall be used
to reduce to zero, through the payment to the Owners of the
unrelated Classes of Class A Certificates of a
Subordination Increase Amount included in the Principal
Distribution Amount for such unrelated Classes pursuant to
clauses (b)(iii)(B) or (C) below, any related Subordination
Deficiency Amount, as of such Payment Date;
(H) eighth, if a Certificate Insurer Default, as defined in
clause (a) of the definition thereof, has occurred and is
continuing, then any portion of the Total Monthly Excess
Cashflow with respect to a Home Equity Loan Group remaining
after the allocations described in clauses (b)(ii)(A), (B),
(C), (D), (E), (F) and (G) above shall be paid to the
Certificate Insurer in respect of any Reimbursement Amount
with respect to the unrelated Classes of Class A
Certificates;
(I) ninth, any portion of Total Monthly Excess Cashflow with
respect to Group II remaining after the allocation
described in clauses (b)(ii)(A), (B), (C), (D), (E), (F),
(G) and (H) above shall be allocated to the Owners of Class
A-7 Certificates pursuant to clause (b)(iii)(E) below, to
the extent of any Unpaid Class A-7 Certificateholders'
Interest Index Carryovers from prior Payment Dates; and
(J) tenth, any Total Monthly Excess Cashflow remaining after
the application described in clauses (b)(ii)(A), (B), (C),
(D), (E), (F), (G), (H) and (I) above shall be allocated to
the Servicer pursuant to clause (b)(iii)(F) below to the
extent of any unreimbursed Delinquency Advances,
unreimbursed Servicing Advances and unreimbursed
Compensating Interest;
(iii)third, following the making by the Trustee of all allocations,
transfers and disbursements described (b)(ii) above from amounts
(including any related Insured Payment which shall be used only
to make the payments set forth in clauses (iii)(A)-(C)) then on
deposit in the Certificate Account for the related Home Equity
Loan Group (after giving effect to the allocations provided in
clause (b)(ii) above from the other Home Equity Loan Group), the
Trustee shall distribute:
(A) to the Owners of each Class of related Class A
Certificates, the related Current Interest for each Class
(including the proceeds of any Insured Payments made by the
Certificate Insurer in respect of Current Interest) and in
the case of the Fixed Rate Certificates on a pro rata basis
based on each such Class A Certificate's Current Interest
without priority among the Fixed Rate Certificates;
(B) the Group I Principal Distribution Amount shall be
distributed as follows: (I) to the Owners of the Class A-6
Certificates an amount equal to the Class A-6 Lockout
Distribution Amount and (II) the remainder as follows: (i)
first, to the Owners of the Class A-1 Certificates until
the Class A-1 Certificate Principal Balance is reduced to
zero; (ii) second, to the Owners of the Class A-2
Certificates until the Class A-2 Certificate Principal
Balance is reduced to zero; (iii) third, to the Owners of
the Class A-3 Certificates until the Class A-3 Certificate
Principal Balance is reduced to zero; (iv) fourth, to the
Owners of the Class A-4 Certificates until the Class A-4
Certificate are reduced to zero; (v) fifth, to the Owners
of the Class A-5 Certificates until the Class A-5
Certificate Principal Balance is reduced to zero; and (vi)
sixth, to the Owners of the Class A-6 Certificates until
the Class A-6 Certificate Principal Balance is reduced to
zero (the "Class A-6 Termination Date");
(C) the Group II Principal Distribution Amount shall be
distributed to the Owners of the Class A-7 Certificates
until the Class A-7 Certificate Principal Balance is
reduced to zero;
(D) to the Certificate Insurer the amounts described in clauses
(b)(ii)(C), (D), (F) and (H) above;
(E) to the Owners of the Class A-7 Certificates, the aggregate
amount of any Unpaid Class A-7 Certificateholders' Interest
Index Carryover from prior Payment Dates;
(F) to the Servicer the amounts set forth in clause (b)(ii)(J)
above;
(G) to the Trustee, any unreimbursed Trustee Reimbursable
Expenses, and to any successor Servicer, amounts owed
pursuant to Section 8.20; and
(iv) fourth, from remaining amount on deposit in the Certificate0
Account following the making by the Trustee of all allocations,
transfers and disbursements described above, the Trustee shall
distribute to the Owners of the Class R Certificates, the
Residual Net Monthly Excess Cashflow, if any, for such Payment
Date.
(c) On any Payment Date during the continuance of any Certificate
Insurer Default, if there is a Subordination Deficit with respect to Group I,
then the Group I Principal Distribution Amount for such Payment Date shall be
distributed pro rata to the Owners of any related Outstanding Class A
Certificates on such Payment Date.
(d) Notwithstanding any of the foregoing provisions, the aggregate
amounts distributed on all Payment Dates to the Owners of the related Class A
Certificates on account of principal pursuant to clause (b)(iii)(B) and (C)
shall not exceed the original Certificate Principal Balance of the related
Class A Certificates.
(e) Upon receipt of Insured Payments from the Certificate Insurer on
behalf of Owners of the Class A Certificates, the Trustee shall deposit such
Insured Payments in the Policy Payments Account. On each Payment Date, pursuant
to Section 12.02(b) hereof, such amounts will be transferred from the Policy
Payments Account to the Certificate Account and the Trustee shall distribute
such Insured Payments, or the proceeds thereof in accordance with Section
7.03(b), to the Owners of such Class A Certificates.
(f) The Trustee or Paying Agent shall (i) receive for each Owner of
the Class A Certificates any Insured Payment from the Certificate Insurer and
(ii) disburse the same to the Owners of the related Class A Certificates as set
forth in Section 7.03(b). Insured Payments disbursed by the Trustee or Paying
Agent from proceeds of the Certificate Insurance Policy shall not be considered
payment by the Trust, nor shall such payments discharge the obligation of the
Trust with respect to such Class A Certificates and the Certificate Insurer
shall be entitled to receive the Reimbursement Amount pursuant to Section
7.03(b)(iii)(D) hereof. Nothing contained in this paragraph shall be construed
so as to impose duties or obligations on the Trustee that are different from or
in addition to those expressly set forth in this Agreement.
The rights of the Owners to receive distributions from the proceeds
of the Trust Estate, and all ownership interests of the Owners in such
distributions, shall be as set forth in this Agreement. In this regard, all
rights of the Owners of the Class R Certificates to receive distributions in
respect of the Class R Certificates shall be subject and subordinate to the
preferential rights of the holders of the Class A Certificates to receive
distributions thereon and the ownership interests of such Owners in such
distributions, as described herein. In accordance with the foregoing, the
ownership interests of the Owners of the Class R Certificates in amounts
deposited in the Accounts from time to time shall not vest unless and until
such amounts are distributed in respect of the Class R Certificates in
accordance with the terms of this Agreement. Notwithstanding anything contained
in this Agreement to the contrary, and the Owners of the Class R Certificate
shall not be required to refund any amount properly distributed on the Class R
Certificates pursuant to this Section 7.03.
Section 7.04. [Reserved]
Section 7.05. Investment of Accounts.
(a) Consistent with any requirements of the Code, all or a portion of
any Account held by the Trustee for the benefit of the Owners may (i) remain
uninvested or (ii) be invested and reinvested by the Trustee in the name of the
Trustee for the benefit of the Owners and the Certificate Insurer in one or
more Eligible Investments bearing interest or sold at a discount. The bank
serving as Trustee or any affiliate thereof may be the obligor on any
investment which otherwise qualifies as an Eligible Investment. No investment
in any Account shall mature later than the Business Day immediately preceding
the next Payment Date. Amounts held in the Certificate Account shall be
invested in Eligible Investments, which Eligible Investments shall mature no
later than the Business Day preceding the immediately following Payment Date
or, if such Eligible Investments are an obligation of the Trustee or are money
market funds for which the Trustee or any affiliate is the manager or the
adviser, such Eligible Investments shall mature no later than the following
Payment Date.
(b) If any amounts are needed for disbursement from any Account held
by the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) All income or other gain from investment in the Certificate
Account held by the Trustee shall be withdrawn and retained by the Trustee. Any
investment losses on amounts held in the Certificate Account shall be for the
account of the Trustee and promptly upon the realization of such loss shall be
contributed by the Trustee to the Certificate Account.
Section 7.06. Payment of Trust Expenses.
(a) The Trustee shall make demand on the Seller to pay and the Seller
shall pay the amount of the expenses of the Trust referred to in Section 2.05
(other than payments of premiums to the Certificate Insurer) (including
Trustee's fees and expenses not covered by Sections 7.03(b)(i)(A) and
7.03(b)(iii)(G) respectively), and the Seller shall promptly pay such expenses
directly to the Persons to whom such amounts are due. With respect to the
Certificate Account the Trustee shall receive all income and other gains from
investments as described in Section 7.05(c).
(b) The Seller shall pay directly on the Startup Day the reasonable
fees and expenses of counsel to the Trustee.
Section 7.07. Eligible Investments.
The following are Eligible Investments:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of 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, FHLMC
senior debt obligations, and FNMA senior debt obligations, but excluding any of
such securities whose terms do not provide for payment of a fixed dollar amount
upon maturity or call for redemption;
(b) Federal Housing Administration debentures;
(c) FHLMC participation certificates which guaranty timely payment of
principal and interest and senior debt obligations;
(d) Consolidated senior debt obligations of any Federal Home Loan
Banks;
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities) and senior debt obligations;
(f) Federal funds, certificates of deposit, time deposits, and
bankers' acceptances (having original maturities of not more than 365 days) of
any domestic bank, the short-term debt obligations of which have been rated A-l
by Standard & Poor's and P-l by Moody's; provided that any such certificates of
deposit must be secured at all times by collateral described in clause (a) or
(b) above, such collateral must be held by a third party and the Trustee must
have a perfected first priority security interest in such collateral;
(g) Deposits of any bank or savings and loan association (the
long-term deposit rating of which is Baa3 or better by Moody's and BBB by
Standard & Poor's) which has combined capital, surplus and undivided profits of
at least $50,000,000 which deposits are insured by the FDIC and held up to the
limits insured by the FDIC;
(h) Repurchase agreements collateralized by securities described in
(a), (c), or (e) above with any registered broker/dealer subject to the
Securities Investors Protection Corporation's jurisdiction and subject to
applicable limits therein promulgated by Securities Investors Protection
Corporation or any commercial bank, if such broker/dealer or bank has an
uninsured, unsecured and unguaranteed short-term obligation rated P-l by
Moody's and A-1+ or better by Standard & Poor's, provided:
a. A master repurchase agreement or specific written repurchase
agreement governs the transaction, and
b. The securities are held free and clear of any lien by the
Trustee or an independent third party acting solely as agent for the
Trustee, and such third party is (a) a Federal Reserve Bank, (b) a
bank which is a member of the FDIC and which has combined capital,
surplus and undivided profits of not less than $25,000,000, or (c) a
bank approved in writing for such purpose by the Certificate Insurer,
and the Trustee shall have received written confirmation from such
third party that it holds such securities, free and clear of any
lien, as agent for the Trustee, and
c. A perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed at 31 CFR 306.1
et seq. or 31 CFR 350.0 et seq., in such securities is created for
the benefit of the Trustee, and
d. The repurchase agreement has a term of thirty days or less
and the Trustee will value the collateral securities no less
frequently than weekly marked-to-market at current market price plus
interest and will liquidate the collateral securities if any
deficiency in the required collateral percentage is not restored
within two business days of such valuation, and
e. The fair market value of the collateral securities in
relation to the amount of the repurchase obligation, including
principal and interest, is equal to at least 106%;
(i) Commercial paper (having original maturities of not more than 270
days) rated in the highest short-term rating categories of Standard & Poor's
and Moody's;
(j) Any money market fund rated AAAm or AAAm-G by Standard & Poor's
and Aaa by Moody's which funds are registered under the Investment Company Act
of 1940 and whose shares are registered under the Securities Act of 1933,
including any such fund that is managed by the Trustee or any affiliate of the
Trustee or for which the Trustee or any of its affiliates acts as an adviser;
and
(k) Any other investment permitted by each of the Rating Agencies and
the Certificate Insurer;
provided that no instrument described above shall evidence either the right to
receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that all instruments described hereunder shall mature at par on or prior to the
next succeeding Payment Date unless otherwise provided in this Agreement and
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Section 7.08. Accounting and Directions by Trustee.
By 12:00 noon New York time, on each Payment Date (or such earlier
period as shall be agreed by the Seller and the Trustee), the Trustee shall
notify (subject to the terms of Section 10.03(j) hereof, based solely on
information provided to the Trustee by the Servicer and upon which the Trustee
may rely) the Seller, the Depositor, each Owner and the Certificate Insurer, of
the following information with respect to such Payment Date (which notification
may be given by facsimile, or by telephone promptly confirmed in writing):
(1) The aggregate amount on deposit in the Certificate Account as of
the related Determination Date;
(2) The Class A Distribution Amount, with respect to each Class
individually, and all Classes in the aggregate on the next
Payment Date;
(3) The amount of any Subordination Increase Amount for each Group;
(4) The amount of any Insured Payment to be made by the Certificate
Insurer on such Payment Date;
(5) The application of the amounts described in clauses (1), (3) and
(4) above in respect of the distribution of the Class A
Distribution Amount on such Payment Date in accordance with
Section 7.03 hereof;
(6) The Class A Certificate Principal Balance, the aggregate amount
of the principal of each Class of the Class A Certificates to be
paid on such Payment Date and the remaining Certificate
Principal Balance of each Class of Class A Certificates
following any such payment;
(7) The amount, if any, of any Realized Losses for each Group for
the related Remittance Period;
(8) The amount of any Subordination Deficit, any Subordination
Reduction Amount and the Specified Subordination Amount for each
Group;
(9) [Reserved]
Section 7.09. Reports by Trustee to Owners and Certificate Insurer.
(a) On each Payment Date the Trustee shall transmit a report in
writing to each Owner, the Underwriters, the Depositor, the
Certificate Insurer, Standard & Poor's and Moody's:
(i) the amount of the distribution with respect to such Owners'
Certificates (based on a Certificate in the original principal amount
of $1,000);
(ii) the amount of such Owner's distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments in full or other Prepayments or other recoveries of
principal included therein with respect to Group I and Group II
(based on a Certificate in the original principal amount of $1,000)
and any related Subordination Increase Amount;
(iii) the amount of such Owner's distributions allocable to
interest (based on a Certificate in the original principal amount of
$1,000);
(iv) if the distribution to the Owners of any Class of the Class
A Certificates on such Payment Date was less than the related Class A
Distribution Amount on such Payment Date, the related Carry Forward
Amount and the allocation thereof to the related Classes of Class A
Certificates resulting therefrom;
(v) the amount of any Insured Payment included in the amounts
distributed to the Owners of Class A Certificates on such Payment
Date;
(vi) the principal amount of each Class of Class A Certificate
which will be Outstanding and the aggregate Loan Balance of each
Group after giving effect to any payment of principal on such Payment
Date;
(vii) the Subordinated Amount, Specified Subordinated Amount and
Subordination Deficit for each Group, if any, remaining after giving
effect to all distributions and transfers on such Payment Date;
(viii) based upon information furnished by the Servicer, such
information as may be required by Section 6049(d)(7)(C) of the Code
and the regulations promulgated thereunder to assist the Owners in
computing their market discount;
(ix) the total of any Substitution Amounts and any Loan Purchase
Price amounts included in such distribution with respect to each
Group;
(x) the weighted average Coupon Rate of the Home Equity Loans in
each Group;
(xi) the amount of any Carry-Forward Amounts;
(xii) [Reserved]
(xiii) such other information as the Certificate Insurer or any
Owner may reasonably request with respect to Delinquent Home Equity
Loans;
(xiv) the weighted average gross margin of the Home Equity Loans
in Group II;
(xv) the largest home equity loan balance outstanding in each
Group; and
(xvi) the Class A-7 Pass-Through Rate for the related Payment
Date.
The Servicer shall provide to the Trustee the information described
in Section 8.08(d)(iii) and in clause (b) below to enable the Trustee to
perform its reporting obligations under this Section, and such obligations of
the Trustee under this Section are conditioned upon such information being
received and the information provided in clauses (ii), (ix) and (x) shall be
based solely upon information contained in the monthly servicing report
provided by the Servicer to the Trustee pursuant to Section 8.08 hereof.
(b) In addition, on each Payment Date the Trustee will distribute to
each Owner, the Certificate Insurer, the Underwriters Standard & Poor's and
Moody's, together with the information described in Subsection (a) preceding,
the following information with respect to each Home Equity Loan Group and for
both Groups in the aggregate which is hereby required to be prepared by the
Servicer and furnished to the Trustee for such purpose on or prior to the
related Monthly Remittance Date:
(i) the number and aggregate principal balances of Home Equity
Loans (a) 30-59 days Delinquent, (b) 60-89 days Delinquent and (c) 90
or more days Delinquent, as of the close of business on the last
Business Day of the calendar month immediately preceding the Payment
Date, (d) the numbers and aggregate Loan Balances of all Home Equity
Loans as of such Payment Date after giving effect to any payment of
principal on the last day of the Remittance Period immediately
preceding the Payment Date and (e) the percentage that each of the
amounts represented by clauses (a), (b) and (c) represent as a
percentage of the respective amounts in clause (d);
(ii) the status and the number and dollar amounts of all Home
Equity Loans in foreclosure proceedings as of the close of business
on the last Business Day of the calendar month immediately preceding
such Payment Date, separately stating, for this purpose, all Home
Equity Loans with respect to which foreclosure proceedings were
commenced in the immediately preceding calendar month;
(iii) the number of Mortgagors and the Loan Balances of (a) the
related Mortgages involved in bankruptcy proceedings as of the close
of business on the last Business Day of the calendar month
immediately preceding such Payment Date and (b) Home Equity Loans
that are "balloon" loans;
(iv) the existence and status of any REO Properties, as of the
close of business of the last Business Day of the month immediately
preceding the Payment Date;
(v) the book value of any REO Property as of the close of
business on the last Business Day of the calendar month immediately
preceding the Payment Date;
(vi) cumulative Realized Losses, incurred on the Home Equity
Loans from the Startup Day to and including the Remittance Period
immediately preceding the Payment Date;
(vii) the amount of Net Liquidation Proceeds realized on the
Home Equity Loans during the Remittance Period immediately preceding
the Payment Date;
(viii) the Annual Loss Percentage (Rolling Twelve Month) with
respect to such Payment Date; and
(ix) the 90+ Delinquency Percentage (Rolling Three Month) with
respect to such Payment Date.
The Trustee shall forward such report (together with the information
described in (a) above) concurrently with each distribution to the
Certificateholders, the Rating Agencies, the Certificate Insurer, Bloomberg (at
499 Park Avenue, New York, New York 10022, Attention: Mike Geller) and Intex
Solutions (at 35 Highland Circle, Needham, Massachusetts 02144, Attention:
Harold Brennman) on the related Payment Date.
(c) (i) The Trustee shall, on behalf of the Trust, cause to be filed
with the Commission any periodic reports required to be filed under the
provisions of the Exchange Act, and the rules and regulations of the Commission
thereunder. Upon the request of the Trustee, each of the Seller, the Servicer
and the Depositor shall cooperate with the Trustee in the preparation of any
such report and shall provide to the Trustee in a timely manner all such
information or documentation as is in the possession of such Person and that
the Trustee may reasonably request in connection with the performance of its
duties and obligations under this Section.
(ii) The Trustee shall file with the Commission a Form 15 with
respect to the Trust as soon as practicable following the first date
on which the conditions to filing thereof have been satisfied.
Following the filing of such Form 15, the Trustee will submit a
certificate addressed to an officer of the Depositor certifying that
all filings under the Exchange Act have been made and shall attach a
copy of acceptance slips for such filings. On the Startup Date, the
Depositor shall provide the Trustee with a letter at Closing,
substantially in the form attached hereto as Exhibit N, instructing
the Trustee, as filing agent, to comply with the reporting
obligations for the Trust under the Exchange Act.
Section 7.10. Reports by Trustee.
(a) The Trustee shall report to the Depositor, the Seller, the
Certificate Insurer and each Owner, with respect to the amount on deposit in
the Certificate Account (including the amount therein relating to each Group)
and the identity of the investments included therein, as the Depositor, the
Seller, any Owner or the Certificate Insurer may from time to time reasonably
request. Without limiting the generality of the foregoing, the Trustee shall,
at the reasonable request of the Depositor, the Seller, any Owner or the
Certificate Insurer transmit promptly to the Depositor, the Seller, any Owner
and the Certificate Insurer copies of all accountings of receipts in respect of
the Home Equity Loans furnished to it by the Servicer and shall notify the
Seller and the Certificate Insurer if any Monthly Remittance Amount has not
been received by the Trustee when due.
(b) The Trustee shall report to the Certificate Insurer and each
Owner with respect to any written notices it may from time to time receive
which provide an Authorized Officer with actual knowledge that any of the
statements set forth in Section 3.04(b) hereof are inaccurate.
END OF ARTICLE VII
ARTICLE VIII
SERVICING AND ADMINISTRATION OF HOME EQUITY LOANS
Section 8.01. Servicer and Sub-Servicers.
Acting directly or through one or more Sub-Servicers as provided in
Section 8.03, the Servicer shall service and administer the Home Equity Loans
in accordance with this Agreement and the terms of the respective Home Equity
Loans, and with prudent and reasonable care, using the degree of skill and
attention that the Servicer exercises with respect to comparable home equity
loans that it services for itself or others and shall have full power and
authority, acting alone, to do or cause to be done any and all things in
connection with such servicing and administration which it may deem necessary
or desirable but without regard to: (i) any relationship that the Servicer, any
Sub-Servicer or any Affiliate of the Servicer or any Sub-Servicer may have with
the related Mortgagor; (ii) the ownership of any Certificate by the Servicer or
any Affiliate of the Servicer; (iii) the Servicer's obligation to make
Delinquency Advances or Servicing Advances; or (iv) the Servicer's or any
Sub-Servicer's right to receive compensation for its services hereunder or with
respect to any particular transaction.
Subject to Section 8.03 hereof, the Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to
all or certain of the Home Equity Loans through a Sub-Servicer as it may from
time to time designate, but no such designation of a Sub-Servicer shall serve
to release the Servicer from any of its obligations under this Agreement. Such
Sub-Servicer shall have the rights and powers of the Servicer which have been
delegated to such Sub-Servicer with respect to such Home Equity Loans under
this Agreement.
Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Servicer in its own name or in the name of a
Sub-Servicer is hereby authorized and empowered to execute and deliver, on
behalf of itself, the Owners and the Trustee or any of them, (i) 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 Home Equity
Loans and with respect to the Properties, (ii) to institute foreclosure
proceedings or obtain a deed in lieu of foreclosure so as to effect ownership
of any Property in the name of the Servicer on behalf of the Trustee, and (iii)
to hold title to any Properly upon such foreclosure or deed in lieu of
foreclosure on behalf of the Trustee; provided, however, that to the extent any
instrument described in clause (i) preceding would be delivered by the Servicer
outside of its usual procedures for home equity loans held in its own portfolio
the Servicer shall, prior to executing and delivering such instrument, obtain
the prior written consent of the Certificate Insurer, and provided, further,
however, that Section 8.13(a) and Section 8.14(a) shall each constitute a
revocable power of attorney from the Trustee to the Servicer to execute an
instrument of satisfaction (or assignment of mortgage without recourse) with
respect to any Home Equity Loan held by the Trustee hereunder paid in full or
foreclosed (or with respect to which payment in full has been escrowed).
Revocation of the power of attorney created by the final proviso of the
preceding sentence shall take effect upon (i) the receipt by the Servicer of
written notice thereof from the Trustee, (ii) a Servicer Termination Event or
(iii) the termination of the Trust. The Trustee shall execute any documentation
furnished to it by the Servicer for recordation by the Servicer in the
appropriate jurisdictions, as shall be necessary to effectuate the foregoing.
Subject to Sections 8.13 and 8.14, the Trustee shall, if necessary, execute a
power of attorney to the Servicer or any Sub-Servicer and furnish them with any
other documents as the Servicer or such Sub-Servicer shall reasonably request
to enable the Servicer and such Sub-Servicer to carry out their respective
servicing and administrative duties hereunder.
Upon the request of the Trustee, the Servicer shall send to the
Trustee and, if requested by the Certificate Insurer, the Certificate Insurer,
the details concerning the servicing of the Home Equity Loans on computer
generated tape, diskette or other machine readable format which is mutually
agreeable.
The Servicer shall give prompt notice to the Trustee and the
Certificate Insurer of any action, of which the Servicer has actual knowledge,
to (i) assert a claim against the Trust or (ii) assert jurisdiction over the
Trust.
Servicing Advances incurred by the Servicer or any Sub-Servicer in
connection with the servicing of the Home Equity Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges)
on any Property shall be recoverable by the Servicer or such Sub-Servicer to
the extent described in Section 8.09(b) hereof.
Section 8.02. Collection of Certain Home Equity Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Home Equity Loans, and shall,
to the extent such procedures shall be consistent with this Agreement and the
terms and provisions of any applicable Insurance Policy, follow collection
procedures for all Home Equity Loans at least as rigorous as those described in
the FNMA Guide. Consistent with the foregoing, the Servicer may in its
discretion waive or permit to be waived any late payment charge, prepayment
charge, assumption fee or any penalty interest in connection with the
prepayment of a Home Equity Loan or any other fee or charge which the Servicer
would be entitled to retain hereunder as servicing compensation. In the event
the Servicer shall consent to the deferment of the due dates for payments due
on a Note, the Servicer shall (i) notify the Certificate Insurer of such action
in writing promptly therefore and (ii) nonetheless make payment of any required
Delinquency Advance with respect to the payments so extended to the same extent
as if such installment were due, owing and Delinquent and had not been
deferred, and shall be entitled to reimbursement therefor in accordance with
Section 8.09(a) hereof. The Servicer shall not consent to any such deferment
with respect to the same Note more than once in any 12-month period or more
than 3 times during the life of the Home Equity Loan unless the Certificate
Insurer has been given written notice of such proposed action and its consent
has been obtained or it has failed to object has occurred within ten days of
receipt.
Section 8.03. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
The Servicer may, with the prior written consent of the Certificate
Insurer, enter into Sub-Servicing Agreements for any servicing and
administration of Home Equity Loans with any institution which is acceptable to
the Certificate Insurer and which, (x) is in compliance with the laws of each
state necessary to enable it to perform its obligations under such
Sub-Servicing Agreement, (y) has experience servicing home equity loans that
are similar to the Home Equity Loans and (z) has equity of not less than
$5,000,000 (as determined in accordance with generally accepted accounting
principles). The Servicer shall give notice to the Trustee, the Owners, the
Certificate Insurer and the Rating Agencies of the appointment of any
Sub-Servicer (and shall receive the confirmation of the Rating Agencies that
such Sub-Servicer shall not result in a withdrawal or downgrading by any Rating
Agency of the rating or the shadow rating of the Class A Certificates). For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Home Equity Loans when any Sub-Servicer has received such payments.
Each Sub-Servicer shall be required to service the Home Equity Loans in
accordance with this Agreement and any such Sub-Servicing Agreement shall be
consistent with and not violate the provisions of this Agreement. Each
Sub-Servicing Agreement shall provide that the Trustee (if acting as successor
Servicer) or any other successor Servicer shall have the option to terminate
such agreement without payment of any fees if the original Servicer is
terminated or resigns. The Servicer shall deliver to the Trustee and the
Certificate Insurer copies of all Sub-Servicing Agreements, and any amendments
or modifications thereof promptly upon the Servicer's execution and delivery of
such instrument.
Section 8.04. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and to either itself directly service the related Home Equity Loans
or enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 8.03.
Section 8.05. Liability of Servicer; Indemnification.
(a) The Servicer shall not be relieved of its obligations under this
Agreement notwithstanding any Sub-Servicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer and the Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Home Equity Loans. The Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Servicer by
such Sub-Servicer and nothing contained in such Sub-Servicing Agreement shall
be deemed to limit or modify this Agreement.
(b) The Servicer agrees to indemnify and hold the Trustee, the
Depositor, the Certificate Insurer and each Owner 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 Trustee, the
Depositor, the Certificate Insurer and any Owner may sustain in any way related
to the failure of the Servicer to perform its duties and service the Home
Equity Loans in compliance with the terms of this Agreement. The Servicer shall
immediately notify the Trustee, the Depositor, the Certificate Insurer and each
Owner if a claim is made by a third party with respect to this Agreement, and
the Servicer shall assume (with the consent of the Trustee and the Certificate
Insurer) the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Servicer, the
Trustee, the Depositor, the Certificate Insurer and/or Owner in respect of such
claim. The Trustee shall, in accordance with instructions received from the
Servicer, reimburse the Servicer only from amounts otherwise distributable on
the Class R Certificates for all amounts advanced by it pursuant to the
preceding sentence, except when a final nonpayable adjudication determines that
the claim relates directly to the failure of the Servicer to perform its duties
in compliance with the Agreement. The provisions of this Section 8.05(b) shall
survive the termination of this Agreement and the payment of the outstanding
Certificates.
Section 8.06. No Contractual Relationship Between Sub-Servicer,
Trustee or the Owners.
Any Sub-Servicing Agreement and any other transactions or services
relating to the Home Equity Loans involving a Sub-Servicer shall be deemed to
be between the Sub-Servicer and the Servicer alone and the Trustee and the
Owners shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer except as
set forth in Section 8.07.
Section 8.07. Assumption or Termination of Sub-Servicing Agreement by
Trustee.
In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Servicer hereunder by
the Trustee pursuant to Section 8.20 or another successor Servicer, it is
understood and agreed that the Servicer's rights and obligations under any
Sub-Servicing Agreement then in force between the Servicer and a Sub-Servicer
shall be assumed simultaneously by the Trustee or another successor Servicer
without act or deed on part of the Trustee; provided, however, that the Trustee
(if acting as successor Servicer) or any other successor Servicer may, with the
consent of the Certificate Insurer, and shall, at the direction of the
Certificate Insurer, terminate the Sub-Servicer as provided in Section 8.03.
The Servicer shall, upon the reasonable request of the Trustee, but
at the expense of the Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to
effect the orderly and efficient transfer of the Sub-Servicing Agreements to
the assuming party.
Section 8.08. Principal and Interest Account.
(a) The Servicer shall establish and maintain at one or more
Designated Depository Institutions the Principal and Interest Account to be
held as a trust account. The Principal and Interest Account shall be an
Eligible Account. Each Principal and Interest Account shall be identified on
the records of the Designated Depository Institution as follows: Norwest Bank
Minnesota, National Association, as Trustee on behalf of Financial Security
Assurance Inc. and the Owners of the Centex Home Equity Loan Trust 1998-3 Home
Equity Loan Pass-Through Certificates. If the institution at any time holding
the Principal and Interest Account ceases to be eligible as a Designated
Depository Institution hereunder, then the Servicer shall immediately be
required to name a successor institution meeting the requirements for a
Designated Depository Institution hereunder. If the Servicer fails to name such
a successor institution, then the Principal and Interest Account shall
thenceforth be held as a trust account with a qualifying Designated Depository
Institution selected by the Trustee. The Servicer shall notify the Trustee, the
Certificate Insurer and the Owners if there is a change in the name, account
number or institution holding the Principal and Interest Account.
Subject to Subsection (c) below, the Servicer shall deposit all
receipts required pursuant to Subsection (c) below and related to the Home
Equity Loans to the Principal and Interest Account on a daily basis (but no
later than the first Business Day after receipt).
(b) All funds in the Principal and Interest Account shall be held (i)
uninvested up to the amount insured by the FDIC or (ii) invested in Eligible
Investments. Any investments of funds in the Principal and Interest Account
shall mature or be withdrawable at par on or prior to the immediately
succeeding Monthly Remittance Date. The Principal and Interest Account shall be
held in trust in the name of the Trust for the benefit of the Owners. The Trust
shall be divided into two separate sub-trusts; one for Group I and any Trust
assets allocable to such Group I and the other for Group II and any Trust
assets allocable to such Group II. Any investment earnings on funds held in the
Principal and Interest Account shall be for the account of the Servicer and may
only be withdrawn from the Principal and Interest Account by the Servicer
immediately following the remittance of the Monthly Remittance Amount (and the
Total Monthly Excess Spread included therein) by the Servicer in accordance
with the terms hereof. Any investment losses on amounts held in the Principal
and Interest Account shall be for the account of the Servicer and promptly upon
the realization of such loss shall be contributed by the Servicer to the
Principal and Interest Account. Any references herein to amounts on deposit in
the Principal and Interest Account shall refer to amounts net of such
investment earnings.
(c) The Servicer shall deposit to the Principal and Interest Account
on the Business Day after receipt, all principal collected and interest due on
the Home Equity Loans (net of the Servicing Fee related to such Home Equity
Loans) on and after the Cut-Off Date and the Replacement Cut-Off Date, as
applicable, including any Prepayments and Net Liquidation Proceeds, other
recoveries or amounts related to the Home Equity Loans received by the Servicer
and any income from REO Properties, but net of (i) Net Liquidation Proceeds to
the extent such Net Liquidation Proceeds exceed the sum of (I) the Loan Balance
of the related Home Equity Loan immediately prior to liquidation, plus (II)
accrued and unpaid interest on such Home Equity Loan (net of the related
Servicing Fee) and (III) any unrecovered Cram Down Losses, (ii) principal
received and interest due on the Home Equity Loans prior to the Cut-Off Date or
the related Replacement Cut-Off Date, as the case may be, (iii) reimbursements
for unreimbursed Delinquency Advances (but solely from amounts received on the
related Home Equity Loan) and (iv) reimbursements for amounts deposited in the
Principal and Interest Account representing payments of principal and/or
interest on a Note by a Mortgagor which are subsequently returned by a
depository institution as unpaid (all such net amount herein referred to as
"Daily Collections").
(d) (i) The Servicer may make withdrawals from the Principal and
Interest Account, with respect to each Home Equity Loan Group, only in the
following priority and for the following purposes:
(A) on each Monthly Remittance Date, to pay itself the related
Servicing Fees to the extent such Servicing Fees are not
retained by the Servicer;
(B) to withdraw investment earnings on amounts on deposit in
the Principal and Interest Account;
(C) to withdraw amounts that have been deposited to the
Principal and Interest Account in error;
(D) to reimburse itself pursuant to Section 8.09(a) for
unrecovered Delinquency Advances and unrecovered Servicing
Advances (in each case, solely from amounts recovered on
the related Home Equity Loan);
(E) Nonrecoverable Advances; and
(F) to clear and terminate the Principal and Interest Account
following the termination of the Trust pursuant to Article
IX;
(ii) The Servicer shall (a) remit to the Trustee for deposit in
the Certificate Account by wire transfer, or otherwise make funds
available in immediately available funds, without duplication, the
Monthly Remittance Amount allocable to a Remittance Period not later
than the related Monthly Remittance Date, and (b) on each Monthly
Remittance Date, deliver to the Trustee, the Depositor and the
Certificate Insurer, a monthly servicing report, with respect to each
Home Equity Loan Group, containing (without limitation) the following
information: principal and interest collected in respect of the Home
Equity Loans, scheduled principal and interest that was due on the
Home Equity Loans, relevant information with respect to Liquidated
Loans, if any, summary and detailed delinquency reports, Liquidation
Proceeds and other similar information concerning the servicing of
the Home Equity Loans and any other information requested by the
Certificate Insurer (including, without limitation, a liquidation
report with respect to each Liquidated Loan). In addition, the
Servicer shall inform the Trustee and the Certificate Insurer on each
Monthly Remittance Date, with respect to each Home Equity Loan Group,
of the amounts of any Loan Purchase Prices or Substitution Amounts so
remitted during the related Remittance Period, and of the Loan
Balance of the Home Equity Loan having the largest Loan Balance as of
such date.
(iii) The Servicer shall provide to the Trustee the information
described in Section 8.08(d)(ii)(b) and in Section 7.09(b) to enable
the Trustee to perform its reporting requirements under Section 7.09
and to make the allocations and disbursements set forth in Sections
7.02 and 7.03.
Section 8.09. Delinquency Advances and Servicing Advances.
(a) On or before each Monthly Remittance Date, the Servicer shall be
required to remit to the Trustee for deposit to the Certificate Account out of
the Servicer's own funds or from collections on any Home Equity Loans that are
not required to be distributed on the Payment Date occurring during the month
in which such reimbursement is made (all or any portion of such amount to be
replaced on future Monthly Remittance Dates to the extent required for
distribution) any Delinquent payment of interest with respect to each
Delinquent Home Equity Loan, which payment was not received on or prior to the
last day of the related Remittance Period. Such amounts of the Servicer's own
funds so deposited are "Delinquency Advances".
The Servicer shall be permitted to reimburse itself on any Business
Day for any Delinquency Advances paid from the Servicer's own funds, from late
collections on the related Home Equity Loan or as provided in Section
7.03(b)(iii)(F).
Notwithstanding the foregoing, in the event that the Servicer
determines in its reasonable business judgment in accordance with the servicing
standards set out herein that any proposed Delinquency Advance would not be
recoverable, the Servicer shall not be required to make Delinquency Advances
with respect to such Home Equity Loan. To the extent that the Servicer
previously has made Delinquency Advances with respect to a Home Equity Loan
that the Servicer subsequently determines is a Nonrecoverable Advance, the
Servicer shall be entitled to reimbursement for such aggregate Nonrecoverable
Advances from collections on any Home Equity Loan on deposit in the Principal
and Interest Account. The Servicer shall give written notice of such
determination as to why such amount would not be recoverable to the Trustee and
the Certificate Insurer; the Trustee shall promptly furnish a copy of such
notice to the Owners of the Class R Certificates; provided, further, that the
Servicer shall be entitled to recover any unreimbursed Delinquency Advances
from Liquidation Proceeds for the related Home Equity Loan.
(b) The Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, (i) Preservation Expenses, (ii) the cost of any enforcement or
judicial proceedings, including foreclosures, (iii) the cost of the management
and liquidation of REO Property, (iv) advances required by Section 8.13(a),
except to the extent that such amounts are determined by the Servicer in its
reasonable business judgment not to be recoverable and (v) expenses incurred
pursuant to Section 8.22. Such costs will constitute "Servicing Advances". The
Servicer may recover a Servicing Advance (x) from the Mortgagors to the extent
permitted by the Home Equity Loans or, if not theretofore recovered from the
Mortgagor on whose behalf such Servicing Advance was made, from Liquidation
Proceeds realized upon the liquidation of the related Home Equity Loan and (y)
as provided in Section 7.03(b)(iii)(F). The Servicer shall be entitled to
recover the Servicing Advances from the Liquidation Proceeds on the related
Home Equity Loan prior to the payment of the Liquidation Proceeds to any other
party to this Agreement. In no case may the Servicer recover Servicing Advances
from the principal and interest payments on any other Home Equity Loan except
as provided in Section 7.03(b)(iii)(F).
Section 8.10. Compensating Interest; Repurchase of Home Equity Loans.
(a) If a Prepayment in full of a Home Equity Loan or a Prepayment of
at least six times a Mortgagor's Monthly Payment occurs during any calendar
month, any shortfall between (x) the interest collected from the Mortgagor in
connection with such payoff, and (y) the full months interest at the Coupon
Rate that would be due on the related Due Date for such Home Equity Loan
("Compensating Interest") (but not in excess of the aggregate Servicing Fee for
the related Remittance Period) shall be deposited by the Servicer to the
Principal and Interest Account (or if such difference is an excess, the
Servicer shall retain such excess) on the next succeeding Monthly Remittance
Date and shall be included in the Monthly Remittance Amount to be made
available to the Trustee on such Monthly Remittance Date. The Servicer may
recover any unreimbursed payments of Compensating Interest as provided in
Section 7.03(b)(iii)(F).
(b) Subject to the clause (c) below, the Servicer has the right and
the option, but not the obligation, to purchase for its own account any Home
Equity Loan which becomes Delinquent, in whole or in part, as to at least three
consecutive monthly installments or any Home Equity Loan as to which
enforcement proceedings have been brought by the Servicer pursuant to Section
8.13; provided, however, that the Servicer may not purchase any such Home
Equity Loan unless the Servicer has delivered to the Trustee and the
Certificate Insurer at the Servicer's expense, an Opinion of Counsel acceptable
to the Certificate Insurer and to the Trustee to the effect that such a
purchase would not constitute a Prohibited Transaction for the Trust or
otherwise subject the Trust to tax and would not jeopardize the status of the
Trust Estate as a REMIC. Any such Home Equity Loan so purchased shall be
purchased by the Servicer on or prior to a Monthly Remittance Date at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be deposited in the Principal and Interest Account.
(c) If a Home Equity Loan to be repurchased by the Servicer pursuant
to clause (b) above, is the greatest number of days Delinquent of all then
Delinquent Home Equity Loans (including Home Equity Loans relating to REO
Property), the Servicer may purchase Home Equity Loans without having first
notified the Certificate Insurer of such purchase. In all other cases, the
Servicer must notify the Certificate Insurer and the Trustee, in writing, of
its intent to purchase a Home Equity Loan and the Servicer may not purchase
such Home Equity Loan without the written consent of the Certificate Insurer.
(d) The Net Liquidation Proceeds from the disposition of any REO
Property shall be deposited in the Principal and Interest Account and remitted
to the Trustee as part of the Monthly Remittance Amount remitted by the
Servicer to the Trustee.
Section 8.11. Maintenance of Insurance.
(a) The Servicer shall cause to be maintained with respect to each
Home Equity Loan a hazard insurance policy with a carrier generally acceptable
to the Servicer that provides for fire and extended coverage, and which
provides for a recovery by the Trust of insurance proceeds relating to such
Home Equity Loan in an amount not less than the least of (i) the outstanding
principal balance of the Home Equity Loan (plus the related senior lien loan,
if any), (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises. The
Servicer shall maintain the insurance policies required hereunder in the name
of the mortgagee, its successors and assigns, and shall be named as loss payee.
The policies shall require the insurer to provide the mortgagee with 30 days'
notice prior to any cancellation or as otherwise required by law. The Servicer
may also maintain a blanket hazard insurance policy or policies if the insurer
or insurers of such policies are rated investment grade by Moody's and Standard
& Poor's.
(b) If the Home Equity Loan at the time of origination (or if
required by federal law, at any time thereafter) relates to a Property in an
area identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards, the Servicer will cause to be
maintained with respect thereto a flood insurance policy in a form meeting the
requirements of the then current guidelines of the Federal Insurance
Administration with a carrier generally acceptable to the Servicer in an amount
representing coverage, and which provides for a recovery by the Trust of
insurance proceeds relating to such Home Equity Loan of not less than the least
of (i) the outstanding principal balance of the Home Equity Loan (plus the
related senior lien loan, if any), (ii) the minimum amount required to
compensate for damage or loss on a replacement cost basis and (iii) the maximum
amount of insurance that is available under the Flood Disaster Protection Act
of 1973. The Servicer shall indemnify the Trust and the Certificate Insurer out
of the Servicer's own funds for any loss to the Trust or the Certificate
Insurer resulting from the Servicer's failure to advance premiums for such
insurance required by this Section when so permitted by the terms of the
Mortgage as to which such loss relates.
(c) Amounts collected by the Servicer under any Insurance Policies
shall be deposited into the Principal and Interest Account.
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements.
When a Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Equity Loan under any "due-on-sale" clause contained in the
related Mortgage or Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief
of the Servicer, is not enforceable under applicable law. An Opinion of
Counsel, provided at the expense of the Servicer, to the foregoing effect shall
conclusively establish the reasonableness of such belief. In such event, the
Servicer shall 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 Note and, unless prohibited by
applicable law or the Mortgage documents, the Mortgagor remains liable thereon.
If the foregoing is not permitted under applicable law, the Servicer is
authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as Mortgagor and becomes liable under the Note;
provided, however, that to the extent any such substitution of liability
agreement would be delivered by the Servicer outside of its usual procedures
for home equity loans held in its own portfolio the Servicer shall, prior to
executing and delivering such agreement, obtain the prior written consent of
the Certificate Insurer. The Home Equity Loan, as assumed, shall conform in all
material respects to the requirements, representations and warranties of this
Agreement. The Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Trustee or to
the Custodian on the Trustee's behalf the original copy of such assumption or
substitution agreement (indicating the File to which it relates) which copy
shall be added by the Trustee or by the Custodian on the Trustee's behalf to
the related File and which shall, for all purposes, be considered a part of
such File to the same extent as all other documents and instruments
constituting a part thereof. The Servicer shall be responsible for recording
any such assumption or substitution agreements. In connection with any such
assumption or substitution agreement, no material term of the Home Equity Loan
(including, without limitation, the required monthly payment on the related
Home Equity Loan, the stated maturity, the outstanding principal amount or the
Coupon Rate) shall be changed nor shall any required monthly payments of
principal or interest be deferred or forgiven. Any fee collected by the
Servicer or the Sub-Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to
the Servicer as additional 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 assumption of
a Home Equity Loan by operation of law or any assumption which the Servicer may
be restricted by law from preventing, for any reason whatsoever.
Section 8.13. Realization Upon Defaulted Home Equity Loans; Workout
of Home Equity Loans.
(a) The Servicer shall foreclose upon or otherwise comparably effect
the ownership in the name of the Trustee on behalf of the Trust of Properties
relating to defaulted Home Equity Loans as to which no satisfactory
arrangements can be made for collection of Delinquent payments and which the
Servicer has not purchased pursuant to Section 8.10(b). In connection with such
foreclosure or other conversion, the Servicer shall exercise such of the rights
and powers vested in it hereunder, and use the same degree of care and skill in
their exercise or use, as prudent mortgage lenders would exercise or use under
the circumstances in the conduct of their own affairs and consistent with the
servicing standards set forth in the FNMA Guide, including, but not limited to,
advancing funds for the payment of taxes, amounts due with respect to Senior
Liens, and insurance premiums. Any amounts so advanced shall constitute
"Servicing Advances" within the meaning of Section 8.09(b) hereof. The Servicer
shall sell any REO Property within 35 months of its acquisition by the Trust,
at such price as the Servicer in good faith deems necessary to comply with this
covenant unless the Servicer obtains for the Certificate Insurer and the
Trustee, an Opinion of Counsel (the expense of which opinion shall be a
Servicing Advance) experienced in federal income tax matters acceptable to the
Certificate Insurer and the Trustee, addressed to the Certificate Insurer, the
Trustee and the Servicer, to the effect that the holding by the Trust of such
REO Property for any greater period will not result in the imposition of taxes
on "Prohibited Transactions" of the Trust or the REMIC Estate as defined in
Section 860F of the Code or cause the REMIC Estate to fail to qualify as a
REMIC under the REMIC Provisions at any time that any Certificates are
Outstanding. Notwithstanding the generality of the foregoing provisions, the
Servicer shall manage, conserve, protect and operate each REO Property for the
Owners solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the REMIC created hereunder of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code or any "net
income from foreclosure property" which is subject to taxation under the REMIC
Provisions. Pursuant to its efforts to sell such REO Property, the Servicer
shall either itself or through an agent selected by the Servicer protect and
conserve such REO Property in the same manner and to such extent as is
customary in the locality where such REO Property is located and may, incident
to its conservation and protection of the interests of the Owners, rent the
same, or any part thereof, as the Servicer deems to be in the best interest of
the Owners for the period prior to the sale of such REO Property. 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 Resource
Conservation and Recovery Act of 1976, or other federal, state or local
environmental legislation, on a Property in determining whether to foreclose
upon or otherwise comparably convert the ownership of such Property. If the
Servicer has actual knowledge of any environmental or hazardous waste risk with
respect to the Property that the Servicer is contemplating acquiring in
foreclosure or deed in lieu of foreclosure, the Servicer will cause an
environmental inspection of the Property in accordance with the servicing
standards set forth in this Agreement. The Servicer shall not take any such
action with respect to any Property known by the Servicer to contain such
wastes or substances or to be within one mile of the site of such wastes or
substances, without the prior written consent of the Certificate Insurer.
(b) The Servicer shall determine, with respect to each defaulted Home
Equity Loan, when it has recovered, whether through trustee's sale, foreclosure
sale or otherwise, all amounts it expects to recover from or on account of such
defaulted Home Equity Loan, whereupon such Home Equity Loan shall become a
"Liquidated Loan" and the Servicer shall promptly submit a liquidation report
to the Certificate Insurer in form acceptable to the Certificate Insurer.
(c) The Servicer shall not agree to any modification, waiver or
amendment of any provision of any Home Equity Loan unless, in the Servicer's
good faith judgment, such modification, waiver or amendment would minimize the
loss that might otherwise be experienced with respect to such Home Equity Loan
and only in the event of a payment default with respect to such Home Equity
Loan or in the event that a payment default with respect to such Home Equity
Loan is reasonably foreseeable by the Servicer; provided, however, that no such
modification, waiver or amendment shall extend the maturity date of such Home
Equity Loan beyond the Remittance Period related to the Final Scheduled Payment
Date of the latest Class of Class A Certificates remaining in the Trust.
Notwithstanding anything set out in this Section 8.13(c) or elsewhere in this
Agreement to the contrary, the Servicer shall be permitted to modify, waive or
amend any provision of a Home Equity Loan if required by statute or a court of
competent jurisdiction to do so.
(d) The Servicer has no intent to foreclose on any Mortgage based on
the delinquency characteristics as of the Startup Day; provided, that the
foregoing does not prevent the Servicer from initiating foreclosure proceedings
on any date hereafter if the facts and circumstances of such Mortgage including
delinquency characteristics in the Servicer's discretion so warrant such
action.
Section 8.14. Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Home Equity Loan (including any
liquidation of such Home Equity Loan through foreclosure or otherwise), 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 deliver to the
Custodian, on behalf of the Trustee, a written request of the Servicer signed
by an Authorized Officer which states the purpose of the release of a File.
Upon receipt of such written request, the Custodian, on behalf of the Trustee
shall promptly release the related File, in trust, in its reasonable discretion
to (i) the Servicer, (ii) an escrow agent or (iii) any employee, agent or
attorney of the Trustee. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Servicer is
authorized to give, as attorney-in-fact for the Trustee and the mortgagee under
the Mortgage which secured the Note, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Property relating 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 payment in full, it being understood and agreed that no
expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account or to the Trustee. In lieu of executing any such satisfaction
or assignment, as the case may be, the Servicer may prepare and submit to the
Custodian, on behalf of the Trustee, a satisfaction (or assignment without
recourse, if requested by the Person or Persons entitled thereto) in form for
execution by the Trustee with all requisite information completed by the
Servicer; in such event, the Custodian, on behalf of the Trustee shall execute
and acknowledge such satisfaction or assignment, as the case may be, and
deliver the same with the related File, as aforesaid.
(b) The Servicer shall have the right (upon receiving the prior
written consent of the Certificate Insurer) to accept applications of
Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages.
No application for approval shall be considered by the Servicer unless: (x) the
provisions of the related Note and Mortgage have been complied with; (y) the
Loan-to-Value Ratio and debt-to-income ratio after any release does not exceed
the Loan-to-Value Ratio and debt-to-income ratio of such Note on the Cut-Off
Date and any increase in the Loan-to-Value Ratio shall not exceed 5% unless
approved in writing by the Certificate Insurer; and (z) the lien priority of
the related Mortgage is not affected. Upon receipt by the Trustee of an
Officer's Certificate executed on behalf of the Servicer setting forth the
action proposed to be taken in respect of a particular Home Equity Loan and
certifying that the criteria set forth in the immediately preceding sentence
have been satisfied, the Trustee shall execute and deliver to the Servicer the
consent or partial release so requested by the Servicer. A proposed form of
consent or partial release, as the case may be, shall accompany any Officer's
Certificate delivered by the Servicer pursuant to this paragraph. The Servicer
shall notify the Certificate Insurer and the Rating Agencies if an application
is approved under clause (y) above.
(c) From time to time and as appropriate in the servicing of any Home
Equity Loan, including, without limitation, foreclosure or other comparable
conversion of a Home Equity Loan or collection under any applicable Insurance
Policy, the Trustee shall release the related File to the Servicer, promptly
upon a written request of the Servicer signed by an Authorized Officer, which
states the purpose of the release of a File; provided, however, that no more
than 5% of the outstanding Home Equity Loans (by number) shall be released to
the Servicer at any time. Such receipt shall obligate the Servicer to return
the File to the Trustee when the need therefore by the Servicer no longer
exists.
(d) In all cases where the Servicer needs the Trustee to sign any
document or to release a File within a particular period of time, the Servicer
shall notify an Authorized Officer of the Trustee by telephone of such need and
the Trustee shall thereon use its best efforts to comply with the Servicer's
needs, but in any event will comply within two Business Days of such request.
(e) No costs associated with the procedures described in this Section
8.14 shall be an expense of the Trust.
Section 8.15. Servicing Compensation.
As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the related Servicing Fee with respect to each
Home Equity Loan. Additional servicing compensation in the form of prepayment
charges, release fees, bad check charges, assumption fees, late payment
charges, prepayment penalties, or any other servicing-related fees, Net
Liquidation Proceeds not required to be deposited in the Principal and Interest
Account pursuant to Section 8.08(c)(i) and similar items may, to the extent
collected from Mortgagors, be retained by the Servicer, unless a successor
Servicer is appointed pursuant to Section 8.20 hereof, in which case the
successor Servicer shall be entitled to such fees as are agreed upon by the
Trustee, the Certificate Insurer and the successor Servicer.
The right to receive the Servicing Fee may not be transferred in
whole or in part except in connection with the transfer of all of the
Servicer's responsibilities and obligations under this Agreement.
Section 8.16. Annual Statement as to Compliance.
The Servicer, at its own expense, will deliver to the Trustee, the
Certificate Insurer, the Depositor, and the Rating Agencies, on or before July
31 of each year, commencing in 1999, an Officer's Certificate stating, as to
each signer thereof, that (i) a review of the activities of the Servicer during
such preceding calendar year and of performance under this Agreement has been
made under such officers' supervision, and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement for such year, or, if there has been a default in the
fulfillment of all such obligations, specifying each such default known to such
officers and the nature and status thereof including the steps being taken by
the Servicer to remedy such default.
The Servicer shall deliver to the Trustee, the Depositor, the
Certificate Insurer and the Rating Agencies, promptly after having obtained
knowledge thereof but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time would become a Servicer Termination
Event.
Section 8.17. Annual Independent Certified Public Accountants'
Reports.
On or before July 31 of each year, commencing in 1999, the Servicer,
at its own expense (or if the Trustee is then acting as Servicer, at the
expense of the Seller, which in no event shall exceed $1,000 per annum), shall
cause to be delivered to the Trustee, the Certificate Insurer, the Depositor,
and the Rating Agencies a letter or letters of a firm of independent,
nationally recognized certified public accountants reasonably acceptable to the
Certificate Insurer stating that such firm has examined the Servicer's overall
servicing operations in accordance with the requirements of the Uniform Single
Attestation Program for Mortgage Bankers, and stating such firm's conclusions
relating thereto.
Section 8.18. Access to Certain Documentation and Information
Regarding the Home Equity Loans.
The Servicer shall provide to the Trustee and the Certificate Insurer
access to the documentation regarding the Home Equity Loans, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it.
Upon any change in the format of the computer tape maintained by the
Servicer in respect of the Home Equity Loans, the Servicer shall deliver a copy
of such computer tape to the Trustee and in addition shall provide a copy of
such computer tape to the Trustee, and the Certificate Insurer at such other
times as the Trustee or the Certificate Insurer may reasonably request.
Section 8.19. Assignment of Agreement.
Other than with respect to entering into Sub-Servicing Agreements
pursuant to Section 8.03 hereof, the Servicer may not assign its obligations
under this Agreement, in whole or in part, unless it shall have first obtained
the written consent of the Trustee and the Certificate Insurer, which such
consent shall not be unreasonably withheld; provided, however, that any
assignee must meet the eligibility requirements set forth in Section 8.20(h)
hereof for a successor servicer.
Section 8.20. Removal of Servicer; Retention of Servicer; Resignation
of Servicer.
(a) The Certificate Insurer or the Trustee (with the prior written
consent of the Certificate Insurer) may remove the Servicer upon the occurrence
of any of the following events (each a "Servicer Termination Event"):
(i) The Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or
similar entity with respect to itself or its property, (II) admit in
writing its inability to pay its debts generally as they become due,
(III) make a general assignment for the benefit of creditors, (IV) be
adjudicated a bankrupt or insolvent, (V) commence a voluntary case
under the federal bankruptcy laws of the United States of America or
any state bankruptcy law or similar laws or file a voluntary petition
or answer seeking reorganization, an arrangement with creditors or an
order for relief or seeking to take advantage of any insolvency law
or file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency
proceeding or (VI) take corporate action for the purpose of effecting
any of the foregoing; or
(ii) If without the application, approval or consent of the
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the
Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition
or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or
similar entity with respect to the Servicer or of all or any
substantial part of its assets, or other like relief in respect
thereof under any bankruptcy or insolvency law, and, if such
proceeding is being contested by the Servicer in good faith, the same
shall (A) result in the entry of an order for relief or any such
adjudication or appointment or (B) continue undismissed or pending
and unstayed for any period of seventy-five (75) consecutive days; or
(iii) The Servicer shall fail to perform any one or more of its
obligations hereunder and shall continue in default thereof for a
period of thirty (30) days (one (1) Business Day in the case of a
delay in making a payment or deposit required of the Servicer under
this Agreement) after the earlier of (a) actual knowledge of an
officer of the Servicer or (b) receipt of notice from the Trustee or
the Certificate Insurer of said failure; provided, however, that if
the Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that it is diligently pursuing remedial action,
then the cure period may be extended with the written approval of the
Certificate Insurer; or
(iv) The Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 3.02 or in the
other Operative Documents which materially and adversely affects the
interests of the Owners or the Certificate Insurer which remains
unremedied for a period of sixty (60) days after the earlier of the
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Servicer can demonstrate to the reasonable satisfaction
of the Certificate Insurer that it is diligently pursuing remedial
action, then the cure period may be extended with the written
approval of the Certificate Insurer; or
(v) The merger, consolidation or other combination of the
Servicer with or into any other entity, unless (1) the Servicer or an
Affiliate of the Servicer is the surviving entity of such combination
or (2) the surviving entity (A) is servicing at least $300,000,000 of
home equity loans that are similar to the Home Equity Loans, (B) has
Tangible Net Worth of not less than $15,000,000 (as determined in
accordance with generally acceptable account principles), (C) is
consented to by the Certificate Insurer (such consent not to be
unreasonably withheld) and (D) agrees to assume the Servicer's
obligations thereunder; or
(vi) The failure of the Servicer to satisfy the Servicer
Termination Test;
(vii) The Certificate Insurer notifies the Trustee of an Event
of Default under the Insurance Agreement.
(b) Upon the occurrence of a Servicer Termination Event, the Servicer
shall continue to act as servicer under this Agreement until removed as set
forth in this Section 8.20 and a successor Servicer has assumed the servicing
obligations. After the occurrence of a Servicer Termination Event, the
Certificate Insurer or the Trustee (with the prior written consent of the
Certificate Insurer) may remove the Servicer by written notice to the Servicer.
Such termination shall be effective on the date specified in such notice,
provided that a successor Servicer or the Trustee has assumed the servicing
obligations. Upon the effective date of termination of the Servicer, the
Trustee (or another successor Servicer appointed by the Certificate Insurer)
shall assume the servicing obligations hereunder. The Certificate Insurer may
appoint a successor Servicer other than the Trustee. Until a successor Servicer
has been appointed by the Certificate Insurer, the Trustee shall be the
successor Servicer in all respects without further action, and all authority
and power of the Servicer under this agreement shall pass to and be vested in
the Trustee on and after the effective date of termination.
(c) [Reserved]
(d) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except upon (i) determination that its duties hereunder
are no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it, the other
activities of the Servicer so causing such a conflict being of a type and
nature carried on by the Servicer at the date of this Agreement or (ii) written
consent of the Certificate Insurer and the Trustee. Any such determination
under clause (i) shall be evidenced by an Opinion of Counsel acceptable to the
Trustee and the Certificate Insurer at the expense of the Servicer to such
effect which shall be delivered to the Trustee and the Certificate Insurer.
(e) No removal or resignation of the Servicer shall become effective
until the Trustee or a successor Servicer shall have assumed the Servicer's
responsibilities and obligations in accordance with this Section.
(f) Upon removal or resignation of the Servicer, the Servicer at its
own expense also shall promptly deliver or cause to be delivered to a successor
servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Servicer has maintained
for the Home Equity Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Servicer's possession.
(g) Any collections then being held by the Servicer prior to its
removal and any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee or the successor Servicer.
(h) Upon removal or resignation of the Servicer, the Trustee may (A)
unless the Certificate Insurer has appointed a successor Servicer other than
the Trustee, solicit bids for a successor servicer as described below and (B)
until such time as another successor Servicer is appointed by the Certificate
Insurer, shall assume the duties and obligations of the Servicer hereunder. The
Trustee agrees to act as Servicer during the solicitation process and shall
assume all duties and obligations of the Servicer. The Certificate Insurer may
appoint a successor Servicer other than the Trustee. If the Certificate Insurer
fails to appoint a successor Servicer, the Trustee shall, if it is unable to
obtain a qualifying bid and is prevented by law from acting as Servicer,
appoint, or petition a court of competent jurisdiction to appoint, any housing
and home finance institution, bank or mortgage servicing institution which has
been designated as an approved seller-servicer by FNMA or FHLMC for first and
second home equity loans and having equity of not less than $5,000,000 (or such
lower level as may be acceptable to the Certificate Insurer), as determined in
accordance with generally accepted accounting principles and acceptable to the
Certificate Insurer as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder. The compensation of any successor Servicer (other than
the Trustee in its capacity as successor Servicer) so appointed shall be the
amount agreed to between the successor Servicer, the Certificate Insurer and
the Trustee (up to a maximum of 0.50% per annum on the outstanding principal
balance of each Home Equity Loan), together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.08 and 8.15; provided, however, that if the Trustee
becomes the successor Servicer it shall receive as its compensation the same
compensation paid to the Servicer immediately prior to the Servicer's removal
or resignation; provided, further, however, that the predecessor Servicer
agrees to pay to the Trustee or other successor Servicer at such time that it
becomes such successor Servicer a set-up fee of twenty-five dollars ($25) for
each Home Equity Loan then included in the Trust Estate. The amount payable in
excess of twenty-five dollars ($25) per Home Equity Loan, if any, shall be
payable to the successor Servicer and reimbursable pursuant to Section
7.03(b)(iii)(G) hereof. The Trustee shall be obligated to serve as successor
Servicer whether or not the fee described in this section is paid by the
Servicer, but shall in any event be entitled to receive, and to enforce payment
of, such fee from the Servicer.
(i) In the event the Trustee elects to solicit bids as provided
above, the Trustee shall solicit, by public announcement, bids from housing and
home finance institutions, banks and mortgage servicing institutions meeting
the qualifications set forth above. Such public announcement shall specify that
the successor Servicer shall be entitled to servicing compensation in
accordance with clause (h) above, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.08 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price it will
pay to obtain servicing provided that the Certificate Insurer has given its
prior written consent. The Trustee shall deduct from any sum received by the
Trustee from the successor to the Servicer in respect of such sale, transfer
and assignment all costs and expenses of any public announcement and of any
sale, transfer and assignment of the servicing rights and responsibilities
hereunder. After such deductions, the remainder of such sum less any amounts
due the Trustee or the Trust from the Servicer shall be paid by the Trustee to
the predecessor Servicer at the time of such sale, transfer and assignment to
the Servicer's successor.
(j) The Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession, including the notification to all Mortgagors of the transfer of
servicing. The predecessor Servicer agrees to cooperate with the Trustee and
any successor Servicer in effecting the termination of the predecessor
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Trustee or such successor Servicer, as applicable, all documents
and records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Servicer, as applicable, all amounts which then have been or should
have been deposited in the Principal and Interest Account by the Servicer or
which are thereafter received with respect to the Home Equity Loans. Any
amounts and documents which are property of the Trust held by the predecessor
Servicer shall be held in trust on behalf of the Trustee until transferred to
the successor Servicer or Trustee. Neither the Trustee nor any other successor
Servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer. If the Servicer resigns or is replaced
hereunder, the Servicer agrees to reimburse the Trust, the Owners and the
Certificate Insurer for the costs and expenses associated with the transfer of
servicing to the replacement Servicer, but subject to a maximum reimbursement
to all such parties in the amount of twenty-five dollars ($25) for each Home
Equity Loan then included in the Trust Estate. The amount payable in excess of
twenty-five dollars ($25) per Home Equity Loan, if any, shall be payable to the
successor Servicer and reimbursable pursuant to Section 7.03(b)(iii)(G) hereof.
(k) The Trustee or any other successor Servicer, upon assuming the
duties of Servicer hereunder, shall immediately (i) record all assignments of
Home Equity Loans not previously recorded in the name of the Trustee pursuant
to Section 3.05(b)(ii) as a result of an Opinion of Counsel and (ii) make all
Delinquency Advances and Compensating Interest payments and deposit them to the
Principal and Interest Account which the Servicer has theretofore failed to
remit with respect to the Home Equity Loans.
(l) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors, to Moody's and to Standard & Poor's of the transfer
of the servicing to the successor.
(m) The Trustee shall give notice to the Certificate Insurer, the
Depositor, the Owners, the Trustee, the Seller, Moody's and Standard & Poor's
of the occurrence of any event described in paragraphs (a) above of which the
Trustee is aware.
(n) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities of the predecessor Servicer including,
but not limited to, the maintenance of the hazard insurance policy(ies), the
fidelity bond and an errors and omissions policy pursuant to Section 8.21(b)
and shall be entitled to the Servicing Fee and all of the rights granted to the
predecessor Servicer by the terms and provisions of this Agreement. The
appointment of a successor Servicer shall not affect any liability of the
predecessor Servicer which may have arisen under this Agreement prior to its
termination as Servicer (including, without limitation, any deductible under an
insurance policy) nor shall any successor Servicer be liable for any acts or
omissions of the predecessor Servicer or for any breach by such Servicer of any
of its representations or warranties contained herein or in any related
document or agreement.
Section 8.21. Inspections by Certificate Insurer; Errors and
Omissions Insurance.
(a) At any reasonable time and from time to time upon reasonable
notice, the Trustee, the Certificate Insurer, any Owner of a Class R
Certificate, or any agents thereof may inspect the Servicer's servicing
operations and discuss the servicing operations of the Servicer during the
Servicer's normal business hours with any of its officers or directors;
provided, however, that the costs and expenses incurred by the Servicer or its
agents or representatives in connection with any such examinations or
discussions shall be paid by the Servicer.
(b) The Servicer (including the Trustee if it shall become the
Servicer hereunder) agrees to maintain errors and omissions coverage and a
fidelity bond, each at least to the extent required by Section 305 of Part I of
FNMA Guide or any successor provision thereof; provided, however, that in any
event that the fidelity bond or the errors and omissions coverage is no longer
in effect, the Servicer shall notify the Trustee and the Trustee shall promptly
give such notice to the Certificate Insurer and the Owners.
Section 8.22. Additional Servicing Responsibilities for Second
Mortgage Loans.
The Servicer shall file (or cause to be filed) a request for notice
of any action by a superior lienholder under a superior lien for the protection
of the Trustee's interest, where permitted by local law and whenever applicable
state law does not require that a junior lienholder be named as a party
defendant in foreclosure proceedings in order to foreclose such junior
lienholder's equity of redemption.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations under a First Mortgage
Loan, or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the Trust, whatever actions are necessary to protect the interests of
the Owners and the Certificate Insurer, and/or to preserve the security of the
related Home Equity Loan, subject to the application of the REMIC Provisions.
The Servicer shall advance the necessary funds to cure the default or reinstate
the lien securing a First Mortgage Loan, if such advance is in the best
interests of the Certificate Insurer and the Owners; provided, however, that no
such additional advance need be made if such advance would be nonrecoverable
from Liquidation Proceeds on the related Home Equity Loan. The Servicer shall
thereafter take such action as is necessary to recover the amount so advanced.
Any expenses incurred by the Servicer pursuant to this Section 8.22 shall be
Servicing Advances.
Section 8.23. The Group II Home Equity Loans.
The Servicer shall enforce each adjustable rate Home Equity Loan in
Group II in accordance with its terms and shall timely calculate, record,
report and apply all interest rate adjustments in accordance with the related
Note. The Servicer's records shall, at all times, reflect the then Coupon Rate
and monthly payment and the Servicer shall timely notify the Mortgagor of any
changes to the Coupon Rate or the Mortgagor's monthly payment. If the Servicer
fails to make either a timely or accurate adjustment to the Coupon Rate or
monthly payment or to notify the Mortgagor of such adjustments, upon the
Servicer's discovery of such error and such continued failure, the Servicer
shall pay from its own funds any shortage. If the Servicer's continued failure
after notice thereof to make a scheduled change affects the Trust's rights to
make future adjustments under the terms of such Home Equity Loan, the Servicer
shall repurchase such Group Home Equity Loan in accordance with the provisions
hereof. Any amounts paid by the Servicer pursuant to this Section shall not be
an advance and shall not be reimbursable from the proceeds of any Group II Home
Equity Loan.
Section 8.24. Merger, Conversion, Consolidation or Succession to
Business of Servicer. Any corporation into which the Servicer may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer shall be a
party or any corporation succeeding to all or substantially all of 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 provided that such corporation meets the qualifications set
forth in Section 8.20(h) and the resulting corporation has a Tangible Net Worth
of at least $15,000,000.
Section 8.25. Notices of Material Events. The Servicer shall give
prompt notice to the Certificate Insurer, the Trustee, Moody's and Standard &
Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event of which the Servicer has
knowledge which results, or which with notice or the passage of time, or both,
would result in the occurrence of a default by the Seller, or the Servicer
under any Operative Document or would constitute a material breach of a
representation, warranty or covenant under any Operative Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Seller or the Servicer to which the Servicer has knowledge in any federal,
state or local court or before any governmental body or agency or before any
arbitration board or any such proceedings threatened by any governmental
agency, which, if adversely determined, would have a material adverse effect
upon any of the Seller's or the Servicer's ability to perform its obligations
under any Operative Document;
(c) The commencement of any proceedings by or against the Seller or
the Servicer under any applicable bankruptcy, reorganization, liquidation,
insolvency or other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, trustee or other similar official shall have
been, or may be, appointed or requested for the Seller or the Servicer; and
(d) The receipt of notice from any agency or governmental body having
authority over the conduct of any of the Seller's or the Servicer's business
that the Seller or the Servicer is to cease or desist, or to undertake any
practice, program, procedure or policy employed by the Seller or the Servicer
in the conduct of the business of any of them, and such cessation or
undertaking will materially and adversely affect the conduct of the Seller's or
the Servicer's business or its ability to perform under the Operative Documents
or materially and adversely affect the financial affairs of the Seller or the
Servicer.
Section 8.26. Indemnification by the Servicer. The Servicer agrees to
indemnify and hold the Trustee, the Depositor, the Certificate Insurer and each
Owner 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 Trustee, the Depositor, the Certificate Insurer and any
Owner may sustain in any way related to the failure of the Servicer to perform
its duties and service the Home Equity Loans in compliance with the terms of
this Agreement. A party against whom a claim is brought shall immediately
notify the other parties and the Rating Agencies if a claim is made by a third
party with respect to this Agreement, and the Servicer shall assume (with the
consent of the Trustee) the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Certificate Insurer, the Servicer, the Trustee and/or Owner in respect of such
claim.
END OF ARTICLE VIII
ARTICLE IX
TERMINATION OF TRUST
Section 9.01. Termination of Trust.
The Trust created hereunder and all obligations created by this
Agreement will terminate upon the payment to the Owners of all Certificates
from amounts other than those available under the Certificate Insurance Policy
of all amounts held by the Trustee and required to be paid to such Owners
pursuant to this Agreement and payment in full of all amounts owed to the
Certificate Insurer upon the later to occur of (a) the final payment or other
liquidation (or any advance made with respect thereto) of the last Home Equity
Loan in the Trust Estate, (b) the disposition of all property acquired in
respect of any Home Equity Loan remaining in the Trust Estate and (c) at any
time if a Qualified Liquidation of both Home Equity Loan Groups within the
Trust is effected as described in Section 9.02. To effect a termination of this
Agreement pursuant to clause (c) above, the Owners of all Certificates then
Outstanding shall provide to the Trustee and the Certificate Insurer, at their
expense, an Opinion of Counsel experienced in federal income tax matters
acceptable to the Certificate Insurer and the Trustee to the effect that each
such liquidation constitutes a Qualified Liquidation, and the Servicer either
shall sell or purchase the Home Equity Loans and the Trustee shall distribute
the proceeds of the liquidation of the Trust Estate. In no event, however, will
the Trust created by this Agreement continue beyond the expiration of
twenty-one (21) years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late Ambassador of the United States to the United
Kingdom, living on the date hereof. The Trustee shall give written notice of
termination of the Agreement to each Owner in the manner set forth in Section
11.05.
Section 9.02. Termination Upon Option of the Servicer.
(a) On any Monthly Remittance Date after the Clean-Up Call Date, the
Servicer may determine to purchase, in whole only, and may cause the purchase
from the Trust of all (but not fewer than all) Home Equity Loans and all
property theretofore acquired in respect of any Home Equity Loan by
foreclosure, deed in lieu of foreclosure, or otherwise then remaining in the
Trust Estate (i) on terms agreed upon between the Certificate Insurer, the
Servicer and such Owners of the Class R Certificates, or (ii) in the absence of
such an agreement, at a price equal to the Termination Price. In connection
with such purchase, the Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase.
(b) In the event that the Servicer purchases all Home Equity Loans
and each REO Property remaining in the Trust Estate pursuant to Section
9.02(a), the Trust Estate shall be terminated in accordance with the following
additional requirements:
(i) The Trustee shall specify the first day in the 90-day
liquidation period in a statement attached to the final Tax Return of
the REMIC created hereunder pursuant to Treasury regulation Section
1.860F-1 and shall satisfy all requirements of a qualified
liquidation under Section 860F of the Code and any regulations
thereunder;
(ii) During such 90-day liquidation period, and at or prior to
the time of making the final payment on the Certificates, the Trustee
shall sell all of the assets of the Trust Estate to the Servicer for
cash; and
(iii) At the time of the making of the final payment on the
Certificates and payment of all amounts owed to the Certificate
Insurer, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Owners of the Class R Certificates
all cash on hand in the Trust Estate (other than cash retained to
meet claims), and the Trust Estate shall terminate at that time.
(c) By their acceptance of the Certificates, the Owners thereof
hereby agree to authorize the Trustee to specify the first day in the 90-day
liquidation period in a statement attached to the Trust Estate's final Tax
Return, which shall be binding upon all successor Owners.
(d) In connection with any such purchase, the Servicer shall provide
to the Trustee and the Certificate Insurer an Opinion of Counsel at the expense
of the Servicer experienced in federal income tax matters acceptable to the
Certificate Insurer and the Trustee to the effect that such purchase and
liquidation constitutes a Qualified Liquidation of the REMIC Estate.
(e) Promptly following any purchase described in this Section 9.02,
the Trustee will release the Files to the Servicer or the Certificate Insurer,
as the case may be, or otherwise upon their order, in a manner similar to that
described in Section 8.14 hereof.
Section 9.03. Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue Service
or by a court of competent jurisdiction, in either case from which no appeal is
taken within the permitted time for such appeal, or if any appeal is taken,
following a final determination of such appeal from which no further appeal can
be taken, to the effect that the REMIC created hereunder does not and will no
longer qualify as a REMIC pursuant to Section 860D of the Code (the "Final
Determination"), at any time on or after the date which is 30 calendar days
following such Final Determination (i) the Certificate Insurer or the Owners of
a majority in Percentage Interests represented by the Class A Certificates then
Outstanding with the consent of the Certificate Insurer may direct the Trustee
on behalf of the Trust to adopt a plan of complete liquidation, as contemplated
by Section 860F(a)(4) of the Code and (ii) the Certificate Insurer may notify
the Trustee of the Certificate Insurer's determination to purchase from the
Trust all (but not fewer than all) Home Equity Loans and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure, or otherwise
in respect of any Home Equity Loan then remaining in the Trust Estate at a
price equal to the Termination Price.
Upon receipt of such direction from the Certificate Insurer, the
Trustee shall notify the Owners of the Class R Certificates of such election to
liquidate or such determination to purchase, as the case may be (the
"Termination Notice"). The Owners of a majority of the Percentage Interest of
the Class R Certificates then Outstanding may, within 60 days from the date of
receipt of the Termination Notice (the "Purchase Option Period"), at their
option, purchase from the Trust all (but not fewer than all) Home Equity Loans
and all property theretofore acquired by foreclosure, deed in lieu of
foreclosure, or otherwise in respect of any Home Equity Loan then remaining in
the Trust Estate at a purchase price equal to the Termination Price. If, during
the Purchase Option Period, the Owners of the Class R Certificates have not
exercised the option described in the immediately preceding paragraph, then
upon the expiration of the Purchase Option Period (i) in the event that the
Certificate Insurer or the Owners of the Class A Certificates with the consent
of the Certificate Insurer have given the Trustee the direction described in
clause (a)(i) above, the Trustee shall sell the Home Equity Loans and
distribute the proceeds of the liquidation of the Trust Estate, each in
accordance with the plan of complete liquidation, such that, if so directed,
the liquidation of the Trust Estate, the distribution of the proceeds of the
liquidation and the termination of this Agreement occur no later than the close
of the 60th day, or such later day as the Certificate Insurer or the Owners of
the Class A Certificates with the consent of the Certificate Insurer shall
permit or direct in writing, after the expiration of the Purchase Option Period
and (ii) in the event that the Certificate Insurer has given the Trustee notice
of the Certificate Insurer's determination to purchase the Trust Estate
described in clause (a)(ii) preceding the Certificate Insurer shall, within 60
days, purchase all (but not fewer than all) Home Equity Loans and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure or otherwise
in respect of any Home Equity Loan then remaining in the Trust Estate. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to
the Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
(b) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Class R Certificates then Outstanding may, at their
option and upon delivery to the Certificate Insurer of an Opinion of Counsel
experienced in federal income tax matters, acceptable to the Certificate
Insurer and selected by the Owners of the Class R Certificates, which opinion
shall be reasonably satisfactory in form and substance to the Certificate
Insurer, to the effect that the effect of the Final Determination is to
increase substantially the probability that the gross income of the Trust will
be subject to federal taxation, purchase from the Trust all (but not fewer than
all) Home Equity Loans and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Home Equity Loan
then remaining in the Trust Estate at a purchase price equal to the Termination
Price. In connection with such purchase, the Servicer shall remit to the
Trustee all amounts then on deposit in the Principal and Interest Account for
deposit to the Certificate Account, which deposit shall be deemed to have
occurred immediately preceding such purchase. The foregoing opinion shall be
deemed satisfactory unless the Certificate Insurer gives the Owners of a
majority of the Percentage Interest of the Class R Certificates notice that
such opinion is not satisfactory within thirty days after receipt by the
Certificate Insurer of such opinion.
Section 9.04. Disposition of Proceeds.
The Trustee shall, upon receipt thereof, deposit the proceeds of any
Termination Price or other liquidation of the Trust Estate pursuant to this
Article IX to the Certificate Account for distribution in accordance with the
priorities set forth in Section 7.03(b) hereof; provided, however, that any
amounts representing unreimbursed Delinquency Advances and Servicing Advances
theretofore funded by the Servicer from the Servicer's own funds shall be paid
by the Trustee to the Servicer from the proceeds of the Trust Estate.
Notwithstanding the foregoing, no distribution of the proceeds of any
Termination Price shall be made to the Owners of the Class R Certificates until
all such amounts have been applied in reduction of any outstanding Class A-7
Certificateholders Interest Index Carryover.
Section 9.05. Netting of Amounts.
If any Person paying the Termination Price would receive a portion of
the amount to be paid, such Person may net any such amount against the
Termination Price otherwise payable.
END OF ARTICLE IX
ARTICLE X
THE TRUSTEE
Section 10.01. Certain Duties and Responsibilities.
(a) The Trustee (i) (A) undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Trustee
and (B) the banking institution that is the Trustee shall serve as the Trustee
at all times under this Agreement, and (ii) in the absence of bad faith on its
part, may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions or
any other resolutions, statements, reports, documents, orders or other
instruments furnished pursuant to and conforming to the requirements of this
Agreement; but in the case of any such certificates or opinions or any other
resolutions, statements, reports, documents, orders or other instruments which
by any provision hereof are specifically required to be furnished to the
Trustee, shall be under a duty to examine the same to determine whether or not
on their face they conform to the requirements of this Agreement; provided,
however, that the Trustee shall not be responsible for the accuracy or content
of any resolution, Certificate, statement, opinion, report, document, order or
other instrument furnished by the Servicer, the Certificate Insurer, the Seller
or the Depositor hereunder. If any such instrument is found not to conform in
any material respect to the requirements of this Agreement, the Trustee shall
notify the Certificate Insurer of such instrument in the event that the
Trustee, after so requesting does not receive a satisfactorily corrected
instrument. Notwithstanding the foregoing, if a Servicer Termination Event of
which a responsible officer of the Trustee shall have actual knowledge has
occurred and 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 person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Notwithstanding the appointment of the Servicer hereunder, the
Trustee is hereby empowered to perform the duties of the Servicer it being
expressly understood, however, that the foregoing describes a power and not an
obligation of the Trustee (unless the Servicer shall have resigned or been
terminated and a successor Servicer shall not have been appointed pursuant to
the terms of this Agreement), and that all parties hereto agree that, prior to
any termination of the Servicer, the Servicer and, thereafter, the Trustee or
any other successor servicer shall perform such duties. Specifically, and not
in limitation of the foregoing, the Trustee shall upon termination or
resignation of the Servicer, and pending the appointment of any other Person as
successor Servicer have the power and duty during its performance as successor
Servicer:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Home Equity Loans;
(iii)to enforce due-on-sale clauses and to enter into assumption and
substitution agreements as permitted by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to Section 8.14;
(v) to enforce the Home Equity Loans; and
(vi) to make Delinquency Advances and Servicing Advances and to pay
Compensating Interest.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(i) This subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) The Trustee shall not be personally liable for any error of
judgment made in good faith by an Authorized Officer, unless it
shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(iii)The Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance
with the direction of the Certificate Insurer or of the Owners
of a majority in Percentage Interest of the Certificates of the
affected Class or Classes and the Certificate Insurer relating
to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement relating
to such Certificates;
(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default unless an Authorized
Officer of the Trustee shall have received written notice
thereof or an Authorized Officer shall have actual knowledge
thereof. In the absence of receipt of such notice, the Trustee
may conclusively assume that there is no default; and
(v) Subject to the other provisions of this Agreement and without
limiting the generality of this Section l0.01, the Trustee shall
have no duty (A) to see to any recording, filing, or depositing
of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such
recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any
insurance or (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or
encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust Estate from funds
available in the Certificate Account.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. None of the provisions contained in this
Agreement shall in any event require the Trustee to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer under
this Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Servicer in accordance with the terms of this Agreement.
(f) The permissive right of the Trustee to take actions enumerated in
this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Agreement, or to take any steps
in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements and against all liability, except liability which is
adjudicated to have resulted from its negligence or willful misconduct, in
connection with any action so taken.
(h) The Trustee hereby undertakes to provide the Seller with notice
of any correspondence relating to any Property.
(i) The Trustee hereby agrees to disclose the Premium Amount to any
Person upon request.
Section 10.02. Removal of Trustee for Cause.
(a) The Trustee may be removed pursuant to paragraph (b) hereof upon
the occurrence of any of the following events (whatever the reason for such
event and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners
entitled hereto on any Payment Date any amounts available for
distribution that it has received in accordance with the terms hereof;
(provided, however, that any such failure which is due to circumstances
beyond the control of the Trustee shall not be a cause for removal
hereunder); or
(2) the Trustee shall fail in the performance of, or
breach, any covenant or agreement of the Trustee in this Agreement, or
if any representation or warranty of the Trustee made in this Agreement
or in any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material respect
as of the time when the same shall have been made, and such failure or
breach shall continue or not be cured for a period of 30 days after
there shall have been given, by registered or certified mail, to the
Trustee by the Seller, the Certificate Insurer, or by the Owners of at
least 25% of the aggregate Percentage Interests in the Trust Estate
represented by the Class A Certificates then Outstanding, or, if there
are no Class A Certificates then Outstanding, by such Percentage
Interests represented by the Class R Certificates, a written notice
specifying such failure or breach and requiring it to be remedied; or
(3) 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 Trustee, and such decree or order shall have
remained in force undischarged or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or
sequestrator or custodian of the property of the Trustee is appointed
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Trustee or
relating to all or substantially all of its property; or
(5) the Trustee shall become insolvent (however
insolvency is evidenced), generally fail to pay its debts as they come
due, file or consent to the filing of a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, voluntarily suspend payment of its
obligations, or take corporate action for the purpose of any of the
foregoing.
The Depositor shall give to the Certificate Insurer, Moody's and
Standard & Poor's notice of the occurrence of any such event of which the
Depositor is aware.
(b) If any event described an Paragraph (a) occurs and is continuing,
then and in every such case (i) the Certificate Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Certificate
Insurer, the Depositor and the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or if there are no Class A Certificates
then outstanding by such majority of the Percentage Interests represented by
the Class R Certificates, may, whether or not the Trustee resigns pursuant to
Section l0.09(b) hereof, immediately, concurrently with the giving of notice to
the Trustee, and without delaying the 30 days required for notice therein,
appoint a successor Trustee pursuant to the terms of Section l0.09 hereof.
Section 10.03. Certain Rights of the Trustee.
Except as otherwise provided in Section 10.01 hereof:
(a) the Trustee (acting as Trustee or Tax Matters Person) may request
and may rely and shall be protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, note 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) any request or direction of the Depositor, the Seller, the
Certificate Insurer, or the Owners of any Class of Certificates mentioned
herein shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the advice of such
counsel (selected in good faith by the Trustee) shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Owners pursuant to this Agreement, unless such Owners shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) 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, direction, consent, order, bond, note or
other paper or document, unless requested in writing to do so by the Owners;
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to taking any such action;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys
or custodian;
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person and within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication of
the Certificates;
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of such act;
(j) pursuant to the terms of this Agreement, the Servicer is required
to furnish to the Trustee from time to time certain information and make
various calculations which are relevant to the performance of the Trustee's
duties under the Agreement. The Trustee shall be entitled to rely in good faith
on any such information and calculations in the performance of its duties
hereunder, (i) unless and until an Authorized Officer of the Trustee has actual
knowledge, or is advised by any Owner of a Certificate or the Certificate
Insurer (either in writing or orally with prompt written or telecopy
confirmations), that such information or calculations is or are incorrect, or
(ii) unless there is a manifest error in any such information; and
(k) the Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Estate created hereby or the powers
granted hereunder.
Section 10.04. Not Responsible for Recitals or Issuance of
Certificates.
The recitals and representations contained herein and in the
Certificates, except the execution and authentication of the Certificates,
shall be taken as the statements of the Depositor, and the Trustee assumes no
responsibility for their correctness (other than with respect to such execution
and authentication). The Trustee makes no representation as to the validity or
sufficiency of this Agreement, of the Certificates, or any Home Equity Loan or
document related thereto other than as to validity and sufficiency of its
authentication of the Certificates. The Trustee shall not be accountable for
the use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor, the Seller or the Servicer in respect of the Home Equity
Loans or deposited into or withdrawn from the Principal and Interest Account or
the Certificate Account by the Depositor, the Servicer or the Seller, and shall
have no responsibility for filing any financing or continuation statement in
any public office at any time or otherwise to perfect or maintain the
perfection of any security interest or lien or to prepare or file any tax
returns or Securities and Exchange Commission filings for the Trust or to
record this Agreement. The Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any default unless an Authorized Officer
of the Trustee shall have received written notice thereof or an Authorized
Officer has actual knowledge thereof. In the absence of receipt of such notice,
the Trustee may conclusively assume that no default has occurred.
Section 10.05. May Hold Certificates.
The Trustee, any Paying Agent, Registrar or any other agent of the
Trust, in its individual or any other capacity, may become an Owner or pledged
of Certificates and may otherwise deal with the Trust with the same rights it
would have if it were not Trustee, any Paying Agent, Registrar or such other
agent.
Section 10.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other trust funds except to the extent required herein or required by law.
The Trustee shall be under no liability for interest on any money received by
it hereunder except as otherwise agreed with the Depositor and except to the
extent of income or other gain on investments which are deposits in or
certificates of deposit of the Trustee in its commercial capacity and income or
other gain actually received by the Trustee on Eligible Investments.
Section 10.07. Compensation and Reimbursement.
The Trustee shall receive compensation for fees and reimbursement for
expenses pursuant to Section 2.05, Section 6.12, Section 7.03(b)(i)(A),
7.03(b)(iii)(G), Section 7.06 and Section 10.13 hereof. Except as otherwise
provided in this Agreement, the Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Trust and held harmless
against any loss, liability, or "unanticipated out-of-pocket" expense incurred
or paid to third parties (which expenses shall not include salaries paid to
employees, or allocable overhead, of the Trustee) in connection with or any
claim or legal action or any pending or threatened claim or legal action
arising out of or in connection with the acceptance or administration of its
trusts hereunder or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. All such amounts described in the preceding
sentence shall be payable as provided in Section 7.03(b)(iii)(G). It is
understood by the parties hereto that a "claim" as used in this paragraph
includes any claim for indemnification made by the Custodian under the
applicable provisions of the Custodial Agreement. The Trustee and any director,
officer, employee or agent of the Trustee shall be indemnified by the Seller
and held harmless against any loss, liability or reasonable expenses incurred
by the Trustee in performing its duties as Tax Matters Person for the REMIC
created under this Agreement, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of its duties as Tax Matters Person for the REMIC created
hereunder. The provisions of this Section 10.07 shall survive the termination
of this Agreement.
Section 10.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation or association organized and doing business under the laws of the
United States of America or of any State authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 subject to supervision or examination by the United States of
America, or any state, acceptable to the Certificate Insurer and having a
deposit rating of at least A- from Standard & Poor's and A2 by Moody's. If such
Trustee 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 or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall, upon the request of the Certificate
Insurer, resign immediately in the manner and with the effect hereinafter
specified in this Article X.
Section 10.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Depositor and
the Seller and by mailing notice of resignation by first-class mail, postage
prepaid, to the Certificate Insurer and the Owners at their addresses appearing
on the Register. A copy of such notice shall be sent by the resigning Trustee
to the Rating Agencies. Upon receiving notice of resignation, the Depositor
shall promptly appoint a successor Trustee or Trustees acceptable to the
Certificate Insurer by written instrument, in duplicate, executed on behalf of
the Trust by an Authorized Officer of the Depositor, one copy of which
instrument shall be delivered to the Trustee so resigning and one copy to the
successor Trustee or Trustees. If no successor Trustee shall have been
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, or any Owner
may, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor Trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and appropriate, appoint a
successor Trustee.
(c) If at any time the Trustee shall cease to be eligible under
Section 10.08 hereof and shall fail to resign after written request therefor by
the Depositor or by the Certificate Insurer, the Certificate Insurer or the
Depositor with the written consent of the Certificate Insurer may remove the
Trustee and appoint a successor Trustee acceptable to the Certificate Insurer
by written instrument, in duplicate, executed on behalf of the Trust by an
Authorized Officer of the Depositor, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor Trustee.
(d) The Owners of a majority of the Percentage Interests represented
by the Class A Certificates with the prior written consent of the Certificate
Insurer, or, if there are no Class A Certificates then Outstanding, by such
majority of the Percentage Interests represented by the Class R Certificates,
may at any time remove the Trustee and appoint a successor Trustee acceptable
to the Certificate Insurer by delivering to the Trustee to be removed, to the
successor Trustee so appointed, to the Depositor, to the Servicer and to the
Certificate Insurer, copies of the record of the act taken by the Owners, as
provided for in Section 11.03 hereof.
(e) If the Trustee fails to perform its duties in accordance with the
terms of this Agreement, or becomes ineligible pursuant to Section 10.08 to
serve as Trustee, the Certificate Insurer may remove the Trustee and appoint a
successor Trustee by written instrument, in triplicate, signed by the
Certificate Insurer 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 Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Depositor shall promptly appoint a successor Trustee acceptable to the
Certificate Insurer. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Trustee shall be
appointed by act of the Certificate Insurer or the Owners of a majority of the
Percentage Interests represented by the Class A Certificates then Outstanding
with the consent of the Certificate Insurer, the successor Trustee so appointed
shall forthwith upon its acceptance of such appointment become the successor
Trustee and supersede the successor Trustee appointed by the Depositor. If no
successor Trustee shall have been so appointed by the Depositor or the Owners
and shall have accepted appointment in the manner hereinafter provided, any
Owner may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(g) The Servicer shall give notice of any removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the
Certificate Insurer, to the Rating Agencies and to the Owners as their names
and addresses appear in the Register. Each notice shall include the name of the
successor Trustee and the address of its corporate trust office
Section 10.10. Acceptance of Appointment by Successor Trustee.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositor on behalf of the Trust to the
Certificate Insurer and to its predecessor Trustee an instrument accepting such
appointment hereunder and stating its eligibility to serve as Trustee
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts,
duties and obligations of its predecessor hereunder; but, on request of the
Depositor, the Certificate Insurer or the successor Trustee, such predecessor
Trustee shall, upon payment of its charges then unpaid, execute and deliver an
instrument transferring to such successor Trustee all of the rights, powers and
trusts of the Trustee so ceasing to act, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such Trustee
so ceasing to act hereunder. Upon request of any such successor Trustee, the
Depositor on behalf of the Trust shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Depositor shall mail notice thereof by first-class mail,
postage prepaid, to the Owners at their last addresses appearing upon the
Register and to the Certificate Insurer. The Depositor shall send a copy of
such notice to the Rating Agencies. If the Depositor fails to mail such notice
within ten days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Trust.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession to
Business of the Trustee.
Any corporation or association into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to all
or substantially all of the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, without the execution or filing of any
paper or any further act on the pan of any of the parties hereto; provided,
however, that such corporation or association shall be otherwise qualified and
eligible under this Article X. In case any Certificates have been executed, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such Trustee may adopt such execution and
deliver the Certificates so executed with the same effect as if such successor
Trustee had itself executed such Certificates.
Section 10.12. Reporting; Withholding.
(a) The Trustee shall timely provide to the Owners the Internal
Revenue Service's Form 1099 and any other statement required by applicable
Treasury regulations as determined by the Tax Matters Person, and shall
withhold, as required by applicable law, federal, state or local taxes, if any,
applicable to distributions to the Owners, including but not limited to backup
withholding under Section 3406 of the Code and the withholding tax on
distributions to foreign investors under Sections 1441 and 1442 of the Code.
(b) As required by law or upon request of the Tax Matters Person and
except as otherwise specifically set forth in (a) preceding, the Trustee shall
timely file all reports prepared by the Seller and required to be filed by the
Trust, including other reports that must be filed with the Owners, such as the
Internal Revenue Service's Form 1066 and Schedule Q. The Trustee shall, upon
request of the Seller, collect any forms or reports from the Owners determined
by the Seller to be required under applicable federal, state and local tax
laws.
(c) Except as otherwise provided, the Trustee shall have the
responsibility for preparation and execution of those returns, forms, reports
and other documents referred to in this Section.
(d) The Seller covenants and agrees that it shall provide to the
Trustee any information necessary to enable the Trustee to meet its obligations
under subsections (a), (b) and (c) above.
Section 10.13. Liability of the Trustee.
The Trustee shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Trustee
herein. Neither the Trustee nor any of the directors, officers, employees or
agents of the Trustee shall be under any liability on any Certificate or
otherwise to the Certificate Account, the Depositor, the Seller, the Servicer
or any Owner 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 Trustee, its
directors, officers, employees or agents or any such Person against any
liability which would otherwise be imposed by reason of negligent action,
negligent failure to act or willful misconduct in the performance of duties or
by reason of reckless disregard of obligations and duties hereunder. Subject to
the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in the Certificate Account (except for any losses on
obligations on which the bank serving as Trustee is the obligor). In addition,
the Depositor, the Seller and Servicer covenant and agree to indemnify the
Trustee and the Servicer (if the Servicer is also the Trustee) from, and hold
it harmless against, any and all losses, liabilities, damages, claims or
expenses (including legal fees and expenses) of whatsoever kind arising out of
or in connection with the performance of its duties hereunder other than those
resulting from the negligence or bad faith of the Trustee, and the Seller shall
pay all amounts not otherwise paid or reimbursed pursuant to Sections 2.05,
6.12 and 7.06 hereof. The Trustee and any director, officer, employee or agent
of the Trustee may rely and shall be protected in acting or refraining from
acting in good faith on any Certificate, notice or other document of any kind
prima facie properly executed and submitted by the Authorized Officer of any
Person respecting any matters arising hereunder. The provisions of this Section
10.13 shall survive the termination of this Agreement and the payment of the
outstanding Certificates.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate or Property may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and reasonably acceptable to the Certificate Insurer to act as
co-Trustee or co-Trustees, jointly with the Trustee, of all or any part of the
Trust Estate or separate Trustee or separate Trustees of any part of the Trust
Estate, and to vest in such Person or Persons, in such capacity and for the
benefit of the Owners and the Certificate Insurer, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by
it of a request so to do, or in the case any event indicated in Section 8.20(a)
shall have occurred and be continuing, the Trustee subject to reasonable
approval of the Certificate Insurer 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 10.08 and no
notice to Owner of the appointment of any co-Trustee or separate Trustee shall
be required under Section 10.09.
Every separate Trustee and co-Trustee shall, to the extent permitted,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate Trustee or
co-Trustee jointly (it being understood that such separate Trustee or
co-Trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor 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 Estate
or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate Trustee or co-Trustee, but
solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable by
reason of any act or omission of any other co-Trustee hereunder; and
(iii) The Servicer, and the Certificate Insurer and the Trustee
acting jointly may at any time accept the resignation of or remove
any separate Trustee or co-Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate Trustees and
co-Trustees, as effectively as if given to each of them. Every instrument
appointing any separate Trustee or co-Trustee shall refer to this Agreement and
the conditions of this Section 10.14. Each separate Trustee and co-Trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Servicer and the Certificate Insurer.
Any separate Trustee or co-Trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate Trustee or co-Trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a
new or successor Trustee.
Section 10.15. Appointment of Custodians.
The Trustee may appoint one or more Custodians to hold all or a
portion of the Files as agent for the Trustee, by entering into a Custodial
Agreement acceptable to the Certificate Insurer. Subject to this Article X, the
Trustee agrees to comply with the terms of the Custodial Agreement and to
enforce the terms and provisions thereof against the Custodian for the benefit
of the Owners of the Certificates and the Certificate Insurer.
END OF ARTICLE X
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions.
Upon any application or request by the Depositor, the Seller, the
Certificate Insurer or the Owners to the Trustee to take any action under any
provision of this Agreement, the Depositor, the Seller, the Certificate Insurer
or the Owners, as the case may be, shall furnish to the Trustee a certificate
stating that all conditions precedent, if any, provided for in this Agreement
relating to the proposed action have been complied with, except that in the
case of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Agreement relating
to such particular application or request, no additional certificate need be
furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement (including one furnished pursuant to specific requirements of
this Agreement relating to a particular application or request) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 11.02. Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Trustee
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by counsel, unless such Authorized Officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of an Authorized Officer of the Trustee or any Opinion of Counsel may be based,
insofar as it relates to factual matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Depositor, the
Seller or the Servicer, stating that the information with respect to such
factual matters is in the possession of the Depositor, the Seller or the
Servicer, unless such Authorized Officer or counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Any Opinion of
Counsel may also be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Authorized Officer of the
Trustee, stating that the information with respect to such matters is in the
possession of the Trustee, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any Opinion of Counsel may be based
on the written opinion of other counsel, in which event such Opinion of Counsel
shall be accompanied by a copy of such other counsel's opinion and shall
include a statement to the effect that such counsel believes that such counsel
and the Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.03. Acts of Owners.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Owners may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Owners in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the Seller. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Owners signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Whenever such execution is by an officer of a corporation or a member
of a partnership on behalf of such corporation or partnership, such certificate
or affidavit shall also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Owner of any Certificate shall bind the Owner of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.04. Notices, etc. to Trustee.
Any request, demand, authorization, direction, notice, consent,
waiver or act of the Owners or other documents provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with the Trustee by
any Owner, the Certificate Insurer, the Depositor, the Seller shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with and received by the Trustee at its Corporate Trust Office as
set forth in Section 2.02 hereof.
Section 11.05. Notices and Reports to Owners; Waiver of Notices.
Where this Agreement provides for notice to Owners of any event or
the mailing of any report to Owners, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Owner affected by such event or to whom
such report is required to be mailed, at the address of such Owner as it
appears on the Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice or the mailing of
such report. In any case where a notice or report to Owners is mailed in the
manner provided above, neither the failure to mail such notice or report nor
any defect in any notice or report so mailed to any particular Owner shall
affect the sufficiency of such notice or report with respect to other Owners,
and any notice or report which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given or provided. Notwithstanding the
foregoing, if the Servicer is removed or resigned or the Trust is terminated,
notice of any such events shall be made by overnight courier, registered mail
or telecopy followed by a telephone call.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any Rating Agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.06. Rules by Trustee.
The Trustee may make reasonable rules for any meeting of Owners.
Section 11.07. Successors and Assigns.
All covenants and agreements in this Agreement by any party hereto
shall bind its successors and assigns, whether so expressed or not.
Section 11.08. Severability.
In case any provision in this Agreement or in the Certificates shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 11.09. Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or
implied, shall give to any Person, other than the Owners, the Certificate
Insurer and the parties hereto and their successors hereunder, any benefit or
any legal or equitable right, remedy or claim under this Agreement.
Section 11.10. Legal Holidays.
In any case where the date of any Payment Date, any other date on
which any distribution to any Owner is proposed to be paid, or any date on
which a notice is required to be sent to any Person pursuant to the terms of
this Agreement (with the exception of any Monthly Remittance Date) shall not be
a Business Day, then (notwithstanding any other provision of the Certificates
or this Agreement) payment or mailing need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made or mailed on the nominal date of any such Payment Date, or such other date
for the payment of any distribution to any Owner or the mailing of such notice,
as the case may be, and no interest shall accrue for the period from and after
any such nominal date, provided such payment is made in full on such next
succeeding Business Day. In any case where the date of any Monthly Remittance
Date or any Monthly Reporting Date shall not be a Business Day, then payment or
mailing need not be made on such date, but must be made on the preceding
Business Day.
Section 11.11. Governing Law; Submission to Jurisdiction.
(a) In view of the fact that Owners are expected to reside in many
states and outside the United States and the desire to establish with certainty
that this Agreement will be governed by and construed and interpreted in
accordance with the law of a state having a well-developed body of commercial
and financial law relevant to transactions of the type contemplated herein,
this Agreement and each Certificate shall be construed in accordance with and
governed by the laws of the State of New York applicable to agreements made and
to be performed therein, without giving effect to the conflicts of law
principles thereof.
(b) The parties hereto hereby irrevocably submit to the jurisdiction
of the United States District Court for the Southern District of New York and
any court in the State of New York located in the City and County of New York,
and any appellate court from any thereof, in any action, suit or proceeding
brought against it or in connection with this Agreement or any of the related
documents or the transactions contemplated hereunder or for recognition or
enforcement of any judgment, and the parties hereto hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. The parties hereto agree that a
final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. To the extent permitted by applicable law, the parties
hereto hereby waive and agree not to assert by way of motion, as a defense or
otherwise in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that the related documents or the subject
matter thereof may not be litigated in or by such courts.
(c) Each of the Depositor, Seller and Servicer hereby irrevocably
appoints and designates the Trustee as its true and lawful attorney and duly
authorized agent for acceptance of service of legal process with respect to any
action, suit or proceeding set forth in paragraph (b) hereof. Each of the Seller
and Servicer agrees that service of such process upon the Trustee shall
constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect the
right of the Depositor, the Seller, the Servicer or the Certificate Insurer or
third-party beneficiary hereunder, as the case may be, to serve process in any
other manner permitted by law or to start legal proceedings relating to any of
the Home Equity Loans against any Mortgagor in the courts of any jurisdiction.
Section 11.12. Counterparts.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 11.13. Usury.
The amount of interest payable or paid on any Certificate under the
terms of this Agreement shall be limited to an amount which shall not exceed
the maximum nonusurious rate of interest allowed by the applicable laws of the
State of New York or any applicable law of the United States permitting a
higher maximum nonusurious rate that preempts such applicable New York laws,
which could lawfully be contracted for, charged or received (the "Highest
Lawful Rate"). In the event any payment of interest on any Certificate exceeds
the Highest Lawful Rate, the Trust stipulates that such excess amount will be
deemed to have been paid to the Owner of such Certificate as a result of an
error on the part of the Trustee acting on behalf of the Trust and the Owner
receiving such excess payment shall promptly, upon discovery of such error or
upon notice thereof from the Trustee on behalf of the Trust, refund the amount
of such excess or, at the option of such Owner, apply the excess to the payment
of principal of such Certificate, if any, remaining unpaid. In addition, all
sums paid or agreed to be paid to the Trustee for the benefit of Owners of
Certificates for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such Certificates.
Section 11.14. Amendment.
(a) The Trustee, the Depositor, the Seller and the Servicer, may at
any time and from time to time, with the prior written approval of the
Certificate Insurer but without the giving of notice to or the receipt of the
consent of the Owners, amend this Agreement, and the Trustee shall consent to
the amendment for the purposes of (i) if accompanied by an approving Opinion of
Counsel which shall not be at the expense of the Trustee experienced in federal
income tax matters, removing the restriction against the transfer of a Class R
Certificate to a Disqualified Organization (as such term is defined in the
Code), (ii) complying with the requirements of the Code including any
amendments necessary to maintain REMIC status of the REMIC Estate, (iii) curing
any ambiguity, (iv) correcting or supplementing any provisions of this
Agreement which are inconsistent with any other provisions of this Agreement or
(v) for any other purpose, provided that in the case of clause (v), such
amendment shall not adversely affect in any material respect any Owner. Any
such amendment shall be deemed not to adversely affect in any material respect
any Owner if such Owner shall have consented thereto in writing or if there is
delivered to the Trustee written notification from each Rating Agency that such
amendment will not cause such Rating Agency to reduce its then current rating
assigned to the Class A Certificates without regard to the Certificate
Insurance Policy. Notwithstanding anything to the contrary, no such amendment
shall (a) change in any manner the amount of, or delay the timing of, payments
which are required to be distributed to any Owner without the consent of the
Owner of such Certificate, (b) change the percentages of Percentage interest
which are required to consent to any such amendments, without the consent of
the Owners of all Certificates of the Class or Classes affected then
outstanding or (c) which affects in any manner the terms or provisions of the
Certificate Insurance Policy.
(b) The Certificate Insurer and the Rating Agencies shall be provided
by the Seller and the Depositor with copies of any amendments to this
Agreement, together with copies of any opinions or other documents or
instruments executed in connection therewith.
(c) Notwithstanding any contrary provisions of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel (provided by the Person requesting
such amendment) to the effect that such amendment will not result in the
imposition of any tax on the Trust pursuant to the REMIC Provisions or cause the
REMIC created hereunder to fail to qualify as a REMIC at any time that any of
the Certificates are outstanding.
Section 11.15. Paying Agent; Appointment and Acceptance of Duties.
The Trustee is hereby appointed Paying Agent. The Seller may, subject
to the eligibility requirements for the Trustee set forth in Section 10.08
hereof, including, without limitation, the prior written consent of the
Certificate Insurer, appoint one or more other Paying Agents or successor
Paying Agents.
Each Paying Agent, immediately upon such appointments shall signify
its acceptance of the duties and obligations imposed upon it by this Agreement
by written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of Section 6.02, that such Paying
Agent will:
(a) allocate all sums received for distribution to the
Owners of Certificates of each Class for which it is acting as Paying
Agent on each Payment Date among such Owners in the proportion
specified by the Trustee; and
(b) hold all sums held by it for the distribution of
amounts due with respect to the Certificates in trust for the benefit
of the Owners entitled thereto until such sums shall be paid to such
Owners or otherwise disposed of as herein provided and pay such sums to
such Persons as herein provided.
Any Paying Agent other than the Trustee may at any time resign and be
discharged of the duties and obligations created by this Agreement by giving at
least sixty (60) days written notice to the Trustee. Any such Paying Agent may
be removed at any time by an instrument filed with such Paying Agent and signed
by the Trustee.
In the event of the resignation or removal of any Paying Agent other
than the Trustee such Paying Agent shall pay over, assign and deliver any
moneys held by it as Paying Agent to its successor, or if there be no
successor, to the Trustee.
Upon the appointment, removal or notice of resignation of any Paying
Agent, the Trustee shall notify the Certificate Insurer and the Owners by
mailing notice thereof at their addresses appearing on the Register.
Section 11.16. REMIC Status.
(a) The parties hereto intend that the REMIC Estate shall constitute,
and that the affairs of the REMIC Estate shall be conducted so as to qualify it
as a REMIC in accordance with the REMIC Provisions. In furtherance of such
intention, Norwest Bank Minnesota, National Association or such other person
designated pursuant to Section 11.18 hereof shall act as agent for the Trust
and as Tax Matters Person for the Trust and that in such capacity it shall: (i)
prepare or cause to be prepared and filed, at its own expense, in a timely
manner, annual tax returns and any other tax return required to be filed by the
REMIC created hereunder using a calendar year as the taxable year for such
REMIC; (ii) in the related first such tax return, make (or cause to be made) an
election satisfying the requirements of the REMIC Provisions, on behalf of the
REMIC created hereunder, for it to be treated as a REMIC; (iii) at the Tax
Matters Person's expense, prepare and forward, or cause to be prepared and
forwarded, to the Owners all information, reports or tax returns required with
respect to the REMIC created hereunder, including Schedule Q to Form 1066, as,
when and in the form required to be provided to the Owners, and to the Internal
Revenue Service and any other relevant governmental taxing authority in
accordance with the REMIC Provisions and any other applicable federal, state or
local laws, including without limitation information reports relating to
"original issue discount" as defined in the Code based upon the prepayment
assumption and calculated by using the "Issue Price" (within the meaning of
Section 1273 of the Code) of the Certificates of the related Class; provided
that the tax return filed on Schedule Q to Form 1066 shall be prepared and
forwarded to the Owners of the Class R Certificates no later than 50 days after
the end of the period to which such tax return was due; (iv) not take any
action or omit to take any action that would cause the termination of the REMIC
status of the REMIC created hereunder, except as provided under this Agreement;
(v) represent, the Trust or the REMIC created hereunder in any administrative
or judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to a taxable year of
the Trust or the REMIC created hereunder, enter into settlement agreements with
any governmental taxing agency, extend any statute of limitations relating to
any tax item of the Trust or the REMIC created hereunder, and otherwise act on
behalf of the Trust or the REMIC created hereunder in relation to any tax
matter involving the Trust or the REMIC created hereunder (the legal expenses
and costs of any such action described in this subsection (v) and any liability
resulting therefrom shall constitute expenses of the Trust and the Trustee
shall be entitled to reimbursement therefor as provided in Section
7.03(b)(iii)(G) unless such legal expenses and costs are incurred by reason of
the Trustee's willful misfeasance, bad faith or negligence); (vi) comply with
all statutory or regulatory requirements with regard to its conduct of
activities pursuant to the foregoing clauses of this Section 11.16, including,
without limitation, providing all notices and other information to the Internal
Revenue Service and Owners of Class R Certificates required of a "tax matters
person" pursuant to subtitle F of the Code and the Treasury Regulations
thereunder; (vii) make available information necessary for the computation of
any tax imposed (A) on transferor of residual interests to certain Disqualified
Organizations or (B) on pass-through entities, any interest in which is held by
a Disqualified Organization; and (viii) acquire and hold the Tax Matters Person
Residual Interest. The obligations of the Trustee or such other designated Tax
Matters Person pursuant to this Section 11.16 shall survive the termination or
discharge of this Agreement.
(b) The Seller, the Depositor, the Trustee and the Servicer covenant
and agree for the benefit of the Owners and the Certificate Insurer (i) to take
no action which would result in the termination of REMIC status for the REMIC
created hereunder, (ii) not to engage in any "prohibited transaction", as such
term is defined in Section 860F(a)(2) of the Code, (iii) not to engage in any
other action which may result in the imposition on the Trust of any other taxes
under the Code and (iv) to cause the Servicer not to take or engage in any such
action, to the extent the Seller is aware of any such proposed action by the
Servicer.
(c) The REMIC created hereunder shall, for federal income tax
purposes, maintain books on a calendar year basis and report income on an
accrual basis.
(d) Except as otherwise permitted by Section 7.05(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to
a plan of liquidation in accordance with Article IX hereof).
(e) None of the Depositor, the Seller or the Trustee shall enter into
any arrangement by which the Trustee will receive a fee or other compensation
for services rendered pursuant to this Agreement, other than as expressly
contemplated by this Agreement.
(f) Notwithstanding the foregoing clauses (d) and (e), the Trustee or
the Seller may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received an Opinion of Counsel experienced
in federal income tax matters acceptable to the Certificate Insurer to the
effect that such transaction does not result in a tax imposed on the Trustee or
cause a termination of REMIC status for the REMIC created hereunder; provided,
however, that such transaction is otherwise permitted under this Agreement.
(g) In the event that any tax is imposed on "prohibited transactions"
of the Trust created hereunder as defined in Section 860F(a)(2) of the Code, on
"net income from foreclosure property" of the Trust as defined in Section
860G(c) of the Code, on any contributions to the Trust after the Startup Date
therefor pursuant to Section 860G(d) of the Code, or any other tax is imposed
by the Code or any applicable provisions of state or local tax laws, such tax
shall be charged (i) to the Trustee if such tax arises out of or results from
the willful misfeasance, bad faith or negligence in performance by the Trustee
of any of its obligations under Article X, (ii) to the Servicer if such tax
arises out of or results from a breach by the Servicer of any of its
obligations under Article VIII or otherwise.
Section 11.17. Additional Limitation on Action and Imposition of Tax.
Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an Opinion of Counsel experienced in
federal income tax matters acceptable to the Certificate Insurer at the expense
of the party seeking to take such action but in no event at the expense of the
Trust to the effect that such transaction does not result in a tax imposed on
the Trust or the REMIC created hereunder or cause a termination of REMIC status
for the REMIC created hereunder, (i) sell any assets in the Trust Estate, (ii)
accept any contribution of assets after the Startup Day, (iii) allow the
Servicer to foreclose upon any Home Equity Loan if such foreclosure would
result in a tax on the Trust or the REMIC created hereunder or cause
termination of the REMIC status for the REMIC created hereunder or (iv) agree
to any modification of this Agreement. To the extent that sufficient amounts
cannot be so retained to pay or provide for the payment of such tax, the
Trustee is hereby authorized to and shall segregate, into a separate
non-interest bearing account, the net income from any such Prohibited
Transactions of the REMIC created hereunder and use such income, to the extent
necessary, to pay such tax; provided that, to the extent that any such income
is paid to the Internal Revenue Service, the Trustee shall retain an equal
amount from future amounts otherwise distributable to the Owners of Class R
Certificates and shall distribute such retained amounts to the Owners of Class
A Certificates to the extent they are fully reimbursed and then to the Owners
of the Class R Certificates. If any tax, including interest penalties or
assessments, additional amounts or additions to tax, is imposed on the Trust,
such tax shall be charged against amounts otherwise distributable to the owners
of the Class R Certificates on a pro rata basis. The Trustee is hereby
authorized to and shall retain from amounts otherwise distributable to the
Owners of the Class R Certificates sufficient funds to pay or provide for the
payment of, and to actually pay, such tax as is legally owed by the Trust (but
such authorization shall not prevent the Trustee from contesting any such tax
in appropriate proceedings, and withholding payment of such tax, if permitted
by law, pending the outcome of such proceedings).
Section 11.18. Appointment of Tax Matters Person.
A Tax Matters Person will be appointed for the REMIC created
hereunder for all purposes of the Code and such Tax Matters Person will
perform, or cause to be performed, such duties and take, or cause to be taken,
such actions as are required to be performed or taken by the Tax Matters Person
under the Code. The Tax Matters Person for the REMIC created hereunder shall be
the Trustee as long as it owns a Class R Certificate. If the Trustee does not
own a Class R Certificate, the Tax Matters Person may be any other entity that
owns a Class R Certificate and accepts a designation hereunder as Tax Matters
person by delivering an affidavit in the form of Exhibit I.
Section 11.19. The Certificate Insurer.
Any right conferred to the Certificate Insurer hereunder, including
but not limited to consent rights, shall be suspended and shall run to the
benefit of the Owners and shall be exercisable by a vote of Owners holding
certificates representing at least a 51% Percentage Interest of all Class A
Certificates during any period in which there exists a Certificate Insurer
Default; provided, that the right of the Certificate Insurer to receive the
Premium Amount shall not be suspended if such Certificate Insurer Default was a
default other than a default under clause (a) of the definition thereof. If a
Certificate Insurer Default shall cease to exist, the rights of the Certificate
Issuer shall be immediately restored. At such time as the Class A Certificates
are no longer Outstanding hereunder and the Certificate Insurer has received
all Reimbursement Amounts, the Certificate Insurer's rights hereunder shall
terminate.
Section 11.20. Reserved.
Section 11.21. Third Party Rights.
The Trustee, the Seller, the Servicer, the Depositor and the Owners
agree that the Certificate Insurer shall be deemed a third-party beneficiary of
this Agreement as if it were a party hereto.
Section 11.22. Notices.
All notices hereunder shall be given as follows, until any
superseding instructions are given to all other Persons listed below:
The Trustee: Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
with a copy to the following:
Norwest Bank Minnesota, National Association
Corporate Trust Services
11000 Broken Land Parkway
Columbia, Maryland 21044
Attention: Centex Home Equity Loan Trust 1998-3
Tel: (410) 884-2000
Fax: (410) 884-2360
The Depositor: Lehman ABS Corporation
200 Vesey Street
Three World Financial Center
New York, NY 10285
Attention: Martin P. Harding
Tel: (212)
Fax: (212)
with a copy to
The Seller: Centex Credit Corporation
d/b/a Centex Home Equity Corporation
2728 North Harwood
Dallas, TX 75201
Attention: Anthony H. Barone
Telecopy No.: (214) 981-5990
Confirmation: (214) 981-5220
The Servicer: Centex Credit Corporation
d/b/a Centex Home Equity Corporation
2728 North Harwood
Dallas, TX 75201
Attention: Anthony H. Barone
Telecopy No.: (214) 981-5990
Confirmation: (214) 981-5220
The Certificate
Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Centex Home Equity Loan Trust 1998-3
Tel: (212) 826-0100
Fax: (212) 339-3518 or (212) 339-3529
(in each case in which notice or other
communication to the Certificate Insurer
refers to a Servicer Termination Event, a
claim on the Certificate Insurance Policy or
with respect to which failure on the part of
the Certificate Insurer to respond shall be
deemed to constitute consent or acceptance,
then a copy should also be sent to the
attention of each of the General Counsel and
the Head-Financial Guaranty Group and shall
be marked to indicate "URGENT MATERIAL
ENCLOSED.")
The Underwriters: Lehman Brothers Inc.
200 Vesey Street
Three World Financial Center
New York, NY 10285
Attention:
Tel: (212)
Fax: (212)
Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: The Residential Mortgage
Monitoring Department
Tel: (212) 553-0300
Fax: (212) 553-0355
Standard & Poor's: Standard & Poor's Ratings Services,
a division of the McGraw-Hill Companies
26 Broadway
15th Floor
New York, New York 10004
Attention: Residential Mortgage Group
Tel: (212) 208-8000
Fax: (212) 208-8365
Section 11.23. Rule 144A Information. For so long as any of the Class
R Certificates are "restricted securities" within the meaning of Rule 144A
under the Securities Act, the Servicer (or if the Trustee is then acting as
Servicer, the Seller) agrees to provide to any Owner of the Class R Certificate
and to any prospective purchaser of Class R Certificates designated by such an
Owner, upon the request of such Owner or prospective purchaser, the information
specified below which is intended to satisfy the condition set forth in Rule
144A(d)(4) under the Securities Act; provided that this Section 11.23 shall
require, as to the Trustee or the Servicer, only that the Servicer (or if the
Trustee is then acting as Servicer, the Seller) provide publicly available
information regarding it or the Trustee in response to any such request; and
provided further that the Servicer (or if the Trustee is then acting as
Servicer, the Seller) shall be obligated to provide only such basic, material
information concerning the structure of the Class R Certificates and
distributions thereon, the nature, performance and servicing of the Home Equity
Loans supporting the Certificates, and any credit enhancement mechanism, if
any, associated with the Certificates. Any recipient of information provided
pursuant to this Section 11.23 shall agree that such information shall not be
disclosed or used for any purpose other than the evaluation of the Class R
Certificates by the prospective purchaser. The Trustee shall have no
responsibility for the sufficiency under Rule 144A of any information so
provided by the Servicer to any Owner or prospective purchaser of Class R
Certificates.
END OF ARTICLE XI
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.01. Trust Estate and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Estate for the benefit of the
related Owners and the Certificate Insurer and all references in this Agreement
and in the Certificates to the benefit of Owners 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.
The Servicer hereby acknowledges and agrees that it shall service and
administer the Home Equity Loans and any REO Properties, and shall maintain the
Principal and Interest Account, for the benefit of the Owners and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Owners shall be deemed to include the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Servicer
shall not terminate any Sub-Servicing Agreements without the prior consent of
the Certificate Insurer.
Section 12.02. Claims Upon the Policy; Policy Payments Account.
(a) If, by 10:00 a.m. New York time on the third Business Day prior
to a Payment Date, the Trustee determines that the Available Funds will not be
sufficient to pay the Class A Certificateholders the Insured Payment for such
Payment Date, the trustee shall give notice to the Certificate Insurer and the
Fiscal Agent (if any) in the form set forth as Exhibit A to the Certificate
Insurance Policy. Following Receipt (as defined in the Certificate Insurance
Policy) by the Certificate Insurer of such notice in such form, the Certificate
Insurer or the Fiscal Agent will pay any amount payable under the Certificate
Insurance Policy on the later to occur of (i) 12:00 noon New York time on the
third Business Day following such Receipt and (ii) 12:00 noon New York time on
the Payment Date to which such deficiency relates, as provided in the
Endorsement to the Certificate Insurance Policy.
(b) The Trustee shall establish and maintain a separate special
purpose trust account for the benefit of the Owners of the Class A Certificates
and the Certificate Insurer referred to herein as the "Policy Payments Account"
over which the Trust shall have exclusive control and sole right of withdrawal.
The Policy Payments Account shall be an Eligible Account. The Trustee shall
deposit any amount paid under the Certificate Insurance Policy in the Policy
Payments Account and distribute such amount only for purposes of payment to the
Owners of the related Class A Certificates of the Insured Payments for which a
claim was made and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Servicer, the Seller, the Depositor, the
Custodian, the Trustee or the Trust. Amounts paid under the Certificate
Insurance Policy shall be transferred to the Certificate Account in accordance
with the next succeeding paragraph and disbursed by the Trustee to Owners of
the related Class A Certificates in accordance with Section 7.03. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Insured Payments with other
funds available to make such payment. However, the amount of any payment of
principal of or interest on the related Class A Certificates to be paid from
funds transferred from the Policy Payments Account shall be noted as provided
in paragraph (c) below in the Register and in the statement to be furnished to
Owners of the Class A Certificates pursuant to Section 7.08. Funds held in the
Policy Payments Account shall not be invested by the Trustee.
On any Payment Date with respect to which a claim has been made under
the Certificate Insurance Policy, the amount of funds received by the Trustee
as a result of any claim under the Certificate Insurance Policy, to the extent
required to make the Insured Payment on such Payment Date shall be withdrawn
from the Policy Payments Account and deposited in the Certificate Account and
applied by the Trustee, together with the other funds to be withdrawn from the
Certificate Account, directly to the payment in full of the Insured Payment due
on the related Class of Class A Certificates. Funds received by the Trustee as
a result of any claim under either Certificate Insurance Policy shall be
deposited by the Trustee in the Policy Payments Account and used solely for
payment to the Owners of the Class A Certificates and may not be applied to
satisfy any costs, expenses or liabilities of the Servicer, the Seller, the
Depositor, the Custodian, the Trustee or the Trust. Any funds remaining in the
Policy Payments Account on the first Business Day following a Payment Date
shall be remitted to the Certificate Insurer, pursuant to the instructions of
the Certificate Insurer, by the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Certificate
from moneys received under the Certificate Insurance Policy. The Certificate
Insurer shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer and
Fiscal Agent (as defined in the Certificate Insurance Policy) of any proceeding
or the institution of any action, of which an Authorized Officer of the Trustee
has actual knowledge, seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership or similar law (a "Preference
Claim") of any distribution made with respect to the Class A Certificates. Each
Owner of a Class A Certificate by its purchase of such Certificate, the
Servicer and the Trustee hereby 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 the rights of the Servicer, the Trustee and Owner of Class A
Certificate in the conduct of any such Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Preference Claim.
Section 12.03. Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of 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 such Certificates from the Trust and
shall not result in the payment of or the provision for the payment of the
principal of or interest on such Certificates within the meaning of Section
7.03. The Depositor, the Servicer and the Trustee acknowledge, and each Owner
by its acceptance of a Certificate agrees, that without the need for any
further action on the part of the Certificate Insurer, the Depositor, the
Servicer, the Trustee or the Registrar (a) to the extent the Certificate
Insurer makes payments, directly or indirectly, on account of principal of or
interest on any Class A Certificates to the Owners of such Certificates, the
Certificate Insurer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Trust and (b) the Certificate
Insurer shall be paid such principal and interest but only from the sources and
in the manner provided herein for the payment of such principal and interest.
The Trustee, the Seller, the Depositor 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 Owners as otherwise set forth therein.
Section 12.04. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required
by this Agreement to be sent to any other party hereto or to any of the Owners
shall also be sent to the Certificate Insurer.
Section 12.05. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
Section 12.06. Rights to the Certificate Insurer To Exercise Rights
of Owners.
By accepting its Certificate, each Owner of a Class A Certificate
agrees that unless a Certificate Insurer Default exists, the Certificate
Insurer shall have the right to exercise all rights of the Owners of the Class
A Certificates as specified under this Agreement without any further consent of
the Owners of the Class A Certificates and that the Owners of Class A
Certificates may not exercise such rights except with the written consent of
the Certificate Insurer.
Section 12.07. Trustee to Hold the Certificate Insurance Policy.
The Trustee will hold the Certificate Insurance Policy in trust as
agent for the Holders of the Class A Certificates for the purpose of making
claims thereon and distributing the proceeds thereof. Neither the Certificate
Insurance Policy nor the amounts paid on the Certificate Insurance Policy will
constitute part of the Trust created by this Agreement. Each Holder of Class A
Certificates, by accepting its Class A Certificates, appoints the Trustee as
attorney-in-fact for the purpose of making claims on the Certificate Insurance
Policy.
Section 12.08. Trustee To Act Solely with Consent of the Certificate
Insurer. Unless a Certificate Insurer Default exists, the Trustee shall not,
without the Certificate Insurer's consent or unless directed by the Certificate
Insurer:
(a) terminate the rights and obligations of the Servicer as Servicer
pursuant to Section 8.20 hereof;
(b) agree to any amendment pursuant to Section 11.14 hereof; or
(c) undertake any litigation.
END OF ARTICLE XII
IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer and the
Trustee have caused this Agreement to be duly executed their respective
officers thereunto duly authorized, all as of the day and year first above
written.
LEHMAN ABS CORPORATION,
as Depositor
By:______________________________________
Title:___________________________________
CENTEX CREDIT CORPORATION d/b/a
CENTEX HOME EQUITY CORPORATION,
as Seller
By:______________________________________
Title:___________________________________
CENTEX CREDIT CORPORATION d/b/a
CENTEX HOME EQUITY CORPORATION,
as Servicer
By:______________________________________
Title:___________________________________
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:______________________________________
Title:___________________________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 29th day of September, 1998, before me personally came Samir
A. Tabet, to me known that he is a Senior Vice President of Lehman ABS
Corporation, a Delaware corporation; and that he signed his name thereto by
order of the respective Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
NOTARIAL SEAL
____________________________
Notary Public
STATE OF )
: ss.:
COUNTY OF )
On the 29th day of September, 1998, before me personally came _______
_________ to me known that he is President of Centex Credit Corporation d/b/a
Centex Home Equity Corporation, a Nevada corporation and that he signed his
name thereto by order of the respective Boards of Directors of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
NOTARIAL SEAL
_______________________________
Notary Public
STATE OF )
: ss.:
COUNTY OF )
On the 29th day of September, 1998, before me personally came Randall
S. Reider to me known that he/she is a Trust Officer of described in and that
executed the above instrument as Trustee; and that he/she signed his/her name
thereto by order of the Board of Directors of said national banking
association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
NOTARIAL SEAL
________________________________
Notary Public
SCHEDULE I-A
SCHEDULE OF HOME EQUITY LOANS
A copy of this Schedule is maintained by the Trustee at the Corporate
Trust Office and by the Servicer.
SCHEDULE I-B
SCHEDULE OF HOME EQUITY LOANS
A copy of this Schedule is maintained by the Trustee at the Corporate
Trust Office and by the Servicer.
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A CLASS OF
"REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-1
(6.29% PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group I Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group I Home Equity Loans and
certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-1-1 152314 AM2
CUSIP
$63,993,000 September 29, 1998 July 2017
- ------------------------ ------------------ ---------
Original Class A-1 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in the Group I (other
than any principal received and interest due thereon prior to September 1,
1998) listed in Schedule I-A to the Pooling and Servicing Agreement which the
Seller is causing to be delivered to the Depositor and the Depositor is causing
to be delivered to the Trustee (and all substitutions therefor as provided by
Section 3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together
with the related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to the Group I as may
be held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-1 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-1
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the Original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class A-1 (the "Class A-1 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor
(the "Depositor") and Norwest Bank Minnesota, National Association, in its
capacity as the Trustee (the "Trustee"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are Certificates designated as Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates, Class A-2 (the "Class A-2
Certificates"), Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class
A-4 Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the
"Class A-6 Certificates"), Class A-7 (the "Class A-7 Certificates") and Class R
(Residual Interest) (the "Class R Certificates"). The Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates, the Class A-5 Certificates, the Class A-6 and the Class A-7
Certificates shall be together referred to as the "Class A Certificates" and
the Class A Certificates and the Class R Certificates are together referred to
herein as the "Certificates." Terms capitalized herein and not otherwise
defined herein shall have the respective meanings set forth in the Pooling and
Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-1 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-1 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $__________ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-l Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-1 Certificates. The Percentage Interest of
each Class A-1 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-1 Certificate on the Startup Day by the aggregate Class A-l
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy, all as more specifically set forth hereinabove
and in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the Owners of such Class A-l
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-l Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-1 Certificates and shall receive all future distributions of the Class
A-l Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
affect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
Interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendments. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-1 Certificates are exchangeable
for new Class A-1 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:__________________________________
Title:_______________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:____________________________________
Title:_________________________________
EXHIBIT A-2
FORM OF CLASS A-2 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-2
(5.93% PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group I Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group I Home Equity Loans and
certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-2-1 152314 AN0
CUSIP
$10,531,000 September 29, 1998 September 2019
- ------------------------------ ------------------ --------------
Original Class A-1 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in Group I (other than
any principal received and interest due thereon prior to September 1, 1998)
listed in Schedule I-A to the Pooling and Servicing Agreement which the Seller
is causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to the Group I as may
be held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-2 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-2
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the Original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class A-2 (the "Class A-2 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor
(the "Depositor") and Norwest Bank Minnesota, National Association, in its
capacity as the Trustee (the "Trustee"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are Certificates designated as Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates, Class A-1 (the "Class A-1
Certificates"), Class A-3 (the "Class A-3 Certificates"), Class A-4 (the "Class
A-4 Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the
"Class A-6 Certificates"), Class A-7 (the "Class A-7 Certificates") and Class R
(Residual Interest) (the "Class R Certificates"). The Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates, the Class A-5 Certificates, the Class A-6 and the Class A-7
Certificates shall be together referred to as the "Class A Certificates" and
the Class A Certificates and the Class R Certificates are together referred to
herein as the "Certificates." Terms capitalized herein and not otherwise
defined herein shall have the respective meanings set forth in the Pooling and
Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-2 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-2 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $________ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-2 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-2 Certificates. The Percentage Interest of
each Class A-2 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-2 Certificate on the Startup Day by the aggregate Class A-2
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by, Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the Owners of such Class A-2
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-2 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-2 Certificates and shall receive all future distributions of the Class
A-2 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided, that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-2 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-2 Certificates are exchangeable
for new Class A-2 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_________________________________
Title:______________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:____________________________
Title:_________________________
EXHIBIT A-3
FORM OF CLASS A-3 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-3
(5.91% PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group I Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group I Home Equity Loans and
certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-3-1 152314 AP5
CUSIP
$32,755,000 September 29, 1998 December 2024
- ------------------------------- ------------------ -------------
Original Class A-1 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in Group I (other than
any principal received and interest due thereon prior to September 1, 1998)
listed in Schedule I-A to the Pooling and Servicing Agreement which the Seller
is causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to the Group I as may
be held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-3 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-3
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class A-2 (the "Class A-2 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor
(the "Depositor") and Norwest Bank Minnesota, National Association, in its
capacity as the Trustee (the "Trustee"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are Certificates designated as Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates, Class A-1 (the "Class A-1
Certificates"), Class A-2 (the "Class A-2 Certificates"), Class A-4 (the "Class
A-4 Certificates"), Class A-5 (the "Class A-5 Certificates"), Class A-6 (the
"Class A-6 Certificates"), Class A-7 (the "Class A-7 Certificates") and Class R
(Residual Interest) (the "Class R Certificates"). The Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates, the Class A-5 Certificates, the Class A-6 and the Class A-7
Certificates shall be together referred to as the "Class A Certificates" and
the Class A Certificates and the Class R Certificates are together referred to
herein as the "Certificates." Terms capitalized herein and not otherwise
defined herein shall have the respective meanings set forth in the Pooling and
Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-3 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-3 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $_______ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-3 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-3 Certificates. The Percentage Interest of
each Class A-3 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-3 Certificate on the Startup Day by the aggregate Class A-3
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by, Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the Owners of such Class A-3
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-3 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-3 Certificates and shall receive all future distributions of the Class
A-3 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided, that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-3 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-3 Certificates are exchangeable
for new Class A-3 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:__________________________________
Title:_______________________________
Trustee Authentication
Norwest Bank Minnesota, National Association, as Trustee
By:_______________________________
Title:____________________________
EXHIBIT A-4
FORM OF CLASS A-4 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-4
(6.15% PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group I Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group I Home Equity Loans and
certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-4-1 152314 AQ3
CUSIP
$20,304,000 September 29, 1998 January 2027
- ------------------------------ ------------------ ------------
Original Class A-1 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in Group I (other than
any principal received and interest due thereon prior to September 1, 1998)
listed in Schedule I-A to the Pooling and Servicing Agreement which the Seller
is causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to Group I as may be
held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-4 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-4
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the Original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust A, Home Equity Loan Pass-Through
Certificates, Class A-4 (the "Class A-4 Certificates") and issued under and
subject to the terms, provisions and conditions of that certain Pooling and
Servicing Agreement dated as of September 1, 1998 (the "Pooling and Servicing
Agreement") by and among Centex Credit Corporation d/b/a Centex Home Equity
Corporation, in its capacity as the Seller (the "Seller") and as the Servicer
(the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor (the
"Depositor") and Norwest Bank Minnesota, National Association, in its capacity
as the Trustee (the "Trustee"), to which Pooling and Servicing Agreement the
Owner of this Certificate by virtue of acceptance hereof assents and by which
such Owner is bound. Also issued under the Pooling and Servicing Agreement are
Certificates designated as Centex Home Equity Loan Trust 1998-3 Home Equity
Loan Pass-Through Certificates, Class A-1 (the "Class A-1 Certificates"), Class
A-2 (the "Class A-2 Certificates"), Class A-3 (the "Class A-3 Certificates"),
Class A-5 (the "Class A-5 Certificates"), Class A-6 (the "Class A-6
Certificates"), Class A-7 (the "Class A-7 Certificates") and Class R (Residual
Interest) (the "Class R Certificates"). The Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the
Class A-5 Certificates, the Class A-6 Certificates and the Class A-7
Certificates shall be together referred to as the "Class A Certificates" and
the Class A Certificates and the Class R Certificates are together referred to
are together referred to herein as the "Certificates." Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth
in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-4 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-4 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $_______ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-4 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-4 Certificates. The Percentage Interest of
each Class A-4 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-4 Certificate on the Startup Day by the aggregate Class A-4
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by, Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the Owners of such Class A-4
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-4 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-4 Certificates and shall receive all future distributions of the Class
A-4 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-4 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-4 Certificates are exchangeable
for new Class A-4 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:________________________________
Title:_____________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:______________________________
Title:___________________________
EXHIBIT A-5
FORM OF CLASS A-5 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-5
(6.58% PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group I Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group I Home Equity Loans and
certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-5-1 152314 AR1
CUSIP
$18,906,000 September 29, 1998 October 2029
- ------------------------------- ------------------ ------------
Original Class A-5 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in Group I (other than
any principal received and interest due thereon prior to September 1, 1998)
listed in Schedule I-A to the Pooling and Servicing Agreement which the Seller
is causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to Group I as may be
held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-5 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-5
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class A-5 (the "Class A-5 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor
(the "Depositor") and Norwest Bank Minnesota, National Association, in its
capacity as the Trustee (the "Trustee"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are Certificates designated as Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates, Class A-1 (the "Class A-1
Certificates"), Class A-2 (the "Class A-2 Certificates"), Class A-3 (the "Class
A-3 Certificates"), Class A-4 (the "Class A-4 Certificates"), Class A-5 (the
"Class A-5 Certificates"), Class A-6 (the "Class A-6 Certificates"), Class A-7
(the "Class A-7 Certificates") and Class R (Residual Interest) (the "Class R
Certificates"). The Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates,
the Class A-6 Certificates and the Class A-7 Certificates shall be together
referred to as the "Class A Certificates" and the Class A Certificates and the
Class R Certificates are together referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-5 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-5 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $__________ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-5 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-5 Certificates. The Percentage Interest of
each Class A-5 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-5 Certificate on the Startup Day by the aggregate Class A-5
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by, Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the Owners of such Class A-5
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-5 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-5 Certificates and shall receive all future distributions of the Class
A-5 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided, that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-5 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-5 Certificates are exchangeable
for new Class A-5 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:__________________________________
Title:_______________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:_________________________________
Title:______________________________
EXHIBIT A-6
FORM OF CLASS A-6 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-6
(6.04% PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group I Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group I Home Equity Loans and
certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-6-1 152314 AS9
CUSIP
$16,276,000 September 29, 1998 October 2029
- ------------------------------- ------------------ ------------
Original Class A-6 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in Group I (other than
any principal received and interest due thereon prior to September 1, 1998)
listed in Schedule I-A to the Pooling and Servicing Agreement which the Seller
is causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to Group I as may be
held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-6 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-6
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class A-6(the "Class A-6 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor
(the "Depositor") and Norwest Bank Minnesota, National Association, in its
capacity as the Trustee (the "Trustee"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are Certificates designated as Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates, Class A-1 (the "Class A-1
Certificates"), Class A-2 (the "Class A-2 Certificates"), Class A-3 (the "Class
A-3 Certificates"), Class A-4 (the "Class A-4 Certificates"), Class A-5 (the
"Class A-5 Certificates"), Class A-6 (the "Class A-6 Certificates"), Class A-7
(the "Class A-7 Certificates") and Class R (Residual Interest) (the "Class R
Certificates"). The Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates,
the Class A-6 Certificates and the Class A-7 Certificates shall be together
referred to as the "Class A Certificates" and the Class A Certificates and the
Class R Certificates are together referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-6 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-6 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $_________ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-6 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-6 Certificates. The Percentage Interest of
each Class A-6 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-6 Certificate on the Startup Day by the aggregate Class A-6
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by, Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the Owners of such Class A-6
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-6 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-6 Certificates and shall receive all future distributions of the Class
A-6 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided, that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-6 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-6 Certificates are exchangeable
for new Class A-6 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_________________________________
Title:______________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:_________________________________
Title:______________________________
EXHIBIT A-7
FORM OF CLASS A-7 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-7
(VARIABLE PASS-THROUGH RATE)
Representing Certain Interests in a Pool of Group II Home Equity
Loans Originated and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation (the "Depositor") or Centex Credit Corporation d/b/a Centex
Home Equity Corporation (the "Seller" or the "Servicer"). This Certificate
represents a fractional ownership interest in the Group II Home Equity Loans
and certain other property held by the Trust.)
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
("Centex Home Equity Loan Trust 1998-3") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NO: A-7-1 152314 AT7
CUSIP
$77,235,000 September 29, 1998 October 2029
- ------------------------------ ------------------ ------------
Original Class A-7 Certificate Date Final Scheduled
Principal Balance Payment Date
CEDE & CO.
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans in Group II (other than
any principal received and interest due thereon prior to September 1, 1998)
listed in Schedule I-B to the Pooling and Servicing Agreement which the Seller
is causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee (and all substitutions therefor as provided by Section
3.03, 3.04 and 3.06 of the Pooling and Servicing Agreement), together with the
related Home Equity Loan documents and the Depositor's interest in any
Property, and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts allocable to Group II as may be
held by the Trustee in the Certificate Account, together with investment
earnings on such amounts and such amounts as may be held in the name of the
Trustee in the Principal and Interest Account, if any, exclusive of investment
earnings thereon (except as otherwise provided in the Pooling and Servicing
Agreement), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Servicer), (c) the
Depositor's rights, but none of its obligations, under the Loan Purchase
Agreement and (d) proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, flood insurance, hazard
insurance and title insurance policy relating to the Home Equity Loans, cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part of or are included in the proceeds of any of the foregoing) to pay the
Certificates as specified in the Pooling and Servicing Agreement ((a) - (d)
above shall be collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment
Date, as hereinafter described, which will fully amortize such original Class
A-7 Certificate Principal Balance over the period from the date of initial
issuance of the Certificates to the final Payment Date for the Class A-7
Certificates. Therefore, the actual Outstanding principal amount of this
Certificate may, on any date subsequent to October 26, 1998 (the first Payment
Date) be less than the Original Class A Certificate Principal Balance set forth
above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement (as defined below) provides that, in any event, upon the making of
the final distribution due on this Certificate, this Certificate shall be
deemed canceled for all purposes under the Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS.
THEREFORE, THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON
ANY DATE SUBSEQUENT TO OCTOBER 26, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN
ITS ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class A-7 (the "Class A-7 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as Depositor
(the "Depositor") and Norwest Bank Minnesota, National Association, in its
capacity as the Trustee (the "Trustee"), to which Pooling and Servicing
Agreement the Owner of this Certificate by virtue of acceptance hereof assents
and by which such Owner is bound. Also issued under the Pooling and Servicing
Agreement are Certificates designated as Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates, Class A-1 (the "Class A-1
Certificates"), Class A-2 (the "Class A-2 Certificates"), Class A-3 (the "Class
A-3 Certificates"), Class A-4 (the "Class A-4 Certificates"), Class A-5 (the
"Class A-5 Certificates"), Class A-6 (the "Class A-6 Certificates"), Class A-7
(the "Class A-7 Certificates") and Class R (Residual Interest) (the "Class R
Certificates"). The Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates,
the Class A-6 Certificates and the Class A-7 Certificates shall be together
referred to as the "Class A Certificates" and the Class A Certificates and the
Class R Certificates are together referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, the Owners of the Class A-7 Certificates as of the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which a Payment Date occurs (the "Record Date")
will be entitled to receive the Class A-7 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $________ (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-7 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment
Date to the Owners of the Class A-7 Certificates. The Percentage Interest of
each Class A-7 Certificate as of any date of determination will be equal to the
percentage obtained by dividing the original Certificate Principal Balance of
such Class A-7 Certificate on the Startup Day by the aggregate Class A-7
Certificate Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners provided
that timely notice has been given to the Certificate Insurer by the Trustee.
"Insured Payments" shall have the meaning as provided therefor in the
Certificate Insurance Policy.
Upon receipt of amounts under the Certificate Insurance Policy on
behalf of the Owners of the Class A Certificates, the Trustee shall distribute
in accordance with the Pooling and Servicing Agreement such amounts (directly
or through a Paying Agent) to the Owners of the appropriate Class of the Class
A Certificates.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by, Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans and amounts on deposit in the Certificate Account and the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement) and payments received by the Trustee pursuant to the
Certificate Insurance Policy all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner. The Owner of this
Certificate, by its acceptance hereof, agrees, however, that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee or Paying Agent), to the owners of such Class A-7
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-7 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-7 Certificates and shall receive all future distributions of the Class
A-7 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement and payment in full
of all amounts owed to the Certificate Insurer upon the latest to occur of (a)
the final payment or other liquidation (or any advance made with respect
thereto) of the last Home Equity Loan in the Trust Estate, (b) the disposition
of all property acquired in respect of any Home Equity Loan remaining in the
Trust Estate or (c) at any time if a Qualified Liquidation of the Trust Estate
is effected as described below. To effect a termination of the Pooling and
Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Servicer does not do so. In addition,
under certain circumstances relating to the qualification of the REMIC as a
REMIC under the Code, the Home Equity Loans may be sold, thereby effecting the
early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage
interest will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided, that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-7 Certificates are issuable only as registered
Certificates in minimum denominations of $1,000 original Certificate Principal
Balance. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-7 Certificates are exchangeable
for new Class A-7 Certificates of authorized denominations evidencing the same
aggregate principal amount.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:________________________________
Title:_____________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:___________________________________
Title:________________________________
EXHIBIT C
FORM OF CLASS R CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
CLASS OF "RESIDUAL INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE
WITHOUT REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.08 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET FORTH IN
THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE
MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(E)(5)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH TERM
INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING TELEPHONE SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION
(OTHER THAN A FARMER'S COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO
TRANSFER OF THIS CLASS R CERTIFICATE WILL BE REGISTERED BY THE CERTIFICATE
REGISTRAR UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING,
AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT
AFFIRMING, AMONG OTHER THINGS, THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED
ORGANIZATION AND IS NOT ACQUIRING THE CLASS R CERTIFICATE FOR THE ACCOUNT OF A
DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH
PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE
TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT
ACTING FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CLASS R
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS.
FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF
SUBCHAPTER 1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
CENTEX HOME EQUITY LOAN TRUST 1998-3
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS R
(RESIDUAL INTEREST)
Representing Certain Interests Relating to two Pools of
Home Equity Loans Originated or Purchased
and Serviced by
CENTEX CREDIT CORPORATION D/B/A CENTEX HOME EQUITY CORPORATION
(This certificate does not represent an interest in, or an obligation
of, nor are the underlying Home Equity Loans insured or guaranteed by Lehman
ABS Corporation or Centex Credit Corporation d/b/a Centex Home Equity
Corporation This Certificate represents a fractional ownership interest in the
Trust Estate as defined below.)
NO: R- September 29, 1998
Date
Percentage Interest %
CHEC Residual Corporation
Registered Owner
The registered Owner named above is the registered beneficial Owner
of a fractional interest in (a) the Home Equity Loans (other than any principal
and interest due thereon on or prior to September 1, 1998 whether or not
received) listed in Schedule I-A and Schedule I-B to the Pooling and Servicing
Agreement which the Seller is causing to be delivered to the Depositor and the
Depositor is causing to be delivered to the Trustee (and all substitutions
therefor as provided by Section 3.03, 3.04 and 3.06 of the Pooling and
Servicing Agreement), together with the related Home Equity Loan documents and
the Seller's interest in any Property which secured a Home Equity Loan but
which has been acquired by foreclosure or deed in lieu of foreclosure, and all
payments thereon and proceeds of the conversion, voluntary or involuntary, of
the foregoing; (b) such amounts as may be held by the Trustee in the
Certificate Account, together with investment earnings on such amounts and such
amounts as may be held in the name of the Trustee in the Principal and Interest
Account, if any, exclusive of investment earnings thereon (except as otherwise
provided in the Pooling and Servicing Agreement), whether in the form of cash,
instruments, securities or other properties (including any Eligible Investments
held by the Servicer), (c) the Depositor's rights but none of its obligations
under the Loan Purchase Agreement and (d) proceeds of all the foregoing
(including, but not by way of limitation, all proceeds of any mortgage
insurance, hazard insurance and title insurance policy relating to the Home
Equity Loans, cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables which at any
time constitute all or part of or are included in the proceeds of any of the
foregoing) to pay the Certificates as specified in the Pooling and Servicing
Agreement ((a) - (d) above shall be collectively referred to herein as the
"Trust Estate").
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly-authorized Certificates
designated as Centex Home Equity Loan Trust 1998-3, Home Equity Loan
Pass-Through Certificates, Class R (the "Class R Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement") by and among Centex Credit Corporation d/b/a Centex Home
Equity Corporation, in its capacity as the Seller (the "Seller") and as the
Servicer (the "Servicer"), Lehman ABS Corporation, in its capacity as
Depositor, (the "Depositor") and Norwest Bank Minnesota, National Association,
a national banking association, in its capacity as the Trustee (the "Trustee"),
to which Pooling and Servicing Agreement the Owner of this Certificate by
virtue of acceptance hereof assents and by which such Owner is bound. Also
issued under the Pooling and Servicing Agreement are Certificates designated as
Centex Home Equity Loan Trust 1998-3 Home Equity Loan Pass-Through
Certificates, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6
and Class A-7 (collectively, the "Class A Certificates"). The Class A
Certificates and the Class R Certificates are together referred to are together
referred to herein as the "Certificates." Terms capitalized herein and not
otherwise defined herein shall have the respective meanings set forth in the
Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing October 26, 1998, each owner of a Class R Certificate as of the
close of business on the last day of the calendar month immediately preceding
the calendar month in which a Payment Date occurs (the "Record Date") will be
entitled to receive the Residual Net Monthly Excess Cashflow relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Class R Certificates having an aggregate
Percentage Interest of at least 10% (by wire transfer or otherwise) to the
account of an Owner at a domestic bank or other entity having appropriate
facilities therefor, if such Owner has so notified the Trustee, or by check
mailed to the address of the person entitled thereto as it appears on the
Register.
The Trustee or any duly-appointed Paying Agent will duly and
punctually pay distributions with respect to this Certificate in accordance
with the terms hereof and the Pooling and Servicing Agreement. Amounts properly
withheld under the Code by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Home Equity Loans will be serviced by the Servicer pursuant to
the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Home Equity Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Home Equity Loans insured or
guaranteed by Lehman ABS Corporation or Centex Credit Corporation d/b/a Centex
Home Equity Corporation or any of their affiliates. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Home
Equity Loans, all as more specifically set forth hereinabove and in the Pooling
and Servicing Agreement.
No Owner shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement upon the latest to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Home Equity Loan in the Trust Estate, (b) the
disposition of all property acquired in respect of any Home Equity Loan
remaining in the Trust Estate or (c) at any time when a Qualified Liquidation
of the Trust Estate is effected as described below. To effect a termination of
the Pooling and Servicing Agreement pursuant to clause (c) above, the Owners of
all Certificates then Outstanding shall provide the Trustee and the Certificate
Insurer, at such Owners' expense, an Opinion of Counsel experienced in federal
income tax matters acceptable to the Certificate Insurer and the Trustee to the
effect that each such liquidation constitutes a Qualified Liquidation, and the
Servicer shall either sell the Home Equity Loans and the Trustee shall
distribute the proceeds of the liquidation of the Trust Estate, or the Servicer
shall distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation, each in accordance with such plan, so that
the liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of the Pooling and Servicing
Agreement occur no later than the close of the 90th day after the date of
adoption of the plan of liquidation and such liquidation qualifies as a
Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that the
Servicer may, at its option, purchase from the Trust all remaining Home Equity
Loans and other property then constituting the Trust Estate, and thereby effect
early retirement of the Certificates, on any Monthly Remittance Date after the
Clean-Up Call Date. Under certain circumstances, the Certificate Insurer may
also exercise such purchase rights if the Owners of the Class R Certificates do
not do so. In addition, under certain circumstances relating to the
qualification of the REMIC as a REMIC under the Code, the Home Equity Loans may
be sold, thereby effecting the early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the
Percentage Interests represented by the Class A Certificates with the prior
written consent of the Certificate Insurer have the right to exercise any trust
or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like aggregate
fractional undivided interest in the Trust Estate will be issued to the
designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Seller and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and without the consent of the
Owners; provided, that in certain other circumstances provided for in the
Pooling and Servicing Agreement such consent of the Owners will be required
prior to amendment. Any such consent by the Owner at the time of the giving
thereof, of this Certificate shall be conclusive and binding upon such Owner
and upon all future Owners of the Certificate and of any Certificate issued
upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class R Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class R Certificates are exchangeable
for new Class R Certificates evidencing the same Percentage Interest as the
Class R Certificates exchanged.
No service charge will be made for any such registration of transfer
or exchange, but the Registrar or Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Trustee and any agent of the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed on behalf of the Trust.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:________________________________
Title:_____________________________
Trustee Authentication
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:____________________________
Title:_________________________
EXHIBIT D
[RESERVED]
EXHIBIT E
FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
CERTIFICATE RE: PREPAID LOANS
I, ____________________________, ____________________ of Centex
Credit Corporation d/b/a Centex Home Equity Corporation ("Centex"), hereby
certify that between the "Cut-Off Date" (as defined in the Pooling and
Servicing Agreement dated as of September 1, 1998 among Lehman ABS Corporation,
as Depositor, Centex as Seller and Servicer, and Norwest Bank Minnesota,
National Association, as Trustee) and the "Startup Day," the following schedule
of "Home Equity Loans" (each as defined in the Pooling and Servicing Agreement)
have been prepaid in full.
Account Original Current Date
Number Name Amount Balance Paid Off
Dated: , 199
By:_____________________________
Title:__________________________
EXHIBIT F
CUSTODIAN'S ACKNOWLEDGMENT OF RECEIPT
The First Chicago National Processing Corporation, in its capacity as
custodian (the "Custodian") under the Custodial Agreement dated as of September
1, 1998 among the Custodian and Norwest Bank Minnesota, National Association,
in its capacity as Trustee (the "Trustee") under that certain Pooling and
Servicing Agreement dated as of September 1, 1998 ("the Pooling and Servicing
Agreement") among Lehman ABS Corporation, as Depositor, Centex Credit
Corporation d/b/a Centex Home Equity Corporation, a Nevada corporation, as
seller and servicer ("Centex"), and Norwest Bank Minnesota, National
Association, as Trustee (the "Trustee"), hereby acknowledges receipt (subject
to review as required by Section 3.06(a) of the Pooling and Servicing
Agreement) of the items delivered to it by Centex with respect to the Home
Equity Loans pursuant to Section 3.05(b)(i) of the Pooling and Servicing
Agreement.
The Schedule of Home Equity Loans is attached to this Receipt.
The Custodian hereby additionally acknowledges that it shall review
such items as required by Section 3.06(a) of the Pooling and Servicing
Agreement and shall otherwise comply with Section 3.06(b) and 3.06(c) of the
Pooling and Servicing Agreement as required thereby.
THE FIRST CHICAGO NATIONAL
PROCESSING CORPORATION,
as Custodian
By:____________________________
Name:__________________________
Title:_________________________
Dated: , 199
EXHIBIT G
FORM OF POOL CERTIFICATION
POOL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of First Chicago
National Processing Corporation, in its capacity as Custodian (the "Custodian")
under the Custodial Agreement dated September 1, 1998 between the Custodian and
Norwest Bank Minnesota, National Association, acting in its capacity as trustee
(the "Trustee") of a certain pool of mortgage loans (the "Pool") heretofore
conveyed in trust to the Trustee, pursuant to that certain Pooling and
Servicing Agreement dated as of September 1, 1998 (the "Pooling and Servicing
Agreement") among Lehman ABS Corporation, as Depositor, Centex Credit
Corporation d/b/a Centex Home Equity Corporation, as Seller (the "Seller") and
Servicer, and Norwest Bank Minnesota, National Association, as Trustee; and
WHEREAS, the Custodian is required, pursuant to Section 3.06(a) of
the Pooling and Servicing Agreement, to review the Files relating to the Home
Equity Loans within a specified period following the Startup Day and to notify
the Seller promptly of any defects with respect to the Home Equity Loans, and
the Seller is required to remedy such defects or take certain other action, all
as set forth in Section 3.06(b) of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.06(a) of the Pooling and Servicing Agreement
requires the Custodian to deliver this Pool Certification upon the satisfaction
of certain conditions set forth therein.
NOW, THEREFORE, the Custodian hereby certifies that it has determined
that all required documents (or certified copies of documents listed in Section
3.05 of the Pooling and Servicing Agreement) have been executed or received,
and that such documents relate to the Home Equity Loans identified in the
Schedule of Home Equity Loans pursuant to Section 3.06(a) of the Pooling and
Servicing Agreement or, in the event that such documents have not been executed
and received or do not so relate to such Home Equity Loans, any remedial action
by the Seller pursuant to Section 3.06(b) of the Pooling and Servicing
Agreement has been completed. The Custodian makes no certification hereby,
however, with respect to any intervening assignments or assumption and
modification agreements.
FIRST CHICAGO NATIONAL PROCESSING
CORPORATION, as Custodian
By:____________________________________
Title:_________________________________
Dated: , 199
EXHIBIT H
FORM OF DELIVERY ORDER
DELIVERY ORDER
Norwest Bank Minnesota, National Association, as Trustee
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Dear Sirs:
Pursuant to Section 4.01 of the Pooling and Servicing Agreement,
dated as of September 1, 1998 (the "Pooling and Servicing Agreement") among
Lehman ABS Corporation, as Depositor ("DMAC"), Centex Credit Corporation d/b/a
Centex Home Equity Corporation, a Nevada corporation, as Seller and Servicer,
and Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"),
DMAC HEREBY CERTIFIES that all conditions precedent to the issuance of the
Centex Home Equity Loan Trust 1998-3 Home Equity Loan Pass-Through
Certificates, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7 and Class R (the "Certificates"), HAVE BEEN SATISFIED, and HEREBY
REQUESTS YOU TO AUTHENTICATE AND DELIVER said Certificates, and to RELEASE said
Certificates to the owners thereof, or otherwise upon their order. Instructions
regarding the registration of the Certificates are attached hereto.
Very truly yours,
LEHMAN ABS CORPORATION
By:______________________
Title:___________________
Dated: , 199
EXHIBIT I
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION
860E(e) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of ] [the United States], on behalf of which he
makes this affidavit.
2. That (i) the Investor is not a "disqualified organization" and
will not be a "disqualified organization" as of [date of transfer] (For this
purpose, a "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 (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or
any organization (other than a farmers' cooperative) that is exempt from
federal income tax unless such organization is subject to the tax on unrelated
business income.); (ii) it is not acquiring the Class R Certificate for the
account of a disqualified organization; (iii) it consents to any amendment of
the Pooling and Servicing Agreement that shall be deemed necessary by the
Trustee (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; and (iv) it will not transfer such Class R
Certificate unless (a) it has received from the transferee an affidavit in
substantially the same form as this affidavit containing these same four
representations and (b) as of the time of the transfer, it does not have actual
knowledge that such affidavit is false.
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this day of , .
[NAME OF INVESTOR]
By:_____________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
Attest:
________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer],
known or proved to be the same person who executed the foregoing instrument and
to be the [Title of Officer] 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 _________, _________.
______________________
NOTARY PUBLIC
COUNTY OF __________________
STATE OF ___________________
My commission expires the day of , .
EXHIBIT J-1
FORM OF CERTIFICATE REGARDING TRANSFER
(ACCREDITED INVESTOR)
[DATE]
Norwest Bank Minnesota, National Association, as Trustee
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Advanced Structured Products Services
Re: Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates
("Certificates")
Gentlemen:
In connection with our purchase on the date hereof of the
above-referenced Certificates from ("Seller"), [PURCHASER] (the "Purchaser")
hereby certifies that:
1. The Purchaser is acquiring the Certificates for [investment
purposes only for]1 the Purchaser's own account and not with a view to or for
sale or transfer in connection with any distribution thereof in any manner
which would violate Section 5 of the Securities Act of 1933, as amended (the
"Act"), provided that the disposition of its property shall at all times be and
remain within its control;
2. The Purchaser understands that the Certificates have not been and
will not be registered under the Act and may not be resold or transferred
unless they are (a) registered pursuant to the Act or (b) sold or transferred
in transactions which are exempt from registration;
3. The Purchaser has received a copy of the Pooling and Servicing
Agreement dated as of September 1, 1998 (the "Pooling and Servicing Agreement")
pursuant to which the Certificates are being sold, and such other documents and
information concerning the Certificates and the home equity loans in which the
Certificates represent interests which it has requested;
4. The Purchaser believes it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Certificates and that it is able to bear the
economic risks of such an investment;
5. [The Purchaser is not an "employee benefit plan," within the
meaning of Section 3(3) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA") that is subject to the provisions of Title I of
ERISA or a "plan" described in Section 4975(e)(1) of the Internal Revenue Code
of 1986] OR [The source of funds to be used by the Purchaser to purchase the
Certificates is a general account and either (i) no part of such assets
constitutes assets of an "employee benefit plan," within the meaning of Section
3(3) of the Employment Retirement Income Security Act of 1974, as amended
("ERISA") that is subject to the provisions of Title I of ERISA or a "plan"
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, or (ii)
to the extent that such assets constitute assets of an "employee benefits plan"
within the meaning of Section 3(3) of ERISA, or a "plan" within the meaning of
Section 4975(e)(1) of the Code, it acknowledges that in the discharge of its
duty as a plan fiduciary in connection with the purchase of the Certificates it
has concluded that such purchase will not constitute a violation of Section
404(a) of ERISA];
6. If the Purchaser sells any of the Certificates at its option, it
will (i) obtain from any investor that purchases any Certificate from it a
letter substantially in the form of Exhibit J-1 or J-2 to the Pooling and
Servicing Agreement and (ii) to the extent required by the Pooling and
Servicing Agreement, cause an Opinion of Counsel to be delivered, addressed and
satisfactory to the Seller and the Trustee, to the effect that such sale is in
compliance with all applicable federal and state securities laws; and
7. The Purchaser certifies that for purposes of the Certificate
Register, its address, including telecopier number and telephone number, is as
follows:
telecopier:
telephone:
8. The purchase of the Certificates by the Purchaser does not violate
the provisions of the first sentence of Section 5.08(d) of the Pooling and
Servicing Agreement.
IN WITNESS WHEREOF, the Purchaser has caused this letter to be
executed by its signatory, duly authorized, as of the date first above written.
[PURCHASER]
By:_____________________________
Name:___________________________
Title:__________________________
EXHIBIT J-2
FORM OF CERTIFICATE REGARDING TRANSFER
(Rule 144A)
[Date]
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Advanced Structured Products Services
Re: Centex Home Equity Loan Trust 1998-3
Home Equity Loan Pass-Through Certificates,
Class ___ - ____ ("Certificates")
Dear Gentlemen or Ladies:
In connection with our purchase on the date hereof of the
above-referenced Certificates from ____________________ ("Seller") hereby
certify that:
1. We are acquiring the Certificates for our own account for
investment and not with a view to or for sale or transfer in connection with
any distribution thereof in any manner which would violate the Securities Act
of 1933, as amended (the "Act"), provided that the disposition of our property
shall at all times be and remain within our control;
2. We understand that the Certificates have not been and will not be
registered under the Act and may not be resold or transferred unless they are
(a) registered pursuant to the Act or (b) sold or transferred in transactions
which are exempt from registration;
3. We have received a copy of the Pooling and Servicing Agreement
dated as of September 1, 1998 (the "Pooling and Servicing Agreement") pursuant
to which the Certificates are being sold, and such other documents and
information concerning the Certificates and the home equity loans in which the
Certificates represent interests which we have requested;
4. We believe we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Certificates and that we are able to bear the economic risks
of such an investment;
5. If we sell any of the Certificates at our option, we will either
(i) obtain from any institutional investor that purchases any Certificate from
us a certificate containing the same representations, warranties and agreements
contained in the foregoing paragraphs 1, 2 through 4 and this paragraph 5 or
(ii) deliver an Opinion of Counsel to such institutional investor, addressed
and satisfactory to the Seller and the Trustee, to the effect that such sale is
in compliance with all applicable federal and state securities laws;
6. We are acquiring the Certificates for our own account and the
source of funds to be used by us to purchase the Certificates is a general
account and either (i) no part of such assets constitutes assets of an
"employee benefit plan," within the meaning of Section 3(3) of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to
the provisions of Title I of ERISA or a "plan" described in Section 4975(e)(1)
of the Internal Revenue Code of 1986, or (ii) to the extent that such assets
constitute assets of an "employee benefits plan" within the meaning of Section
3(3) of ERISA, or a "plan" within the meaning of Section 4975(e)(1) of the
Code, we acknowledge that in the discharge of our duty as a plan fiduciary in
connection with the purchase of the Certificates we have concluded that such
purchase will not constitute a violation of Section 404(a) of ERISA;
7. We certify that for purposes of the Certificate Register, our
address, including telecopier number and telephone number, is as follows:
______________________________________
______________________________________
______________________________________
telecopier: __________________________
telephone: ___________________________
8. If we sell any of the Certificates, we will obtain from any
purchaser from us the same representations contained in the foregoing paragraph
6 and this paragraph 7; and
9. Our purchase of the Certificates does not violate the provisions
of the first sentence of Section 5.08(d) of the Pooling and Servicing
Agreement.
IN WITNESS WHEREOF, we have signed this certificate as of the date
first written above.
By:______________________________
Name:____________________________
Title:___________________________
EXHIBIT K TO THE POOLING AND SERVICING AGREEMENT
HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
Loan Number Borrower Name Original Loan Amount Exception
EXHIBIT L
DEFINITION OF GROUP II SPECIFIED SUBORDINATED AMOUNT
(AND RELATED DEFINITIONS)
"Group II Delinquency Amount" means sum of (without duplication) (i)
the aggregate Loan Balance of the Home Equity Loans in Group II which are
90-Day Delinquent Loans, (ii) the aggregate Loan Balance of Home Equity Loans
in Group II in foreclosure and (iii) the aggregate outstanding principal
balance of Home Equity Loans in Group II relating to REO Properties.
"Group II Initial Specified Subordinated Amount" means the Group II
Target Percentage times the Original Group II Pool Balance.
"Group II Specified Subordinated Amount" means:
(a) for any Payment Date occurring during the period commencing on
the Startup Day and ending on the later of (A) the date upon which principal in
the amount equal to one half of the Original Group II Pool Balance has been
received by the Owners of the Class A-7 Certificates and (B) the thirtieth
Payment Date following the Startup Day, the greater of: (i) the Group II
Initial Specified Subordinated Amount, and (ii), if the Step-Up Test is not
satisfied, 70% of the Group II Delinquency Amount.
(b) for any Payment Date occurring after the end of the period in
clause (a) above, (x) if the Step-Down Test is satisfied the greatest of (i)
two times the Group II Target Percentage times the aggregate Loan Balance of
the Home Equity Loans in Group II, (ii) 0.50% of the Original Group II Pool
Balance, and (iii) the Group II Initial Specified Subordinated Amount less the
product of (A) the excess of the Group II Initial Specified Subordinated Amount
over the amount set forth in clause (b) (x) (i) and (B) fraction (not to exceed
1.0), the numerator of which is a whole number equal to the number of Payment
Dates since the most recent of the 30th Payment Date and the most recent
Payment Date on which the Step-Down Test was not met and the denominator of
which is 3 and (y) if the Step-Down Test is not met, the amount set forth in
clause (a).
The Certificate Insurer may, in its sole discretion, modify this
definition of Group II Specified Subordinated Amount for the purpose of
reducing or eliminating, in whole or in part, the definition hereof. The
Trustee and the Rating Agencies shall be notified in writing of such
modification prior to the related Payment Date and such modification shall not
result in a downgrading of the then-current ratings of the Class A
Certificates, without regard to the Certificate Insurance Policy.
"Group II Target Percentage" means 5.5%.
"Original Group II Pool Balance" means the aggregate Loan Balance of
the Home Equity Loans in Group II as of the Startup Day.
"Step-Down Loss Test" is satisfied for any period set out below, if
the Cumulative Loss Percentage for such period does not exceed the percentage
set out for such period below:
Period Cumulative Loss Percentage
------ --------------------------
February 2001 - January 2002 2.00%
February 2002 - January 2003 2.65%
February 2003 - January 2004 3.30%
February 2004 and thereafter 4.00%
"Step-Down Test" is satisfied for any date of determination thereof,
if (x) the 90+ Delinquency Percentage (Rolling Six Month) is less than 11%, (y)
the Step-Down Loss Test is satisfied, and (z) the Annual Loss Percentage
(Rolling 12 Month) for the twelve month period immediately preceding the date
of determination is not greater than 0.85%
"Step-Up Loss Test" is satisfied for any period set out below, if the
Cumulative Loss Percentage for such period does not exceed the percentage set
out for such period below:
Period Cumulative Loss Percentage
------ --------------------------
October 1998 - September 1999 1.40%
October 1999 - September 2000 1.95%
October 2000 - September 2001 2.70%
October 2001 - September 2002 3.45%
October 2002 - September 2003 4.20%
October 2003 and thereafter 4.90%
"Step-Up Test" is satisfied for any date of determination thereof, if
(x) the 90+ Delinquency Percentage (Rolling Six Month) is less than 12%, (y)
the Step-Up Loss Test is satisfied, and (z) the Annual Loss Percentage (Rolling
12 Month) for the twelve month period immediately preceding the date of
determination is not greater than 1.0%.
EXHIBIT M
DEFINITION OF GROUP I SPECIFIED SUBORDINATED AMOUNT
(AND RELATED DEFINITIONS)
"Group I Delinquency Amount" means the sum (without duplication) of
(i) the aggregate Loan Balance of the Home Equity Loans in Group I which are
90-Day Delinquent Loans, (ii) the aggregate Loan Balance of the Home Equity
Loans in Group I in foreclosure plus (iii) the aggregate outstanding principal
balance of Home Equity Loans in Group I relating to REO Properties.
"Group I Initial Specified Subordinated Amount" means the Group I
Target Percentage times the Original Group I Pool Balance.
"Group I Specified Subordinated Amount" means:
(a) for any Payment Date occurring during the period commencing on
the Startup Day and ending on the later of (A) the date upon which principal in
the amount equal to one half of the Original Group I Pool Balance has been
received by the Owners of the Fixed Rate Certificates and (B) the thirtieth
Payment Date following the Startup Day, the greater of: (i) the Group I Initial
Specified Subordinated Amount, and (ii), if the Step-Up Test is not satisfied,
70% of the Group I Delinquency Amount.
(b) for any Payment Date occurring after the end of the period in
clause (a) above, (x) if the Step-Down Test is satisfied the greatest of (i)
two times the Group I Target Percentage times the aggregate Loan Balance of the
Home Equity Loans in Group I, (ii) 0.50% of the Original Group I Pool Balance,
and (iii) the Group I Initial Specified Subordinated Amount less the product of
(A) the excess of the Group I Initial Specified Subordinated Amount over the
amount set forth in clause (b) (x) (i) and (B) fraction (not to exceed 1.0),
the numerator of which is a whole number equal to the number of Payment Dates
since the most recent of the 30th Payment Date and the most recent Payment Date
on which the Step-Down Test was not met and the denominator of which is 3 and
(y) if the Step-Down Test is not met, the amount set forth in clause (a).
The Certificate Insurer may, in its sole discretion, modify the
definition of Group I Specified Subordinated Amount for the purpose of reducing
or eliminating, in whole or in part, the definition hereof. The Trustee and the
Rating Agencies shall be notified in writing of such modification prior to the
related Payment Date and such modification shall not result in a downgrading of
the then-current ratings of the Class A Certificates, without regard to the
Certificate Insurance Policy.
"Group I Target Percentage" means 2.10%.
"Original Group I Pool Balance" means the aggregate Loan Balance of
the Home Equity Loans in Group I as of the Startup Day.
"Step-Down Loss Test" is as defined in Exhibit L.
"Step-Down Test" is as defined in Exhibit L.
"Step-Up Loss Test" is as defined in Exhibit L.
"Step-Up Test" is as defined in Exhibit L.
EXHIBIT N
FORM OF LETTER REGARDING REPORTING OBLIGATIONS UNDER THE SECURITIES
EXCHANGE ACT OF 1934
September, 1998
Norwest Bank Minnesota,
National Association
6th & Marquette
Minneapolis, Minnesota
Re: Centex Home Equity Loan Trust 1998-3
Home Equity Loan Asset-Backed Certificates,
Series 1998-3
Ladies and Gentlemen:
Pursuant to and in reference to Section 7.09(c) of the Pooling and
Servicing Agreement dated as of September 1, 1998 relating to the above
referenced Certificates, please note the following:
(a) CIK Number for Centex Home Equity Loan Trust 1998-3 (the
"Trust"): .
(b) CCC for the Trust: .
In order to comply with the reporting obligations for the Trust under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), the
Trustee must file within 15 days following each Payment Date a copy of the
report distributed by the Trustee to the Certificateholders in a current report
on Form 8-K. Such reports provide all current information ordinarily of
interest to the Certificateholders. The Trustee must also report on a current
report on Form 8-K any significant occurrences during the reporting period that
would be reportable under Item 1, Item 2, Item 4 and Item 5. In addition, the
Trustee should cause the filing of an annual report on Form 10-K within 90 days
following the end of the Trust's fiscal year containing the following
information:
Part I, Item 3. A description of any material pending
litigation;
Part I, Item 4. A description of any submission matters
to vote of Certificateholders;
Part II, Item 5. A statement of the number of
Certificateholders and the principal
market, if any, in which the
Certificates trade;
Part II, Item 9. A statement as to any changes in or
disagreements with the independent
public accounts for the Trust;
Part IV, Item 14. A copy of the annual certificate of
compliance by an officer of the
Servicer, and any Subservicer and the
audit of the servicing by the independent
accounting firm.
Promptly after filing the Form 10-K, the Trustee should file a Form 15 in
accordance with Section 7.09(c) of the Pooling and Servicing Agreement,
deregistering the Trust and terminating the reporting obligations under the
Exchange Act. All filings must be made through the Edgar System and all
acceptance slips from the filings should be saved as they will be needed for the
annual certificate.
LEHMAN ABS CORPORATION
By:____________________________
Name:
Title:
