As filed with the Securities and Exchange Commission on September 18, 1998
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
CHASE FUNDING, INC.
(Seller)
CHASE MANHATTAN ACCEPTANCE CORPORATION
(Seller)
(Exact names of the registrants as specified in their respective charters)
------------
New York 343 Thornall Street 13-3840732
(State or other jurisdiction Edison, New Jersey 08837 (I.R.S. Employer
of incorporation or (732) 205-0600 Identification Number)
organization)
(Address, including zip code, and telephone number, including area code,
of registrant Chase Funding, Inc.'s prncipal executive offices)
Delaware 343 Thornall Street 13-3456395
(State or other jurisdiction Edison, New Jersey 0883 (I.R.S. Employer
or incorporation or (732) 205-0600 Identification Number)
organization)
(Address, including zip code, and telephone number, including area code,
of registrant Chase Funding, Inc.'s prncipal executive offices)
------------
PAUL E. MULLINGS
c/o Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, New Jersey 08837
(732) 205-0600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------
Copy to:
STEVEN J. MOLITOR, ESQ.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Maximum Proposed
Title of Each Class of Securities to be Amount to be Offering Price Per Maximum Aggregate Amount of
Registered Registered Certificate* Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Pass-Through Certificates... $1,000,000.00 100% $1,000,000.00 $295.00
====================================================================================================================================
</TABLE>
* Estimated for the purpose of calculating the registration fee.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Version 1
SUBJECT TO COMPLETION DATED SEPTEMBER 18, 1998
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus Dated [DATE])
$[___________] (Approximate)
Chase Funding
Mortgage Loan Asset-Backed Certificates, Series [____]
Chase Funding Trust, Series [_____]
Issuer
Chase Funding, Inc.
Depositor
Advanta Mortgage Corp. USA
Subservicer
Chase Manhattan Mortgage Corporation
Master Servicer
$__________ _____% Class IA-1 Certificates
$__________ _____% Class IA-2 Certificates
$__________ _____% Class IA-3 Certificates
$__________ _____% Class IA-4 Certificates
$__________ _____%(1) Class IA-5 Certificates
$__________ _____% Class IA-6 Certificates
$__________ _____% Class IM-1 Certificates
$__________ _____% Class IM-2 Certificates
$__________ _____%(2) Class IB Certificates
$__________ (3) Class IIA-1 Certificates
$__________ _____% Class IIA-2 Certificates
$__________ (3) Class IIM-1 Certificates
$__________ (3) Class IIM-2 Certificates
$__________ (3) Class IIB Certificates
- -----------
(1) The Pass-Through Rate for the Class IA-5 Certificates on any
Distribution Date will equal ______%; provided, however, that on any
Distribution Date after the Optional Termination Date (defined herein),
the Pass-Through Rate for the Class IA-5 Certificates will equal
_____%.
(2) The Pass-Through Rate for the Class IB Certificates on any Distribution
Date will equal the lesser of (i) the per annum rate set forth above
for such Class and (ii) the weighted average Net Mortgage Rate on the
Fixed Rate Mortgage Loans (each as defined herein).
(3) The Pass-Through Rates for the Group II Certificates (other than the
Class IIA-2 Certificates) adjust monthly as described herein. See
"Description of the Certificates-Distributions-Interest."
-----------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST FUND ONLY AND DO
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, THE
SUBSERVICER, THE TRUSTEE, THE MASTER SERVICER OR ANY AFFILIATE THEREOF,
<PAGE>
EXCEPT TO THE EXTENT PROVIDED HEREIN. NEITHER THE CERTIFICATES NOR THE
MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
-----------
Prospective investors should review the information set forth under
"Risk Factors" beginning on page S-__ herein and beginning on page __ in the
accompanying Prospectus.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Original Certificate
Principal Underwriting Proceeds to
Balance(1) Price to Public Discount Depositor(2)
---------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Class IA-1.................. $__________ ___% _____% $__________
Class IA-2.................. $__________ ___% _____% $__________
Class IA-3.................. $__________ ___% _____% $__________
Class IA-4.................. $__________ ___% _____% $__________
Class IA-5.................. $__________ ___% _____% $__________
Class IA-6.................. $__________ ___% _____% $__________
Class IM-1.................. $__________ ___% _____% $__________
Class IM-2.................. $__________ ___% _____% $__________
Class IB.................... $__________ ___% _____% $__________
Class IIA-1................. $__________ ___% _____% $__________
Class IIA-2................. $__________ ___% _____% $__________
Class IIM-1................. $__________ ___% _____% $__________
Class IIM-2................. $__________ ___% _____% $__________
Class IIB................... $__________ ___% _____% $__________
Total....................... $__________ $___________ $__________ $__________
</TABLE>
- -----------
(1) Subject to a permitted variance of plus or minus 10%.
(2) Less expenses payable by the Depositor, estimated to be $_______ and
accrued interest.
-----------
The Offered Certificates are offered subject to prior sale and subject
to the Underwriters' right to reject orders in whole or in part. It is expected
that delivery of the [Offered Certificates] will be made in book-entry form only
though the facilities of The Depository Trust Company, CEDEL Bank, societe
anonyme and the Euroclear System on or about [DATE] (the "Closing Date"). The
Offered Certificates will be offered in Europe and the United States of America.
[UNDERWRITER(S)]
The date of this Prospectus Supplement is [DATE].
(cover page continued)
S-2
<PAGE>
The Mortgage Loan Asset-Backed Certificates, Series [______] (the
"Certificates"), will consist of: (a) (i) the Class IA-1, Class IA-2, Class
IA-3, Class IA-4, Class IA-5 and Class IA-6 Certificates (collectively, the
"Class A Group I Certificates"), (ii) the Class IM-1 and Class IM-2 Certificates
(together, the "Mezzanine Group I Certificates") and (iii) the Class IB
Certificates (the "Class IB Certificates" and together with the Mezzanine Group
I Certificates, the "Subordinated Group I Certificates" and the Subordinated
Group I Certificates together with the Class A Group I Certificates, the "Group
I Certificates"); (b) (i) the Class IIA-1 and Class IIA-2 Certificates
(collectively, "Class A Group II Certificates"), (ii) the Class IIM-1 and Class
IIM-2 Certificates (together, the "Mezzanine Group II Certificates") and (iii)
the Class IIB Certificates (the "Class IIB Certificates" and together with the
Mezzanine Group II Certificates, the "Subordinated Group II Certificates" and
the Subordinated Group II Certificates together with the Class A Group II
Certificates, the "Group II Certificates"); and (c) the Class R Certificates
(the "Residual Certificates"). The Group I Certificates and the Group II
Certificates are each referred to herein as a "Certificate Group" and
collectively as the "Certificate Groups." Only the Group I Certificates and the
Group II Certificates (collectively, the "Offered Certificates") are offered
hereby.
The Certificates will represent the entire beneficial ownership
interest in a trust fund (the "Trust Fund") to be created pursuant to a Pooling
and Servicing Agreement, dated as of [DATE], among MorServ, Inc., as depositor
(the "Depositor"), Advanta Mortgage Corp. USA, as subservicer (the "Subservicer"
or "Advanta"), Chase Manhattan Mortgage Corporation, as master servicer (the
"Master Servicer" or "Chase Manhattan Mortgage") and Citibank, N.A., as trustee
(the "Trustee"). The Trust Fund will consist of a pool (the "Mortgage Pool") of
conventional, sub-prime mortgage loans (the "Mortgage Loans") secured by first
liens on real properties (each, a "Mortgaged Property") and certain other assets
described herein. The Mortgage Pool will be divided into two separate groups of
Mortgage Loans (each, a "Loan Group") based on whether the interest rate for the
related Mortgage Loans is fixed or adjustable. The Group I Certificates will
represent an undivided ownership interest in a Loan Group of fixed rate Mortgage
Loans (the "Fixed Rate Mortgage Loan Group") and the Group II Certificates will
represent an undivided ownership interest in a Loan Group of adjustable rate
Mortgage Loans (the "Adjustable Rate Mortgage Loan Group"). See "The Mortgage
Pool." Distributions in respect of the Group I Certificates will generally be
calculated with reference to the Fixed Rate Mortgage Loan Group. Distributions
in respect of the Group II Certificates will generally be calculated with
reference to the Adjustable Rate Mortgage Loan Group.
For federal income tax purposes, the Trust Fund will include two
segregated asset pools, with respect to which elections will be made to treat
each as a "real estate mortgage investment conduit" (a "REMIC"). As described
more fully herein and in the Prospectus, the Certificates, other than the
Residual Certificates, will constitute "regular interests" in the Master REMIC.
The Residual Certificates will represent the sole class of "residual interests"
in both the Master REMIC and the Subsidiary REMIC. See "Federal Income Tax
Consequences" herein and in the Prospectus.
Each Loan Group is subject to optional termination under the limited
circumstances described herein. Any such optional termination will result in an
early retirement of the Certificates in the Certificate Group related to such
Loan Group. Distributions to Certificateholders will be made on the 25th day of
each month or, if such 25th day is not a Business Day, on the first Business Day
thereafter (each, a "Distribution Date"), commencing in [DATE].
The Offered Certificates evidence interests in the Trust Fund only and
are payable solely from amounts received with respect thereto.
The yield to investors on the Certificates of each Certificate Group
will be sensitive to, among other things, the rate and timing of principal
payments (including prepayments, liquidations, repurchases and
S-3
<PAGE>
defaults) of, and losses on, the Mortgage Loans in the related Loan Group and,
in certain circumstances, the rate and timing of principal payments (including
prepayments, liquidations, repurchases and defaults) of, and losses on, the
Mortgage Loans in the other Loan Group, as described herein. Because certain of
the Mortgage Loans contain prepayment penalties, the rate of principal payments
may be less than the rate of principal payments for mortgage loans which do not
contain prepayment penalties. The yield to investors on the Class IB
Certificates will be negatively affected to the extent that the Pass-Through
Rate on such Certificate is determined by the weighted average Net Mortgage Rate
on the Fixed Rate Mortgage Loans, as described herein. The yield to investors on
the Group II Certificates will also be sensitive to the level of the London
Interbank offered rate for one-month United States dollar deposits, calculated
as described herein ("One-Month LIBOR"). In addition, the yield to investors on
the Group II Certificates will be sensitive to the level of the Mortgage Index
(as defined herein) and the additional limitations on the Pass-Through Rate for
the Group II Certificates, as described herein. No representation is made as to
the anticipated rate or timing of prepayments on the Mortgage Loans, the amount
and timing of losses thereon, the level of One-Month LIBOR or the Mortgage Index
or the resulting yield to maturity of the Offered Certificates.
[Underwriter] and [Underwriter] (each, an "Underwriter") intend to make
a secondary market in the Offered Certificates but have no obligation to do so.
There is currently no secondary market for the Offered Certificates and there
can be no assurance that such a market will develop or, if it does develop, that
it will continue or that such market will provide sufficient liquidity to
Certificateholders.
-----------
This Prospectus Supplement does not contain complete information about
the offering of the Offered Certificates. Additional information is contained in
the Prospectus dated [DATE] (the "Prospectus") which accompanies this Prospectus
Supplement and purchasers are urged to read both this Prospectus Supplement and
the Prospectus in full. Sales of the Offered Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus.
Certain persons participating in this offering may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Offered Certificates. Such transactions may include stabilizing and the purchase
of the Offered Certificates to cover syndicate short positions. See "Method of
Distribution."
-----------
Until ninety days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and the Prospectus. This is in addition to the obligation of dealers
to deliver a Prospectus Supplement and the Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
S-4
<PAGE>
SUMMARY OF TERMS
This Summary of Terms is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary of
Terms are defined elsewhere in this Prospectus Supplement or in the Prospectus.
See "Index of Defined Terms" beginning on page S-__ of this Prospectus
Supplement for the location of the definitions of certain capitalized terms.
Title of Certificates....... Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [DATE] (the
"Certificates"), consisting of: (a) (i) the
Class IA-1, Class IA-2, Class IA-3, Class IA-4,
Class IA-5 and Class IA-6 Certificates
(collectively, the "Class A Group I
Certificates"), (ii) the Class IM-1 and Class
IM-2 Certificates (together, the "Mezzanine
Group I Certificates") and (iii) the Class IB
Certificates (the "Class IB Certificates" and
together with the Mezzanine Group I
Certificates, the "Subordinated Group I
Certificates" and the Subordinated Group I
Certificates together with the Class A Group I
Certificates, the "Group I Certificates"); (b)
(i) the Class IIA-1 and Class IIA-2
Certificates (together, the "Class A Group II
Certificates"), (ii) the Class IIM-1 and Class
IIM-2 Certificates (together, the "Mezzanine
Group II Certificates") and (iii) the Class IIB
Certificates (the "Class IIB Certificates" and
together with the Mezzanine Group II
Certificates, the "Subordinated Group II
Certificates" and the Subordinated Group II
Certificates together with the Class A Group II
Certificates, the "Group II Certificates"); and
(c) the Class R Certificates (the "Residual
Certificates"). The Group I Certificates and
the Group II Certificates are each referred to
herein as a "Certificate Group" and
collectively as the "Certificate Groups." Only
the Group I Certificates and the Group II
Certificates (collectively, the "Offered
Certificates") are offered hereby. References
to "Class A," "Class M-1," "Class M-2," "Class
B," "Mezzanine Certificates" and "Subordinated
Certificates" are references to Certificates of
either or both Certificate Groups of similar
designations, as the context requires.
Depositor................... Chase Funding, Inc. (the "Depositor") a
wholly-owned, limited purpose subsidiary of
Chase Manhattan Mortgage (defined below).
Neither the Depositor nor any of its
affiliates, including The Chase Manhattan Bank
and Chase Manhattan Mortgage, has guaranteed or
is otherwise obligated with respect to the
Certificates.
Seller and Master Servicer.. Chase Manhattan Mortgage Corporation, a New
Jersey corporation, as seller (the "Seller" or
"Chase Manhattan Mortgage") and as master
servicer (in such capacity, the "Master
Servicer"). See "Chase Manhattan Mortgage
Corporation." The Mortgage Loans were
originated by Chase Manhattan Mortgage and will
be acquired by the Depositor on the Closing
Date (defined herein). Neither the Depositor
nor Chase Manhattan Mortgage has guaranteed, or
is otherwise obligated with respect to, the
Certificates. The Master Servicer will (a)
provide certain administrative services and
file certain reports with regard to the
Certificates, (b) provide certain reports to
the Trustee regarding the Mortgage Loans and
the Certificates and (c) receive payments with
respect to the Mortgage Loans from the
Subservicer and, in its capacity as paying
agent for the Certificates (in such capacity,
the "Paying Agent"), remit such payments to the
Certificateholders as described herein. The
Master Servicer will be entitled to (i) a
monthly Master Servicer Fee with respect to
each Mortgage Loan, as described herein and
(ii) any interest earned on funds in the
Certificate Account and the Distribution
Account (defined herein).
S-5
<PAGE>
Subservicer................. Advanta Mortgage Corp. USA (the "Subservicer"
or "Advanta"). Except as specified herein or as
the context otherwise requires, all references
to the "Servicer" in the Prospectus shall be
deemed to refer to the Subservicer and the
rights and duties of the "Servicer" described
in the Prospectus will instead generally be
those of the Subservicer pursuant to the terms
of the Pooling and Servicing Agreement. See
"Servicing of Mortgage Loans-The Subservicer."
Trustee..................... [TRUSTEE], a _____________________, not in its
individual capacity but solely as trustee on
behalf of the Certificateholders (the
"Trustee").
Issuer...................... Chase Funding Trust, Series [____]
Cut-off Date................ [DATE].
Closing Date................ On or about [DATE].
Description of Certificates
A. General.................. The Certificates will be issued pursuant to a
Pooling and Servicing Agreement, dated as of
[DATE] (the "Pooling and Servicing Agreement"),
among the Depositor, the Subservicer, the
Master Servicer and the Trustee. The Offered
Certificates and the Residual Certificates will
represent the entire beneficial ownership
interest in a trust fund (the "Trust Fund"),
which will consist of a pool (the "Mortgage
Pool") of conventional, sub-prime mortgage
loans (the "Mortgage Loans") secured by first
liens on real properties (each, a "Mortgaged
Property") and certain other assets described
herein. The Mortgage Pool will be divided into
two separate groups of Mortgage Loans (each, a
"Loan Group") based on whether the interest
rate for the related Mortgage Loans is fixed or
adjustable. The Group I Certificates will
represent an undivided ownership interest in a
Loan Group of fixed rate Mortgage Loans (the
"Fixed Rate Mortgage Loan Group") and the Group
II Certificates will represent an undivided
ownership interest in a Loan Group of
adjustable rate Mortgage Loans (the "Adjustable
Rate Mortgage Loan Group"). The aggregate
unpaid principal balance of the Mortgage Loans
in the Fixed Rate Mortgage Loan Group (the
"Fixed Rate Mortgage Loans") as of the Cut-off
Date is referred to herein as the "Fixed Rate
Cut-off Date Principal Balance"; the aggregate
unpaid balance of the Mortgage Loans in the
Adjustable Rate Mortgage Loan Group (the
"Adjustable Rate Mortgage Loans") as of the
Cut-off Date is referred to herein as the
"Adjustable Rate Cut-off Date Principal
Balance"; and the aggregate unpaid principal
balance of all Mortgage Loans as of the Cut-off
Date is referred to herein as the "Cut-off Date
Principal Balance." See "The Mortgage Pool"
herein. The Original Certificate Principal
Balances, the Pass-Through Rates and the Last
Scheduled Distribution Dates for the Offered
Certificates are as follows:
S-6
<PAGE>
<TABLE>
<CAPTION>
Original Last
Certificate Pass- Scheduled
Principal Through Distribution
Class Balance (1) Rate Date(2)
- ----- ----------- ---- -------
<S> <C> <C> <C>
Group I Certificates
Class IA-1................................................................. $__________ _____% [DATE]
Class IA-2................................................................. $__________ _____% [DATE]
Class IA-3................................................................. $__________ _____% [DATE]
Class IA-4................................................................. $__________ _____% [DATE]
Class IA-5................................................................. $__________ _____%(3) [DATE]
Class IA-6................................................................. $__________ _____% [DATE]
Class IM-1................................................................. $__________ _____% [DATE]
Class IM-2................................................................. $__________ _____% [DATE]
Class IB................................................................... $__________ _____%(4) [DATE]
Group II Certificates
Class IIA-1................................................................ $__________ (5) [DATE]
Class IIA-2................................................................ $__________ _____% [DATE]
Class IIM-1................................................................ $__________ (5) [DATE]
Class IIM-2................................................................ $__________ (5) [DATE]
Class IIB.................................................................. $__________ (5) [DATE]
</TABLE>
- -----------
(1) The Original Certificate Principal Balance of the Offered Certificates will
be subject to a permitted variance of plus or minus 10%.
(2) Calculated in accordance with the assumptions for the determination of Last
Scheduled Distribution Date set forth herein under "Yield, Prepayment and
Maturity Considerations." It is expected that the actual last Distribution
Date for each Class of Certificates will occur significantly earlier.
(3) The Pass-Through Rate for the Class IA-5 Certificates on any Distribution
Date will equal _____%; provided, however, that on any Distribution Date
after the Optional Termination Date (defined herein) the Pass-Through Rate
for the Class IA-5 Certificates will equal _____%.
(4) The Pass-Through Rate for the Class IB Certificates on any Distribution
Date will equal the lesser of (i) the per annum rate for such Class set
forth above and (ii) the weighted average Net Mortgage Rate on the Fixed
Rate Mortgage Loans.
(5) The Pass-Through Rates for the Group II Certificates (other than with
respect to the Class IIA-2 Certificates) adjust monthly as described below.
The Pass-Through Rates per annum for the Group
II Certificates (other than for the Class IIA-2
Certificates) will be equal to the least of (i)
the London interbank offered rate for one month
United States dollar deposits, calculated as
described under "Description of the
Certificates-Calculation of One-Month LIBOR"
("One-Month LIBOR"), plus the Pass-Through
Margin (defined below) for such Class, (ii) the
"Maximum Funds Cap" for the Group II
Certificates, which is defined as the weighted
average of the maximum lifetime Mortgage Rates
on the Adjustable Rate Mortgage Loans less the
Servicing Fee and the Master Servicer Fee, and
(iii) the "Available Funds Cap" for the Group
II Certificates, which is defined as a per
annum rate equal to 12 times the quotient of
(x) the total scheduled interest on the
Mortgage Loans in the Adjustable Rate Mortgage
Loan Group based on the Net Mortgage Rates
(defined herein) in effect on the related Due
Date divided by (y) the aggregate principal
balance of the Group II Certificates.
The "Pass-Through Margin" for each Class of
Group II Certificates (other than for the Class
IIA-2 Certificates) is as follows: for any
Distribution Date on or before the applicable
Optional Termination Date (defined herein):
Class IIA-1, _____%; Class IIM-1, _____%; Class
IIM-2, _____% and Class IIB, _____%; and for
any Distribution Date after the applicable
Optional Termination Date: Class IIA-1, _____%;
Class IIM-1, _____%; Class IIM-2, _____%; and
Class IIB, _____%.
S-7
<PAGE>
If on any Distribution Date, the Pass-Through
Rate for a Class of Group II Certificates is
based upon its Available Funds Cap, the excess
of (i) the amount of interest that such Class
would have been entitled to receive on such
Distribution Date had the Pass-Through Rate for
that Class not been calculated based on the
Available Funds Cap up to but not exceeding the
Maximum Funds Cap over (ii) the amount of
interest such Class received on such
Distribution Date based on the Available Funds
Cap, together with the unpaid portion of any
such excess from prior Distribution Dates (and
interest accrued thereon at the then applicable
Pass-Through Rate, without giving effect to the
Available Funds Cap) is the "Adjustable Rate
Certificate Carryover" for such Class. Any
Adjustable Rate Certificate Carryover will be
paid on future Distribution Dates from and to
the extent of funds available therefor as
described herein. The ratings of the Group II
Certificates do not address the likelihood of
the payment of any Adjustable Rate Certificate
Carryover.
B. Form of Certificates..... The Offered Certificates will initially be
issued in book-entry form. Persons acquiring
beneficial ownership interests in the Offered
Certificates ("Certificate Owners") may elect
to hold their Offered Certificate interests
through The Depository Trust Company ("DTC"),
in the United States, or Cedel Bank, societe
anonyme ("CEDEL") or the Euroclear System
("Euroclear"), in Europe. Transfers within DTC,
CEDEL or Euroclear, as the case may be, will be
in accordance with the usual rules and
operating procedures of the relevant system. So
long as the Offered Certificates are Book-Entry
Certificates (as defined herein), such
Certificates will be evidenced by one or more
Certificates registered in the name of Cede &
Co. ("Cede"), as the nominee of DTC or one of
the relevant depositaries (collectively, the
"European Depositaries"). Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will
be effected in DTC through Citibank N.A.
("Citibank") or Chase, the relevant
depositaries of CEDEL or Euroclear,
respectively, and each a participating member
of DTC. The interests of the Offered
Certificateholders will be represented by book
entries on the records of DTC and participating
members thereof. No Certificate Owner will be
entitled to receive a definitive certificate
representing such person's interest, except in
the event that Definitive Certificates (as
defined herein) are issued under the limited
circumstances described under "Description of
the Certificates-Book-Entry Certificates"
herein. All references in this Prospectus
Supplement to the Offered Certificates reflect
the rights of Certificate Owners only as such
rights may be exercised through DTC and its
participating organizations for so long as the
Offered Certificates are held by DTC. See "Risk
Factors-Consequences of Owning Book-Entry
Certificates," "Description of the
Certificates-Book-Entry Certificates" and
"Annex I" hereto.
S-8
<PAGE>
C. Distributions............ Distributions on the Offered Certificates will
be made on the 25th day of each month or, if
such day is not a Business Day, on the first
Business Day thereafter, commencing in
[MONTH/YEAR] (each, a "Distribution Date").
Distributions on each Distribution Date will be
made to Certificateholders of record as of the
close of business on the last day of the month
preceding the month of such Distribution Date
(each, a "Record Date"), except that the final
distribution on any Offered Certificate will be
made only upon presentation and surrender of
such Offered Certificate at the office or
agency of the Paying Agent in New York, New
York. Distributions on the Offered Certificates
on each Distribution Date will be applied to
the payment of principal and interest on such
Certificates in accordance with the priorities
described in this Prospectus Supplement.
Subject in certain cases to the
crosscollateralization provisions of the
Pooling and Servicing Agreement described below
under "Description of the
Certificates-Overcollateralization and
Crosscollateralization Provisions," (i) the
rights of the holders of the Class IB
Certificates to receive distributions with
respect to the Fixed Rate Mortgage Loans are
subordinate to the rights of the holders of the
Mezzanine Group I Certificates, which in turn
are subordinate to the rights of the holders of
the Class A Group I Certificates and (ii) the
rights of the holders of the Class IIB
Certificates to receive distributions with
respect to the Adjustable Rate Mortgage Loans
are subordinate to rights of the holders of the
Mezzanine Group II Certificates, which in turn
are subordinate to the rights of the holders of
the Class A Group II Certificates, in each case
to the extent described herein. The rights of
the holders of the Residual Certificates to
receive distributions with respect to the
Mortgage Loans are subordinate to the rights of
the Offered Certificateholders, to the extent
described herein.
1. Interest............... On each Distribution Date, the interest
distributable with respect to the Group I
Certificates and the Class IIA-2 Certificates
is the interest which has accrued thereon at
the related Pass-Through Rate during the
calendar month immediately preceding the
calendar month in which such Distribution Date
occurs less Prepayment Interest Shortfalls
(defined herein); and the interest
distributable with respect to the Group II
Certificates (other than with respect to the
Class IIA-2 Certificates) is the interest which
has accrued thereon at the related Pass-Through
Rate from and including the preceding
Distribution Date (or from the Closing Date, in
the case of the first Distribution Date) to and
including the day prior to the current
Distribution Date less Prepayment Interest
Shortfalls. Each period referred to in the
prior sentence relating to the accrual of
interest is the "Accrual Period" for the
related Class of Offered Certificates. All
calculations of interest on the Group I
Certificates and Class IIA-2 Certificates will
be made on the basis of a 360-day year assumed
to consist of twelve 30-day months. All
calculations of interest on the Group II
Certificates (other than the Class IIA-2
Certificates) will be made on the basis of a
360-day year and the actual number of days
elapsed in the applicable Accrual Period.
2. Principal.............. On each Distribution Date, monthly
distributions that reduce the Certificate
Principal Balances of the Offered Certificates:
(i) will generally reflect collections of
principal in respect of the Mortgage Loans in
the related Loan Group; and (ii) until certain
overcollateralization levels have been reached,
will include excess interest collected on the
Mortgage Loans. See "Description of the
Certificates-Distributions" and
"-Overcollateralization and
Crosscollateralization Provisions."
S-9
<PAGE>
Credit Enhancement.......... The Credit Enhancement provided for the benefit
of the Holders of the Offered Certificates
consists of (x) with respect to the Class A
Certificates and, to a limited extent, the
Mezzanine Certificates, the provisions with
respect to preferential distributions of
principal and interest described herein and (y)
the application of excess interest on the
Mortgage Loans under the overcollateralization
and crosscollateralization mechanics discussed
herein. Senior and Subordinated Distributions:
On each Distribution Date, distributions with
respect to principal of and interest on the
Certificates of each Certificate Group will be
made first to the Class A Certificates, in the
manner described herein under "Description of
the Certificates-Distributions"), second to the
Class M-1 Certificates, third to the Class M-2
Certificates, fourth to the Class B
Certificates and finally to the Residual
Certificates. Initially, principal will be
distributed exclusively to the Class A
Certificates of a Certificate Group until the
Stepdown Date (defined herein). On or after the
Stepdown Date, so long as a Trigger Event
(defined herein) is not in effect for such Loan
Group, principal not required to be distributed
with respect to the Class A Certificates of
that Certificate Group will be distributed to
the Class M-1 Certificates of that Certificate
Group generally until the excess of the
aggregate Stated Principal Balances (defined
herein) of the Mortgage Loans in the related
Loan Group over the sum of the Certificate
Principal Balances of the Class A and Class M-1
Certificates of the related Certificate Group
is equal to ____% for the Fixed Rate Mortgage
Loan Group and _____% for the Adjustable Rate
Mortgage Loan Group, of such Stated Principal
Balances; thereafter, principal not required to
be distributed with respect to the Class A and
Class M-1 Certificates of that Certificate
Group will be distributed to the Class M-2
Certificates of that Certificate Group
generally until the excess of the aggregate
Stated Principal Balances of the Mortgage Loans
in the related Loan Group over the sum of the
Certificate Principal Balances of the Class A,
Class M-1 and Class M-2 Certificates of the
related Certificate Group is equal to ____% for
the Fixed Rate Mortgage Loan Group and _____%
for the Adjustable Rate Mortgage Loan Group, of
the applicable Stated Principal Balances;
thereafter principal not required to be
distributed with respect to Class A, Class M-1
and Class M-2 Certificates of that Certificate
Group will be distributed to the Class B
Certificates of that Certificate Group
generally until the excess of the aggregate
Stated Principal Balances of the Mortgage Loans
in the related Loan Group over the sum of the
Certificate Principal Balances of the Class A,
Class M-1, Class M-2 and Class B Certificates
of the related Certificate Group is equal to
____% for the Fixed Rate Mortgage Loan Group
and ____% for the Adjustable Rate Mortgage Loan
Group, of the applicable Stated Principal
Balances; thereafter principal not required to
be distributed to the Offered Certificates will
be distributed to the Residual Certificates.
See "Description of the
Certificates-Distributions-Distributions of
Principal."
S-10
<PAGE>
Overcollateralization and
Crosscollateralization. The cashflow provisions
described herein are expected to result
initially in an increased rate of amortization
of the Class A Certificates of each Certificate
Group relative to the amortization of the
Mortgage Loans in the related Loan Group
through the application of excess interest
received on the Mortgage Loans in such Loan
Group to the payment of the principal of Class
A Certificates of such Certificate Group until
a required level of overcollateralization is
achieved. In addition, the cashflow provisions
require, under certain circumstances, that
excess interest generated by one Loan Group be
applied towards the payment of Certificates
related to the other Loan Group
("crosscollateralization"). As a result, the
aggregate Stated Principal Balances of the
Mortgage Loans in each Loan Group are expected,
from time to time, to exceed the aggregate
Certificate Principal Balances of the Offered
Certificates in the related Certificate Group
(such excess, "overcollateralization"). Once
the required level of overcollateralization is
reached, and subject to the provisions
described in the next paragraph, the increased
rate of amortization of the Class A
Certificates will cease, unless necessary to
maintain the required level of
overcollateralization.
The Pooling and Servicing Agreement provides
that, subject to certain floors, caps and
triggers, the required level of
overcollateralization with respect to a Loan
Group may increase or decrease over time as
described herein. An increase would result in a
temporary period of faster amortization of the
Class A Certificates in the related Certificate
Group in order to increase the actual level of
overcollateralization to its required level; a
decrease would result in a temporary period of
slower amortization in order to reduce the
actual level of overcollateralization to its
required level. See "Description of the
Certificates- Overcollateralization and
Crosscollateralization Provisions."
Realized Losses. If on any Distribution Date
the Certificate Principal Balances of the
Offered Certificates of a Certificate Group
exceed the Stated Principal Balances of the
Mortgage Loans in the related Loan Group, the
Certificate Principal Balances of the related
Subordinated Certificates (but not the Class A
Certificates) of such Certificate Group will be
reduced, in reverse order of seniority (first
Class B, second Class M-2 and third Class M-1),
by the amount of the excess; any such excess is
referred to as an "Applied Realized Loss
Amount." Thereafter, such Subordinated
Certificates are only entitled to distributions
of interest and principal with respect to their
Certificate Principal Balances as so reduced,
and the amount of any Applied Realized Loss
Amount will be payable to the applicable Class
of Subordinated Certificates only to the extent
of future excess cash flow as described herein.
See "Description of the
Certificates-Overcollateralization and
Crosscollateralization Provisions."
S-11
<PAGE>
The Mortgage Loans.......... The Mortgage Loans will be divided into two
separate groups (each, a "Loan Group") based on
whether the interest rate for the related
Mortgage Loan is fixed or adjustable. The
Mortgage Loans are secured by first liens on
real properties (each, a "Mortgaged Property").
The Fixed Rate Mortgage Loan Group consists of
all the fixed rate Mortgage Loans. The
Adjustable Rate Mortgage Loan Group consists of
all the adjustable rate Mortgage Loans. The
aggregate principal balance of the Mortgage
Loans as of [DATE] (the "Cut-off Date") was
approximately $___________. As of the Cut-off
Date, the aggregate principal balance of the
Mortgage Loans in the Fixed Rate Mortgage Loan
Group (the "Fixed Rate Mortgage Loans") was
approximately $___________. As of the Cut-off
Date, the aggregate principal balance of the
Mortgage Loans in the Adjustable Rate Mortgage
Loan Group (the "Adjustable Rate Mortgage
Loans") was approximately $___________.
References herein to percentages of Mortgage
Loans refer in each case to the percentage of
the aggregate principal balance of the Mortgage
Loans or, as the case may be, the Mortgage
Loans in the applicable Mortgage Group, as of
the Cut-off Date, based on the outstanding
principal balances of the Mortgage Loans as of
the Cut-off Date, after giving effect to
Monthly Payments due on or prior to the Cut-off
Date, whether or not received. References to
percentages of Mortgaged Properties refer, in
each case, to the percentages of aggregate
principal balances of the related Mortgage
Loans (determined as described in the preceding
sentence.)
Fixed Rate Mortgage Loan Group. The
following summarizes certain approximate
characteristics of the Fixed Rate Mortgage
Loans as of the Cut-off Date:
Number of Mortgage Loans............................. _____
Aggregate Outstanding Principal Balance.............. $___________
Average Outstanding Principal Balance................ $______
Range of Outstanding Principal Balances.............. $_____ to $_______
Weighted Average Mortgage Rate....................... _____%
Range of Mortgage Rates.............................. _____% to ______%
Weighted Average Loan-to-Value Ratio................. _____%
Range of Loan-to-Value Ratios........................ ____% to _____%
Weighted Average Stated Remaining Term............... ___ months
Range of Stated Remaining Terms...................... ___ months to ___ months
Number of Mortgage Loans with Prepayment Penalties... _____
Product Type:
[10 year fixed]................................... ____%
[15 year fixed]................................... _____%
[20 year fixed]................................... ____%
[25 year fixed]................................... ____%
[30 year fixed]................................... _____%
[Balloon Loan].................................... _____%
Adjustable Rate Mortgage Loan Group. The
following summarizes certain approximate
characteristics of the Adjustable Rate Mortgage
Loans as of the Cut-off Date:
Number of Mortgage Loans............................. _____
Aggregate Outstanding Principal Balance.............. $___________
S-12
<PAGE>
Average Outstanding Principal Balance................ $_______
Range of Outstanding Principal Balances.............. $______ to $_______
Mortgage Rates:
Current Weighted Average Mortgage Rate............ _____%
Range of Current Mortgage Rates................... _____% to ______%
Weighted Average Maximum Mortgage Rate............ ______%
Range of Maximum Mortgage Rates................... ______% to ______%
Weighted Average Lifetime Minimum
Mortgage Rate........................................ _____%
Range of Minimum Lifetime Mortgage Rates.......... _____% to ______%
Weighted Average Loan-to-Value Ratio................. _____%
Range of Loan-to-Value Ratios........................ _____% to _____%
Weighted Average Stated Remaining Term............... ____ months
Range of Stated Remaining Terms...................... ___ months to ___ months
Number of Mortgage Loans with Prepayment Penalties... ___
Product type:
[6 month LIBOR]................................... ____%
[1/29 Loan]....................................... ____%
[2/28 Loan]....................................... _____%
[3/27 Loan]....................................... _____%
[5/25 Loan]....................................... ____%
[Other]........................................... ____%
All the Adjustable Rate Mortgage Loans are
expected to be subject to periodic interest
rate adjustment caps, lifetime interest rate
ceilings and lifetime interest rate floors. As
described herein under "The Mortgage
Pool-General," the Mortgage Rates for all of
the Adjustable Rate Mortgage Loans will
generally be subject to adjustment
semi-annually to equal the sum, rounded to the
nearest 0.125%, of the Mortgage Index and the
Gross Margin for such Mortgage Loan, subject to
the effects of any applicable Periodic Rate
Cap, Maximum Mortgage Rate and Minimum Mortgage
Rate (each, as defined herein). The Mortgage
Index applicable to any semi-annual Adjustment
Date for substantially all of the Adjustable
Rate Mortgage Loans will be the average of the
London interbank offered rates for six-month
U.S. dollar deposits in the London market, as
set forth in The Wall Street Journal, or, if
the Mortgage Index ceases to be published in
The Wall Street Journal or becomes unavailable
for any reason, then the Mortgage Index shall
be a new index selected by the Trustee, as
holder of the related Mortgage Note (defined
herein), based on comparable information, in
each case as most recently announced as of a
date __ days prior to such Adjustment Date. The
Mortgage Index value published on [DATE] was
_______%. See "The Mortgage Pool."
S-13
<PAGE>
Servicing................... Advanta (the "Subservicer") will serve as the
servicer of the Mortgage Loans under the
Pooling and Servicing Agreement. The
Subservicer will be responsible for the
servicing of the Mortgage Loans and will
receive from interest collected on the Mortgage
Loans a monthly servicing fee on each Mortgage
Loan equal to the Stated Principal Balance
thereof multiplied by one-twelfth of the
Servicing Fee Rate (such product, the
"Servicing Fee"). See "Servicing of Mortgage
Loans-Servicing Compensation and Payment of
Expenses" herein. The Subservicer is obligated
to make cash advances ("Advances") with respect
to delinquent payments of principal of and
interest on any Mortgage Loan to the extent
described herein. The Trustee will be obligated
to make any such Advance if the Subservicer
fails in its obligation to do so, to the extent
provided in the Pooling and Servicing
Agreement. See "Servicing of Mortgage
Loans-Advances."
Optional Termination........ On any Distribution Date on which the aggregate
unpaid principal balance of the Mortgage Loans
(the "Stated Principal Balance") of either Loan
Group is less than or equal to __% of the
Cut-off Date Principal Balance for all Mortgage
Loans in such Loan Group (an "Optional
Termination Date"), the Master Servicer will
have the option (but not the obligation) to
purchase, in whole, the Mortgage Loans and the
REO Property (as defined herein), if any,
remaining in such Loan Group and thereby effect
the early retirement of all Certificates in the
related Certificate Group. See "Description of
the Certificates-Optional Termination."
Federal Income Tax
Consequences................ For federal income tax purposes, the Trust
Fund will include two segregated asset pools,
with respect to which elections will be made to
treat each as a "real estate mortgage
investment conduit" ("REMIC"). The Offered
Certificates will constitute "regular
interests" in the Master REMIC. As such, the
Offered Certificates will be treated as debt
instruments issued by a REMIC. The Residual
Certificates will represent the sole class of
residual interests in the Master REMIC and the
Subsidiary REMIC. Certain Classes of Offered
Certificates may be issued with original issue
discount ("OID") for federal income tax
purposes. See "Federal Income Tax Consequences"
herein and in the Prospectus.
ERISA Considerations........ The acquisition of a Class A Certificate by an
employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or a plan or arrangement
subject to Section 4975 of the Code (each of
the foregoing, a "Plan") could, in some
instances, result in a "prohibited transaction"
or other violation of the fiduciary
responsibility provisions of ERISA and Code
Section 4975.
However, certain exemptions from the prohibited
transaction rules of ERISA could be applicable
to the acquisition of Class A Certificates.
Subject to the considerations and conditions
described under "ERISA Considerations" herein,
it is expected that the Class A Certificates
may be purchased by a Plan. Any Plan fiduciary
considering whether to purchase any Class of
the Class A Certificates on behalf of a Plan
should consult with its counsel regarding the
applicability of the provisions of ERISA and
the Code. The Subordinated Certificates may not
be purchased by Plans except as provided
herein. See "ERISA Considerations" herein and
in the Prospectus.
S-14
<PAGE>
Legal Investment............ The Offered Certificates will not constitute
"mortgage related securities" under the
Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). No representation
is made as to the appropriate characterization
of the Offered Certificates under any laws
relating to investment restrictions and
investors should consult their own counsel as
to whether they have the legal authority to
invest in non-SMMEA Securities such as the
Offered Certificates. See "Risk Factors-Limited
Liquidity; Lack of SMMEA Eligibility" herein
and "Legal Investment Considerations" herein
and "Legal Investment" in the Prospectus.
Ratings..................... It is a condition of the issuance of the
Offered Certificates that (i) the Class A
Certificates be rated "AAA" by each of [RATING
AGENCY] ("RATING AGENCY") and together with
[RATING AGENCY], the "Rating Agencies"), (ii)
the Class M-1 Certificates be rated at least
"AA" by each of [RATING AGENCY] and [RATING
AGENCY], (iii) the Class M-2 Certificates be
rated at least "A" by each of [RATING AGENCY]
and [RATING AGENCY]; and (iv) the Class B
Certificates be rated at least "BBB-" by
[RATING AGENCY] and at least "BBB" by [RATING
AGENCY].
The security ratings of the Offered
Certificates should be evaluated independently
from similar ratings on other types of
securities. A security rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the Rating Agencies. The ratings
assigned to the Group II Certificates do not
address the likelihood of the payment of any
Adjustable Rate Certificate Carryover. The
Depositor has not requested a rating of the
Offered Certificates by any rating agency other
than the Rating Agencies; there can be no
assurance, however, as to whether any other
rating agency will rate any Class of the
Offered Certificates or, if it does, what
rating would be assigned by such other rating
agency. The rating assigned by such other
rating agency to any Class of the Offered
Certificates could be lower than the respective
ratings assigned by the Rating Agencies. See
"Ratings" herein.
S-15
<PAGE>
RISK FACTORS
Investors should consider the following risks in connection with the
purchase of the Offered Certificates.
Consequences of Owning Book-Entry Certificates. Issuance of the Offered
Certificates in book-entry form may reduce the liquidity of the Offered
Certificates in the secondary trading market since investors may be unwilling to
purchase Offered Certificates for which they cannot obtain physical
certificates. See "Description of the Certificates-Book-Entry Certificates."
Since transactions in the Offered Certificates can be effected only
through DTC, CEDEL, Euroclear, participating organizations, indirect
participants and certain banks, the ability of a Certificate Owner to pledge an
Offered Certificate to persons or entities that do not participate in the DTC,
CEDEL or Euroclear system may be limited due to lack of a physical certificate
representing the Offered Certificates. See "Description of the
Certificates-Book-Entry Certificates."
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Offered Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificate Owners either directly or
indirectly through indirect participants. Certificate Owners will not be
recognized as Certificateholders of the Offered Certificates as such term is
used in the Pooling and Servicing Agreement, and Certificate Owners will be
permitted to exercise the rights of Offered Certificateholders only indirectly
through DTC and its Participants. See "Description of the
Certificates-Book-Entry Certificates."
Cash Flow Considerations and Risks. Even assuming that the Mortgaged
Properties provide adequate security for the Mortgage Loans, substantial delays
could be encountered in connection with the liquidation of Mortgage Loans that
are delinquent and resulting shortfalls in distributions to the
Certificateholders could occur. Further, liquidation expenses (such as legal
fees, real estate taxes, and maintenance and preservation expenses) will reduce
the security for such Mortgage Loans and thereby reduce the proceeds payable to
the Certificateholders. In the event any of the Mortgaged Properties fail to
provide adequate security for the related Mortgage Loans, the Offered
Certificates (particularly the most subordinate Classes) could experience a
loss.
Subordination-Limited Protection Afforded to Offered Certificates. The
rights of the Class M-1 Certificates of each Certificate Group to receive
distributions with respect to the Mortgage Loans of the related Loan Group will
be subordinate to the rights of the Class A Certificates of such Certificate
Group to receive such distributions; the rights of the Class M-2 Certificates of
each Certificate Group to receive distributions with respect to the Mortgage
Loans of the related Loan Group will be subordinate to the rights of the Class A
and the Class M-1 Certificates of such Certificate Group to receive such
distributions; and the rights of the Class B Certificates of each Certificate
Group to receive distributions with respect to the Mortgage Loans of the related
Loan Group will be subordinate to the rights of the Class A, Class M-1 and Class
M-2 Certificates of such Certificate Group to receive such distributions. The
subordination of the Subordinated Certificates of each Certificate Group
relative to the Class A Certificates of such Certificate Group (and of the more
lower-ranking Classes of the Subordinated Certificates of each Certificate Group
to the higher-ranking Classes thereof) is intended to enhance the likelihood of
regular receipt by each Class A Certificate of the full amount of the monthly
distributions allocable to them, and to afford protection against losses. If
such protection is eliminated, the risk of losses on the Mortgage Loans will be
borne by the Class A Certificates.
S-16
<PAGE>
Subordination-Allocation of Losses to Subordinated Certificates. If
Realized Losses are incurred with respect to the Mortgage Loans in a Loan Group
to the extent that the aggregate Certificate Principal Balance of the Offered
Certificates of such Certificate Group exceeds the Stated Principal Balances of
the Mortgage Loans in such Loan Group, the Certificate Principal Balances of the
Subordinated Certificates of such Certificate Group will be reduced in reverse
order of seniority (first Class B, second Class M-2 and third Class M-1) by the
amount of the excess. Consequently, the yields to maturity on the Mezzanine
Certificates and Class B Certificates of each Certificate Group will be
sensitive, in varying degrees, to defaults on the Mortgage Loans in such Loan
Group (and the timing thereof). Investors should fully consider the risks
associated with an investment in the Mezzanine Certificates or Class B
Certificates, including the possibility that such investors may not fully
recover their initial investment as a result of Realized Losses.
Overcollateralization Provisions. The operation of the
overcollateralization provisions of the Pooling and Servicing Agreement will
affect the weighted average life of the Certificates of each Certificate Group
and consequently the yield to maturity of such Certificates. Unless and until
the required amount of overcollateralization for such Certificate Group is
reached, Net Excess Cashflow (defined herein) for the related Loan Group will be
applied as distributions of principal of the Class A Certificates of such
Certificate Group, thereby reducing the weighted average lives thereof. The
actual required amount of overcollateralization for a Certificate Group may
change from Distribution Date to Distribution Date pursuant to the terms of the
Pooling and Servicing Agreement, producing uneven distributions of accelerated
payments in respect of principal for such Certificate Group. There can be no
assurance as to when or whether the required amount of overcollateralization for
a Certificate Group will be reached.
Net Excess Cashflow for a particular Loan Group generally is the excess
of interest collected or advanced on the Mortgage Loans in such Loan Group over
the interest required to pay interest on the Certificates in the related
Certificate Group and certain Trust Fund expenses allocable to such Certificate
Group. Mortgage Loans with higher Net Mortgage Rates will contribute more
interest to the Net Excess Cashflow. Mortgage Loans with higher Net Mortgage
Rates may prepay faster than Mortgage Loans with relatively lower Net Mortgage
Rates in response to a given change in market interest rates. Any such
disproportionate prepayments of Mortgage Loans in a Loan Group that have higher
Net Mortgage Rates may adversely affect the amount of Net Excess Cashflow for
such Loan Group.
As a result of the interaction of the foregoing factors, the effect of
the overcollateralization provisions on the weighted average life of the Offered
Certificates may vary significantly over time. See "Yield, Prepayment and
Maturity Considerations" herein and "Yield, Maturity and Weighted Average Life
Considerations" in the Prospectus.
Prepayment Considerations and Risks. Each Loan Group's prepayment
experience may be affected by a wide variety of factors, including general
economic conditions, interest rates, the availability of alternative financing
and homeowner mobility. In addition, substantially all of the Mortgage Loans
contain due-on-sale provisions and the Subservicer intends to enforce such
provisions unless (i) such enforcement is not permitted by applicable law or
(ii) the Subservicer, in a manner consistent with accepted servicing practices,
permits the purchaser of the related Mortgaged Property to assume the Mortgage
Loan. To the extent permitted by applicable law, such assumption will not
release the original borrower from its obligation under any such Mortgage Loan.
See "Yield, Prepayment and Maturity Considerations" herein and "Certain Legal
Aspects of Mortgage Loans-Enforceability of Due-on-Sale Clauses" in the
Prospectus for a description of certain provisions of the Mortgage Loans that
may affect the prepayment experience thereof. The yield to maturity and weighted
average life of the Offered Certificates in each Certificate Group will be
affected primarily by the rate and timing of principal payments (including
prepayments, liquidations, repurchases and defaults) of, and losses on, the
Mortgage Loans in the related Loan Group.
S-17
<PAGE>
The yield to investors on the Group II Certificates other than the
Class IIA-2 Certificates will also be sensitive to the level of One-Month LIBOR,
the level of the Mortgage Index and the additional limitations on the
Pass-Through Rate described herein. In addition, the yield to maturity of the
Offered Certificates purchased at a discount or premium will be more sensitive
to the rate and timing of payments thereon. Certificateholders should consider,
in the case of the Offered Certificates purchased at a discount, the risk that a
slower than anticipated rate of principal payments could result in an actual
yield that is lower than the anticipated yield and, in the case of the Offered
Certificates purchased at a premium, the risk that a faster than anticipated
rate of principal payments could result in an actual yield that is lower than
the anticipated yield. Because certain of the Mortgage Loans contain prepayment
penalties, the rate of principal prepayments may be less than the rate of
principal prepayments for mortgage loans which do not contain prepayment
penalties. No representation is made as to the anticipated rate of prepayments
on the Mortgage Loans, the amount and timing of losses thereon, the level of
One-Month LIBOR or the Mortgage Index or the resulting yield to maturity of any
Offered Certificates. Any reinvestment risks resulting from a faster or slower
incidence of prepayments on the Mortgage Loans will be borne entirely by the
Offered Certificateholders as described herein. See "Yield, Prepayment and
Maturity Considerations" herein and "Yield Considerations" in the Prospectus.
Risk of Higher Delinquencies Associated with Guidelines. The B&C
Underwriting Guidelines (as described herein under "Chase Manhattan Mortgage
Corporation-Underwriting Standards-B&C Quality Loans") consider the credit
quality of a mortgagor and the value of the mortgaged property. The Originators
provide loans primarily to mortgagors who do not qualify for loans conforming to
Fannie Mae or FHLMC guidelines. Furthermore, the B&C Underwriting Guidelines do
not prohibit a borrower from obtaining secondary financing at the time of
origination of the Originator's first lien, which financing would reduce the
equity the borrower would otherwise have in the related mortgaged property.
As a result of the B&C Underwriting Guidelines, the Mortgage Loans are
likely to experience rates of delinquency, foreclosure and bankruptcy that are
higher, and that may be substantially higher, than those experienced by mortgage
loans underwritten to Fannie Mae and FHLMC conforming guidelines. Furthermore,
changes in the values of Mortgaged Properties may have a greater effect on the
delinquency, foreclosure, bankruptcy and loss experience of the Mortgage Loans
than on mortgage loans originated in a more traditional manner. No assurance can
be given that the values of the Mortgaged Properties will not experience an
overall decline in value.
Effect of Mortgage Loan Yield on Group II Certificates Pass-Through
Rate; Basis Risk. The calculation of the Pass-Through Rate on each Class of the
Group II Certificates (other than the Class IIA-2 Certificates) is based upon
the value of an index (One-Month LIBOR) which is different from the value of the
index applicable to substantially all the Adjustable Rate Mortgage Loans
(Six-Month LIBOR) as described under "The Mortgage Pool-General" and is subject
to the Available Funds Cap. The Available Funds Cap effectively limits the
amount of interest accrued on each Class of the Group II Certificates (other
than the Class IIA-2 Certificates) to the weighted average of the Mortgage Rates
on the Adjustable Rate Mortgage Loans, less the Servicing Fee Rate and the
Master Servicer Fee Rate. Approximately ____% of the Adjustable Rate Mortgage
Loans as of the Cut-off Date adjust semi-annually based upon the London
interbank offered rate for Six-Month United States dollar deposits ("Six-Month
LIBOR"), whereas the Pass-Through Rate on each Class of the Group II
Certificates (other than the Class IIA-2 Certificates) adjusts monthly based
upon One-Month LIBOR as described under "Description of the
Certificates-Calculation of One-Month LIBOR", subject to the Available Funds
Cap. Consequently, the Pass-Through Rate on each Class of the Group II
Certificates (other than the Class IIA-2 Certificates) for any Distribution Date
may be reduced as a result. Approximately ____% of the Adjustable Rate Mortgage
Loans as of the Cut-off Date are 1/29 Loans that provide for a fixed interest
rate for a period of approximately one year following origination. Approximately
_____% of the Adjustable Rate Mortgage Loans as of the Cut-off Date are 2/28
Loans that provide for a fixed interest rate for a period of approximately two
years following origination.
S-18
<PAGE>
Approximately _____% of the Adjustable Rate Mortgage Loans as of the Cut-off
Date are 3/27 Loans that provide for a fixed interest rate for a period of
approximately three years following origination. Approximately ____% of the
Adjustable Rate Mortgage Loans as of the Cut-off Date are 5/25 Loans which
provide for a fixed interest rate for a period of approximately five years
following origination. Thereafter, substantially all of such Mortgage Loans
provide for interest rate and payment adjustments in a manner similar to the
Six-Month LIBOR Loans. A decline in the level of One-Month LIBOR during the
period when some of the Adjustable Rate Mortgage Loans are not yet subject to
adjustment could reduce the yield to maturity on the Group II Certificates
(other than the Class IIA-2 Certificates). One-Month LIBOR and Six-Month LIBOR
may respond to different economic and market factors, and there is not
necessarily a correlation between them. Thus, it is possible, for example, that
One-Month LIBOR may rise during periods in which Six-Month LIBOR is stable or is
falling or that, even if both One-Month LIBOR and Six-Month LIBOR rise during
the same period, One-Month LIBOR may rise more rapidly than Six-Month LIBOR.
Furthermore, even if One-Month LIBOR and Six-Month LIBOR were at the same level,
various factors may cause the Available Funds Cap to limit the amount of
interest that would otherwise accrue on each Class of the Group II Certificates
(other than the Class IIA-2 Certificates). In particular, the Pass-Through Rate
on each Class of the Group II Certificates (other than the Class IIA-2
Certificates) adjusts monthly, while the interest rates of the Adjustable Rate
Mortgage Loans adjust less frequently, with the result that the operation of the
Available Funds Cap may cause the Pass-Through Rates to be reduced for extended
periods in a rising interest rate environment. In addition, the Adjustable Rate
Mortgage Loans are subject to periodic (i.e., semi-annual) adjustment caps and
maximum rate caps, and the weighted average margin is subject to change based
upon prepayment experience, which also may result in the Available Funds Cap
limiting increases in the Pass-Through Rate for such Classes of the Group II
Certificates. Finally, the Adjustable Rate Mortgage Loans accrue interest on the
basis of a 360-day year assumed to consist of twelve 30-day months, while
calculations of interest on each Class of the Group II Certificates (other than
the Class IIA-2 Certificates) will be made on the basis of the actual number of
days elapsed in the related Accrual Period and a year of 360 days. This may
result in the Available Funds Cap limiting the Pass-Through Rate for such
Classes of Certificates in Accrual Periods that have more than 30 days.
Consequently, the interest which becomes due on the Adjustable Rate Mortgage
Loans (net of the sum of the Servicing Fee and the Master Servicer Fee) with
respect to any Distribution Date may not equal the amount of interest that would
accrue at One-Month LIBOR plus the margin on each Class of the Group II
Certificates (other than the Class IIA-2 Certificates) and the Pass-Through Rate
with respect to the Class IIA-2 Certificates during the related Accrual Period.
Furthermore, if the Available Funds Cap determines the Pass-Through Rate for a
Class of the Group II Certificates for a Distribution Date, the market value of
such Class of Certificates may be temporarily or permanently reduced.
Certificate Rating. The rating of each Class of the Offered
Certificates will depend primarily on an assessment by the Rating Agencies of
the Mortgage Loans as well as the structure of the transaction. The rating by
the Rating Agencies of any Class of Offered Certificates is not a recommendation
to purchase, hold or sell any Offered Certificates, inasmuch as such rating does
not comment as to the market price or suitability for a particular investor.
There is no assurance that the ratings will remain in place for any given period
of time or that the ratings will not be lowered or withdrawn by the Rating
Agencies. In general, the ratings address credit risk and do not address the
likelihood of prepayments. The ratings of each Class of the Offered Certificates
do not address the possibility of the imposition of United States withholding
tax with respect to non-U.S. persons.
Bankruptcy and Insolvency Risks. The sale of the Mortgage Loans from
the Seller to the Depositor will be treated as a sale of the Mortgage Loans.
However, in the event of an insolvency of the Seller, the trustee in bankruptcy
of the Seller may attempt to recharacterize the sale of the Mortgage Loans as a
borrowing by the Seller, secured by a pledge of the applicable Mortgage Loans.
If the trustee in bankruptcy decided to challenge such transfer, delays in
payments of the Offered Certificates and reductions in the amounts thereof could
occur.
S-19
<PAGE>
In the event of a bankruptcy or insolvency of the Subservicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or the
Certificateholders from appointing a successor Subservicer.
Geographic Concentration. As of the Cut-off Date, approximately 18.96%
of the Mortgaged Properties of the Fixed Rate Mortgage Loan Group and
approximately 10.50% of the Mortgaged Properties of the Adjustable Rate Mortgage
Loan Group were located in the State of Florida. An overall decline in the
Florida residential real estate market could adversely affect the values of the
Mortgaged Properties securing such Mortgage Loans such that the principal
balances of the related Mortgage Loans could equal or exceed the value of such
Mortgaged Properties. As the residential real estate market is influenced by
many factors, including the general condition of the economy and interest rates,
no assurances may be given that the Florida residential real estate market will
not weaken. If the Florida residential real estate market should experience an
overall decline in property values, the rates of losses on such Mortgage Loans
would be expected to increase, and could increase substantially.
Delinquent Mortgage Loans. The Trust Fund may include Mortgage Loans
which are __ or fewer days delinquent as of the Cut-off Date. It is expected
that not more than ____% of the Mortgage Loans (by Cut-off Date Principal
Balance) will be between __ days and __ days delinquent. If there are not
sufficient funds from amounts collected on the Mortgage Loans, the aggregate
amount of principal returned to any Class of Offered Certificateholders may be
less than the Certificate Principal Balance thereof on the day the such Class of
Offered Certificates were issued.
Limited Liquidity; Lack of SMMEA Eligibility. The Underwriters intend
to make a secondary market in the Offered Certificates, but will have no
obligation to do so. There can be no assurance that a secondary market for any
Class of Offered Certificates will develop, or if one does develop, that it will
continue or provide sufficient liquidity of investment or that it will remain
for the term of the related Class of Offered Certificates. The Offered
Certificates will not constitute "mortgage related securities" for purposes of
SMMEA. Accordingly, many institutions with legal authority to invest in SMMEA
securities will not be able to invest in the Offered Certificates, thereby
limiting the market for the Offered Certificates. In light of the foregoing,
investors should consult their own counsel as to whether they have the legal
authority to invest in non-SMMEA securities such as the Offered Certificates.
See "Legal Investment Considerations" herein and "Legal Investment" in the
Prospectus.
Risks Associated with Year 2000 Compliance. The Depositor is aware of
the issues associated with the programming code in existing computer systems as
the millennium (year 2000) approaches. The "year 2000 problem" is pervasive and
complex; virtually every computer operation will be affected in some way by the
rollover of the two digit year value to 00. The issue is whether computer
systems will properly recognize date-sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail.
The Depositor has been advised by each of the Master Servicer, the
Subservicer and the Trustee that they are committed to either (i) implementing
modifications to their respective existing systems to the extent required to
cause them to be year 2000 compliant or (ii) acquiring computer systems that are
year 2000 compliant in each case prior to January 1, 2000. However, neither the
Depositor nor any affiliate of the Depositor has made any independent
investigation of the computer systems of the Master Servicer, the Subservicer or
the Trustee. In the event that computer problems arise out of a failure of such
efforts to be completed on time, or in the event that the computer systems of
the Trustee, the Master Servicer or the Subservicer are not fully year 2000
compliant, the resulting disruptions in the collection or distribution of
receipts on the Mortgage Loans could materially adversely affect the holders of
the Offered Certificates.
For a discussion of additional risks pertaining to the Offered
Certificates, see "Risk Factors" in the Prospectus.
S-20
<PAGE>
THE MORTGAGE POOL
General
The mortgage pool with respect to the Certificates (the "Mortgage
Pool") will consist of approximately _____ conventional mortgage loans (the
"Mortgage Loans") evidenced by promissory notes (each, a "Mortgage Note") having
an aggregate principal balance on August 1, 1998 (the "Cut-off Date") of
approximately $___________. References herein to percentages of Mortgage Loans
refer in each case to the percentage of the aggregate principal balance of the
Mortgage Loans or, as the case may be, the Mortgage Loans in the applicable
Mortgage Group, as of the Cut-off Date, based on the outstanding principal
balances of the Mortgage Loans as of the Cut-off Date, after giving effect to
Scheduled Payments (defined herein) due on or prior to the Cut-off Date, whether
or not received. References to percentages of Mortgaged Properties (defined
herein) refer, in each case, to the percentages of aggregate principal balances
of the related Mortgage Loans (determined as described in the preceding
sentence). The Mortgage Notes are secured by mortgages or deeds of trust or
other similar security instruments creating first liens on real properties (the
"Mortgaged Properties"), including single-family residences, two- to-four family
dwelling units, attached planned unit developments, condominiums, detached
planned unit developments, manufacturing housing and small mixed use properties.
The Trust Fund includes, in addition to the Mortgage Pool, (i) the amounts held
from time to time in one or more accounts (collectively, the "Accounts")
maintained in the name of the Trustee pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be dated as of [DATE], by
and among Chase Funding, Inc., as depositor (the "Depositor"), Advanta Mortgage
Corp. USA, as subservicer ("Advanta" or the "Subservicer"), Chase Manhattan
Mortgage Corporation, as master servicer (the "Master Servicer") and [TRUSTEE],
as trustee (the "Trustee"), (ii) any property which initially secured a Mortgage
Loan and which is acquired by foreclosure or deed-in-lieu of foreclosure, (iii)
all insurance policies and the proceeds thereof described below and (iv) certain
rights to require repurchase of the Mortgage Loans by the Seller for breach of
representation or warranty.
All of the Mortgage Loans will provide for the amortization of the
amount financed over a series of monthly payments. The Mortgage Loans to be
included in the Trust Fund will have been originated or purchased by Chase
Manhattan Mortgage Corporation (the "Seller") and will have been originated
substantially in accordance with the Seller's underwriting criteria for
sub-prime ("B&C") quality mortgage loans described herein under "Chase Manhattan
Mortgage Corporation-Underwriting Standards-B&C Quality Mortgage Loans."
Sub-prime mortgage loans are generally mortgage loans made to borrowers who do
not qualify for financing under conventional underwriting criteria due to prior
credit difficulties, the inability to satisfy conventional documentation
standards, or both.
Scheduled monthly payments made by the Mortgagors on the Mortgage Loans
("Scheduled Payments") either earlier or later than the scheduled due dates
thereof will not affect the amortization schedule or the relative application of
such payments to principal and interest. Substantially all of the Mortgage Notes
will provide for a _______ (__) day grace period for monthly payments. Any
Mortgage Loan may be prepaid in full or in part at any time; however,
approximately _____% of the Fixed Rate Mortgage Loans and approximately _____%
of the Adjustable Rate Mortgage Loans provide for the payment by the borrower of
a prepayment charge in limited circumstances on full or partial prepayments made
during the prepayment penalty term. The weighted average prepayment penalty term
is approximately __ months with respect to the Fixed Rate Mortgage Loans which
have prepayment penalties and approximately __ months with respect to the
Adjustable Rate Mortgage Loans which have prepayment penalties. In general, the
related Mortgage Note will provide that a prepayment charge will apply if,
during the prepayment penalty term, the borrower prepays such Mortgage Loan in
full or in part. The amount of the prepayment charge will generally be equal to
six months' advance interest calculated on the basis of the rate in effect at
the time of such prepayment on the amount prepaid in excess of __% of the
original balance of such Mortgage Loan.
S-21
<PAGE>
The enforceability of prepayment penalties is unclear under the laws of many
states. See "Certain Legal Aspects of the Mortgage Loans-Late Charges, Default
Interest and Limitations on Payment" in the Prospectus.
[Approximately ____% of the Adjustable Rate Mortgage Loans (the "Six
Month LIBOR Loans") substantially all of which will have a Mortgage Rate which
is subject to semi-annual adjustment on the first day of the months specified in
the related Mortgage Note (each such date, an "Adjustment Date") to equal the
sum, rounded to the nearest _____%, of (i) the average of the London interbank
offered rates for six-month U.S. dollar deposits in the London market, as set
forth in The Wall Street Journal, or, if such rate ceases to be published in The
Wall Street Journal or becomes unavailable for any reason, then based upon a new
index selected by the Trustee, as holder of the related Mortgage Note, based on
comparable information, in each case as most recently announced as of a date __
days prior to such Adjustment Date (the "Mortgage Index"), and (ii) a fixed
percentage amount specified in the related Mortgage Note (the "Gross Margin");
provided, however, that the Mortgage Rate will not increase or decrease by more
than ____% on any Adjustment Date (the "Periodic Rate Cap") and, provided
further, that it will not be higher than the Maximum Mortgage Rate or lower than
the Minimum Mortgage Rate (each as defined below). Substantially all of the Six
Month LIBOR Loans were originated with Mortgage Rates less than the sum of the
then applicable Mortgage Index and the related Gross Margin. Substantially all
of the Six Month LIBOR Loans will provide that over the life of each such
Adjustable Rate Mortgage Loan the Mortgage Rate will in no event be more than
the initial Mortgage Rate plus ____% (such sum, the "Maximum Mortgage Rate").
Substantially all of the Six Month LIBOR Loans provide that in no event will the
Mortgage Rate for each such Six Month LIBOR Loan be less than the initial
Mortgage Rate (such rate, the "Minimum Mortgage Rate"). Effective with the first
payment due on a Adjustable Rate Mortgage Loan after each related Adjustment
Date, the monthly payment will be adjusted to an amount which will fully
amortize the outstanding principal balance of the Mortgage Loan over its
remaining term.]
[Approximately ____% of the Adjustable Rate Mortgage Loans as of the
Cut-off Date (the "1/29 Loans"), bear interest at a fixed rate for a period of
one year after origination and thereafter have semiannual interest rate and
payment adjustments at frequencies and in substantially the same manner as the
Six-Month LIBOR Loans. Substantially all of the 1/29 Loans are subject to a
____% Periodic Rate Cap with respect to the first Adjustment Date and a ____%
Periodic Rate Cap with respect to each Adjustment Date thereafter, and have a
Maximum Mortgage Rate equal to the initial Mortgage Rate plus ____%.]
[Approximately _____% of the Adjustable Rate Mortgage Loans as of the
Cut-off Date (the "2/28 Loans"), bear interest at a fixed rate of interest for a
period of two years after origination and thereafter have semiannual interest
rate and payment adjustments at frequencies and in substantially the same manner
as the Six-Month LIBOR Loans. Substantially all of the 2/28 Loans are subject to
a ____% Periodic Rate Cap with respect to the first Adjustment Date and a ____%
Periodic Rate Cap with respect to each Adjustment Date thereafter, and have a
Maximum Mortgage Rate equal to the initial Mortgage Rate plus ____%.]
[Approximately _____% of the Adjustable Rate Mortgage Loans as of the
Cut-off Date (the "3/27 Loans"), bear interest at a fixed rate of interest for a
period of three years after origination and thereafter have semiannual interest
rate and payment adjustments at frequencies and in substantially the same manner
as the Six-Month LIBOR Loans. Substantially all of the 3/27 Loans are subject to
a ____% Periodic Rate Cap with respect to the first Adjustment Date and a ____%
Periodic Rate Cap with respect to each Adjustment Date thereafter, and have a
Maximum Mortgage Rate equal to the initial Mortgage Rate plus ____%.]
[Approximately ____% of the Adjustable Rate Mortgage Loans as of the
Cut-off Date (the "5/25 Loans"), bear interest at a fixed rate for a period of
five years after origination and thereafter have semiannual interest rate and
payment adjustments at frequencies and in substantially the same manner as the
S-22
<PAGE>
Six-Month LIBOR Loans. Substantially all of the 5/25 Loans are subject to a
____% Periodic Rate Cap with respect to the first Adjustment Date and a ____%
Periodic Rate Cap with respect to each Adjustment Date thereafter, and have a
Maximum Mortgage Rate equal to the initial Mortgage Rate plus ____%.]
Fixed Rate Mortgage Loan Group. As of the Cut-off Date, the aggregate
principal balance of the Fixed Rate Mortgage Loans was approximately
$___________. As of the Cut-off Date, the average outstanding principal balance
of the Fixed Rate Mortgage Loans was approximately $______, the minimum
outstanding principal balance was approximately $_____, the maximum outstanding
principal balance was approximately $_______, the lowest Mortgage Rate and the
highest Mortgage Rate were _____% and ______% per annum, respectively, and the
weighted average Mortgage Rate was approximately _____% per annum. Approximately
_____% of the Fixed Rate Mortgage Loans (each, a "Balloon Loan") have original
terms to stated maturity of approximately 15 years and provide for level monthly
payments based on a 30-year amortization schedule with a balloon payment of the
remaining outstanding principal balance (a "Balloon Amount") due on each such
Mortgage Loan at its stated maturity.
Adjustable Rate Mortgage Loan Group. As of the Cut-off Date, the
aggregate principal balance of the Adjustable Rate Mortgage Loans is
approximately $___________. As of the Cut-off Date the average outstanding
principal balance of the Adjustable Rate Mortgage Loans was approximately
$_______, the minimum outstanding principal balance was approximately $______,
the maximum outstanding principal balance was approximately $_______, the lowest
current Mortgage Rate and the highest current Mortgage Rate were approximately
_____% and ______% per annum, respectively, and the weighted average Mortgage
Rate was approximately _____% per annum.
The "Loan-to-Value Ratio" of a Mortgage Loan is equal to (i) the
principal balance of such Mortgage Loan at the date of origination, divided by
(ii) the Collateral Value of the related Mortgaged Property. The "Collateral
Value" of a Mortgaged Property is the lesser of (x) the appraised value based on
an appraisal made for the Seller by an independent fee appraiser at the time of
the origination of the related Mortgage Loan, and (y) the sales price of such
Mortgaged Property at such time of origination. With respect to a Mortgage Loan
the proceeds of which were used to refinance an existing mortgage loan, the
"Collateral Value" is the appraised value of the Mortgaged Property based upon
the appraisal obtained at the time of refinancing. The weighted average
Loan-to-Value Ratio as of the Cut-off Date for the Fixed Rate Mortgage Loans was
approximately _____% and the weighted average Loan-to-Value Ratio as of the
Cut-off Date for the Adjustable Rate Mortgage Loans was approximately _____%.
Approximately ____% of the Mortgage Loans were contractually delinquent
for thirty or more days as of the Cut-off Date.
S-23
<PAGE>
Mortgage Loans
The following tables describe the Mortgage Loans and the related
Mortgaged Properties as of the close of business on the Cut-off Date. The sum of
the columns below may not equal the total indicated due to rounding.
FIXED RATE LOAN GROUP
Mortgage Rates for the Fixed Rate Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Range of Mortgage Rates Mortgage Loans Balance Outstanding Loan Group
- ----------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------------- ---------------- --------
================ ================ ========
</TABLE>
- -----------
(1) As of the Cut-off Date, the Mortgage Rates borne by the Fixed Rate
Mortgage Loans ranged from ______% per annum to ______% per annum and
the weighted average Mortgage Rate of the Fixed Rate Mortgage Loans was
approximately _____% per annum.
S-24
<PAGE>
Remaining Months to Stated Maturity for the Fixed Rate Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Remaining Term Mortgage Loans Balance Outstanding Loan Group
- -------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ---------- ------
========== ========== ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the remaining terms to stated maturity of the
Fixed Rate Mortgage Loans ranged from ___ months to ___ months and the
weighted average remaining term to stated maturity of the Fixed Rate
Mortgage Loans was approximately ___ months.
Original Mortgage Loan Principal Balances for the Fixed Rate Mortgage Loan
Group(1)
<TABLE>
<CAPTION>
Range of Original Mortgage Number of Aggregate Principal Percent of
Loan Principal Balances Mortgage Loans Balance Outstanding Loan Group
- -------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the outstanding principal balances of the Fixed
Rate Mortgage Loans ranged from approximately $______ to approximately
$_______ and the average outstanding principal balance of the Fixed
Rate Mortgage Loans was approximately $______.
S-25
<PAGE>
State Distributions of Fixed Rate Mortgaged Properties(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
State Mortgage Loans Balance Outstanding Loan Group
- ----- -------------- ------------------- ----------
<S> <C> <C> <C>
$ %
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) No more than approximately _____% of the Fixed Rate Mortgage Loans will
be secured by Mortgaged Properties located in any one zip code area.
S-26
<PAGE>
Loan-to-Value Ratios for the Fixed Rate Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Range of Loan-to-Value Ratios Mortgage Loans Balance Outstanding Loan Group
- ----------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the Loan-to-Value Ratios of the Fixed Rate
Mortgage Loans ranged from ____% to _____% and the weighted average
Loan-to-Value Ratio of the Fixed Rate Mortgage Loans was approximately
_____%.
Loan Purpose for the Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Loan Purpose Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
S-27
<PAGE>
Type of Mortgaged Properties for the Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Property Type Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
Totals..........................
========== ============ ======
</TABLE>
Documentation Summary for the Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Documentation Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
Occupancy Types for the Fixed Rate Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Occupancy Type Mortgage Loans Balance Outstanding Loan Group
- -------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) Based upon representations of the related Mortgagor at the time of
origination.
S-28
<PAGE>
Mortgage Loan Age Summary for the Fixed Rate Mortgage Loan Group (1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Mortgage Loan Age (Months Mortgage Loans Balance Outstanding Loan Group
- ------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) The weighted average age of the Fixed Rate Mortgage Loans is approximately
__ months.
S-29
<PAGE>
Credit Grade Summary for the Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Credit Grade Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
Year of Origination for the Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Year of Origination Mortgage Loans Balance Outstanding Loan Group
- ------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
Prepayment Penalties for the Fixed Rate Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Prepayment Penalty Term Mortgage Loans Balance Outstanding Loan Group
- ----------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) The weighted average prepayment penalty term with respect to the Fixed
Rate Mortgage Loans having prepayment penalties is approximately __
months.
S-30
<PAGE>
ADJUSTABLE RATE LOAN GROUP
Current Mortgage Rates for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Range of Current Mortgage Rates Mortgage Loans Balance Outstanding Loan Group
- ------------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the current Mortgage Rates borne by the
Adjustable Rate Mortgage Loans ranged from _______% per annum to
______% per annum and the weighted average Mortgage Rate borne by the
Adjustable Rate Mortgage Loans was approximately _____% per annum.
Remaining Months to Stated Maturity for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Remaining Term Mortgage Loans Balance Outstanding Loan Group
- -------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the remaining terms to stated maturity of the
Adjustable Rate Mortgage Loans ranged from ___ months to ___ months and
the weighted average remaining term to stated maturity of the
Adjustable Rate Mortgage Loans was approximately ___ months.
S-31
<PAGE>
Original Mortgage Loan Principal Balances for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Range of Original Mortgage Loan Number of Aggregate Principal Percent of
Principal Balances Mortgage Loans Balance Outstanding Loan Group
- ------------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
Totals.........................
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the outstanding principal balances of the
Adjustable Rate Mortgage Loans ranged from approximately $_____ to
approximately $_______ and the average outstanding principal balance of
the Adjustable Rate Mortgage Loans was approximately $_______.
State Distributions of Adjustable Rate Mortgaged Properties (1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
State Mortgage Loans Balance Outstanding Loan Group
- ----- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) No more than approximately ____% of the Adjustable Rate Mortgage Loans
will be secured by Mortgaged Properties located in any one zip code
area.
S-32
<PAGE>
Loan-to-Value Ratios for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Range of Loan-to-Value Ratios Mortgage Loans Balance Outstanding Loan Group
- ----------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the Loan-to-Value Ratios of the Adjustable Rate
Mortgage Loans ranged from _____% to _____% and the weighted average
Loan-to-Value Ratio of the Adjustable Rate Mortgage Loans was
approximately _____%.
Loan Purpose for the Adjustable Rate
Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Loan Purpose Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
S-33
<PAGE>
Type of Mortgaged Properties for the Adjustable Rate
Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Property Type Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
Totals....................................
========== ============ ======
</TABLE>
Documentation Summary for the Adjustable Rate
Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Documentation Mortgage Loans Balance Outstanding Loan Group
- ------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
Occupancy Types for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Occupancy Type Mortgage Loans Balance Outstanding Loan Group
- -------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) Based upon representations of the related Mortgagor at the time of
origination.
S-34
<PAGE>
Mortgage Loan Age Summary for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Mortgage Loan Age (Months Mortgage Loans Balance Outstanding Loan Group
- ------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) The weighted average age of the Adjustable Rate Mortgage Loans is
approximately __ months.
Credit Grade Summary for the Adjustable Rate
Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Credit Grade Mortgage Loans Balance Outstanding Loan Group
- ------------ -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
S-35
<PAGE>
Year of Origination for the Adjustable Rate
Mortgage Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Year of Origination Mortgage Loans Balance Outstanding Loan Group
- ------------------- - -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
Prepayment Penalties for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Prepayment Penalty Term Mortgage Loans Balance Outstanding Loan Group
- ----------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) The weighted average prepayment penalty term with respect to the
Adjustable Rate Mortgage Loans having prepayment penalties is
approximately __ months.
S-36
<PAGE>
Maximum Mortgage Rates for the Adjustable Rate
Mortgage Loan Group(1)
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Range of Maximum Mortgage Rates Mortgage Loans Balance Outstanding Loan Group
- ------------------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
- -----------
(1) As of the Cut-off Date, the Maximum Mortgage Rates for the Adjustable
Rate Mortgage Loans ranged from ______% per annum to ______% per annum
and the weighted average Maximum Mortgage Rate for the Adjustable Rate
Mortgage Loans was ______% per annum.
Next Adjustment Date for the Adjustable Rate Mortgage
Loan Group
<TABLE>
<CAPTION>
Number of Aggregate Principal Percent of
Next Adjustment Date Mortgage Loans Balance Outstanding Loan Group
- -------------------- -------------- ------------------- ----------
<S> <C> <C> <C>
---------- ------------ ------
========== ============ ======
</TABLE>
Assignment of the Mortgage Loans
The Depositor will cause the Mortgage Loans to be assigned to the
Trustee, together with the rights to all principal and interest due on or with
respect to the Mortgage Loans after the Cut-off Date other than interest accrued
on the Mortgage Loans prior to the Cut-off Date. The Chase Manhattan Bank, as
authenticating agent, will, concurrently with such assignment, authenticate and
deliver the Certificates. Each Mortgage Loan will be identified in a schedule
appearing as an exhibit to the Pooling and Servicing Agreement (the "Mortgage
Loan Schedule"). The Mortgage Loan Schedule will specify, among other things,
S-37
<PAGE>
with respect to each Mortgage Loan, the original principal balance and the
unpaid principal balance as of the close of business on the Cut-off Date; the
Monthly Payment; the months remaining to stated maturity of the Mortgage Note;
and the Mortgage Rate.
In addition, the Depositor will, as to each Mortgage Loan, deliver or
cause to be delivered to the Trustee the Mortgage Note (together with all
amendments and modifications thereto) endorsed without recourse to the Trustee
or its designee, the original or a certified copy of the mortgage (together with
all amendments and modifications thereto) with evidence of recording indicated
thereon and an original or certified copy of an assignment of the Mortgage in
recordable form. The Depositor will cause the assignments to be recorded in the
appropriate public records.
Representations and Warranties
The Depositor will make certain representations and warranties for the
benefit of the Trustee with respect to the Mortgage Loans as described in the
Prospectus under "The Trust Fund-The Mortgage Pools" and will be obligated to
repurchase any Mortgage Loan as to which there is a material breach of any such
representation or warranty. Such repurchase will constitute the sole remedy
available to Certificate Owners for a breach of such representations or
warranties. The Trustee will enforce the repurchase obligations of the
Depositor. In lieu of such repurchase obligation, the Depositor may, within two
years after the date of initial delivery of the Certificates, substitute for the
affected Mortgage Loans Substitute Mortgage Loans, as described under "The Trust
Fund-The Mortgage Pools" in the Prospectus.
S-38
<PAGE>
CHASE MANHATTAN MORTGAGE CORPORATION
Chase Manhattan Mortgage Corporation ("Chase Manhattan Mortgage") is a
New Jersey corporation, formed in 1920. It is a wholly-owned indirect subsidiary
of Chase Manhattan Bank USA, National Association. Chase Manhattan Mortgage is
engaged in the mortgage origination and servicing businesses. Chase Manhattan
Mortgage is a HUD-approved mortgagee. Chase Manhattan Mortgage is subject to
supervision, examination and regulation by the Office of the Comptroller of the
Currency and various state regulatory bodies. The address of Chase Manhattan
Mortgage is 343 Thornall Street, Edison, New Jersey 08837 and its telephone
number is (732) 205-0600. Chase Manhattan Mortgage makes loans in all 50 states
primarily for the purpose of enabling borrowers to purchase or refinance
residential real property, secured by first liens on such property. Chase
Manhattan Mortgage's real estate loans primarily are made to homeowners based on
the security of one- to four-family residences.
Underwriting Standards
B&C Quality Mortgage Loans. The following is a description of the
underwriting procedures customarily employed by Chase Manhattan Mortgage with
respect to B&C quality mortgage loans (the "B&C Underwriting Guidelines"). Prior
to the funding of any B&C quality mortgage loan, Chase Manhattan Mortgage
underwrites the related mortgage loan in accordance with the underwriting
standards established by Chase Manhattan Mortgage.
The B&C Underwriting Guidelines consider the value and adequacy of the
mortgaged property as collateral for the proposed mortgage loan but also take
into consideration the borrower's credit standing and repayment ability. On a
case by case basis, Chase Manhattan Mortgage may determine that, based upon
compensating factors, a prospective borrower not strictly qualifying under the
underwriting risk category guidelines described below warrants an underwriting
exception. Compensating factors may include, without limitation, relatively low
loan-to-value ratio, relatively low debt-to-income ratio, stable employment and
time in the same residence. It is expected that a significant number of the
Mortgage Loans underwritten in accordance with the B&C Underwriting Guidelines
will have been originated based on such underwriting exceptions.
The B&C Underwriting Guidelines permit loans with loan-to-value ratios
at origination of up to 95%, depending on among other things, the program, type
and use of the property, creditworthiness of the borrower and debt-to-income
ratio.
Chase Manhattan Mortgage requires title insurance on all B&C quality
mortgage loans secured by liens on real property. Chase Manhattan Mortgage also
requires that fire and hazard insurance coverage be maintained on the mortgaged
property in an amount at least equal to the principal balance or the replacement
cost of the mortgaged property, whichever is less. Flood insurance is also
required for any mortgage loan with respect to which the related mortgaged
property is located in either flood zone "A" or "V" as determined by the Federal
Emergency Management Agency.
The B&C Underwriting Guidelines are less stringent than the standards
generally acceptable to FNMA and FHLMC with regard to the borrower's credit
standing and repayment ability. Borrowers who qualify generally would not
satisfy FNMA and FHLMC underwriting guidelines for any number of reasons,
including, without limitation, unsatisfactory payment histories or
debt-to-income ratios, or a record of major derogatory credit items such as
outstanding judgments or prior bankruptcies.
Chase Manhattan Mortgage offers four types of income documentation
programs under the B&C Underwriting Guidelines: Full Documentation, 24 Month
Bank Statement, Reduced Documentation and Stated Income. In general, for
mortgage loans underwitten pursuant to the Full Documentation program,
S-39
<PAGE>
Chase Manhattan Mortgage verifies income and assets through alternate
documentation or written third party verifications. The 24 Month Bank Statement
program utilizes the last 24 months of bank statements to support income. In
general, this documentation type is available to AO, A-, B and B- credit grades.
In general, the Reduced Documentation program is available for AO through D
credit grades in the case of self-employed borrowers and AO, A- and B credit
grades in the case of salaried borrowers. Under the Reduced Documentation
program, the maximum loan-to-value ratio for salaried borrowers is 70%, and
asset verification for source of down payment is required if the loan-to-value
ratio is 70% or greater. In general, the Stated Income program is a no income/no
asset (except that asset verification is required if the loan-to-value ratio is
70% or greater) program for credit grades AO through C, in the case of
self-employed borrowers, and for credit grades AO, A- and B, in the case of
salaried borrowers. The maximum loan-to-value for salaried borrowers is 70%.
Income from the application as stated by the borrower is used to qualify.
The B&C Underwriting Guidelines utilize various credit grade categories
to grade the likelihood that the mortgagor will satisfy the repayment conditions
of the mortgage loan. These credit grade categories establish the maximum
permitted loan-to-value ratio, debt-to-income ratio and loan amount, given the
borrower's credit history considered in a manner generally consistent with
subprime mortgage industry practice, the occupancy status of the mortgaged
property, the type of mortgaged property and documentation type. A summary of
such categories is set forth below.
Credit Grade Category: "AO"
Debt-to-Income Ratio: Maximum of 45%
Mortgage History: No delinquencies of 30 days or more during the
previous 12 months; no more than one such delinquency during the
previous 24 months.
Consumer/Revolving Credit History: No more than one delinquency (in the
case of "major" credit) or two delinquencies (in the case of "minor"
credit) during the previous 12 months; provided that no such
delinquencies may have exceeded 59 days; no more than two ("major"
credit) or three ("minor" credit) such delinquencies during the
previous 24 months ("major" credit being defined as installment debt
with monthly payments over $100 and revolving accounts with credit
limits over $2,500).
Collections/Chargeoffs: All in previous 36 months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over three years from the
date of application; substantial re-establishment of credit required.
Credit Grade Category: "A-"
Debt-to-Income Ratio: Maximum of 45%
Mortgage History: No more than two delinquencies of 30 days or more
during the previous 12 months; provided that no such delinquencies may
have exceeded 59 days.
S-40
<PAGE>
Consumer/Revolving Credit History: No delinquencies of 60 days or more
during the previous 12 months (during the case of "major" credit) or no
delinquencies of 90 days or more during the previous 12 months (in the
case of "minor" credit).
Collections/Chargeoffs: All except for up to $1,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over two years from the date
of application (or three years, if the loan-to-value ratio exceeds
85%); substantial re-establishment of credit required.
Credit Grade Category: "B"
Debt-to-Income Ratio: Maximum of 50%
Mortgage History: No more than three delinquencies of 30 days or more
during the previous 12 months; provided that no such delinquencies may
have exceeded 59 days.
Consumer/Revolving Credit History: No delinquencies of 90 days or more
during the previous 12 months (in the case of "major" credit) and no
delinquencies of 120 days or more during the previous 12 months (in the
case of "minor" credit).
Collections/Chargeoffs: All except for up to $2,500 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over eighteen months from
the date of application; substantial re-establishment of credit
required.
Credit Grade Category: "B-"
Debt-to-Income Ratio: Maximum of 50%
Mortgage History: No more than four delinquencies of 30 days or more
during the previous 12 months, provided that no such delinquency may
have exceeded 59 days; and no more than one delinquency of 60 days or
more during the previous 12 months, provided that no such delinquency
may have exceeded 89 days.
Consumer/Revolving Credit History: No delinquencies of 90 days or more
during the previous 12 months (in the case of "major" credit) and no
delinquencies of 120 days or more during the previous 12 months (in the
case of "minor" credit).
Collections/Chargeoffs: All except for up to $2,500 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over eighteen months from
the date of application; substantial re-establishment of credit
required.
S-41
<PAGE>
Credit Grade Category: "C"
Debt-to-Income Ratio: Maximum of 55%
Mortgage History: No more than five delinquencies of 30 days or more
during the previous 12 months, provided that no such delinquency may
have exceeded 59 days; and no more than two delinquencies of 60 days or
more during the previous 12 months, provided that no such delinquency
may have exceeded 89 days; and no more than one delinquency of 90 days
or more during the previous 12 months, provided that; such delinquency
may not have exceeded 119 days.
Consumer/Revolving Credit History: No delinquencies of 120 days or more
on any "major" credit during the previous 12 months.
Collections/Chargeoffs: All except for up to $5,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Must be discharged over one year from date of
application; substantial re-establishment of credit required.
Credit Grade Category: "C-"
Debt-to-Income Ratio: Maximum of 55%
Mortgage History: Borrower cannot be more than four months delinquent
at time of loan closing.
Consumer/Revolving Credit History: Borrower exhibits significant past
or present credit problems.
Collections/Chargeoffs: All except for up to $5,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Chapter 13 and foreclosures must be discharged
or consummated prior to loan application. Chapter 7 must be discharged
or consummated over one year from date of application.
Credit Grade Category: "D"
Debt-to-Income Ratio: Maximum of 60%
Mortgage History: History disregarded; default action allowable.
Consumer/Revolving Credit History: "Major" and "minor" credit
disregarded.
Collections/Chargeoffs: All except for up to $5,000 in previous 36
months must be satisfied.
Bankruptcy/Foreclosure: Current Chapter 13 bankruptcy and foreclosures
paid through loan. Chapter 7 bankruptcy must be discharged prior to
loan application.
S-42
<PAGE>
SERVICING OF THE MORTGAGE LOANS
General
The Subservicer will service the Mortgage Loans in accordance with the
terms set forth in the Pooling and Servicing Agreement. The Subservicer may
perform any of its obligations under the Pooling and Servicing Agreement through
one or more subservicers. Notwithstanding any such subservicing arrangement, the
Subservicer will remain liable for its servicing duties and obligations under
the Pooling and Servicing Agreement as if the Subservicer alone were servicing
the Mortgage Loans.
The Subservicer
The information set forth below concerning the Subservicer has been
provided to the Depositor by the Subservicer. Neither the Depositor, the Seller,
the Trustee, the Underwriters nor any of their respective affiliates have made
any independent investigation of such information.
Advanta
Advanta Mortgage Corp. USA ("Advanta") will act as the Subservicer of
the Mortgage Loans pursuant to the Pooling and Servicing Agreement. Advanta is
an indirect subsidiary of Advanta Corp., a Delaware corporation ("Advanta
Parent"), a publicly traded company based in Springhouse, Pennsylvania with
assets as of June 30, 1998 of approximately $3.1 billion.
Advanta Parent, through its subsidiaries (including Advanta) had
managed assets (including mortgage loans) in excess of $____ billion as of
[DATE].
On October 28, 1997, Advanta Parent announced that it had reached a
definitive agreement under which Fleet Financial Group, Inc. ("Fleet") would
acquire Advanta Parent's consumer credit card business and would combine it with
Fleet's consumer credit card business (the "Transaction"). On February 20, 1998,
a special meeting of stockholders of Advanta Parent was held whereby the
stockholders approved the Transaction with Fleet. The Transaction was completed
on the same day. In addition, Advanta Parent completed its cash tender offer
(the "Tender Offer") to purchase approximately $850 million of its Class A and
Class B common stock at $40 per share net, and its Stock Appreciation Income
Linked Securities Depositary shares at $32.80 per share net. The Tender Offer
commenced on January 20, 1998 and expired at 12:00 midnight, New York City time
on February 20, 1998. Advanta Parent continues to operate its mortgage and
business services companies, including Advanta.
The ability of Advanta Parent's subsidiaries to honor their financial
and other obligations is to some extent influenced by the financial conditions
of Advanta Parent. Such obligations of Advanta, insofar as they relate to the
Trust with respect to the Mortgage Loans, primarily consist of Advanta's limited
advancing obligation and its obligation to service the Mortgage Loans.
As of [DATE], Advanta and its subsidiaries were servicing approximately
______ mortgage loans in the Owned and Managed Servicing Portfolio representing
an aggregate outstanding principal balance of approximately $___ billion, and
approximately _______ mortgage loans in the Third-Party Servicing Portfolio
representing an aggregate outstanding principal balance of approximately $__
billion.
The Certificates will not represent an interest in or obligation of,
nor are the Mortgage Loans guaranteed by, Advanta or the Advanta Parent.
Additional information with respect to Advanta and Advanta Parent is available
in the various reports filed by Advanta and Advanta Parent with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended.
S-43
<PAGE>
Owned and Managed Servicing Portfolio. The following tables set forth
information relating to the delinquency, loan loss and foreclosure experience of
Advanta for its servicing portfolio, excluding certain loans serviced by Advanta
that were not originated or purchased and are underwritten by affiliates of
Advanta (the "Owned and Managed Servicing Portfolio"), of fixed and adjustable
rate mortgage loans as of June 30, 1998, and for each of the four prior years
ended December 31. In addition to the Owned and Managed Servicing Portfolio,
Advanta serviced as of June 30, 1998, approximately 127,000 mortgage loans with
an aggregate principal balance as of such date of approximately $8.2 billion;
such loans were not originated by Advanta or affiliates of Advanta and are being
serviced for third parties on a contract servicing basis (the "Third Party
Servicing Portfolio"). No loans in the Third Party Servicing Portfolio are
included in the tables set forth below.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF
ADVANTA'S OWNED AND MANAGED SERVICING PORTFOLIO
OF MORTGAGE LOANS
(Dollars in Thousands)
<TABLE>
<CAPTION>
By By By By By
By No. Dollar By No. Dollar By No. Dollar By Dollar By No. Dollar
of Amount of Amount of Amount No. of Amount of Amount
Loans of Loans Loans of Loans Loans of Loans Loans of Loans Loans of Loans
----- -------- ----- -------- ----- -------- ----- -------- ----- --------
1994 1995 1996 1997 1998
-------------------- ----------------- ------------------ ------------------ ------------------
Six Months Ending
Year Ending December 31, June 30,
------------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio........... 26,446 $1,346,100 32,592 $1,797,582 43,303 $2,595,981 74,525 $4,888,936 91,746 $6,162,373
Delinquency
percentage(1)
30-59 days.......... 2.01% 1.57% 2.67% 2.44% 3.07% 2.90% 3.13% 2.99% 2.56% 2.36%
60-89 days.......... 0.57 0.45% 0.72 0.71 0.85 0.90 0.98 0.98 0.84 0.81
90 days or more..... 1.85 1.51 1.69 1.23 1.45 1.26 1.39 1.28 1.48 1.42
------ --------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
Total............... 4.43% 3.53% 5.08% 4.38% 5.37% 5.06% 5.50% 5.25% 4.88% 4.59%
Foreclosure rate(2). 1.35% 1.38% 1.29% 1.53% 1.62% 1.92% 2.10% 2.32% 2.15% 2.31%
REO properties(3)... 0.47% - 0.52% - 0.42% - 0.40% - 0.70% -
</TABLE>
- -----------
(1) The period of delinquency is based on the number of days payments are
contractually past due. The delinquency statistics for the period
exclude loans in foreclosure.
(2) "Foreclosure Rate" is the number of mortgage loans or the dollar amount
of mortgage loans in foreclosure as a percentage of the total number of
mortgage loans or the dollar amount of mortgage loans, as the cases may
be, as of the date indicated.
(3) REO Properties (i.e., "real estate owned" properties-properties
relating to mortgages foreclosed or for which deeds in lieu of
foreclosure have been accepted, and held by Advanta pending
disposition) percentages are calculated using the number of loans, not
the dollar amount.
S-44
<PAGE>
LOAN LOSS EXPERIENCE
OF ADVANTA'S OWNED AND MANAGED SERVICING PORTFOLIO
OF MORTGAGE LOANS*
<TABLE>
<CAPTION>
Year Ending December 31,
-------------------------------------------------------
Six Months Ending
June 30,
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Average amount outstanding(1).......... $1,225,529 $1,540,238 $2,102,643 $3,677,342 $5,501,780
Gross losses(2)........................ $20,886 $13,978 $15,184 $18,897 $14,361
Recoveries(3).......................... $179 $148 $117 $45 $40
Net losses(4).......................... $20,707 $13,830 $15,067 $18,852 $14,321
Net losses as a percentage of average
amount outstanding(s)(5)............ 1.69% 0.90% 0.72% 0.51% 0.52%
</TABLE>
- -----------
(1) "Average Amount Outstanding" during the period is the arithmetic
average of the principal balances of the mortgage loans outstanding on
the last business day of each month during the period.
(2) "Gross Losses" are amounts which have been determined to be
uncollectible relating to mortgage loans for each respective period.
(3) "Recoveries" are recoveries from liquidation proceeds and deficiency
judgments.
(4) "Net Losses" represents "Gross Losses" minus "Recoveries."
(5) June 30, 1998 percentage has been based on annualized net losses.
Advanta experienced an increase in the net loss rate on its Owned and
Managed Servicing Portfolio during the period 1990 through 1994. It believes
that such increase was due to four primary factors; the seasoning of its
portfolio, economic conditions, a decline in property values in certain regions
and the acceleration of charge-offs on loans in 1994. In addition, the level of
net losses during such period was negatively impacted by the performance of the
Non-Income Verification ("NIV") loan program. The net loss rate as a percentage
of the average amount outstanding on its Owned and Managed Servicing Portfolio,
excluding NIV loans, is 1.42% for the period ending December 31, 1994.
Collection Procedures. Advanta employs a variety of collection
techniques during the various stages of delinquency. The primary purpose of all
collection efforts performed by Advanta is to bring a delinquent mortgage loan
current in as short a time as possible. Phone calls are used as the principal
form of contacting a mortgagor. Advanta utilizes a predictive dialing system for
the effective management of collection calling activity. Prior to initiating
foreclosure proceedings, Advanta makes every reasonable effort to determine the
reason for the default; whether the delinquency is a temporary or permanent
condition; and the mortgagor's attitude toward the obligation. Advanta will take
action to foreclose a mortgage only once every reasonable effort to cure the
default has been made and a projection of the ultimate gain or loss on REO sale
is determined. Foreclosures are processed within individual state guidelines and
in accordance with the provisions of the mortgage and applicable state law.
Servicing Compensation and Payment of Expenses
The Subservicer will be paid a monthly fee from interest collected with
respect to each Mortgage Loan (as well as from any liquidation proceeds from a
Liquidated Mortgage Loan that are applied to accrued and unpaid interest) equal
to the Stated Principal Balance thereof multiplied by one-twelfth of the
Servicing Fee Rate (such product, the "Servicing Fee"). The "Servicing Fee Rate"
for each Mortgage Loan will equal _____% per annum. The amount of the monthly
Servicing Fee is subject to adjustment with respect to prepaid Mortgage Loans,
as described herein under "-Adjustment to Servicing Fee in Connection with
S-45
<PAGE>
Certain Prepaid Mortgage Loans." The Subservicer is also entitled to receive, as
additional servicing compensation, all assumption fees and other similar charges
and all investment income earned on amounts on deposit in the Collection
Account. The Subservicer is obligated to pay certain ongoing expenses associated
with the Mortgage Loans in connection with its responsibilities under the
Pooling and Servicing Agreement.
Adjustment to Servicing Fee in Connection with Certain Prepaid Mortgage Loans
When a Mortgagor prepays all or a portion of a Mortgage Loan between
scheduled monthly payment dates ("Due Dates"), the Mortgagor pays interest on
the amount prepaid only to the date of prepayment. Prepayments received during
the prior Due Period (defined herein) are included in the distribution to
Certificate Owners on the Distribution Date thereby causing a shortfall in
interest. In order to mitigate the effect of any such shortfall in interest
distributions to Certificate Owners on any Distribution Date, the amount of the
Servicing Fee otherwise payable to the Subservicer for such month shall, to the
extent of such shortfall, be deposited by the Subservicer in the Collection
Account for distribution to the Certificate Owners on such Distribution Date
(the amount of such deposit, "Compensating Interest"). However, any such
reduction in the Servicing Fee will be limited to the product of (i) one-twelfth
of ____% and (ii) the aggregate outstanding principal balance of the Mortgage
Loans with respect to the related Distribution Date. Any such deposit by the
related Subservicer will be reflected in the distributions to the Owners of the
Certificates made on the Distribution Date to which such Due Period relates. Any
such shortfall in excess of Compensating Interest (such excess, the "Prepayment
Interest Shortfall") will be allocated on such Distribution Date pro rata among
the outstanding Classes of Certificates based upon the amount of interest each
such Class would otherwise be paid on such Distribution Date.
Advances
Subject to the following limitations, on the Business Day prior to each
Servicer Remittance Date, the Subservicer will be required to advance its own
funds, or funds in the Collection Account that are not required to be
distributed on the related Distribution Date, in an amount equal to the
aggregate of payments of principal and interest on the Mortgage Loans (adjusted
to the applicable Net Mortgage Rate) that were due on the related Due Date and
delinquent on the related Servicer Remittance Date, together with an amount
equivalent to interest (adjusted to the applicable Net Mortgage Rate) deemed due
on each Mortgage Loan as to which the related Mortgaged Property has been
acquired by the Subservicer through foreclosure or deed-in-lieu of foreclosure
in connection with a defaulted Mortgage Loan ("REO Property"), such latter
amount to be calculated after taking into account any rental income from such
Mortgaged Property (any such advance, an "Advance", and the date of any such
Advance, as described herein, a "Servicer Advance Date").
Advances are intended to maintain a regular flow of scheduled interest
and principal payments on the Offered Certificates rather than to guarantee or
insure against losses. The Subservicer is obligated to make Advances with
respect to delinquent payments of principal of or interest on each Mortgage Loan
(with such payments of interest adjusted to the related Net Mortgage Rate) to
the extent that such Advances are, in its judgment, reasonably recoverable from
future payments and collections or insurance payments or proceeds of liquidation
of the related Mortgage Loan; provided, however, that the Subservicer need not
make Advances with respect to the principal portion of any Balloon Amount but
the Subservicer will be required to Advance amortizing interest on a Balloon
Loan until the principal balance thereof is reduced to zero. If the Subservicer
determines on any Servicer Remittance Date to make an Advance, such Advance will
be included with the distribution to holders of the Offered Certificates on the
related Distribution Date. Any failure by the Subservicer to make an Advance as
required under the Pooling and Servicing Agreement will constitute an event of
default thereunder, in which case the Trustee, as successor servicer, or such
other entity as may be appointed as successor servicer, will be obligated to
make any such Advance in accordance with the terms of the Pooling and Servicing
Agreement.
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<PAGE>
Master Servicer
Chase Manhattan Mortgage will act as "Master Servicer." The Master
Servicer will (a) provide certain administrative services and file certain
reports with regard to the Certificates, (b) provide certain reports to the
Trustee regarding the Mortgage Loans and the Certificates and (c) receive
payments with respect to the Mortgage Loans from the Subservicer and, in its
capacity as paying agent for the Certificates, remit such payments to the
Certificateholders as described herein. The Master Servicer will pay certain
administrative expenses of the Trust including the fees of the Trustee. The
Master Servicer will be entitled to a monthly "Master Servicer Fee" with respect
to each Mortgage Loan, payable on each Remittance Date, in an amount equal to
the sum of (i) one-twelfth of the Master Servicer Fee Rate multiplied by the
principal balance of such Mortgage Loan and (ii) all late payment fees and
prepayment penalties and all investment income earned on funds in the
Certificate Account and the Distribution Account. The "Master Servicer Fee Rate"
is ______% per annum.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement. A copy of the Pooling and Servicing Agreement will be attached as an
exhibit to the Current Report on Form 8-K of the Depositor that will be
available to purchasers of the Certificates at, and will be filed with the
Securities and Exchange Commission within 15 days of, the initial delivery of
the Certificates. Reference is made to the Prospectus for additional information
regarding the terms and conditions of the Pooling and Servicing Agreement.
The following summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Pooling and Servicing Agreement. When particular provisions or terms used in the
Pooling and Servicing Agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference.
The Chase Funding Mortgage Loan Asset-Backed Certificates, Series
[DATE] (the "Certificates") will consist of: (a) the Class IA-1, Class IA-2,
Class IA-3, Class IA-4, Class IA-5 and Class IA-6 Certificates (collectively,
the "Class A Group I Certificates"), the Class IM-1 Certificates (the "Class
IM-1 Certificates") and Class IM-2 Certificates (the "Class IM-2 Certificates"
and together with the Class IM-1 Certificates, the "Mezzanine Group I
Certificates") and the Class IB Certificates (the "Class IB Certificates" and
together with the Mezzanine Group I Certificates, the "Subordinated Group I
Certificates" and the Subordinated Group I Certificates together with the Class
A Group I Certificates, the "Group I Certificates"); (b) the Class IIA-1 and
Class IIA-2 Certificates (together, the "Class A Group II Certificates" and
together with the Class A Group I Certificates, the "Class A Certificates"), the
Class IIM-1 Certificates (the "Class IIM-1 Certificates" and together with the
Class IM-1 Certificates, the "Class M-1 Certificates") and Class IIM-2
Certificates (the "Class IIM-2 Certificates" and together with the Class IIM-1
Certificates, the "Mezzanine Group II Certificates" and together with the IM-2
Certificates, the "Class M-2 Certificates") and the Class IIB Certificates (the
"Class IIB Certificates" and together with the Mezzanine Group II Certificates,
the "Subordinated Group II Certificates" and together with the Class IB
Certificates, the "Class B Certificates", and the Subordinated Group II
Certificates together with the Class A Group II Certificates, the "Group II
Certificates"); and (c) the Class R Certificates (the "Residual Certificates").
The Mezzanine Group I Certificates and the Mezzanine Group II Certificates are
referred to collectively as the "Mezzanine Certificates". The Subordinated Group
I Certificates and the Subordinated Group II Certificates are referred to
collectively as the "Subordinated Certificates." The Group I Certificates and
the Group II Certificates are referred to as the "Offered Certificates". As used
herein, a "Certificate Group" is either the Group I Certificates or the Group II
Certificates, as the context requires.
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The Offered Certificates will be issued in book-entry form as described
below. The Offered Certificates will be issued in minimum dollar denominations
of [$25,000] and integral multiples of $1,000 in excess thereof.
Book-Entry Certificates
The Offered Certificates will be book-entry Certificates (the
"Book-Entry Certificates"). Persons acquiring beneficial ownership interests in
the Offered Certificates ("Certificate Owners") may elect to hold their Offered
Certificates through the Depository Trust Company ("DTC") in the United States,
or CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
Book-Entry Certificates will be issued in one or more certificates which equal
the aggregate principal balance of the Offered Certificates and will initially
be registered in the name of Cede & Co. ("Cede"), the nominee of DTC. CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and Euroclear's names on the books of
their respective depositaries which in turn will hold such positions in
customers' securities accounts in the depositaries' names on the books of DTC.
Citibank will act as depositary for CEDEL and Chase will act as depositary for
Euroclear (in such capacities, individually the "Relevant Depositary" and
collectively the "European Depositaries"). Investors may hold such beneficial
interests in the Book-Entry Certificates in minimum denominations representing
Certificate Principal Balances of [$25,000] and integral multiples of $1,000 in
excess thereof. Except as described below, no person acquiring a Book-Entry
Certificate (each, a "beneficial owner") will be entitled to receive a physical
certificate representing such Offered Certificate (a "Definitive Certificate").
Unless and until Definitive Certificates are issued, it is anticipated that the
only Certificateholder of the Offered Certificates will be Cede & Co., as
nominee of DTC. Certificate Owners will not be Certificateholders as that term
is used in the Pooling and Servicing Agreement. Certificate Owners are only
permitted to exercise their rights indirectly through the participating
organizations that utilize the services of DTC, including securities brokers and
dealers, banks and trust companies and clearing corporations and certain other
organizations ("Participants") and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant and on
the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Offered Certificates from the Trustee through DTC and DTC
participants. While the Offered Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Offered Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Participants and organizations which have indirect access to the DTC system,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"), with whom Certificate Owners have accounts
with respect to Offered Certificates are similarly required to make book-entry
transfers and receive and transmit such distributions on behalf of their
respective Certificate Owners. Accordingly, although Certificate Owners will not
possess certificates, the Rules provide a mechanism by which Certificate Owners
will receive distributions and will be able to transfer their interest.
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Certificate Owners will not receive or be entitled to receive
certificates representing their respective interests in the Offered
Certificates, except under the limited circumstances described below. Unless and
until Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Offered Certificates only through
Participants and Indirect Participants by instructing such Participants and
Indirect Participants to transfer Offered Certificates, by book-entry transfer,
through DTC for the account of the purchasers of such Offered Certificates,
which account is maintained with their respective Participants. Under the Rules
and in accordance with DTC's normal procedures, transfers of ownership of
Offered Certificates will be executed through DTC and the accounts of the
respective Participants at DTC will be debited and credited. Similarly, the
Participants and Indirect Participants will make debits or credits, as the case
may be, on their records on behalf of the selling and purchasing Certificate
Owners.
Because of time zone differences, credits of securities received in
CEDEL, or Euroclear as a result of a transaction with a Participant will be made
during, subsequent securities settlement processing and dated the business day
following, the DTC settlement date. Such credits or any transactions in such
securities, settled during such processing will be reported to the relevant
Euroclear or CEDEL Participants on such business day. Cash received in CEDEL or
Euroclear, as a result of sales of securities by or through a CEDEL Participant
(as defined, below) or Euroclear Participant (as defined below) to a DTC
Participant, will be received with value on the DTC settlement date but will be
available in the relevant CEDEL or Euroclear cash account only as of the
business day following settlement in DTC. For information with respect to tax
documentation procedures, relating to the Offered Certificates, see "Federal
Income Tax Consequences-Taxation of Certain Foreign Investors" in the Prospectus
and "Global, Clearance, Settlement And Tax Documentation Procedures-Certain U.S.
Federal Income Tax Documentation Requirements" in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterpart in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company,
performs services for its participants, some of which (and/or their
representatives) own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each DTC participant in the Book-Entry
Certificates, whether held for its own account or as a nominee for another
person. In general, beneficial ownership of Book-Entry Certificates will be
subject to the rules, regulations and procedures governing DTC and DTC
participants as in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates.
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Transactions may be settled in CEDEL in any of 28 currencies, including United
States dollars. CEDEL provides to its CEDEL Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary Institute.
CEDEL participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to CEDEL
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable DTC participants
in accordance with DTC's normal procedures. Each DTC participant will be
responsible for disbursing such payments to the beneficial owners of the
Book-Entry Certificates that it represents and to each Financial Intermediary
for which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the Book-Entry Certificates
that it represents.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede. Distributions with respect to
Offered Certificates held through CEDEL or Euroclear will be credited to the
cash accounts of CEDEL Participants or Euroclear Participants in accordance with
the relevant system's rules
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and procedures, to the extent received by the Relevant Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Federal Income Tax
Consequences-Taxation of Certain Foreign Investors" and "-Backup Withholding" in
the Prospectus. Because DTC can only act on behalf of Financial Intermediaries,
the ability of a beneficial owner to pledge Book-Entry Certificates to persons
or entities that do not participate in the depository system, or otherwise take
actions in respect of such Book-Entry Certificates, may be limited due to the
lack of physical certificates for such Book-Entry Certificates. In addition,
issuance of the Book-Entry Certificates in book-entry form may reduce the
liquidity of such Offered Certificates in the secondary market since certain
potential investors may be unwilling to purchase Offered Certificates for which
they cannot obtain physical certificates.
Monthly and annual reports on the Trust Fund provided by the
Subservicer to Cede, as nominee of DTC, may be made available to beneficial
owners upon request, in accordance with the rules, regulations and procedures
creating and affecting DTC or the Relevant Depositary, and to the Financial
Intermediaries to whose DTC accounts the Book-Entry Certificates of such
beneficial owners are credited.
DTC has advised the Depositor and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Certificates under the Pooling and
Servicing Agreement only at the direction of one or more Financial
Intermediaries to whose DTC accounts the Book-Entry Certificates are credited,
to the extent that such actions are taken on behalf of Financial Intermediaries
whose holdings include such Book-Entry Certificates. CEDEL or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Holder of an Offered Certificate under the Pooling and Servicing Agreement
on behalf of a CEDEL Participant or Euroclear Participant only in accordance
with its relevant rules and procedures and subject to the ability of the
Relevant Depositary to effect such actions on its behalf through DTC. DTC may
take actions, at the direction of the related Participants, with respect to some
Offered Certificates which conflict with actions taken with respect to other
Offered Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC
or the Depositor advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depositary with respect to the Book-Entry Certificates and the Depositor or the
Trustee is unable to locate a qualified successor, (b) the Depositor at its sole
option, elects to terminate a book-entry system through DTC or (c) after the
occurrence of an Event of Default (as defined herein), beneficial owners having
not less than 51% of the Voting Rights (as defined herein) evidenced by the
Offered Certificates advise the Trustee and DTC through the Financial
Intermediaries and the DTC participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of beneficial owners of such Class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
holders of the Offered Certificates under the Pooling and Servicing Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
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Payments on Mortgage Loans; Collection Account;
Certificate Account; Distribution Account
The Pooling and Servicing Agreement provides that the Subservicer for
the benefit of the Certificateholders shall establish and maintain a Collection
Account (the "Collection Account"), into which the Subservicer is generally
required to deposit or cause to be deposited, promptly upon receipt and in any
event within two Business Days, the payments and collections described in
"Description of the Certificates-Certificates Evidencing Interests in Mortgage
Loans-Payments on Mortgage Loans" in the Prospectus, except that the Subservicer
may deduct its Servicing Fee and any expenses of liquidating defaulted Mortgage
Loans or property acquired in respect thereof. The Pooling and Servicing
Agreement permits the Master Servicer to direct any depository institution
maintaining the Collection Account to invest the funds in the Collection Account
in one or more investments acceptable to [RATING AGENCY] and [RATING AGENCY] (as
provided in the Pooling and Servicing Agreement), that mature, unless payable on
demand, no later than the Business Day preceding the 18th day of each month, or,
if such day is not a business day, the preceding business day (the "Servicer
Remittance Date"). The Subservicer will be entitled to all income and gain
realized from any such investment, and such income and gain will be subject to
withdrawal by the Subservicer from time to time. The Subservicer will be
required to deposit the amount of any losses incurred in respect to any such
investments out of its own funds as such losses are realized.
The Master Servicer will be obligated to establish an account (the
"Certificate Account"), into which the Subservicer will deposit or cause to be
deposited not later than 1:00 p.m. Pacific Time on the Servicer Remittance Date
from amounts on deposit in the Collection Account, the Interest Funds and
Principal Funds for each Loan Group and the Master Servicer Fee with respect to
such Distribution Date. Subject to the restrictions set forth in the Pooling and
Servicing Agreement, the Master Servicer is permitted to direct that the funds
in the Certificate Account be invested so long as such investments mature,
unless payable on demand, no later than two Business Days prior to the
Distribution Date. All income and gain realized from any such investment will
belong to the Master Servicer and is subject to its withdrawal or order from the
Certificate Account. The Master Servicer will be required to deposit in the
Certificate Account out of its own funds the amount of any losses incurred in
respect of any such investment, as such losses are realized.
The Master Servicer, as initial Paying Agent, is obligated under the
Pooling and Servicing Agreement to establish and maintain a separate trust
account (the "Distribution Account"), into which the Master Servicer is
obligated to deposit on the Business Day preceding each Distribution Date, an
amount equal to the Interest Funds and Principal Funds for each Loan Group with
respect to such Distribution Date. Subject to the restrictions set forth in the
Pooling and Servicing Agreement, the Master Servicer is permitted to direct that
the funds in the Distribution Account be invested so long as such investments
mature, unless payable on demand, no later than the related Distribution Date.
All income and gain realized from any such investment will belong to the Master
Servicer and is subject to its withdrawal or order from the Distribution
Account. The Master Servicer will be required to deposit in the Distribution
Account out of its own funds the amount of any losses incurred in respect of any
such investment, as such losses are realized.
The "Interest Funds" with respect to each Loan Group are equal to the
sum, without duplication, of (i) all scheduled interest collected during the
related Due Period less the Servicing Fee and Master Servicer Fee, (ii) all
Advances relating to interest, (iii) all Compensating Interest and (iv)
Liquidation Proceeds (to the extent such Liquidation Proceeds relate to
interest) less all non-recoverable Advances relating to interest and certain
expenses reimbursed during the related Due Period.
The "Principal Funds" with respect to each Loan Group are equal to the
sum, without duplication, of (i) the scheduled principal collected during the
related Due Period or advanced on or before the related Servicer Remittance
Date, (ii) prepayments collected in the related Prepayment Period, (iii) the
Stated Principal Balance of each Mortgage Loan that was repurchased by the
Depositor, (iv) the amount, if any, by which the aggregate unpaid principal
balance of any replacement Mortgage Loans is less than the aggregate unpaid
principal balance of any Mortgage Loans delivered by the Seller in connection
with a substitution of a Mortgage Loan and (v) all Liquidation Proceeds
collected during the related Due Period (to the extent
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such Liquidation Proceeds related to principal) less all non-recoverable
Advances relating to principal and all non-recoverable servicing advances
reimbursed during the related Due Period.
The "Due Period" with respect to any Distribution Date is the period
beginning on the second day of the calendar month preceding the calendar month
in which such Distribution Date occurs (or, in the case of the first
Distribution Date, on the Cut-off Date) and ending on the Due Date in the month
in which such Distribution Date occurs. The "Prepayment Period" with respect to
any Distribution Date is the calendar month preceding the month in which such
Distribution Date occurs.
Distributions
General. Distributions on the Certificates will be made by the Paying
Agent on the 25th day of each month, or if such day is not a Business Day, on
the first Business Day thereafter, commencing in [MONTH\YEAR] (each, a
"Distribution Date"), to the persons in whose names such Certificates are
registered at the close of business on the last Business Day of the month
preceding the month of such Distribution Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed to
the address of the person entitled thereto as it appears on the Certificate
Register or, in the case of any Certificateholder that holds 100% of a Class of
Certificates or who holds a Class of Certificates with an aggregate initial
Certificate Principal Balance of [$1,000,000] or more and that has so notified
the Trustee in writing in accordance with the Pooling and Servicing Agreement,
by wire transfer in immediately available funds to the account of such
Certificateholder at a bank or other depository institution having appropriate
wire transfer facilities; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and surrender
of such Certificates at the Corporate Trust Office of the Master Servicer. On
each Distribution Date, a Holder of a Certificate will receive such Holder's
Percentage Interest of the amounts required to be distributed with respect to
the applicable Class of Certificates. The "Percentage Interest" evidenced by a
Certificate will equal the percentage derived by dividing the denomination of
such Certificate by the aggregate denominations of all Certificates of the
applicable Class.
Distributions of Interest. On each Distribution Date, the interest
distributable with respect to the Group I Certificates and the Class IIA-2
Certificates is the interest which has accrued thereon at the related
Pass-Through Rate during the calendar month immediately preceding the calendar
month in which such Distribution Date occurs less Prepayment Interest
Shortfalls; and the interest distributable with respect to the Group II
Certificates (other than with respect to the Class IIA-2 Certificates) is the
interest which has accrued thereon at the then applicable related Pass-Through
Rate from and including the preceding Distribution Date (or from the Closing
Date in the case of the first Distribution Date) to and including the day prior
to the current Distribution Date less Prepayment Interest Shortfalls. Each
period referred to in the prior sentence relating to the accrual of interest is
the "Accrual Period" for the related Class of Offered Certificates.
All calculations of interest of the Group I Certificates and the Class
IIA-2 Certificates will be made on the basis of a 360-day year assumed to
consist of twelve 30-day months. All calculations of interest on the Group II
Certificates (other than the Class IIA-2 Certificates) will be made on the basis
of a 360-day year and the actual number of days elapsed in the applicable
Accrual Period.
On each Distribution Date, the Interest Funds for such Distribution
Date with respect to each Loan Group are required to be distributed in the
following order of priority, until such Interest Funds have been fully
distributed:
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(i) to each Class of the Class A Certificates of the
Certificate Group related to such Loan Group, the Current Interest and
any Interest Carry Forward Amount; provided, however, that if the
Interest Funds for the Group I Certificates are not sufficient to make
a full distribution of the aggregate Current Interest and the aggregate
Interest Carry Forward Amount, the Interest Funds for such Certificate
Group will be distributed pro rata among each Class of the Class A
Group I Certificates based upon the ratio of (x) the Current Interest
and Interest Carry Forward Amount for each Class of the Class A
Certificates of such Certificate Group to (y) the total amount of
Current Interest and any Interest Carry Forward Amount for the Class A
Certificates of such Certificate Group;
(ii) to the Class M-1 Certificates of such Certificate Group,
the Current Interest for such Class and any Interest Carry Forward
Amount;
(iii) to the Class M-2 Certificates of such Certificate Group,
the Current Interest for such Class and any Interest Carry Forward
Amount;
(iv) to the Class B Certificates of such Certificate Group,
the Current Interest for such Class and any Interest Carry Forward
Amount; and
(v) any remainder to be distributed as described below under
"-Overcollateralization and Crosscollateralization Provisions".
"Current Interest", with respect to each Class of the Offered
Certificates and each Distribution Date, is the interest accrued at the
applicable Pass-Through Rate for the applicable Accrual Period on the
Certificate Principal Balance of such Class plus any amount previously
distributed with respect to interest for such Class that is recovered as a
voidable preference by a trustee in bankruptcy.
- -----------
* Owned and managed portfolio statistics restated to exclude interest
advances on serviced portfolio to be consistent with presentation of
owned portfolio.
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"Interest Carry Forward Amount", with respect to each Class of the
Offered Certificates and each Distribution Date, is the sum of (i) the excess of
(A) Current Interest for such Class with respect to prior Distribution Dates
(excluding any Adjustable Rate Certificate Carryover) over (B) the amount
actually distributed to such Class with respect to interest on such prior
Distribution Dates and (ii) interest on such excess (to the extent permitted by
applicable law) at the applicable Pass-Through Rate.
The "Pass-Through Rate" with respect to each Class of Group I
Certificates is the per annum rate set forth for each such Class on the cover
page hereof; provided, however, that the "Pass-Through Rate" for the Class IB
Certificates on any Distribution Date will equal the lesser of (i) the per annum
rate for such Class set forth on the cover page hereof and (ii) the weighted
average Net Mortgage Rates on the Fixed Rate Mortgage Loans and; provided,
further, that the Pass-Through Rate for the Class IA-5 Certificates on any
Distribution Date after the Optional Termination Date will equal _____%. The
"Pass Through Rate" with respect to each Class of Group II Certificates will be
determined as described below.
The Pass-Through Rates per annum for the Group II Certificates (other
than the Class IIA-2 Certificates) will be equal to the least of (i) the London
interbank offered rate for one month United States dollar deposits, calculated
as described under "Description of the Certificates-Calculation of One-Month
LIBOR" ("One-Month LIBOR"), plus the Pass-Through Margin (defined below) for
such Class, (ii) the "Maximum Funds Cap," which is defined as the weighted
average of the maximum lifetime Mortgage Rates on the Adjustable Rate Mortgage
Loans less the Servicing Fee and the Master Servicer Fee, and (iii) the
"Available Funds Cap" for the Group II Certificates, which is defined as a per
annum rate equal to 12 times the quotient of (x) the total scheduled interest on
the Adjustable Rate Mortgage Loans in the Adjustable Rate Mortgage Loan Group
based on the Net Mortgage Rates in effect on the related Due Date divided by (y)
the aggregate principal balance of the Group II Certificates. The Pass-Through
Rate with respect to the Class IIA-2 Certificates will be equal to _____% per
annum.
With respect to any Mortgage Loan, the "Net Mortgage Rate" is the
Mortgage Rate with respect to such Mortgage Loan less the sum of (i) the
Servicing Fee Rate and (ii) the Master Servicer Fee Rate.
The "Pass-Through Margin" for each Class of Group II Certificates
(other than the Class IIA-2 Certificates) is as follows: for any Distribution
Date on or before the applicable Optional Termination Date: Class IIA-1, _____%;
Class IIM-1, _____%; Class IIM-2, _____% and Class IIB, _____%; and for any
Distribution Date after the applicable Optional Termination Date: Class IIA-1,
_____%; Class IIM-1, _____%; Class IIM-2, _____%; and Class IIB, _____%.
If on any Distribution Date, the Pass-Through Rate for a Class of Group
II Certificates is based upon its Available Funds Cap, the excess of (i) the
amount of interest that such Class would have been entitled to receive on such
Distribution Date had the Pass-Through Rate for that Class not been calculated
based on the Available Funds Cap, up to but not exceeding the Maximum Funds Cap
over (ii) the amount of interest such Class received on such Distribution Date
based on the Available Funds Cap, up to but not exceeding the Maximum Funds Cap,
together with the unpaid portion of any such excess from prior Distribution
Dates (and interest accrued thereon at the then applicable Pass-Through Rate,
without giving effect to the Available Funds Cap) is the "Adjustable Rate
Certificate Carryover" for such Class. Any Adjustable Rate Certificate Carryover
will be paid on future Distribution Dates from and to the extent of funds
available therefor as described herein. The ratings of the Group II Certificates
do not address the likelihood of the payment of any Adjustable Rate Certificate
Carryover.
Distributions of Principal. On each Distribution Date, the Principal
Distribution Amount (as defined below) for such Distribution Date with respect
to each Loan Group is required to be distributed as follows until such Principal
Distribution Amount has been fully distributed:
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(i) (a) with respect to Class A Group I Certificates, Class A
Principal Distribution Amount for the Group I Certificates is required
to be distributed as follows: first, the Class IA-6 Distribution Amount
to the Class IA-6 Certificates, and second, the remaining Class A
Principal Distribution Amount shall be paid sequentially to the Class
IA-1, Class IA-2, Class IA-3, Class IA-4, Class IA-5 and Class IA-6
Certificates, in that order, until the respective Certificate Principal
Balances thereof have been reduced to zero; provided, however, that, on
any Distribution Date on which the aggregate Certificate Principal
Balances of the Class A Group I Certificates are equal to or greater
than the Stated Principal Balances of the Fixed Rate Mortgage Loans,
the Class A Principal Distribution Amount for the Class A Group I
Certificates will be distributed pro rata and not as described above;
and (b) with respect to Class A Group II Certificates, Class A
Principal Distribution Amount for the Group II Certificates is required
to be distributed as follows: first, the Class IIA-2 Distribution
Amount to the Class IIA-2 Certificates, and second, the remaining Class
A Principal Distribution Amount shall be paid sequentially to the Class
IIA-1 and Class IIA-2 Certificates, in that order, until the respective
Certificate Principal Balances thereof have been reduced to zero;
provided, however, that, on any Distribution Date on which the
aggregate Certificate Principal Balances of the Class A Group II
Certificates are equal to or greater than the Stated Principal Balances
of the Adjustable Rate Mortgage Loans, the Class A Principal
Distribution Amount for the Class A Group II Certificates will be
distributed pro rata and not as described above;
(ii) to the Class M-1 Certificates of each Certificate Group,
the Class M-1 Principal Distribution Amount for such Certificate Group;
(iii) to the Class M-2 Certificates of each Certificate Group,
the Class M-2 Principal Distribution Amount for such Certificate Group;
(iv) to the Class B Certificates of each Certificate Group,
the Class B Principal Distribution Amount for such Certificate Group;
and
(v) any remainder to be distributed as described under
"-Overcollateralization and Crosscollateralization Provisions" below.
"Principal Distribution Amount", with respect to each Distribution Date
and a Certificate Group, is the sum of (i) the Principal Funds for such
Distribution Date for such Certificate Group and (ii) any Extra Principal
Distribution Amount (defined below) for such Distribution Date for the related
Certificate Group.
"Class A Principal Distribution Amount", for a Certificate Group is (i)
with respect to any Distribution Date prior to the related Stepdown Date
(defined below) or as to which a Trigger Event (defined below) exists, 100% of
the Principal Distribution Amount for such Certificate Group for such
Distribution Date and (ii) with respect to any Distribution Date on or after the
Stepdown Date and as to which a Trigger Event does not exist, the excess of (A)
the Certificate Principal Balance of the Class A Certificates for such
Certificate Group immediately prior to such Distribution Date over (B) the
lesser of (i) approximately _____% for the Fixed Rate Mortgage Loan Group and
approximately _____% (or approximately _____%, if a Stepup Trigger Event
(defined below) has occurred) for the Adjustable Rate Mortgage Loan Group, of
the Stated Principal Balances of the Mortgage Loans in such Loan Group on the
preceding Due Date and (ii) the Stated Principal Balances of the Mortgage Loans
in such Loan Group on the preceding Due Date less approximately $_______ for the
Fixed Rate Mortgage Loan Group and approximately $_________ for the Adjustable
Rate Mortgage Loan Group.
"Class IA-6 Distribution Amount", for any Distribution Date, is the
product of (i) a fraction, the numerator of which is the Certificate Principal
Balance of the Class IA-6 Certificates and the denominator of which is the
aggregate Certificate Principal Balance of all Class A Certificates for the
Fixed Rate
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Mortgage Loan Group, in each case immediately prior to such Distribution Date,
(ii) the Class A Principal Distribution Amount with respect to the Fixed Rate
Mortgage Loan Group for such Distribution Date and (iii) the applicable
percentage for such Distribution Date set forth in the following table:
Distribution Date Occurring In Percentage
- ------------------------------ ----------
[MONTH/YEAR] ___%
[MONTH/YEAR] ___%
[MONTH/YEAR] ___%
[MONTH/YEAR] ___%
[MONTH/YEAR] ___%
"Class IIA-2 Distribution Amount", for any Distribution Date prior to
the Distribution Date occurring in September 2001, is the product of (i) a
fraction, the numerator of which is the Certificate Principal Balance of the
Class IIA-2 Certificates and the denominator of which is the aggregate
Certificate Principal Balance of all Group II Class A Certificates, in each case
immediately prior to such Distribution Date, (ii) the Class A Principal
Distribution Amount with respect to the Adjustable Rate Mortgage Loan Group for
such Distribution Date and (iii) the applicable percentage for such Distribution
Date set forth in the following table:
Distribution Date Occurring In Percentage
- ------------------------------ ----------
[MONTH/YEAR] ___%
[MONTH/YEAR] ___%
With respect to the Distribution Date occurring in [MONTH/YEAR] and each
Distribution Date thereafter until the Certificate Principal Balance of the
Class IIA-2 Certificates has been reduced to zero, the Class IIA-2 Distribution
Amount will be the Class A Principal Distribution Amount with respect to the
Adjustable Rate Mortgage Loan Group for such Distribution Date.
"Class M-1 Principal Distribution Amount", for a Certificate Group and
with respect to any Distribution Date on or after the related Stepdown Date is
100% of the Principal Distribution Amount for the related Certificate Group if
the Certificate Principal Balance of each Class of Class A Certificates for such
Certificate Group has been reduced to zero and a Trigger Event has occurred, or,
if any Class A Certificates for such Certificate Group are still outstanding,
and as long as a Trigger Event is not in effect for such Certificate Group, is
the excess of (i) the sum for such Certificate Group of (A) the Certificate
Principal Balance of the related Class A Certificates (after taking into account
distributions of the Class A Principal Distribution Amount to such Class A
Certificates for such Distribution Date) and (B) the Certificate Principal
Balance of the related Class M-1 Certificates immediately prior to such
Distribution Date over (ii) the lesser of (A) approximately _____% for the Fixed
Rate Mortgage Loan Group and approximately _____% (or approximately _____%, if a
Stepup Trigger Event has occurred) for the Adjustable Rate Mortgage Loan Group
of the Stated Principal Balances of the Mortgage Loans in such Loan Group on the
preceding Due Date and (B) the Stated Principal Balances of the Mortgage Loans
in such Loan Group on the preceding Due Date less approximately $_______ for the
Fixed Rate Mortgage Loan Group and approximately $_________ for the Adjustable
Rate Mortgage Loan Group. Notwithstanding the foregoing, on any Distribution
Date prior to the Stepdown Date on which the Certificate Principal Balance of
each Class of Class A Certificates for a Certificate Group has been reduced to
zero, the Class M-1 Principal Distribution Amount for such Certificate Group
will equal the lesser of (A) the outstanding Certificate Principal Balance of
the related Class M-1 Certificates and (B) 100% of the Principal Distribution
Amount for such Certificate Group.
"Class M-2 Principal Distribution Amount", for a Certificate Group and
with respect to any Distribution Date on or after the related Stepdown Date, is
100% of the Principal Distribution Amount for
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the related Certificate Group if the Certificate Principal Balance of each Class
of Class A and Class M-1 Certificates for such Certificate Group has been
reduced to zero and a Trigger Event has occurred, or, if the Class A and Class
M-1 Certificates for such Certificate Group are still outstanding and as long as
a Trigger Event is not in effect for such Certificate Group, is the excess of
(i) of the sum for such Certificate Group of (A) the Certificate Principal
Balance of the Class A Certificates (after taking into account distributions of
the Class A Principal Distribution Amount to such Class A Certificates for such
Distribution Date), (B) the Certificate Principal Balance of the related Class
M-1 Certificates (after taking into account distribution of the Class M-1
Principal Distribution Amount to such Class M-1 Certificates for such
Distribution Date) and (C) the Certificate Principal Balance of the related
Class M-2 Certificates immediately prior to such Distribution Date over (ii) the
lesser of (A) approximately _____% for the Fixed Rate Mortgage Loan Group and
approximately _____% (or approximately _____%, if a Stepup Trigger Event has
occurred) for the Adjustable Rate Mortgage Loan Group, of the aggregate Stated
Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due
Date and (B) the Stated Principal Balances of the Mortgage Loans in such Loan
Group on the preceding Due Date less approximately $_______ for the Fixed Rate
Mortgage Loan Group and approximately $_________ for the Adjustable Rate
Mortgage Loan Group. Notwithstanding the foregoing, on any Distribution Date
prior to the Stepdown Date on which the aggregate Certificate Principal Balance
of each class of Class A Certificates and the Class M-1 Certificates for a
Certificate Group has been reduced to zero, the Class M-2 Principal Distribution
Amount for such Certificate Group will equal the lesser of (A) the outstanding
Certificate Principal Balance of the related Class M-2 Certificates and (B) 100%
of the Principal Distribution Amount for such Certificate Group.
"Class B Principal Distribution Amount", for a Certificate Group and
with respect to any Distribution Date on or after the related Stepdown Date and
as long as a Trigger Event is not in effect for such Certificate Group, is the
excess of (i) of the sum for such Certificate Group of (A) the Certificate
Principal Balance of the related Class A Certificates (after taking into account
distributions of the Class A Principal Distribution Amount for such Distribution
Date), (B) the Certificate Principal Balance of the Class M-1 Certificates
(after taking into account distribution of the Class M-1 Principal Distribution
Amount to such Class M-1 Certificates for such Distribution Date), (C) the
Certificate Principal Balance of the related Class M-2 Certificates (after
taking into account distributions of the Class M-2 Principal Distribution Amount
to such Class M-2 Certificates for such Distribution Date) and (D) the
Certificate Principal Balance of the related Class B Certificates immediately
prior to such Distribution Date over (ii) the lesser of (A) approximately _____%
for the Fixed Rate Mortgage Loan Group and approximately _____% (or
approximately _____%, if a Stepup Trigger Event has occurred) for the Adjustable
Rate Mortgage Loan Group, of the Stated Principal Balances of the Mortgage Loans
in such Loan Group on the preceding Due Date and (B) the Stated Principal
Balances of the Mortgage Loans in such Loan Group on the preceding Due Date less
approximately $_______ for the Fixed Rate Mortgage Loan Group and approximately
$____8____ for the Adjustable Rate Mortgage Loan Group, provided, however, that
after the Certificate Principal Balances of the Class A, Class M-1 and Class M-2
Certificates for such Certificate Group are reduced to zero, the Class B
Principal Distribution Amount for such Distribution Date will equal 100% of the
Principal Distribution Amount for the related Loan Group.
"Extra Principal Distribution Amount", for a Mortgage Loan Group and
with respect to any Distribution Date, is (i) prior to the Stepdown Date, the
excess of (A) the sum of (i) the aggregate Certificate Principal Balances of the
Certificates of the related Certificate Group and (ii) approximately $_______
for the Fixed Rate Mortgage Loan Group and approximately $_________ (or
$_________, if a Stepup Trigger Event has occurred) for the Adjustable Rate
Mortgage Loan Group over (B) the Stated Principal Balances of the Mortgage Loans
in such Loan Group and (ii) on and after the Stepdown Date, the excess of (A)
the sum of (i) the aggregate Certificate Principal Balances of the Certificates
of such Certificate Group and (II) the greater of (x) ____% for the Fixed Rate
Mortgage Loan Group and ____% (or ____%, if a Stepup Trigger Event has occurred)
for the Adjustable Rate Mortgage Loan Group of the Stated Principal Balances of
the Mortgage Loans in the related Loan Group and (y) approximately $_______ for
the Fixed Rate
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Mortgage Loan Group and approximately $_________ for the Adjustable Rate
Mortgage Loan Group over (B) the Stated Principal Balances of the Mortgage Loans
in the related Certificate Group.
"Stepdown Date", with respect to each Certificate Group, is the later
to occur of (i) the Distribution Date in [MONTH/YEAR] or (ii) the first
Distribution Date on which (A) the Certificate Principal Balance of the Class A
Certificates in such Certificate Group is less than or equal to (B) _____%, for
the Fixed Rate Mortgage Loan Group, and _____% (or _____%, if a Stepup Trigger
Event has occurred), for the Adjustable Rate Mortgage Loan Group, of the Stated
Principal Balances of the Mortgage Loans in the related Loan Group.
A "Trigger Event", with respect to each Certificate Group and a
Distribution Date after the Stepdown Date, exists if the product of (i) ___, for
the Fixed Rate Mortgage Loan Group, and ___, for the Adjustable Rate Mortgage
Loan Group and (ii) the quotient of (A) the aggregate Stated Principal Balance
of all Mortgage Loans __ or more days delinquent for each Loan Group (including
Mortgage Loans in foreclosure and REO Properties) and (B) the Stated Principal
Balance of that Loan Group as of the preceding Servicer Advance Date equals or
exceeds the Required Percentage. A "Required Percentage," with respect to each
Certificate Group and a Distribution Date after the Stepdown Date is equal to
the quotient of (x) the excess (i) the Stated Principal Balance of such Loan
Group over (ii) the Certificate Principal Balance of the most senior Class of
Certificates of such Certificate Group outstanding as of the preceding Servicer
Advance Date and (y) the Stated Principal Balance of such Loan Group. As used
herein, the Certificate Principal Balance of the most senior Class of
Certificates of the Group I Certificates will equal the aggregate Certificate
Principal Balance of the Class A Group I Certificates for such date of
calculation.
With respect to the Adjustable Rate Mortgage Loan Group, a "Stepup
Trigger Event" exists with respect to a Distribution Date (and thereafter will
exist with respect to each subsequent Distribution Date) if either
(A) Realized Losses with respect to the Adjustable Rate
Mortgage Loans as of such Distribution Date equal or exceed the
following levels (expressed as a percentage of aggregate principal
balance of the Adjustable rate Mortgage Loans as of the Cut-off Date)
Distribution Date Occurring In Percentage
- ------------------------------ ----------
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
or (B) the three month rolling average of Adjustable Rate
Mortgage Loans that are 60 days or more delinquent (calculated as set
forth in the Pooling and Servicing Agreement) as of such Distribution
Date equals or exceeds the following levels (expressed as a percentage
of the aggregate principal balance of the Adjustable Rate Mortgage
Loans as of such Distribution Date):
Distribution Date Occurring In Percentage
- ------------------------------ ----------
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
[MONTH/YEAR]................................... ____%
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Overcollateralization and Crosscollateralization Provisions
As set forth below, Interest Funds and Principal Funds with respect to
a Certificate Group not otherwise required to be distributed with respect to
principal of and interest on the Certificates of such Certificate Group ("Net
Excess Cashflow") will be required to be applied as an Extra Principal
Distribution Amount with respect to the other Mortgage Loan Group whenever the
Stated Principal Balances of the Mortgage Loans in such Loan Group do not
exceed, by the required amount, the aggregate Certificate Principal Balances of
the related Certificates. If on any Distribution Date, after giving effect to
any Extra Principal Distribution Amount, the aggregate Certificate Principal
Balances of the Offered Certificates with respect to a Mortgage Loan Group
exceed the Stated Principal Balances of the Mortgage Loans in the related Loan
Group, the Certificate Principal Balances of the Subordinated Certificates of
such Group will be reduced, in inverse order of seniority (beginning with the
Class B Certificates) by an amount equal to such excess.
If the Certificate Principal Balance of a Class of Subordinated
Certificates is reduced, that Class thereafter will be entitled to distributions
of interest and principal only with respect to the Certificate Principal Balance
as so reduced. On subsequent Distribution Dates, however, as described below,
Interest Funds and Principal Funds with respect to each Certificate Group not
otherwise required to be distributed with respect to principal of and interest
on the Certificates of such Certificate Group will be applied to reduce Unpaid
Realized Loss Amounts previously allocated to such Certificates in order of
seniority.
On each Distribution Date, Interest Funds and Principal Funds with
respect to each Loan Group not otherwise required to be distributed with respect
to principal of and interest on the Certificates of such Certificate Group as
described above will be required to be distributed as follows until fully
distributed:
(i) the Extra Principal Distribution Amount for such Loan
Group;
(ii) to the Class M-1 Certificates of such Certificate Group,
any Unpaid Realized Loss Amount for such Class;
(iii) to the Class M-2 Certificates of such Certificate Group,
any Unpaid Realized Loss Amount for such Class;
(iv) to the Class B Certificates of such Certificate Group,
the Unpaid Realized Loss Amount for such Class;
(v) for distribution to the Certificates in the other
Certificate Group to the extent that any of the amounts listed above
with respect to the other Certificate Group have not otherwise been
funded in full for such Distribution Date in accordance with the
priorities set forth above;
(vi) in the case of the Adjustable Rate Mortgage Loan Group,
to the Group II Certificates, on a pro rata basis, the Adjustable Rate
Certificate Carryover; and
(vii) to the Residual Certificates, the remaining amount.
"Applied Realized Loss Amount", with respect to any Class of the
Subordinated Certificates and as to any Distribution Date, means the sum of the
Realized Losses with respect to Mortgage Loans which have been applied in
reduction of the Certificate Principal Balance of such Class.
"Realized Loss" is the excess of the Stated Principal Balance of a
defaulted Mortgage Loan over the net liquidation proceeds with respect thereto
that are allocated to principal.
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"Unpaid Realized Loss Amount", with respect to any Class of the
Subordinated Certificates and as to any Distribution Date, is the excess of (i)
Applied Realized Loss Amounts with respect to such Class over (ii) the sum of
all distributions in reduction of the Applied Realized Loss Amounts on all
previous Distribution Dates. Any amounts distributed to a Class of Subordinated
Certificates in respect of any Unpaid Realized Loss Amount will not be applied
to reduce the Certificate Principal Balance of such Class.
Calculation of One-Month LIBOR
On the second LIBOR Business Day (as defined below) preceding the
commencement of each Accrual Period for the Group II Certificates, other than
the Class IIA-2 Certificates (each such date, an "Interest Determination Date"),
the Master Servicer will determine the London interbank offered rate for
one-month United States dollar deposits ("One-Month LIBOR") for such Accrual
Period on the basis of the (i) offered rates for one-month United States dollar
deposits, as such rates appear on Telerate page 3750, as of 11:00 a.m. (London
time) on such Interest Determination Date or (ii) if such rate does not appear
on Telerate Page 3750 as of 11:00 a.m., (London time), the Master Servicer will
determine such rate on the basis of the offered rates of the Reference Banks for
one-month United States dollar deposits, as such rates appear on the Reuters
Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest Determination
Date. As used in this section, "LIBOR Business Day" means a day on which banks
are open for dealing in foreign currency and exchange in London and New York
City; "Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London interbank offered
rates of major banks); and "Reference Banks" means leading banks selected by the
Master Servicer and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) whose quotations appear on the Reuters Screen LIBO Page on the
Interest Determination Date in question, (iii) which have been designated as
such by the Master Servicer and (iv) not controlling, controlled by, or under
common control with, the Depositor, the Master Servicer, the Seller or any
successor Subservicer.
If one-month LIBOR is determined pursuant to clause (ii) above, on each
Interest Determination Date, One-Month LIBOR for the related Accrual Period for
the Group II Certificates, other than the Class IIA-2 Certificates, will be
established by the Master Servicer as follows:
(a) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, One-Month LIBOR for
the related Accrual Period for the Group II Certificates shall be the
arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest whole multiple of _______%).
(b) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for
the related Accrual Period shall be the higher of (x) One-Month LIBOR
as determined on the previous Interest Determination Date and (y) the
Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate
per annum that the Master Servicer determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of _______%) of the one-month United States dollar lending
rates which New York City banks selected by the Master Servicer are
quoting on the relevant Interest Determination Date to the principal
London offices of leading banks in the London interbank market or, in
the event that the Master Servicer can determine no such arithmetic
mean, (ii) the lowest one-month United States dollar lending rate which
New York City banks selected by the Master Servicer are quoting on such
Interest Determination Date to leading European banks.
The establishment of One-Month LIBOR on each Interest Determination
Date by the Master Servicer and the Master Servicer's calculation of the rate of
interest applicable to the Group II Certificates, other than
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the Class IIA-2 Certificates, for the related Accrual Period for such Group II
Certificates shall (in the absence of manifest error) be final and binding.
Reports to Certificateholders
On each Distribution Date, the Master Servicer will forward to each
Certificateholder, the Subservicer, the Trustee and the Depositor a statement
generally setting forth, among other information:
(i) the amount of the related distribution to holders of the
Certificates allocable to principal, separately identifying (A) the
aggregate amount of any principal prepayments included therein, (B) the
aggregate amount of all scheduled payments of principal included
therein and (C) any Extra Principal Distribution Amount;
(ii) the amount of such distribution to holders of the
Certificates allocable to interest;
(iii) the Interest Carry-Forward Amount;
(iv) the Certificate Principal Balance of the Certificates
after giving effect to the distribution of principal on such
Distribution Date;
(v) the aggregate outstanding principal balance of the Offered
Certificates for the following Distribution Date;
(vi) the amount of the Servicing Fee paid to or retained by
the Subservicer for the related Due Period;
(vii) the Pass-Through Rate for each Class of Certificates for
such Distribution Date;
(viii) the amount of Advances included in the distribution on
such Distribution Date;
(ix) the number and aggregate principal amounts of Mortgage
Loans in each Loan Group (A) delinquent (exclusive of Mortgage Loans in
foreclosure) (1) 30 days, (2) 31 to 60 days, (3) 61 to 90 days and (4)
91 or more days, and (B) in foreclosure and delinquent (1) 30 days, (2)
31 to 60 days, (3) 61 to 90 days and (4) 91 or more days, in each case
as of the close of business on the last day of the calendar month
preceding such Distribution Date;
(x) with respect to any Mortgage Loan that became an REO
Property in each Loan Group during the preceding calendar month, the
loan number and Stated Principal Balance of such Mortgage Loan as of
the close of business on the fifteenth day of the month of such
Distribution Date (or, if not a Business Day, the immediately preceding
Business Day) (the "Determination Date") and the date of acquisition
thereof;
(xi) with respect to each Loan Group, whether a Trigger Event
has occurred;
(xii) the total number and principal balance of any REO
Properties in each Loan Group as of the close of business on the
related Determination Date; and
(xiii) any Adjustable Rate Certificate Carryover paid and all
remaining Adjustable Rate Certificate Carryover remaining on each Class
of the Adjustable Rate Certificate on such Distribution Date.
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In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer will prepare and deliver to each
Certificateholder of record during the previous calendar year a statement
containing information necessary to enable Certificateholders to prepare their
tax returns. Such statements will not have been examined and reported upon by an
independent public accountant.
Amendment
The Pooling and Servicing Agreement may be amended by the Depositor,
the Subservicer, the Master Servicer, and the Trustee, without the consent of
Certificateholders, for any of the purposes set forth under "Description of the
Certificates-Miscellaneous-Amendment" in the Prospectus. In addition, the
Pooling and Servicing Agreement may be amended by the Depositor, the
Subservicer, the Master Servicer and the Trustee and the holders of a Majority
in Interest of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or of modifying in any manner
the rights of the Certificateholders; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
required to be distributed on any Certificate without the consent of the Holder
of such Certificate; (ii) adversely affect in any material respect the interests
of the holders of any Class of Certificates in a manner other than as described
in clause (i) above, without the consent of the holders of Certificates of such
Class evidencing, as to such Class, Percentage Interests aggregating 66%; or
(iii) reduce the aforesaid percentage of aggregate outstanding principal amounts
of Certificates of each Class, the holders of which are required to consent to
any such amendment, without the consent of the holders of all Certificates of
such Class.
Optional Termination
The Master Servicer will have the right (but not the obligation) to
repurchase all remaining Mortgage Loans and REO Properties in either Loan Group
and thereby effect early retirement of all the Certificates of the related
Certificate Group, subject to the Stated Principal Balance of the Mortgage Loans
and REO Properties in such Loan Group at the time of repurchase being less than
or equal to 10% of the Cut-off Date Principal Balance of the Mortgage Loans in
such Loan Group (an "Optional Termination Date"). In the event such option is
exercised by the Depositor, the repurchase will be made at a price equal to the
sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan (other
than in respect of REO Property) plus accrued interest thereon at the applicable
Mortgage Rate, net of the Servicing Fee and any unreimbursed Advances, (ii) the
appraised value of any REO Property (up to the Stated Principal Balance of the
related Mortgage Loan), and (iii) any unreimbursed out-of-pocket costs and
expenses and the principal portion of Advances, in each case previously incurred
by the Subservicer in the performance of its servicing obligations. Proceeds
from such repurchase will be distributed to the Certificateholders in the
related Certificate Group in the priority described above. The proceeds from any
such distribution may not be sufficient to distribute the full amount to which
each Class of Certificates is entitled if the purchase price is based in part of
the appraised value of any REO Property and such appraised value is less than
the Stated Principal Balance of the related Mortgage Loan. Any repurchase of the
Mortgage Loans and REO Properties will result in an early retirement of the
Certificates in the related Certificate Group.
Optional Purchase of Defaulted Loans
As to any Mortgage Loan which is delinquent in payment by 91 days or
more, the Master Servicer may, at its option, purchase such Mortgage Loan at a
price equal to 100% of the Stated Principal Balance thereof plus accrued
interest thereon at the applicable Mortgage Rate, from the date through which
interest was last paid by the related mortgagor or advanced to the first day of
the month in which such amount is to be distributed.
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Events of Default
Events of Default will consist of: (i) any failure by the Subservicer
to deposit in the Collection Account or the Certificate Account the required
amounts or remit to the Trustee any payment (including an Advance required to be
made under the terms of the Pooling and Servicing Agreement) which continues
unremedied for five Business Days after written notice of such failure shall
have been given to the Subservicer and the Depositor by the Trustee or the
Depositor, or to the Subservicer, the Depositor and the Trustee by the holders
of Certificates evidencing not less than 25% of the Voting Rights evidenced by
the Certificates; (ii) any failure by the Subservicer to observe or perform in
any material respect any other of its covenants or agreements, or any breach of
a representation or warranty made by the Subservicer in the Pooling and
Servicing Agreement, which continues unremedied for 60 days after the giving of
written notice of such failure to the Subservicer by the Trustee, the Master
Servicer or the Depositor, or to the Subservicer, the Depositor, the Master
Servicer and the Trustee by the holders of Certificates evidencing not less than
25% of the Voting Rights evidenced by the Certificates; or (iii) insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, and certain actions by or on behalf of the Subservicer indicating
its insolvency or inability to pay its obligations. As of any date of
determination, (i) holders of the Offered Certificates will be allocated 95% of
all Voting Rights, allocated among the Offered Certificates in proportion to
their respective outstanding Certificate Principal Balances and (ii) holders of
the Residual Certificates will be allocated all of the remaining Voting Rights.
Voting Rights will be allocated among the Certificates of each such Class in
accordance with their respective Percentage Interests.
Rights upon Event of Default
So long as an Event of Default under the Pooling and Servicing
Agreement remains unremedied, the Trustee shall, but only upon the receipt of
instructions from the holders of Certificates having not less than 25% of the
Voting Rights evidenced by the Certificates, terminate all of the rights and
obligations of the Subservicer under the Pooling and Servicing Agreement and in
and to the Mortgage Loans, whereupon the Trustee will succeed to all of the
responsibilities and duties of the Subservicer under the Pooling and Servicing
Agreement, including the obligation to make Advances. No assurance can be given
that termination of the rights and obligations of the Subservicer under the
Pooling and Servicing Agreement would not adversely affect the servicing of the
Mortgage Loans, including the delinquency experience of the Mortgage Loans.
No Certificateholder, solely by virtue of such Holder's status as a
Certificateholder, will have any right under the Pooling and Servicing Agreement
to institute any proceeding with respect thereto, unless such Holder previously
has given to the Trustee written notice of the continuation of an Event of
Default and unless the holders of Certificates having not less than 25% of the
Voting Rights evidenced by the Certificates have made written request to the
Trustee to institute such proceeding in its own name as Trustee thereunder and
have offered to the Trustee reasonable indemnity and the Trustee for 60 days has
neglected or refused to institute any such proceeding.
The Trustee
[TRUSTEE] will be the Trustee under the Pooling and Servicing
Agreement. The Depositor, the Master Servicer and the Subservicer may maintain
other banking relationships in the ordinary course of business with the Trustee.
The Corporate Trust Office of the Trustee is located at ____________________, or
at such other addresses as the Trustee may designate from time to time.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
General
The weighted average life of, and the yield to maturity on each Class
of the Offered Certificates will be directly related to the rate of payment of
principal (including prepayments) of the Mortgage Loans in the related Loan
Group. The actual rate of principal prepayments on pools of mortgage loans is
S-64
<PAGE>
influenced by a variety of economic, tax, geographic, demographic, social, legal
and other factors and has fluctuated considerably in recent years. In addition,
the rate of principal prepayments may differ among pools of mortgage loans at
any time because of specific factors relating to the mortgage loans in the
particular pool, including, among other things, the age of the mortgage loans,
the geographic locations of the properties securing the loans, the extent of the
mortgagor's equity in such properties, and changes in the mortgagors' housing
needs, job transfers and employment status, as well as whether the related
mortgage loan is subject to a prepayment penalty. In addition, the Seller may
solicit mortgagors to refinance their Mortgage Loans for a variety of reasons.
Any such refinancings will affect the rate of principal prepayments on the
Mortgage Pool.
The timing of changes in the rate of prepayments may significantly
affect the actual yield to investors who purchase the Offered Certificates at
prices other than par, even if the average rate of principal prepayments is
consistent with the expectations of investors. In general, the earlier the
payment of principal of the Mortgage Loans the greater the effect on an
investor's yield to maturity. As a result, the effect on an investor's yield of
principal prepayments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the issuance
of the Offered Certificates may not be offset by a subsequent like reduction (or
increase) in the rate of principal prepayments. Investors must make their own
decisions as to the appropriate prepayment assumptions to be used in deciding
whether to purchase any of the Offered Certificates. The Depositor does not make
any representations or warranties as to the rate of prepayment or the factors to
be considered in connection with such determinations.
The weighted average life and yield to maturity of each Class of
Offered Certificates will also be influenced by the amount of Net Excess
Cashflow generated by the Mortgage Loans and applied in reduction of the
Certificate Principal Balances of such Certificates. The level of Net Excess
Cashflow available on any Distribution Date to be applied in reduction of the
Certificate Principal Balances of the Class A Certificates will be influenced
by, among other factors, (i) the overcollateralization level of the assets in
the related Loan Group at such time (i.e., the extent to which interest on the
related Mortgage Loans is accruing on a higher Stated Principal Balance than the
Certificate Principal Balance of the related Class A Certificates), (ii) the
delinquency and default experience of the related Mortgage Loans, (iii) the
level of One-Month LIBOR and the Mortgage Index for the Adjustable Rate Mortgage
Loans, and (iv) the provisions of the Pooling and Servicing Agreement that
permit Net Excess Cashflow to be distributed to the Residual Certificates when
required overcollateralization levels have been met. To the extent that greater
amounts of Net Excess Cashflow are distributed in reduction of the Certificate
Principal Balances of a Class of Offered Certificates, the weighted average life
thereof can be expected to shorten. No assurance, however, can be given as to
the amount of Net Excess Cashflow distributed at any time or in the aggregate.
See "Description of the Offered Certificates-Overcollateralization and
Crosscollateralization Provisions" herein.
The Class IA-6 Certificates are not expected to receive distributions
of principal until the Distribution Date in [MONTH/YEAR] (except as otherwise
described herein). Thereafter, the relative entitlement of the Class IA-6
Certificates to payments in respect of principal is subject to increase in
accordance with the calculation of the Class IA-6 Distribution Amount. See
"Description of the Certificates-Distributions" herein.
The Class IIA-2 Certificates are not expected to receive distributions
of principal until the Distribution Date in [MONTH/YEAR] (except as otherwise
described herein). Thereafter, the relative entitlement of the Class IIA-2
Certificates to payments in respect of principal is subject to increase in
accordance with the calculation of the Class IIA-2 Distribution Amount. See
"Description of the Certificates-Distributions" herein.
S-65
<PAGE>
Prepayments and Yields for Offered Certificates
Generally, if purchased at other than par, the yield to maturity on the
Offered Certificates will be affected by the rate of the payment of principal of
the Mortgage Loans in the related Loan Group. If the actual rate of payments on
the Mortgage Loans in a Loan Group is slower than the rate anticipated by an
investor who purchases related Offered Certificates at a discount, the actual
yield to such investor will be lower than such investor's anticipated yield. If
the actual rate of payments on the Mortgage Loans in a Loan Group is faster than
the rate anticipated by an investor who purchases related Offered Certificates
at a premium, the actual yield to such investor will be lower than such
investor's anticipated yield.
All the Mortgage Loans in the Fixed Rate Mortgage Loan Group are fixed
rate mortgage loans. In general, if prevailing interest rates fall significantly
below the interest rates on fixed rate mortgage loans, such mortgage loans are
likely to be subject to higher prepayment rates than if prevailing rates remain
at or above the interest rates on such mortgage loans. Conversely, if prevailing
interest rates rise appreciably above the interest rates on fixed rate mortgage
loans, such mortgage loans are likely to experience a lower prepayment rate than
if prevailing rates remain at or below the interest rates on such mortgage
loans.
All the Mortgage Loans in the Adjustable Rate Mortgage Loan Group are
adjustable rate Mortgage Loans. As is the case with conventional fixed rate
mortgage loans, adjustable rate mortgage loans may be subject to a greater rate
of principal prepayments in a declining interest rate environment. For example,
if prevailing interest rates fall significantly, adjustable rate mortgage loans
could be subject to higher prepayment rates than if prevailing interest rates
remain constant because the availability of fixed rate mortgage loans at lower
interest rates may encourage mortgagors to refinance their adjustable rate
mortgage loans to a lower fixed interest rate. Nevertheless, no assurance can be
given as to the level of prepayment that the Mortgage Loans will experience.
Although the Mortgage Rates on the Mortgage Loans in the Adjustable
Rate Mortgage Loan Group are subject to adjustment, the Mortgage Rates adjust
less frequently than the Pass-Through Rate on the Group II Certificates and
adjust by reference to the Mortgage Index. Changes in One-Month LIBOR may not
correlate with changes in the Mortgage Index and also may not correlate with
prevailing interest rates. It is possible that an increased level of One-Month
LIBOR could occur simultaneously with a lower level of prevailing interest rates
which would be expected to result in faster prepayments, thereby reducing the
weighted average life of the Group II Certificates. The Mortgage Rate applicable
to the Mortgage Loans in the Adjustable Rate Mortgage Loan Group and any
Adjustment Date will be based on the Mortgage Index value most recently
announced generally as of a date __ days prior to such Adjustment Date. Thus, if
the Mortgage Index value with respect to a Mortgage Loan in the Adjustable Rate
Mortgage Loan Group rises, the lag in time before the corresponding Mortgage
Rate increases will, all other things being equal, slow the upward adjustment of
the Available Funds Cap on the Group II Certificates. See "The Mortgage Pool."
Although the Pooling and Servicing Agreement provides a mechanism to
pay any Adjustable Rate Certificate Carryover, there is no assurance that funds
will be available to pay such amount. The ratings assigned to the Group II
Certificates do not address the likelihood of the payment of, any such amount.
The extent to which the yield to maturity of the Offered Certificates
may vary from the anticipated yield will depend upon the degree to which it is
purchased at a discount or premium and, correspondingly, the degree to which the
timing of payments thereon is sensitive to prepayments, liquidations and
purchases of the Mortgage Loans in the related Loan Group. In particular, in the
case of an Offered Certificate purchased at a discount, an investor should
consider the risk that a slower than anticipated rate of principal payments,
liquidations and purchases of the Mortgage Loans in the related Loan Group could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of an Offered Certificate purchased at a premium, the
risk that a faster than anticipated rate of principal payments, liquidations and
S-66
<PAGE>
purchases of such Mortgage Loans in the related Loan Group could result in an
actual yield to such investor that is lower than the anticipated yield.
The Last Scheduled Distribution Date for each Class of the Offered
Certificates is the date on which the Certificate Principal Balance thereof
would be reduced to zero assuming, among other things, that no prepayments are
received on the Mortgage Loans in the related Loan Group and that scheduled
monthly payments of principal of and interest on each of such Mortgage Loans are
timely received and that excess interest is not used to make accelerated
payments of principal. The actual final Distribution Date with respect to each
Class of Offered Certificates could occur significantly earlier than its Last
Scheduled Distribution Date because (i) prepayments are likely to occur which
will be applied to the payment of the Certificate Principal Balances thereof,
(ii) excess interest to the extent available will be applied as an accelerated
payment of principal on the Offered Certificates as described herein and (iii)
the Master Servicer may purchase all the Mortgage Loans in a Loan Group when
outstanding Stated Principal Balances thereof has declined to 10% or less of the
Cut-off Date Principal Balance of such Loan Group.
Prepayments on mortgage loans are commonly measured relative to a
prepayment model or standard. The models used in this Prospectus Supplement
("Prepayment Models") are based on an assumed rate of prepayment each month of
the then unpaid principal balance of a pool of mortgage loans similar to the
Mortgage Loans in each Loan Group. For the Fixed Rate Mortgage Loan Group, the
Prepayment Model used in this Prospectus Supplement ("Home Equity Prepayment" or
"HEP") is a prepayment assumption which represents an assumed rate of prepayment
each month relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans. 22% HEP, which represents
100% of the Prepayment Model for the Fixed Rate Mortgage Loan Group, assumes
prepayment rates of 2.2% per annum of the then outstanding principal balance of
the related Mortgage Loans in the first month of the life of such Mortgage Loans
and an additional 2.2% per annum in each month thereafter up to and including
the tenth month. Beginning in the eleventh month and in each month thereafter
during the life of such Mortgage Loans, 22% HEP assumes a constant prepayment
rate of 22% per annum. For the Adjustable Rate Mortgage Loan Group, the
Prepayment Model used in this Prospectus Supplement ("Constant Prepayment Rate"
or "CPR") is a prepayment assumption which represents a constant assumed rate of
prepayment each month relative of the then outstanding principal balance of a
pool of mortgage loans for the life of such mortgage loans. 27% CPR, which
represents 100% of the Prepayment Model for the Adjustable Rate Mortgage Loan
Group, assumes a constant prepayment rate of 27% per annum.
As used in the following tables "0% of the Prepayment Model" assumes no
prepayments on the Mortgage Loans; "80% of the Prepayment Model" assumes the
Mortgage Loans will prepay at rates equal to 80% of the related Prepayment
Model; "100% of the Prepayment Model" assumes the Mortgage Loans will prepay at
rates equal to 100% of the related Prepayment Model; "150% of the Prepayment
Model" assumes the Mortgage Loans will prepay at rates equal to 150% of the
related Prepayment Model; and "200% of the Prepayment Model" assumes the
Mortgage Loans will prepay at rates equal to 200% of the Prepayment Model
assumed prepayment rates.
There is no assurance, however, that prepayments on the Mortgage Loans
will conform to any level of the Prepayment Model, and no representation is made
that the Mortgage Loans will prepay at the prepayment rates shown or any other
prepayment rate. The rate of principal payments on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors,
including the level of interest rates. Other factors affecting prepayment of
mortgage loans include changes in obligors' housing needs, job transfers and
unemployment. In the case of mortgage loans in general, if prevailing interest
rates fall significantly below the interest rates on such mortgage loans, the
mortgage loans are likely to be subject to higher prepayment rates than if
prevailing interest rates remain at or above the rates borne by such mortgage
loans. Conversely, if prevailing interest rates rise above the interest on such
mortgage loans, the rate of prepayment would be expected to decrease.
S-67
<PAGE>
The following tables have been prepared on the basis of the following
assumptions (collectively, the "Modeling Assumptions"): (i) the Mortgage Loans
of the related Loan Group prepay at the indicated percentage of the related
Prepayment Model; (ii) distributions on the Offered Certificates are received,
in cash, on the 25th day of each month, commencing [DATE], in accordance with
the payment priorities defined herein; (iii) no defaults or delinquencies in, or
modifications, waivers or amendments respecting, the payment by the Mortgagors
of principal and interest on the Mortgage Loans occur; (iv) scheduled payments
are assumed to be received on the related Due Date commencing on [DATE], and
prepayments represent payment in full of individual Mortgage Loans and are
assumed to be received on the last day of each Due Period, commencing [DATE],
and include 30 days' interest thereon; (v) the level of one year CMT remains
constant at ____%, the level of Six-Month LIBOR remains constant at ______%, and
the level of One-Month LIBOR remains constant at ________%; (vi) the
Pass-Through Rates for the Group II Certificates remain constant at the rates
applicable prior to the related Optional Termination Date; (vii) the Closing
Date for the Certificates is [DATE]; (viii) the Mortgage Rate for each
Adjustable Rate Mortgage Loan is adjusted on its next Mortgage Rate Adjustment
Date (and on any subsequent Mortgage Rate Adjustment Dates, if necessary) to
equal the sum of (a) the assumed level of the Mortgage Index and (b) the
respective Gross Margin (such sum being subject to the applicable periodic
adjustment caps and floors); (ix) overcollateralization levels are initially set
as specified in the Pooling and Servicing Agreement, and thereafter decrease in
accordance with the provisions of the Pooling and Servicing Agreement; (x) the
Mortgage Loans in the Fixed Rate Mortgage Loan Group are purchased on the first
applicable Optional Termination Date and the Mortgage Loans in the Adjustable
Rate Mortgage Loan Group are purchased on the first applicable Optional
Termination Date; (xi) each Loan Group consists of Mortgage Loans having the
approximate characteristics described below:
Fixed Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Original
Original Amortization Remaining
Current Net Term Term Term
Balance Mortgage Rate Mortgage Rate (in months) (in months) (in months)
- ------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
</TABLE>
S-68
<PAGE>
Adjustable Rate Mortgage Loan Group
<TABLE>
<CAPTION>
Number of
Months
Until
Net Original Remaining Reset Nest Rate
Current Mortgage Mortgage Term Term Gross Periodic Change Adjustment
Balance Rate Rate (in months) (in months) Margin Cap Frequency Date Index
- ------- ---- ---- ----------- ----------- ------ --- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
S-69
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IA-1 Class IA-2
---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-70
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IA-3 Class IA-4
---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-71
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IA-5 Class IA-6
---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-72
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IM-1 Class IM-2
---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-73
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IB Class IIA-1
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-74
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IIA-2 Class IIM-1
----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-75
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200%
----------------- -- --- ---- ---- ---- -- --- ---- ---- ----
Class IIM-2 Class IIB
----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
[DATE].......................................
Weighted Average Life in years(1)............
</TABLE>
- -----------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-76
<PAGE>
Additional Information
The Depositor has filed certain additional yield tables and other
computational materials with respect to the Offered Certificates with the
Securities and Exchange Commission in a report on Form 8-K. Such tables and
materials were prepared by the Underwriters at the request of certain
prospective investors, based on assumptions provided by, and satisfying the
special requirements of, such prospective investors. Such tables and assumptions
may be based on assumptions that differ from the Modeling Assumptions.
Accordingly, such tables and other materials may not be relevant to or
appropriate for investors other than those specifically requesting them.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the Trust Fund will include two
segregated asset pools, with respect to which elections will be made to treat
each as a separate REMIC. One REMIC (the "Subsidiary REMIC") will issue
uncertificated subclasses of nonvoting interest ("Subsidiary REMIC Regular
Interests"), which will be designated as the regular interests in the Subsidiary
REMIC. The assets of the Subsidiary REMIC will consist of the Mortgage Loans and
all other property in the Trust Fund except for the property in the Trust Fund
allocated to the second REMIC (the "Master REMIC"). The Master REMIC will issue
the Regular Certificates, which will be designated as the regular interests in
the Master REMIC. The Residual Certificates will represent the beneficial
ownership of the residual interest in the Subsidiary REMIC and the residual
interest in the Master REMIC. The assets of the Master REMIC will consist of the
Subsidiary REMIC Regular Interests. Aggregate distributions on the Subsidiary
REMIC Regular Interests will equal the aggregate distributions on the Regular
Certificates issued by the Master REMIC.
Holders of Subordinate Certificates may be required to accrue income
currently even though their distributions may be reduced due to defaults and
delinquencies on the related Mortgage Loans. See "Federal Income Tax
Consequences" in the Prospectus.
Original Issue Discount
For purposes of determining the amount and rate of accrual of original
issue discount and market discount, the Depositor intends to assume that there
will be prepayments on the Mortgage Loans in each Loan Group at a rate equal to
100% of the applicable Prepayment Model, as described above. No representation
is made as to whether the Mortgage Loans will prepay at that rate or any other
rate. See "Yield, Prepayment and Maturity Considerations" herein and "Federal
Income Tax Consequences" in the Prospectus.
The Offered Certificates may be treated as being issued at a premium.
In such case, the Offered Certificateholders may elect under Section 171 of the
Code to amortize such premium under the constant yield method and to treat such
amortizable premium as an offset to interest income on the Certificates. Such
election, however, applies to all the Certificateholder's debt instruments held
during or after the first taxable year in which the election is first made, and
should only be made after consulting with a tax adviser.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder, such Certificateholder will be permitted to offset such
excess amounts only against the respective future income, if any, from such
Certificate. Although the tax treatment is uncertain, a Certificateholder may be
permitted to deduct a loss to the extent that such Holder's respective remaining
basis in such Certificate exceeds the maximum amount of future payments to which
such Holder is entitled, assuming no further Principal Prepayments on the
Mortgage Loans are received. Although the matter is not free from doubt, any
such loss might be treated as a capital loss.
S-77
<PAGE>
Special Tax Attributes of the Offered Certificates
As is described more fully under "Federal Income Tax Consequences" in
the Prospectus, the Certificates will represent qualifying assets under Sections
856(c)(5)(B) and 7701(a)(19)(C)(v) of the Code, and net interest income
attributable to the Class A Certificates will be "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Code, to the extent the assets of the Trust Fund are assets
described in such sections. The Class A Certificates will represent qualifying
assets under Section 860G(a)(3) if acquired by a REMIC within the prescribed
time periods of the Code.
Prohibited Transactions Tax and Other Taxes
The Code imposes a tax on REMICs equal to 100% of the net income
derived from "prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain specified exceptions, a prohibited transaction means
the disposition of a Mortgage Loan, the receipt of income from a source other
than a Mortgage Loan or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Loans for temporary investment pending
distribution on the Certificates. It is not anticipated that the Trust Fund will
engage in any prohibited transactions in which it would recognize a material
amount of net income.
In addition, certain contributions to a trust fund that elects to be
treated as a REMIC made after the day on which such trust fund issues all of its
interests could result in the imposition of a tax on the trust fund equal to
100% of the value of the contributed property (the "Contributions Tax"). The
Trust Fund will not accept contributions that would subject it to such tax.
In addition, a trust fund that elects to be treated as a REMIC may also
be subject to federal income tax at the highest corporate rate on "net income
from foreclosure property," determined by reference to the rules applicable to
real estate investment trusts. "Net income from foreclosure property" generally
means gain from the sale of a foreclosure property other than qualifying rents
and other qualifying income for a real estate investment trust. It is not
anticipated that the Trust Fund will recognize net income from foreclosure
property subject to federal income tax.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on the REMIC arises out of a breach of the Subservicer's or the
Trustee's obligations, as the case may be, under the Pooling and Servicing
Agreement and in respect of compliance with then applicable law, such tax will
be borne by the Subservicer or Trustee in either case out of its own funds. In
the event that either the Subservicer or the Trustee, as the case may be, fails
to pay or is not required to pay any such tax as provided above, such tax will
be paid by the Trust Fund first with amounts otherwise distributable to the
holders of Certificates in the manner provided in the Pooling and Servicing
Agreement. It is not anticipated that any material state or local income or
franchise tax will be imposed on the Trust Fund.
For further information regarding the federal income tax consequences
of investing in the Class Certificates, see "Federal Income Tax
Consequences-REMIC Certificates" in the Prospectus.
STATE TAXES
The Depositor makes no representations regarding the tax consequences
of purchase, ownership or disposition of the Offered Certificates under the tax
laws of any state. Investors considering an investment in the Offered
Certificates should consult their own tax advisors regarding such tax
consequences.
S-78
<PAGE>
All investors should consult their own tax advisors regarding the
federal, state, local or foreign income tax consequences of the purchase,
ownership and disposition of the Offered Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), prohibits "parties in interest" with respect to an employee
benefit plan subject to ERISA and Section 4975 of the Code prohibits a
"disqualified person" with respect to a plan or other arrangement subject to the
excise tax provisions set forth under Section 4975 of the Code (each of the
foregoing, a "Plan") from engaging in certain transactions involving such Plan
and its assets unless a statutory, regulatory or administrative exemption
applies to the transaction. Section 4975 of the Code imposes certain excise
taxes on prohibited transactions involving plans described under that Section.
ERISA authorizes the imposition of civil penalties for prohibited transactions
involving plans not covered under Section 4975 of the Code. Any Plan fiduciary
which proposes to cause a Plan to acquire the Offered Certificates should
consult with its counsel with respect to the potential consequences under ERISA
and the Code of the Plan's acquisition and ownership of such Certificates. See
"ERISA Considerations" in the Prospectus.
Certain employee benefit plans, including governmental plans and
certain church plans, are not subject to ERISA's requirements. Accordingly,
assets of such plans may be invested in the Class A Certificates without regard
to the ERISA considerations described herein and in the Prospectus, subject to
the provisions of other applicable federal and state law. Any such plan which is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
may nonetheless be subject to the prohibited transaction rules set forth in
Section 503 of the Code.
Except as noted above, investments by Plans are subject to ERISA's
general fiduciary requirements, including the requirement of investment prudence
and diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. A fiduciary which decides to
invest the assets of a Plan in the Class A Certificates should consider, among
other factors, the extreme sensitivity of the investments to the rate of
principal payments (including prepayments) on the Mortgage Loans.
The U.S. Department of Labor has granted administrative exemptions to
Chase Securities Inc. (Prohibited Transaction __-__, __ Fed. Reg. _____ (DATE)
and to [UNDERWRITER] (Prohibited Transaction Exemption __-__; __ Fed. Reg. _____
(DATE)) (together, the "Exemptions") from certain of the prohibited transaction
rules of ERISA and the related excise tax provisions of Section 4975 of the Code
with respect to the initial purchase, the holding and the subsequent resale by
Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemptions. The Exemptions apply to mortgage loans such as
the Mortgage Loans in the Trust Fund.
Among the conditions that must be satisfied for the Exemptions to apply
are the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction
with an unrelated party;
(2) the rights and interests evidenced by the certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the trust fund;
(3) the certificates acquired by the Plan have received a
rating at the time of such acquisition that is one of the three highest
generic rating categories from Standard & Poor's, a
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<PAGE>
division of the McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or
Fitch IBCA, Inc. ("Fitch");
(4) the trustee must not be an affiliate of any other member
of the Restricted Group (as defined below);
(5) the sum of all payments made to and retained by the
underwriters in connection with the distribution of the certificates
represents not more than reasonable compensation for underwriting the
certificates; the sum of all payments made to and retained by the
seller pursuant to the assignment of the loans to the trust fund
represents not more than the fair market value of such loans; the sum
of all payments made to and retained by the servicer and any other
servicer represents not more than reasonable compensation for such
person's services under the agreement pursuant to which the loans are
pooled and reimbursements of such person's reasonable expenses in
connection therewith; and
(6) the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933.
The trust fund must also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets
of the type that have been included in other investment pools;
(ii) certificates in such other investment pools must have
been rated in one of the three highest rating categories of S&P,
Moody's, Fitch or DCR for at least one year prior to the Plan's
acquisition of certificates; and
(iii) certificates evidencing interests in such other
investment pools must have been purchased by investors other than Plans
for at least one year prior to any Plan's acquisition of certificates.
Moreover, the Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust and the
fiduciary (or its affiliate) is an obligor on the receivables held in the trust
provided that, among other requirement, (i) in the case of an acquisition in
connection with the initial issuance of certificates, at least fifty percent
(50%) of each class of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group; (ii) such fiduciary (or its
affiliate) is an obligor with respect to five percent (5%) or less of the fair
market value of the obligations contained in the trust; (iii) the Plan's
investment in certificates of any class does not exceed twenty-five percent
(25%) of all of the certificates of that class outstanding at the time of the
acquisition; and (iv) immediately after the acquisition, no more than
twenty-five percent (25%) of the assets of any Plan with respect to which such
person is a fiduciary are invested in certificates representing an interest in
one or more trusts containing assets sold or serviced by the same entity. The
Exemptions would not apply to Plans sponsored by either Underwriter, the
Trustee, the Master Servicer, the Subservicer, any obligor with respect to
Mortgage Loans included in the Trust Fund constituting more than five percent of
the aggregate unamortized principal balance of the assets in the Trust Fund, or
any affiliate of such parties (the "Restricted Group").
It is expected that the Exemptions will apply to the acquisition and
holding of the Class A Certificates by Plans and that all conditions of the
Exemptions other than those within the control of the investors will be met. In
addition, as of the date hereof, there is no single Mortgagor that is the
obligor on
S-80
<PAGE>
five percent (5%) of the Mortgage Loans included in the Trust Fund by aggregate
unamortized principal balance of the assets of the Trust Fund.
The Exemptions do not apply to the initial purchase, the holding or the
subsequent resale of the Subordinated Certificates because the Subordinated
Certificates are subordinate to certain other Classes of Certificates.
Consequently, transfers of the Subordinated Certificates will not be registered
by the Trustee unless the Trustee receives: (i) a representation from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or a plan or arrangement
subject to Section 4975 of the Code, nor a person acting on behalf of any such
plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer; (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60; or (iii) an opinion of counsel
satisfactory to the Trustee that the purchase or holding of such Certificate by
a Plan, any person acting on behalf of a Plan or using such Plan's assets, will
not result in the assets of the Trust Fund being deemed to be "plan assets" and
subject to the prohibited transaction requirements of ERISA and the Code and
will not subject the Trustee to any obligation in addition to those undertaken
in the Pooling and Servicing Agreement. Such representation as described above
shall be deemed to have been made to the Trustee by the transferee's acceptance
of a Subordinated Certificate. In the event that such representation is
violated, or any attempt to transfer to a Plan or person acting on behalf of a
Plan or using such Plan's assets is attempted without such opinion of counsel,
such attempted transfer or acquisition shall be void and of no effect.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1
described in the Prospectus and the Exemptions, and the potential consequences
in their specific circumstances, prior to making an investment in the Offered
Certificates. Moreover, each Plan fiduciary should determine whether under the
general fiduciary standards of investment prudence and diversification, an
investment in the Offered Certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
LEGAL INVESTMENT MATTERS
The Offered Certificates will not constitute "mortgage related
securities" under the Secondary Mortgage Market Enhancement Act of 1984, as
amended ("SMMEA"). The appropriate characterization of the Offered Certificates
under various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase the Offered Certificates, may be
subject to significant interpretive uncertainties. All investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether, and to what extent, the Offered
Certificates will constitute legal investments for them.
The Depositor makes no representation as to the proper characterization
of the Offered Certificates for legal investment or financial institution
regulatory purposes, or as to the ability of particular investors to purchase
Offered Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Offered Certificates) may adversely affect the liquidity of the Offered
Certificates. See "Legal Investment" in the Prospectus.
S-81
<PAGE>
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Offered Certificates will be applied by the Depositor to the purchase price
of the Mortgage Loans.
METHOD OF DISTRIBUTION
Subject to the terms and conditions of the underwriting agreement and
the terms agreement each dated [DATE] (together, the "[UNDERWRITER] Underwriting
Agreement") between the Depositor and Chase Securities Inc. ("[UNDERWRITER]"),
as underwriter, and the underwriting agreement and the terms agreement each
dated [DATE] (together, the "[UNDERWRITER] Underwriting Agreement") between the
Seller and [UNDERWRITER] ("[UNDERWRITER]"), as underwriter, the Offered
Certificates are being purchased from the Seller by the Underwriters in the
respective initial Certificate Principal Balance of each Class of Offered
Certificates set forth below, in each case upon issuance thereof. Each of
[UNDERWRITER] and [UNDERWRITER] is referred to herein as an "Underwriter," and
together, as the "Underwriters."
Class of Certificate [UNDERWRITER] [UNDERWRITER]
- -------------------- ------------- -------------
Class IA-1 Certificates..................
Class IA-2 Certificates..................
Class IA-3 Certificates..................
Class IA-4 Certificates..................
Class IA-5 Certificates..................
Class IA-6 Certificates..................
Class IM-1 Certificates..................
Class IM-2 Certificates..................
Class IB Certificates....................
Class IIA-1 Certificates.................
Class IIA-2 Certificates.................
Class IIM-1 Certificates.................
Class IIM-2 Certificates.................
Class IIB Certificates...................
----------- ------------
Total....................................
=========== ============
The Depositor has been advised that the Underwriters propose initially
to offer the Offered Certificates to certain dealers at such price less a
selling concession not to exceed the percentage of the Certificate denomination
set forth below, and that the Underwriters may allow and such dealers may
reallow a reallowance discount not to exceed the percentage of the Certificate
denomination set forth below:
Selling Reallowance
Class of Certificate Concession Discount
- -------------------- ---------- -----------
Class IA-1 Certificates................
Class IA-2 Certificates................
Class IA-3 Certificates................
Class IA-4 Certificates................
Class IA-5 Certificates................
Class IA-6 Certificates................
Class IM-1 Certificates................
Class IM-2 Certificates................
Class IB Certificates..................
Class IIA-1 Certificates...............
Class IIA-2 Certificates...............
Class IIM-1 Certificates...............
Class IIM-2 Certificates...............
Class IIB Certificates.................
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<PAGE>
After the initial public offering, the public offering price, such
concessions and such discounts may be changed.
The Depositor has been advised by each Underwriter that it intends to
make a market in the Offered Certificates, but neither Underwriter has any
obligation to do so. There can be no assurance that a secondary market for the
Offered Certificates (or any particular Class thereof) will develop or, if it
does develop, that it will continue or that such market will provide sufficient
liquidity to Certificateholders.
Until the distribution of the Offered Certificates is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Offered Certificates. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Offered Certificates. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Offered Certificates.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Depositor nor either of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the prices of the Offered
Certificates. In addition, neither the Depositor nor any of the Underwriters
makes any representation that the Underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
The Depositor has agreed to indemnify the Underwriters against, or make
contributions to the Underwriters with respect to, certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Chase Securities Inc. is an affiliate of the Depositor and the Master
Servicer.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Morgan,
Lewis & Bockius LLP, New York, New York and for the Underwriters by
___________________. The material federal income tax consequences of the
Certificates will be passed upon for the Depositor by Morgan, Lewis & Bockius
LLP.
RATINGS
It is a condition of the issuance of the Offered Certificates that they
be each Class of Offered Certificates be assigned the ratings designated below
by [RATING AGENCY] and [RATING AGENCY].
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<PAGE>
[RATING [RATING
AGENCY] AGENCY]
CLASS RATING RATING
- ----- ------- -------
IA-1..................... AAA AAA
IA-2..................... AAA AAA
IA-3..................... AAA AAA
IA-4..................... AAA AAA
IA-5..................... AAA AAA
IA-6..................... AAA AAA
IM-1..................... AA AA
IM-2..................... A A
IB ...................... BBB- BBB
IIA-1.................... AAA AAA
IIA-2.................... AAA AAA
IIM-1.................... AA AA
IIM-2.................... A A
IIB...................... BBB- BBB
The security ratings assigned to the Offered Certificates should be
evaluated independently from similar ratings on other types of securities. A
security rating is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the Rating Agencies. The
ratings on the Offered Certificates do not, however, constitute statements
regarding the likelihood or frequency of prepayments on the Mortgage Loans, the
payment of the Adjustable Rate Certificate Carryover or the anticipated yields
in light of prepayments.
[S&P's ratings on mortgage pass-through certificates address the
likelihood of receipt by Certificateholders of payments required under the
operative agreements. S&P's ratings take into consideration the credit quality
of the mortgage pool including any credit support providers, structural and
legal aspects associated with the certificates, and the extent to which the
payment stream of the mortgage pool is adequate to make payment required under
the certificates. S&P's ratings on mortgage pass-through certificates do not,
however, constitute a statement regarding the frequency of prepayments on the
mortgage loans. S&P's ratings do not address the possibility that investors may
suffer a lower than anticipated yield.]
[The ratings assigned by FITCH to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage loans
by the related certificateholders under the agreements pursuant to which such
certificates are issued. FITCH's ratings take into consideration the credit
quality of the related mortgage pool, including any credit support providers,
structural and legal aspects associated with such certificates, and the extent
to which the payment stream on the mortgage pool is adequate to make the
payments required by such certificates. FITCH ratings on such certificates do
not, however, constitute a statement regarding frequency of prepayments of the
mortgage loans.]
The Depositor has not requested a rating of the Offered Certificates by
any rating agency other than [RATING AGENCY] and [RATING AGENCY]. However, there
can be no assurance as to whether any other rating agency will rate the Offered
Certificates or, if it does, what ratings would be assigned by such other rating
agency. The ratings assigned by any such other rating agency to the Offered
Certificates could be lower than the respective ratings assigned by the Rating
Agencies.
S-84
<PAGE>
INDEX OF DEFINED TERMS
Page
----
1/29 Loans................................................................ S-22
2/28 Loans................................................................ S-22
3/27 Loans................................................................ S-22
5/25 Loans................................................................ S-22
Accrual Period............................................................ S-9
Adjustable Cut-off Date Principal Balance................................. S-6
Adjustable Rate Certificate Carryover..................................... S-7
Adjustable Rate Mortgage Loan Group....................................... S-2
Adjustable Rate Mortgage Loans............................................ S-6
Adjustment Date........................................................... S-22
Advance................................................................... S-46
Advances.................................................................. S-14
Advanta................................................................... S-2
Applied Realized Loss Amount.............................................. S-11
Available Funds Cap....................................................... S-7
B&C....................................................................... S-21
B&C Underwriting Guidelines............................................... S-39
Balloon Amount............................................................ S-23
Balloon Loan.............................................................. S-23
Beneficial Owner.......................................................... S-49
Book-Entry Certificates................................................... S-48
Cede...................................................................... S-7
CEDEL..................................................................... S-7
CEDEL Participants........................................................ S-50
Certificate Account....................................................... S-52
Certificate Group......................................................... S-2
Certificate Owners........................................................ S-7
Certificates.............................................................. S-2
Chase Manhattan Mortgage.................................................. S-2
Citibank.................................................................. S-8
Class A................................................................... S-4
Class A Certificates...................................................... S-48
Class A Group I Certificates.............................................. S-2
Class A Group II Certificates............................................. S-2
Class A Principal Distribution Amount..................................... S-56
Class IA-6 Distribution Amount............................................ S-56
Class IIA-2 Distribution Amount........................................... S-57
Class B................................................................... S-4
Class B Certificates...................................................... S-47
Class B Principal Distribution Amount..................................... S-57
Class IB Certificates..................................................... S-2
Class IIB Certificates.................................................... S-2
Class M-1................................................................. S-4
Class M-1 Certificates.................................................... S-48
Class M-1 Principal Distribution Amount................................... S-57
Class M-2................................................................. S-4
Class M-2 Certificates.................................................... S-48
S-85
<PAGE>
Class M-2 Principal Distribution Amount................................... S-57
Class IM-1 Certificates................................................... S-48
Class IM-2 Certificates................................................... S-48
Class IIM-1 Certificates.................................................. S-48
Class IIM-2 Certificates.................................................. S-48
Closing Date.............................................................. Cover
Collateral Value.......................................................... S-23
Compensating Interest..................................................... S-46
Constant Prepayment Rate.................................................. S-67
Contributions Tax......................................................... S-77
Cooperative............................................................... S-51
CPR....................................................................... S-67
crosscollateralization.................................................... S-11
CSI....................................................................... S-81
CSI Underwriting Agreement................................................ S-81
Current Interest.......................................................... S-54
Cut-off Date.............................................................. S-11
DCR....................................................................... S-78
Definitive Certificate.................................................... S-49
Depositor................................................................. S-2
Distribution Account...................................................... S-53
Distribution Date......................................................... S-2
DTC....................................................................... S-7
Due Dates................................................................. S-46
Due Period................................................................ S-53
ERISA..................................................................... S-14
Euroclear................................................................. S-7
Euroclear Operator........................................................ S-51
Euroclear Participants.................................................... S-50
European Depositaries..................................................... S-8
Exemptions................................................................ S-78
Extra Principal Distribution Amount....................................... S-58
Financial Intermediary.................................................... S-48
[RATING AGENCY]........................................................... S-15
Fixed Rate Cut-off Date Principal Balance................................. S-6
Fixed Rate Mortgage Loan Group............................................ S-2
Fixed Rate Mortgage Loans................................................. S-5
Gross Margin.............................................................. S-22
Group I Certificates...................................................... S-2
Group II Certificates..................................................... S-2
HEP....................................................................... S-67
Home Equity Prepayment.................................................... S-67
Indirect Participants..................................................... S-49
Interest Carry Forward Amount............................................. S-55
Interest Determination Date............................................... S-60
LIBO...................................................................... S-61
LIBOR Business Day........................................................ S-61
Loan Group................................................................ S-2
Loan-to-Value Ratio....................................................... S-23
Master REMIC.............................................................. S-76
Master Servicer........................................................... S-2
S-86
<PAGE>
Master Servicer Fee....................................................... S-2
Master Servicer Fee Rate.................................................. S-47
Maximum Funds Cap......................................................... S-7
Maximum Mortgage Rate..................................................... S-22
Mezzanine Certificates.................................................... S-4
Mezzanine Group I Certificates............................................ S-2
Mezzanine Group II Certificates........................................... S-2
Minimum Mortgage Rate..................................................... S-22
Modeling Assumptions...................................................... S-68
Moody's................................................................... S-78
Mortgage Index............................................................ S-22
Mortgage Loans............................................................ S-2
Mortgage Note............................................................. S-21
Mortgage Pool............................................................. S-2
Mortgaged Property........................................................ S-2
Net Excess Cashflow....................................................... S-59
Net Mortgage Rate......................................................... S-55
NIV....................................................................... S-45
Offered Certificates...................................................... S-2
OID....................................................................... S-14
One-Month LIBOR........................................................... S-7
Optional Termination Date................................................. S-14
overcollateralization..................................................... S-11
Participants.............................................................. S-49
Pass-Through Margin....................................................... S-7
Pass-Through Rate......................................................... S-55
Paying Agent.............................................................. S-5
Percentage Interest....................................................... S-54
Periodic Rate Cap......................................................... S-22
Plan...................................................................... S-14
Pooling and Servicing Agreement........................................... S-5
Prepayment Interest Shortfall............................................. S-46
Prepayment Models......................................................... S-67
Prepayment Period......................................................... S-53
Principal Distribution Amount............................................. S-56
Principal Funds........................................................... S-53
Prohibited Transactions Tax............................................... S-77
Prospectus................................................................ S-3
PSI....................................................................... S-81
PSI Underwriting Agreement................................................ S-81
PTCE 95-60................................................................ S-79
Rating Agencies........................................................... S-15
Realized Loss............................................................. S-60
Record Date............................................................... S-8
Reference Banks........................................................... S-61
Relevant Depositary....................................................... S-49
REMIC..................................................................... S-2
REO Property.............................................................. S-46
Required Percentage....................................................... S-59
Residual Certificates..................................................... S-2
Restricted Group.......................................................... S-79
S-87
<PAGE>
Reuters Screen LIBO Page.................................................. S-61
Rules..................................................................... S-49
[RATING AGENCY]........................................................... S-15
Scheduled Payments........................................................ S-21
Seller.................................................................... S-4
Servicer Advance Date..................................................... S-46
Servicer Remittance Date.................................................. S-52
Servicing Fee............................................................. S-14
Servicing Fee Rate........................................................ S-46
Six Month LIBOR Loans..................................................... S-22
SMMEA..................................................................... S-15
Stated Principal Balance.................................................. S-14
Stepdown Date............................................................. S-59
Stepup Trigger Event...................................................... S-59
Subordinated Group II Certificates........................................ S-2
Subordinated Certificates................................................. S-4
Subordinated Group I Certificates......................................... S-4
Subservicer............................................................... S-2
Subsidiary REMIC.......................................................... S-76
Subsidiary REMIC Regular Interests........................................ S-76
Terms and Conditions...................................................... S-51
Third Party Servicing Portfolio........................................... S-44
Trigger Event............................................................. S-59
Trust Fund................................................................ S-2
Trustee................................................................... S-2
Underwriter............................................................... S-3
Underwriters.............................................................. S-81
Unpaid Realized Loss Amount............................................... S-60
S-88
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Chase
Funding Mortgage Loan Asset-Backed Certificates, Series [DATE] (the "Global
Securities") will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of The Depository Trust
Company ("DTC"), CEDEL or Euroclear. The Global Securities will be tradeable as
home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional Eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior mortgage pass-through certificate
issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts as
DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior mortgage pass-through
certificate issues. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional Eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
S-89
<PAGE>
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior mortgage
pass-through certificate issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional Eurobonds in same-day funds.
Trading between DTC Seller and CEDEL or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a CEDEL Participant or a Euroclear Participant, the purchaser
will send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, on the basis of either the actual number
of days in such accrual period and a year assumed to consist of 360 days or a
360-day year of twelve 30-day months, as applicable to the related Class of
Global Securities. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the first day of the following
month. Payment will then be made by the respective Depositary of the DTC
Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's account.
The securities credit will appear the next day (European time) and the cash debt
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the CEDEL or Euroclear cash debt will be valued instead as of
the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each CEDEL
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases
S-90
<PAGE>
CEDEL or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the Global Securities to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment to and excluding the settlement date on the
basis of either the actual number of days in such accrual period and a year
assumed to consist of 360 days or a 360-day year of twelve 30-day months, as
applicable to the related Class of Global Securities. For transactions settling
on the 31st of the month, payment will include interest accrued to and excluding
the first day of the following month. The payment will then be reflected in the
account of the CEDEL Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the CEDEL
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debt in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
CEDEL Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until
the purchase side of the day trade is reflected in their CEDEL or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their CEDEL or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from the DTC
Participant is at least one day prior to the value date for the sale to
the CEDEL Participant or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
CEDEL or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with Effectively Connected Income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption
S-91
<PAGE>
from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax
on Income Effectively Connected with the Conduct of a Trade or Business in the
United States).
Exemption or Reduced Rate for non-U.S. Persons Resident in Treaty
Countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing in
a country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only
for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the Certificate
Owners or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States, any state thereof or the District of Columbia (unless, in the
case of a Partnership, Treasury regulations provide otherwise), (iii) an estate
the income of which is includible in gross income for United States tax
purposes, regardless of its source or (iv) a trust if a court within the United
States is able to exercise primary supervision of the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be a U.S.
Person. This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
S-92
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized
to give any information or to make any representations not contained
in this Prospectus Supplement or the Prospectus and, if given or
made, such information or representation must
not be relied upon as having been authorized by the Seller or
any Underwriter. This Prospectus Supplement and the Prospectus do
not constitute an offer to sell or a solicitation of
an offer to buy any of the Offered Certificates in any
jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information
herein is correct as of any time subsequent to the date hereof
or that there has been no change in the affairs of the Seller
since such date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Summary of Terms.................................................S-
Risk Factors.....................................................S-
The Mortgage Pool................................................S-
Chase Manhattan Mortgage Corporation.............................S-
Servicing of the Mortgage Loans..................................S-
Description of the Certificates..................................S-
Yield, Prepayment and Maturity Considerations....................S-
Federal Income Tax Consequences..................................S-
State Taxes......................................................S-
ERISA Considerations.............................................S-
Legal Investment Matters.........................................S-
Use of Proceeds..................................................S-
Method of Distribution...........................................S-
Legal Matters....................................................S-
Ratings..........................................................S-
Index of Defined Terms...........................................S-
Annex I..........................................................A-
PROSPECTUS
Prospectus Supplement..............................................
Available Information..............................................
Incorporation of Certain Documents by Reference....................
Reports to Certificateholders......................................
Summary of Prospectus..............................................
Risk Factors.......................................................
Description of the Certificates....................................
The Mortgage Pools.................................................
Credit Support.....................................................
Yield Maturity and Weighted Avegage Life Considerations............
Chase Manhattan Acceptance Corporation.............................
Chase Funding, Inc.................................................
Servicing of the Mortgage Loans....................................
The Pooling and Servicing Agreement................................
Material Legal Aspects of the Mortgage Loans.......................
Legal Investment Matters...........................................
ERISA Considerations...............................................
Federal Income Tax Consequences....................................
Plan of Distribution...............................................
Use of Proceeds....................................................
Legal Matters......................................................
Index of Prospectus Definitions....................................
================================================================================
<PAGE>
================================================================================
Chase Funding, Inc.
Depositor
Chase Funding Trust,
Series [ ],
Issuer
$[__________]
Mortgage Loan Asset-Backed
Certificates, Series [___]
[LOGO]
Chase Manhattan
Mortgage Corporation
Master Servicer
Advanta Mortgage Corp. USA
Subservicer
---------------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------------
[Underwriter]
_____________
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Version 2
SUBJECT TO COMPLETION DATED SEPTEMBER 18, 1998
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus dated [DATE])
$[__________] (Approximate)
Chase Manhattan Acceptance Corporation
Seller
Chase Mortgage Trust, Series [ ]
Issuer
Multi-Class Mortgage Pass-Through Certificates, Series [___]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
$__________ ________% Class A-1 Certificates $_________ ________% Class A-7 Certificates
$__________ ________% Class A-2 Certificates $_________ (3) Class A-P Certificates
$__________ ________% Class A-3 Certificates $_________ ________% Class A-R(4) Certificates
$__________ ________% Class A-4 Certificates $_________ ________% Class M(4) Certificates
$__________ Adjustable Rate (1) Class A-5 Certificates $_________ ________% Class B-1(4) Certificates
$__________ Adjustable Rate (2) Class A-6 Certificates $_________ ________% Class B-2(4) Certificates
- -------------------
</TABLE>
(1) The Class A-5 Certificates will accrue interest at a per annum rate of
[________]% from [DATE] through [DATE]. Thereafter, the Class A-5
Certificates will accrue interest during each succeeding Interest
Accrual Period (defined herein) at a per annum rate equal to the lesser
of (A) [________]% plus LIBOR (defined herein) and (B) [________]%.
(2) The Class A-6 Certificates will accrue interest at a per annum rate of
[________]% from [DATE] through [DATE]. Thereafter, the Class A-6
Certificates will accrue interest during each succeeding Interest
Accrual Period at a per annum rate equal to the lesser of (A)
[________]% minus the product of (x) [________] and (y) LIBOR, but not
less than 0.00% and (B) [________]%
(3) The Class A-P Certificates will be entitled to principal only as
described herein under "Description of the Certificates--Principal
(Including Prepayments) -- Distributions to the Class A-P
Certificateholders."
(4) Transfer of the Class A-R, Class M, Class B-1 and Class B-2 is
restricted. See "Description of the Certificates -- Restrictions on
transfer of the Class A-R, Class M and Offered Class B Certificates.
Principal and interest payable monthly, commencing in [DATE]
The Series [___] Certificates will consist of the nine Classes of Class
A Certificates set forth above and the Class A-X Certificates (collectively, the
"Class A Certificates"), the Class M Certificates and the Class B-1, Class B-2,
Class B-3, Class B-4 and Class B-5 Certificates (collectively, the "Class B
Certificates"). The "Certificates" are the Class A, Class M and Class B
Certificates, referred to collectively. The Class A Certificates (exclusive of
the Class A-X Certificates) are sometimes collectively referred to herein as the
"Offered Class A Certificates." The "Offered Certificates" are the Offered Class
A Certificates, the Class M Certificates, the Class B-1 Certificates and the
Class B-2 Certificates, referred to collectively. The "Offered Class B
Certificates" are the Class B-1 and Class B-2 Certificates, referred to
collectively. The "Non-Offered Class B Certificates" are the Class B-3, Class
B-4 and Class B-5 Certificates, referred to collectively. Only the Offered
Certificates are offered hereby.
The Certificates will represent beneficial interests in a pool (the
"Mortgage Pool") of fixed rate one- to four-family first lien mortgage loans
having original terms to stated maturity of not more than approximately [30
years] (the "Mortgage Loans") and certain related property (together, the "Trust
Fund") conveyed by Chase Manhattan Acceptance Corporation (the "Seller"). The
Offered Certificates will be issued in the initial principal amounts set forth
above and the Non-Offered Class B Certificates will be issued in the aggregate
initial principal amount of approximately $_________. [Chase Manhattan Mortgage
Corporation ("Chase Manhattan Mortgage")] will serve as Servicer (in such
capacity, the "Servicer") of the Mortgage Pool. Capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Prospectus dated [DATE] attached hereto (the "Prospectus").
(Cover continued on next page)
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
S-1
<PAGE>
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS
NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------------------
Prospective Investors in the Offered Certificates should consider the
factors discussed under "Risk Factors" beginning on page S-__ of this Prospectus
Supplement and "Risk Factors" beginning on page __ of the Prospectus.
The yield to maturity of the Class A-P Certificates will be extremely
sensitive to the rate and timing of principal prepayments (including
prepayments, liquidations, repurchases and defaults) on the Discount Mortgage
Loans (defined herein), which may fluctuate significantly from time to time. See
"Prepayment and Yield Considerations -- Yield Considerations With Respect to the
Class A-P Certificates."
The Class M, Class B-1 and Class B-2 Certificates are subordinated
Certificates and may experience a lower than expected yield due to losses on the
Mortgage Loans. See "Prepayment and Yield Considerations."
The Offered Certificates will be purchased from the Seller by
[Underwriter] ("Underwriter"). The Offered Certificates will be offered by such
Underwriter from time to time in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. Proceeds to the Seller from the
sale of the Offered Certificates will be approximately $___________ plus accrued
interest on the Offered Certificates (other than the Class A-P Certificates),
before deducting expenses payable by the Seller, estimated to be $___________.
---------------------------
The Offered Certificates purchased by the Underwriter are offered by
the Underwriter subject to prior sale, when, as and if delivered to and accepted
by the company, and subject to certain other conditions. It is expected that
delivery of the [Class A-R, Class M, Class B-1 and Class B-2] Certificates will
be made at the offices of [Underwriter], New York, New York, and that delivery
of the remaining Classes of Offered Certificates will be made in book-entry form
only, through the Same Day Funds Settlement System of The Depository Trust
Company, in each case on or about [DATE].
---------------------------
[UNDERWRITER]
The date of the Prospectus Supplement is [DATE]
<PAGE>
Initially, the Class A Certificates will evidence a beneficial interest
of approximately ______% in the aggregate principal balance of the Mortgage
Loans in the Trust Fund, the Class M Certificates will evidence a beneficial
interest of approximately ______% in the aggregate principal balance of the
Mortgage Loans in the Trust Fund, the Class B-1 Certificates will evidence a
beneficial interest of approximately ______% in the aggregate principal balance
of the Mortgage Loans in the Trust Fund, the Class B-2 Certificates will
evidence a beneficial interest of approximately ______% in the aggregate
principal balance of the Mortgage Loans in the Trust Fund and the Non-Offered
Class B Certificates will evidence a beneficial interest of the remaining
approximately ______% in the aggregate principal balance of the Mortgage Loans
in the Trust Fund. The rights of the Class M Certificateholders to receive
distributions with respect to the Mortgage Loans will be subordinated to the
rights of the Class A Certificateholders to the extent described herein. The
rights of the Class B-1 Certificateholders to receive distributions with respect
to the Mortgage Loans will be subordinated to the rights of the Class A and
Class M Certificateholders to the extent described herein. The rights of the
Class B-2 Certificateholders to receive distributions with respect to the
Mortgage Loans will be subordinated to the rights of the Class A, Class M and
Class B-1 Certificateholders to the extent described herein. The rights of the
Non-Offered Class B Certificateholders to receive distributions with respect to
the Mortgage Loans will be subordinated to the rights of the Class A, Class M,
Class B-1 and Class B-2 Certificateholders to the extent described herein. The
percentage interest of the Class A, Class M, Class B-1 and Class B-2
Certificates in the Mortgage Pool on each Distribution Date will vary to the
extent that the Class A, Class M, Class B-1 or Class B-2 Certificateholders, as
the case may be, do not receive amounts due to them on such date, losses are
realized on the Mortgage Loans or there are principal prepayments of, or certain
other unscheduled amounts of principal are received with respect to, the
Mortgage Loans. Realized Losses (defined herein) on the Mortgage Loans (other
than Excess Losses (defined herein)) will be allocated first to the Non-Offered
Class B Certificates, then to the Class B-2 Certificates, then to the Class B-1
Certificates, then to the Class M Certificates and then to the Class A
Certificates as described herein, in each case until their principal balances
have been reduced to zero. See "Description of the Certificates--Subordinated
Certificates and Shifting Interests."
Proceeds of the assets in the Trust Fund are the sole source of
payments on the Offered Certificates. The Offered Certificates will not
represent an interest in or obligation of the Seller, Chase Manhattan Mortgage
or any of their affiliates or any other entity. The Offered Certificates will
not be savings accounts or deposits and neither the Offered Certificates nor the
underlying Mortgage Loans will be insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency or by the Seller, Chase
Manhattan Mortgage or any of their affiliates or any other entity, nor has the
Federal Deposit Insurance Corporation or any other governmental agency passed
upon the accuracy of the information contained in this Prospectus Supplement or
in the Prospectus.
The Offered Certificates may not be an appropriate investment for
individual investors who do not have sufficient resources or expertise to
evaluate the particular characteristics of the applicable Class of Offered
Certificates. This may be the case because:
o The yield to maturity of Offered Certificates purchased at a
price other than par will be sensitive to the uncertain rate
and timing of principal prepayments (including full or partial
prepayments, repurchases, defaults and liquidations) on the
Mortgage Loans;
o The rate of principal distributions on, and the weighted
average life of, the Offered Certificates will be sensitive to
the uncertain rate and timing of principal prepayments
(including full or partial prepayments, repurchases, defaults
and liquidations) on the Mortgage Loans, and as such the
Offered Certificates may be inappropriate investments for an
investor requiring a distribution of a particular amount of
principal on a specific date or an otherwise predictable
stream of distributions;
o There can be no assurance that an investor will be able to
reinvest amounts distributed in respect of principal on an
Offered Certificate (which, in general, are expected to be
greater
S-2
<PAGE>
during periods of relatively low interest rates) at a rate at
least as high as the Certificate Rate applicable thereto;
o As discussed below, there can be no assurance that a secondary
market for the Offered Certificates will develop or provide
Certificateholders with liquidity of investment; and
o The Offered Certificates are subject to the further risks and
other special considerations discussed herein and in the
Prospectus under the heading "Risk Factors."
The yield to maturity of the Class A-P Certificates will be extremely
sensitive to the rate and timing of principal payments (including prepayments,
liquidations, repurchases and defaults) on the Discount Mortgage Loans, which
may fluctuate significantly from time to time. A slower rate of principal
prepayments on the Discount Mortgage Loans than that anticipated by investors
will have a material negative effect on the yield to maturity of the Class A-P
Certificates. Investors should fully consider the associated risks, including
the risk that a relatively slow rate of principal payments (including
prepayments, liquidations, repurchases and defaults) on the Discount Mortgage
Loans will have a material negative effect on the yield to an investor in the
Class A-P Certificates. See "Prepayment and Yield Considerations -- Yield
Considerations With Respect to the Class A-P Certificates."
The yield to maturity on the Class M, Class B-1 and Class B-2
Certificates, respectively, will be extremely sensitive to losses on the
Mortgage Loans (and the timing thereof), to the extent such losses are not
covered by the applicable Classes of Certificates subordinate thereto, because
the entire amount of any such losses (other than Excess Losses) will be
allocable to such Classes of Certificates until their principal balance is
reduced to zero. See "Prepayment and Yield Considerations."
The Book-Entry Certificates (defined herein) will be represented by
certificates registered in the name of Cede & Co., as nominee of DTC, as further
described herein. The interests of beneficial owners of the Book-Entry
Certificates will be represented by book entries on the records of participating
members of DTC. Definitive certificates will be available for the Book-Entry
Certificates only under the limited circumstances described herein. See
"Description of the Certificates--Book-Entry Registration."
It is a condition to the issuance of the Offered Certificates that (i)
the Class A Certificates (other than the Class A-P and Class A-X Certificates)
be rated "AAA" by each of [RATING AGENCY] ("Rating Agency") and [RATING AGENCY]
("Rating Agency"), (ii) the Class A-P and Class A-X Certificates be rated "AAA"
by Rating Agency and "AAAr" by Rating Agency, (iii) the Class M Certificates be
rated at least "AA" by Rating Agency, (iv) the Class B-1 Certificates be rated
at least "A" by Rating Agency, and (v) the Class B-2 Certificates be rated at
least "BBB" by Rating Agency. See "Ratings."
The Seller intends to cause an election to be made to treat the assets
of the Trust Fund as a real estate mortgage investment conduit (a "REMIC") for
federal income tax purposes. The Offered Certificates (other than the Class A-R
Certificate) will constitute "regular interests" in the REMIC. The Class A-R
Certificate will represent the sole class of "residual interests" in the REMIC.
See "Federal Income Tax Considerations" herein and "Federal Income Tax
Consequences" in the Prospectus.
There is currently no secondary market for the Offered Certificates and
there can be no assurance that a secondary market will develop or, if such a
market does develop, that it will provide Certificateholders with liquidity of
investment at any particular time or for the life of the Offered Certificates.
Each [Company] intends to act as a market maker in the Offered Certificates
purchased by such Underwriter, subject to applicable provisions of federal and
state securities laws and other regulatory requirements, but is under no
obligation to do so and any such market making may be discontinued at any time.
There can be no assurance that any investor will be able to sell an Offered
Certificate at a price equal to or greater than the price at which such
Certificate was purchased. The Class M and Offered Class B Certificates may not
be transferred
S-3
<PAGE>
unless the transferee has delivered (i) a representation letter to the Servicer
stating either (a) that the transferee is not a Plan and is not acting on behalf
of a Plan or using the assets of a Plan to effect such purchase or (b) subject
to certain conditions described herein, that the source of funds used to
purchase the Class M or Offered Class B Certificates is an "insurance company
general account" or (ii) an opinion of counsel and such other documentation as
provided in this Prospectus Supplement. In addition, the Class A-R Certificate
may not be purchased by or transferred to (i) a "Disqualified Organization,"
(ii) except under certain limited circumstances, a person who is not a "U.S.
Person," (iii) a Plan or a person acting on behalf of or investing the assets of
a Plan or (iv) any person or entity who the transferor knows or has reason to
know will be unwilling or unable to pay when due federal, state or local taxes
with respect thereto. See "ERISA Considerations" and "Description of the
Certificates -- Restrictions on Transfer of the Class A-R, Class M and Offered
Class B Certificates" herein and "Federal Income Tax Consequences" in the
Prospectus.
---------------------------
The Seller will file with the Securities and Exchange Commission (the
"Commission") certain computational materials relating to the Mortgage Loans and
the Offered Certificates on Form 8-K. Such materials were prepared by the
Underwriter for certain prospective investors, and, unless otherwise specified
in such Form 8-K, the information included in such materials is subject to and
is superseded by, the information set forth in this Prospectus Supplement.
---------------------------
This Prospectus Supplement does not contain complete information about
the offering of the Offered Certificates. Additional information is contained in
the Prospectus and purchasers are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Offered Certificates may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus.
---------------------------
Until [DATE], all dealers effecting transactions in the Offered
Certificates, whether or not participating in this distribution, may be required
to deliver a Prospectus Supplement and Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as Underwriters and with respect to their unsold allotments of
subscriptions.
---------------------------
S-4
<PAGE>
TERMS OF THE CERTIFICATES
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned them in the Prospectus.
Securities Offered........... Multi-Class Mortgage Pass-Through Certificates,
Series [___], Class A, Class M, Class B-1 and
Class B-2. The Class A Certificates (exclusive
of the Class A-X Certificates), Class M
Certificates, Class B-1 Certificates and Class
B-2 Certificates are sometimes collectively
referred to herein as the "Offered
Certificates." Only the Offered Certificates
are offered hereby.
[The "Class A Certificates" will consist of the
Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-P,
Class A-R and Class A-X Certificates.]
The Class A Certificates (exclusive of the
Class A-P Certificates) are sometimes
collectively referred to herein as the "Non-PO
Class A Certificates."
The Class A Certificates (exclusive of the
Class A-X Certificates) are sometimes
collectively referred to herein as the "Offered
Class A Certificates."
The Class A-P Certificates are principal only
Certificates and will not be entitled to
payments of interest.
The "Class B Certificates" will consist of the
Class B-1, Class B-2, Class B-3, Class B-4 and
Class B-5 Certificates.
The Class M and Class B Certificates are
sometimes collectively referred to herein as
the "Subordinated Certificates."
The Class B-1 and Class B-2 Certificates are
sometimes collectively referred to herein as
the "Offered Class B Certificates."
The Class B-3, Class B-4 and Class B-5
Certificates are sometimes collectively
referred to herein as the "Non-Offered Class B
Certificates."
The Class A-X, Class B-3, Class B-4 and Class
B-5 Certificates are not offered hereby. Any
information contained herein relating to the
Class A-X, Class B-3, Class B-4 and Class B-5
Certificates is presented solely to provide a
better understanding of the Offered
Certificates.
Seller....................... Chase Manhattan Acceptance Corporation (the
"Seller"). See "Chase Manhattan Acceptance
Corporation" in the Prospectus.
Servicer..................... [Chase Manhattan Mortgage Corporation ("Chase
Manhattan Mortgage" or the "Servicer"). See
"Chase Manhattan Mortgage Corporation."]
Trustee...................... [TRUSTEE], a __________________ (the
"Trustee"). See "The Pooling and Servicing
Agreement -- Trustee."
S-5
<PAGE>
Issuer....................... Chase Mortgage Trust, Series [ ].
Initial Principal Amount of
Offered Certificates......... $[__________]. (Approximate; the initial
principal amount of the Offered Certificates
will be subject to a permitted variance of plus
or minus 5%. Any difference between the
aggregate principal balance of the Certificates
as of the date of issuance of the Certificates
and the approximate aggregate initial principal
balance thereof as of the date of this
Prospectus Supplement will be allocated among
the various Classes of Certificates so as to
retain materially the characteristics thereof
described herein. Any such difference will be
described in a Current Report on Form 8-K of
the Seller that will be available to purchasers
of the Certificates at, and will be filed with
the Securities and Exchange Commission within
15 days of, the initial delivery of the
Certificates. See "Description of the
Certificates."
Denominations and Registration
of the Certificates.......... The Offered Certificates generally will be
issuable in denominations of ____________
principal amount (or integral multiples of
$1,000 in excess thereof). A single Class A-R
Certificate will be issuable in a $100
denomination. The ________________ initially
will be issued in book-entry form and initially
will be represented by one or more physical
certificates registered in the name of Cede &
Co., as the nominee of The Depository Trust
Company ("DTC"). No person acquiring an
interest in any Offered Class A Certificate (a
"Certificate Owner") will be entitled to
receive a Definitive Certificate (defined
herein) representing such person's interest in
the Trust Fund, except in the event that
Definitive Certificates are issued under the
limited circumstances described herein. The
Class ______________________Certificates will
be issued in definitive form. All references
herein to holders of Certificates
("Certificateholders") and their rights shall
mean and include the rights of Certificate
Owners, as such rights may be exercised through
DTC and its participating organizations, except
as otherwise specified herein. See "Description
of the Certificates-- Book-Entry Registration"
and "--Definitive Certificates."
Cut-Off Date................. [DATE]
Agreement.................... The Pooling and Servicing Agreement, to be
dated as of [DATE] (the "Agreement"), among the
Seller, the Servicer and the Trustee, relating
to the Certificates.
The Mortgage Loans........... Fixed rate, first lien mortgage loans secured
by one- to four-family residential properties,
with original terms to stated maturity of [30
years or less], having an aggregate unpaid
principal balance on the Cut-off Date of
approximately $_______________ (the "Mortgage
Loans"). Monthly payments of principal of and
interest on the Mortgage Loans ("Monthly
Payments") will be due on the first day of each
month (each, a "Due Date"). The Mortgage Loans
will be conveyed to the Trust Fund pursuant to
the Agreement.
S-6
<PAGE>
The Seller expects the Mortgage Loans to have
the characteristics described below. References
herein to percentages of the Mortgage Loans
refer to the percentage of the aggregate
principal balance of the Mortgage Loans as of
the Cut-off Date, after giving effect to
Monthly Payments due on or prior to the Cut-off
Date, whether or not received. See "The
Mortgage Pool."
Selected Mortgage Loan Data
(Approximate as of the Cut-off Date)
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Mortgage Loans................................................................. ________
Aggregate Unpaid Principal Balance....................................................... $________
Range of Unpaid Principal Balances....................................................... $________- $________
Average Unpaid Principal Balance......................................................... _________
Range of Mortgage Rates.................................................................. ________%- ________%
Weighted Average Mortgage Rate........................................................... ________%
Range of Remaining Terms to Stated Maturity.............................................. _____ months - ____ months
Weighted Average Remaining Term to Stated Maturity....................................... ____ months
Range of Remaining Terms to Expected Maturity(1)......................................... ____ months - ____ months
Weighted Average Remaining Term to Expected Maturity(1).................................. ____ months
Weighted Average Loan Age(2)............................................................. ____ months
Range of Original Loan-to-Value Ratios................................................... ______% - ______%
Weighted Average Original Loan-to-Value Ratio............................................ ______%
Weighted Average FICO Score(3)........................................................... ________
- ---------------
</TABLE>
(1) Based on payments actually received (or scheduled to be received) on each
Mortgage Loan as of the Cut-off Date.
(2) Based on the number of months from and including the first Monthly Payment
to and including the Cut-off Date.
(3) Based on the portion of the Mortgage Loans (approximately _____%) that
were scored.
Prepayment and Yield
Considerations............... The rate of principal payments and the yields
to maturity of the Offered Certificates are
related to the rate and timing of payments of
principal, including prepayments, on the
underlying Mortgage Loans. As is the case with
mortgage-backed securities generally, the
Offered Certificates are subject to substantial
inherent cash-flow uncertainties because the
Mortgage Loans may be prepaid, in whole or in
part, at any time without penalty. Any
prepayments will result in distributions to
Certificateholders of principal amounts which
would otherwise be distributed over the
remaining terms of the related Mortgage Loans.
S-7
<PAGE>
The rate of prepayments with respect to
mortgage loans secured by one- to four-family
residences has fluctuated significantly in
recent years. The Seller believes that a
predominant factor affecting the prepayment
rate on a large pool of mortgage loans is the
difference between the interest rates on the
mortgage loans (giving consideration to the
cost of any refinancing) and prevailing
mortgage rates. In general, if mortgage
interest rates were to fall below (or rise
above) the interest rates on the Mortgage
Loans, the rate of prepayment would be expected
to increase (or decrease). Other factors
affecting the prepayment rate of the Mortgage
Loans may include changes in mortgagors'
housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgaged
properties and servicing decisions.
In general, rapid rates of prepayments on the
Mortgage Loans are likely to coincide with
periods of low prevailing interest rates.
During such periods, the yields at which an
investor may be able to reinvest amounts
received as principal payments on the
investor's Class of Offered Certificates may be
lower than the Certificate Rate on that Class.
Conversely, in general, slow rates of
prepayments on the Mortgage Loans are likely to
coincide with periods of high prevailing
interest rates. During such periods, the amount
of principal payments available to an investor
for reinvestment at such high rates may be
relatively low.
The tables set forth herein under "Prepayment
and Yield Considerations" illustrates the
effect of various constant prepayment rates on
the weighted average lives of each Class of
Offered Certificates based on certain
assumptions described therein (the "Modeling
Assumptions").
[The yield to maturity of the Class A-P
Certificates will be extremely sensitive to the
rate and timing of principal payments
(including prepayments, liquidations,
repurchases and defaults) on the Discount
Mortgage Loans, which may fluctuate
significantly from time to time. A slower rate
of principal prepayments on the Discount
Mortgage Loans than that anticipated by
investors will have a material negative effect
on the yield to maturity of the Class A-P
Certificates. Investors should fully consider
the associated risks, including the risk that a
relatively slow rate of principal payments
(including prepayments, liquidations,
repurchases and defaults) on the Discount
Mortgage Loans will have a material negative
effect on the yield to an investor in the Class
A-P Certificates. See "Prepayment and Yield
Considerations -- Yield Considerations With
Respect to the Class A-P Certificates."]
The yield to maturity on the Class M, Class B-1
and Class B-2 Certificates, respectively, will
be extremely sensitive to losses on the
Mortgage Loans (and the timing thereof), to the
extent such losses are not covered by the
applicable Classes of Certificates subordinate
thereto, because the entire amount of any such
losses (other than Excess Losses (defined
herein)) will be allocable to such Classes of
Certificates until their principal balance is
reduced to zero.
S-8
<PAGE>
If an Offered Certificate (particularly a
[Class A-P] Certificate) is purchased at a
discount from its original principal amount and
if the purchaser of such Offered Certificate
calculates its yield to maturity based on a
faster assumed rate of payment of principal
than that actually received on such Offered
Certificate, its actual yield to maturity will
be lower than that so calculated. Conversely,
if an Offered Certificate is purchased at a
premium to its original principal amount, and
if the purchaser of such Offered Certificate
calculates its yield to maturity based on a
slower assumed rate of payment of principal
than that actually received on such Offered
Certificate, its actual yield to maturity will
be lower than that so calculated and, under
certain circumstances, such a purchaser may
fail to recoup its initial investment.
See "Prepayment and Yield Considerations"
herein and "Yield, Maturity and Weighted
Average Life Considerations" in the Prospectus.
Description of the
Certificates............. Initially, the Class A Certificates will
evidence in the aggregate a beneficial interest
of approximately _____% (the "Class A
Percentage") in the aggregate principal amount
of the Mortgage Loans (the "Mortgage Pool") and
certain other property held in trust for the
benefit of the Certificateholders (the "Trust
Fund"), the Class M Certificates will evidence
in the aggregate a beneficial interest of
approximately _____% (the "Class M Percentage")
in the aggregate principal balance of the
Mortgage Loans in the Trust Fund, the Class B-1
Certificates will evidence in the aggregate a
beneficial interest of approximately _____%
(the "Class B-1 Percentage") in the aggregate
principal balance of the Mortgage Loans in the
Trust Fund, the Class B-2 Certificates will
evidence in the aggregate a beneficial interest
of approximately _____% (the "Class B-2
Percentage") in the aggregate principal balance
of the Mortgage Loans in the Trust Fund and the
Non-Offered Class B Certificates will evidence
in the aggregate the remaining beneficial
interest of approximately _____% (the
"Non-Offered Class B Percentage") in the
aggregate principal balance of the Mortgage
Loans in the Trust Fund. The Class A
Percentage, the Class M Percentage, the Class
B-1 Percentage and the Class B-2 Percentage
will vary from time to time, as described
herein, to the extent that the Class A, Class
M, Class B-1 or Class B-2 Certificateholders do
not receive amounts due to them on any
Distribution Date, losses are realized on the
Mortgage Loans or there are principal
prepayments of, or certain other unscheduled
amounts of principal are received with respect
to, the Mortgage Loans. The Non-Offered Class B
Certificates will have an initial aggregate
principal balance of approximately $_______ and
the Class A-X Certificates will have an initial
notional amount of approximately $_________,
and such Certificates will be privately placed
with a limited number of institutional
investors and are not offered hereby. See
"Description of the Certificates --
Distributions to Certificateholders" and "--
Subordinated Certificates and Shifting
Interests."
Record Date.................. The last business day of the month preceding
the month of each Distribution Date.
S-9
<PAGE>
Principal (Including
Prepayments)............... Principal received or advanced as a portion of
the Monthly Payment on each Mortgage Loan will
be passed through monthly, on the 25th day of
the month (or if such day is not a business
day, the next succeeding business day) in which
the related Due Date occurs (each, a
"Distribution Date"), commencing [DATE].
Principal prepayments received during the
period from the first day of any month to the
last day of such month (each, a "Principal
Prepayment Period") will be distributed on the
Distribution Date occurring in the month
following the month of receipt. Distributions
in respect of principal will be allocated among
the various Classes as described herein under
"Description of the Certificates --
Distributions to Certificateholders --
Principal (Including Prepayments)" and on a pro
rata basis among the Certificates of each
Class. The Class A-X Certificates will be
entitled to interest only and will not be
entitled to distributions of principal. The
rate of distribution allocable to principal
will depend on, among other factors, the rate
of payment of principal (including prepayments)
of the Mortgage Loans. The Final Scheduled
Distribution Date (defined herein) of each
Class of Offered Certificates has been
calculated as described herein. The actual
final distribution with respect to each Class
of Offered Certificates is likely to occur
prior to its Final Scheduled Distribution Date,
although, in the event of defaults in payment
of the Mortgage Loans, it could occur later or
earlier. See "Description of the Certificates
-- Distributions to Certificateholders --
Principal (Including Prepayments)."
Interest..................... Interest received or advanced on each Mortgage
Loan at the applicable Net Mortgage Rate
(defined herein) will be passed through monthly
on the Distribution Date occurring in the month
in which the related Due Date occurs,
commencing [DATE]. Interest will be payable to
the holders of each Class of Offered
Certificates at the rate (the "Certificate
Rate") specified or described on the cover
hereof on the outstanding respective principal
balances of such Certificates as of the
relevant Determination Date (defined herein),
calculated on the basis of a 360-day year of
twelve 30-day months, less any Non-Supported
Interest Shortfalls (defined herein) and the
interest portion of any Realized Losses
(defined herein). The Class A-P Certificates
will be entitled to principal only and will not
be entitled to distributions of interest. See
"Description of the Certificates --
Distributions to Certificateholders --
Interest" and "--Principal (Including
Prepayments)."
The Servicer will receive a fee for the
servicing of each Mortgage Loan (the "Servicing
Fee") equal to ______% per annum of the unpaid
principal balance of each Mortgage Loan. See
"The Pooling and Servicing Agreement --
Servicing Compensation and Payment of
Expenses."
[The Class A-X Certificates are interest only
certificates. The Class A-X Certificates will
not receive distributions of principal, but
will accrue interest on the Class A-X Notional
Amount (defined herein). The Class A-X
Certificates are not offered hereby.]
S-10
<PAGE>
Subordinated Certificates.... The rights of the holders of each Class of
Subordinated Certificates to receive
distributions with respect to the Mortgage
Loans will be subordinated to the rights of the
Class A Certificateholders, and (except in the
case of the Class M Certificateholders) to the
holders of each Class of Class B Certificates
having a lower numerical class designation, to
the extent described below. The subordination
provided by the Subordinated Certificates is
intended to enhance the likelihood of regular
receipt by the Class A Certificateholders of
the full amount of monthly distributions due
them and to protect the Class A
Certificateholders against losses. The
subordination provided by each Class of Class B
Certificates relative to the Class M
Certificates and each Class of Class B
Certificates having a lower numerical class
designation is intended to similarly benefit
such Classes of Subordinated Certificates.
On each Distribution Date, payments to the
Class A Certificateholders will be made prior
to payments to the Class M and Class B
Certificateholders, payments to the Class M
Certificateholders will be made prior to
payments to the Class B Certificateholders,
payments to the Class B-1 Certificate holders
will be made prior to payments to the Class B-2
Certificateholders and the Non-Offered Class B
Certificateholders and payments to the Class
B-2 Certificateholders will be made prior to
payments to the Non-Offered Class B
Certificateholders. If, on any Distribution
Date prior to the Credit Support Depletion Date
(defined herein), the Class A
Certificateholders receive less than the amount
due to them on such date, the interest of the
Class A Certificateholders in the Trust Fund
will increase so as to preserve the entitlement
of the Class A Certificateholders with respect
to unpaid principal of the Mortgage Loans and
interest thereon. If a principal prepayment is
made or certain other unscheduled amounts of
principal are received on a Mortgage Loan, the
Non-PO Class A Certificateholders will be
entitled to receive an amount equal to the
Non-PO Class A Prepayment Percentage (defined
herein) of the amount received. This will have
the effect of accelerating receipt of principal
by the Non-PO Class A Certificateholders (other
than the [Class A-7 and Class A-X]
Certificateholders), thus reducing their
proportionate interest in the Trust Fund and
increasing the relative interest evidenced by
the Class M and Class B Certificates (absent
offsetting Realized Losses (defined herein)
allocated to the Class B or Class M
Certificates). Increasing the interest of the
Class M and Class B Certificates relative to
that of the Class A Certificates is intended to
preserve the availability of the subordination
provided by the Class M and Class B
Certificates. Similarly, because, as described
herein, the then-current level of Credit
Support (defined herein) of each Class of
Subordinated Certificates will determine which
Class or Classes of Subordinated Certificates
will receive amounts in respect of principal
prepayments included in the Subordinated
Optimal Principal Amount (defined herein),
under certain circumstances, on any
Distribution Date, Realized Losses on the
Mortgage Loans may cause one or more Classes of
Subordinated Certificates to receive a
disproportionate amount of the Subordinated
Optimal Principal Amount. See "Description of
the Certificates -- Distributions to
Certificateholders -- Principal (Including
Prepayments)" and "--Subordinated Certificates
and Shifting Interests."
S-11
<PAGE>
Advances..................... The Servicer is obligated to make advances
("Advances") for distribution to the
Certificateholders in respect of delinquent
Monthly Payments due on the immediately
preceding Due Date unless the Servicer
determines such Advances will not be
recoverable from future payments or collections
on the related Mortgage Loans. See "The Pooling
and Servicing Agreement -- Advances."
Compensating Interest........ When a Mortgagor makes a full or partial
principal prepayment of a Mortgage Loan between
Due Dates, the Mortgagor generally is required
to pay interest on the principal balance
thereof only to the date of prepayment. In
order to minimize any resulting shortfall in
interest (such shortfall, a "Prepayment
Interest Shortfall"), the aggregate amount of
the Servicing Fee will be reduced to the extent
necessary to include an amount in payment to
the holders of the Offered Certificates equal
to a full month's interest payment at the
applicable Net Mortgage Rate (defined herein)
with respect to such pre- paid Mortgage Loan;
provided, however, that such reductions in the
Servicing Fee will be made only up to the
product of (i) one-twelfth of ______% and (ii)
the aggregate scheduled principal balance of
the Mortgage Loans with respect to the related
Distribution Date. See "The Pooling and
Servicing Agreement --Adjustment to Servicing
Fee in Connection with Prepaid Mortgage Loans."
Optional Termination......... On any Distribution Date on which the aggregate
unpaid principal balance of the Mortgage Loans
is less than 10% of the aggregate unpaid
scheduled principal balance of the Mortgage
Pool on the Cut-off Date, the Servicer may
repurchase from the Trust Fund all Mortgage
Loans remaining outstanding at a purchase price
equal to the sum of (i) the unpaid principal
amount of such Mortgage Loans (other than any
such Mortgage Loans as to which the related
Mortgaged Properties have been acquired and
whose fair market values are included in clause
(ii) below), plus accrued interest thereon at
the Net Mortgage Rate (defined herein) to the
next Due Date and (ii) the fair market value of
any such acquired properties, in each case less
any unreimbursed Advances made with respect to
such Mortgage Loans. Upon such repurchase,
holders of the Offered Certificates generally
will receive the outstanding principal balance
of the Offered Certificates plus (except in the
case of the Class A-P Certificates) accrued
interest thereon at their respective
Certificate Rates. See "The Pooling and
Servicing Agreement -- Optional Termination."
Federal Income Tax
Consequences................ An election will be made to treat the assets of
the Trust Fund as a real estate mortgage
investment conduit (a "REMIC") for federal
income tax purposes. The Offered Certificates
(other than the Class A-R Certificate) will
represent regular interests in the REMIC. As
such, the Offered Certificates (other than the
Class A-R Certificate) will be treated as debt
instruments issued by a REMIC. The Class A-R
Certificate will represent the sole Class of
residual interests in the REMIC.
S-12
<PAGE>
All Certificateholders will be required to use
the accrual method of accounting with respect
to interest income on the Certificates,
regardless of their normal method of
accounting. Holders of Offered Certificates
that have original issue discount will be
required to include amounts in income with
respect to such Certificates in advance of the
receipt of cash attributable to such income. It
is anticipated that the Class _________
Certificates will be issued with original issue
discount in an amount equal to the excess of
their initial principal balances over their
respective issue prices (including accrued
interest). It is also anticipated that the
Class _________ Certificates will be issued at
a premium, and that the Class ________
Certificates will be issued with de minimis
original issue discount for federal income tax
purposes. Holders of Offered Certificates that
have original issue discount will be required
to include amounts in income with respect to
such Certificates in advance of the receipt of
cash attributable to such income. The
prepayment assumption that will be used in
computing the amount of original issue discount
includible periodically will be ___% of the
Prepayment Model. See "Prepayment and Yield
Considerations." No representation is made that
payments on the Offered Certificates will occur
at that rate or any other rate.
The Offered Certificates will be treated as (i)
assets described in section 7701(a)(19)(C) of
the Internal Revenue Code of 1986, as amended
(the "Code") and (ii) "real estate assets"
within the meaning of section 856(c)(5)(B) of
the Code, in each case to the extent described
herein and in the Prospectus. See "Federal
Income Tax Consequences" in the Prospectus.
Class A-R Certificate. The Class A-R
Certificate generally will be treated in the
same manner as the Class A Certificates for the
various qualification purposes referred to
above, but generally will not be treated as
evidences of indebtedness for federal income
tax purposes. Instead, the holders of the Class
A-R Certificate will be required to report, and
will be taxed on, their pro rata shares of the
taxable income or loss of the REMIC, and such
requirements will continue until there are no
Certificates of any Class outstanding, even
though the Class A-R Certificateholder
previously may have received full payment of
its stated interest and principal. Furthermore,
the taxable income of the Class A-R
Certificateholder attributable to the Class A-R
Certificate may exceed the principal and
interest distributions received by such
Certificateholders with respect to such
Certificates during the corresponding period,
which could result in a negative after-tax
return for such Certificateholders. See
"Federal Income Tax Considerations."
The Class A-R Certificate, which represents the
residual interest in the REMIC, may experience
a negative after-tax return. Accordingly,
prospective investors are urged to consult
their own tax advisors and consider the
after-tax effect of ownership of the Class A-R
Certificate and the suitability of the Class
A-R Certificate to their investment objectives.
S-13
<PAGE>
Restrictions on Purchase and Transfer of Class
A-R Certificate. The Class A-R Certificate is
not offered for sale to tax-exempt
organizations that are "disqualified
organizations" as defined in "Federal Income
Tax Consequences -- Transfers of Residual
Certificates -- Disqualified Organizations" in
the Prospectus. In addition, there are
limitations on transfers of the Class A-R
Certificate to plans ("Plans") described in or
subject to the plan asset regulations set forth
in 29 C.F.R. ss. 2510.3-101, persons acting on
behalf of Plans, or persons using the assets of
Plans. Furthermore, the Class A-R Certificate
may not be purchased by or transferred to any
person that is not a "U.S. Person," as defined
herein under "Description of the Certificates
-- Restrictions on Transfer of the Class A-R,
Class M and Offered Class B Certificates,"
unless (i) such person holds the Class A-R
Certificates in connection with the conduct of
a trade or business within the U.S. and
furnishes the transferor and the Trustee with
an effective Internal Revenue Service Form 4224
or (ii) the transferee delivers to both the
transferor and the Trustee an opinion of
counsel to the effect that such transfer of the
Class A-R Certificate will not be disregarded
for Federal income tax purposes. Finally,
neither the Class A-R Certificate nor any
beneficial interest therein may be sold or
otherwise transferred without the consent of
the Trustee, which will be withheld if
necessary to avoid a risk of REMIC
disqualification or REMIC-level tax. See
"Description of the Certificates --
Restrictions on Transfer of the Class A-R,
Class M and Offered Class B Certificates."
ERISA Considerations......... A fiduciary of any employee benefit plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code, including an
individual retirement account (each, a "Plan"),
or any other person investing "plan assets" of
any Plan, should carefully review with its
legal advisors whether the purchase or holding
of Class A Certificates could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. Because
the Class M, Class B-1 and Class B-2
Certificates are subordinated to the Class A
Certificates, such Certificates may not be
transferred unless the transferee has delivered
(i) a representation letter to the Trustee
stating either (a) that the transferee is not a
Plan and is not acting on behalf of a Plan or
using the "plan assets" of a Plan to effect
such purchase or (b) subject to certain
conditions described herein, that the source of
funds used to purchase the Class M, Class B-1
or Class B-2 Certificates is an "insurance
company general account" or (ii) an opinion of
counsel as described under "ERISA
Considerations" in this Prospectus Supplement.
See "ERISA Considerations" herein and in the
Prospectus.
S-14
<PAGE>
Legal Investment............. The Class A and Class M Certificates will
constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act
of 1984, as amended ("SMMEA") for so long as
they are rated in one of the two highest rating
categories by at least one nationally
recognized statistical rating organization,
and, as such, will be "legal investments" for
certain types of institutional investors to the
extent provided in SMMEA, subject to state laws
overriding SMMEA. There may be certain
restrictions on the ability of certain
investors either to purchase Class A and Class
M Certificates or to purchase Class A and Class
M Certificates representing more than a
specified percentage of the investor's assets.
The Class B-1 and Class B-2 Certificates will
not constitute "mortgage related securities"
under SMMEA. The appropriate characterization
of the Class B-1 and Class B-2 Certificates
under various legal investment restrictions,
and thus the ability of investors subject to
these restrictions to purchase the Class B-1 or
Class B-2 Certificates, may be subject to
significant interpretive uncertainties.
Prospective purchasers of the Offered
Certificates, including those institutions
whose investment activities are subject to
review by federal or state regulatory
authorities, should consult their own legal,
tax and accounting advisors and, where
appropriate, applicable regulatory authorities,
in determining the consequences to them of the
purchase, ownership and disposition of the
Offered Certificates. See "Legal Investment
Matters" herein and in the Prospectus.
Use of Proceeds.............. Substantially all of the net proceeds from the
sale of the Offered Certificates will be
applied by the Seller to the purchase price of
the Mortgage Loans. See "Use of Proceeds."
Liquidity Considerations..... There is currently no secondary market for the
Certificates offered hereby, and there can be
no assurance that such a market will develop.
The Underwriter has indicated its intention to
make a secondary market in the Offered
Certificates purchased by it, but it is not
obligated to do so. There can be no assurance
that a secondary market for such Certificates
will develop, or if it does develop, will
continue for the life of the Certificates, or
will provide investors with liquidity of
investment. In addition, there can be no
assurance that an investor in a Certificate
will be able to sell such Certificate at a
price that is equal to or greater than the
price at which such investor purchased such
Certificate.
Final Scheduled Distribution
Date........................ The Final Scheduled Distribution Date of each
Class of Offered Certificates is [DATE], which
is the Distribution Date occurring in the month
that is one month following the latest stated
maturity date of any Mortgage Loan.
The rate of principal payments of the
Certificates will depend on the rate of
principal payments of the Mortgage Loans
(including prepayments, defaults, delinquencies
and liquidations) which, in turn, will depend
on the characteristics of the Mortgage Loans,
the level of prevailing interest rates and
other economic factors, and no assurance can be
given as to the actual payment experience. The
principal balance or notional amount, as
applicable, of each Class of Certificates may
be reduced to zero earlier or later than its
Final Scheduled Distribution Date.
S-15
<PAGE>
Ratings..........................It is a condition to the issuance of the
Offered Certificates that (i) the Class A
Certificates be rated "AAA" by each of [RATING
AGENCY] and [RATING AGENCY], (ii) the Class A-P
and Class A-X Certificates be rated "AAA" by
[RATING AGENCY] and "AAAr" by [RATING AGENCY],
(iii) the Class M Certificates be rated at
least "AA" by [RATING AGENCY], (iv) the Class
B-1 Certificates be rated at least "A" by
[RATING AGENCY], and (v) the Class B-2
Certificates be rated at least "BBB" by [RATING
AGENCY]. See "Ratings."
S-16
<PAGE>
RISK FACTORS
Prepayments May Adversely Affect Yield
The rate of distributions in reduction of the principal balance of any
Class of Offered Certificates, the aggregate amount of distributions of
principal and interest on any Class of Offered Certificates and the yield to
maturity of any Class of Offered Certificates will be directly related to the
rate of payments of principal on the Mortgage Loans and to the amount and timing
of mortgagor defaults resulting in Realized Losses. The rate of principal
payments on the Mortgage Loans will in turn be affected by, among other things,
the amortization schedules of the Mortgage Loans, the rate of principal
prepayments (including partial prepayments and those resulting from refinancing)
thereon by mortgagors, liquidations of defaulted Mortgage Loans, repurchases of
Mortgage Loans by the Seller as a result of defective documentation or breaches
of representations and warranties, optional purchase by the Servicer of
defaulted Mortgage Loans and optional purchase by the Servicer of all of the
Mortgage Loans in connection with the termination of the Trust Fund. See
"Prepayment and Yield Considerations" and "The Pooling and Servicing Agreement
- -- Optional Termination" herein and "The Pooling and Servicing Agreement --
Assignment of Mortgage Loans; Warranties," "--Repurchase or Substitution" and
"--Termination; Purchase of Mortgage Loans" in the Prospectus. Mortgagors are
permitted to prepay the Mortgage Loans, in whole or in part, at any time without
penalty.
The rate of payments (including prepayments, liquidations and defaults)
on pools of mortgage loans is influenced by a variety of economic, geographic,
social and other factors. If prevailing rates for similar mortgage loans fall
below the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment
would generally be expected to increase. Conversely, if interest rates on
similar mortgage loans rise above the Mortgage Interest Rates on the Mortgage
Loans, the rate of prepayment would generally be expected to decrease.
An investor that purchases any Offered Certificates at a discount,
particularly the Class A-P Certificates, should consider the risk that a slower
than anticipated rate of principal payments (including prepayments, liquidations
and defaults) on the Mortgage Loans or, in the case of the Class A-P
Certificates, on the Discount Mortgage Loans, will result in an actual yield
that is lower than such investor's expected yield. See "Prepayment and Yield
Considerations--Yield Considerations With Respect to the Class A-P
Certificates." An investor that purchases any Offered Certificates at a premium
should consider the risk that a faster than anticipated rate of principal
payments (including prepayments, liquidations and defaults) on the Mortgage
Loans will result in an actual yield that is lower than such investor's expected
yield.
Subordination of Subordinated Certificates Increases Risk of Loss To Such
Classes
The rights of the holders of the Class M Certificates to receive
distributions with respect to the Mortgage Loans will be subordinated to such
rights of the holders of the Class A Certificates and the rights of the holders
of a Class of Class B Certificates to receive distributions with respect to the
Mortgage Loans will be subordinated to such rights of the holders of the Class A
Certificates, the Class M Certificates and the Classes of Class B Certificates
with lower numerical designations, all to the extent described herein under
"Description of the Certificates -- Subordination Certificates and Shifting
Interests."
S-17
<PAGE>
Book-Entry System for Certain Classes of Class A Certificates May Limit Rights
of Certificate Owners
Transactions in the Book-Entry Certificates generally can be effected
only through DTC, Participants and Indirect Participants. The ability of a
Certificate Owner to pledge Book-Entry Certificates and the liquidity of the
Book-Entry Certificates in general may be limited due to the lack of a physical
certificate for such Book-Entry Certificates. In addition, Certificate Owners
may experience delays in their receipt of payments.
Geographic Concentration of the Mortgaged Properties May Increase Risk of Loss
Approximately _____% _____% _____% and _____% of the Mortgage Loans (by
aggregate principal balance as of the Cut-off Date) are expected to be secured
by Mortgaged Properties located in the states of __________, __________,
__________, and __________, respectively. Consequently, losses and prepayments
on the Mortgage Loans and resultant payments on the Offered Certificates may,
both generally and particularly, be affected significantly by changes in the
housing markets and regional economies of, and the occurrence of natural
disasters (such as earthquakes, fires, floods or hurricanes) in, the states of
__________, __________, __________, and __________.
Certificates May Not Be Appropriate For Individual Investors
The Offered Certificates may not be an appropriate investment for
individual investors who do not have sufficient resources or expertise to
evaluate the particular characteristics of the applicable Class of Offered
Certificates. This may be the case because, among other things:
o The yield to maturity of Offered Certificates purchased at a
price other than par will be sensitive to the uncertain rate
and timing of principal prepayments on the Mortgage Loans;
o The rate of principal distributions on, and the weighted
average life of, the Offered Certificates will be sensitive to
the uncertain rate and timing of principal prepayments on the
Mortgage Loans and the priority of principal distributions
among the Classes of Certificates, and as such the Offered
Certificates may be inappropriate investments for an investor
requiring a distribution of a particular amount of principal on
a specific date or an otherwise predictable stream of
distributions;
o There can be no assurance that an investor will be able to
reinvest amounts distributed in respect of principal on an
Offered Certificate (which, in general, are expected to be
greater during periods of relatively low interest rates) at a
rate at least as high as the Pass-Through Rate applicable
thereto; or
o There can be no assurance that a secondary market for the
Offered Certificate will develop or provide Certificateholders
with liquidity of investment.
Individual investors considering the purchase of an Offered Certificate
should also carefully consider the further risks and other special
considerations discussed above and under the headings "Terms of the Certificates
- -- Prepayment and Yield Considerations" and "Prepayment and Yield
Considerations" herein and in the Prospectus under the heading "Risk Factors."
S-18
<PAGE>
Risks Associated with Year 2000 Compliance
The Seller is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000 problem" is pervasive and complex; virtually every computer operation will
be affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Seller has been advised by each of the Servicer and the Trustee that
they are committed to either (i) implementing modifications to their respective
existing systems to the extent required to cause them to be year 2000 compliant
or (ii) acquiring computer systems that are year 2000 compliant, in each case
prior to January 1, 2000. However, neither the Seller nor any affiliate of the
Seller has made any independent investigation of the computer systems of the
Trustee. In the event that computer problems arise out of a failure of such
efforts to be completed on time, or in the event that the computer systems of
the Trustee or the Servicer are not fully year 2000 compliant, the resulting
disruptions in the collection or distribution of receipts on the Mortgage Loans
could materially adversely affect the holders of the Offered Certificates.
See "Risk Factors" in the Prospectus for a description of certain other
risks and special considerations applicable to the Offered Certificates.
S-19
<PAGE>
THE MORTGAGE POOL
General
The mortgage pool with respect to the Certificates (the "Mortgage
Pool") will consist of approximately _________ conventional mortgage loans (the
"Mortgage Loans") evidenced by fixed interest rate promissory notes (each, a
"Mortgage Note") having an aggregate principal balance on [DATE] (the "Cut-off
Date") of approximately $_________. References herein to percentages of Mortgage
Loans refer in each case to the percentage of the aggregate principal balance of
the Mortgage Loans as of the Cut-off Date, based on the outstanding principal
balances of the Mortgage Loans as of the Cut-off Date, after giving effect to
Monthly Payments (defined herein) due on or prior to the Cut-off Date, whether
or not received. References to percentages of Mortgaged Properties (defined
herein) refer, in each case, to the percentages of aggregate principal balances
of the related Mortgage Loans (determined as described in the preceding
sentence). The Mortgage Notes are secured by mortgages or deeds of trust or
other similar security instruments creating first liens on single-family (one-
to four-family) residential properties (the "Mortgaged Properties"). The
Mortgaged Properties consist of individual dwelling units, individual
cooperative apartment dwelling units, individual condominium units, two- to
four-family dwelling units, attached planned unit developments and detached
planned unit developments. The Trust Fund includes, in addition to the Mortgage
Pool, (i) the amounts held from time to time in one or more accounts
(collectively, the "Accounts") maintained in the name of the Trustee pursuant to
the Pooling and Servicing Agreement (the "Agreement") to be dated as of [DATE]
by and among Chase Manhattan Acceptance Corporation (the "Seller"), [Chase
Manhattan Mortgage Corporation], as servicer (in such capacity, the "Servicer")
and [Trustee], as trustee (the "Trustee"), (ii) any property which initially
secured a Mortgage Loan and which is acquired by foreclosure or deed-in-lieu of
foreclosure, (iii) all insurance policies and the proceeds thereof described
below and (iv) certain rights to require repurchase of the Mortgage Loans by the
Seller for breach of representation or warranty.
The Seller will cause the Mortgage Loans to be assigned to the Trustee.
The Servicer will service the Mortgage Loans either by itself or through other
mortgage servicing institutions (the "Sub-servicers"), pursuant to the
Agreement. With respect to those Mortgage Loans serviced by the Servicer through
a Sub-servicer, the Servicer will remain liable for its servicing obligations
under the Agreement as if the Servicer alone were servicing such Mortgage Loans.
Representations and Warranties
The Seller will make certain representations and warranties for the
benefit of the Trustee with respect to the Mortgage Loans as described in the
Prospectus under "The Mortgage Pools" and "The Pooling and Servicing Agreement
- -- Assignment of Mortgage Loans; Warranties" and "-- Repurchase or Substitution"
and will be obligated to repurchase any Mortgage Loan as to which there is a
material breach of any such representation or warranty. Such repurchase will
constitute the sole remedy available to Certificateholders for a breach of such
representations or warranties. The Trustee will enforce the repurchase
obligations of the Seller. In lieu of such repurchase obligation, the Seller
may, within two years after the date of initial delivery of the Certificates,
substitute for the affected Mortgage Loans Substitute Mortgage Loans, as
described under "The Pooling and Servicing Agreement -- Assignment of Mortgage
Loans; Warranties" and "-- Repurchase or Substitution" in the Prospectus.
S-20
<PAGE>
Mortgage Loans
Statistical data with respect to the Mortgage Loans are set forth
below. The Mortgage Loans were originated between [DATE] and [DATE]. All of the
Mortgage Loans had original terms to stated maturity of ___ months or less.
The weighted average number of months from and including the first
Monthly Payment on the Mortgage Loans to and including the Cut-off Date was
approximately _________ months.
Monthly payments of principal and interest on the Mortgage Loans
("Monthly Payments") will be due on the first day of each month (each, a "Due
Date").
All of the Mortgage Loans having original Loan-to-Value Ratios of
greater than _____% are insured under Primary Mortgage Insurance Policies (as
defined in the Prospectus). Not more than approximately _____% of the Mortgage
Loans are insured by any one Primary Mortgage Insurance Policy insurer. At the
time of origination of the Mortgage Loans, each of the Primary Mortgage
Insurance Policy insurers was approved by the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").
See "Servicing of the Mortgage Loans -- Private Mortgage Insurance" in the
Prospectus.
Approximately _____% of the Mortgage Loans have FICO Scores. The
weighted average FICO Score for the Mortgage Loans that were scored is _________
and the range of such FICO Scores is ____ to ____. "FICO Scores" are statistical
credit scores obtained by many mortgage lenders in connection with the loan
application to help assess a borrower's credit-worthiness. FICO Scores are
generated by models developed by a third party and are made available to lenders
through three national credit bureaus. The models were derived by analyzing data
on consumers in order to establish patterns which are believed to be indicative
of the borrower's probability of default. The FICO Score is based on a
borrower's historical credit data, including, among other things, payment
history, delinquencies on accounts, levels of outstanding indebtedness, length
of credit history, types of credit, and bankruptcy experience. FICO Scores range
from approximately 250 to approximately 900, with higher scores indicating an
individual with a more favorable credit history compared to an individual with a
lower score. However, a FICO Score purports only to be a measurement of the
relative degree of risk a borrower represents to a lender, i.e., that a borrower
with a higher score is statistically expected to be less likely to default in
payment than a borrower with a lower score. In addition, it should be noted that
FICO Scores were developed to indicate a level of default probability over a
two-year period which does not correspond to the life of a mortgage loan.
Furthermore, FICO Scores were not developed specifically for use in connection
with mortgage loans, but for consumer loans in general. Therefore, a FICO Score
does not take into consideration the effect of mortgage loan characteristics on
the probability of repayment by the borrower. Neither the Seller nor Chase
Manhattan Mortgage makes any representations or warranties as to the actual
performance of any Mortgage Loan or that a particular FICO Score should be
relied upon as a basis for an expectation that the borrower will repay the
Mortgage Loan according to its terms.
S-21
<PAGE>
Additional data with respect to the Mortgage Loans are set forth in the
following tables (totals may not sum to 100.0% due to rounding):
Mortgage Rates(1)
<TABLE>
<CAPTION>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Mortgage Rate Mortgage Loans Cut-off Date Cut-off Date
------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$
------------ ------------ ----------
Totals.............. $ %
============ ============ ==========
</TABLE>
- ---------------
(1) The interest rates (the "Mortgage Rates") borne by the Mortgage Loans
as of the Cut-off Date ranged from ____% per annum to ____% per annum
and the weighted average Mortgage Rate on the Mortgage Loans as of the
Cut-off Date was approximately ____% per annum.
Geographical Distribution
of Mortgaged Properties
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Mortgage Pool by
Aggregate Aggregate Principal
Number of Principal Balance Balance as of the
State Mortgage Loans as of the Cut-off Date Cut-off Date
- ----------------------------- ---------------- ----------------------- --------------------
$
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Mortgage Pool by
Aggregate Aggregate Principal
Number of Principal Balance Balance as of the
State Mortgage Loans as of the Cut-off Date Cut-off Date
- ---------------------------- ---------------- ----------------------- --------------------
------------ ------------- ------------
Totals.............. $ %
============ ============= ============
</TABLE>
S-23
<PAGE>
Original Principal Balance(2)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Original Number of as of the Balance as of the
Principal Balance Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- ------------------- ---------------------
$ $ %
--------- --------------
Totals................ $ %
========= ============== =========
</TABLE>
- ---------------
(2) The average outstanding principal balance of the Mortgage Loans as of
the Cut-off Date was approximately $________. The original principal
balances of the Mortgage Loans ranged from $_________ to $_________.
S-24
<PAGE>
Mortgage Loan Age
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Mortgage Loan Age Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- ------------------- ---------------------
$ %
--------- ------------ ---------
Total............ $ %
========= ============ =========
</TABLE>
Original Loan-to-Value Ratio(3)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Original Principal Balance Aggregate Principal
Loan-to-Value Number of as of the Balance as of the
Ratio Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- ------------------- ---------------------
$ %
Totals.................... $ %
=========== ========== ========
</TABLE>
- ---------------
(3) The weighted average original Loan-to-Value Ratio of the Mortgage Loans
was approximately _____% as of the Cut-off Date.
S-25
<PAGE>
Loan Purpose
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Aggregate Principal
Number of Balance Balance as of the
Loan Purpose Mortgage Loans as of the Cut-off Date
Cut-off Date
- ----------------------------- ---------------- -------------- ---------------------
Purchase..................... $ %
Cash-out Refinance...........
Rate/Term Refinance.......... ------ ----------- -----------
Totals.............. $ %
====== =========== ===========
</TABLE>
Remaining Terms to Stated Maturity(4)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Months Remaining Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- ------------------- ---------------------
$ %
--------- ------------ ---------
Totals.............. $ %
========= ============ ==========
</TABLE>
- ---------------
(4) The weighted average remaining term to stated maturity of the Mortgage
Loans as of the Cut-off Date was approximately _________ months.
S-26
<PAGE>
Remaining Terms to Expected Maturity(5)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Months Remaining Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- ------------------- ---------------------
%
$
----------- -------- ---------
Totals................ $ %
=========== ======== =========
</TABLE>
- ---------------
(5) Based on payments actually received (or scheduled to be received) on
each Mortgage Loan as of the Cut-off Date. The weighted average
remaining term to expected maturity of the Mortgage Loans as of the
Cut-off Date was approximately ____ months.
Types of Mortgaged Properties
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Aggregate
Balance Principal Balance
Number of as of the as of the
Property Type Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- -------------- -------------------
$ %
-------- ---------- ---------
Totals.............. $ %
========= ========== =========
</TABLE>
- ------------
S-27
<PAGE>
Occupancy(7)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of
Aggregate Mortgage Pool by
Principal Balance Aggregate Principal
Number of as of the Balance as of the
Occupancy Mortgage Loans Cut-off Date Cut-off Date
- ----------------------------- ---------------- ------------------- ---------------------
$ %
--------- --------- -------
Totals.............. $ %
========= ========= =======
</TABLE>
- ---------------
(7) Based on representations by the Mortgagors at the time of origination
of the related Mortgage Loans.
Loan Documentation
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Aggregate Percentage of
Principal Balance Mortgage Pool by
Number of as of the Aggregate Principal
Mortgage Cut-off Date Balance as of the
Loan Documentation Loans Cut-off Date
- ----------------------------- ----------- ------------------ ---------------------
$ %
------ --------- --------
Totals.............. $ %
====== ========= ========
</TABLE>
At the date of issuance of the Certificates, no Mortgage Loan will be
delinquent more than 30 days or will have had more than one delinquency in
excess of 30 days as to any Monthly Payment during the preceding twelve months.
No zip code area contains greater than approximately _____% of the
Mortgaged Properties.
A Standard Hazard Insurance Policy is required to be maintained by the
Mortgagor with respect to each Mortgage Loan in an amount equal to the maximum
insurable value of the improvements securing such Mortgage Loan or the principal
balance of such Mortgage Loan, whichever is less. See "Servicing of the Mortgage
Loans -- Hazard Insurance" in the Prospectus. No Mortgage Pool Insurance Policy,
Special Hazard Insurance Policy or Mortgagor Bankruptcy Insurance will be
maintained with respect to the Mortgage Pool, nor will any Mortgage Loan be
insured by the FHA or guaranteed by the VA.
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as presently
constituted. Prior to the issuance of the Certificates, Mortgage Loans may be
removed from the Mortgage Pool if the Seller deems such removal necessary or
appropriate. Other mortgage loans may be included in the Mortgage Pool prior to
the issuance of the Certificates unless
S-28
<PAGE>
including such mortgage loans would materially alter the characteristics of the
Mortgage Pool as described herein. The information set forth herein is
representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Certificates are issued. If any of the
characteristics as of the Cut-Off Date of the Mortgage Loans on the date of
initial issuance of the Certificates vary materially from those described
herein, revised information regarding such Mortgage Loans will be included in a
Current Report on Form 8-K of the Seller that will be available to purchasers of
the Certificates at, and filed with the Securities and Exchange Commission
within 15 days of, the initial delivery of the Certificates. In any event, no
more than 5% of the Mortgage Loans described herein will be removed from or
added to the Mortgage Pool prior to the issuance of the Certificates unless a
revised prospectus supplement is delivered to prospective investors in the
Offered Certificates.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Offered Certificates, the
aggregate amount of each interest payment on the Offered Certificates (other
than the [Class A-P] Certificates) and the yield to maturity of such
Certificates are related to the rate and timing of payments of principal on the
underlying Mortgage Loans. The principal payments on such Mortgage Loans may be
in the form of scheduled principal payments or prepayments (for this purpose,
the term "prepayment" includes prepayments in full, curtailments and
liquidations due to default, casualty, condemnation and the like, as well as
repurchases by a mortgage loan seller). Any such prepayments will result in
distributions to holders of Certificates ("Certificateholders") of principal
amounts which would otherwise be distributed over the remaining terms of the
Mortgage Loans. In addition, because, for at least nine years after the issuance
of the Certificates, the Offered Class A Certificateholders (other than the
[Class A-7] and [Class A-P] Certificateholders) will be entitled to receive a
percentage of certain amounts, including principal prepayments, which is greater
than their proportionate interest in the Trust Fund, the rate of principal
prepayments on the Mortgage Loans will have a greater effect on the rate of
principal payments and the amount of interest payments on, and the yield to
maturity of, such Certificates than if such Certificateholders were entitled
only to their proportionate interest in such amounts. In general, the prepayment
rate may be influenced by a number of factors, including general economic
conditions and homeowner mobility. Mortgagors are permitted to prepay the
Mortgage Loans, in whole or in part, at any time without penalty. The rate of
payment of principal may also be affected by any repurchase of the Mortgage
Loans as to which there has been a material breach of a representation or
warranty or defect in documentation, or by a purchase by the Servicer of certain
Mortgage Loans modified at the request of a Mortgagor (including Mortgagors with
respect to which the Servicer has solicited such a request), or by the exercise
by the Servicer of its right to purchase a defaulted Mortgage Loan. See "The
Mortgage Pool -- General" and "The Pooling and Servicing Agreement -- Optional
Termination." In such event, the repurchase price will be passed through to the
Certificateholders as a prepayment of principal in the month following the month
of such repurchase.
The rate of prepayments with respect to mortgage loans on one- to
four-family residences has fluctuated significantly in recent years. The Seller
believes that in a fluctuating interest rate environment a predominant factor
affecting the prepayment rate on a large pool of mortgage loans is the
difference between the interest rates on the mortgage loans (giving
consideration to the cost of any refinancing) and prevailing mortgage rates. In
general, if mortgage interest rates were to fall below the interest rates on the
Mortgage Loans, the rate of prepayment would be expected to increase.
Conversely, in general, if mortgage interest rates were to rise above the
interest rates on the Mortgage Loans, the rate of prepayment would be expected
to decrease. Other factors affecting prepayment of mortgage loans include
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors'
net equity in the mortgaged properties and servicing
S-29
<PAGE>
decisions. Additionally, in general, mortgage loans having relatively high
principal balances and/or relatively low loan-to-value ratios may be more likely
to prepay than mortgage loans having relatively low principal balances and/or
relatively high loan-to-value ratios. Therefore, if a mortgage pool consists of
mortgage loans which generally have relatively high principal balances and
relatively low loan-to-value ratios, the rate of prepayments with respect to
such mortgage pool could be higher than would otherwise be the case. In
addition, prepayments generally will also result from home sales by mortgagors
and from foreclosures due to defaults on mortgage loans. There is no historical
prepayment data available for the Mortgage Pool, and comparable data is not
available because the Mortgage Loans do not constitute a representative sample
of mortgage loans generally. In addition, historical data available with respect
to mortgage loans underlying mortgage pass-through certificates issued by GNMA,
FNMA or FHLMC may not be comparable to prepayments expected to be experienced by
the Mortgage Pool, because the Mortgage Loans have characteristics which differ
from mortgage loans underlying pass-through certificates issued by GNMA, FNMA
and FHLMC.
The timing of changes in the rate of prepayments on the Mortgage Loans
may significantly affect the total distributions received, the date of receipt
of such distributions and the actual yield to maturity to an investor in the
Offered Certificates, even if the average rate of principal payments is
consistent with an investor's expectations. Because the rate of distribution of
principal of the Certificates will be directly related to the actual
amortization (including prepayments) of the Mortgage Loans, which may include
Mortgage Loans that have remaining terms to maturity shorter or longer than
those assumed and interest rates higher or lower than those assumed, the
distributions of the Offered Certificates are likely to differ from those
reflected in the following tables, even if all the Mortgage Loans prepay at the
indicated percentages of the Prepayment Model (defined below). In addition, it
is not likely that the Mortgage Loans will prepay at a constant rate until
maturity or that all of the Mortgage Loans will prepay at the same rate. In
general, the earlier a payment of principal on the Mortgage Loans, the greater
the effect on an investor's yield to maturity. As a result, if principal
payments occur at a rate higher (or lower) than the rate anticipated by an
investor in the Offered Certificates during the period immediately following the
issuance of the Certificates, the effect on such investor's yield will not be
equally offset by a subsequent like reduction (or increase) in the rate of
principal payments. If an Offered Certificate is offered at a discount from its
original principal amount and if the purchaser of such Offered Certificate
calculates its yield to maturity based on a faster assumed rate of payment of
principal than that actually received on such Certificate, its actual yield to
maturity will be lower than that so calculated. Conversely, if an Offered
Certificate is offered at a premium to its original principal amount, and if the
purchaser of such Offered Certificate calculates its yield to maturity based on
a slower assumed rate of payment of principal than that actually received on
such Certificate, its actual yield to maturity will be lower than that so
calculated and, under certain circumstances, such a purchaser may fail to recoup
its initial investment. No assurances can be given as to the rate of payments on
the Mortgage Loans.
Investors in the Class A-7 Certificates should be aware that because
the Class A- 7 Certificates are not expected to receive any distributions of
payments of principal prior to the Distribution Date occurring in [DATE] and
until the Distribution Date occurring in [DATE] are expected to receive a
disproportionately small portion of principal payments (unless the principal
balances of the Non-PO Class A Certificates (other than the Class A-7
Certificates) have been reduced to zero), the weighted average life of the Class
A-7 Certificates will be longer than would otherwise be the case, and the effect
on the market value of the Class A-7 Certificates of changes in market interest
rates or market yields for similar securities will be greater than for other
classes of Class A Certificates entitled to such distributions.
S-30
<PAGE>
If the aggregate principal balance of the Non-Offered Class B
Certificates is reduced to zero, the yield to maturity on the Class B-2
Certificates will be extremely sensitive to losses on the Mortgage Loans (and
the timing thereof), because the entire amount of any such losses (other than
Excess Losses) which occur after the aggregate principal balance of the
Non-Offered Class B Certificates has been reduced to zero will be allocable to
the Class B-2 Certificates, as described herein. If the aggregate principal
balance of the Class B-2 Certificates and the Non-Offered Class B Certificates
is reduced to zero, the yield to maturity on the Class B-1 Certificates will be
extremely sensitive to losses on the Mortgage Loans and the timing thereof
because the entire amount of any such losses (other than Excess Losses) which
occur after the aggregate principal balance of the Class B-2 Certificates and
the Non-Offered Class B Certificates has been reduced to zero will be allocable
to the Class B-1 Certificates, as described herein. If the aggregate principal
balance of the Class B Certificates is reduced to zero, the yield to maturity on
the Class M Certificates will be extremely sensitive to losses on the Mortgage
Loans and the timing thereof because the entire amount of any such losses (other
than Excess Losses) which occur after the aggregate principal balance of the
Class B Certificates has been reduced to zero will be allocable to the Class M
Certificates, as described herein. In addition, as described herein, for at
least nine years after the issuance of the Certificates or such lesser time as
the Class A Certificates are outstanding, each Class of Subordinated
Certificates (defined herein), will be entitled to receive a percentage of
certain amounts, including principal prepayments, which is generally less than
their proportionate interest in the trust fund. See "Description of the
Certificates -- Subordinated Certificates and Shifting Interests."
No assurance can be given as to the rate or timing of principal
payments or prepayments on the Mortgage Loans. In addition, it is unlikely that
prepayments on the Mortgage Loans will occur at a constant rate even if the
average prepayment experience equals the indicated levels of the Prepayment
Model.
In the event of acceleration of Mortgage Loans as a result of
enforcement of "due-on-sale" provisions in connection with transfers of the
related Mortgaged Properties, the level of prepayments on the respective
Mortgage Loans will be increased, thereby shortening the weighted average lives
of the Offered Certificates. See "Yield, Maturity and Weighted Average Life
Considerations" in the Prospectus.
The yield to holders of the Offered Certificates will depend upon,
among other things, the price at which such Offered Certificates are purchased
and the amount of and rate at which principal, including both scheduled and
unscheduled payments thereof, is paid to the respective Certificateholders.
The yield to Certificateholders (other than the [Class A-P]
Certificateholders) will be reduced by lags between the time interest income
accrues to Certificateholders and the time the related interest income is
received by Certificateholders. In addition, the yield to Certificateholders
(other than the [Class A-P] Certificateholders) may be reduced as a result of
Prepayment Interest Shortfalls (defined herein) to the extent described herein.
See "The Pooling and Servicing Agreement -- Adjustment to Servicing Fee in
Connection with Prepaid Mortgage Loans."
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement (the
"Prepayment Model") represents an assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool of mortgage loans. A
prepayment assumption of 100% of the Prepayment Model assumes prepayment rates
of 0.2% per annum of the then outstanding principal balance of such mortgage
loans in the first month of the life of the mortgage loans and an additional
0.2% per annum in each month thereafter until the thirtieth month. Beginning in
the
S-31
<PAGE>
thirtieth month and in each month thereafter during the life of the mortgage
loans, 100% of the Prepayment Model assumes a constant prepayment rate of 6.0%
per annum. The tables set forth below are based on the assumption that the
Mortgage Loans prepay at the indicated percentages of the Prepayment Model.
Neither the Prepayment Model nor any other prepayment model purports to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of mortgage loans, including the
Mortgage Pool.
The tables set forth below have been prepared on the basis of the
characteristics of the Mortgage Loans that are expected to be included in the
Trust Fund and the respective expected initial principal balances of the Offered
Certificates. For purposes of preparation of the tables, it has been assumed
that the Mortgage Loans included in the Mortgage Pool on the Closing Date have
the actual characteristics of the Mortgage Loans described herein and that [(i)
scheduled payments on all Mortgage Loans are received on the first day of each
month beginning [MONTH/YEAR], (ii) any principal prepayments on the Mortgage
Loans are received on the last day of each month beginning in [MONTH/YEAR] and
include 30 days of interest thereon, (iii) there are no defaults or
delinquencies on the Mortgage Loans, (iv) optional termination of the Trust Fund
does not occur, (v) there are no partial prepayments on the Mortgage Loans and
prepayments are computed after giving effect to scheduled payments received on
the following day, (vi) the Mortgage Loans prepay at the indicated constant
percentages of the Prepayment Model, (vii) the date of issuance for the
Certificates is [DATE], (viii) cash distributions are received by the
Certificateholders on the 25th day of each month when due and (ix) the scheduled
monthly payments for each Mortgage Loan are computed based upon the amount of
principal and interest contractually due each month under the Mortgage Note.]
The assumptions set forth in this paragraph are referred to herein as the
"Modeling Assumptions."
Any discrepancy between the characteristics of the Mortgage Loans
actually included in the Trust Fund and the characteristics of the Mortgage
Loans expected to be so included may affect the percentages of the original
principal balance outstanding set forth in the tables and the weighted average
lives of the Offered Certificates. In addition, to the extent that the Mortgage
Loans that actually are included in the Trust Fund have characteristics that
differ from those assumed in preparing the following tables, the outstanding
principal balance of any Offered Certificate will likely be reduced to zero
earlier or later than indicated by the tables.
Variations in actual prepayment experience and the principal balances
of Mortgage Loans that prepay may increase or decrease the percentages of the
original principal balances outstanding and the weighted average lives shown in
the following tables. Such variations may occur even if the average prepayment
experience of all such Mortgage Loans equals the indicated levels of the
Prepayment Model. There is no assurance that the Mortgage Loans will prepay at
any constant level of the Prepayment Model.
Based on the foregoing assumptions, the following tables indicate the
weighted average life of each Class of Offered Certificates and set forth the
percentages of the original principal balance of each Class of Offered
Certificates that would be outstanding after each of the dates shown at various
percentages of the Prepayment Model.
No assurance can be given as to the rate or timing of principal payments or
prepayments on any of the mortgage loans.
S-32
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Class A-2
-------------------------------------------- --------------------------------------------
Distribution Date % % % % % % % % % %
--- --- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-33
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-3 Class A-4
---------------------------------------------- --------------------------------------------
Distribution Date % % % % % % % % % %
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-34
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-5 Class A-6
--------------------------------------------- --------------------------------------------
Distribution Date % % % % % % % % % %
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-35
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-7 Class A-P
-------------------------------------------- -------------------------------------------
Distribution Date % % % % % % % % % %
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-36
<PAGE>
Percentage of Initial Principal Balance Outstanding
at the Respective Percentages of the Prepayment
Model Set Forth Below
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-R Class M, Class B-1 and Class B-2
--------------------------------------------- -------------------------------------------
Distribution Date % % % % % % % % % %
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
- ---------------
(1) The weighted average lives of the Offered Certificates as shown above
are determined by (i) multiplying the amount of each assumed principal
distribution by the number of years from the date of issuance of the
Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the total principal distribution on such
Certificates.
S-37
<PAGE>
Yield Considerations with Respect to the Class A-P Certificates
The yield to maturity of the Class A-P Certificates will be extremely
sensitive to the rate and timing of principal payments (including prepayments
and defaults) on the Discount Mortgage Loans (defined herein), which may
fluctuate significantly from time to time. A slower rate of principal payments
on the Discount Mortgage Loans than that anticipated by investors will have a
material negative effect on the yield to maturity of the Class A-P Certificates.
An investor should fully consider the associated risks, including the risk that
a relatively slow rate of principal payments (including prepayments and
defaults) on the Discount Mortgage Loans will have a material negative effect on
the yield to an investor in the Class A-P Certificates. The Discount Mortgage
Loans will have lower Net Mortgage Rates than the other Mortgage Loans. In
general, mortgage loans with lower mortgage interest rates may tend to prepay at
a slower rate of payment in respect of principal than mortgage loans with
relatively higher mortgage interest rates in response to changes in market
interest rates. As a result, the Discount Mortgage Loans may prepay at a slower
rate of payment in respect of principal than the other Mortgage Loans, resulting
in a lower yield on the Class A-P Certificates than would be the case if the
Discount Mortgage Loans prepaid at the same rate as the other Mortgage Loans. As
of the Cut-off Date, there were approximately __ Discount Mortgage Loans, with
an aggregate outstanding principal balance of approximately $_________.
The following table illustrates the significant effect that principal
prepayments on the Discount Mortgage Loans have upon the yield to maturity of
the Class A-P Certificates. The actual prices to be paid for the Class A-P
Certificates have not been determined and will be dependent on the
characteristics of the Mortgage Pool. The table shows the hypothetical pre-tax
yields to maturity of the Class A-P Certificates, stated on a corporate bond
equivalent basis, under five different prepayment assumptions based on the
Prepayment Model described above. The table is based on the Modeling Assumptions
and assumes further that the purchase price of the Class A-P Certificates is
_____%.
Pre-Tax Yield
Prepayment Model
% % % % %
---- ---- ---- ---- ----
% % % % %
---- ---- ---- ---- ----
Any change in the composition of the Mortgage Pool from that assumed
could substantially alter the information set forth in the table above. No
assurances can be given as to the rate or timing of principal payments or
prepayments on the Discount Mortgage Loans.
The pre-tax yields set forth in the preceding table were calculated by
determining the monthly discount rates which, when applied to the assumed
streams of cash flows to be paid on the Class A-P Certificates would cause the
discounted present value of such assumed streams of cash flows to equal the
assumed offering price of _____% for the Class A-P Certificates. In all cases
monthly rates are then converted to the corporate bond equivalent yields shown
above. Implicit in the use of any discounted present value or internal rate of
return calculation such as these is the assumption that intermediate cash flows
are reinvested at the discount rate or internal rate of return. Thus, these
calculations do not take into account the
S-38
<PAGE>
different interest rates at which investors may be able to reinvest funds
received by them as distributed on the Class A-P Certificates. Consequently,
these yields do not purport to reflect the return on any investment in the Class
A-P Certificates when such reinvestment rates are considered.
It is unlikely that the characteristics of the Discount Mortgage Loans
will correspond exactly to those assumed in preparing the table above. The
pre-tax yield of the Class A-P Certificates may therefore differ even if all the
Discount Mortgage Loans prepay monthly at the assumed prepayment rate. In
addition, it is highly unlikely that any Discount Mortgage Loan will prepay at a
constant rate until maturity or that all the Discount Mortgage Loans will prepay
at the same rate. The timing of changes in the rate of prepayments on the
Discount Mortgage Loans may affect significantly the total distributions
received, the date of receipt of such distributions and the actual yield
received by a holder of a Class A-P Certificate even if the average rate of
principal prepayments on the Discount Mortgage Loans is consistent with an
investor's expectations.
The Seller makes no representation that any of the Mortgage Loans will
prepay in the manner or at any of the rates assumed in the tables set forth
above. Each investor must make its own decision as to the appropriate prepayment
assumption to be used in deciding whether or not to purchase any of the Offered
Certificates. Since the rate of principal payments (including prepayments) and
repurchases on the Mortgage Loans will significantly affect the yield to
maturity on the Offered Certificates, prospective investors are urged to consult
their investment advisors as to both the anticipated rate of future principal
payments (including prepayments) on the Mortgage Loans and the suitability of
the Offered Certificates to their investment objectives.
The Seller intends to file certain additional yield tables and other
computational materials with respect to one or more Classes of Offered
Certificates with the Securities and Exchange Commission in a Report on Form
8-K. See "Incorporation of Certain Documents By Reference" in the Prospectus.
Such tables and materials were prepared by the Underwriter at the request of
certain prospective investors, based on assumptions provided by, and satisfying
the special requirements of, such investors. Such tables and assumptions may be
based on assumptions that differ from the Modeling Assumptions. Accordingly,
such tables and other materials may not be relevant to or appropriate for
investors other than those specifically requesting them.
CHASE MANHATTAN MORTGAGE CORPORATION
Chase Manhattan Mortgage is a New Jersey corporation, formed in 1920.
It is a wholly-owned indirect subsidiary of Chase Manhattan Bank USA, National
Association. Chase Manhattan Mortgage is engaged in the mortgage origination and
servicing businesses. Chase Manhattan Mortgage is HUD-approved mortgagee. Chase
Manhattan Mortgage is subject to supervision, examination and regulation by the
Office of the Comptroller of the Currency and various state regulatory bodies.
The address of Chase Manhattan Mortgage is 343 Thornall Street, Edison, New
Jersey 08837 and its telephone number is (732) 205-0600. Chase Manhattan
Mortgage makes loans in all 50 states primarily for the purpose of enabling
borrowers to purchase or refinance residential real property, secured by first
liens on such property. Chase Manhattan Mortgage's real estate loans primarily
are made to homeowners based on the security of one- to four-family residences.
Loan Delinquency and Foreclosure Experience. The recent loan
delinquency and loan foreclosure experience of Chase Manhattan Mortgage as
servicer of first mortgage loans secured by one- to four-family residential
properties which were originated by or for Chase Manhattan Mortgage (exclusive
of any such
S-39
<PAGE>
mortgage loans as to which master servicing or subservicing arrangements exist)
(expressed as percentages of the total portfolio of such loans as of such date)
was as follows:
<TABLE>
<CAPTION>
As of June 30, As of December 31,
---------------- -------------------
1998 1997 1996
---- ---- ----
By By By By By By
Number Principal Number Principal Number Principal
Period of Delinquency of Loans Balance of Loans Balance of Loans Balance
- --------------------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
30 to 59 days 3.27% 2.71% 3.97% 3.28% 3.96% 3.30%
60 to 89 days 0.77 0.62 0.85 0.69 0.91 0.73
90 days or more 0.52 0.42 0.56 0.48 0.77 0.61
Total 4.56% 3.75% 5.38% 4.45% 5.64% 4.64%
Foreclosure 1.63% 1.35% 1.67% 1.37% 1.48% 1.24%
</TABLE>
The following table presents, for the portfolio of mortgage loans
originated by or for Chase Manhattan Mortgage which are owned by The Chase
Manhattan Bank or its affiliates, the net gains (losses) as a percentage of the
average principal amount of such portfolio on the disposition of properties
acquired in foreclosure or by deed-in-lieu of foreclosure during the periods
indicated. Loss statistics for periods prior to 1997 are unavailable.
<TABLE>
<CAPTION>
As of June 30 As of December 31,
------------- ------------------
1998 1997
---- ----
(Dollars in Millions)
<S> <C> <C>
Total portfolio principal amount................ $23,928 $23,315
Six Month
Period Ended Year Ended
June 30, December 31,
-------------- --------------
1998 1997
---- ----
Net gains (losses)(1).......................... (0.08%) (0.15%)
</TABLE>
- --------------
(1) Losses are defined as unrealized losses on properties acquired in
foreclosure by or deed-in-lieu of foreclosure and proceeds from sale
less outstanding book balance (after recognition of such unrealized
losses) less certain capitalized costs related to disposition of the
related property (exclusive of accrued interest).
There can be no assurance that the delinquency, foreclosure and loss
experience on the Mortgage Loans will correspond to the delinquency, foreclosure
and loss experience set forth in the foregoing tables. In general, during
periods in which the residential real estate market is experiencing an overall
decline in property values such that the principal balances of the Mortgage
Loans and any secondary financing on the related Mortgaged Properties become
equal to or greater than the value of the related Mortgaged Properties, rates of
delinquencies, foreclosure and losses could be significantly higher than might
otherwise be the case.
S-40
<PAGE>
In addition, adverse economic conditions (which may affect real property values)
may affect the timely payment by Mortgagors of Monthly Payments, and
accordingly, the actual rates of delinquencies, foreclosures and losses with
respect to the Mortgage Pool.
Underwriting Policies. The following is a description of the
underwriting policies customarily employed by Chase Manhattan Mortgage with
respect to residential mortgage loans which it originated during the period of
origination of the Mortgage Loans. Chase Manhattan Mortgage has represented to
the Company that the Mortgage Loans were originated generally in accordance with
such policies.
Chase Manhattan Mortgage's real estate lending process for one-to
four-family residential mortgage loans follows procedures established to comply
with applicable federal and state laws and regulations. Chase Manhattan
Mortgage's underwriting standards are designed to evaluate a borrower's credit
standing and repayment ability and the value and adequacy of the mortgaged
property as collateral.
The Mortgage Loans were originated in a manner generally consistent,
except as to loan amounts, with FNMA or FHLMC published underwriting guidelines.
Chase Manhattan Mortgage believes that each Mortgage Loan originated in such a
manner generally meets the credit, appraisal and underwriting standards
described in such published underwriting guidelines, except for the original
principal balances of such Mortgage Loans. Initially, a prospective borrower is
required to fill out an application designed to provide pertinent information
about the borrower's assets, liabilities, income and credit, the property to be
financed and the type of loan desired. Chase Manhattan Mortgage obtains a credit
report which summarizes the prospective borrower's credit history with
merchants, lenders and other creditors reporting such information as well as
matters of public record. In addition, Chase Manhattan Mortgage verifies
employment, income and assets. Self-employed prospective borrowers are generally
required to submit their federal income tax returns for the last two years
and/or a separate statement of income and expenses independently verified by a
third party.
Approximately ____% of the Mortgage Loans were originated using Chase
Manhattan Mortgage's Limited Documentation Program. Pursuant to this program,
written verification of the borrower's income is not required. The information
is verbally verified and subject to an audit at a later date. The borrower must
satisfy a 25% downpayment requirement from their own assets. These assets are
verified through bank statements and may be supplemented by third-party
verification. A residential mortgage credit report, or "in file" report, is
obtained and reviewed to determine the borrower's repayment history. The maximum
Loan-to-Value Ratio of any mortgage loan originated under this program is
approximately 75% (65% for "cash out" refinancings).
Once the necessary information is received, a determination is made as
to whether the prospective borrower has sufficient monthly income available to
meet the borrower's monthly obligations on the proposed loan and other expenses
related to the residence (such as property taxes and insurance) as well as to
meet other financial obligations and monthly living expenses. For loans with a
Loan-to-Value Ratio of 80% or less, Chase Manhattan Mortgage's lending
guidelines require that all current fixed obligations of the borrower (including
mortgage payments based on Chase Manhattan Mortgage's mortgage rates at the time
of the application and other expenses related to the residence) generally may
not exceed 40% of the borrower's gross income in the case of a borrower with
income of under $75,000, 42% of the borrower's gross income in the case of a
borrower with income of between $75,000 and $150,000 and 44% of the borrower's
gross income in the case of a borrower with income in excess of $150,000. For
loans with a Loan-to-Value Ratio between 80.01% and 90%. Chase Manhattan
Mortgage's lending guidelines require that
S-41
<PAGE>
the mortgage payments (based on Chase Manhattan Mortgage's mortgage rates at the
time of application) plus applicable real property taxes, any condominium common
charges and hazard insurance, generally may not exceed 33% of the borrower's
gross income and that all monthly payments, including those mentioned above and
other fixed obligations, such as car payments, generally may not exceed 38% of
the borrower's gross income. For loans with a Loan-to-Value Ratio between 90.01%
and 95%, Chase Manhattan Mortgage's lending guidelines require that the mortgage
payments (based on Chase Manhattan Mortgage's mortgage rates at the time of
application) plus applicable real property taxes, any condominium common charges
and hazard insurance, generally may not exceed 28% of the borrower's gross
income and that all monthly payments, including those mentioned above and other
fixed obligations, such as car payments, generally may not exceed 36% of the
borrower's gross income. Other credit considerations may cause Chase Manhattan
Mortgage to depart from these guidelines in certain cases. Where there are two
individuals signing the mortgage note, the income and debts of both are included
in the computation.
Chase Manhattan Mortgage requires an appraisal to be made of each
property to be financed. The appraisal is conducted by an independent fee
appraiser. The person conducting the appraisal personally visits the property
and estimates its market value on the basis of comparable properties. The
independent appraisers do not receive any compensation dependent upon either the
amount of the loan or its consummation. In normal practice, the lower of
purchase price or appraised value determines the maximum amount which will be
lent on the property.
From time to time, exceptions and/or variances to Chase Manhattan
Mortgage's underwriting policies may be made. Such exceptions and/or variances
may be made only if specifically approved on a loan-by-loan basis by certain
credit personnel of Chase Manhattan Mortgage who have the authority to make such
exceptions and/or variances. Exceptions and/or variances may be made only after
careful consideration of certain mitigating factors such as borrower capacity,
liquidity, employment and residential stability and local economic conditions.
Chase Manhattan Mortgage obtains a search of the liens of record to
which the property being financed is subject at the time of origination. Title
insurance is required in the case of all mortgage loans.
Servicing Activities. As of June 30, 1998, Chase Manhattan Mortgage
serviced approximately $181 billion of one- to four-family residential mortgage
loans.
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THE POOLING AND SERVICING AGREEMENT
The Certificates will be issued pursuant to the Agreement. The
following summaries, together with the summaries set forth under "The Pooling
and Servicing Agreement" in the accompanying Prospectus, describe the material
provisions of the Agreement. The summaries below do not purport to be complete
and are subject to, and qualified in their entirety by reference to, the
provisions of the Agreement. Where particular provisions or terms used in the
Agreement are referred to, such provisions or terms are as specified in the
Agreement. See "The Pooling and Servicing Agreement" in the Prospectus.
Assignment of Mortgage Loans
The Seller will cause the Mortgage Loans to be assigned to the Trustee,
together with the rights to all principal and interest due on or with respect to
the Mortgage Loans after the Cut-off Date other than interest accrued on the
Mortgage Loans prior to the Cut-off Date. The Chase Manhattan Bank, as
authenticating agent, will, concurrently with such assignment, authenticate and
deliver the Certificates. Each Mortgage Loan will be identified in a schedule
appearing as an exhibit to the Agreement (the "Mortgage Loan Schedule"). The
Mortgage Loan Schedule will specify, among other things, with respect to each
Mortgage Loan, the original principal amount and the unpaid principal balance as
of the close of business on the Cut-off Date; the Monthly Payment; the months
remaining to stated maturity of the Mortgage Note; and the Mortgage Rate.
In addition, the Seller will, as to each Mortgage Loan, deliver or
cause to be delivered to the Trustee the Mortgage Note (together with all
amendments and modifications thereto) endorsed without recourse to the Trustee
or its designee, the original or a certified copy of the mortgage (together with
all amendments and modifications thereto) with evidence of recording indicated
thereon and an original or certified copy of an assignment of the Mortgage in
recordable form. The Seller will cause the assignments to be recorded in the
appropriate public records.
Servicing
The Mortgage Loans will be serviced by the Servicer generally in
accordance with procedures described in the accompanying Prospectus under the
headings "Servicing of the Mortgage Loans" and "Description of the
Certificates."
When any Mortgaged Property is conveyed by the Mortgagor, the Servicer
generally will enforce any "due-on-sale" clause contained in the Mortgage Loan,
to the extent permitted under applicable law and governmental regulations.
Acceleration of Mortgage Loans as a result of enforcement of such "due-on-sale"
provisions in connection with transfers of the related Mortgaged Properties will
affect the level of prepayments on the Mortgage Loans, thereby affecting the
weighted average lives and yields to maturity of the Offered Certificates. See
"Prepayment and Yield Considerations" herein and "Yield, Maturity and Weighted
Average Life Considerations" in the Prospectus. The terms of the Mortgage Loans
or applicable law, however, may provide that the Servicer is prohibited from
exercising the "due-on-sale" clause if information is submitted so as to
evaluate the intended buyer as if a new loan were being made to the buyer and it
can reasonably be determined that the security under the related Mortgage Note
will not be impaired by the assumption of the Mortgage Loan and that the risk of
a breach of any covenant in the Mortgage Note is acceptable. Upon any such
assumption, a fee equal to a specified percentage of the outstanding principal
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balance of the Mortgage Loan is typically required, which sum will be retained
by the Servicer as additional servicing compensation.
Servicing Compensation and Payment of Expenses
The Servicer will be paid a monthly fee (the "Servicing Fee")
(including sub-servicing compensation) with respect to each Mortgage Loan in an
amount equal to _____% (the "Servicing Fee Rate") per annum of the unpaid
principal balance of each Mortgage Loan.
The Servicer is obligated to pay certain ongoing expenses associated
with the Mortgage Pool and incurred by the Servicer in connection with its
responsibilities under the Agreement. See "The Pooling and Servicing Agreement
- -- Servicing and Other Compensation and Payment of Expenses" in the Prospectus
for information regarding other possible compensation to the Servicer and for
information regarding expenses payable by the Servicer.
Adjustment to Servicing Fee in Connection with Prepaid Mortgage Loans
When a Mortgagor makes a full or partial principal prepayment of a
Mortgage Loan between Due Dates, the Mortgagor generally is required to pay
interest on the principal balance thereof only to the date of prepayment. In
order to minimize any resulting shortfall in interest (such shortfall, a
"Prepayment Interest Shortfall"), the aggregate amount of the Servicing Fee will
be reduced to the extent necessary to include an amount in payments to the
holders of the Offered Certificates equal to a full month's interest payment at
the applicable Net Mortgage Rate (defined herein) with respect to such prepaid
Mortgage Loan; provided, however, that such reductions in the Servicing Fee will
be made only up to the product of (i) one-twelfth of _____% and (ii) the
aggregate scheduled principal balance of the Mortgage Loans with respect to the
related Distribution Date. Any Prepayment Interest Shortfalls (adjusted to the
applicable Net Mortgage Rate) in excess of such amount (such excess, the
"Non-Supported Interest Shortfall") will be allocated on such Distribution Date
pro rata among the outstanding Classes of Certificates (including the Class A-X
Certificates) based upon the amount of interest which each such Class would
otherwise be paid on such Distribution Date and will consequently reduce the
yield on the applicable Classes of Certificates. Any principal prepayment,
together with a full month's interest thereon at the applicable Net Mortgage
Rate (to the extent described in this paragraph), will be paid on the
Distribution Date in the month following the month in which the last day of the
related Principal Prepayment Period (defined herein) occurred. See "Yield,
Maturity and Weighted Average Life Considerations" in the Prospectus.
Payments on Mortgage Loans; Collection Account; Certificate Account
The Agreement provides that the Servicer for the benefit of the
Certificateholders shall establish and maintain a Collection Account (the
"Collection Account"), into which the Servicer is generally required to deposit
or cause to be deposited on a daily basis the payments and collections described
in "The Pooling and Servicing Agreement -- Payments on Mortgage Loans;
Certificate Account" in the Prospectus, except that the Servicer may deduct its
Servicing Fee and any expenses of liquidating defaulted Mortgage Loans or
property acquired in respect thereof. The Agreement permits the Servicer to
direct any depository institution maintaining the Collection Account to invest
the funds in the Collection Account in one or more investments acceptable to
[RATING AGENCY] and [RATING AGENCY] (as provided in the Agreement) that mature,
unless payable on demand, no later than the Business Day preceding the 24th day
of each month, or, if such day is not a business day, the preceding business day
(the "Servicer Remittance Date"). The Servicer will
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be entitled to all income and gain realized from any such investment, and such
income and gain will be subject to withdrawal by the Servicer from time to time.
The Servicer will be required to deposit the amount of any losses incurred in
respect of any such investments out of its own funds as such losses are
realized.
The Trustee will be obligated to establish an account (the "Certificate
Account"), into which the Servicer will deposit or cause to be deposited on the
Servicer Remittance Date the Available Distribution Amount (including any
Advances with respect to such Servicer Remittance Date) for the related
Distribution Date, together with certain other amounts specified in the
Agreement. Subject to the restrictions set forth in the Agreement, the Trustee
is permitted to direct the investment of funds in the Certificate Account. Any
such investments are required to mature, unless payable on demand, no later than
the related Distribution Date. The Trustee will be entitled to all income and
gain realized from any such investment, and such income and gain will be subject
to withdrawal by the Trustee from time to time. The Trustee will be required to
deposit the amount of any losses incurred in respect of any such investments out
of its own funds as such losses are realized.
Advances
In the event that any Mortgagor fails to make any payment of principal
or interest required under the terms of a Mortgage Loan, the Servicer will
advance the entire amount of such payment, net of the applicable Servicing Fee,
less the amount of any such payment that the Servicer reasonably believes will
not be recoverable out of liquidation proceeds or otherwise. The amount of any
scheduled payment required to be advanced by the Servicer will not be affected
by any agreement between the Servicer and a Mortgagor providing for the
postponement or modification of the due date or amount of such scheduled
payment. The Servicer will be entitled to reimbursement for any such advance
from related late payments on the Mortgage Loan as to which such advance was
made. Furthermore, in the event that any Mortgage Loan as to which an advance
has been made is foreclosed while in the Trust Fund, the Servicer will be
entitled to reimbursement for such advance from related liquidation proceeds or
insurance proceeds prior to payment to Certificateholders of the related
Mortgage Pool of the Scheduled Principal Balance of such Mortgage Loan plus
accrued interest at the Net Mortgage Rate.
If the Servicer makes a good faith judgment that all or any portion of
any advance made by it with respect to any Mortgage Loan may not ultimately be
recoverable from related liquidation proceeds (a "Nonrecoverable Advance"), the
Servicer will so notify the Trustee and the Servicer will be entitled to
reimbursement for such Nonrecoverable Advance from recoveries on all other
unrelated Mortgage Loans included in the related Mortgage Pool. The Servicer's
judgment that it has made a Nonrecoverable Advance with respect to any Mortgage
Loan will be based upon its assessment of the value of the related Mortgaged
Property and such other facts and circumstances as it may deem appropriate in
evaluating the likelihood of receiving liquidation proceeds, net of expenses,
equal to or greater than the aggregate amount of unreimbursed advances made with
respect to such Mortgage Loan.
Purchases of Defaulted Mortgage Loans
Under the Agreement, the Servicer will have the option (but not the
obligation) to purchase any Mortgage Loan as to which the Mortgagor has failed
to make unexcused payment in full of three or more scheduled payments of
principal and interest (a "Defaulted Mortgage Loan"). Any such purchase will be
for a price equal to 100% of the outstanding principal balance of such Mortgage
Loan, plus accrued and unpaid interest thereon at the Net Mortgage Rate (less
any amounts representing previously unreimbursed
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advances). The purchase price for any Defaulted Mortgage Loan will be deposited
in the Certificate Account on the business day prior to the Distribution Date on
which the proceeds of such purchase are to be distributed to the
Certificateholders.
Trustee
The Trustee for the Certificates offered hereby will be [Trustee], a
__________________. The Corporate Trust Office of the Trustee is located at
[Address] (the "Corporate Trust Office"). The Servicer will pay to the Trustee a
fee in consideration for its services as trustee under the Agreement. [The
Trustee will appoint The Chase Manhattan Bank ("Chase") as certificate registrar
and authenticating agent. Chase's office for such purposes is 450 West 33rd
Street, New York, New York 10001.]
Optional Termination
The Servicer may, on any Distribution Date, repurchase from the Trust
Fund all Mortgage Loans remaining outstanding at such time as the aggregate
unpaid principal balance of such Mortgage Loans is less than 10% of the
aggregate unpaid scheduled principal balance of the Mortgage Pool on the Cut-off
Date. The repurchase price will equal the greater of (A) the sum of (i) the
unpaid principal amount of such Mortgage Loans (other than any such Mortgage
Loans as to which the related Mortgaged Properties have been acquired and whose
fair market values are included in clause (ii) below), plus accrued interest
thereon at the Remittance Rate to the next Due Date and (ii) the fair market
value of any such acquired properties (as determined by an appraisal to be
conducted by an appraiser selected by the Trustee), in each case less any
unreimbursed Advances made with respect to such Mortgage Loans and (B) the
outstanding principal balance of the Offered Certificates plus accrued interest
thereon at the Remittance Rate. Upon any such repurchase, the Offered
Certificateholders will receive the outstanding principal balance of the Offered
Certificates plus accrued interest thereon at the Remittance Rate. Such amounts
will be distributed to Certificateholders on the Distribution Date in the month
following the month of repurchase.
Special Servicing Agreements
The Agreement may permit the Servicer to enter into a special servicing
agreement with an unaffiliated holder of a Class of Class B Certificates or of a
class of securities representing interests in the Class B Certificates and/or
other subordinated mortgage pass-through certificates. Pursuant to such
agreement, such holder may instruct the Servicer to commence or delay
foreclosure proceedings with respect to delinquent Mortgage Loans. Such
commencement or delay at such holder's direction will be taken by the Servicer
only after such holder deposits a specified amount of cash with the Servicer.
Such cash will be available for distribution to Certificateholders if
Liquidation Proceeds are less than the outstanding principal balance of the
related Mortgage Loan.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. A copy of
the Agreement will be attached as an exhibit to the Current Report on Form 8-K
of the Seller that will be available to purchasers of the Certificates at, and
will be filed with the Securities and Exchange Commission within 15 days of, the
initial delivery of the Certificates. Reference is made to the Prospectus for
additional information regarding the terms and conditions of the Agreement. The
approximate initial principal amount of the Offered Certificates will be
$_________, subject to a permitted variance of plus or minus 5%. Any difference
between the
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aggregate principal balance of the Certificates as of the date of issuance of
the Certificates and the approximate aggregate initial principal balance thereof
as of the date of this Prospectus Supplement will be allocated among the various
Classes of Certificates so as to retain materially the characteristics thereof
described herein.
The following summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Agreement. When particular provisions or terms used in the Agreement are
referred to, the actual provisions (including definitions of terms) are
incorporated by reference.
General
Initially, the Class A Certificates will evidence in the aggregate a
beneficial interest of approximately _____% in the aggregate principal balance
of the Mortgage Loans in the Trust Fund (the "Class A Percentage"), the Class M
Certificates will evidence a beneficial interest of approximately _____% in the
aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class
M Percentage"), the Class B-1 Certificates will evidence a beneficial interest
of approximately _____% in the aggregate principal balance of the Mortgage Loans
in the Trust Fund (the "Class B-1 Percentage"), the Class B-2 Certificates will
evidence in the aggregate a beneficial interest of approximately _____% in the
aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class
B-2 Percentage") and the Non-Offered Class B Certificates will evidence in the
aggregate the remaining beneficial interest (the "Non-Offered Class B
Percentage") in the aggregate principal balance of the Mortgage Loans in the
Trust Fund. Initially, the Non-Offered Class B Percentage will be approximately
_____% The Class A Percentage, the Class M Percentage, the Class B-1 Percentage
and the Class B-2 Percentage will vary from time to time to the extent that the
respective Class A, Class M, Class B-1 or Class B-2 Certificateholders do not
receive amounts due to them on any Distribution Date, losses are realized on the
Mortgage Loans, or principal prepayments are made or certain other unscheduled
amounts of principal are received in respect of the Mortgage Loans. See
"Description of the Certificates -- Subordinated Certificates and Shifting
Interests." The Class A-X Certificates and the Non-Offered Class B Certificates
will be privately placed with a limited number of institutional investors and
are not offered hereby. The Offered Certificates generally will be issuable in
denominations of $_________ (or $_______, in the case of the Class M and Offered
Class B Certificates) principal amount (or, in either case, integral multiples
of $1,000 in excess thereof). A single Class A-R Certificate will be issuable in
a $100 denomination.
The Class _________________ Certificates, as well as Definitive
Certificates (defined herein), if any, will be transferable and exchangeable at
the Corporate Trust Office. No service charge will be made for any registration
or transfer of Offered Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge in connection with
such transfer. The Offered Certificates, other than the Class A-R, Class M,
Class B-1 and Class B-2 Certificates (such Classes of Certificates, the
"Book-Entry Certificates") will be represented initially by one or more physical
certificates registered in the name of Cede & Co. ("Cede") as the nominee of The
Depository Trust Company ("DTC"). No person acquiring an interest in the
Book-Entry Certificates (a "Certificate Owner") will be entitled to receive a
certificate representing such person's interest in the Trust Fund, except as set
forth below under "Description of the Certificates -- Definitive Certificates."
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions by the Book-Entry
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below) and all references herein to distributions,
notices, reports and statements to the Book-Entry
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Certificateholders shall refer to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the Book-Entry Certificates, as the
case may be, for distribution to Certificate Owners in accordance with DTC
procedures. See "Description of the Certificates -- Book-Entry Registration."
The Final Scheduled Distribution Date of each Class of Offered
Certificates is [DATE], which is the Distribution Date occurring in the month
that is one month following the latest stated maturity date of any Mortgage
Loan.
The rate of principal payments of the Certificates will depend on the
rate of principal payments of the Mortgage Loans (including prepayments,
defaults, delinquencies and liquidations) which, in turn, will depend on the
characteristics of the Mortgage Loans, the level of prevailing interest rates
and other economic factors, and no assurance can be given as to the actual
payment experience. The principal balance or notional amount, as applicable, of
each Class of Certificates may be reduced to zero earlier or later than its
Final Scheduled Distribution Date.
Book-Entry Registration
DTC is a limited purpose trust company organized under the laws of the
State of New York and is a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934. DTC was created to hold securities for its participating
organizations (each, a "Participant") and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (including
[Underwriter]), banks, trust companies and clearing corporations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Certificate Owners that are not Participants or Indirect Participants
and that desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Book-Entry Certificates may do so only through Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest on the Book-Entry Certificates through a
Participant or an Indirect Participant. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants, which thereafter will forward them to
Certificate Owners directly or through an Indirect Participant. It is
anticipated that the only "Certificateholder" of a Book-Entry Certificate will
be Cede, as nominee of DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Agreement, and
Certificate Owners will be permitted to exercise the rights of Book-Entry
Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC will be required to make book-entry
transfers of Book-Entry Certificates among Participants and to receive and
transmit distributions of principal of, and interest on, Book-Entry
Certificates. Participants and Indirect Participants with which Certificates
Owners have accounts with respect to the Book-Entry Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although Certificate
Owners will not possess
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physical certificates, the Rules provide a mechanism by which Participants and
Certificate Owners will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, and on behalf of certain banks, the ability of
a Certificate Owner to pledge Book-Entry Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect to
such Certificates, may be limited due to the absence of physical certificates
for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Participants to whose accounts with DTC the Book-Entry Certificates are
credited. Additionally, DTC has advised the Seller that it will take such action
where the consent of specified percentages of the Offered Certificates is
required under the Agreement only at the direction of and on behalf of
Participants whose interests represent such specified percentages. DTC may take
conflicting actions on behalf of other Participants.
Neither the Seller, the Servicer nor the Trustee will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Book-Entry Certificates held by Cede,
as nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Definitive Certificates
The [Class A-R, Class M, Class B-1 and Class B-2] Certificates will be
issued in fully registered, certificated form. The Book-Entry Certificates will
be issued in fully registered, certificated form ("Definitive Certificates") to
Certificate Owners or their nominees, rather than to DTC or its nominee, only if
(i) the Seller advises the Servicer in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with respect to
the Book-Entry Certificates and the Seller is unable to locate a qualified
successor within 30 days or (ii) the Seller, at its option, elects to terminate
the book-entry system through DTC.
Upon the occurrence of either event described in the immediately
preceding paragraph, the Trustee is required to notify DTC which in turn will
notify all Certificate Owners through Participants of the availability of
Definitive Certificates in exchange for Book-Entry Certificates. Upon surrender
by Cede, as nominee of DTC, of the definitive certificates representing the
Book-Entry Certificates and receipt of instructions for re-registration, the
Trustee or its agent will reissue the Book-Entry Certificates as Definitive
Certificates to Certificate Owners.
Restrictions on Transfer of the Class A-R, Class M and Offered Class B
Certificates
The Class A-R Certificate will be subject to the following restrictions
on transfer, and the Class A-R Certificate will contain a legend describing such
restrictions.
The REMIC provisions of the Code impose certain taxes on (i)
transferors of residual interests to, or agents that acquire residual interests
on behalf of, Disqualified Organizations (as defined in the Prospectus) and (ii)
certain Pass-Through Entities (as defined in the Prospectus) that have
Disqualified Organizations as beneficial owners. No tax will be imposed on a
Pass-Through Entity (other than an "electing large partnership" as defined in
the Code) with respect to the Class A-R Certificate to the extent
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it has received an affidavit from the owner thereof that such owner is not a
Disqualified Organization or a nominee for a Disqualified Organization. The
Agreement will provide that no legal or beneficial interest in the Class A-R
Certificate may be transferred to or registered in the name of any person unless
(i) the proposed purchaser provides to the Trustee an affidavit to the effect
that, among other items, such transferee is not a Disqualified Organization and
is not purchasing the Class A-R Certificate as an agent for a Disqualified
Organization (i.e., as a broker, nominee, or other middleman thereof) and (ii)
the transferor states in writing to the Trustee that it has no actual knowledge
that such affidavit or letter is false. Further, such affidavit or letter
requires the transferee to affirm that it (i) historically has paid its debts as
they have come due and intends to do so in the future, (ii) understands that it
may incur tax liabilities with respect to the Class A-R Certificate in excess of
cash flows generated thereby, (iii) intends to pay taxes associated with holding
the Class A-R Certificate as such taxes become due and (iv) will not transfer
the Class A-R Certificate to any person or entity that does not provide a
similar affidavit or letter.
In addition, the Class A-R Certificate may not be purchased by or
transferred to any person that is not a "U.S. Person," unless (i) such person
holds such Class A-R Certificate in connection with the conduct of a trade or
business within the United States and furnishes the transferor and the Trustee
with an effective Internal Revenue Service Form 4224 or (ii) the transferee
delivers to both the transferor and the Trustee an opinion of a nationally
recognized tax counsel to the effect that such transfer of the Class A-R
Certificate will not be disregarded for federal income tax purposes. The term
"U.S. Person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or a
trust if (A) a court within the United States is able to exercise primary
supervision over the administration of such trust, and (B) one or more United
States fiduciaries have the authority to control all substantial decisions of
such trust.
The Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest no
rights in any purported transferee. Any transferor or agent to whom the Trustee
provides information as to any applicable tax imposed on such transferor or
agent may be required to bear the cost of computing or providing such
information. See "Federal Income Tax Consequences -- REMIC Certificates; --
Income from Residual Certificates; -- Taxation of Certain Foreign Investors; --
Transfers of Residual Certificates; -- Servicing Compensation and Other REMIC
Pool Expense" in the Prospectus.
The Class A-R Certificate may not be purchased by or transferred to a
Plan or a person acting on behalf of or investing the assets of a Plan. See
"ERISA Considerations" herein and in the Prospectus.
Because the Class M and Offered Class B Certificates are subordinated
to the Class A Certificates, the Class M Certificates and the Offered Class B
Certificates may not be transferred unless the transferee has delivered (i) a
representation letter to the Trustee stating either (a) that the transferee is
not a Plan and is not acting on behalf of a Plan or using the assets of Plan to
effect such purchase or (b) subject to the conditions described herein, that the
source of funds used to purchase the Class M or Offered Class B Certificates in
an "insurance company general account" or (ii) an opinion of counsel and such
other documentation as described herein under "ERISA Considerations." See "ERISA
Considerations" herein and in the Prospectus.
Distributions to Certificateholders
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Distributions of principal and interest on the Certificates will be
made on the 25th day of each month or, if such day is not a business day, the
next succeeding business day (each, a "Distribution Date"), beginning [DATE], to
the persons in whose names the Certificates are registered at the close of
business on the last business day of the month preceding the month in which
payment is made (each, a "Record Date"). Distributions will be made to each
Class as described below and on a pro rata basis among the Certificates of each
Class. Distributions of principal of and interest on the Book-Entry Certificates
will initially be made by the Trustee directly to Cede by wire transfer.
Distributions with respect to the Class A-R, Class M, Class B-1 and Class B-2
Certificates and, upon the issuance of Definitive Certificates to persons other
than Cede, distributions of principal and interest on such Definitive
Certificates will be made by the Trustee directly to holders in whose names such
Certificates were registered at the close of business on the related Record
Date. Such distributions will be made by check mailed to the address of the
person entitled thereto as it appears on the certificate register, or, upon
written request to the Trustee delivered at least ten business days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
by a holder of an Offered Certificate having an original aggregate principal
balance of at least $5,000,000 (or by a holder which holds all of the
Certificates of a Class), by wire transfer to such Certificateholder, except
that the final distribution in retirement of Certificates will be made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee specified in the final distribution notice to Certificateholders.
Principal received or advanced as part of a regularly scheduled Monthly
Payment on each Mortgage Loan will be passed through monthly on the Distribution
Date occurring in the month in which the related Due Date occurs. The Non-PO
Class A Certificateholders will be entitled to an amount equal to the Non-PO
Class A Percentage (defined herein) of the applicable Non-PO Percentage (defined
herein) of scheduled principal amounts due or advanced with respect to each
Mortgage Loan. Principal prepayments and certain other unscheduled amounts of
principal received during the period from the first day of any month to the last
day of such month (each, a "Principal Prepayment Period") will be passed through
on the Distribution Date occurring in the month following the month of receipt.
The Non-PO Class A Certificateholders will be entitled to an amount equal to the
Non-PO Class A Prepayment Percentage (defined herein) of the applicable Non-PO
Percentage of such unscheduled amounts of principal.
The aggregate amount available for distribution to Certificateholders
on each Distribution Date will be the Available Distribution Amount. The
"Available Distribution Amount" means, generally, as of any Distribution Date,
an amount equal to the amount on deposit in the Collection Account as of the
close of business on the related Servicer Remittance Date (including amounts to
be advanced by the Servicer in respect of delinquent Monthly Payments), except:
(a) amounts received as late payments or other recoveries of principal or
interest (including liquidation proceeds and insurance proceeds) and respecting
reimbursement for Advances to be determined to be nonrecoverable and amounts
representing reimbursement for Advances determined to be nonrecoverable and
amounts representing reimbursement for certain losses and expenses incurred by
the Servicer, as described in the Agreement; (b) the Servicing Fee, as adjusted
as provided in the Agreement with respect to principal prepayments; (c) all
amounts representing Monthly Payments due after the related Due Date; and (d)
all principal prepayments, liquidation proceeds, insurance proceeds,
condemnation proceeds and repurchase proceeds received after the related
Principal Prepayment Period;
On each Distribution Date, the Available Distribution Amount will be
allocated among the Classes of Certificates and distributed to the holders of
record thereof as of the related Record Date as follows:
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[Describe payment methodology]
The "Credit Support Depletion Date" is the first Distribution Date on
which the aggregate outstanding principal balance of the Subordinated
Certificates has been or will be reduced to zero.
With respect to each Mortgage Loan, the "PO Percentage" will equal a
fraction, expressed as a percentage (but not less than 0%), the numerator of
which will equal the excess, if any, of _____% per annum (the "Remittance Rate")
over the applicable Net Mortgage Rate (defined herein) and the denominator of
which will equal the Remittance Rate. The PO Percentage will 0% with respect to
Mortgage Loans for which the Net Mortgage Rate is greater than or equal to the
Remittance Rate. As of the Cut-off Date, the weighted average Mortgage Rate of
the Discount Mortgage Loans (defined below) is approximately ____%.
With respect to each Mortgage Loan, the "Non-PO Percentage" will equal
a fraction, expressed as a percentage (but not greater than 100%), the numerator
of which will equal the applicable Net Mortgage Rate and the denominator of
which will equal the Remittance Rate. The Non-PO Percentage will be 100% with
respect to Mortgage Loans for which the Net Mortgage Rate is greater than or
equal to the Remittance Rate.
The "Discount Mortgage Loans" are those Mortgage Loans having Net
Mortgage Rates less than the Remittance Rate.
The "Non-Discount Mortgage Loans" are those Mortgage Loans having Net
Mortgage Rates greater than the Remittance Rate.
The Class A-P Certificates will not be entitled to receive interest and
will be entitled to receive principal only with respect to the Discount Mortgage
Loans. The Class A-X Certificates will not be entitled to receive principal and
will be entitled to receive interest only with respect to the Non-Discount
Mortgage Loans.
With respect to each Mortgage Loan, the "Net Mortgage Rate" equals the
applicable Mortgage Rate less the Servicing Fee Rate.
Interest
On each Distribution Date, interest will be payable to each Class of
Certificates (other than the [Class A-P] Certificates) in an amount equal to the
sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any
Interest Shortfall with respect to such Class.
As of any Distribution Date, the "Interest Accrual Amount" with respect
to any Class of Certificates (other than the Class [A-P] Certificates) means
generally one month's interest at the Certificate Rate on the outstanding
principal balance thereof (or, in the case of the Class [A-X] Certificates, on
the Class [A-X] Notional Amount), minus (i) any Non-Supported Interest
Shortfalls allocated to such Class on such Distribution Date (as described
herein under "The Pooling and Servicing Agreement -- Adjustment to Servicing Fee
in connection with Prepaid Mortgage Loans") and (ii) the interest portion of any
Realized Losses allocated to such Class as described herein.
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As of any Distribution Date, the "Interest Shortfall" with respect to
any Class of Certificates (other than the Class [A-P] Certificates) means
generally any portion of the Interest Accrual Amount with respect to any
previous Distribution Amount which remains unpaid (before giving effect to
distributions made on such Distribution Date).
For any Class of Certificates (other than the Class [A-P], Class [A-X]
and Non-Offered Class B Certificates ), the "Certificate Rate" is the per annum
rate of interest specified or described for such Class on the cover hereof. The
"Certificate Rate" for the Class A-X Certificates and each Class of Non-Offered
Class B Certificates is equal to _____%.
Interest will accrue on the Class A-5 and Class A-6 Certificates at
their respective Certificate Rates during the one-month period beginning on the
25th day of the month preceding the month in which the related Distribution Date
occurs and ending on the 24th date of the month of such Distribution Date (each
such period, an "Interest Accrual Period"). Such Certificate Rates will be
calculated as follows:
(i) the Certificate Rate on the Class A-5 Certificates
with respect to the first Distribution Date will be _____%, and as to
any Distribution Date thereafter, the Certificate Rate on the Class A-5
Certificates will equal the lesser of (A) _____% plus LIBOR (determined
as described below) ("LIBOR") and (B) _____%.
(ii) The Certificate Rate on the Class A-6
Certificates with respect to the first Distribution Date will be _____%
and as to any Distribution Date thereafter, the Certificate Rate on the
Class A-6 Certificates will equal the lesser of (A) approximately
_____% minus the product of (x) approximately _________ and (y) LIBOR,
but not less than 0.00% and (B) _____%.
The "Class A-X Notional Amount" with respect to any Distribution Date
will equal the product of (x) the aggregate scheduled principal balance of the
Non-Discount Mortgage Loans as of (1) the second preceding Due Date after giving
effect to payments scheduled to be received as of such Due Date, whether or not
received, together with any prepayments or other unscheduled principal amounts
received with respect to the Non-Discount Mortgage Loans as of such Due Date, or
(2) with respect to the Distribution Date in [DATE], as of the Cut-Off Date, of
the Non-Discount Mortgage Loans and (y) a fraction, the numerator of which is
the weighted average of the Stripped Interest Rates for the Non-Discount
Mortgage Loans as of such Due Date and the denominator of which is _____%. The
initial Class A-X Notional Amount will be
$---------.
The "Stripped Interest Rate" means for each Mortgage Loan, the excess,
if any, of the Net Mortgage Rate for such Mortgage Loan over _____%.
[Determination of LIBOR
LIBOR for any Interest Accrual Period (other than the first Interest
Accrual Period) after the initial Interest Accrual Period will be determined as
described below.
On each Distribution Date, LIBOR shall be established by the Servicer
and as to any Interest Accrual Period (other than the first Interest Accrual
Period), LIBOR will equal the rate for United States dollar deposits for one
month which appears on the Dow Jones Telerate Screen Page 3750 as of 11:00 A.M.,
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London time, on the LIBOR Business Day (defined below) prior to the first day of
such Interest Accrual Period (each such day, a "Rate Adjustment Date").
"Telerate Screen Page 3750" means the display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks). If
such rate does not appear on such page (or such other page as may replace that
page on that service, or if such service is no longer offered, such other
service for displaying LIBOR or comparable rates as may be selected by the
Servicer), the rate will be the Reference Bank Rate. The "Reference Bank Rate"
will be determined on the basis of the rates at which deposits in the U.S.
Dollars are offered by the reference banks (which shall be three major banks
that are engaged in transactions in the London interbank market, selected by the
Servicer) as of 11:00 A.M., London time, on the day that is one LIBOR Business
Day prior to the immediately preceding Distribution Date to prime banks in the
London interbank market for a period of one month in amounts approximately equal
to the aggregate outstanding principal balance of the Class A-5 and Class A-6
Certificates. The Servicer will request the principal London office of each of
the reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations.
If on such date fewer than two quotations are provided as requested, the rate
will be the arithmetic mean of the rates quoted by one or more major banks in
New York City, selected by the Servicer, as of 11:00 A.M., New York City time,
on such date for loans in the U.S. Dollars to leading European banks for a
period of one month in amounts approximately equal to the aggregate outstanding
principal balance of the [Class A-5 and Class A-6] Certificates. If no such
quotations can be obtained, the rate will be LIBOR for the prior Distribution
Date, or in the case of the first Rate Adjustment Date, _____%. "LIBOR Business
Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which
banking institutions in the city of London, England are required or authorized
by law to be closed.
The establishment of LIBOR by the Servicer and the Servicer's
subsequent calculation of the Certificate Rates applicable to the Class A-5 and
Class A-6 Certificates for the relevant Interest Accrual Period, in the absence
of manifest error, will be final and binding.]
Principal (Including Prepayments)
[Describe principal payment methodology]
Principal distributions made on each Class of Certificates will be paid
pro rata among the Certificates of such Class in accordance with their
respective outstanding principal balances.
The "Non-PO Class A Optimal Principal Amount" means generally as of any
Distribution Date, an amount, not in excess of the Non-PO Class A Principal
Balance equal to the sum of: (a) an amount equal to the Non-PO Class A
Percentage of the applicable Non-PO Percentage of the principal portion of all
Monthly Payments whether or not received, which were due on the related Due Date
on outstanding Mortgage Loans as of such Due Date; (b) an amount equal to the
Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of all
principal prepayments received during the related Principal Prepayment Period;
(c) with respect to each Mortgage Loan not described in (d) below, an amount
equal to the Non-PO Class A Percentage of the applicable Non-PO Percentage of
the sum of the principal portion of all insurance proceeds, condemnation awards
and any other cash proceeds from a source other than the Mortgagor, to the
extent required to be deposited in the Collection Account, which were received
during the related Principal Prepayment Period, net of related unreimbursed
servicing advances and net of any portion thereof which, as to any Mortgage
Loan, constitutes a late collection with respect to which an Advance has
previously been made; (d) with respect to each Mortgage Loan which has become a
Liquidated Mortgage Loan during the
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related Principal Prepayment Period, an amount equal to the lesser of (i) the
Non-PO Class A Percentage of the applicable Non-PO Percentage of an amount equal
to the principal balance of such Mortgage Loan (net of Advances with respect to
principal) as of the Due Date immediately preceding the date on which it became
a liquidated Mortgage Loan and (ii) the Non-PO Class A Prepayment Percentage of
the applicable Non-PO Percentage of the net liquidation proceeds, if any, with
respect to such liquidated Mortgage Loan (net of any unreimbursed Advances); (e)
with respect to each Mortgage Loan repurchased during the related Principal
Prepayment Period, an amount equal to the Non-PO Class A Prepayment Percentage
of the applicable Non-PO Percentage of the principal portion of the purchase
price thereof (net of amounts with respect to which a distribution has
previously been made to the Non-PO Class A Certificateholders); and (f) while
none of the Subordinated Certificates remains outstanding, the excess of the
outstanding principal balance of the Non-PO Class A Certificates (calculated
after giving effect to reductions thereof on such Distribution Date with respect
to amounts described in (a) - (e) above) over the Non-PO Allocated Amount
(defined below).
As of any Distribution Date, the "Non-PO Class A Percentage" will equal
a fraction, expressed as a percentage, the numerator of which is the Non-PO
Class A Principal Balance and the denominator of which is the Non-PO Allocated
Amount immediately prior to the Due Date in the month of such Distribution Date.
The "Non-PO Allocated Amount" will be calculated as of any date by (i)
multiplying the outstanding principal balance of each Mortgage Loan as of such
date (giving effect to any Advances but prior to giving effect to any principal
prepayments received with respect to such Mortgage Loan that have not been
passed through to the Certificateholders) by the Non-PO Percentage with respect
to such Mortgage Loan and (ii) summing the results.
The "Non-PO Class A Principal Balance" means, generally, as of any
Distribution Date, (a) the Non-PO Class A Principal Balance for the preceding
Distribution Date less (b) amounts distributed to the Non-PO Class A
Certificateholders on such preceding Distribution Date allocable to principal
(including Advances) and any losses allocated to the Non-PO Class A
Certificates; provided that the Non-PO Class A Principal Balance on the first
Distribution Date will be the initial Non-PO Class A Principal Balance, which is
expected to be approximately $_________.
The "Non-PO Class A Prepayment Percentage" means, generally, as of any
Distribution Date up to and including the Distribution Date in [DATE], 100%; as
of any Distribution Date in the first year thereafter, the Non-PO Class A
Percentage plus _____% of the Subordinated Percentage for such Distribution
Date; as of any Distribution Date in the second year thereafter, the Non-PO
Class A Percentage plus _____% of the Subordinated Percentage for such
Distribution Date; as of any Distribution Date in the third year thereafter, the
Non-PO Class A Percentage plus _____% of the Subordinated Percentage for such
Distribution Date; as of any Distribution Date in the fourth year thereafter,
the Non-PO Class A Percentage plus _____% of the Subordinated Percentage for
such Distribution Date; and as of any Distribution Date after the fourth year
thereafter, the Non-PO Class A Percentage; provided that, if the Non-PO Class A
Percentage as of any such Distribution Date is greater than the initial Non-PO
Class A Percentage, the Non-PO Class A Prepayment Percentage shall be 100%; and
provided further, however, that no reduction of the Non-PO Class A Prepayment
Percentage below the level in effect for the most recent period shall occur with
respect to any Distribution Date unless, as of the last day of the month
preceding such Distribution Date, (i) the aggregate outstanding principal
balance of Mortgage Loans delinquent 60 days or more (including for this purpose
any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the
related Mortgaged Property has been acquired by the Trust Fund) does not exceed
_____% of the aggregate principal balance of the Subordinated Certificates as of
such date and (ii) cumulative Realized Losses do not exceed (a)
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_____% of the aggregate principal balance of the Subordinated Certificates as of
the date of issuance of the Certificates (the "Original Subordinated Principal
Balance") if such Distribution Date occurs between and including [DATE] and
[DATE], (b) _____% of the Original Subordinated Principal Balance if such
Distribution Date occurs between and including [DATE] and [DATE], (c) _____% of
the Original Subordinated Principal Balance if such Distribution Date occurs
between and including [DATE] and [DATE], (d) _____% of the Original Subordinated
Principal Balance if such Distribution Date occurs between and including [DATE]
and [DATE], and (e) _____% of the Original Subordinated Principal Balance if
such Distribution Date occurs during or after [DATE].
As of any Distribution Date, the "Subordinated Percentage" means the
difference between 100% and the Non-PO Class A Percentage, and the "Subordinated
Prepayment Percentage" means the difference between 100% and the Non-PO Class A
Prepayment Percentage.
Allocation of the Subordinated Optimal Principal Amount
On each Distribution Date, distributions in respect of principal will
be made to each Class of Subordinated Certificates up to an amount equal to the
portion of the Subordinated Optimal Principal Amount (defined below) allocable
to such Class, calculated as described below.
The "Subordinated Optimal Principal Amount" means generally as of any
Distribution Date, an amount, not in excess of the aggregate outstanding
principal balance of the Subordinated Certificates, equal to (1) the sum of: (a)
an amount equal to the Subordinated Percentage of the applicable Non-PO
Percentage of the principal portion of all Monthly Payments whether or not
received, which were due on the related Due Date on outstanding Mortgage Loans
as of such Due Date; (b) an amount equal to the Subordinated Prepayment
Percentage of the applicable Non-PO Percentage of all principal prepayments
received during the related Principal Prepayment Period; (c) with respect to
each Mortgage Loan not described in (d) below, an amount equal to the
Subordinated Percentage of the applicable Non-PO Percentage of the sum of the
principal portion of all insurance proceeds, condemnation awards and any other
cash proceeds from a source other than the Mortgagor, to the extent required to
be deposited in the Collection Account, which were received during the related
Principal Prepayment Period, net of related unreimbursed servicing advances and
net of any portion thereof which, as to any Mortgage Loan, constitutes a late
collection with respect to which an Advance has previously been made; (d) with
respect to each Mortgage Loan which has become a Liquidated Mortgage Loan during
the related Principal Prepayment Period, an amount equal to the portion (if any)
of the net liquidation proceeds with respect to such liquidated Mortgage Loan
(net of any unreimbursed Advances) that was not included in the Class A-P
Distribution Amount or the Non-PO Class A Optimal Principal Amount with respect
to such Distribution Date; and (e) with respect to each Mortgage Loan
repurchased during the related Principal Prepayment Period, an amount equal to
the Subordinated Prepayment Percentage of the applicable Non-PO Percentage of
the principal portion of the purchase price thereof (net of amounts with respect
to which a distribution has previously been made to the Subordinated
Certificateholders), minus (2) the Class A-P Shortfall Amount with respect to
such Distribution Date.
On each Distribution Date, the Subordinated Optimal Principal Amount
will be allocated among the outstanding Classes of Subordinated Certificates
entitled to receive distributions in respect thereof on such Distribution Date,
as described in the second succeeding sentence. Each such Class will be
allocated its pro rata portion of the Subordinated Optional Principal Amount
based upon the outstanding principal balances of all Classes of Subordinated
Certificates entitled to distributions in respect of the Subordinated Optimal
Principal Amount on such Distribution Date. On each Distribution Date, the
Subordinated Optimal Principal
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Amount will be allocated among the following Classes of Certificates: (i) any
Class of Subordinated Certificates which has current Credit Support (defined
herein) (before giving effect to any distribution of principal thereon on such
Distribution Date) greater than or equal to the original Credit Support for such
Class; (ii) the Class of Subordinated Certificates having the lowest numerical
class designation of any outstanding Class of Subordinated Certificates which
does not meet the criteria in (i) above; and (iii) the Class B-5 Certificates if
all other outstanding Classes of Subordinated Certificates meet the criteria in
(i) above or if no other Class of Subordinated Certificates is outstanding;
provided, however, that no Class of Subordinated Certificates will receive any
distribution in respect of the Subordinated Optimal Principal Amount on any
Distribution Date if on such Distribution Date any Class of Subordinated
Certificates having a lower numerical class designation than such Class fails to
meet the criteria in (i) above. For the purposes of (ii) above, the Class M
Certificates will be deemed to have a lower numerical class designation than
each Class of Class B Certificates.
Each Class of Subordinated Certificates (other than the Class B-5
Certificates) will have the benefit of a level of credit support, expressed as a
percentage of the aggregate outstanding principal balance of the Certificates
("Credit Support"). Credit Support for such Classes of Certificates will equal
in each case the percentage obtained by dividing the aggregate outstanding
principal balance of all Classes of Subordinated Certificates having higher
numerical class designations than such Class by the aggregate outstanding
principal balance of all outstanding Classes of Certificates (other than the
Class A-P Certificates) (for this purpose, the Class M Certificates shall be
deemed to have a lower numerical class designation than each Class of Class B
Certificates). Generally, the level of Credit Support for any Class will
decrease to the extent Realized Losses are allocated to any Class of
Subordinated Certificates having a higher numerical class designation and will
increase to the extent that any Class or Classes of Certificates not
subordinated to such Class receives a disproportionate portion of payments
(including prepayments) of principal on the Mortgage Loans.
Additional Rights of the Class A-R Certificateholder
The Class A-R Certificate will remain outstanding for so long as the
Trust Fund shall exist, whether or not such Certificate is receiving current
distributions of principal or interest. In addition to distributions of
principal and interest distributable as described under "Distributions on the
Certificates," the holder of the Class A-R Certificate will be entitled to
receive (i) the amounts, if any, of the Available Distribution Amount remaining
in the Certificate Account on any Distribution Date after distributions of
principal and interest on the Certificates on such date and (ii) the proceeds of
the assets of the Trust Fund, if any, remaining in the REMIC on the final
Distribution Date for the Certificates, after distributions in respect of any
accrued and unpaid interest on such Certificates, and after distributions in
respect of principal have reduced the Certificate Principal Balances of the
Certificates to zero. It is not anticipated that there will be any material
assets remaining in the Trust Fund at any such time or that any material
distributions will be made with respect to the Class A-R Certificate at any
time. See "Federal Income Tax Consequences--Residual Certificates" in the
Prospectus.
Subordinated Certificates and Shifting Interests
The rights of the Class M Certificateholders to receive distributions
with respect to the Mortgage Loans will be subordinated to the rights of the
Class A Certificateholders, the rights of the holders of each Class of Class B
Certificates to receive distributions with respect to the Mortgage Loans will be
subordinated to the rights of the holders of the Class A Certificates, the Class
M Certificates, and each Class of Class B
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Certificates having a lower numerical class designation than such Class of Class
B Certificates, each to the extent described below. The subordination provided
by the Class M and Class B Certificates is intended to enhance the likelihood of
regular receipt by the Class A Certificateholders of the full amount of monthly
distributions due them and to protect the Class A Certificateholders against
losses. The subordination provided by each Class of Class B Certificates is
intended to enhance the likelihood of regular receipt by the holders of the
Class A Certificates, the Class M Certificates, and each Class of Class B
Certificates having a lower numerical class designation than such Class of Class
B Certificates of the full amount of monthly distributions due them and to
protect such Certificateholders against losses.
On each Distribution Date payments to the Class A Certificateholders
will be made prior to payments to the Class M and Class B Certificateholders,
payments to the Class M Certificateholders will be made prior to payments to the
Class B Certificateholders, payments to the Class B-1 Certificateholders will be
made prior to payments to the Class B-2 Certificateholders and the Non-Offered
Class B Certificateholders and payments to the Class B-2 Certificateholders will
be made prior to payments to the Non-Offered Class B Certificateholders. If on
any Distribution Date on which the aggregate outstanding principal balance of
the Class M and Class B Certificates is greater than zero the Non-PO Class A
Certificateholders are paid less than the Non-PO Class A Optimal Principal
Amount for such date, the interest of the Non-PO Class A Certificateholders in
the Trust Fund will vary so as to preserve the entitlement of the Non-PO Class A
Certificateholders to unpaid principal of the Mortgage Loans and interest
thereon. This may have the effect of increasing the proportionate interest of
the Non-PO Class A Certificateholders in the Trust Fund.
The Non-PO Class A Certificateholders will be entitled to receive the
Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the
amount of principal prepayments and certain other unscheduled amounts of
principal received on the Mortgage Loans as described above. This will have the
effect of initially accelerating principal payments to the Non-PO Class A
Certificateholders (other than the Class A-7 Certificateholders) and reducing
their proportionate interest in the Trust Fund and correspondingly increasing
(in the absence of offsetting Realized Losses) the Credit Support of each Class
of Subordinated Certificates having Credit Support. See "Description of the
Certificates -- Distributions of Principal and Interest." Increasing the
interest of the Class M and Class B Certificates in the Trust Fund relative to
that of the Class A Certificates is intended to preserve the availability of the
benefits of the subordination provided by the Class M and Class B Certificates.
All Realized Losses on the Mortgage Loans (other than Excess Losses
(defined below)) generally will be allocated first, to the Non-Offered Class B
Certificates until the principal balance of the Non-Offered Class B Certificates
has been reduced to zero; second, to the Class B-2 Certificates until the
principal balance of the Class B-2 Certificates has been reduced to zero; third,
to the Class B-1 Certificates until the principal balance of the Class B-1
Certificates has been reduced to zero; fourth, to the Class M Certificates until
the principal balance of the Class M Certificates has been reduced to zero; and
fifth, to the Non-PO Class A Certificates pro rata based upon their respective
outstanding principal balances until the principal balance of the Non-PO Class A
Certificates has been reduced to zero; provided, however, that if a Realized
Loss occurs with respect to a Discount Mortgage Loan (A) the amount of such
Realized Loss equal to the product of (i) the amount of such Realized Loss and
(ii) the PO Percentage with respect to such Discount Mortgage Loan will be
allocated to the Class A-P Certificates and (B) the remainder of such Realized
Loss will be allocated as described above.
A "Realized Loss" is generally the amount, if any, with respect to any
defaulted Mortgage Loan which has been liquidated in accordance with the
Agreement, by which the unpaid principal balance and
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accrued interest thereon at a rate equal to the Net Mortgage Rate exceeds the
amount actually recovered by the Servicer with respect thereto (net of
reimbursement of certain expenses) at the time such defaulted Mortgage Loan was
liquidated.
Excess Fraud Losses, Excess Bankruptcy Losses and Excess Special Hazard
Losses (collectively, "Excess Losses") will be allocated to all Classes of
Certificates pro rata based upon their respective outstanding principal
balances; provided, however, that the applicable PO Percentage of any Excess
Losses on the Discount Mortgage Loans will be allocated to the Class A-P
Certificates.
The aggregate amount of Realized Losses that may be allocated in
connection with Special Hazard Losses (defined below) on the Mortgage Loans (the
"Special Hazard Amount") to the Subordinated Certificates will initially be
equal to approximately $_________. As of each anniversary of the Cut-off Date,
the Special Hazard Amount generally will be reduced, but not increased, to an
amount equal to the lesser of (i) the Special Hazard Amount as of the previous
anniversary of the Cut-off Date less the sum of all amounts allocated to the
Certificates in respect of Special Hazard Losses on the Mortgage Loans since
such previous anniversary or (ii) the Adjustment Amount. The "Adjustment Amount"
with respect to each anniversary of the Cut-off Date will be equal to the
greatest of (i) ____% multiplied by the aggregate outstanding principal balance
of the Mortgage Loans, (ii) the aggregate outstanding principal balance of the
Mortgage Loans secured by Mortgaged Properties located in the California postal
zip code area in which the highest percentage of the Mortgage Loans are located
and (iii) twice the outstanding principal balance of the Mortgage Loan having
the largest outstanding principal balance, in each case as of such anniversary
of the Cut-off Date.
A "Special Hazard Loss" is a loss incurred in respect of any defaulted
Mortgage Loan as a result of direct physical loss or damage to the Mortgage
Property, which is not insured against under the standard hazard insurance
policy or blanket policy insuring against hazard losses which the Servicer is
required to cause to be maintained on each Mortgage Loan. See "Servicing of the
Mortgage Loans--Hazard Insurance" in the Prospectus.
"Excess Special Hazard Losses" are Special Hazard Losses in excess of
the Special Hazard Amount.
The aggregate amount of Realized Losses incurred on defaulted Mortgage
Loans as to which there was fraud in the origination of such Mortgage Loan
("Fraud Losses") which may be allocated to the Subordinated Certificates (the
"Fraud Loss Amount") will initially be equal to approximately $_________. As of
any date of determination after the Cut-off Date, the Fraud Loss Amount
generally will equal to (X) prior to the first anniversary of the Cut-off Date
an amount equal to _____% of the aggregate principal balance of all of the
Mortgage Loans as of the Cut-off Date minus the aggregate amounts allocated to
the Certificates with respect to Fraud Losses on the Mortgage Loans up to such
date of determination and (Y) from the first to the fifth anniversary of the
Cut-off Date, an amount equal to (1) _____% of the aggregate principal balance
of all of the Mortgage Loans as of the most recent anniversary of the Cut-off
Date minus (2) the aggregate amounts allocated to the Certificates with respect
to Fraud Losses on the Mortgage Loans since the most recent anniversary of the
Cut-off Date up to such date of determination. On and after the fifth
anniversary of the Cut-off Date, the Fraud Loss Amount will be zero.
"Excess Fraud Losses" are Fraud Losses in excess of the Fraud Loss
Amount.
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The aggregate amount of Realized Losses which may be allocated in
connection with Bankruptcy Losses on the Mortgage Loans (the "Bankruptcy
Amount") to the Subordinate Certificates will initially be equal to
approximately $_________. As of any date of determination, the Bankruptcy Amount
will equal approximately $_______ less the sum of any amounts allocated to the
Certificates for such losses up to such date of determination.
A "Bankruptcy Loss" is a Deficient Valuation or a Debt Service
Reduction. With respect to any Mortgage Loan, A "Deficient Valuation" is a
valuation by a court of competent jurisdiction of the Mortgage Property in an
amount less than the then outstanding indebtedness under the Mortgage Loan,
which valuation results from a proceeding initiated under the United States
Bankruptcy Code. A "Debt Service Reduction" is any reduction in the amount which
a mortgagor is obligated to pay on a monthly basis with respect to a Mortgage
Loan as a result of any proceeding initiated under the United States Bankruptcy
Code, other than a reduction attributable to a Deficient Valuation.
"Excess Bankruptcy Losses" are Bankruptcy Losses in excess of the
Bankruptcy Amount.
Amounts actually paid at any time to the Class M and Class B
Certificateholders in accordance with the terms of the Agreement will not be
subsequently recoverable from the Class M and Class B Certificateholders.
FEDERAL INCOME TAX CONSIDERATIONS
An election will be made to treat the assets of the Trust Fund as a
REMIC for federal income tax purposes. The Offered Certificates (other than the
Class A-R Certificate) will represent regular interests in the REMIC and will be
treated as newly originated debt instruments. The Class A-R Certificate will
represent the residual interest in the REMIC. All Certificateholders will be
required to use the accrual method of accounting with respect to interest income
on the Certificates, regardless of their normal method of accounting. Holders of
Offered Certificates that have original issue discount will be required to
include amounts in income with respect to such Certificates in advance of the
receipt of cash attributable to such income. It is anticipated that the Class
____ Certificates will be issued with original issue discount in an amount equal
to the excess of their initial principal balances over their respective issue
prices (including accrued interest). It is also anticipated that the Class ____
Certificates will be issued at a premium, and that the Class ____ Certificates
will be issued with de minimis original issue discount for federal income tax
purposes. The prepayment assumption that will be used in computing the amount
and rate of accrual of original issue discount includible periodically will be
___% of the Prepayment Model set forth herein. See "Prepayment and Yield
Considerations." No representation is made that payments on the Offered
Certificates will occur at that rate or any other rate.
The Offered Certificates will be treated as (i) assets described in
section 7701(a)(19)(C) of the Code and (ii) "real estate assets" within the
meaning of section 856(c)(5)(B) of the Code, in each case to the extent
described herein and in the Prospectus. Interest on the Offered Certificates
will be treated as "interest on obligations secured by mortgages on real
property" within the meaning of section 856(c)(3)(B) of the Code to the same
extent that the Offered Certificates are treated as "real estate assets" within
the meaning of section 856(c)(5)(B) of the Code.
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Class A-R Certificate
The holder of the Class A-R Certificate must include the taxable income
or loss of the REMIC in determining its federal taxable income. The Class A-R
Certificate will remain outstanding for federal income tax purposes until there
are no Certificates of any other Class outstanding. Prospective investors are
cautioned that the Class A-R Certificateholder's REMIC taxable income and the
tax liability thereon may exceed, and may substantially exceed, cash
distributions to such holder during certain periods, in which event, the holder
thereof must have sufficient alternative sources of funds to pay such tax
liability. Furthermore, it is anticipated that all or a substantial portion of
the taxable income of the REMIC includible by the holder of the Class A-R
Certificate will be treated as "excess inclusion" income, resulting in (i) the
inability of such holder to use net operating losses to offset such income from
the REMIC, (ii) the treatment of such income as "unrelated business taxable
income" to certain holders who are otherwise tax-exempt, and (iii) the treatment
of such income as subject to 30% withholding tax to certain non-U.S.
investors, with no exemption or treaty reduction.
The Class A-R Certificate will be considered a "noneconomic residual
interest," with the result that transfers thereof would be disregarded for
federal income tax purposes if any significant purpose of the transferor was to
impede the assessment or collection of tax. Accordingly, the transferee
affidavit used for transfer of the Class A-R Certificate will require the
transferee to affirm that it (i) historically has paid its debts as they have
come due and intends to do so in the future, (ii) understands that it may incur
tax liabilities with respect to the Class A-R Certificate in excess of cash
flows generated thereby, (iii) intends to pay taxes associated with holding the
Class A-R Certificate as such taxes become due and (iv) will not transfer the
Class A-R Certificate to any person or entity that does not provide a similar
affidavit. The transferor must certify in writing to the Trustee that, as of the
date of the transfer, it had no knowledge or reason to know that the
affirmations made by the transferee pursuant to the preceding sentence were
false. Additionally, the Class A-R Certificate generally may not be transferred
to certain persons who are not U.S. Persons (as defined herein). See
"Description of the Certificates -- Restrictions on Transfer of the Class A-R,
Class M and Offered Class B Certificates" herein and "Federal Income Tax
Consequences -- REMIC Certificates; -- Income from Residual Certificates;
Taxation of Certain Foreign Investors; -- Transfers of Residual Certificates" in
the Prospectus.
An individual, trust or estate that holds the Class A-R Certificate
(whether such Certificate is held directly or indirectly through certain
pass-through entities) also may have additional gross income with respect to,
but may be subject to limitations on the deductibility of, Servicing Fees on the
Mortgage Loans and other administrative expenses of the Trust Fund in computing
such holder's regular tax liability, and may not be able to deduct such fees or
expenses to any extent in computing such holder's alternative minimum tax
liability. In addition, some portion of a purchaser's basis, if any, in the
Class A-R Certificate may not be recovered until termination of the Trust Fund.
Furthermore, the federal income tax consequences of any consideration paid to a
transferee on a transfer of the Class A-R Certificate are unclear. The preamble
to the REMIC Regulations indicates that the Internal Revenue Service anticipates
providing guidance with respect to the federal tax treatment of such
consideration. Any transferee receiving consideration with respect to the Class
A-R Certificate should consult its tax advisors.
Due to the special tax treatment of residual interests, the effective
after-tax return of the Class A-R Certificate may be significantly lower than
would be the case if the Class A-R Certificate were taxed as a debt instrument,
or may be negative.
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For further information regarding the federal income tax consequences
of investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or section 4975 of
the Code, including an individual retirement account (each, a "Plan"), or any
other person investing "plan assets" of any Plan, should carefully review with
its legal advisors whether the purchase or holding of Class A Certificates could
give rise to a transaction prohibited or not otherwise permissible under ERISA
or the Code. See "ERISA Considerations" in the Prospectus.
The Class A-R Certificate may not be purchased by or transferred to a
Plan or any other person investing "plan assets" of any Plan. Accordingly, the
following discussion does not purport to discuss any considerations under ERISA
with respect to the purchase, acquisition or resale of the Class A-R Certificate
and for purposes of the following discussion all references to the Offered
Certificates are deemed to exclude the Class A-R Certificate.
The U.S. Department of Labor ("DOL") has issued Prohibited Transaction
Class Exemption 83-1 ("PTCE 83-1") exempting certain transactions involving
mortgage pool investment entities holding mortgages on certain residential
property from the prohibited transaction provisions of ERISA and the Code. See
"ERISA Considerations" in the Prospectus for a discussion of PTCE 83-1 and the
prohibited transaction provisions of ERISA and the Code.
Prohibited Transaction Exemption _____, __ Fed. Reg. _____ ([DATE])
granted by the DOL to [Underwriter] (the "Exemption"), exempts the purchase and
holding of the Class A Certificates by or with "plan assets" of a Plan from the
prohibited transaction provisions of section 406(a) of ERISA (and the excise
taxes imposed by section 4975(c)(1)(A) of the Code) provided that certain
conditions are met. Among the conditions are the following: (i) the Underwriter
is the sole underwriter, or the manager or co-manager of the underwriting
syndicate for such Class A Certificates, (ii) the Class A Certificates are rated
in one of the three highest generic rating categories by Standard and Poor's
Ratings Group, Fitch IBCA, Inc., Duff & Phelps Credit Rating Co. and Moody's
Investors Service, Inc., (iii) the Class A Certificates are collateralized by,
among other things, obligations that bear interest or are purchased at a
discount and which are secured by single-family residential, multifamily
residential or commercial real property (including obligations secured by
leasehold interests on commercial real property), or fractional undivided
interests in such obligations, (iv) the Class A Certificates are not
subordinated to other Certificates of the Trust Fund, (v) the Plan is an
"accredited investor" (as defined under Rule 501(a)(1) of Regulation D under the
Securities Act of 1933, as amended (the "Act")), (vi) the acquisition of the
Class A Certificates by a Plan is on terms that are at least as favorable to the
Plan as they would be in an arm's length transaction with an unrelated third
party, and (vii) the compensation to the Underwriter represents reasonable
compensation, the proceeds to the Seller represent no more than the fair market
value of the obligations securing such Class A Certificates and the sum of all
payments made to and retained by the Servicer represents not more than
reasonable compensation for the Servicer's services under the Agreement and
reimbursement of the Servicer's reasonable expenses in connection therewith. It
is expected that the Class A Certificates will satisfy the conditions of the
corresponding Exemption set forth above in clauses (i), (iii), (iv) and (vii).
Whether the remaining conditions of the exemption will be satisfied with respect
to the Class A Certificates will depend on the circumstances at the time "plan
assets" of a Plan are used to acquire such Certificates. In that
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connection, the Class A Certificates will, on the date of their original issue,
satisfy the condition set forth in clause (ii). In addition, if certain
additional conditions specified in the Exemption are met, the Exemption would
provide an exemption from the prohibited transaction provisions of ERISA section
406(b) (and the excise taxes imposed by section 4975(c)(1)(E) of the Code)
relating to possible self-dealing transactions by fiduciaries who have
discretionary authority, or render investment advice, with respect to Plan
assets used to purchase Class A Certificates where the fiduciary (or its
affiliate) is an obligor on the obligations or receivables held in the Trust
Fund. The Exemption would not apply to certain otherwise prohibited transactions
with respect to Plans sponsored by the following entities (or any affiliate of
any such entity): (a) the Seller, (b) [Underwriter], (c) the Trustee, (d) the
Servicer or (e) any obligor with respect to obligations or receivables included
in the Seller constituting more than five percent of the aggregate unamortized
principal balance of the assets in the Seller.
Before purchasing a Class A Certificate, a fiduciary of a Plan or any
other person investing "plan assets" of any Plan, should itself confirm that (a)
the Class A Certificates constitute "certificates" for the purposes of the
Exemption and (b) that the specific and general conditions set forth in the
Exemption would be satisfied. In addition to making its own determination as to
the availability of the exemptive relief provided in the Exemption, the
fiduciary or other Plan investor should consider its general fiduciary
obligations under ERISA in determining whether to purchase a Certificate on
behalf or with "plan assets" of a Plan.
Neither the Exemption nor PTCE 83-1 will apply to the Class M
Certificates, the Class B-1 Certificates or the Class B-2 Certificates;
therefore, the purchase or holding of a Class M Certificate, a Class B-1
Certificate or a Class B-2 Certificate by or with "plan assets" of a Plan may
result in prohibited transactions or the imposition of excise taxes or civil
penalties. Accordingly, transfer of the Class M, Class B-1 or Class B-2
Certificates will not be made unless the transferee (i) executes a
representation letter in form and substance satisfactory to the Trustee and the
Seller stating that (a) it is not, and is not acting on behalf of, any such Plan
or using the "plan assets" of any such Plan to effect such purchase or (b) if it
is an insurance company, that the source of funds used to purchase the Class M,
Class B-1 or Class B-2 Certificates is an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995) and there is
no Plan with respect to which the amount of such general account's reserves and
liabilities for the contract(s) held by or on behalf of such Plan and all other
Plans maintained by the same employer (or affiliate thereof as defined in
Section V(a)(1) of PTCE 95-60 or by the same employee organization, exceed 10%
of the total of all reserves and liabilities of such general account (as such
amounts are determined under Section 1(a) of PTCE 95-60) at the date of
acquisition or (ii) provides an opinion of counsel in form and substance
satisfactory to the Trustee and the Seller that the purchase or holding of the
Class M, Class B-1 or Class B-2 Certificates by or on behalf of such Plan will
not result in the assets of the Trust Fund being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code and will
not subject the Seller, the Servicer or the Trustee to any obligation in
addition to those undertaken in the Agreement. The Class M, Class B-1 and Class
B-2 Certificates will contain a legend describing such restrictions on transfer
and the Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest no
rights in any purported transferee.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1, the
Exemption or other exemptions, and the potential consequences to their specific
circumstances prior to making an investment in the Class A Certificates.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment
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procedure and diversification an investment in the Class A Certificates is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.
The sale of Certificates to a Plan is in no respect a representation by
the Seller or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or by any particular
Plan, or that this investment is appropriate for Plans generally or for any
particular Plan.
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<PAGE>
LEGAL INVESTMENT MATTERS
[The Class A and Class M Certificates offered hereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"), and, as such, are legal investments for
certain entities to the extent provided in SMMEA. However, institutions subject
to the jurisdiction of the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, the National Credit Union
Administration or federal or state banking, insurance or other regulatory
authorities should review applicable rules, supervisory policies and guidelines,
since certain restrictions may apply to investments in such classes. It should
also be noted that certain states have enacted legislation limiting to varying
extents the ability of certain entities (in particular insurance companies) to
invest in mortgage related securities. Investors should consult with their own
legal advisors in determining whether, and to what extent the Class A and Class
M Certificates constitute legal investments for such investors. See "Legal
Investment Matters" in the Prospectus.
The Class B-1 and Class B-2 Certificates will not constitute "mortgage
related securities" under SMMEA. The appropriate characterization of the Class
B-1 and Class B-2 Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase Class
B-1 and Class B-2 Certificates, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Class B-1 and Class B-2 Certificates will constitute legal
investments for them.
Except as to the status of the Class A and Class M Certificates as
"mortgage related securities", the Seller makes no representations as to the
proper characterization of the Offered Certificates for legal investment or
financial institution regulatory purposes, or as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
restrictions. The uncertainties described above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristic of the Offered Certificates) may adversely affect the liquidity
of the Offered Certificates.]
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Offered Certificates will be applied by the Seller to the purchase price of
the Mortgage Loans.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement and
the terms agreement, each dated [DATE] (together, the "Underwriting Agreement")
between the Seller and [Underwriter], as underwriter, the Offered Certificates
are being purchased from the Seller by the Underwriter.
The Underwriting Agreement provides that the Underwriter's obligations
thereunder are subject to certain conditions precedent. The Underwriter is
committed to purchase all of the Offered Certificates if any Offered
Certificates are purchased.
The Underwriter has advised the Seller that it proposes to offer the
Offered Certificates from time to time in one or more negotiated transactions,
or otherwise, at varying prices to be determined, in each case,
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at the time of sale. The Underwriter may effect such transactions by selling the
Offered Certificates purchased by the Underwriter to or through dealers, and
such dealers may receive from the Underwriter, for whom they act as agents,
compensation in the form of underwriting discounts, concessions or commissions.
The Underwriter and any dealers that participate with the Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters, and
any discounts, concessions or commissions received by them, and any profit on
the resale of the Offered Certificates by them, may be deemed to be underwriting
discounts and commissions under the Act.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Seller by Morgan,
Lewis & Bockius LLP, New York, New York and for the Underwriter by
________________________________. The material federal income tax consequences
of the Certificates will be passed upon for the Seller by Morgan, Lewis &
Bockius LLP.
RATINGS
It is a condition to the issuance of the Offered Certificates that the
Class A Certificates be rated "AAA" by each of [RATING AGENCY] and [RATING
AGENCY] and that the Class M, Class B-1 and Class B-2 Certificates be rated at
least "AA", "A" and "BBB", respectively, by [RATING AGENCY].
[RATING AGENCY]'s ratings on mortgage pass-through certificates address
the likelihood of receipt by Certificateholders of payments required under the
operative agreements. [RATING AGENCY]'s ratings take into consideration the
credit quality of the mortgage pool including any credit support providers,
structural and legal aspects associated with the certificates, and the extent to
which the payment stream of the mortgage pool is adequate to make payment
required under the certificates. [RATING AGENCY]'s ratings on mortgage
pass-through certificates do not, however, constitute a statement regarding the
frequency of prepayments on the mortgage loans. [RATING AGENCY]'s ratings do not
address the possibility that investors may suffer a lower than anticipated
yield.
The ratings by [RATING AGENCY] assigned to the Offered Certificates do
not constitute a recommendation to purchase or sell such Certificates. Rather,
they are an indication of the likelihood of the payment of principal and
interest as set forth in the transaction documentation. The ratings do not
address the effect on the Offered Certificates' yield attributable to
prepayments or recoveries on the underlying Mortgage Loans. Further, the ratings
on the [Class A-X] Certificates do not address whether investors will recoup
their initial investment. Additionally, the rating on the Class A-R Certificate
addresses only the return of the Class A-R Certificate's principal balance and
interest thereon at the stated rate. The rating on the Class A-P Certificates do
not assess the likelihood of return to investors except to the extent of the
principal balance thereof.
The ratings of the Offered Certificates should be evaluated
independently from similar ratings on other types of securities. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
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The Seller has not requested a rating of the Offered Certificates by
any rating agency other than [RATING AGENCY] and [RATING AGENCY] and the Seller
has not provided information relating to the Certificates offered hereby or the
Mortgage Loans to any rating agency other than [RATING AGENCY] and [RATING
AGENCY]. However, there can be no assurance as to whether any other rating
agency will rate the Offered Certificates or, if another rating agency rates
such Certificates, what rating would be assigned to such Certificates by such
rating agency. Any such unsolicited rating assigned by another rating agency to
the Offered Certificates may be lower than the rating assigned to such
Certificates by either, or both, of [RATING AGENCY] and [RATING AGENCY].
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GLOSSARY OF DEFINED TERMS IN PROSPECTUS SUPPLEMENT
Page
----
Accounts....................................................................S-20
Act.........................................................................S-62
Advances....................................................................S-12
Agreement....................................................................S-6
Available Distribution Amount...............................................S-51
Bankruptcy Amount...........................................................S-59
Bankruptcy Loss.............................................................S-60
Book-Entry Certificates.....................................................S-47
Cede........................................................................S-47
Certificate Account.........................................................S-44
Certificate Owner............................................................S-6
Certificate Rate............................................................S-10
Certificateholders...........................................................S-6
Certificates.................................................................S-1
Chase.......................................................................S-46
Chase Manhattan Mortgage.....................................................S-1
Class A Certificates.........................................................S-1
Class A Percentage...........................................................S-9
Class A-X Notional Amount...................................................S-53
Class B Certificates.........................................................S-1
Class B-1 Percentage.........................................................S-9
Class B-2 Percentage.........................................................S-9
Class M Percentage...........................................................S-9
Code........................................................................S-13
Collection Account..........................................................S-44
Commission...................................................................S-4
Corporate Trust Office......................................................S-46
Credit Support..............................................................S-57
Credit Support Depletion Date...............................................S-51
Cut-off Date................................................................S-20
Debt Service Reduction......................................................S-60
Defaulted Mortgage Loan.....................................................S-45
Deficient Valuation.........................................................S-60
Definitive Certificates.....................................................S-49
Discount Mortgage Loans.....................................................S-52
Distribution Date...........................................................S-10
DOL.........................................................................S-62
DTC..........................................................................S-6
Due Date.....................................................................S-6
ERISA.......................................................................S-14
Excess Bankruptcy Losses....................................................S-60
Excess Fraud Losses.........................................................S-59
Excess Losses...............................................................S-59
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Excess Special Hazard Losses................................................S-59
Exemption...................................................................S-62
FHLMC.......................................................................S-21
FNMA........................................................................S-21
Fraud Loss Amount...........................................................S-59
Fraud Losses................................................................S-59
Indirect Participants.......................................................S-48
Interest Accrual Amount.....................................................S-52
Interest Accrual Period.....................................................S-53
Interest Shortfall..........................................................S-52
LIBOR.......................................................................S-53
LIBOR Business Day..........................................................S-54
Modeling Assumptions.........................................................S-8
Monthly Payments.............................................................S-6
Mortgage Loans...............................................................S-1
Mortgage Loan Schedule......................................................S-43
Mortgage Note...............................................................S-20
Mortgage Pool................................................................S-1
Mortgaged Properties........................................................S-20
Mortgage Rates..............................................................S-22
Net Mortgage Rate...........................................................S-52
Non-Discount Mortgage Loans.................................................S-52
Non-Offered Class B Certificates.............................................S-1
Non-Offered Class B Percentage..............................................S-47
Non-PO Allocated Amount.....................................................S-55
Non-PO Class A Certificates..................................................S-5
Non-PO Class A Optimal Principal Amount.....................................S-54
Non-PO Class A Percentage...................................................S-55
Non-PO Class A Prepayment Percentage........................................S-55
Non-PO Class A Principal Balance............................................S-55
Non-PO Percentage...........................................................S-52
Non-Supported Interest Shortfall............................................S-44
Offered Certificates.........................................................S-1
Offered Class A Certificates.................................................S-1
Offered Class B Certificates.................................................S-1
Original Subordinated Principal Balance.....................................S-55
Participant.................................................................S-48
Plan........................................................................S-14
PO Percentage...............................................................S-52
Prepayment Interest Shortfall...............................................S-12
Prepayment Model............................................................S-31
Principal Prepayment Period.................................................S-10
Prospectus...................................................................S-1
PTCE 83-1...................................................................S-60
Rate Adjustment Date........................................................S-53
Realized Loss...............................................................S-58
Record Date.................................................................S-50
S-69
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Reference Bank Rate.........................................................S-54
REMIC........................................................................S-3
Remittance Rate.............................................................S-52
Rules.......................................................................S-48
Seller.......................................................................S-1
Servicer.....................................................................S-1
Servicer Remittance Date....................................................S-44
Servicing Fee...............................................................S-10
Servicing Fee Rate..........................................................S-44
SMMEA.......................................................................S-15
Special Hazard Amount.......................................................S-59
Special Hazard Loss.........................................................S-59
Subordinated Certificates....................................................S-5
Subordinated Optimal Principal Amount.......................................S-56
Subordinated Percentage.....................................................S-56
Subordinated Prepayment Percentage..........................................S-56
Subservicers................................................................S-20
Telerate Screen Page 3750...................................................S-53
Trustee......................................................................S-5
Trust Fund...................................................................S-1
Underwriting Agreement......................................................S-64
Underwriter..................................................................S-2
S-70
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
=================================================================== ======================================
No dealer, salesperson or other person has been authorized
to give any information or to make any representations not Chase Manhattan
contained in this Prospectus Supplement or the Prospectus Acceptance Corporation
and, if given or made, such information or representation must Seller
not be relied upon as having been authorized by the Seller or
any Underwriter. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or a solicitation of Chase Mortgage Trust,
an offer to buy any of the Offered Certificates in any Series [ ],
jurisdiction to any person to whom it is unlawful to make such Issuer
offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information $[__________]
herein is correct as of any time subsequent to the date hereof Multi-Class Mortgage
or that there has been no change in the affairs of the Seller Pass-Through Certificates,
since such date. Series [___]
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT [LOGO]
Page
----
Terms of the Certificates..........................................
Risk Factors.......................................................
The Mortgage Pool.................................................. Chase Manhattan
Prepayment and Yield Considerations................................ Mortgage Corporation
Chase Manhattan Mortgage Corporation............................... Servicer
The Pooling and Servicing Agreement................................
Description of the Certificates....................................
Federal Income Tax Considerations..................................
ERISA Considerations...............................................
Legal Investment Matters...........................................
Use of Proceeds.................................................... -------------------------------------
Underwriting....................................................... PROSPECTUS SUPPLEMENT
Legal Matters...................................................... -------------------------------------
Ratings............................................................
Glossary...........................................................
PROSPECTUS
Prospectus Supplement..............................................
Available Information.............................................. [Underwriter]
Incorporation of Certain Documents by Reference....................
Reports to Certificateholders......................................
Summary of Prospectus.............................................. _____________
Risk Factors.......................................................
Description of the Certificates.................................... [DATE]
The Mortgage Pools.................................................
Credit Support.....................................................
Yield Maturity and Weighted Avegage Life Considerations............
Chase Manhattan Acceptance Corporation.............................
Chase Funding, Inc.................................................
Servicing of the Mortgage Loans....................................
The Pooling and Servicing Agreement................................
Material Legal Aspects of the Mortgage Loans.......................
Legal Investment Matters...........................................
ERISA Considerations...............................................
Federal Income Tax Consequences....................................
Plan of Distribution...............................................
Use of Proceeds....................................................
Legal Matters......................................................
Index of Prospectus Definitions....................................
=================================================================== ======================================
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED SEPTEMBER 18, 1998
PROSPECTUS
Chase Manhattan Acceptance Corporation
Chase Funding, Inc.
Seller, as specified in the related Prospectus Supplement
Mortgage Pass-Through Certificates
(Issuable in Series)
The Mortgage Pass-Through Certificates offered hereby and by the
Prospectus Supplement (as defined below) (the "Certificates") will be offered
from time to time in series. The Seller with respect to any series of
Certificates will be either Chase Manhattan Acceptance Corporation or Chase
Funding, Inc. as specified in the related Prospectus Supplement (as to either,
the "Seller"). Each series of Certificates will represent in the aggregate the
entire beneficial ownership interest, minus any interest retained by the Seller,
in a segregated pool of various types of conventional one- to four-family
residential first mortgage loans (the "Mortgage Loans") which may, if so
specified in the related Prospectus Supplement, include cooperative apartment
loans ("Cooperative Loans"), together with other assets described herein
(collectively, a "Trust Fund"). Information regarding the Mortgage Loans in a
Trust Fund, including the approximate aggregate principal amount and general
characteristics of such Mortgage Loans and the applicable Certificate Rate (as
defined herein), will be furnished in a supplement to this Prospectus at the
time of offering (a `Prospectus Supplement").
Each series of Certificates will include one or more classes. Each
class of Certificates of any series will represent the right, which may be
senior or subordinate to the rights of one or more of the other classes of
Certificates, to receive a specified portion of distributions of principal or
interest (or both) on the Mortgage Loans in the related Trust Fund in the manner
described herein and in the related Prospectus Supplement. A series may include
one or more classes of Certificates entitled to principal distributions, with
disproportionate, nominal or no interest distributions, or to interest
distributions, with disproportionate, nominal or no principal distributions. See
"Description of the Certificates". A series may include two or more classes of
Certificates which differ as to the timing, sequential order, priority of
payment, pass-through rate or amount of distributions of principal or interest
or both. Distributions of principal and interest will be made on the 25th day of
each month or, if such day is not a business day, on the next succeeding
business day, commencing with the month following delivery unless otherwise
specified in the related Prospectus Supplement.
<PAGE>
The only obligations of the Seller with respect to a series of
Certificates will be pursuant to its representations and warranties with respect
to such Certificates as described herein. Unless otherwise specified in the
related Prospectus Supplement, the Servicer for each series of Certificates will
be Chase Manhattan Mortgage Corporation. The principal obligations of the
Servicer with respect to a series of Certificates will be Chase Manhattan
Mortgage Corporation. The principal obligations of the services with respect to
a series of Certificates will be limited to its contractual servicing
obligations, and its obligation in the event of payment delinquencies on the
Mortgage Loans, to make certain cash advances with respect to the Mortgage Loans
to the extent described herein and in the related Prospectus Supplement.
The Trust Fund for a series of Certificates may include any combination
of a mortgage pool insurance policy, letter of credit, bankruptcy bond, special
hazard insurance policy, reserve fund or other form of credit support. In
addition to or in lieu of the foregoing, credit enhancement may be provided by
means of subordination as described herein and in the related Prospectus
Supplement. See "Description of the Certificates" and "Credit Support".
Each Trust Fund will be held in trust for the benefit of the holders of
the related series of Certificates pursuant to a Pooling and Servicing Agreement
as more fully described herein. If so provided in the Prospectus Supplement for
a series of Certificates, one or more separate elections will be made to treat
the related Trust Fund (or designated portions thereof) as one or more "real
estate mortgage investment conduits" for federal income tax purposes. See
"Federal Income tax Consequences".
A series of Certificates may include one or more senior classes and one
or more subordinate classes. Each such class will represent the right to receive
a specified portion of payments of principal and interest on the Mortgage Loans
in the related Trust Fund in the manner described herein and in the related
Prospectus Supplement. See "Description of Certificates".
THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE SELLER, THE CHASE MANHATTAN BANK OR CHASE MANHATTAN MORTGAGE
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH HEREIN
AND IN THE RELATED PROSPECTUS
<PAGE>
SUPPLEMENT, NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS WILL BE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
SELLER, THE CHASE MANHATTAN BANK OR CORPORATION OR ANY OF THEIR AFFILIATES.
The yield on each class of Certificates of a series will be affected by
the rate of payment of principal (including prepayments) on the assets in the
related Trust Fund and the timing of receipt of such payments as described
herein and in the related Prospectus Supplement. Each series of Certificates may
be subject to early termination only under the circumstances described herein
and in the related Prospectus Supplement.
Prospective investors in the Certificates should consider the factors
discussed under "Risk Factors" beginning on page 7.
If specified in a Prospectus Supplement, an election will be made to
treat the related Trust Fund as a "real estate mortgage investment conduit"
("REMIC") for federal income tax purposes, or two REMIC elections may be made
with respect to the related Trust Fund. See "Federal Income Tax Consequences".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described under
"Plan of Distribution") herein and in the related Prospectus Supplement. There
will have been no public market for any series of Certificates prior to the
offering thereof. Accordingly, once an offering of any Series of Certificates
has been made, there can be no assurance that a secondary market for
Certificates of such Series will develop or, if it does develop, that such
market will continue. No application will be made to list the Certificates on
any securities exchange.
This Prospectus may not be used to consummate sales of Certificates
unless accompanied by a Prospectus Supplement.
2
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a series of Certificates being
offered hereby will, among other things, set forth with respect to such series
of Certificates (i) information as to the assets comprising the Trust Fund,
including the characteristics of the Mortgage Loans and, if applicable, the
insurance, guarantees or other instruments or agreements included in the Trust
Fund and the amount and source of any reserve accounts; (ii) the aggregate
original principal balance of each class of Certificates entitled to
distributions allocable to principal and, if a fixed rate of interest, the
interest rate for each class of such Certificates entitled to distributions
allocable to interest; (iii) information as to any class of Certificates that
has a rate of interest that is subject to change from time to time and the basis
on which such interest rate will be determined; (iv) information as to any class
of Certificates on which interest will accrue and be added to the principal or,
if applicable, the notional principal balance thereof; (v) information as to the
method used to calculate the amount of interest to be paid on any class entitled
to distributions of interest only; (vi) information as to the nature and extent
of subordination with respect to any class of Certificates that is subordinate
in right of payment to any other class; (vii) the circumstances, if any, under
which the Trust Fund is subject to early termination; (viii) if applicable, the
final distribution date and the first mandatory principal distribution date of
each class of such Certificates; (ix) the method used to calculate the aggregate
amounts of principal and interest required to be distributed on each
distribution date in respect of each class of such Certificates and, with
respect to any series consisting of more than one class, the basis on which such
amounts will be allocated among the classes of such series; (x) the distribution
date for each class of the Certificates, the date on which payments received in
respect of the assets included in the Trust Fund during the related period will
be deposited in the related Collection Account (as defined herein) and, if
applicable, the assumed reinvestment rate applicable to payments received in
respect of such assets and the date on which such payments are assumed to be
received for such series of Certificates; (xi) the name of the trustee of the
Trust Fund; (xii) information with respect to the administrator, if any, of the
Trust Fund; (xiii) whether an election will be made to treat all or a portion of
the Trust Fund as a REMIC or a double REMIC and, if applicable, the designation
of the regular interests and residual interests therein; and (xiv) information
with respect to the plan of distribution of such Certificates.
AVAILABLE INFORMATION
The Seller will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect
to the series of Certificates offered hereby and by the related Prospectus
Supplement, and in accordance therewith will file reports and other information
with the Securities and Exchange Commission (the "Commission"). Such reports and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Such material can also be obtained from the web site that the Commission
maintains at http://www.sec.gov.
The Seller has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended, with respect to the Certificates. This
Prospectus, which forms a part of the Registration Statement, omits certain
information contained in such Registration Statement pursuant to the rules and
regulations of the Commission. The Registration Statement can be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission as described in the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act with respect to a series of Certificates subsequent
to the date of this Prospectus and the related Prospectus
3
<PAGE>
Supplement and prior to the termination of the offering of such series of
Certificates shall be deemed to be incorporated by reference in this Prospectus
as supplemented by the related Prospectus Supplement. If so specified in any
such document, such document shall also be deemed to be incorporated by
reference in the Registration Statement of which this Prospectus forms a part.
Any statement contained herein or in a Prospectus Supplement for a
series of Certificates or in a document incorporated or deemed to be
incorporated by reference herein or therein shall be deemed to be modified or
superseded for purposes of this Prospectus and such Prospectus Supplement to the
extent that a statement contained herein or in such Prospectus Supplement or in
any subsequently filed document which also is or is deemed to be incorporated by
reference herein or in such Prospectus Supplement modifies or supersedes such
statement, except to the extent that such subsequently filed document expressly
states otherwise. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the related Prospectus Supplement or, if applicable, the
Registration Statement.
The Seller will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus and the related Prospectus
Supplement is delivered, on the written or oral request of any such person, a
copy of any and all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Office of the President, Chase Mortgage Finance
Corporation, 343 Thornall Street, Edison, New Jersey 08837. Telephone requests
for such copies should be directed to the Office of the President at (732)
205-0600.
------------------
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the series of Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus Supplement and
Prospectus when acting as underwriters of the series of Certificates covered by
such Prospectus Supplement and with respect to their unsold allotments or
subscriptions.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon as having been authorized. This
Prospectus and any Prospectus Supplement with respect hereto do not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the Certificates offered hereby and thereby nor an offer to sell or a
solicitation of an offer to buy the Certificates to any person in any state or
other jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus or any Prospectus Supplement with
respect hereto nor any sale made hereunder and thereunder shall, under any
circumstances, create any implication that the information herein or therein is
correct as of any time subsequent to the date of such information.
------------------
REPORTS TO CERTIFICATEHOLDERS
The Servicer will provide to the holders of Certificates of each
series, annually and on each Distribution Date, reports concerning the Trust
Fund related to such Certificates. See "The Pooling and Servicing Agreement--
Reports to Certificateholders". The Servicer will file with the Commission such
reports with respect to the Trust Fund for a series of Certificates as are
required under the Exchange Act and the rules and regulations of the Commission
thereunder until the completion of the reporting period required by Rule 15d-1
under the Exchange Act.
------------------
4
<PAGE>
TABLE OF CONTENTS
RISK FACTORS..................................................................8
DESCRIPTION OF THE CERTIFICATES...............................................10
General .....................................................................10
Classes of Certificates.......................................................11
Distributions of Principal and Interest.......................................12
THE MORTGAGE POOLS............................................................13
CREDIT SUPPORT................................................................16
General .....................................................................16
Limited Guarantee of the Guarantor............................................16
Subordination.................................................................17
Certificate Guaranty Insurance Policies.......................................18
Overcollateralization.........................................................18
Cross-Support.................................................................18
Pool Insurance................................................................19
Special Hazard Insurance......................................................20
Bankruptcy Bond...............................................................21
Repurchase Bond...............................................................22
Guaranteed Investment Contracts...............................................22
Reserve Accounts..............................................................22
Other Insurance and Guarantees................................................23
YIELD, MATURITY AND WEIGHTED AVERAGE LIFE CONSIDERATIONS......................23
CHASE MORTGAGE FINANCE CORPORATION............................................25
UNDERWRITING POLICIES.........................................................25
SERVICING OF THE MORTGAGE LOANS...............................................25
Collection and Other Servicing Procedures.....................................25
Private Mortgage Insurance....................................................26
Hazard Insurance..............................................................26
Advances .....................................................................28
Servicing and Other Compensation and Payment of Expenses......................29
Resignation, Succession and Indemnification of the Servicer...................29
THE POOLING AND SERVICING AGREEMENT...........................................30
Assignment of Mortgage Loans; Warranties......................................30
Payments on Mortgage Loans; Collection Account................................32
Repurchase or Substitution....................................................32
Certain Modifications and Refinancings........................................33
Forward Commitments; Pre-Funding..............................................34
Evidence as to Compliance.....................................................34
The Trustee...................................................................35
Reports to Certificateholders.................................................35
Events of Default.............................................................36
Rights Upon Event of Default..................................................37
Amendment.....................................................................37
i
<PAGE>
Termination; Purchase of Mortgage Loans.......................................38
MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS..................................38
General .....................................................................38
Foreclosure...................................................................39
Right of Redemption...........................................................40
Anti-Deficiency Legislation and Other Limitations on Lenders..................40
Consumer Protection Laws......................................................42
Enforceability of Due-on-Sale Clauses.........................................42
Applicability of Usury Laws...................................................43
Soldiers' and Sailors' Civil Relief Act.......................................43
Late Charges, Default Interest and Limitations on Prepayment..................44
Environmental Considerations..................................................44
Forfeiture in Drug and RICO Proceedings.......................................46
LEGAL INVESTMENT MATTERS......................................................46
ERISA CONSIDERATIONS..........................................................48
FEDERAL INCOME TAX CONSEQUENCES...............................................49
General .....................................................................49
REMIC Elections...............................................................50
REMIC Certificates............................................................50
Tax Opinion...................................................................50
Status of Certificates........................................................50
Income from Regular Certificates..............................................51
Income from Residual Certificates.............................................55
Sale or Exchange of Certificates..............................................57
Taxation of Certain Foreign Investors.........................................58
Transfers of Residual Certificates............................................59
Servicing Compensation and Other REMIC Pool Expenses..........................61
Reporting and Administrative Matters..........................................61
Non-REMIC Certificates........................................................62
Trust Fund as Grantor Trust...................................................62
Status of the Certificates....................................................62
Possible Application of Stripped Bond Rules...................................63
Taxation of Certificates if Stripped Bond Rules Do Not Apply..................63
Taxation of Certificates if Stripped Bond Rules Apply.........................64
Sales of Certificates.........................................................65
Foreign Investors.............................................................65
Backup Withholding............................................................65
PLAN OF DISTRIBUTION..........................................................66
USE OF PROCEEDS...............................................................67
LEGAL MATTERS.................................................................68
ii
<PAGE>
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the Prospectus Supplement to be prepared in connection with each Series of
Certificates. Unless otherwise specified, capitalized terms used and not defined
in this Summary of Prospectus have the meanings given to them in this Prospectus
and in the related Prospectus Supplement.
Title of Securities.......... Mortgage Pass-Through Certificates, issuable in
series.
Seller; Servicer............. Chase Mortgage Finance Corporation (the
"Seller"). See "Chase Mortgage Finance
Corporation." Chase Manhattan Mortgage
Corporation ("Chase Manhattan Mortgage") or the
"Servicer"), or such other entity or entities
specified in the Prospectus Supplement will
service, and may act as master servicer with
respect to, the Mortgage Loans included in the
Trust Fund.
Description of Certificates.. Each Certificate will represent a beneficial
ownership interest in one of a number of trusts
to be created by the Seller from time to time
pursuant to a pooling and servicing agreement
(each, an "Agreement") among the Seller, the
Servicer and the commercial bank or trust
company acting as trustee specified in the
Prospectus Supplement. The property of each
trust (a "Trust Fund") will consist of a pool
(a "Mortgage Pool") of residential one- to
four-family mortgage loans (the "Mortgage
Loans") and related property and interests
(including, for example, (i) amounts received
as Monthly Payments or principal prepayments
which are on deposit in the Collection Account
from time to time, (ii) property which secured
a Mortgage Loan which has been acquired by
foreclosure or (iii) proceeds of the
liquidation of a Mortgaged Property) conveyed
to each Trust Fund by the Seller. As specified
in the related Prospectus Supplement, each
Mortgage Pool will consist entirely of
fixed-rate or adjustable-rate Mortgage Loans
originated by the Servicer, either directly or
through correspondent originators, or
originated by other originators and, in any
such case, acquired by the Servicer or an
affiliate thereof. If specified in the related
Prospectus Supplement, a Trust Fund may also
include one or more of the following:
reinvestment income, reserve accounts,
insurance policies, guarantees or similar
instruments or agreements intended to decrease
the likelihood that Certificateholders will
experience delays in distributions of scheduled
payments on, or losses in respect of, the
assets in such Trust Fund. The Certificates of
any series will be entitled to payment only
from the assets of the related Trust Fund.
1
<PAGE>
The Certificates of any series may be issued in
a single class or in two or more classes, as
specified in the Prospectus Supplement. One or
more classes of Certificates of each series (i)
may be entitled to receive distributions
allocable only to principal, only to interest
or to any combination thereof; (ii) may be
entitled to receive distributions only of
prepayments of principal throughout the lives
of the Certificates or during specified
periods; (iii) may be subordinated in the right
to receive distributions of scheduled payments
of principal, prepayments of principal,
interest or any combination thereof to one or
more other classes of Certificates of such
series throughout the lives of the Certificates
or during specified periods; (iv) may be
entitled to receive such distributions only
after the occurrence of events specified in the
Prospectus Supplement; (v) may be entitled to
receive distributions in accordance with a
schedule or formula or on the basis of
collections from designated portions of the
assets in the Trust Fund; (vi) as to
Certificates entitled to distributions
allocable to interest, may be entitled to
receive interest at a fixed rate or a rate that
is subject to change from time to time; and
(vii) as to Certificates entitled to
distributions allocable to interest, may be
entitled to distributions allocable to interest
only after the occurrence of events specified
in the Prospectus Supplement and may accrue
interest until such events occur, in each case
as specified in the Prospectus Supplement. The
timing and amounts of such distributions may
vary among classes, over time, or otherwise as
specified in the related Prospectus Supplement.
The Certificates will be offered in
fully-registered form only in the denominations
specified in the Prospectus Supplement. The
Certificates will not be guaranteed or insured
by any governmental agency or instrumentality
or any other issuer and, except as described in
the Prospectus Supplement, the Mortgage Loans
included in the related Trust Fund will not be
guaranteed or insured by any governmental
agency or instrumentality or any other person.
Distributions on the
Certificates................ Distributions on the Certificates entitled
thereto will be made on the 25th day (or, if
such day is not a business day, the business
day immediately following such 25th day) of
each month or such other date specified in the
Prospectus Supplement solely out of the
payments received in respect of the assets of
the related Trust Fund. The amount allocable to
payments of principal and interest on any
distribution date will be determined as
specified in the Prospectus Supplement. All
distributions will be made pro rata to
Certificateholders of the class entitled
thereto or by the other method specified in the
Prospectus Supplement. See "Description of the
Certificates."
The aggregate original principal balance of the
Certificates will equal the aggregate
distributions allocable to principal that such
Certificates will be entitled to receive. If
specified in the Prospectus Supplement, the
Certificates of a series will have an aggregate
original principal balance equal to the
aggregate unpaid principal balance of the
related Mortgage Loans as of the first day of
the month of creation of the Trust Fund and
will bear interest in the aggregate at a rate
equal to the interest rate borne by the
underlying Mortgage Loans, net of servicing
fees payable to the Servicer and any primary or
sub-services of the Mortgage Loans and any
other amounts (including fees payable to the
Servicer as master Servicer, if applicable)
specified in the Prospectus Supplement (as to
each Mortgage Loan, the "Remittance Rate"). See
"Description of the Certificates--Distributions
of Principal and Interest."
2
<PAGE>
The rate at which interest will be passed
through to holders of Certificates entitled
thereto may be a fixed rate or a rate that is
subject to change from time to time, in each
case as specified in the Prospectus Supplement.
Any such rate may be calculated on a
loan-by-loan, weighted average or other basis,
in each case as described in the Prospectus
Supplement. See "Description of the
Certificates--Distributions of Principal and
Interest."
The Mortgage Pools........... As specified in the Prospectus Supplement, each
Mortgage Pool will consist of Mortgage Loans
which were represented to the Seller as meeting
certain standards. Each Mortgage Pool will
contain one or more of the following types of
Mortgage Loans:(1) 20- to 30-year ("30-year")
fixed-rate, fully amortizing Mortgage Loans
providing for level monthly payments of
principal and interest; (2) 10- to 15-year
("15-year") fixed-rate, fully amortizing
Mortgage Loans providing for level monthly
payments of principal and interest; (3)
adjustable-rate Mortgage Loans ("ARMs" or "ARM
Loans"), which may include loans providing for
negative amortization; (4) another type of
Mortgage Loan, as described in the applicable
Prospectus Supplement. If specified in the
applicable Prospectus Supplement, a Mortgage
Pool may contain Mortgage Loans subject to
buy-down plans ("Buy-Down Mortgage Loans"). See
"The Mortgage Pools."
Primary Mortgage Insurance... To the extent specified in the applicable
Prospectus Supplement, each Mortgage Loan
having a Loan-to-Value Ratio above a specified
level will be covered by a Primary Mortgage
Insurance Policy insuring against default by
the Borrower with respect to all or a specified
portion of the principal amount thereof until
the principal balance of such Mortgage Loan is
reduced below a specified percentage of the
lesser of the sales price or appraised value of
the Mortgaged Property. See "The Mortgage
Pools."
Purchase of Mortgage Loans... As described in the applicable Prospectus
Supplement, the Agreement for each series may
permit, but not require, the Seller, the
Servicer or another party to purchase from the
Trust Fund for such series all remaining
Mortgage Loans and all property acquired in
respect of the Mortgage Loans, at a price
described in the Prospectus Supplement, subject
to the condition that the aggregate outstanding
principal balance of the Mortgage Loans for
such series at the time of purchase shall be
less than a percentage of the aggregate
principal balance at the Cut-Off Date specified
in the Prospectus Supplement. The exercise of
such right will result in the early retirement
of the Certificates of that series. See "The
Pooling and Servicing Agreement--Termination;
Purchase of Mortgage Loans."
Collection Account........... With respect to each Trust Fund, the Servicer
will be obligated to establish an account into
which it will deposit on the dates specified in
the related Prospectus Supplement payments
received in respect of the assets in such Trust
Fund. See "The Pooling and Servicing
Agreement--Payments on Mortgage Loans;
Collection Account."
3
<PAGE>
Advances..................... If specified in the Prospectus Supplement, the
Servicer, as Servicer or master servicer of the
Mortgage Loans, will be obligated to advance,
using its own funds, delinquent installments of
principal and interest (the latter adjusted to
the applicable Remittance Rate) on the Mortgage
Loans in a Trust Fund. Any such obligation to
make advances may be limited to amounts due
holders of certain classes of Certificates of
the related series, to amounts deemed to be
recoverable from late payments or liquidation
proceeds, for specified periods or any
combination thereof, in each case as specified
in the related Prospectus Supplement. Any such
advance will be recoverable by the Servicer as
specified in the related Prospectus Supplement.
See "Servicing of the Mortgage
Loans--Advances."
Credit Support............... If specified in the Prospectus Supplement, a
series of Certificates, or certain classes
within such series, may have the benefit of one
or more of the following types of credit
support. The protection against losses afforded
by any such credit support will be limited. See
"Credit Support."
A. Limited Guarantee........ If specified in the Prospectus Supplement,
certain obligations of the Servicer under the
related Agreement, including obligations of the
Servicer to cover certain deficiencies in
principal or interest payments on the Mortgage
Loans resulting from the bankruptcy of the
related borrower, may be covered by a financial
guarantee policy, limited guarantee or other
similar instrument (the "Limited Guarantee"),
limited in scope and amount, issued by an
entity named in the Prospectus Supplement (the
"Guarantor"). If so specified, the Guarantor
may be obligated to take either or both of the
following actions in the event the Servicer
fails to do so: make deposits to the Collection
Account (a "Deposit Guarantee"); or make
advances (an "Advance Guarantee"). Any such
Limited Guarantee will be limited in amount and
a portion of the coverage of any such Limited
Guarantee may be separately allocated to
certain events. The scope, amount and, if
applicable, the allocation of any Limited
Guarantee will be described in the related
Prospectus Supplement. See "Credit
Support--Limited Guarantee of the Guarantor."
B. Subordination............ A series of Certificates may include one or
more classes that are subordinate in the right
to receive distributions on such Certificates
to one or more senior classes of Certificates
of the same series, to the extent described in
the related Prospectus Supplement. If so
specified in the related Prospectus Supplement,
subordination may apply only in the event of
certain types of losses not covered by other
forms of credit support, such as hazard losses
not covered by standard hazard insurance
policies or losses resulting from the
bankruptcy of the borrower.
If specified in the Prospectus Supplement, a
reserve fund may be established and maintained
by the deposit therein of distributions
allocable to the holders of subordinate
Certificates until a specified level is
reached. The related Prospectus Supplement will
set forth information concerning the amount of
subordination of a class or classes of
subordinate Certificates in a series, the
circumstances in which such subordination will
be applicable, the manner, if any, in which the
amount of subordination will decrease over
time, the manner of funding the related reserve
fund, if any, and the conditions under which
amounts in any such reserve fund will be used
to make distributions to holders of senior
Certificates or released from the related Trust
Fund. See "Credit Support--Subordination."
4
<PAGE>
C. Certificate Guaranty
Insurance Policies........... If specified in the related Prospectus
Supplement, one or more certificate guaranty
insurance policies (each, a "Certificate
Guaranty Insurance Policy") will be obtained
and maintained for one or more Classes or
Series of Certificates. The issuer of any such
Certificate Guaranty Insurance Policy (the
"Certificate Insurer") will be named int he
related Prospectus Supplement. In general,
Certificate Guaranty Insurance Policies
unconditionally and irrevocably guarantee that
the full amount of the distributions of
principal and interest to which the holders of
the related Certificates are entitled under the
related Agreement, as well as any other amounts
specified in the related Prospectus Supplement,
will be received by an agent of the Trustee for
distribution by the Trustee to such holders.
D. Overcollateralization.... If specified in the related Prospectus
Supplement, the aggregate principal balance of
the Mortgage Assets included in a Trust Fund
may exceed the original principal balance of
the related Certificates. In addition, if so
specified in the related Prospectus Supplement,
certain Classes of Certificates may be entitled
to receive distributions, creating a limited
acceleration of the payment of the principal of
such Certificates relative to the amortization
of the related Mortgage Loans by applying
excess interest collected on the Mortgage Loans
to distributions of principal on such Classes
of Certificates. Such acceleration feature may
continue for the life of the applicable Classes
of Certificates or may be limited. In the case
of limited acceleration, once the required
level of overcollateralization is reached, and
subject to certain provisions specified in the
related Prospectus Supplement, the acceleration
feature will cease unless necessary to maintain
the required overcollateralization level.
E. Cross-Support............ If specified in the Prospectus Supplement, the
beneficial ownership of separate groups of
assets included in a Trust Fund may be
evidenced by separate classes of the related
series of Certificates. In such case, and if so
specified, credit support may be provided by a
cross-support feature which requires that
distributions be made with respect to
Certificates evidencing beneficial ownership of
one or more asset groups prior to distributions
to subordinate Certificates evidencing a
beneficial ownership interest in other asset
groups within the same Trust Fund. If specified
in the Prospectus Supplement, the coverage
provided by one or more forms of credit support
may apply concurrently to two or more separate
Trust Funds. If applicable, the Prospectus
Supplement will identify the Trust Funds to
which such credit support relates and the
manner of determining the amount of the
coverage provided thereby and of the
application of such coverage to the identified
Trust Funds. See "Credit Support--Cross
Support."
F. Pool and Special Hazard
Insurance.................... In order to decrease the likelihood that
Certificateholders will experience losses in
respect of the Mortgage Loans, if specified in
the Prospectus Supplement, the Seller will
obtain one or more insurance policies to cover
(i) losses by reason of defaults by borrowers
(a "Mortgage Pool Insurance Policy") and (ii)
losses by reason of hazards not covered under
the standard form of hazard insurance (a
"Special Hazard Insurance Policy"), in each
case up to the amounts, for the periods and
subject to the conditions specified in the
Prospectus Supplement. See "Credit Support--
Pool Insurance" and "-- Special Hazard
Insurance."
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G. Reserve Accounts, Other
Insurance, Guarantees and
Similar Instruments and
Agreements................... In order to decrease the likelihood that
Certificateholders will experience delays in
the receipt of scheduled payments on, and
losses in respect of, the assets in a Trust
Fund, if specified in the related Prospectus
Supplement, such Trust Fund may also include
reserve accounts, other insurance, guarantees
and similar instruments and agreements entered
into with the entities, in the amounts, for the
purposes and subject to the conditions
specified in the Prospectus Supplement. See
"Credit Support--Reserve Accounts" and "--Other
Insurance, Guarantees and Similar Instruments
or Agreements."
Pre-Funding Account.......... A Trust Fund may enter into an agreement (each,
a "Pre-Funding Agreement") with the Depositor
whereby the Depositor will agree to transfer
additional Mortgage Assets to such Trust Fund
following the date on which such Trust Fund is
established and the related Securities are
issued. Any Pre-Funding Agreement will require
that any Mortgage Loans so transferred conform
to the requirements specified in such
Pre-Funding Agreement. If a Pre-Funding
Agreement is to be utilized, the related
Trustee will be required to deposit in a
segregated account (each, a "Pre-Funding
Account") all or a portion of the proceeds
received by the Trustee in connection with the
sale of one or more classes of Securities of
the related series; subsequently, the
additional Mortgage Assets will be transferred
to the related Trust Fund in exchange for money
released to the Depositor from the related
Pre-Funding Account. Each Pre-Funding Agreement
will set a specified period during which any
such transfers must occur, which period will
not exceed 90 days from the date the Trust Fund
is established. If all moneys originally
deposited to such Pre-Funding Account are not
used by the end of such specified period, then
any remaining moneys will be applied as a
mandatory prepayment of a class or classes of
Securities as specified in the related
Prospectus Supplement. The specified period for
the acquisition by a Trust Fund of additional
Mortgage Loans will generally not exceed three
months form the date such Trust Fund is
established.
Federal Income Tax
Consequences................. The federal income tax consequences to
Certificateholders will depend on, among other
factors, whether an election is made to treat
the Trust Fund or specified portions thereof as
a "real estate mortgage investment conduit"
("REMIC") under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code").
See "Federal Income Tax Consequences".
ERISA Considerations......... A fiduciary of any employee benefit plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
a plan subject to Section 4975 of the Code
should carefully review with its own legal
advisors whether the purchase or holding of
Certificates could give rise to a transaction
prohibited or otherwise impermissible under
ERISA or the Code. See "ERISA Considerations".
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Legal Investment Matters..... The Prospectus Supplement for each series of
Certificates will specify which, if any, of the
classes of Certificates offered thereby will
constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act
of 1984 ("SMMEA"). Classes of Certificates that
qualify as "mortgage related securities" will
be legal investments for certain types of
institutional investors to the extent provided
in SMMEA, subject, in any case, to any other
regulations which may govern investments by
such institutional investors. Institutions
whose investment authority is subject to legal
restrictions should consult with their own
legal advisors or the applicable authorities to
determine whether and to what extent an
investment in a particular class of
Certificates (whether or not such class
constitutes a "mortgage related security")
constitutes a legal investment for them. See
"Legal Investment Matters".
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RISK FACTORS
Prospective Certificateholders should consider, among other things, the
following factors in connection with the purchase of the Certificates:
l. Losses on the Mortgage Pool. An investment in Certificates
evidencing interests in Mortgage Loans may be affected, among other things, by a
decline in real estate values or changes in mortgage market rates. If the
residential real estate market in the locale of properties securing the Mortgage
Loans should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans, and any secondary financing on the
Mortgaged Properties in a particular Mortgage Pool, become equal to or greater
than the value of Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. To the extent that such losses are not covered by
any subordination feature, applicable insurance policies or other credit
enhancement, holders of the Certificates of a Series evidencing interests in
such Mortgage Pool will bear all risk of loss resulting from default by
mortgagors and will have to look primarily to the value of the Mortgaged
Properties for recovery of the outstanding principal and unpaid interest of the
defaulted Mortgage Loans. See "The Mortgage Pools."
2. Limited Obligations. The Certificates will not represent an interest
in or obligation of the Seller. The Certificates will not be insured or
guaranteed by any government agency or instrumentality, nor, unless expressly
provided in the related Prospectus Supplement, by The Chase Manhattan Bank,
Chase Manhattan Mortgage Corporation, Chase Mortgage Finance Corporation or any
of their affiliates.
3. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates of any Series or, if it does develop, that it
will provide the holders of Certificates of such Series with liquidity of
investment or that it will remain for the term of such series of Certificates.
Although the Certificateholders of each series receive monthly statements
containing certain statistical information with respect to the related Mortgage
Pool, neither the Company nor the Servicer publishes any information relating to
the Certificates of any series or any Mortgage Pool. The limited availability of
any such published information may influence the liquidity of the Certificates.
The Certificates will not be listed on any securities exchange.
4. Prepayment Considerations. The prepayment experience on the Mortgage
Loans will affect the average life of the Certificates or each class of
Certificates. Prepayments on the Mortgage Loans may be influenced by a variety
of economic, geographic, social and other factors, including the difference
between the interest rates on the Mortgage Loans and prevailing mortgage rates
(giving consideration to the cost of refinancing). In general, if mortgage
interest rates fall below the interest rates on the Mortgage Loans, the rate of
prepayment would be expected to increase, and the yields at which an investor in
the Certificates may be able to reinvest amounts received as payments on such
investor's Certificates may be lower than the yield on such Certificates.
Conversely, if mortgage interest rates rise above the interest rates on the
Mortgage Loans, the rate of prepayment would be expected to decrease, and the
amount of payments available to a Certificateholder for reinvestment may be
relatively low. Other factors affecting prepayment of mortgage loans include
changes in housing needs, job transfers, unemployment and servicing decisions.
See "Yield, Maturity and Weighted Average Life Considerations."
5. Yield, Maturity and Weighted Average Life Considerations. The yield
of the Certificates of each series will depend in part on the rate of principal
payment on the Mortgage Loans (including
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prepayments, liquidations due to defaults and mortgage loan repurchases). Such
yield may be adversely affected, depending upon whether a particular Certificate
is purchased at a premium or discount price, by a higher or lower than
anticipated rate of prepayments on the related Mortgage Loans. In particular,
the yield on Classes of Certificates entitling the holders thereof primarily or
exclusively to payments of interest or primarily or exclusively to payments of
principal will be extremely sensitive to the rate of prepayments on the related
Mortgage Loans. In addition, the yield on certain Classes of Certificates may be
relatively more sensitive to the rate of prepayment of specified Mortgage Loans
than other Classes of Certificates. Furthermore, the yield to investors may be
adversely affected by interest shortfalls which may result from the timing of
the receipt of prepayments or liquidations to the extent that such interest
shortfalls are not covered by aggregate Servicing Fees or other mechanisms
specified in the applicable Prospectus Supplement. The yield to investors in
Classes of Certificates will be adversely affected to the extent that losses on
the Mortgage Loans in the related Trust Fund are allocated to such Classes and
may be adversely affected to the extent of unadvanced delinquencies on the
Mortgage Loans in the related Trust Fund. Classes of Certificates identified in
the applicable Prospectus Supplement as subordinated Certificates are more
likely to be affected by delinquencies and losses than other Classes of
Certificates. See "Yield, Maturity and Weighted Average Life Considerations."
6. Subordination. With respect to Certificates of a series having one
or more classes of subordinated Certificates, while the subordination feature is
intended to enhance the likelihood of timely payment of principal and interest
to senior Certificateholders, such subordination will be limited as specified in
the Prospectus Supplement, any reserve fund could be depleted under certain
circumstances, and payments applied to the senior Certificates which are
otherwise due to the subordinated Certificates may be less than losses.
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<PAGE>
DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to a separate
pooling and servicing agreement (each, an "Agreement") entered into among the
Seller, the Servicer and a commercial bank or trust company named in the
Prospectus Supplement, as trustee (the "Trustee"\) for the benefit of holders of
Certificates of that Series. The provisions of each Agreement will vary
depending upon the nature of the Certificates to be issued thereunder and the
nature of the related Trust Fund. The Agreement will be substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
is a part, or in such similar form as will reflect the terms of a series of
Certificates described in the Prospectus Supplement. The following summaries
describe the material provisions which may appear in each Agreement. The
Prospectus Supplement for a series of Certificates will describe any provision
of the Agreement relating to such series that materially differs from the
description thereof contained in this Prospectus. The summaries do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Agreement for each series of
Certificates and the applicable Prospectus Supplement. The Seller will provide
any Certificateholder, without charge, on written request a copy of the
Agreement for any series. Requests should be addressed to Chase Mortgage Finance
Corporation, 343 Thornall Street, Edison, New Jersey 08837, Attention:
President. The Agreement relating to a series of Certificates will be filed with
the Securities and Exchange Commission in a report on Form 8-K within 15 days
after the date of issuance of such series of Certificates (the "Delivery Date").
The Certificates of a series will be entitled to payment only from the
assets included in the Trust Fund related to such series and will not be
entitled to payments in respect of the assets included in any other trust fund
established by the Seller. The Certificates will not represent obligations of
the Seller, the Servicer or any of their affiliates and will not be insured or
guaranteed by any governmental agency or any other person. The Seller's only
obligations with respect to the Certificates will consist of its obligations
pursuant to certain representations and warranties made by it. The Servicer's
only obligations with respect to the Certificates will consist of its
contractual servicing and/or master servicing obligations, including any
obligation to make advances under certain limited circumstances specified herein
of delinquent installments of principal and interest (adjusted to the applicable
Remittance Rate), and its obligations pursuant to certain representations and
warranties made by it.
The Mortgage Loans will not be insured or guaranteed by any
governmental entity or, except as specified in the Prospectus Supplement, by any
other person. To the extent that delinquent payments on or losses in respect of
defaulted Mortgage Loans are not advanced by the Servicer or any other entity or
paid from any applicable credit support arrangement, such delinquencies may
result in delays in the distribution of payments to the holders of one or more
classes of Certificates, and such losses will be borne by the holders of one or
more classes of Certificates.
General
The Certificates of each series will be issued in fully-registered form
only. The minimum original Certificate Principal Balance or Notional Principal
Balance that may be represented by a Certificate (the "denomination") will be
specified in the Prospectus Supplement. The original Certificate Principal
Balance of each Certificate will equal the aggregate distributions allocable to
principal to which such Certificate is entitled. Distributions allocable to
interest on each Certificate that is not entitled to distributions allocable to
principal will be calculated based on the Notional Principal Balance of such
Certificate. The Notional Principal Balance of a Certificate will not evidence
an interest in or entitlement to distributions allocable to
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principal but will be used solely for convenience in expressing the calculation
of interest and for certain other purposes.
The Certificates of a series will be transferable and exchangeable on a
Certificate Register to be maintained at the corporate trust office of the
Trustee for the related series or such other office or agency maintained for
such purposes by the Trustee in New York City (or at the office of the
certificate registrar specified in the related Prospectus Supplement). No
service charge will be made for any registration of transfer or exchange of
Certificates, but payment of a sum sufficient to cover any tax or other
governmental charge may be required.
Classes of Certificates
Each series of Certificates will be issued in a single class or in two
or more classes. The Certificates of each class will evidence the beneficial
ownership of (i) any distributions in respect of the assets of the Trust Fund
that are allocable to principal, in the aggregate amount of the original
Certificate Principal Balance, if any, of such class of Certificates as
specified in the Prospectus Supplement and (ii) any distributions in respect of
the assets of the Trust Fund that are allocable to interest on the Certificate
Principal Balance or Notional Principal Balance of such Certificates from time
to time at the Certificate Rate, if any, applicable to such class of
Certificates as specified in the Prospectus Supplement. If specified in the
Prospectus Supplement, one or more classes of a series of Certificates may
evidence beneficial ownership interests in separate groups of assets included in
the related Trust Fund.
If specified in the Prospectus Supplement, the Certificates will have
an aggregate original Certificate Principal Balance equal to the aggregate
unpaid principal balance of the Mortgage Loans as of the close of business on
the first day of the month of creation of the Trust Fund (the "Cut-Off Date")
after deducting payments of principal due on or before, and prepayments of
principal received on or before, the Cut-Off Date and in the aggregate will bear
interest equal to the weighted average of the Remittance Rates. The Remittance
Rate will equal the rate of interest payable on each Mortgage Loan minus the
Servicer's servicing fee as described herein, the servicing fee of any third
party servicer of the Mortgage Loans and such other amounts (including fees
payable to the Servicer as master servicer, if applicable) as are specified in
the Prospectus Supplement. The Certificates may have an original Certificate
Principal Balance as determined in the manner specified in the Prospectus
Supplement.
Each class of Certificates that is entitled to distributions allocable
to interest will bear interest at a fixed rate or a rate that is subject to
change from time to time (a) in accordance with a schedule, (b) in reference to
an index, or (c) otherwise (each, a "Certificate Rate"), in each case as
specified in the Prospectus Supplement. One or more classes of Certificates may
provide for interest that accrues, but is not currently payable ("Accrual
Certificates"). With respect to any class of Accrual Certificates, if specified
in the Prospectus Supplement, any interest that has accrued but is not paid on a
given Distribution Date (as defined below under "Distributions of Principal and
Interest") will be added to the aggregate Certificate Principal Balance of such
class of Certificates on that Distribution Date.
A series of Certificates may include one or more classes entitled only
to distributions (i) allocable to interest, (ii) allocable to principal (and
allocable as between scheduled payments of principal and Principal Prepayments,
as defined below) or (iii) allocable to both principal (and allocable as between
scheduled payments of principal and Principal Prepayments) and interest. A
series of Certificates may consist of one or more classes as to which
distributions will be allocated (i) on the basis of collections from designated
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portions of the assets of the Trust Fund, (ii) in accordance with a schedule or
formula, (iii) in relation to the occurrence of events, or (iv) otherwise, in
each case as specified in the Prospectus Supplement. The timing and amounts of
such distributions may vary among classes, over time or otherwise, in each case
as specified in the Prospectus Supplement.
The taking of action with respect to certain matters under the
Agreement, including certain amendments thereto, will require the consent of the
holders of the Certificates. The voting rights allocated to each class of
Certificates will be specified in the Prospectus Supplement. Votes may be
allocated in different proportions among classes of Certificates depending on
whether the Certificates of a class have a Notional Principal Balance or a
Certificate Principal Balance.
Distributions of Principal and Interest
General.
Distributions of principal and interest at the applicable Certificate
Rate (if any) on the Certificates will be made to the extent of funds available
from the related Trust Fund on the 25th day (or if such 25th day is not a
business day, on the business day next following such 25th day) of each calendar
month (each, a "Distribution Date"), commencing in the month following the
issuance of the related series, or on such other date as is specified in the
Prospectus Supplement. Distributions will be made to the persons in whose names
the Certificates are registered at the close of business on the dates specified
in the Prospectus Supplement (each, a "Record Date"). Distributions will be made
by check or money order mailed to the person entitled thereto at the address
appearing in the Certificate Register or, if specified in the Prospectus
Supplement, in the case of Certificates that are of a certain minimum
denomination as specified in the Prospectus Supplement, upon written request by
the Certificateholder, by wire transfer or by such other means as are agreed
upon with the person entitled thereto; provided, however, that the final
distribution in retirement of the Certificates will be made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee specified in the notice to Certificateholders of such final
distribution.
Distributions allocable to principal and interest on the Certificates
will be made by the entity specified in the Prospectus Supplement as the paying
agent (the "Paying Agent") out of, and only to the extent of, funds in a
separate account established and maintained under the Agreement for the benefit
of holders of the Certificates of the related series (the "Collection Account"),
including any funds transferred from any Reserve Account. As between
Certificates of different classes and as between distributions of principal
(and, if applicable, between distributions of Principal Prepayments and
scheduled payments of principal) and interest, distributions made on any
Distribution Date will be applied as specified in the Prospectus Supplement.
Distributions to any class of Certificates will be made pro rata to all
Certificateholders of that class or by the other method described in the
Prospectus Supplement. If so specified in the Prospectus Supplement, the amounts
deposited into the Collection Account as described below under "The Pooling and
Servicing Agreement--Payments on Mortgage Loans; Collection Account" will be
invested in the eligible investments specified in the Agreement and all income
or other gain from such investments will be deposited in the Collection Account
and will be for the benefit of the Servicer or other entity specified in the
Prospectus Supplement and subject to withdrawal from time to time.
Distributions of Interest. Interest will accrue on the aggregate
Certificate Principal Balance (or, in the case of Certificates entitled only to
distributions allocable to interest, the aggregate Notional Principal Balance)
of each class of Certificates entitled to interest from the date, at the
Certificate Rate and for the
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periods (each, an "Interest Accrual Period") specified in the Prospectus
Supplement. To the extent funds are available therefor, interest accrued during
each Interest Accrual Period on each class of Certificates entitled to interest
(other than a class of Accrual Certificates) will be distributable on the
Distribution Dates specified in the Prospectus Supplement until the aggregate
Certificate Principal Balance of the Certificates of such class has been
distributed in full or, in the case of Certificates entitled only to
distributions allocable to interest, until the aggregate Notional Principal
Balance of such Certificates is reduced to zero or for the period of time
designated in the Prospectus Supplement. Distributions of interest on each class
of Accrual Certificates will commence only after the occurrence of the events
specified in the Prospectus Supplement. Prior to such time, the beneficial
ownership interest of such class of Accrual Certificates in the Trust Fund, as
reflected in the aggregate Certificate Principal Balance of such class of
Accrual Certificates, will increase on each Distribution Date by the amount of
interest that accrued on such class of Accrual Certificates during the preceding
Interest Accrual Period but that was not required to be distributed to such
class on such Distribution Date. Any such class of Accrual Certificates will
thereafter accrue interest on its outstanding Certificate Principal Balance as
so adjusted.
Distributions of Principal. The aggregate Certificate Principal Balance
of any class of Certificates entitled to distributions of principal generally
will be the aggregate original Certificate Principal Balance of such class of
Certificates specified in the Prospectus Supplement, reduced by all
distributions reported to the holders of such Certificates as allocable to
principal, and, in the case of Accrual Certificates, as specified in the
Prospectus Supplement, increased on each Distribution Date by all interest
accrued but not then distributable on such Accrual Certificates. The Prospectus
Supplement will specify the method by which the amount of principal to be
distributed on the Certificates on each Distribution Date will be calculated and
the manner in which such amount will be allocated among the classes of
Certificates entitled to distributions of principal.
If so specified in the Prospectus Supplement, one or more classes of
senior Certificates will be entitled to receive all or a disproportionate
percentage of the payments or other recoveries of principal on a Mortgage Loan
which are received in advance of their scheduled due dates and not accompanied
by amounts of interest representing scheduled interest due after the month of
such payments ("Principal Prepayments") in the percentages and under the
circumstances or for the periods specified in the Prospectus Supplement. Any
such allocation of Principal Prepayments to such class or classes of
Certificateholders will have the effect of accelerating the amortization of such
Certificates while increasing the interests evidenced by the remaining
Certificates in the Trust Fund.
THE MORTGAGE POOLS
Each mortgage pool (a "Mortgage Pool") will consist of one- to
four-family residential mortgage loans evidenced by promissory notes (each, a
"Note") secured by first mortgages or first deeds of trust or other similar
security instrument (each, a "Mortgage") creating a first lien on properties
(the "Mortgaged Properties"). When each series of Certificates is issued, the
Seller will cause the Mortgage Loans comprising each Mortgage Pool to be
assigned to the Trustee for the benefit of the holders of the Certificates of
that series, and will receive the Certificates in exchange therefor. Certain
Certificates evidencing interests in a Trust Fund may not form part of the
offering made pursuant to this Prospectus and the related Prospectus Supplement.
The Mortgaged Properties in each Mortgage Pool may consist of
single-unit dwellings, two-, three- and four-unit detached, townhouse or
rowhouse dwellings, condominium and planned-unit development
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("PUD") units and such other types of homes or units as are described in the
applicable Prospectus Supplement, and may include vacation and second homes and
investment properties (i.e. one-to-four family properties owned for investment
and rented to generate income). The applicable Prospectus Supplement will
contain information concerning the originators of the Mortgage Loans and the
underwriting standards employed by such originators.
All Mortgage Loans will (i) be secured by Mortgaged Properties located
in one of the states of the United States or the District of Columbia, and (ii)
be of one or more of the following types of Mortgage Loans:
(1) Fully-amortizing Mortgage Loans, each with a 20-to 30-year
("30-Year") term at origination, interest (the "Mortgage Rate") at a fixed rate
and level monthly payments over the term of the Mortgage Loan.
(2) Fully-amortizing Mortgage Loans, each with a 10-to 15-year
("15-Year") term at origination, a fixed Mortgage Rate and level monthly
payments over the term of the Mortgage Loan.
(3) Mortgage Loans, each with an adjustable Mortgage Rate.
Mortgage Loans with certain Loan-to-Value Ratios and/or certain
principal balances may be covered wholly or partially by primary mortgage
guaranty insurance policies (each, a "Primary Mortgage Insurance Policy"). The
existence, extent and duration of any such coverage will be described in the
applicable Prospectus Supplement. The "Loan-to- Value Ratio" is the ratio,
expressed as a percentage, of the principal amount of the Mortgage Loan to the
lesser of (i) the sales price for such property at the time the Mortgage Loan is
closed and (ii) the appraised value at origination or, in the case of
refinancings, the value set forth in the appraisal, if any, obtained by the loan
originator in connection with such refinancing. Each Mortgage Loan will also be
covered by a Standard Hazard Insurance Policy, as described under "Servicing of
the Mortgage Loans--Hazard Insurance" below.
In addition, other credit enhancements acceptable to the rating agency
(or agencies) rating the Certificates may be provided for coverage of certain
risks of default or losses. See "Credit Support" herein.
If specified in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans subject to buy-down plans ("Buy-Down Mortgage Loans")
pursuant to which the monthly payments made by the Borrower will be less than
the scheduled monthly payments on the Buy-Down Mortgage Loan, the resulting
difference to be drawn from an amount contributed by the seller of the Mortgaged
Property or another source at the time of origination of the Buy-Down Mortgage
Loan and placed in a trust or custodial account (the "Buy-Down Fund") (such
amount hereinafter referred to as the "Buy-Down Reserve"). The applicable
Prospectus Supplement or Current Report (as defined below) will contain
information, with respect to any Buy-Down Mortgage Loans, concerning limitations
on the interest rate payable by the Borrower initially, on annual increases in
the interest rate, on the length of the buy-down period, and on the Buy-Down
Fund. The repayment of a temporary Buy-Down Mortgage Loan is dependent on the
ability of the Borrower to make larger monthly payments after the Buy-Down
Reserves have been depleted and, for certain Buy-Down Mortgage Loans, while such
funds are being depleted. The inability of the Borrower to make larger monthly
payments may lead to a default on the Buy-Down Mortgage Loan or, if the Borrower
is able to obtain refinancing on favorable terms, a prepayment of such loan. See
"Yield, Maturity and Weighted Average Life Considerations."
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The Prospectus Supplement for a series of Certificates may specify that
the related Mortgage Pool contains Mortgage Loans that have been used for
refinancing for the purpose of removing equity from the related Mortgaged
Properties ("Cash-Out Refinance Loans").
The Prospectus Supplement for each series of Certificates will specify
the approximate aggregate principal balance of the Mortgage Loans (within the
percentage or dollar range specified therein). The Prospectus Supplement for
each series of Certificates will contain information regarding the Mortgage
Loans which are expected to be included in the related Mortgage Pool, including
among other things, information, as of the applicable Cut-Off Date and to the
extent then specifically known to the Seller, as to (i) the aggregate principal
balance of the Mortgage Loans, (ii) the aggregate principal balance or
percentage by aggregate principal balance of Mortgage Loans secured by each type
of property, (iii) the original terms to maturity of the Mortgage Loans, (iv)
the smallest and largest in principal balance at origination of the Mortgage
Loans, (v) the earliest origination date and latest maturity date of the
Mortgage Loans, (vi) the aggregate principal balance or percentage by aggregate
principal balance of Mortgage Loans having Loan-to-Value Ratios at origination
exceeding 80%, (vii) the Mortgage Rate or range of Mortgage Rates borne by the
Mortgage Loans and (viii) the average outstanding principal balance of the
Mortgage Loans. If specific information with respect to the Mortgage Loans is
not known at the time the related series of Certificates is initially offered,
more general information of the nature described above will be provided in the
Prospectus Supplement, and specific information will be set forth in a report on
Form 8-K to be filed with the Securities and Exchange Commission within fifteen
days after the initial issuance of such Certificates (the "Current Report"). A
copy of the Agreement with respect to a series of Certificates will be attached
to the related Current Report and will be available for inspection at the
corporate trust office of the Trustee specified in the related Prospectus
Supplement.
The Seller's assignment of the Mortgage Loans to the Trustee will be
without recourse. The Seller or another party identified in the applicable
Prospectus Supplement will make certain representations concerning the Mortgage
Loans, including that no Mortgage Loan in a Mortgage Pool evidenced by
Certificates will be more than one month delinquent as of the date of the
initial issuance of the Certificates. For a description of other representations
that will be made by the party specified in the applicable Prospectus Supplement
concerning the Mortgage Loans, see "The Pooling and Servicing
Agreement--Assignment of Mortgage Loans; Warranties." The Seller's obligations
with respect to the Mortgage Loans will be limited to any representations and
warranties made by it in, as well as its contractual obligations under, the
Agreement for each series of Certificates. These obligations consist primarily
of the obligation under certain circumstances to repurchase or replace Mortgage
Loans as to which there has been a material breach of the Seller's
representations and warranties which materially and adversely affects the
interests of the Certificateholders in a Mortgage Loan or to cure such breach,
and of the obligation, under certain circumstances, to ensure the timely payment
of premiums on certain insurance policies and bonds. See "The Pooling and
Servicing Agreement--Assignment of Mortgage Loans; Warranties."
In addition, to the extent specified in the applicable Prospectus
Supplement, in the event of delinquencies in payments of principal and interest
on the Mortgage Loans in any Mortgage Pool, the Servicer (or, if so indicated in
the applicable Prospectus Supplement, another entity) will advance cash in
amounts described herein under "The Pooling and Servicing Agreement-Advances"
and "--Payments on Mortgage Loans; Collection Account." The Servicer is not
required to make any advance which it determines in its good faith judgment not
to be ultimately recoverable under any applicable policy of insurance
("Insurance Proceeds") or out of the proceeds of liquidation of a Mortgage Loan
("Liquidation Proceeds"). Each month, the Trustee (or such other paying agent as
may be specified in the applicable Prospectus
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Supplement) will be obligated to remit to Certificateholders of each series all
amounts relating to the Mortgage Loans due to the Certificateholders to the
extent such amounts have been collected or advanced by the Servicer or such
other entity and remitted to the Trustee pursuant to the terms of the Agreement
for such series. See "Description of the Certificates--Distributions of
Principal and Interest."
There can be no assurance that real estate values will remain at
present levels in the areas in which the Mortgaged Properties will be located.
If the residential real estate market should experience an overall decline in
property values such that the outstanding balances of the Mortgage Loans, and
any secondary financing on the Mortgaged Properties, in a particular Mortgage
Pool become equal to or greater than the value of the properties subject to the
Mortgage Loans included in such Mortgage Pool, the actual rates of
delinquencies, foreclosures and losses could be significantly higher than those
now generally experienced in the mortgage lending industry. To the extent that
such delinquencies, foreclosures and losses are not covered by applicable credit
enhancements described in the Prospectus Supplement, the losses resulting
therefrom will be borne by holders of the Certificates of the series evidencing
interests in such Mortgage Pool. With respect to any series as to which
subordinated Certificates shall have been issued, such losses will first be
borne by the holders of subordinated Certificates as a result and to the extent
of the subordination in right of payment of the subordinated Certificates to the
senior Certificates and as a result of first allocating such losses to reduce
the Certificate Principal Balance of such subordinated Certificates.
Because the principal amounts of Mortgage Loans decline monthly as
principal payments, including prepayments, are received, the fractional
undivided interest in principal evidenced by each Certificate in a series
multiplied by the aggregate principal balance of the Mortgage Loans in the
related Mortgage Pool will decline correspondingly. The principal balance
represented by a Certificate, therefore, ordinarily will decline over time.
CREDIT SUPPORT
General
Credit support may be provided with respect to one or more classes of
a series of Certificates or with respect to the assets in the related Trust
Fund. Credit support may be in the form of a limited financial guarantee policy,
limited guarantee or other similar instrument (a "Limited Guarantee") issued by
an entity named in the Prospectus Supplement (the "Guarantor"), the
subordination of one or more classes of the Certificates of such series, the
establishment of one or more reserve accounts, the use of a pool insurance
policy, bankruptcy bond, special hazard insurance policy, repurchase bond,
guaranteed investment contract or another method of credit support described in
the related Prospectus Supplement, or any combination of the foregoing. Any
credit support will not provide protection against all risks of loss and will
not guarantee repayment of the entire principal balance of the Certificates and
interest thereon. If losses occur which exceed the amount covered by credit
support or which are not covered by the credit support, Certificateholders will
bear their allocable share of the resulting deficiencies.
Limited Guarantee of the Guarantor
If specified in the Prospectus Supplement, certain obligations of the
Servicer under the related Agreement may be covered by a Limited Guarantee,
limited in scope and amount, issued by the Guarantor. If so specified, the
Guarantor may be obligated to take either or both of the following actions in
the event the Servicer fails to do so: make deposits to the Collection Account
(a "Deposit Guarantee"); or make
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advances (an "Advance Guarantee"). Any such Limited Guarantee will be limited in
amount and a portion of the coverage of any such Limited Guarantee may be
separately allocated to certain events. The scope, amount and, if applicable,
the allocation of any Limited Guarantee will be described in the related
Prospectus Supplement.
Subordination
If so specified in the Prospectus Supplement, distributions in respect
of scheduled principal, Principal Prepayments, interest or any combination
thereof that otherwise would have been payable to one or more classes of
Certificates of a series (the "subordinated Certificates") will instead be
payable to holders of one or more other classes of such series (the "senior
Certificates") under the circumstances and to the extent specified in the
Prospectus Supplement. If specified in the Prospectus Supplement, delays in
receipt of scheduled payments on the Mortgage Loans and losses on defaulted
Mortgage Loans will be borne first by the various classes of subordinated
Certificates and thereafter by the various classes of senior Certificates, in
each case under the circumstances and subject to the limitations specified in
the Prospectus Supplement. The aggregate distributions in respect of delinquent
payments on the Mortgage Loans over the lives of the Certificates or at any
time, the aggregate losses in respect of defaulted Mortgage Loans which must be
borne by the subordinated Certificates by virtue of subordination and the amount
of the distributions otherwise distributable to the subordinated
Certificateholders that will be distributable to senior Certificateholders on
any Distribution Date may be limited as specified in the Prospectus Supplement.
If aggregate distributions in respect of delinquent payments on the Mortgage
Loans or aggregate losses in respect of such Mortgage Loans were to exceed the
total amounts payable and available for distribution to holders of subordinated
Certificates or, if applicable, were to exceed the specified maximum amount,
holders of senior Certificates could experience losses on the Certificates.
In addition to or in lieu of the foregoing, if so specified in the
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of subordinated Certificates on any Distribution Date may instead be
deposited into one or more reserve accounts (a "Reserve Account") established by
the Trustee. If so specified in the Prospectus Supplement, such deposits may be
made on each Distribution Date, on each Distribution Date for specified periods
or until the balance in the Reserve Account has reached a specified amount and,
following payments from the Reserve Account to holders of senior Certificates or
otherwise, thereafter to the extent necessary to restore the balance in the
Reserve Account to required levels, in each case as specified in the Prospectus
Supplement. If so specified in the Prospectus Supplement, amounts on deposit in
the Reserve Account may be released to the Servicer or the holders of any class
of Certificates at the times and under the circumstances specified in the
Prospectus Supplement.
If specified in the Prospectus Supplement, one or more classes of
Certificates may bear the risk of certain losses on defaulted Mortgage Loans not
covered by other forms of credit support prior to other classes of Certificates.
Such subordination might be effected by reducing the Certificate Principal
Balance of the subordinated Certificates on account of such losses, thereby
decreasing the proportionate share of distributions allocable to such
Certificates, or by another means specified in the Prospectus Supplement.
If specified in the Prospectus Supplement, various classes of senior
Certificates and subordinated Certificates may themselves be subordinate in
their right to receive certain distributions to other classes of senior and
subordinated Certificates, respectively, through a cross-support mechanism or
otherwise.
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As between classes of senior Certificates and as between classes of
subordinated Certificates, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events, or
(iv) otherwise, in each case as specified in the Prospectus Supplement. As
between classes of subordinated Certificates, payments to holders of senior
Certificates on account of delinquencies or losses and payments to any Reserve
Account will be allocated as specified in the Prospectus Supplement.
Certificate Guaranty Insurance Policies
If specified in the related Prospectus Supplement, one or more
certificate guaranty insurance policies (each, a "Certificate Guaranty Insurance
Policy") will be obtained and maintained for one or more Classes or Series of
Certificates. The issuer of any such Certificate Guaranty Insurance Policy (the
"Certificate Insurer") will be named int he related Prospectus Supplement. In
general, Certificate Guaranty Insurance Policies unconditionally and irrevocably
guarantee that the full amount of the distributions of principal and interest to
which the holders of the related Certificates are entitled under the related
Agreement, as well as any other amounts specified in the related Prospectus
Supplement, will be received by an agent of the Trustee for distribution by the
Trustee to such holders.
The specific terms of any Certificate Guaranty Insurance Policy will be
set forth in the related Prospectus Supplement. Certificate Guaranty Insurance
Policies may have limitations including, but not limited to, limitations on the
obligation of the Certificate Insurer to guarantee any Servicer's obligation to
repurchase or substitute for any specified date. The Certificate Insurer may be
subrogated to the rights of the holders of the related Certificates to receive
distributions to which they are entitled, as well as certain other amounts
specified in the related Prospectus Supplement, to the extent of any payments
made by such Certificate Insurer under the related Certificate Guaranty
Insurance Policy.
Overcollateralization
If specified in the related Prospectus Supplement, the aggregate
principal balance of the Mortgage Assets included in a Trust Fund may exceed the
original principal balance of the related Certificates. In addition, if so
specified in the related Prospectus Supplement, certain Classes of Certificates
may be entitled to receive distributions, creating a limited acceleration of the
payment of the principal of such Certificates relative to the amortization of
the related Mortgage Loans by applying excess interest collected on the Mortgage
Loans to distributions of principal on such Classes of Certificates. Such
acceleration feature may continue for the life of the applicable Classes of
Certificates or may be limited. In the case of limited acceleration, once the
required level of overcollateralization is reached, and subject to certain
provisions specified in the related Prospectus Supplement, the acceleration
feature will cease unless necessary to maintain the required
overcollateralization level.
Cross-Support
If specified in the Prospectus Supplement, the beneficial ownership of
separate groups of assets included in a Trust Fund may be evidenced by separate
classes of the related series of Certificates. In such case, credit support may
be provided by a cross-support feature which may require that distributions be
made with respect to Certificates evidencing beneficial ownership of one or more
asset groups prior to distributions to subordinated Certificates evidencing a
beneficial ownership interest in other asset groups within the same
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Trust Fund. The Prospectus Supplement for a series which includes a
cross-support feature will describe the manner and conditions for applying such
cross-support feature.
If specified in the Prospectus Supplement, the coverage provided by one
or more forms of credit support may apply concurrently to two or more separate
Trust Funds. If applicable, the Prospectus Supplement will identify the Trust
Funds to which such credit support relates and the manner of determining the
amount of the coverage provided thereby and of the application of such coverage
to the identified Trust Funds.
Pool Insurance
In order to decrease the likelihood that Certificateholders will
experience losses in respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one or more pool insurance
policies. Any such policies may be in lieu of or in addition to any obligations
of the Seller or the Servicer in respect of the Mortgage Loans. Such pool
insurance policy will, subject to the limitations described below and in the
Prospectus Supplement, cover loss by reason of default in payments on the
Mortgage Loans up to the amounts specified in the Prospectus Supplement or the
Detailed Description and for the periods specified in the Prospectus Supplement.
The Servicer will agree to use its best reasonable efforts to maintain in effect
any such pool insurance policy and to present claims thereunder to the pool
insurer on behalf of itself, the Trustee and the Certificateholders. The pool
insurance policy, however, is not a blanket policy against loss, since claims
thereunder may only be made respecting particular defaulted Mortgage Loans and
only upon satisfaction of certain conditions precedent described below. The pool
insurance policy, if any, will not cover losses due to a failure to pay or
denial of a claim under a primary mortgage insurance policy, irrespective of the
reason therefor. The related Prospectus Supplement will describe any provisions
of a pool insurance policy that are materially different from those described
below.
Any pool insurance policy may provide that no claims may be validly
presented thereunder unless (i) any required primary mortgage insurance policy
is in effect for the defaulted Mortgage Loan and a claim thereunder has been
submitted and settled; (ii) hazard insurance on the related Mortgaged Property
has been kept in force and real estate taxes and other protection and
preservation expenses have been paid; (iii) if there has been physical loss or
damage to the Mortgaged Property, it has been restored to its condition
(reasonable wear and tear excepted) at the Cut-Off Date; (iv) the insured has
acquired good and merchantable title to the Mortgaged Property free and clear of
liens, except certain permitted encumbrances; and (v) the Servicer has advanced
foreclosure costs. Upon satisfaction of these conditions, the pool insurer will
have the option either (a) to purchase the Mortgaged Property at a price equal
to the Principal Balance thereof plus accrued and unpaid interest at the
Mortgage Rate to the date of purchase and certain expenses incurred by the
Servicer on behalf of the Trustee and the Certificateholders, or (b) to pay the
amount by which the sum of the Principal Balance of the defaulted Mortgage Loan
plus accrued and unpaid interest at the Mortgage Rate to the date of payment of
the claim and the aforementioned expenses exceeds the proceeds received from an
approved sale of the Mortgaged Property, in either case net of certain amounts
paid or assumed to have been paid under any related primary mortgage insurance
policy. If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy or any applicable
special hazard insurance policy are insufficient to restore the damaged property
to a condition sufficient to permit recovery under the pool insurance policy,
the Servicer will not be required to expend its own funds to restore the damaged
property unless it determines (i) that such restoration will increase the
proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Servicer for its expenses,
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and (ii) that such expenses will be recoverable by it through proceeds of the
sale of the property or proceeds of the pool insurance policy or any primary
mortgage insurance policy.
In general, no pool insurance policy will insure (and many primary
mortgage insurance policies may not insure) against loss sustained by reason of
a default arising from, among other things, (i) fraud or negligence in the
origination or servicing of a Mortgage Loan, including misrepresentation by the
Mortgagor or persons involved in the origination thereof, or (ii) failure to
construct a Mortgaged Property in accordance with plans and specifications. If
so specified in the related Prospectus Supplement, a failure of coverage
attributable to one of the foregoing events might result in a breach of a
representation of the Seller (or another party) and in such event might give
rise to an obligation on the part of the Seller (or such other party) to
purchase or replace the defaulted Mortgage Loan if the breach materially and
adversely affects the interests of Certificateholders and cannot be cured.
As specified in the Prospectus Supplement, the original amount of
coverage under any pool insurance policy will be reduced over the life of the
related series of Certificates by the aggregate dollar amount of claims paid
less the aggregate of the net amounts realized by the pool insurer upon
disposition of all foreclosed properties. The amount of claims paid will include
certain expenses incurred by the Servicer as well as accrued interest on
delinquent Mortgage Loans to the date of payment of the claim. See "Material
Legal Aspects of the Mortgage Loans --Foreclosure". Accordingly, if aggregate
net claims paid under any pool insurance policy reach the original policy limit,
coverage under that pool insurance policy will be exhausted and any further
losses will be borne by one or more classes of Certificateholders unless assumed
by some other entity, if and to the extent specified in the Prospectus
Supplement.
Since any mortgage pool insurance policy may require that the property
subject to a defaulted Mortgage Loan be restored to its original condition prior
to claiming against the pool insurer, such policy may not provide coverage
against hazard losses. The hazard policies concerning the Mortgage Loans
typically exclude from coverage physical damage resulting from a number of
causes and, even when the damage is covered, may afford recoveries which are
significantly less than the full replacement cost of such losses. Even if
special hazard insurance is applicable as specified in the Prospectus
Supplement, no coverage in respect of special hazard losses will cover all
risks, and the amount of any such coverage will be limited. See "Special Hazard
Insurance" below. As a result, certain hazard risks will not be insured against
and will therefore be borne by Certificateholders, unless otherwise assumed by
some other entity, as specified in the Prospectus Supplement.
Special Hazard Insurance
In order to decrease the likelihood that Certificateholders will
experience losses in respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one or more special hazard
insurance policies with respect to the Mortgage Loans. Such a special hazard
insurance policy will, subject to limitations described below and in the
Prospectus Supplement, protect holders of Certificates from (i) loss by reason
of damage to Mortgaged Properties caused by certain hazards (including
earthquakes and, to a limited extent, tidal waves and related water damage) not
covered by the standard form of hazard insurance policy for the respective
states in which the Mortgaged Properties are located or under flood insurance
policies, if any, covering the Mortgaged Properties, and (ii) loss from partial
damage caused by reason of the application of the co-insurance clause contained
in hazard insurance policies. See "Servicing of the Mortgage Loans--Hazard
Insurance" below. Any special hazard insurance policy may not cover losses
occasioned by war, civil insurrection, certain governmental actions, errors in
design, faulty workmanship
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or materials (except under certain circumstances), nuclear reaction, flood (if
the Mortgaged Property is located in a federally designated flood area),
chemical contamination and certain other risks. Aggregate claims under each
special hazard insurance policy may be limited to a specified percentage of the
aggregate principal balance as of the Cut-Off Date of the Mortgage Loans. Any
special hazard insurance policy may also provide that no claim may be paid
unless hazard and, if applicable, flood insurance on the Mortgaged Property has
been kept in force and other protection and preservation expenses have been paid
by the Servicer.
Subject to the foregoing limitations, any special hazard insurance
policy may provide that, where there has been damage to property securing a
foreclosed Mortgage Loan (title to which has been acquired by the insured) and
to the extent such damage is not covered by the hazard insurance policy or flood
insurance policy, if any, maintained by the mortgagor or the Servicer, the
special hazard insurer will pay the lesser of (i) the cost of repair or
replacement of such property or (ii) upon transfer of the property to the
special hazard insurer, the unpaid principal balance of such Mortgage Loan at
the time of acquisition of such property by foreclosure or deed in lieu of
foreclosure, plus accrued interest to the date of claim settlement and certain
expenses incurred by the Servicer with respect to such property. If the unpaid
principal balance plus accrued interest and certain expenses is paid by the
insurer, the amount of further coverage under the related special hazard
insurance policy will be reduced by such amount less any net proceeds from the
sale of the property. Any amount paid as the cost of repair or replacement of
the property will also reduce coverage by such amount. Restoration of the
property with the proceeds described under clause (i) above will satisfy the
condition under any pool insurance policy that the property be restored before a
claim under such pool insurance policy may be validly presented with respect to
the defaulted Mortgage Loan secured by such property. The payment described
under clause (ii) above will render unnecessary presentation of a claim in
respect of such Mortgage Loan under the related pool insurance policy.
Therefore, so long as a pool insurance policy remains in effect, the payment by
the insurer under a special hazard insurance policy of the cost of repair or
replacement or the unpaid principal balance of the Mortgage Loan plus accrued
interest and certain expenses will not affect the total insurance proceeds paid
to Certificateholders, but will affect the relative amounts of coverage
remaining under the related special hazard insurance policy and pool insurance
policy.
Bankruptcy Bond
In the event of a bankruptcy of a borrower, the bankruptcy court may
establish the value of the Mortgaged Property securing the related Mortgage Loan
at an amount less than the then outstanding principal balance of such Mortgage
Loan secured by such Mortgaged Property and could reduce the secured debt to
such value. In such case, the holder of such Mortgage Loan would become an
unsecured creditor to the extent of the difference between the outstanding
principal balance of such Mortgage Loan and such reduced secured debt. In
addition, certain other modifications of the terms of a Mortgage Loan can result
from a bankruptcy proceeding, including the reduction in monthly payments
required to be made by the borrower. See "Material Legal Aspects of the Mortgage
Loans -- Enforceability of Certain Provisions". If so provided in the related
Prospectus Supplement, the Servicer will obtain a bankruptcy bond or similar
insurance contract (the "bankruptcy bond") for proceedings with respect to
borrowers under the Bankruptcy Code. Any such bankruptcy bond will cover certain
losses resulting from a reduction by a bankruptcy court of scheduled payments of
principal of and interest on a Mortgage Loan or a reduction by such court of the
secured principal amount of a Mortgage Loan and will cover certain unpaid
interest on the amount of such a principal reduction from the date of the filing
of a bankruptcy petition.
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Any such bankruptcy bond will provide coverage in the aggregate amount
specified in the related Prospectus Supplement. Such amount will be reduced by
payments made under such bankruptcy bond in respect of the related Mortgage
Loans, to the extent specified in the related Prospectus Supplement, and will
not be restored.
In lieu of a bankruptcy bond, the Servicer may obtain a Limited
Guarantee to cover such bankruptcy-related losses.
Repurchase Bond
If so specified in the related Prospectus Supplement, the Servicer will
be obligated to purchase any Mortgage Loan up to an aggregate dollar amount
specified in the related Prospectus Supplement) for which insurance coverage is
denied due to dishonesty, misrepresentation or fraud in connection with the
origination or sale of such Mortgage Loan. Such obligation may be secured by a
surety bond or other instrument or mechanism guaranteeing payment of the amount
to be paid by the Servicer.
Guaranteed Investment Contracts
If so specified in the Prospectus Supplement, on or prior to the
Delivery Date, the Trustee will enter into a guaranteed investment contract (a
"GIC") pursuant to which all amounts deposited in the Collection Account, and if
so specified the Reserve Accounts, will be invested by the Trustee and under
which the issuer of the GIC will pay to the Trustee interest at an agreed rate
per annum with respect to the amounts so invested.
Reserve Accounts
If specified in the Prospectus Supplement, cash, U.S. Treasury
securities, instruments evidencing ownership of principal or interest payments
thereon, letters of credit, demand notes, certificates of deposit, other
instruments or obligations or a combination thereof in the aggregate amount
specified in the Prospectus Supplement will be deposited by the Servicer on the
Delivery Date in one or more Reserve Accounts established by the Trustee. Such
cash and the principal and interest payments on such other instruments will be
used to enhance the likelihood of timely payment of principal of, and interest
on, or, if so specified in the Prospectus Supplement, to provide additional
protection against losses in respect of, the assets in the related Trust Fund,
to pay the expenses of the Trust Fund or for such other purposes specified in
the Prospectus Supplement. Whether or not the Servicer has any obligation to
make such a deposit, certain amounts to which the subordinated
Certificateholders, if any, will otherwise be entitled may instead be deposited
into the Reserve Account from time to time and in the amounts as specified in
the Prospectus Supplement. Any cash in the Reserve Account and the proceeds of
any other instrument upon maturity will be invested in Eligible Investments,
which will include obligations of the United States and certain agencies
thereof, certificates of deposit, certain commercial paper, time deposits and
bankers acceptances sold by eligible commercial banks, certain repurchase
agreements of United States government securities with eligible commercial banks
and certain other Eligible Investments described in the Agreement. If a letter
of credit is deposited with the Trustee, such letter of credit will be
irrevocable. Any instrument deposited therein will name the Trustee, in its
capacity as trustee for the holders of the related Certificates, as beneficiary
and will be issued by an entity acceptable to each rating agency that rates the
Certificates. Additional information with respect to such instruments deposited
in the Reserve Accounts will be set forth in the Prospectus Supplement.
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Any amounts so deposited and payments on instruments so deposited will
be available for withdrawal from the Reserve Account for distribution to the
holders of Certificates for the purposes, in the manner and at the times
specified in the Prospectus Supplement.
Other Insurance and Guarantees
If specified in the Prospectus Supplement, the related Trust Fund may
also include insurance, guarantees or letters of credit for the purpose of (i)
maintaining timely payments or providing additional protection against losses on
the assets included in such Trust Fund, (ii) paying administrative expenses or
(iii) establishing a minimum reinvestment rate on the payments made in respect
of such assets or principal payment rate on such assets. Such arrangements may
include agreements under which Certificateholders are entitled to receive
amounts deposited in various accounts held by the Trustee upon the terms
specified in the Prospectus Supplement. Such arrangements may be in lieu of any
obligation of the Servicer to advance delinquent installments in respect of the
Mortgage Loans.
YIELD, MATURITY AND WEIGHTED AVERAGE LIFE CONSIDERATIONS
The yields to maturity and weighted average lives of the Certificates
will be affected primarily by the rate and timing of principal payments received
on or in respect of the Mortgage Loans included in the related Trust Fund. Such
principal payments will include scheduled payments as well as Principal
Prepayments (including refinancings) and prepayments resulting from foreclosure,
condemnation and other dispositions of the Mortgaged Properties (including
amounts paid by insurers under applicable insurance policies), from purchase by
the Seller of any Mortgage Loan as to which there has been a material breach of
warranty or defect in documentation (or deposit of certain amounts in respect of
delivery of a substitute Mortgage Loan), purchase by the Servicer of Mortgage
Loans modified by it in lieu of refinancing thereof and from the repurchase by
the Seller of all of the Mortgage Loans in certain circumstances. See "The
Pooling and Servicing Agreement--Termination; Purchase of Mortgage Loans." The
yield to maturity and weighted average lives of the Certificates may also be
affected by the amount and timing of delinquencies and losses on the Mortgage
Loans.
A number of social, economic, tax, geographic, demographic, legal and
other factors may influence prepayments, delinquencies and losses. For a Trust
Fund comprised of Mortgage Loans, these factors may include the age of the
Mortgage Loans, the geographic distribution of the Mortgaged Properties, the
payment terms of the Mortgages, the characteristics of the mortgagors, homeowner
mobility, economic conditions generally and in the geographic area in which the
Mortgaged Properties are located, enforceability of due-on-sale clauses,
servicing decisions, prevailing mortgage market interest rates in relation to
the interest rates on the Mortgage Loans, the availability of mortgage funds,
the use of second or "home equity" mortgage loans by mortgagors, the
availability of refinancing opportunities (including refinancing opportunities
offered by Chase Manhattan Mortgage Corporation to existing borrowers or to its
affiliates), the use of the properties as second or vacation homes, the extent
of the mortgagors' net equity in the Mortgaged Properties and, where investment
properties are securing the Mortgage Loans, tax-related considerations and the
availability of other investments. The rate of principal payment may also be
subject to seasonal variations.
The rate of principal prepayments on pools of conventional housing
loans has fluctuated significantly in recent years. Generally, if prevailing
interest rates were to fall significantly below the interest rates on the
Mortgage Loans, the Mortgage Loans would be expected to prepay at higher rates
than if prevailing rates
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were to remain at or above the interest rates on the Mortgage Loans. Conversely,
if interest rates were to rise above the interest rates on the Mortgage Loans,
the Mortgage Loans would be expected to prepay at lower rates than if prevailing
rates were to remain at or below interest rates on the Mortgage Loans. The
timing of changes in the rate of prepayments may significantly affect a
Certificateholder's actual yield to maturity, even if the average rate of
principal payments is consistent with a Certificateholder's expectation. In
general, the earlier a prepayment of principal the greater the effect on a
Certificateholder's yield to maturity. As a result, the effect on a
Certificateholder's yield of principal payments occurring at a rate higher (or
lower) than the rate anticipated by the investor during the period immediately
following the issuance of the related series of Certificates will not be offset
by a subsequent like reduction (or increase) in the rate of principal payments.
To the extent described in the applicable Prospectus Supplement, the
effective yields to Certificateholders will be lower than the yields produced by
the interest rates on the Certificates because, while interest will accrue on
each Mortgage Loan from the first day of each month, the distribution of such
interest to Certificateholders will be made in the month following the month of
accrual.
When a Mortgage Loan prepays in full, the borrower will generally be
required to pay interest on the amount of prepayment only to the prepayment
date. When a partial prepayment of principal is made on a Mortgage Loan, the
borrower generally will not be required to pay interest on the amount of the
partial prepayment during the month in which such prepayment is made. In
addition, a full or partial prepayment will not be required to be passed through
to Certificateholders until the month following receipt.
If and to the extent specified in the applicable Prospectus Supplement,
under the Agreement, if a full or partial voluntary prepayment of a Mortgage
Loan is made and does not include the full amount of interest on such Mortgage
Loan which would have been due but for such prepayment to and including the end
of the month in which the prepayment takes place, the servicer will be obligated
to pay the interest thereon at the Remittance Rate from the date of prepayment
through the end of such month (each such payment, a "Compensating Interest
Payment"), provided that the aggregate of such Compensating Interest Payments by
the Servicer with respect to any Distribution Date will not exceed the aggregate
Servicing Fee to which the Servicer is entitled in connection with such
Distribution Date. The Servicer will not be entitled to reimbursement for such
Compensating Interest Payments. Consequently, to the extent the Servicer is so
obligated, neither partial nor full prepayments will reduce the amount of
interest passed through to Certificateholders the following month from the
amount which would have been passed through in the absence of such prepayments.
If the Servicer is not obligated to make Compensating Interest Payments, or if
such payments are insufficient to cover the interest shortfall, partial or full
prepayments will reduce the amount of interest passed through to
Certificateholders, as described in the applicable Prospectus Supplement.
Factors other than those identified herein and in the Prospectus
Supplement could significantly affect principal prepayments at any time and over
the lives of the Certificates. The relative contribution of the various factors
affecting prepayment may also vary from time to time. There can be no assurance
as to the rate of payment of principal of the Mortgage Loans at any time or over
the lives of the Certificates.
The Prospectus Supplement relating to a series of Certificates will
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of such Certificates.
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CHASE MANHATTAN ACCEPTANCE CORPORATION
Chase Manhattan Acceptance Corporation was incorporated in the State of
Delaware on March 1, 1988 and is a direct wholly-owned subsidiary of The Chase
Manhattan Bank. The principal office of Chase Manhattan Acceptance Corporation
is located at 343 Thornall Street, Edison, New Jersey 08837 and its telephone
number is (732) 205-0600.
It is not expected that Chase Manhattan Acceptance Corporation will
have any business operations other than acquiring and pooling mortgage loans and
other receivables and instruments, offering Certificates of the type described
herein or other mortgage-related or asset-backed securities, and related
activities.
CHASE FUNDING, INC.
Chase Funding, Inc. was incorporated in the State of New York on
November 17, 1987 and is a direct wholly-owned subsidiary of The Chase Manhattan
Bank. The principal office of Chase Funding, Inc. is located at 343 Thornall
Street, Edison, New Jersey 08837 and its telephone number is (732) 205-0600.
It is not expected that Chase Funding, Inc. will have any business
operations other than acquiring and pooling mortgage loans and other receivables
and instruments, offering Certificates of the type described herein or other
mortgage-related or asset-backed securities, and related activities.
SERVICING OF THE MORTGAGE LOANS
With respect to each series of Certificates, the related Mortgage Loans
will be serviced by Chase Manhattan Mortgage (or such other entity identified in
the Prospectus Supplement), acting alone or, as master servicer, through one or
more direct servicers. If Chase Manhattan Mortgage acts as master servicer with
respect to a series, the related Agreement will provide that Chase Manhattan
Mortgage shall not be released from its obligations to the Trustee and
Certificateholders with respect to the servicing and administration of the
Mortgage Loans, that any servicing agreement entered into between Chase
Manhattan Mortgage and a direct servicer will be deemed to be between Chase
Manhattan Mortgage and the direct servicer alone and that the Trustee and the
Certificateholders will have no claims, obligations, duties or liabilities with
respect to any such agreement.
Collection and Other Servicing Procedures
Subject to the terms of the Agreement, the Servicer generally will be
obligated to service and administer the Mortgage Loans in accordance with the
specific procedures set forth in the Fannie Mae Seller's Guide and Fannie Mae
Servicing Guide, as amended or supplemented from time to time, and, to the
extent such procedures are unavailable, in accordance with the mortgage
servicing practices of prudent mortgage lending institutions.
The Servicer will be responsible for using its best reasonable efforts
to collect all payments called for under the Mortgage Loans and shall,
consistent with each Agreement, follow such collection procedures as it deems
necessary and advisable with respect to the Mortgage Loans. Consistent with the
above, the Servicer, may, in its discretion, (i) waive any late payment charge
and (ii) if a default on the related Mortgage Loan has occurred or is reasonably
foreseeable, arrange with the mortgagor a schedule for the liquidation of a
delinquency. In the event of any such arrangement the Servicer will be
responsible for
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distributing funds with respect to such Mortgage Loan during the scheduled
period in accordance with the original amortization schedule thereof and without
regard to the temporary modification thereof.
The Servicer will be obligated to use it best reasonable efforts to
realize upon a defaulted Mortgage Loan in such manner as will maximize the
payments to Certificateholders. In this regard, the Servicer may (directly or
through a local assignee) sell the property at a foreclosure or trustee's sale,
negotiate with the mortgagor for a deed in lieu of foreclosure or, in the event
a deficiency judgment is available against the mortgagor or other person,
foreclose against such property and proceed for the deficiency against the
appropriate person. See "Material Legal Aspects of the Mortgage
Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" for a
description of the limited availability of deficiency judgments. The amount of
the ultimate net recovery (including the proceeds of any pool insurance or other
guarantee), after reimbursement to the Servicer of its expenses incurred in
connection with the liquidation of any such defaulted Mortgage Loan will be
distributed to the related Certificateholders on the next Distribution Date
following the month of receipt. If specified in the Prospectus Supplement, if
such net recovery exceeds the Principal Balance of such Mortgage Loan plus one
month's interest thereon at the Remittance Rate, the excess will be paid to the
Servicer as additional servicing compensation. The Servicer will not be required
to expend its own funds in connection with any foreclosure or towards the
restoration of any Mortgaged Property unless it shall determine (i) that such
restoration or foreclosure will increase the Liquidation Proceeds in respect of
the related Mortgaged Loan to Certificateholders after reimbursement to itself
for such expenses and (ii) that such expenses will be recoverable to it either
through Liquidation Proceeds or Insurance Proceeds in respect of the related
Mortgage Loan.
If a Mortgaged Property has been or is about to be conveyed by the
mortgagor, the Servicer will be obligated to accelerate the maturity of the
Mortgage Loan, unless it reasonably believes it is unable to enforce that
Mortgage Loan's "due-on-sale" clause under applicable law or such enforcement
would adversely affect or jeopardize coverage under any related primary mortgage
insurance policy or pool insurance policy. If it reasonably believes it may be
restricted by law, for any reason, from enforcing such a "due-on-sale" clause,
the Servicer, with the consent of the insurer under any insurance policy
implicated thereby, may enter into an assumption and modification agreement with
the person to whom such property has been or is about to be conveyed, pursuant
to which such person becomes liable under the Mortgage Note. Any fee collected
by the Servicer for entering into an assumption agreement will be retained by
the Servicer as additional servicing compensation. For a description of
circumstances in which the Servicer may be unable to enforce "due-on-sale"
clauses, see "Material Legal Aspects of the Mortgage Loans -- Enforceability of
Certain Provisions". In connection with any such assumption, the Mortgage Rate
borne by the related Mortgage Note may not be decreased.
The Servicer will maintain with one or more depository institutions
one or more accounts into which it will deposit all payments of taxes, insurance
premiums, assessments or comparable items received for the account of the
mortgagors. Withdrawals from such account or accounts may be made only to effect
payment of taxes, insurance premiums, assessments or comparable items, to
reimburse the Servicer out of related collections for any cost incurred in
paying taxes, insurance premiums and assessments or otherwise preserving or
protecting the value of the Mortgages, to refund to mortgagors any amounts
determined to be overages and to pay interest to mortgagors on balances in such
account or accounts to the extent required by law.
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Private Mortgage Insurance
Each Agreement will obligate the Servicer to exercise its best
reasonable efforts to maintain and keep in full force and effect a private
mortgage insurance policy on all Mortgage Loans that have a Loan-to-Value Ratio
in excess of 80%.
A private mortgage insurance policy may provide that, as an alternative
to paying a claim thereunder, the mortgage insurer will have the right to
purchase the Mortgage Loan following the receipt of a notice of default, at a
purchase price equal to the sum of the principal balance of the Mortgage Loan,
accrued interest thereon and the amount of certain advances made by the Servicer
with respect to the Mortgage Loan. The mortgage insurer may have such purchase
right after the borrower has failed to make three scheduled monthly payments (or
one payment if it is the first payment due on the Mortgage Loan) or after any
foreclosure or other proceeding affecting the Mortgage Loan or the Mortgaged
Property has been commenced. The proceeds of any such purchase will be
distributed to Certificateholders on the applicable Distribution Date. A
mortgage insurer may be more likely to exercise such purchase option when
prevailing interest rates are low relative to the interest rate borne by the
defaulted Mortgage Loan, in order to reduce the aggregate amount of accrued
interest that the insurer would be obligated to pay upon payment of a claim.
Hazard Insurance
The Servicer will cause to be maintained for each Mortgaged Property a
standard hazard insurance policy. The coverage of such policy is required to be
in an amount at least equal to the maximum insurable value of the improvements
which are a part of such property from time to time or the principal balance
owing on such Mortgage Loan from time to time, whichever is less. All amounts
collected by the Servicer under any hazard policy (except for amounts to be
applied to the restoration or repair of property subject to the related Mortgage
or property acquired by foreclosure or amounts released to the related mortgagor
in accordance with the Servicer's normal servicing procedures) will be deposited
in the Collection Account.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Mortgage Loans will be
underwritten by different insurers and, therefore, will not contain identical
terms and conditions, the basic terms thereof are dictated by state law. Such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other water-related
causes, earth movement (including earthquakes, landslides and mud flow), nuclear
reactions, pollution, wet or dry rot, vermin, rodents, insects or domestic
animals, theft and, in certain cases, vandalism. The foregoing list is merely
indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. If the property securing a Mortgage Loan is located in a
federally designated flood area, the Agreement will require that flood insurance
be maintained in an amount representing coverage not less than the least of (i)
the principal balance owing on such Mortgage Loan from time to time, (ii) the
maximum insurable value of the improvements which are a part of such property
from time to time or (iii) the maximum amount of insurance which is available
under the Flood Disaster Protection Act of 1973, as amended. The Seller may also
purchase special hazard insurance against certain of the uninsured risks
described above. See "Credit Support--Special Hazard Insurance."
Most of the properties securing the Mortgage Loans will be covered by
homeowners' insurance policies, which, in addition to the standard form of fire
and extended coverage, provide coverage for certain
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other risks. These homeowners' policies typically contain a "coinsurance" clause
which in effect requires the insured at all times to carry insurance of a
specified percentage (generally 80% to 90%) of the full replacement value of the
improvements on the property in order to recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, then the
insurer's liability in the event of partial loss will not exceed the lesser of
(i) the actual cash value (generally defined as replacement cost at the time and
place of loss, less physical depreciation) of the improvements damaged or
destroyed, or (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Since the amount of hazard insurance the Servicer is required to cause
to be maintained on the improvements securing the Mortgage Loans declines as the
principal balances owing thereon decrease, if the residential properties
securing the Mortgage Loans appreciate in value over time, the effect of
coinsurance in the event of partial loss may be that hazard insurance proceeds
will be insufficient to restore fully the damaged property.
The Servicer will cause to be maintained on any Mortgaged Property
acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to the lesser of (i)
the maximum insurable value from time to time of the improvements which are a
part of such property or (ii) the unpaid principal balance of the related
Mortgage Loan at the time of such foreclosure or deed in lieu of foreclosure,
plus accrued interest and the Servicer's good-faith estimate of the related
liquidation expenses to be incurred in connection therewith.
The Servicer may maintain, in lieu of causing individual hazard
insurance policies to be maintained with respect to each Mortgage Loan, one or
more blanket insurance policies covering hazard losses on the Mortgage Loans.
The Servicer will pay the premium for such policy on the basis described therein
and will pay any deductible amount with respect to claims under such policy
relating to the Mortgage Loans.
Advances
To the extent specified in the Prospectus Supplement, in the event that
any borrower fails to make any payment of principal or interest required under
the terms of a Mortgage Loan, the Servicer will be obligated to advance the
entire amount of such payment adjusted in the case of any delinquent interest
payment to the applicable Net Mortgage Rate. This obligation to advance will be
limited to amounts which the Servicer reasonably believes will be recoverable by
it out of liquidation proceeds or otherwise in respect of such Mortgage Loan.
The Servicer will be entitled to reimbursement for any such advance from related
late payments on the Mortgage Loan as to which such advance was made.
Furthermore, the Servicer will be entitled to reimbursement for any such advance
(i) from Liquidation Proceeds or Insurance Proceeds received if such Mortgage
Loan is foreclosed prior to any payment to Certificateholders in respect of the
repossession or foreclosure and (ii) from receipts or recoveries on all other
Mortgage Loans or from any other assets of the Trust Fund, for all or any
portion of such advance which the Servicer determines, in good faith, may not be
ultimately recoverable from such liquidation or insurance proceeds (a
"Nonrecoverable Advance"). Any Nonrecoverable Advance will be reimbursable out
of the assets of the Trust Fund. The amount of any scheduled payment required to
be advanced by the Servicer will not be affected by any agreement between the
Servicer and a borrower providing for the postponement or modification of the
due date or amount of such scheduled payment. If specified in the Prospectus
Supplement, the Trustee for the related series will make advances of delinquent
payments of principal and interest in the event of a failure by the Servicer to
perform such obligation.
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Any such obligation to make advances may be limited to amounts due
holders of certain classes of Certificates of the related series or may be
limited to specified periods or otherwise as specified in the Prospectus
Supplement.
Servicing and Other Compensation and Payment of Expenses
The Servicer's primary compensation for its servicing activities will
come from the payment to it, with respect to each interest payment on a Mortgage
Loan, of all or a portion of the difference between the Mortgage Rate for such
Mortgage Loan and the related Remittance Rate. In addition to its primary
compensation, the Servicer will retain all assumption fees, late payment charges
and other miscellaneous charges, all to the extent collected from borrowers. In
the event the Servicer is acting as master servicer under an Agreement, it will
receive compensation with respect to the performance of its activities as master
servicer.
The Servicer generally will be responsible for paying all expenses
incurred in connection with the servicing of the Mortgage Loans (subject to
limited reimbursement as described under "The Pooling and Servicing
Agreement---Payments on Mortgage Loans; Collection Account"), including, without
limitation, payment of any premium for any Advance Guarantee, Deposit Guarantee,
bankruptcy bond, repurchase bond or other guarantee or surety, payment of the
fees and the disbursements of the Trustee and the and independent accountants,
payment of the compensation of any direct servicers of the Mortgage Loans,
payment of all fees and expenses in connection with the realization upon
defaulted Mortgage Loans and payment of expenses incurred in connection with
distributions and reports to Certificateholders. The Servicer may assign any of
its primary servicing compensation in excess of that amount customarily retained
as servicing compensation for similar assets.
Resignation, Succession and Indemnification of the Servicer
The Agreement will provide that the Servicer may not resign from its
obligations and duties as servicer or master servicer thereunder, except upon
determination that its performance of such duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or a
successor has assumed the Servicer's servicing obligations and duties under such
Agreement. The Guarantor's obligations under any Advance Guarantee or Deposit
Guarantee will, upon issuance thereof, be irrevocable, subject to certain
limited rights of assignment as described in the Prospectus Supplement if
applicable.
The Agreement will provide that neither the Seller nor the Servicer
nor, if applicable, the Guarantor, nor any of their respective directors,
officers, employees or agents, shall be under any liability to the Trust Fund or
the Certificateholders of the related series for taking any action, or for
refraining from taking any action, in good faith pursuant to such Agreement, or
for errors in judgment; provided, however, that neither the Servicer nor, if
applicable, the Guarantor, nor any such person, will be protected against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties thereunder. The Agreement will also provide
that the Seller, the Servicer and, if applicable, the Guarantor and their
respective directors, officers, employees and agents are entitled to
indemnification by the related Trust Fund and will be held harmless against any
loss, liability or expense incurred in connection with any legal action relating
to the Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless
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disregard of obligations and duties thereunder. In addition, each Agreement will
provide that neither the Seller nor the Servicer nor, if applicable, the
Guarantor is under any obligation to appear in, prosecute or defend any legal
action which is not incidental to the Servicer's servicing responsibilities
under such Agreement or the Guarantor's payment obligations under any Limited
Guarantee, respectively, and which in its respective opinion may involve it in
any expense or liability. Each of the Seller, the Servicer and, if applicable,
the Guarantor may, however, in its respective discretion undertake any such
action which it may deem necessary or desirable in respect of such Agreement and
the rights and duties of the parties thereto and the interests of the
Certificateholders thereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust Fund, and the Seller, the Servicer and, if applicable,
the Guarantor, will be entitled to be reimbursed therefor from amounts deposited
in the Collection Account.
Any corporation into which the Servicer may be merged or consolidated
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer is a party, or any corporation succeeding to the business of
the Servicer, which assumes the obligations of the Servicer, will be the
successor of the Servicer under each Agreement.
THE POOLING AND SERVICING AGREEMENT
This prospectus summarizes the material provisions of the Agreement.
The summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Agreement applicable to a
particular series of Certificates. Where particular provisions or terms used in
the Agreements are referred to, such provisions or terms are as specified in the
Agreements.
Assignment of Mortgage Loans; Warranties
At the time of issuance of each series of Certificates, the Seller will
cause the Mortgage Loans in the Trust Fund represented by that series of
Certificates to be assigned to the Trustee, together with all principal and
interest due on or with respect to such Mortgage Loans, other than principal and
interest due on or before the Cut-Off Date and prepayments of principal received
before the Cut-Off Date. The Trustee, concurrently with such assignment, will
execute and deliver Certificates evidencing such Trust Fund to the Seller in
exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the Agreement for that series (the "Mortgage
Loan Schedule"). The Mortgage Loan Schedule will include, as to each Mortgage
Loan, information as to the outstanding principal balance as of the close of
business on the Cut-Off Date, as well as information respecting the Mortgage
Rate, the current scheduled monthly payment, the number of months remaining
until the stated maturity date of each Note and the location of the related
Mortgaged Property.
In addition, the Seller will, as to each Mortgage Loan, deliver to the
Trustee (i) the Note, endorsed to the order of the Trustee by the holder/payee
thereof without recourse; (ii) the "buy-down" agreement (if applicable); (iii) a
Mortgage and Mortgage assignment meeting the requirements of the Agreement; (iv)
all Mortgage assignments from the original holder of the Mortgage Loan, through
any subsequent transferees to the transferee to the Trustee; (v) the original
Lender's Title Insurance Policy, or other evidence of title, or if a policy has
not been issued, a written commitment or interim binder or preliminary report of
title issued by the title insurance or escrow company ; (vi) as to each Mortgage
Loan, an original certificate of Primary Mortgage Insurance Policy (or copy
certified to be true by the originator) to the extent required under the
applicable requirements for the Mortgage Pool; and (vii) such other documents as
may be described in the
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applicable Prospectus Supplement. Except as expressly permitted by the
Agreement, all documents so delivered are to be original executed documents;
provided, however, that in instances where the original recorded document has
been retained by the applicable jurisdiction or has not yet been returned from
recordation, the Seller may deliver a photocopy containing a certification of
the appropriate judicial or other governmental authority of the jurisdiction,
and the Servicer shall cause the originals of each Mortgage and Mortgage
assignment which is so unavailable to be delivered to the Trustee as soon as
available.
The Trustee will hold such documents for each series of Certificates in
trust for the benefit of all Certificateholders of such series. The Trustee is
obligated to review such documents for each Mortgage Loan within 270 days after
the conveyance of the Mortgage Loan to it. If any document is found by the
Trustee not to have been executed or received or to be unrelated to the Mortgage
Loan identified in the Agreement, the Trustee will promptly notify the Seller.
The Seller, or another party specified in the applicable Prospectus Supplement,
will be required to cure such defect or to repurchase the Mortgage Loan or to
provide a substitute Mortgage Loan. See "Repurchase or Substitution" below.
In the Agreement for each series, the Seller or another party described
in the Agreement (the "Representing Party") will make certain representations
and warranties with respect to the Mortgage Loans. The representations and
warranties in each Agreement will generally include that (i) the information set
forth in the Mortgage Loan Schedule is true and correct in all material respects
at the date or dates with respect to which such information is furnished; (ii)
each Mortgage constitutes a valid and enforceable first lien on the Mortgaged
Property, including all improvements thereon (subject only to (A) the lien of
current real property taxes and assessments, (B) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally and specifically
referred to in the Lender's Title Insurance Policy delivered to the originator
of the Mortgage Loan and not adversely affecting the value of the Mortgaged
Property and (C) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security intended to
be provided by such Mortgage); (iii) each Primary Mortgage Insurance Policy is
in full force and effect, and (except where noted in the Agreement) each
Mortgage Loan which has a Loan-to-Value Ratio greater than 80% is subject to a
Primary Mortgage Insurance Policy; (iv) at the date of initial issuance of the
Certificates, no Mortgage Loan was more than 30 days delinquent in payment, no
Mortgage Loan had more than one delinquency in excess of 30 days during the
preceding 12-month period; (v) at the time each Mortgage Loan was originated
and, to the best knowledge of the Representing Party, at the date of initial
issuance of the Certificates, there are no delinquent taxes, assessments or
other outstanding charges affecting the Mortgaged Property; (vi) each Mortgage
Loan was originated in compliance with and complied at the time of origination
in all material respects with applicable laws, including usury, equal credit
opportunity and disclosure laws; (vii) each Mortgage Loan is covered by a
lender's title insurance policy insuring the priority of the lien of the
Mortgage in the original principal amount of such Mortgage Loan, and each such
policy is in full force and effect; and (viii) immediately prior to the
assignment to the Trust Fund the Seller had good title to, and was the sole
owner of, each Mortgage Loan free and clear of any lien, claim, charge,
encumbrance or security interest of any kind.
Upon the discovery or notice of a breach of any of such representations
or warranties which materially and adversely affects the interests of the
Certificateholders in a Mortgage Loan, the Seller or the applicable party will
cure the breach or repurchase such Mortgage Loan or will provide a substitute
Mortgage Loan in the manner described under "Repurchase or Substitution" below.
This obligation to repurchase or
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substitute constitutes the sole remedy available to the Certificateholders or
the Trustee for any such breach of representations and warranties.
The Agreement for a Series of Certificates may provide that the
Servicer may, at its sole option, purchase from the Trust Fund, at the price
specified in the Agreement, any Mortgage Loan as to which the related Borrower
has failed to make full payments as required under the related Note for three
consecutive months.
Payments on Mortgage Loans; Collection Account
It is expected that the Agreement for each series of Certificates will
provide that the Servicer will establish and maintain a trust account or
accounts (the "Collection Account") in the name of the Trustee for the benefit
of the Certificateholders. The amount at any time credited to the Collection
Account will be fully-insured to the maximum coverage possible or shall be
invested in Permitted Investments, all as described in the applicable Prospectus
Supplement. In addition, a Certificate Account may be established for the
purpose of making distributions to Certificateholders if and as described in the
applicable Prospectus Supplement.
The Servicer will deposit in the Collection Account, as described more
fully in the applicable Prospectus Supplement, amounts representing the
following collections and payments (other than in respect of principal of or
interest on the Mortgage Loans due on or before the Cut-Off Date and prepayments
of principal received before the Cut-Off Date): (i) all installments of
principal and interest on the applicable Mortgage Loans and any principal and/or
interest required to be advanced by the Servicer that were due on the
immediately preceding Due Date, net of servicing fees due the Servicer and other
amounts, if any, specified in the applicable Prospectus Supplement; (ii) all
amounts received in respect of such Mortgage Loans representing late payments of
principal and interest to the extent such amounts were not previously advanced
by the Servicer with respect to such Mortgage Loans, net of servicing fees due
the Servicer; (iii) all principal prepayments (whether full or partial) on such
Mortgage Loans received, together with interest calculated at the Mortgage Rate
(net of servicing fees due the Servicer) to the end of the calendar month during
which such principal prepayment shall have been received by the Servicer, to the
extent received from the mortgagor or advanced by the Servicer, as described
under "Servicing of the Mortgage Loans--Advances" herein; and (iv) any amounts
received by the Servicer as Insurance Proceeds (to the extent not applied to the
repair or restoration of the Mortgaged Property) or Liquidation Proceeds.
Repurchase or Substitution
The Trustee will review the documents delivered to it with respect to
the assets of the applicable Trust Fund within 270 days after execution and
delivery of the related Agreement. If any document required to be delivered by
the Seller is not delivered or is found to be defective in any material respect,
then within 90 days after notice of such defect, the Seller will (a) cure such
defect, (b) remove the affected Mortgage Loan from the Trust Fund and substitute
one or more other mortgage loans therefor or (c) repurchase the Mortgage Loan
from the Trustee for a price equal to 100% of its Principal Balance plus
interest thereon at the applicable Remittance Rate from the date on which
interest was last paid to the first day of the month in which such purchase
price is to be distributed to the related Certificateholders. This repurchase
and substitution obligation constitutes the sole remedy available to
Certificateholders or the Trustee on behalf of Certificateholders against the
Seller for a material defect in a document relating to a Mortgage Loan.
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The Seller will agree, within 90 days of the earlier of the discovery
by the Seller or receipt by the Seller of notice from the Trustee or the
Servicer of its discovery of any breach of any representation or warranty of the
Seller set forth in the related Agreement with respect to the Mortgage Loans
that materially and adversely affects the interests of the Certificateholders in
a Mortgage Loan (a "Defective Mortgage Loan") or the value of a Mortgage Loan,
to either (a) cure such breach in all material respects, (b) repurchase such
Defective Mortgage Loan at a price equal to 100% of its Principal Balance plus
interest thereon at the applicable Remittance Rate from the date on which
interest was last paid to the first day of the month in which such purchase
price is to be distributed or (c) remove the affected Mortgage Loan from the
Trust Fund and substitute one or more other mortgage loans or contracts
therefor. This repurchase or substitution obligation will constitute the sole
remedy available to Certificateholders or the Trustee on behalf of
Certificateholders for any such breach.
If so specified in the Prospectus Supplement for a series where the
Seller has acquired the related Mortgage Loans, in lieu of agreeing to
repurchase or substitute Mortgage Loans as described above, the Seller may
obtain such an agreement from the entity which sold such mortgage loans, which
agreement will be assigned to the Trustee for the benefit of the holders of the
Certificates of such series. In such event, the Seller will have no obligation
to repurchase or substitute mortgage loans if such entity defaults in its
obligation to do so.
If a mortgage loan is substituted for another Mortgage Loan as
described above, the new mortgage loan will have the following characteristics,
or such other characteristics as may be specified in the Prospectus Supplement:
(i) a Principal Balance (together with any other new mortgage loan so
substituted), as of the first Distribution Date following the month of
substitution, after deduction of all payments due in the month of substitution,
not in excess of the Principal Balance of the removed Mortgage Loan as of such
Distribution Date (the amount of any difference, plus one month's interest
thereon at the applicable Net Mortgage Rate, to be deposited in the Collection
Account on the business day prior to the applicable Distribution Date), (ii) a
Mortgage Rate not less than, and not more than one percentage point greater
than, that of the removed Mortgage Loan, (iii) a remaining term to stated
maturity not later than, and not more than one year less than, the remaining
term to stated maturity of the removed Mortgage Loan, (iv) a Loan-to Value Ratio
at origination not greater than that of the removed Mortgage Loan, and (v) in
the reasonable determination of the Seller, be of the same type, quality and
character (including location of the Mortgaged Property) as the removed Mortgage
Loan (as if the defect or breach giving rise to the substitution had not
occurred) and be, as of the substitution date, in compliance with the
representations and warranties contained in the Agreement.
If a REMIC election is to be made with respect to all or a portion of a
Trust Fund, any such substitution will occur within two years after the initial
issuance of the related Certificates.
Certain Modifications and Refinancings
The Agreement will permit the Servicer to modify any Mortgage Loan upon
the request of the related Mortgagor, and will also permit the Servicer to
solicit such requests by offering Mortgagors the opportunity to refinance their
Mortgage Loans, provided in either case that the Servicer purchases such
Mortgage Loan from the Trust Fund immediately following such modification. Any
such modification may not be made unless the modification includes a change in
the interest rate on the related Mortgage Loan to approximately a prevailing
market rate. Any such purchase will be for a price equal to 100% of the
Principal Balance of such Mortgage Loan, plus accrued and unpaid interest
thereon to the date of purchase at the
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applicable Remittance Rate, net of any unreimbursed advances of principal and
interest thereon made by the Servicer. Such purchases may occur when prevailing
interest rates are below the interest rates on the Mortgage Loans and Mortgagors
request (and/or the Servicer offers) modifications as an alternative to
refinancings through other mortgage originators. If a REMIC election is made
with respect to all or a portion of the related Trust Fund, the Servicer will
indemnify the REMIC against liability for any prohibited transactions taxes and
any related interest, additions or penalties imposed on the REMIC as a result of
any such modification or purchase.
The Agreement will provide that if the Servicer in its individual
capacity agrees to refinance any Mortgage Loan as described above, such Mortgage
Loan will be assigned to the Servicer by the Trustee upon certification that the
Principal Balance of such Mortgage Loan and accrued and unpaid interest thereon
at the Remittance Rate has been deposited in the Collection Account.
Forward Commitments; Pre-Funding
The Trustee of a Trust Fund may enter into a Pre-Funding Agreement for
the transfer of additional Mortgage Loans and Contracts to such Trust following
the date on which such Trust is established and the related Securities are
issued. The Trustee of a Trust may enter into Pre-Funding Agreements to permit
the acquisition of additional Mortgage Loans that could not be delivered by the
Depositor or have not formally completed the origination process, in each case
prior to the Delivery Date. Any Pre-Funding Agreement will require that any
Mortgage Loans so transferred to a Trust conform the requirements specified in
such pre-Funding Agreement. If a Pre-Funding Agreement is to be utilized, the
related Trustee will be required to deposit in the Purchase Account all or a
portion of the proceeds received by the Trustee in connection with the sale of
one or more classes of Securities of the related series; the additional Mortgage
Loans will be transferred to the related Trust in exchange for money released
from the related Pre-Funding Account. Each Pre-Funding Agreement will set a
specified period during which any such transfers must occur. The Pre- Funding
Agreement or the related Agreement will require that, if all moneys originally
deposited to such Pre- Funding Account are not so used by the end of such
specified period, then any remaining moneys will be applied as a mandatory
prepayment of the related class or classes of Securities as specified in the
related Prospectus Supplement. The specified period for the acquisition by a
Trust of additional Mortgage Loans is not expected to exceed three months from
the date such Trust is established.
Evidence as to Compliance
The Agreement will provide that a firm of independent public
accountants will furnish to the Trustee on or before April 15 of each year,
beginning with April 15 in the fiscal year which begins not less than three
months after the date of the initial issue of Certificates, a statement as to
compliance by the Servicer with certain standards relating to the servicing of
the Mortgage Loans.
The Agreement will also provide for delivery to the Trustee on or
before April 15 of each fiscal year, beginning with April 15 in the fiscal year
which begins not less than three months after the date of the initial issue of
the Certificates, a statement signed by an officer of the Servicer to the effect
that, to the best of such officer's knowledge, the Servicer has fulfilled its
obligations under the Agreement throughout the preceding year or, if there has
been a default in the fulfillment of any such obligation, describing each such
default.
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The Trustee
Any commercial bank or trust company serving as Trustee may have normal
banking relationships with the Seller and the Servicer. In addition, the Seller
and the Trustee acting jointly will have the power and the responsibility for
appointing co-trustees or separate trustees of all or any part of the Trust Fund
relating to a particular series of Certificates. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the
Trustee.
The Trustee will make no representations as to the validity or
sufficiency of the Agreement, the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) or of any Mortgage Loan or
related document, and will not be accountable for the use or application by the
Seller or Servicer of any funds paid to the Seller or Servicer in respect of the
Certificates or the related assets, or amounts deposited into the Collection
Account. If no Event of Default has occurred, the Trustee will be required to
perform only those duties specifically required of it under the Agreement.
However, upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee will be required to examine them to
determine whether they conform to the requirements of the Agreement.
The Trustee may resign at any time, and the Seller may remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement, if the Trustee becomes insolvent or in such other instances, if any,
as are set forth in the Agreement. Following any resignation or removal of the
Trustee, the Seller will be obligated to appoint a successor Trustee, any such
successor to be approved by the Guarantor if so specified in the Prospectus
Supplement in the event that the Guarantor has issued any Limited Guarantee with
respect to the Certificates. Any resignation or removal of the Trustee and
appointment of a successor Trustee does not become effective until acceptance of
the appointment by the successor Trustee.
Reports to Certificateholders
On each Distribution Date, the Servicer or the paying agent will mail
to Certificateholders a statement prepared by it and generally setting forth, to
the extent applicable to any series, among other things:
(i) The aggregate amount of the related distribution allocable to
principal, separately identifying the amount allocable to each
class;
(ii) The amount of such distribution allocable to interest
separately identifying the amount allocable to each class;
(iii) The amount of servicing compensation received by the Servicer
in respect of the Mortgage Loans during the month preceding
the month of the Distribution Date;
(iv) The aggregate Certificate Principal Balance (or Notional
Principal Balance) of each class of Certificates after giving
effect to distributions and allocations, if any, of losses on
the Mortgage Loans on such Distribution Date;
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(v) The aggregate Certificate Principal Balance of any class of
Accrual Certificates after giving effect to any increase in
such Certificate Principal Balance that results from the
accrual of interest that is not yet distributable thereon;
(vi) The aggregate amount of any advances made by the Servicer
included in the amounts distributed to Certificateholders on
such Distribution Date;
(vii) If any class of Certificates has priority in the right to
receive Principal Prepayments, the amount of Principal
Prepayments in respect of the Mortgage Loans; and
(viii) The aggregate Principal Balance of Mortgage Loans which were
delinquent as to a total of one, two or three or more
installments of principal and interest or were in foreclosure.
The Servicer will provide Certificateholders which are federally
insured savings and loan associations with certain reports and with access to
information and documentation regarding the Mortgage Loans included in the Trust
Fund sufficient to permit such associations to comply with applicable
regulations of the Office of Thrift Supervision.
Events of Default
Events of Default under the Agreement with respect to a series of
Certificates will consist of: (i) any failure by the Servicer in the performance
of any obligation under the Agreement which causes any payment required to be
made under the terms of the Certificates or the Agreement not to be timely made,
which failure continues unremedied for a period of three business days after the
date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or the Seller, or
to the Servicer, the Seller and the Trustee by Certificateholders representing
not less than 25% of the Voting Rights of any class of Certificates; (ii) any
failure on the part of the Servicer duly to observe or perform in any material
respect any other of the covenants or agreements on the part of the Servicer in
the Certificates or in the Agreement which failure continues unremedied for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Trustee, or to the Servicer and the Trustee by Certificateholders representing
not less than 25% of the Voting Rights of all classes of Certificates; (iii) the
entering against the Servicer of a decree or order of a court, agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator, receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, provided that any such decree or order
shall have remained in force undischarged or unstayed for a period of 60 days;
(iv) the consent by the Servicer to the appointment of a conservator, receiver,
liquidator or liquidating committee in any insolvency, readjustment of debt,
marshalling of assets and liabilities, voluntary liquidation or similar
proceedings of or relating to the Servicer or of or relating to all or
substantially all of its property; (v) the admission by the Servicer in writing
of its inability to pay its debts generally as they become due, the filing by
the Servicer of a petition to take advantage of any applicable insolvency or
reorganization statute, the making of an assignment for the benefit of its
creditors or the voluntary suspension of the payment of its obligations; and
(vi) notice by the Servicer that it is unable to make an Advance required to be
made pursuant to the Agreement.
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Rights Upon Event of Default
As long as an Event of Default under the Agreement remains unremedied
by the Servicer, the Trustee, or holders of Certificates evidencing interests
aggregating more than 50% of such Certificates, may terminate all of the rights
and obligations of the Servicer under the Agreement, whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under the Agreement and will be entitled to similar compensation arrangements,
provided that if the Trustee had no obligation under the Agreement to make
advances of delinquent principal and interest on the Mortgage Loans upon the
failure of the Servicer to do so, or if the Trustee had such obligation but is
prohibited by law or regulation from making such advances, the Trustee will not
be required to assume such obligation of the Servicer. The Servicer shall be
entitled to payment of certain amounts payable to it under the Agreement,
notwithstanding the termination of its activities as servicer. No such
termination will affect in any manner the Guarantor's obligations under any
Limited Guarantee, except that the obligation of the Servicer to make advances
of delinquent payments of principal and interest (adjusted to the applicable
Remittance Rate) will become the direct obligations of the Guarantor under the
Advance Guarantee until a new servicer is appointed. In the event that the
Trustee is unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a housing and home finance
institution with a net worth of at least $15,000,000 and is a FNMA or FHLMC
approved seller/servicer in good standing and, if the Guarantor has issued any
Limited Guarantee with respect to the Certificates, approved by the Guarantor,
to act as successor to the Company, as servicer, under such Agreement. In
addition, if the Guarantor has issued any Limited Guarantee with respect to the
related series of Certificates, the Guarantor will have the right to replace any
successor servicer with an institution meeting the requirements described in the
preceding sentence. The Trustee and such successor may agree upon the servicing
compensation to be paid, which in no event may be greater than the compensation
to the Servicer under such Agreement.
No holder of Certificates will have any right under the Agreement to
institute any proceeding with respect to the Agreement, unless such holder
previously has given to the Trustee written notice of default and unless the
holders of Certificates of any class evidencing, in the aggregate, 25% or more
of the interests in such class have made written request to the Trustee to
institute such proceeding in its own name as Trustee thereunder and have offered
to the Trustee reasonable indemnity and the Trustee for 60 days after receipt of
such notice, request and offer of indemnity has neglected or refused to
institute any such proceedings. However, the Trustee is under no obligation to
exercise any of the trusts or powers vested in it by the Agreement or to make
any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
Amendment
The Agreement may be amended by the Seller, the Servicer and the
Trustee, and if the Guarantor has issued any Limited Guarantee with respect to
the Certificates, with the consent of the Guarantor, but without
Certificateholder consent, to cure any ambiguity, to correct or supplement any
provision therein which may be inconsistent with any other provision therein, to
take any action necessary to maintain REMIC status of any Trust Fund as to which
a REMIC election has been made, to avoid or minimize the risk of the imposition
of any tax on the Trust Fund pursuant to the Code or to make any other
provisions with respect to matters or questions arising under the Agreement
which are not materially inconsistent with the provisions of the Agreement;
provided that such action will not, as evidenced by an opinion of counsel
satisfactory to the Trustee, adversely affect in any material respect the
interests of any Certificateholders of that series. The Agreement may also be
amended by the Seller, the Servicer and the Trustee with the consent of holders
of
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Certificates evidencing interests aggregating not less than 66-2/3% of all
interests of each class affected by such amendment, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of such Agreement or of modifying in any manner the rights of Certificateholders
of that series; provided, however, that no such amendment may (i) reduce in any
manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed in respect of any Certificate without
the consent of the holder of such Certificate, or (ii) reduce the aforesaid
percentage of Certificates, the holders of which are required to consent to any
such amendment, without the consent of the holders of all Certificates of such
affected class then outstanding.
Termination; Purchase of Mortgage Loans
The obligations of the parties to the Agreement for each Series will
terminate upon (i) the purchase of all the Mortgage Loans, as described in the
applicable Prospectus Supplement or (ii) the later of (a) the distribution to
Certificateholders of that series of final payment with respect to the last
outstanding Mortgage Loan, or (b) the disposition of all property acquired upon
foreclosure or deed-in-lieu of foreclosure with respect to the last outstanding
Mortgage Loan and the remittance to the Certificateholders of all funds due
under the Agreement. In no event, however, will the trust created by an
Agreement continue beyond the expiration of 21 years from the death of the
survivor of the descendants living on the date of the Agreement of a specific
person named in such Agreement. With respect to each series, the Trustee will
give or cause to be given written notice of termination of the Agreement to each
Certificateholder, and the final distribution under the Agreement will be made
only upon surrender and cancellation of the related Certificates at an office or
agency specified in the notice of termination.
As described in the applicable Prospectus Supplement, the Agreement for
each series may permit, but not require, the Seller, the Servicer or another
party to purchase from the Trust Fund for such series all remaining Mortgage
Loans and all property acquired in respect of the Mortgage Loans, at a price
described in the Prospectus Supplement, subject to the condition that the
aggregate outstanding principal balance of the Mortgage Loans for such series at
the time of purchase shall be less than a percentage of the aggregate principal
balance at the Cut-Off Date specified in the Prospectus Supplement. The exercise
of such right will result in the early retirement of the Certificates of that
series.
MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of the material legal
aspects of mortgage loans.
General
The Mortgages will be either deeds of trust or mortgages. A mortgage
creates a lien upon the real property encumbered by the mortgage. It is not
prior to the lien for real estate taxes and assessments. Priority between
mortgages depends on their terms and generally on the order of filing with a
state or county office. There are two parties to a mortgage: the mortgagor, who
is the borrower and homeowner or the land trustee or the trustee of an inter
vivos revocable trust (as described below), and the mortgagee, who is the
lender. Under the mortgage instrument, the mortgagor delivers to the mortgagee a
note or bond and the mortgage. In the case of a land trust, there are three
parties because title to the property is held by a land trustee under a land
trust agreement of which the borrower/homeowner is the beneficiary; at
origination of a mortgage loan, the borrower executes a separate undertaking to
make payments on the mortgage note. In the case of an inter vivos revocable
trust, there are three parties because title to the property is held by the
trustee under
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the trust instrument of which the home occupant is the primary beneficiary; at
origination of a mortgage loan, the primary beneficiary and the trustee execute
a mortgage note and the trustee executes a mortgage or deed of trust, with the
primary beneficiary agreeing to be bound by its terms. Although a deed of trust
is similar to a mortgage, a deed of trust normally has three parties, the
borrower-homeowner called the trustor (similar to a mortgagor), a lender
(similar to a mortgagee) called the beneficiary, and a third-party grantee
called the trustee. Under a deed of trust, the borrower grants the property,
irrevocably until the debt is paid, in trust and generally with a power of sale,
to the trustee to secure payment of the obligation. The trustee's authority
under a deed of trust and the mortgagee's authority under a mortgage are
governed by the law of the state in which the real property is located, as well
as by federal law, the express provisions of the deed of trust or mortgage and,
in some cases, the directions of the beneficiary.
Foreclosure
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust that
authorizes the trustee to sell the property to a third party upon any default by
the borrower under the terms of the note or deed of trust. In some states, the
trustee must record a notice of default and send a copy to the borrower-trustor
and any person who has recorded a request for a copy of a notice of default and
notice of sale. In addition, the trustee must provide notice in some states to
any other individual having an interest in the real property, including any
junior lien holders. The borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. Generally, state law controls the amount
of foreclosure expenses and costs, including attorney's fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of sale
must be posted in a public place and, in most states, published for a specific
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest in the real property.
Foreclosure of a mortgage is generally accomplished by judicial action.
The action is initiated by the service of legal pleadings upon all parties
having an interest in the real property. Delays in completion of the foreclosure
may occasionally result from difficulties in locating necessary parties
defendant. Judicial foreclosure proceedings are often not protested by any of
the parties defendant. However, when the mortgagee's right to foreclose is
contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of judicial foreclosure, the court generally
issues a judgment of foreclosure and appoints a referee or other court officer
to conduct the sale of the property.
A junior mortgagee may not foreclose on the property securing a junior
mortgage unless it forecloses subject to the senior mortgages, in which case it
must either pay the entire amount due on the senior mort gages to the senior
mortgagees prior to or at the time of the foreclosure sale or undertake the
obligation to make payments on the senior mortgages in the event the mortgagor
is in default thereunder. In either event, the amounts expended are added to the
balance due on the junior loan, and the rights of the junior mortgagee may be
subrogated to the rights of the senior mortgagees. In addition, in the event
that the foreclosure of a junior mortgage triggers the enforcement of a
"due-on-sale" clause, the junior mortgagee may be required to pay the full
amount of the senior mortgages to the senior mortgagees. Accordingly, with
respect to those Mortgage Loans which are junior mortgage loans, if the lender
purchases the property, the lender's title will be subject to all senior liens
and claims and certain governmental liens. The proceeds received by the referee
or trustee from the sale are applied first to the costs, fees and expenses of
sale and then in satisfaction of the indebtedness secured by the mortgage or
deed of trust under which the sale was conducted. Any remaining
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proceeds are generally payable to the holders of junior mortgages or deeds of
trust and other liens and claims in order of their priority, whether or not the
borrower is in default. Any additional proceeds are generally payable to the
mortgagor or trustor. The payment of the proceeds to the holders of junior
mortgages may occur in the foreclosure action of the senior mortgagee or may
require the institution of separate legal proceeds.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at the foreclosure sale.
Rather, it is common for the lender to purchase the property from the trustee or
referee for an amount equal to the principal amount of the mortgage or deed of
trust, accrued and unpaid interest and expenses of foreclosure. Thereafter, the
lender will assume the burdens of ownership, including obtaining casualty
insurance, paying taxes and making such repairs at its own expense as are
necessary to render the property suitable for sale. The lender will commonly
obtain the services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Any loss may be reduced by the receipt of any
mortgage insurance proceeds.
In foreclosure, courts have imposed general equitable principles. The
equitable principles are gener ally designed to relieve the borrower from the
legal effect of its defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
under take affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that the lenders reinstate loans or
recast payment schedules in order to accommodate borrowers who are suffering
from temporary financial disability. In other cases, courts have limited the
right of a lender to foreclose if the default under the mortgage instrument is
not monetary, such as the borrower's failure to adequately maintain the property
or the borrower's execution of a second mortgage or deed of trust affecting the
property.
Some courts have been faced with the issue of whether or not federal or
state constitutional provisions reflecting due process concerns for adequate
notice require that borrowers under deeds of trust or mortgages receive notices
in addition to the statutorily prescribed minimum. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust, or under a mortgage having a power
of sale, does not involve sufficient state action to afford constitutional
protections to the borrower.
Right of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure
of a mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, the right to redeem is an equitable right. The equity of redemption,
which is a non-statutory right that must be exercised prior to a foreclosure
sale, should be distinguished from statutory rights of redemption. In some
states, redemption may occur only upon payment of the entire principal balance
of the loan, accrued interest and expenses of foreclosure. In other states,
redemption may be authorized if the former borrower pays only a portion of the
sums due. The effect of a statutory right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The rights of redemption
would defeat the
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title of any purchaser from the lender subsequent to foreclosure or sale under a
deed of trust. Consequently, the practical effect of the redemption right is to
force the lender to retain the property and pay the expenses of ownership until
the redemption period has run.
Anti-Deficiency Legislation and Other Limitations on Lenders
Anti-Deficiency Statutes
Certain states have imposed statutory prohibitions that limit the
remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage.
In some states, statutes limit the right of the beneficiary or mortgagee to
obtain a deficiency judgment against the borrower following foreclosure or sale
under a deed of trust. A deficiency judgment would be a personal judgment
against the former borrower equal in most cases to the difference between the
net amount realized upon the public sale of the real property and the amount due
to the lender. Other statutes require the beneficiary or mortgagee to exhaust
the security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. Finally, other statutory provisions limit any deficiency judgment
against the former borrower following a judicial sale to the excess of the
outstanding debt over the fair market value of the property at the time of the
public sale. The purpose of these statutes is generally to prevent a beneficiary
or a mortgagee from obtaining a large deficiency judgment against the former
borrower as a result of low or no bids at the judicial sale.
Bankruptcy Laws
In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws and
state laws affording relief to debtors, may interfere with or affect the ability
of the secured mortgage lender to realize upon collateral and/or enforce a
deficiency judgment. For example, with respect to federal bankruptcy law, the
filing of a petition acts as a stay against the enforcement of remedies in
connection with the collection of a debt. Moreover, a court with federal
bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or
Chapter 13 plan of reorganization to cure a monetary default in respect of a
mortgage loan on a debtor's residence by paying arrearages within a reasonable
time period and reinstating the original mortgage loan payment schedule even
though the lender accelerated the mortgage loan and final judgment of
foreclosure had been entered in state court (provided no sale of the residence
had yet occurred) prior to the filing of the debtor's petition. Some courts with
federal bankruptcy jurisdiction have approved plans, based on the particular
facts of the reorganization case, that effected the curing of a mortgage loan
default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified
if the borrower has filed a petition under Chapter 11 or Chapter 13. These
courts have suggested that such modifications may include reducing the amount of
each monthly payment, changing the rate of interest, altering the repayment
schedule and reducing the lender's security interest to the value of the
residence, thus leaving the lender a general unsecured creditor for the
difference between the value of the residence and the outstanding balance of the
loan. If the borrower has filed a petition under Chapter 13, federal bankruptcy
law and limited case law indicate that the foregoing modifications could not be
applied to the terms of a loan secured solely by property that is the principal
residence of the debtor. In all cases, the secured creditor is entitled to the
value of its security plus post-petition interest, attorneys' fees, if
specifically provided for, and costs to the extent the value of the security
exceeds the debt.
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Tax Liens
The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage. This may have the effect of
delaying or interfering with the enforcement of rights with respect to a
defaulted Mortgage Loan.
Consumer Protection Laws
Substantive requirements are imposed upon mortgage lenders in
connection with the origination and the servicing of mortgage loans by numerous
federal and some state consumer protection laws. These laws and their
implementing regulations include the federal Truth in Lending Act (and
Regulation Z), Real Estate Settlement Procedures Act (and Regulation X), Equal
Credit Opportunity Act (and Regulation B), Fair Credit Billing Act, Fair Credit
Reporting Act, Fair Housing Act, as well as other related statutes and
regulations. These federal laws impose specific statutory liabilities upon
lenders who originate mortgage loans and who fail to comply with the provisions
of the law. In some cases, this liability may affect assignees of the mortgage
loans In particular, the originators' failure to comply with certain
requirements of the federal Truth-in-Lending Act, as implemented by Regulation
Z, could subject both originators and assignees of such obligations to monetary
penalties and could result in obligors rescinding the mortgage loans against
either the originators or assignees.
On March 21, 1994, the United States Court of Appeals for the 11th
Circuit ruled in the case of Rodash v. AIB Mortgage Co. that the federal Truth
in Lending Act requires mortgage lenders to disclose to borrowers the collection
of certain intangible taxes and courier fees as prepaid finance charges. Since
the Rodash decision, class action lawsuits have been brought against numerous
mortgage lending institutions alleging certain violations of the Truth in
Lending Act concerning the improper disclosure of various fees.
For Truth in Lending violations, one of the remedies available to the
borrowers under certain affected non-purchase money mortgage loans is
rescission, which, if elected by the borrower, would serve to cancel the loan
and merely require the borrower to pay the principal balance of the mortgage
loan, less a credit for interest paid, closing costs and prepaid finance
charges.
The Seller or another Representing Party will represent in the
Agreement that all applicable laws, including the Truth in Lending Act, were
complied with in connection with origination of the Mortgage Loans. In the event
that such representation is breached in respect of any Mortgage Loan in a manner
that materially and adversely affects Certificateholders, the Seller or such
Representing Party will be obligated to repurchase the affected Mortgage Loan at
a price equal to the unpaid principal balance thereof plus accrued interest as
provided in the Agreement or to substitute a new mortgage loan in place of the
affected Mortgage Loan.
Enforceability of Due-on-Sale Clauses
Unless the Prospectus Supplement indicates otherwise, all of the
Mortgage Loans will contain due-on-sale clauses. These clauses permit the lender
to accelerate the maturity of a loan if the borrower sells, transfers, or
conveys the property. The enforceability of these clauses was the subject of
legislation or
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litigation in many states, and in some cases the enforceability of these clauses
was limited or denied. However, the Garn-St Germain Depository Institutions Act
of 1982 (the "Garn-St Germain Act") preempts state constitutional, statutory and
case law prohibiting the enforcement of due-on-sale clauses and permits lenders
to enforce these clauses in accordance with their terms, subject to certain
limited exceptions contained in the Garn-St Germain Act and regulations
promulgated by Office of Thrift Supervision (the "OTS"), as successor to the
Federal Home Loan Bank Board. The Garn-St Germain Act does "encourage" lenders
to permit assumption of loans at the original rate of interest or at some other
rate less than the average of the original rate and the market rate.
Due-on-sale clauses contained in mortgage loans originated by federal
savings and loan associations or federal savings banks are fully enforceable
pursuant to regulations of the OTS which preempt state law restrictions on the
enforcement of due-on-sale clauses.
The Garn-St Germain Act also sets forth nine specific instances in
which a mortgage lender covered by the Garn-St Germain Act (including federal
savings and loan associations and federal savings banks) may not exercise a
due-on-sale clause, notwithstanding the fact that a transfer of the property may
have occurred. These include intra-family transfers, certain transfers by
operation of law, leases of three years or less and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St Germain Act by the
Federal Home Loan Bank Board as succeeded by the OTS also prohibit the
imposition of a prepayment penalty upon the acceleration of a loan pursuant to a
due-on-sale clause. If interest rates were to rise above the interest rates on
the Mortgage Loans, then any inability of the Servicer to enforce due-on-sale
clauses may result in the Trust Fund including a greater number of loans bearing
below-market interest rates than would otherwise be the case, since a transferee
of the property underlying a Mortgage Loan would have a greater incentive in
such circumstances to assume the transferor's Mortgage Loan. Any inability of
the Servicer to enforce due-on-sale clauses may affect the average life of the
Mortgage Loans and the number of Mortgage Loans that may be outstanding until
maturity.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980 ("Title V"), provides that state
usury limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. The OTS, as successor
to the Federal Home Loan Bank Board, is authorized to issue rules and
regulations and to publish interpretations governing implementation of Title V.
The statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision which expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V.
Under the Agreement for each series of Certificates, the Seller will
represent and warrant to the Trustee that the Mortgage Loans have been
originated in compliance in all material respects with applicable state laws,
including usury laws.
Soldiers' and Sailors' Civil Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), a borrower who enters military service after the
origination for such borrower's Mortgage Loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
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Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
borrowers who are members of the Army, Navy, Air Force, Marines, National Guard,
Reserves, Coast Guard, and officers of the U.S. Public Health Service ordered to
federal duty with the military. Because the Relief Act applies to borrowers who
enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability for the Master Servicer to collect full amounts of interest on certain
of the Mortgage Loans. Any shortfalls in interest collections resulting from the
application for the Relief Act will be allocated on a pro rata basis to the
Certificates. In addition, the Relief Act imposes limitations that would impair
the ability of the Master Servicers to foreclose on an affected Mortgage Loan
during the borrower's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
Under the applicable Agreement, the Servicer will not be required to
make deposits to the Collection Account for a series of Certificates in respect
of any Mortgage Loan as to which the Relief Act has limited the amount of
interest the related borrower is required to pay each month, and
Certificateholders will bear such loss.
Late Charges, Default Interest and Limitations on Prepayment
Notes and mortgages may contain provisions that obligate the borrower
to pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon involuntary prepayment is unclear under the laws of many states.
Most conventional single-family mortgage loans may be prepaid in full or in part
without penalty. The regulations of the Federal Home Loan Bank Board, as
succeeded by the OTS, prohibit the imposition of a prepayment penalty or
equivalent fee for or in connection with the acceleration of a loan by exercise
of a due-on-sale clause. A mortgagee to whom a prepayment in full has been
tendered may be compelled to give either a release of the mortgage or an
instrument assigning the existing mortgage. The absence of a restraint on
prepayment, particularly with respect to Mortgage Loans having higher mortgage
rates, may increase the likelihood of refinancing or other early retirements of
the Mortgage Loans.
Environmental Considerations
Under the federal Comprehensive Environmental Response, Compensation
and Liability Act, as amended ("CERCLA"), and under state law in certain states,
a secured party which takes a deed-in-lieu of foreclosure, purchases a mortgaged
property at a foreclosure sale, or operates a mortgaged property may become
liable in certain circumstances for the costs of cleaning up hazardous
substances regardless of whether they have contaminated the property. CERCLA
imposes strict, as well as joint and several, liability on several classes of
potentially responsible parties, including current owners and operators of the
property who did not cause or contribute to the contamination. Furthermore,
liability under CERCLA is not limited
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to the original or unamortized principal balance of a loan or to the value of
the property securing a loan. Lenders may be held liable under CERCLA as owners
or operators unless they qualify for the secured creditor exemption to CERCLA.
This exemption exempts from the definition of owners and operators those who,
without participating in the management of a facility, hold indicia of ownership
primarily to protect a security interest in the facility.
The Asset Conservation, Lender Liability and Deposit Insurance Act of
1996 (the "Conservation Act") amended, among other things, the provisions of
CERCLA with respect to lender liability and the secured creditor exemption. The
Conservation Act offers substantial protection to lenders by defining the
activities in which a lender can engage and still have the benefit of the
secured creditor exemption. In order for lender to be deemed to have
participated in the management of a mortgaged property, the lender must actually
participate in the operational affairs of the property of the borrower. The
Conservation Act provides that "merely having the capacity to influence, or
unexercised right to control" operations does not constitute participation
management. A lender will lose the protection of the secured creditor exemption
only if it exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices, or assumes
day-to-day management of all operational functions of the mortgaged property.
The Conservation Act also provides that a lender will continue to have the
benefit of the secured creditor exemption even if it forecloses on a mortgaged
property, purchases it at a foreclosure sale or accepts a deed-in-lieu of
foreclosure provided that the lender seeks to sell the mortgaged property at the
earliest practicable commercially reasonable time on commercially reasonable
terms.
Other federal and state laws in certain circumstances may impose
liability on a secured party which takes a deed-in-lieu of foreclosure,
purchases a mortgaged property at a foreclosure sale, or operates a mortgaged
property on which contaminants other than CERCLA hazardous substances are
present, including petroleum, agricultural chemicals, hazardous wastes,
asbestos, radon, and lead-based paint. Such cleanup costs may be substantial. It
is possible that such cleanup costs could become a liability of a Trust Fund and
reduce the amounts otherwise distributable to the holders of the related series
of Certificates. Moreover, certain federal statutes and certain states by
statute impose a lien for any cleanup costs incurred by such state on the
property that is the subject of such cleanup costs (an "Environmental Lien").
All subsequent liens on such property generally are subordinated to
Environmental Liens. In the latter states, the security interest of the Trustee
in a related parcel of real property that is subject to such an Environmental
Lien could be adversely affected.
Traditionally, many residential mortgage lenders have not taken steps
to evaluate whether contaminants are present with respect to any mortgaged
property prior to the origination of the mortgage loan or prior to foreclosure
or accepting a deed-in-lieu of foreclosure. Neither the Seller nor any
replacement Servicer will be required by any Agreement to undertake any such
evaluations prior to foreclosure or accepting a deed-in-lieu of foreclosure. The
Seller does not make any representations or warranties or assume any liability
with respect to the absence or effect of contaminants on any related real
property or any foreclose on related real property or accept a deed-in-lieu of
foreclosure if it knows or reasonably believes that there are material
contaminated conditions on such property. A failure so to foreclose may reduce
the amounts otherwise available to Certificateholders of the related series.
Except as otherwise specified in the applicable Prospectus Supplement,
at the time the Mortgage Loans were originated, no environmental assessment or a
very limited environment assessment of the Mortgaged Properties will have been
conducted.
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Forfeiture in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of
drug-related crimes or criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984, the
government may seize the property even before conviction. The government must
publish notice of the forfeiture proceeding and may give notice to all parties
"known to have an alleged interest in the property," including the holders of
mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
LEGAL INVESTMENT MATTERS
The Prospectus Supplement for each series of Certificates will specify,
which, if any, of the classes of Certificates offered thereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Marketing
Enhancement Act of 1984, as amended ("SMMEA"). The appropriate characterization
of those Certificates not qualifying as "mortgage related securities"
("Non-SMMEA Certificates") under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such
Certificates, may be subject to interpretive uncertainties. Accordingly,
investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether and to what extent the
Non-SMMEA Certificates constitute legal investments for them.
Generally, only classes of Certificates that (i) are rated in one of
the two highest rating categories by one or more nationally recognized
statistical rating organizations and (ii) are part of a series evidencing
interests in a Trust Fund consisting of loans secured by, among other things, a
single parcel of real estate upon which is located a dwelling or mixed
residential and commercial structure, such as certain multifamily loans,
originated by certain types of obligations as specified in SMMEA, will be
"mortgage related securities" for purposes of SMMEA. As "mortgage related
securities", such classes will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including but not limited to, state-chartered savings banks, commercial banks,
savings and loan associations and insurance companies, as well as trustees and
state government employee retirement systems) created pursuant to or existing
under the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities.
Pursuant to SMMEA, a number of states enacted legislation, on or before
the October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" in most cases by requiring the affected investors
to rely solely upon existing state law, and not SMMEA. Accordingly, the
investors affected by such legislation will be authorized to invest in
Certificates qualifying as "mortgage related securities" only to the extent
provided in such legislation.
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SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal in
mortgage related securities without limitation as to the percentage of their
assets represented thereby, federal credit unions may invest in such securities,
and national banks may purchase such Securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory authority may prescribe. In
this connection, federal credit unions should review the National Credit Union
Administration ("NCUA") Letter to Credit Unions No. 96, as modified by Letter to
Credit Unions No. 108, which includes guidelines to assist federal credit unions
in making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Sections 703.5(f)-(k) which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain Series or Classes of Certificates), except
under limited circumstances.
All depositary institutions considering an investment in the
Certificates (whether or not the class of certificates under consideration for
purchase constitutes a "mortgage related security") should review the Federal
Financial Institutions Examination Council's "Supervisory Policy Statement on
Securities Activities" (to the extent adopted by their respective regulators)
(the "Policy Statement"). The Policy Statement, which has been adopted by the
Board of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Comptroller of the Currency and the Office of Thrift
Supervision, and by the NCUA (with certain modifications), prohibits depository
institutions from investing in certain "high risk mortgage securities"
(including securities such as certain series or classes of the Certificates),
except under limited circumstances, and sets forth certain investment practices
deemed to be unsuitable for regulated institutions. Under the Policy Statement,
it is the responsibility of each depository institution to determine, prior to
purchase (and at stated intervals thereafter), whether a particular mortgage
derivative product is a "high-risk mortgage security", and whether the purchase
(or retention) of such a product would be consistent with the Policy Statement.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as certain series or classes may be deemed to be unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines, or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying", and with regard to any Certificates issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain Certificates as "mortgage related
securities," no representation is made as to the proper characterization of the
Certificates for legal investment purposes, financial institutions regulatory
purposes, or other purposes, or as to the ability of particular investors to
purchase Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial regulatory characteristics of the
Certificates) may adversely affect the liquidity of the Certificates. Investors
should consult their own legal advisors in determining whether and to what
extent the Certificates constitute legal investments for such investors.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Code of 1986, as amended, (the "Code")
impose requirements on employee benefit plans (including retirement plans and
arrangements, collective investment funds and separate accounts in which such
plans, accounts or arrangements are invested) subject to ERISA or the Code
(collectively, "Plans") and on persons who are fiduciaries with respect to such
Plans. Among other things, ERISA requires that the assets of a Plan subject to
ERISA be held in trust and that the trustee, or other duly authorized fiduciary,
have exclusive authority and discretion to manage and control the assets of such
Plan. ERISA also imposes certain duties on persons who are fiduciaries with
respect to a Plan. Under ERISA, any person who exercises any authority or
control respecting the management or disposition of the assets of a Plan
generally is considered to be a fiduciary of such Plan. In addition to the
imposition by ERISA of general fiduciary standards of investment prudence and
diversification, ERISA and Section 4975 of the Code prohibit a broad range of
transactions involving Plan assets and persons having certain specified
relationships to a Plan ("Parties in Interest") and impose additional
prohibitions where Parties in Interest are fiduciaries with respect to such
Plan.
The United States Department of Labor (the "DOL") has issued
regulations concerning the definition of what constitutes the assets of a Plan
(DOL Reg. Section 2510.3-101). Under this regulation, the underlying assets and
properties of corporations, partnerships and certain other entities in which a
Plan makes an "equity" investment could be deemed for purposes of ERISA and
Section 4975 of the Code to be assets of the investing Plan in certain
circumstances. In such a case, the fiduciary making such an investment for the
Plan could be deemed to have delegated the fiduciary's asset management
responsibility, the underlying assets and properties could be subject to the
reporting and disclosure requirements of ERISA, and transactions involving the
underlying assets and properties could be subject to the fiduciary
responsibility requirements of ERISA and Section 4975 of the Code. Certain
exceptions to the regulation may apply in the case of a Plan's investment in the
Certificates, but it cannot be predicted in advance whether such exceptions will
apply due to the factual nature of the conditions to be met. Accordingly,
because the Mortgage Loans may be deemed Plan assets of each Plan that purchases
Certificates, an investment in the Certificates by a Plan might give rise to a
prohibited transaction under ERISA Sections 406 or 407 and be subject to an
excise tax under Code Section 4975 unless a statutory or administrative
exemption applies.
DOL Prohibited Transaction Class Exemption 83-1 ("PTE 83-1") exempts
from the prohibited transaction rules of ERISA and Section 4975 of the Code
certain transactions relating to the operation of residential mortgage pool
investment trusts and the direct or indirect sale, exchange, transfer and
holding of "mortgage pool pass-through certificates" in the initial issuance of
such certificates. PTE 83-1 permits, subject to certain conditions, transactions
which might otherwise be prohibited between Plans and Parties in Interest with
respect to those Plans involving the origination, maintenance and termination of
mortgage pools consisting of mortgage loans secured by either first or second
mortgages, or deeds of trust on single-family residential property, and the
acquisition and holding of certain mortgage pool pass-through certificates
representing an interest in such mortgage pools by Plans.
PTE 83-1 sets forth three general conditions which must be satisfied
for any transaction to be eligible for exemption: (i) the maintenance of a
system of insurance or other protection for the pooled mortgage loans and
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payments due to property damage or defaults in loan
payments in an amount not less than the greater of one percent of the aggregate
principal balance of all covered pooled mortgage loans or the principal balance
of the largest covered pooled mortgage loan; (ii) the existence of a pool
trustee who is not an affiliate of the
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pool sponsor (other than generally in the event of a default by the pool sponsor
which causes the pool trustee to assume duties of the sponsor); and (iii) a
limitation on the amount of the payments retained by the pool sponsor, together
with other funds inuring to its benefit, to not more than adequate consideration
for selling the mortgage loans plus reasonable compensation for services
provided by the pool sponsor to the mortgage pool.
Although the Trustee for any series of Certificates will be
unaffiliated with the Servicer, there can be no assurance that the first or
third conditions of PRE 83-1 referred to above will be satisfied with respect to
any Certificates. In addition, the nature of a trust fund's assets or the
characteristics of one or more classes of the related series of Certificates may
not be included within the scope of PTE 83-1 or any other class exemption under
ERISA.
Several underwriters of mortgage-backed securities have applied for and
obtained individual prohibited transaction exemptions which are in some respects
broader than PTE 83-1. Such exemptions only apply to mortgage-backed securities
which, in addition to satisfying other conditions, are sold in an offering with
respect to which such underwriter serves as the sole or a managing underwriter,
or as a selling or placement agent. If such an exemption might be applicable to
a series of Certificates, the related Prospectus Supplement will refer to such
possibility. In addition, there may also be other class exemptions that are
available to provide relief from the prohibited transaction provisions of ERISA
and the Code.
Each Plan fiduciary who is responsible for making the investment
decisions whether to purchase or commit to purchase and to hold Certificates
must make its own determination as to whether the general and the specific
conditions of PTE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction exemptions. Each Plan fiduciary should also
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Certificates is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Any Plan proposing to invest in Certificates should consult with its
counsel to confirm that such investment will not result in a prohibited
transaction and will satisfy the other requirements of ERISA and the Code. The
sale of Certificates to a Plan is in no respect a representation by any party
that this investment meets all relevant legal requirements with respect to
investments by Plans generally or by any particular Plan, or that this
investment is appropriate for Plans generally or for any particular Plan.
FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion represents the opinion of Morgan, Lewis &
Bockius LLP as to the material federal income tax consequences of purchasing,
owning and disposing of Certificates. It does not address special rules which
may apply to particular types of investors. The authorities on which this
discussion is based are subject to change or differing interpretations, and any
such change or interpretation could apply retroactively. It is recommended that
investors consult their own tax advisors regarding the Certificates.
For purposes of this discussion, unless otherwise specified, the term
"Owner" will refer to the beneficial owner of a Certificate.
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REMIC Elections
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election may be made to treat the Trust Fund related to each Series of
Certificates (or segregated pools of assets within the Trust Fund) as a "real
estate mortgage investment conduit" ("REMIC") within the meaning of Section
860D(a) of the Code. If one or more REMIC elections are made, the Certificates
of any class will be either "regular interests" in a REMIC within the meaning of
Section 860G(a)(1) of the Code ("Regular Certificates") or "residual interests"
in a REMIC within the meaning of Section 860G(a)(2) of the Code ("Residual
Certificates"). The Prospectus Supplement for each Series of Certificates will
indicate whether an election will be made to treat the Trust Fund as one or more
REMICs, and if so, which Certificates will be Regular Certificates and which
will be Residual Certificates.
If a REMIC election is made, the Trust Fund, or each portion thereof
that is treated as a separate REMIC, will be referred to as a "REMIC Pool". If
the Trust Fund is comprised of two REMIC Pools, one will be an "Upper-Tier
REMIC" and one a "Lower-Tier REMIC". The assets of the Lower-Tier REMIC will
consist of the Mortgage Loans and related Trust Fund assets. The assets of the
Upper-Tier REMIC will consist of all of the regular interests issued by the
Lower-Tier REMIC.
The discussion below under the heading "REMIC Certificates" considers
Series for which a REMIC election will be made. Series for which no such
election will be made are addressed under "Non-REMIC Certificates".
REMIC Certificates
The discussion in this section applies only to a Series of Certificates
for which a REMIC election is made.
Tax Opinion.
Qualification as a REMIC requires ongoing compliance with certain
conditions. Upon the issuance of each Series of Certificates for which a REMIC
election is made, Morgan, Lewis & Bockius LLP, counsel to the Seller, will
deliver an additional opinion, dated as of the date of such issuance, that with
respect to each such Series of Certificates, under then existing law and
assuming compliance by the Seller, the Servicer and the Trustee for such Series
with all of the provisions of the related Agreement (and such other agreements
and representations as may be referred to in such opinion), each REMIC Pool will
be a REMIC, and the Certificates of such Series will be treated as either
Regular Certificates or Residual Certificates.
Status of Certificates.
The Certificates will be:
o assets described in Code Section 7701(a)(19)(C) (relating to the
qualification of certain corporations, trusts, or associations as real estate
investment trusts); and
o "real estate assets" under Code Section 856(c)(5)(B) (relating to
real estate interests, interests in real estate mortgages, and shares or
certificates of beneficial interests in real estate investment trusts),
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to the extent the assets of the related REMIC Pool are so treated. Interest on
the Regular Certificates will be "interest on obligations secured by mortgages
on real property or on interests in real property" within the meaning of Code
Section 856(c)(3)(B) in the same proportion that the income of the REMIC Pool is
so treated. If at all times 95% or more of the assets or income of the REMIC
Pool qualifies under the foregoing Code sections, the Certificates (and income
thereon) will so qualify in their entirety.
The rules described in the two preceding paragraphs will be applied to
a Trust Fund consisting of two REMIC Pools as if the Trust Fund were a single
REMIC holding the assets of the Lower-Tier REMIC.
Income from Regular Certificates.
General. Except as otherwise provided in this tax discussion, Regular
Certificates will be taxed as newly originated debt instruments for federal
income tax purposes. Interest, original issue discount and market discount
accrued on a Regular Certificate will be ordinary income to the Owner. All
Owners must account for interest income under the accrual method of accounting,
which may result in the inclusion of amounts in income that are not currently
distributed in cash.
Except as otherwise noted, the discussion below is based upon
regulations adopted by the Internal Revenue Service applying the original issue
discount rules of the Code ("the OID Regulations").
Original Issue Discount. Certain Regular Certificates may have
"original issue discount." An Owner must include original issue discount in
income as it accrues, without regard to the timing of payments.
The total amount of original issue discount on a Regular Certificate is
the excess of its "stated redemption price at maturity" over its "issue price."
The issue price for any Regular Certificate is the price (including any accrued
interest) at which a substantial portion of the class of Certificates including
such Regular Certificate are first sold to the public. In general, the stated
redemption price at maturity is the sum of all payments made on the Regular
Certificate, other than payments of interest that (i) are actually payable at
least annually over the entire life of the Certificates and (ii) are based on a
single fixed rate or variable rate (or certain combinations of fixed and
variable rates). The stated redemption price at maturity of a Regular
Certificate always includes its original principal amount, but generally does
not include distributions of stated interest, except in the case of Accrual
Certificates, and, as discussed below, Interest Only Certificates. An "Interest
Only Certificate" is a Certificate entitled to receive distributions of some or
all of the interest on the Mortgage Loans or other assets in a REMIC Pool and
that has either a notional or nominal principal amount. Special rules for
Regular Certificates that provide for interest based on a variable rate are
discussed below in "Income from Regular Certificates -- Variable Rate Regular
Certificates".
With respect to an Interest Only Certificate, the stated redemption
price at maturity is likely to be the sum of all payments thereon, determined in
accordance with the Prepayment Assumption (as defined below). In that event,
Interest Only Certificates would always have original issue discount.
Alternatively, in the case of an Interest Only Certificate with some principal
amount, the stated redemption price at maturity might be determined under the
general rules described in the preceding paragraph. If, applying those rules,
the stated redemption price at maturity were considered to equal the principal
amount of such Certificate, then the rules described below under "Premium" would
apply. The Prepayment Assumption is the assumed rate of prepayment of the
Mortgage Loans used in pricing the Regular Certificates. The Prepayment
Assumption will be set forth in the related Supplement.
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Under a de minimis rule, original issue discount on a Regular
Certificate will be considered zero if it is less than 0.25% of the
Certificate's stated redemption price at maturity multiplied by the
Certificate's weighted average maturity. The weighted average maturity of a
Regular Certificate is computed based on the number of full years (i.e.,
rounding down partial years) each distribution of principal (or other amount
included in the stated redemption price at maturity) is scheduled to be
outstanding. The schedule of such distributions should be determined in
accordance with the Prepayment Assumption.
The Owner of a Regular Certificate must include in income the original
issue discount that accrues for each day on which the Owner holds such
Certificate, including the date of purchase, but excluding the date of
disposition. The original issue discount accruing in any period equals:
PV End + Dist - PV Beg
Where:
PV End = present value of all remaining distributions to be made as of the end
of the period;
Dist = distributions made during the period includible in the stated
redemption price at maturity; and
PV Beg = present value of all remaining distributions as of the beginning of
the period.
The present value of the remaining distributions is calculated based on
(i) the original yield to maturity of the Regular Certificate, (ii) events
(including actual prepayments) that have occurred prior to the end of the period
and (iii) the Prepayment Assumption. For these purposes, the original yield to
maturity of a Regular Certificate will be calculated based on its issue price,
assuming that the Certificate will be prepaid in all periods in accordance with
the Prepayment Assumption, and with compounding at the end of each accrual
period used in the formula.
Assuming the Regular Certificates have monthly Distribution Dates,
discount would be computed under the formula generally for the one-month periods
(or shorter initial period) ending on each Distribution Date. The original issue
discount accruing during any accrual period is divided by the number of days in
the period to determine the daily portion of original issue discount for each
day.
The daily portions of original issue discount will increase if
prepayments on the underlying Mortgage Loans exceed the Prepayment Assumption
and decrease if prepayments are slower than the Prepayment Assumption (changes
in the rate of prepayments having the opposite effect in the case of an Interest
Only Certificate). If the relative principal payment priorities of the classes
of Regular Certificates of a Series change, any increase or decrease in the
present value of the remaining payments to be made on any such class will affect
the computation of original issue discount for the period in which the change in
payment priority occurs.
If original issue discount computed as described above is negative for
any period, the Owner generally will not be allowed a current deduction for the
negative amount but instead will be entitled to offset such amount only against
future positive original issue discount from such Certificate.
Acquisition Premium. If an Owner of a Regular Certificate acquires such
Certificate at a price greater than its "adjusted issue price," but less than
its remaining stated redemption price at maturity, the
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daily portion for any day (as computed above) is reduced by an amount equal to
the product of (i) such daily portion and (ii) a fraction, the numerator of
which is the amount by which the price exceeds the adjusted issue price and the
denominator of which is the sum of the daily portions for such Regular
Certificate for all days on and after the date of purchase. The adjusted issue
price of a Regular Certificate on any given day is its issue price, increased by
all original issue discount that has accrued on such Certificate and reduced by
the amount of all previous distributions on such Certificate of amounts included
in its stated redemption price at maturity.
Market Discount. A Regular Certificate may have market discount (as
defined in the Code). Market discount equals the excess of the adjusted issue
price of a Certificate over the Owner's adjusted basis in the Certificate. The
Owner of a Certificate with market discount must report ordinary interest
income, as the Owner receives distributions on the Certificate of principal or
other amounts included in its stated redemption price at maturity, equal to the
lesser of (a) the excess of the amount of those distributions over the amount,
if any, of accrued original issue discount on the Certificate or (b) the portion
of the market discount that has accrued and not previously been included in
income. Also, such Owner must treat gain from the disposition of the Certificate
as ordinary income to the extent of any accrued, but unrecognized, market
discount. Alternatively, an Owner may elect in any taxable year to include
market discount in income currently as it accrues on all market discount
instruments acquired by the Owner in that year or thereafter. An Owner may
revoke such an election only with the consent of the Internal Revenue Service.
In general terms, market discount on a Regular Certificate may be
treated, at the Owner's election, as accruing either (a) on the basis of a
constant yield (similar to the method described above for accruing original
issue discount) or (b) alternatively, either (i) in the case of a Regular
Certificate issued without original issue discount, in the ratio of stated
interest distributable in the relevant period to the total stated interest
remaining to be distributed from the beginning of such period (computed taking
into account the Prepayment Assumption) or (ii) in the case of a Regular
Certificate issued with original issue discount, in the ratio of the amount of
original issue discount accruing in the relevant period to the total remaining
original issue discount at the beginning of such period. An election to accrue
market discount on a Regular Certificate on a constant yield basis is
irrevocable with respect to that Certificate.
An Owner may be required to defer a portion of the deduction for
interest expense on any indebtedness that the Owner incurs or maintains in order
to purchase or carry a Regular Certificate that has market discount. The
deferred amount would not exceed the market discount that has accrued but not
been taken into income. Any such deferred interest expense is, in general,
allowed as a deduction not later than the year in which the related market
discount income is recognized.
Market discount with respect to a Regular Certificate will be
considered to be zero if such market discount is de minimis under a rule similar
to that described above in the fourth paragraph under "Original Issue Discount".
Owners should consult their own tax advisors regarding the application of the
market discount rules as well as the advisability of making any election with
respect to market discount.
Discount on a Regular Certificate that is neither original issue
discount nor market discount, as defined above, must be allocated ratably among
the principal payments on the Certificate and included in income (as gain from
the sale or exchange of the Certificate) as the related principal payments are
made (whether as scheduled payments or prepayments).
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Premium. A Regular Certificate, other than an Accrual Certificate or,
as discussed above under "Original Issue Discount", an Interest Only
Certificate, purchased at a cost (net of accrued interest) greater than its
principal amount is considered to be purchased at a premium. The Owner may elect
under Code Section 171 to amortize such premium under the constant yield method,
using the Prepayment Assumption. To the extent the amortized premium is
allocable to interest income from the Regular Certificate, it is treated as an
offset to such interest rather than as a separate deduction. An election made by
an Owner would apply to all its debt instruments and may not be revoked without
the consent of the Internal Revenue Service.
Special Election to Apply OID Rules. In lieu of the rules described
above with respect to de minimis discount, acquisition premium, market discount
and premium, an Owner of a Regular Certificate may elect to accrue such
discount, or adjust for such premium, by applying the principles of the OID
rules described above. An election made by a taxpayer with respect to one
obligation can affect other obligations it holds. Owners should consult with
their tax advisors regarding the merits of making this election.
Retail Regular Certificates. For purposes of the original issue and
market discount rules, a repayment in full of a Retail Certificate that is
subject to payment in units or other increments, rather than on a pro rata basis
with other Retail Certificates, will be treated in the same manner as any other
prepayment.
Variable Rate Regular Certificates. The Regular Certificates may
provide for interest that varies based on an interest rate index. The OID
Regulations provide special rules for calculating income from certain "variable
rate debt instruments" or "VRDIs." A debt instrument must meet certain technical
requirements to qualify as a VRDI, which are outlined in the next paragraph.
Under the regulations, income on a VRDI is calculated by (1) creating a
hypothetical debt instrument that pays fixed interest at rates equivalent to the
variable interest, (2) applying the original issue discount rules of the Code to
that fixed rate instrument, and (3) adjusting the income accruing in any accrual
period by the difference between the assumed fixed interest amount and the
actual amount for the period. In general, where a variable rate on a debt
instrument is based on an interest rate index (such as LIBOR), a fixed rate
equivalent to a variable rate is determined based on the value of the index as
of the issue date of the debt instrument. In cases where rates are reset at
different intervals over the life of a VRDI, adjustments are made to ensure that
the equivalent fixed rate for each accrual period is based on the same reset
interval.
A debt instrument must meet a number of requirements in order to
qualify as a VRDI. A VRDI cannot be issued at a premium above its principal
amount that exceeds a specified percentage of its principal amount (15% or if
less, 1.5% times its weighted average life). As a result, Interest Only
Certificates will never be VRDIs. Also, a debt instrument that pays interest
based on a multiple of an interest rate index is not a VRDI if the multiple is
less than or equal to 0.65 or greater than 1.35, unless, in general, interest is
paid based on a single formula that lasts over the life of the instrument. A
debt instrument is not a VRDI if it is subject to caps and floors, unless they
remain the same over the life of the instrument or are not expected to change
significantly the yield on the instrument. Variable rate Regular Certificates
other than Interest Only Certificates may or may not qualify as VRDIs depending
on their terms.
In a case where a variable rate Regular Certificate does not qualify as
a VRDI, it will be treated under the OID Regulations as a contingent payment
debt instrument. The Internal Revenue Service has issued final regulations
addressing contingent payment debt instruments, but such regulations are not
applicable by their terms to REMIC regular interests. Until further guidance is
forthcoming, one method of calculating income on such a Regular Certificate that
appears to be reasonable would be to apply the principles governing VRDIs
outlined above.
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Subordinated Certificates. Certain Series of Certificates may contain
one or more classes of subordinated Certificates. In the event there are
defaults or delinquencies on the related Mortgage Loans, amounts that otherwise
would be distributed on a class of subordinated Certificates may instead be
distributed on other more senior classes of Certificates. Since Owners of
Regular Certificates are required to report income under an accrual method,
Owners of subordinated Certificates will be required to report income without
giving effect to delays and reductions in distributions on such Certificates
attributable to defaults or delinquencies on the Mortgage Loans, except to the
extent that it can be established that amounts are uncollectible. As a result,
the amount of income reported by an Owner of a subordinated Certificate in any
period could significantly exceed the amount of cash distributed to such Owner
in that period. The Owner will eventually be allowed a loss (or be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Loans. Such a loss could in some circumstances
be a capital loss. Also, the timing and amount of such losses or reductions in
income are uncertain. Owners of subordinated Certificates should consult their
tax advisors on these points.
Income from Residual Certificates.
Taxation of REMIC Income. Owners of Residual Certificates in a REMIC
Pool ("Residual Owners") must report ordinary income or loss equal to their pro
rata shares (based on the portion of all Residual Certificates they own) of the
taxable income or net loss of the REMIC. Such income must be reported regardless
of the timing or amounts of distributions on the Residual Certificates.
The taxable income of a REMIC Pool is determined under the accrual
method of accounting in the same manner as the taxable income of an individual
taxpayer. Taxable income is generally gross income, including interest and
original issue discount income, if any, on the assets of the REMIC Pool and
income from the amortization of any premium on Regular Certificates, minus
deductions. Market discount (as defined in the Code) with respect to Mortgage
Loans held by a REMIC Pool is recognized in the same fashion as if it were
original issue discount. Deductions include interest and original issue discount
expense on the Regular Certificates, reasonable servicing fees attributable to
the REMIC Pool, other administrative expenses and amortization of any premium on
assets of the REMIC Pool. As previously discussed, the timing of recognition of
"negative original issue discount," if any, on a Regular Certificate is
uncertain; as a result, the timing of recognition of the corresponding income to
the REMIC Pool is also uncertain.
If the Trust Fund consists of an Upper-Tier REMIC and a Lower-Tier
REMIC, the OID Regulations provide that the regular interests issued by the
Lower-Tier REMIC to the Upper- Tier REMIC will be treated as a single debt
instrument for purposes of the original issue discount provisions. A
determination that these regular interests are not treated as a single debt
instrument would have a material adverse effect on the Owners of Residual
Certificates issued by the Lower-Tier REMIC.
A Residual Owner may not amortize the cost of its Residual Certificate.
Taxable income of the REMIC Pool, however, will not include cash received by the
REMIC Pool that represents a recovery of the REMIC Pool's initial basis in its
assets, and such basis will include the issue price of the Residual Certificates
(assuming the issue price is positive). Such recovery of basis by the REMIC Pool
will have the effect of amortization of the issue price of the Residual
Certificate over its life. The period of time over which such issue price is
effectively amortized, however, may be longer than the economic life of the
Residual Certificate. The issue price of a Residual Certificate is the price at
which a substantial portion of
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the class of Certificates including the Residual Certificate are first sold to
the public (or if the Residual Certificate is not publicly offered, the price
paid by the first buyer).
A subsequent Residual Owner must report the same amounts of taxable
income or net loss attributable to the REMIC Pool as an original Owner. No
adjustments are made to reflect the purchase price.
Losses. A Residual Owner that is allocated a net loss of the REMIC Pool
may not deduct such loss currently to the extent it exceeds the Owner's adjusted
basis (as defined in "Sale or Exchange of Certificates" below) in its Residual
Certificate. A Residual Owner that is a U.S. person (as defined below in
"Taxation of Certain Foreign Investors"), however, may carry over any disallowed
loss to offset any taxable income generated by the same REMIC Pool.
Excess Inclusions. A portion of the taxable income allocated to a
Residual Certificate is subject to special tax rules. That portion, referred to
as an "excess inclusion," is calculated for each calendar quarter and equals the
excess of such taxable income for the quarter over the daily accruals for the
quarter. The daily accruals equal the product of (i) 120% of the federal
long-term rate under Code Section 1274(d) for the month which includes the
Closing Date (determined on the basis of quarterly compounding and properly
adjusted for the length of the quarter) and (ii) the adjusted issue price of the
Certificate at the beginning of such quarter. The adjusted issue price of a
Residual Certificate at the beginning of a quarter is the issue price of the
Certificate, plus the amount of daily accruals on the Certificate for all prior
quarters, decreased (but not below zero) by any prior distributions on the
Certificate. If the aggregate value of the Residual Certificates is not
considered to be "significant," then to the extent provided in Treasury
regulations, a Residual Owner's entire share of REMIC taxable income will be
treated as an excess inclusion. The regulations that have been adopted under
Code Sections 860A through 86OG (the "REMIC Regulations") do not contain such a
rule.
Excess inclusions generally may not be offset by unrelated losses or
loss carryforwards or carrybacks of a Residual Owner. In addition, for all
taxable years beginning after August 20, 1996, and unless a Residual Owner
elects otherwise for all other taxable years, the alternate minimum taxable
income of a Residual Owner for a taxable year may not be less than the Residual
Owner's excess inclusions for the taxable year and excess inclusions are
disregarded when calculating a Residual Owner's alternate minimum tax operating
loss deduction.
Excess inclusions are treated as unrelated business taxable income for
an organization subject to the tax on unrelated business income. In addition,
under Treasury regulations yet to be issued, if a real estate investment trust,
regulated investment company or certain other pass-through entities are Residual
Owners, a portion of the distributions made by such entities may be treated as
excess inclusions.
Distributions. Distributions on a Residual Certificate (whether at
their scheduled times or as a result of prepayments) generally will not result
in any taxable income or loss to the Residual Owner. If the amount of any
distribution exceeds a Residual Owner's adjusted basis in its Residual
Certificate, however, the Residual Owner will recognize gain (treated as gain
from the sale or exchange of its Residual Certificate) to the extent of such
excess. See "Sale or Exchange of Certificates" below.
Prohibited Transactions; Special Taxes. Net income recognized by a
REMIC Pool from "prohibited transactions" is subject to a 100% tax and is
disregarded in calculating the REMIC Pool's taxable income. In addition, a REMIC
Pool is subject to federal income tax at the highest corporate rate on "net
income from
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foreclosure property." A 100% tax also applies to certain contributions to a
REMIC Pool made after it is formed. It is not anticipated that any REMIC Pool
will (i) engage in prohibited transactions in which it recognizes a significant
amount of net income, (ii) receive contributions of property that are subject to
tax, or (iii) derive a significant amount of net income from foreclosure
property that is subject to tax.
Negative Value Residual Certificates. The federal income tax treatment
of any consideration paid to a transferee on a transfer of a Residual
Certificate is unclear. Such a transferee should consult its tax advisor. The
preamble to the REMIC Regulations indicates that the Internal Revenue Service
may issue future guidance on the tax treatment of such payments.
In addition, on December 23, 1996, the Internal Revenue Service
released final regulations under Code Section 475 relating to the requirement
that a dealer mark certain securities to market. These regulations provide that
a REMIC residual interest that is acquired on or after January 4, 1995 is not a
"security" for the purposes of Section 475 of the Code, and thus is not subject
to the mark to market rules.
The method of taxation of Residual Certificates described in this
section can produce a significantly less favorable after-tax return for a
Residual Certificate than would be the case if the Certificate were taxable as a
debt instrument. Also, a Residual Owner's return may be adversely affected by
the excess inclusions rules described above. In certain periods, taxable income
and the resulting tax liability for a Residual Owner may exceed any
distributions it receives. In addition, a substantial tax may be imposed on
certain transferors of a Residual Certificate and certain Residual Owners that
are "pass-thru" entities. See "Transfers of Residual Certificates" below.
Investors should consult their tax advisors before purchasing a Residual
Certificate.
Sale or Exchange of Certificates.
An Owner will recognize gain or loss upon sale or exchange of a Regular
or Residual Certificate equal to the difference between the amount realized and
the Owner's adjusted basis in the Certificate. The adjusted basis in a
Certificate will equal the cost of the Certificate, increased by income
previously recognized, and reduced (but not below zero) by previous
distributions, and by any amortized premium in the case of a Regular
Certificate, or net losses allowed as a deduction in the case of a Residual
Certificate.
Except as described below, any gain or loss on the sale or exchange
of a Certificate held as a capital asset will be capital gain or loss and will
be long-term or short-term depending on whether the Certificate has been held
for more than one year or one year or less. Such gain or loss will be ordinary
income or loss (i) for a bank or thrift institution, and (ii) in the case of a
Regular Certificate, (a) to the extent of any accrued, but unrecognized, market
discount, or (b) to the extent income recognized by the Owner is less than the
income that would have been recognized if the yield on such Certificate were
110% of the applicable federal rate under Code Section 1274(d).
A Residual Owner should be allowed a loss upon termination of the REMIC
Pool equal to the amount of the Owner's remaining adjusted basis in its Residual
Certificates. Whether the termination will be treated as a sale or exchange
(resulting in a capital loss) is unclear.
Except as provided in Treasury regulations, the wash sale rules of Code
Section 1091 (relating to the disallowance of losses on the sale or disposition
of certain stock or securities) will apply to dispositions of a Residual
Certificate where the seller of the interest, during the period beginning six
months before the sale or disposition of the interest and ending six months
after such sale or disposition, acquires (or enters into
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any other transaction that results in the application of Code Section 1091) any
REMIC residual interest, or any interest in a "taxable mortgage pool" (such as a
non-REMIC owner trust) that is economically comparable to a residual interest.
Taxation of Certain Foreign Investors.
Regular Certificates. A Regular Certificate held by an Owner that is a
non-U.S. person (as defined below), and that has no connection with the United
States other than owning the Certificate, will not be subject to U.S.
withholding or income tax with respect to the Certificate provided such Owner
(i) is not a "10-percent shareholder", related to the issuer, within the meaning
of Code Section 871(h)(3)(B) or a controlled foreign corporation, related to the
issuer, described in Code Section 881(c)(3)(C), and (ii) provides an appropriate
statement, signed under penalties of perjury, identifying the Owner and stating,
among other things, that the Owner is a non-U.S. person. If these conditions are
not met, a 30% withholding tax will apply to interest (including original issue
discount) unless an income tax treaty reduces or eliminates such tax or unless
the interest is effectively connected with the conduct of a trade or business
within the United States by such Owner. In the latter case, such Owner will be
subject to United States federal income tax with respect to all income from the
Certificate at regular rates then applicable to U.S. taxpayers (and in the case
of a corporation, possibly also the "branch profits tax").
The term "non-U.S. person" means any person other than a U.S. person. A
U.S. person is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, any trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust, or an estate that
is subject to U.S. federal income tax regardless of the source of its income.
Residual Certificates. A Residual Owner that is a non-U.S. person, and
that has no connection with the United States other than owning a Residual
Certificate, will not be subject to U.S. withholding or income tax with respect
to the Certificate (other than with respect to excess inclusions) provided that
(i) the conditions described in the second preceding paragraph with respect to
Regular Certificates are met and (ii) in the case of a Residual Certificate in a
REMIC Pool holding Mortgage Loans, the Mortgage Loans were originated after July
18, 1984. Excess inclusions are subject to a 30% withholding tax in all events
(notwithstanding any contrary tax treaty provisions) when distributed to the
Residual Owner (or when the Residual Certificate is disposed of). The Code
grants the Treasury Department authority to issue regulations requiring excess
inclusions to be taken into account earlier if necessary to prevent avoidance of
tax. The REMIC Regulations do not contain such a rule. The preamble thereto
states that the Internal Revenue Service is considering issuing regulations
concerning withholding on distributions to foreign holders of residual interests
to satisfy accrued tax liability due to excess inclusions.
With respect to a Residual Certificate that has been held at any time
by a non-U.S. person, the Trustee (or its agent) will be entitled to withhold
(and to pay to the Internal Revenue Service) any portion of any payment on such
Residual Certificate that the Trustee reasonably determines is required to be
withheld. If the Trustee (or its agent) reasonably determines that a more
accurate determination of the amount required to be withheld from a distribution
can be made within a reasonable period after the scheduled date for such
distribution, it may hold such distribution in trust for the Residual Owner
until such determination can be made.
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Special tax rules and restrictions that apply to transfers of Residual
Certificates to and from non-U.S. persons are discussed in the next section.
Transfers of Residual Certificates.
Special tax rules and restrictions apply to transfers of Residual
Certificates to disqualified organizations or foreign investors, and to
transfers of noneconomic Residual Certificates.
Disqualified Organizations. In order to comply with the REMIC rules of
the Code, the Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless (i) the proposed purchaser provides to the Trustee an "affidavit"
(within the meaning of the REMIC Regulations) to the effect that, among other
items, such transferee is not a "disqualified organization" (as defined below),
is not purchasing a Residual Certificate as an agent for a disqualified
organization (i.e., as a broker, nominee, or other middleman) and is not an
entity that holds REMIC residual securities as nominee to facilitate the
clearance and settlement of such securities through electronic book-entry
changes in accounts of participating organizations (a "Book-Entry Nominee") and
(ii) the transferor states in writing to the Trustee that it has no actual
knowledge that such affidavit is false.
If, despite these restrictions, a Residual Certificate is transferred
to a disqualified organization, the transfer may result in a tax equal to the
product of (i) the present value of the total anticipated future excess
inclusions with respect to such Certificate and (ii) the highest corporate
marginal federal income tax rate. Such a tax generally is imposed on the
transferor, except that if the transfer is through an agent for a disqualified
organization, the agent is liable for the tax. A transferor is not liable for
such tax if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that the affidavit is
false.
A disqualified organization may hold an interest in a REMIC Certificate
through a "pass-thru entity" (as defined below). In that event, the pass-thru
entity is subject to tax (at the highest corporate marginal federal income tax
rate) on excess inclusions allocable to the disqualified organization. However,
such tax will not apply to the extent the pass-thru entity receives affidavits
from record holders of interests in the entity stating that they are not
disqualified organizations and the entity does not have actual knowledge that
the affidavits are false; provided that all partners of an "electing large
partnership" (as defined in the Code) are deemed to be disqualified
organizations for purposes of such tax..
For these purposes, (i) "disqualified organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing, certain organizations that are exempt from taxation under the Code
(including tax on excess inclusions) and certain corporations operating on a
cooperative basis, and (ii) "pass-thru entity" means any regulated investment
company, real estate investment trust, common trust fund, partnership, trust or
estate and certain corporations operating on a cooperative basis. Except as may
be provided in Treasury regulations, any person holding an interest in a
pass-thru entity as a nominee for another will, with respect to that interest,
be treated as a pass-thru entity.
Foreign Investors. Under the REMIC Regulations, a transfer of a
Residual Certificate to a non-U.S. person that will not hold the Certificate in
connection with a U.S. trade or business will be disregarded for
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all federal tax purposes if the Certificate has "tax avoidance potential." A
Residual Certificate has tax avoidance potential unless, at the time of
transfer, the transferor reasonably expects that:
(i) for each excess inclusion, the REMIC will distribute to the
transferee residual interest holder an amount that will equal at least 30
percent of the excess inclusion, and
(ii) each such amount will be distributed at or after the time at which
the excess inclusion accrues and not later than the close of the calendar year
following the calendar year of accrual.
A transferor has such reasonable expectation if the above test would be
met assuming that the REMIC's Mortgage Loans will prepay at each rate between 50
percent and 200 percent of the Prepayment Assumption.
The REMIC Regulations also provide that a transfer of a Residual
Certificate from a non-U.S. person to a U.S. person (or to a non-U.S. person
that will hold the Certificate in connection with a U.S. trade or business) is
disregarded if the transfer has "the effect of allowing the transferor to avoid
tax on accrued excess inclusions."
In light of these provisions, the Agreement provides that a Residual
Certificate may not be purchased by or transferred to any person that is not a
U.S. person, unless (i) such person holds the Certificate in connection with the
conduct of a trade or business within the United States and furnishes the
transferor and the Trustee with an effective Internal Revenue Service Form 4224,
or (ii) the transferee delivers to both the transferor and the Trustee an
opinion of nationally recognized tax counsel to the effect that such transfer is
in accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer will not be disregarded for federal income tax
purposes.
Noneconomic Residual Certificates. Under the REMIC Regulations, a
transfer of a "noneconomic" Residual Certificate will be disregarded for all
federal income tax purposes if a significant purpose of the transfer is to
impede the assessment or collection of tax. Such a purpose exists if the
transferor, at the time of the transfer, either knew or should have known that
the transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC. A transferor is presumed to lack such knowledge if:
(i) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they become due, and
(ii) the transferee represents to the transferor that it understands
that, as the holder of the noneconomic residual interest, it may incur tax
liabilities in excess of any cash flows generated by the interest and that it
intends to pay taxes associated with holding the residual interest as they
become due.
A Residual Certificate (including a Certificate with significant value
at issuance) is noneconomic unless, at the time of the transfer, (i) the present
value of the expected future distributions on the Certificate at least equals
the product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the transfer
occurs, and (ii) the transferor reasonably expects
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that the transferee will receive distributions on the Certificate, at or after
the time at which taxes accrue, in an amount sufficient to pay the taxes.
The Agreement will provide that no legal or beneficial interest in a
Residual Certificate may be transferred to, or registered in the name of, any
person unless the transferor represents to the Trustee that it has conducted the
investigation of the transferee, and made the findings, described in the
preceding paragraph, and the proposed transferee provides to the Trustee the
transferee representations described in the preceding paragraph, and agrees that
it will not transfer the Certificate to any person unless that person agrees to
comply with the same restrictions on future transfers.
Servicing Compensation and Other REMIC Pool Expenses.
Under Code Section 67, an individual, estate or trust is allowed
certain itemized deductions only to the extent that such deductions, in the
aggregate, exceed 2% of the Owner's adjusted gross income, and such a person is
not allowed such deductions to any extent in computing its alternative minimum
tax liability. Under Treasury regulations, if such a person is an Owner of a
REMIC Certificate, the REMIC Pool is required to allocate to such a person its
share of the servicing fees and administrative expenses paid by a REMIC together
with an equal amount of income. Those fees and expenses are deductible as an
offset to the additional income, but subject to the 2% floor.
In the case of a REMIC Pool that has multiple classes of Regular
Certificates with staggered maturities, fees and expenses of the REMIC Pool
would be allocated entirely to the Owners of Residual Certificates. However, if
the REMIC Pool were a "single-class REMIC" as defined in applicable Treasury
regulations, such deductions would be allocated proportionately among the
Regular and Residual Certificates.
Reporting and Administrative Matters.
Annual reports will be made to the Internal Revenue Service, and to
Holders of record of Regular Certificates, and Owners of Regular Certificates
holding through a broker, nominee or other middleman, that are not excepted from
the reporting requirements, of accrued interest, original issue discount,
information necessary to compute accruals of market discount, information
regarding the percentage of the REMIC Pool's assets meeting the qualified assets
tests described above under "Status of Certificates" and, where relevant,
allocated amounts of servicing fees and other Code Section 67 expenses. Holders
not receiving such reports may obtain such information from the related REMIC by
contacting the person designated in IRS Publication 938. Quarterly reports will
be made to Residual Holders showing their allocable shares of income or loss
from the REMIC Pool, excess inclusions, and Code Section 67 expenses.
The Trustee will sign and file federal income tax returns for each
REMIC Pool. To the extent allowable, the Trustee will act as the tax matters
person for each REMIC Pool. Each Owner of a Residual Certificate, by the
acceptance of its Residual Certificate, agrees that the Trustee will act as the
Owner's agent in the performance of any duties required of the Owner in the
event that the Owner is the tax matters person.
An Owner of a Residual Certificate is required to treat items on its
federal income tax return consistently with the treatment of the items on the
REMIC Pool's return, unless the Owner owns 100% of the Residual Certificate for
the entire calendar year or the Owner either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the
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REMIC Pool. The Internal Revenue Service may assess a deficiency resulting from
a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. Any person that holds a Residual
Certificate as a nominee for another person may be required to furnish the REMIC
Pool, in a manner to be provided in Treasury regulations, the name and address
of such other person and other information.
Non-REMIC Certificates
The discussion in this Section applies only to a series of Certificates
for which no REMIC election is made.
Trust Fund as Grantor Trust.
Upon issuance of each series of Certificates, Morgan, Lewis & Bockius
LLP, counsel to the Seller, will deliver an additional opinion, dated as of the
date of such issuance, to the effect that, under then current law, assuming
compliance by the Seller, the Servicer and the Trustee with all the provisions
of the Agreement (and such other agreements and representations as may be
referred to in the opinion), the Trust Fund will be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
Under the grantor trust rules of the Code, each Owner of a Certificate
will be treated for federal income tax purposes as the owner of an undivided
interest in the Mortgage Loans (and any related assets) included in the Trust
Fund. The Owner will include in its gross income, gross income from the portion
of the Mortgage Loans allocable to the Certificate, and may deduct its share of
the expenses paid by the Trust Fund that are allocable to the Certificate, at
the same time and to the same extent as if it had directly purchased and held
such interest in the Mortgage Loans and had directly received payments thereon
and paid such expenses. If an Owner is an individual, trust or estate, the Owner
will be allowed deductions for its share of Trust Fund expenses (including
reasonable servicing fees) only to the extent that the sum of those expenses and
the Owner's other miscellaneous itemized deductions exceeds 2% of adjusted gross
income, and will not be allowed to deduct such expenses for purposes of the
alternative minimum tax. Distributions on a Certificate will not be taxable to
the Owner, and the timing or amount of distributions will not affect the timing
or amount of income or deductions relating to a Certificate.
Status of the Certificates.
The Certificates, other than Interest Only Certificates, will be:
o "real estate assets" under Code Section 856(c)(5)(B) (relating to the
qualification of certain corporations, trusts, or associations as real estate
investment trusts); and
o assets described in Section 7701(a)(19)(B) of the Code (relating to
real estate interests, interests in real estate mortgages, and shares or
certificates of beneficial interests in real estate investment trusts),
to the extent the assets of the Trust Fund are so treated. Interest income from
such Certificates will be "interest on
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obligations secured by mortgages on real property" under Code Section
856(c)(3)(B) to the extent the income of the Trust Fund qualifies under that
section. An "Interest Only Certificate" is a Certificate which is entitled to
receive distributions of some or all of the interest on the Mortgage Loans or
other assets in a REMIC Pool and that has either a notional or nominal principal
amount. Although it is not certain, Certificates that are Interest Only
Certificates should qualify under the foregoing Code sections to the same extent
as other Certificates.
Possible Application of Stripped Bond Rules.
In general, the provisions of Section 1286 of the Code (the "Stripped
Bond Rules") apply to all or a portion of those Certificates where there has
been a separation of the ownership of the rights to receive some or all of the
principal payments on a Mortgage Loan from the right to receive some or all of
the related interest payments. Certain Non-REMIC Certificates may be subject to
these rules either because they represent specifically the right to receive
designated portions of the interest or principal paid on the Mortgage Loans, or
because the Servicing Fee is determined to be excessive (each, a "Stripped
Certificate").
Each Stripped Certificate will be considered to have been issued with
original issue discount for federal income tax purposes. Original issue discount
with respect to a Stripped Certificate must be included in ordinary income as it
accrues, which may be prior to the receipt of the cash attributable to such
income. For these purposes, under original issue discount regulations, each
Stripped Certificate should be treated as a single installment obligation for
purposes of calculating original issue discount and gain or loss on disposition.
The Internal Revenue Service has indicated that with respect to certain mortgage
loans, original issue discount would be considered zero either if (i) the
original issue discount did not exceed an amount that would be eligible for the
de minimis rule described above under "REMIC Certificates - Income From Regular
Certificates - Original Issue Discount", or (ii) the annual stated rate of
interest on the mortgage loan was not more than 100 basis points lower than on
the loan prior to its being stripped. In either such case the rules described
above under "REMIC Certificates--Income From Regular Certificates--Market
Discount" (including the applicable de minimis rule) would apply with respect to
the mortgage loan.
Taxation of Certificates if Stripped Bond Rules Do Not Apply.
If the stripped bond rules do not apply to a Certificate, then the
Owner will be required to include in income its share of the interest payments
on the Mortgage Loans held by the Trust Fund in accordance with its tax
accounting method. The Owner must also account for discount or premium on the
Mortgage Loans if it is considered to have purchased its interest in the
Mortgage Loans at a discount or premium. An Owner will be considered to have
purchased an interest in each Mortgage Loan at a price determined by allocating
its purchase price for the Certificate among the Mortgage Loans in proportion to
their fair market values at the time of purchase. It is likely that discount
would be considered to accrue and premium would be amortized, as described
below, based on an assumption that there will be no future prepayments of the
Mortgage Loans, and not based on a reasonable prepayment assumption. Legislative
proposals which are currently pending would, however, generally require a
reasonable prepayment assumption.
Discount. The treatment of any discount relating to a Mortgage Loan
will depend on whether the discount is original issue discount or market
discount. Discount at which a Mortgage Loan is purchased will be original issue
discount only if the Mortgage Loan itself has original issue discount; the
issuance of Certificates is not considered a new issuance of a debt instrument
that can give rise to original issue discount. A Mortgage Loan will be
considered to have original issue discount if the greater of the amount of
points
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charged to the borrower, or the amount of any interest foregone during any
initial teaser period, exceeds 0.25% of the stated redemption price at maturity
times the number of full years to maturity, or if interest is not paid at a
fixed rate or a single variable rate (disregarding any initial teaser rate) over
the life of the Mortgage Loan. It is not anticipated that the amount of original
issue discount, if any, accruing on the Mortgage Loans in each month will be
significant relative to the interest paid currently on the Mortgage Loans, but
there can be no assurance that this will be the case.
In the case of a Mortgage Loan that is considered to have been
purchased with market discount that exceeds a de minimis amount (generally,
0.25% of the stated redemption price at maturity times the number of whole years
to maturity remaining at the time of purchase), the Owner will be required to
include in income in each month the amount of such discount that has accrued
through such month and not previously been included in income, but limited to
the amount of principal on the Mortgage Loan that is received by the Trust Fund
in that month. Because the Mortgage Loans will provide for monthly principal
payments, such discount may be required to be included in income at a rate that
is not significantly slower than the rate at which such discount accrues. Any
market discount that has not previously been included in income will be
recognized as ordinary income if and when the Mortgage Loan is prepaid in full.
For a more detailed discussion of the market discount rules of the Code, see
"REMIC Certificates -- Income from Regular Certificates -- Market Discount"
above.
In the case of market discount that does not exceed a de minimis
amount, the Owner will be required to allocate ratably the portion of such
discount that is allocable to a Mortgage Loan among the principal payments on
the Mortgage Loan and to include the discount in ordinary income as the related
principal payments are made (whether as scheduled payments or prepayments).
Premium. In the event that a Mortgage Loan is purchased at a premium,
the Owner may elect under Section 171 of the Code to amortize such premium under
a constant yield method based on the yield of the Mortgage Loan to such Owner,
provided that such Mortgage Loan was originated after September 27, 1985.
Premium allocable to a Mortgage Loan originated on or before that date should be
allocated among the principal payments on the Mortgage Loan and allowed as an
ordinary deduction as principal payments are made (whether as scheduled payments
or prepayments).
Taxation of Certificates if Stripped Bond Rules Apply.
If the stripped bond rules apply to a Certificate, income on the
Certificate will be treated as original issue discount and will be included in
income as it accrues under a constant yield method. More specifically, for
purposes of applying the original issue discount rules of the Code, the Owner
will likely be taxed as if it had purchased a newly issued, single debt
instrument providing for payments equal to the payments on the interests in the
Mortgage Loans allocable to the Certificate, and having original issue discount
equal to the excess of the sum of such payments over the Owner's purchase price
for the Certificate (which would be treated as the issue price). The amount of
original issue discount income accruing in any taxable year will be computed as
described above under "REMIC Certificates -- Income from Regular Certificates --
Original Issue Discount". It is possible, however, that the calculation must be
made using as the Prepayment Assumption an assumption of zero prepayments. If
the calculation is made assuming no future prepayments, then the Owner would be
allowed to deduct currently any negative amount of original issue discount
produced by the accrual formula.
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Different approaches could be applied in calculating income under the
stripped bond rules. For example, a Certificate could be viewed as a collection
of separate debt instruments (one for each payment allocable to the Certificate)
rather than a single debt instrument. Also, in the case of an Interest-Only
Certificate, it could be argued that certain proposed regulations governing
contingent payment debt obligations apply. It is recommended that Owners consult
their own tax advisors regarding the calculation of income under the stripped
bond rules.
Sales of Certificates.
A Certificateholder that sells a Certificate will recognize gain or
loss equal to the difference between the amount realized in the sale and its
adjusted tax basis in the Certificate. In general, such adjusted basis will
equal the Certificateholder's cost for the Certificate, increased by the amount
of any income previously reported with respect to the Certificate and decreased
(but not below zero) by the amount of any distributions received thereon, the
amount of any losses previously allowable to such Owner with respect to such
Certificate and any premium amortization thereon. Any such gain or loss would be
capital gain or loss if the Certificate was held as a capital asset, subject to
the potential treatment of gain as ordinary income to the extent of any accrued
but unrecognized market discount under the market discount rules of the Code, if
applicable.
Foreign Investors.
Except as described in the following paragraph, an Owner that is not a
U.S. person (as defined under "REMIC Certificates -- Taxation of Foreign
Investors" above) and that is not subject to federal income tax as a result of
any direct or indirect connection to the United States in addition to its
ownership of a Certificate will not be subject to United States income or
withholding tax in respect of a Certificate (assuming the underlying Mortgage
Loans were originated after July 18, 1984), if the Owner provides an appropriate
statement, signed under penalties of perjury, identifying the Owner and stating,
among other things, that the Owner is not a U.S. person. If these conditions are
not met, a 30% withholding tax will apply to interest (including original issue
discount) unless an income tax treaty reduces or eliminates such tax or unless
the interest is effectively connected with the conduct of a trade or business
within the United States by such Owner. Income effectively connected with a U.S.
trade or business will be subject to United States federal income tax at regular
rates then applicable to U.S. taxpayers (and in the case of a corporation,
possibly also the branch profits tax).
In the event the Trust Fund acquires ownership of real property located
in the United States in connection with a default on a Mortgage Loan, then any
rental income from such property allocable to an Owner that is not a U.S. person
generally will be subject to a 30% withholding tax. In addition, any gain from
the disposition of such real property allocable to an Owner that is not a U.S.
person may be treated as income that is effectively connected with a U.S. trade
or business under special rules governing United States real property interests.
The Trust Fund may be required to withhold tax on gain realized upon a
disposition of such real property by the Trust Fund at a 35% rate.
Reporting
Tax information will be reported annually to the Internal Revenue
Service and to Holders of Certificates that are not excluded from the reporting
requirements.
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Backup Withholding
Distributions made on a Certificate and proceeds from the sale of a
Certificate to or through certain brokers may be subject to a "backup"
withholding tax of 31% unless, in general, the Owner of the Certificate complies
with certain procedures or is a corporation or other person exempt from such
withholding. Any amounts so withheld from distributions on the Certificates
would be refunded by the Internal Revenue Service or allowed as a credit against
the Owner's federal income tax.
PLAN OF DISTRIBUTION
The Seller may sell Certificates of each series to or through
underwriters (the "Underwriters") by a negotiated firm commitment underwriting
and public reoffering by the Underwriters, and also may sell and place
Certificates directly to other purchasers or through agents. The Seller intends
that Certificates will be offered through such various methods from time to time
and that offerings may be made concurrently through more than one of these
methods or that an offering of a particular series of Certificates may be made
through a combination of such methods.
The distribution of the Certificates may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If so specified in the Prospectus Supplement relating to a series of
Certificates, the Seller or any affiliate thereof may purchase some or all of
one or more classes of Certificates of such series from the Underwriter or
Underwriters at a price specified in such Prospectus Supplement. Such purchaser
may thereafter from time to time offer and sell, pursuant to this Prospectus,
some or all of such Certificates so purchased directly, through one or more
underwriters to be designated at the time of the offering of such Certificates
or through broker-dealers acting as agent and/or principal. Such offering may be
restricted in the manner specified in such Prospectus Supplement and may be
effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
In connection with the sale of the Certificates, Underwriters may
receive compensation from the Seller or from the purchasers of Certificates for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell the Certificates of a series to or through
dealers and such dealers may receive compensation in the form of discounts,
concessions or commissions from the Underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of the Certificates of a series may be
deemed to be Underwriters and any discounts or commissions received by them from
the Seller and any profit on the resale of the Certificates by them may be
deemed to be underwriting discounts and commissions, under the Securities Act of
1933, as amended (the "Act"). Any such Underwriters or agents will be
identified, and any such compensation received from the Seller will be
described, in the applicable Prospectus Supplement.
It is anticipated that the underwriting agreement pertaining to the
sale of any series or class of Certificates will provide that the obligations of
the underwriters will be subject to certain conditions precedent and that the
underwriters will be obligated to purchase all such Certificates if any are
purchased.
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Under agreements which may be entered into by the Seller, Underwriters
and agents who participate in the distribution of the Certificates may be
entitled to indemnification by the Seller against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement, the Seller will authorize
Underwriters or other persons acting as the Seller's agents to solicit offers by
certain institutions to purchase the Certificates from the Seller pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational charitable
institutions and others, but in all cases such institutions must be approved by
the Seller. The obligation of any purchaser under any such contract will be
subject to the condition that the purchaser of the offered Certificates shall
not at the time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject from purchasing such Certificates. The
Underwriters and such other agents will not have responsibility in respect of
the validity or performance of such contracts.
The Underwriters may, from time to time, buy and sell Certificates, but
there can be no assurance that an active secondary market will develop and there
is no assurance that any market, if established, will continue.
USE OF PROCEEDS
Substantially all of the net proceeds from the sale of each series of
Certificates will be applied by the Seller to the purchase price of the Mortgage
Loans underlying the Certificates of such Series.
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LEGAL MATTERS
Certain legal matters in connection with the Certificates offered
hereby, including certain federal income tax matters, will be passed upon for
the Seller by Morgan, Lewis & Bockius LLP, New York, New York.
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INDEX OF PROSPECTUS DEFINITIONS
Defined Term Page
- ------------ ----
Accrual Certificates......................................................... 11
Act.......................................................................... 66
Advance Guarantee............................................................ 4
Agreement.................................................................... 1
ARM Loans.................................................................... 3
ARMs......................................................................... 3
Book-Entry Nominee........................................................... 59
Buy-Down Fund................................................................ 14
Buy-Down Mortgage Loans...................................................... 3
Buy-Down Reserve............................................................. 14
Cash-Out Refinance Loans..................................................... 15
Certificate Rate............................................................. 11
CERCLA....................................................................... 44
Chase Manhattan Mortgage..................................................... 1
Code......................................................................... 6
Collection Account .......................................................... 12
Commission................................................................... ii
Compensating Interest Payment................................................ 24
Conservation Act............................................................. 45
Current Report............................................................... 15
Cut-Off Date................................................................. 11
Defective Mortgage Loan...................................................... 33
Delivery Date................................................................ 10
Denomination................................................................. 10
Deposit Guarantee............................................................ 4
Distribution Date............................................................ 12
DOL.......................................................................... 48
Environmental Lien........................................................... 45
ERISA........................................................................ 6
Exchange Act................................................................. ii
Garn-St. Germain Act......................................................... 43
GIC.......................................................................... 22
Guarantor.................................................................... 4
Insurance Proceeds........................................................... 15
Interest Accrual Period...................................................... 13
Limited Guarantee............................................................ 4
Liquidation Proceeds......................................................... 15
Mortgage..................................................................... 13
Mortgage Loan Schedule....................................................... 30
Mortgage Loans............................................................... 1
Mortgage Pool................................................................ 1
Mortgage Rate................................................................ 14
Mortgage Pool Insurance Policy............................................... 5
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Mortgaged Properties......................................................... 13
NCUA......................................................................... 47
Nonrecoverable Advance....................................................... 28
Non-SMMEA Certificates....................................................... 46
Non-U.S. Person.............................................................. 58
Note......................................................................... 13
OID Regulations.............................................................. 51
OTS.......................................................................... 43
Parties in Interest.......................................................... 48
Paying Agent................................................................. 12
Plans........................................................................ 48
Policy Statement............................................................. 47
Primary Mortgage Insurance Policy............................................ 14
Principal Prepayments........................................................ 13
PTE 83-1..................................................................... 48
PUD.......................................................................... 14
Record Date.................................................................. 12
Regular Certificates......................................................... 50
Relief Act................................................................... 43
REMIC......................................................................Cover
REMIC Regulations............................................................ 56
Remittance Rate.............................................................. 2
Representing Party........................................................... 31
Reserve Account.............................................................. 17
Residual Certificates........................................................ 50
Residual Owners.............................................................. 55
RICO......................................................................... 46
Seller.....................................................................Cover
Senior Certificates.......................................................... 17
Servicer...................................................................Cover
SMMEA........................................................................ 7
Special Hazard Insurance Policy.............................................. 5
Stripped Bond Rules.......................................................... 63
Stripped Certificate......................................................... 63
Subordinated Certificates.................................................... 17
Title V......................................................................343
Trustee...................................................................... 10
Trust Fund................................................................... 1
Underwriters................................................................. 66
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the filing
fee, are estimated.
SEC Registration Fee........................... $ *
Legal Fees and Expenses........................ *
Accounting Fees and Expenses................... *
Trustee's Fees and Expenses.................... *
Printing and Engraving Fees.................... *
Rating Agency Fees............................. *
Miscellaneous.................................. *
---------------
Total.......................................... $ *
*To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
(a) Chase Funding, Inc. ("CFI").
The CFI Bylaws provide for indemnification of directors and
officers of CFI and provide, in substance, that CFI shall, under specified
circumstances, indemnify its directors and officers in connection with actions
or proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors or
officers, against expenses incurred in any such action, suit or proceeding.
(b) Chase Manhattan Acceptance Corporation ("CMAC").
CMAC's Certificate of Incorporation provides for
indemnification of its directors and officers to the full extent permitted by
the Delaware General Corporation Law ("DGCL").
Section 145 of the DGCL provides, in substance, that Delaware
corporations shall have the power, under specified circumstances, to indemnify
their directors, officers, employees and agents in connection with actions,
suits or proceedings brought against them by a third party or in the right of
the corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any such action,
suit or proceeding. The DGCL also provides that Chase Manhattan Acceptance
Corporation may purchase insurance on behalf of any such director, officer,
employee or agent.
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Item 16. Exhibits.
*1.1 Form of Underwriting Agreement with respect to CFI.
*1.2 Form of Underwriting Agreement with respect to CMAC.
*4.1 Form of Pooling and Servicing Agreement with respect to CFI.
*4.2 Form of Pooling and Servicing Agreement with respect to CMAC.
*5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality
of the securities being registered.
*8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain
federal income tax matters with respect to the securities
being registered.
*23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in
Exhibits 5.1 and 8.1).
*24.1 Powers of Attorney (incorporated in Signatures).
- ---------------
* Filed herewith.
Item 17. Undertakings.
(a) Undertaking pursuant to Rule 415.
The undersigned Registrants hereby undertake:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
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(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement.
(2) that, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of either Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
either Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, that it reasonably believes that the
security rating requirement set forth in Transaction Requirement B-5 will be met
by the time of sale of the registered securities and that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Edison, New Jersey, on the 18th day of September,
1998.
CHASE FUNDING, INC.
By: /s/ Samuel Cooper
------------------------------
Name: Samuel Cooper
Title: President
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<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Samuel Cooper and Michael D. Katz, and
both of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities as directors and officers of Chase Funding, Inc. in the capacities
and on the date indicated below.
Signature Title Date
--------- ----- ----
/s/ Luke S. Hayden Principal Executive September 18, 1998
- -------------------------- Officer and Director
Luke S. Hayden
/s/ Stephen J. Fortunato Treasurer (Principal September 18, 1998
- -------------------------- Financial and Accounting
Stephen J. Fortunato Officer)
/s/ Samuel Cooper Director September 18, 1998
- --------------------------
Samuel Cooper
/s/ Michael D. Katz Director September 18, 1998
- --------------------------
Michael D. Katz
/s/ Douglas A. Potolsky Director September 18, 1998
- --------------------------
Douglas A. Potolsky
/s/ Matthew Whalen Director September 18, 1998
- --------------------------
Matthew Whalen
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, that it reasonably believes that the
security rating requirement set forth in Transaction Requirement B-5 will be met
by the time of sale of the registered securities and that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Edison, New Jersey, on the 18th day of September,
1998.
CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: /s/ Paul Mullings
--------------------------------
Name: Paul Mullings
Title: President
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul E. Mullings and Michael D. Katz, and
both of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities as directors and officers of Chase Manhattan Acceptance Corporation
in the capacities and on the date indicated below.
Signature Title Date
--------- ----- ----
/s/ Luke S. Hayden Principal Executive September 18, 1998
- -------------------------- Officer and Director
Luke S. Hayden
/s/ Stephen J. Fortunato Treasurer (Principal September 18, 1998
- -------------------------- Financial and Accounting
Stephen J. Fortunato Officer)
/s/ Samuel Cooper Director September 18, 1998
- --------------------------
Samuel Cooper
/s/ Michael D. Katz Director September 18, 1998
- -------------------------
Michael D. Katz
II-7
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
*1.1 Form of Underwriting Agreement with respect to Chase Funding, Inc.
("CFI").
*1.2 Form of Underwriting Agreement with respect to Chase Manhattan
Acceptance Corporation ("CMAC").
*4.1 Form of Pooling and Servicing Agreement with respect to CFI.
*4.2 Form of Pooling and Servicing Agreement with respect to CMAC.
*5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality of the
securities being registered.
*8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain federal
income tax matters with respect to the securities being registered.
*23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in Exhibits
5.1 and 8.1).
*24.1 Powers of Attorney (incorporated in Signatures).
- ---------------
* Filed herewith.
II-8
<PAGE>
Registration No. 333-
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
EXHIBIT VOLUME
- ----------------------------------------------------------------------------
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EXHIBIT INDEX
Exhibit Page No.
- ------- --------
1.1 Form of Underwriting Agreement with respect to Chase Funding,
Inc. ("CFI").
1.2 Form of Underwriting Agreement with respect to Chase Manhattan
Acceptance Corporation ("CMAC").
4.1 Form of Pooling and Servicing Agreement with respect to CFI.
4.2 Form of Pooling and Servicing Agreement with respect to CMAC.
5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality
of the securities being registered.
8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain
federal income tax matters with respect to the securities
being registered.
23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in
Exhibits 5.1 and 8.1).
24.1 Powers of Attorney (incorporated in Signatures).
<PAGE>
CHASE FUNDING, INC.
Pass-Through Certificates
UNDERWRITING AGREEMENT
[DATE]
[Underwriter]
[Address]
Ladies and Gentlemen:
Chase Funding, Inc. (the "Company"), a Delaware corporation, has
authorized the issuance and sale of Pass-Through Certificates (such certificates
evidencing interests in pools of Mortgage Loans, the "Certificates") evidencing
interests in pools of mortgage loans (the "Mortgage Loans"). The Certificates
may be issued in various series, and, within each series, in one or more
classes, and, within each class, in one or more sub-classes, in one or more
offerings on terms determined at the time of sale (each such series, a "Series"
and each such class, a "Class"). Each Series of the Certificates will be issued
under a separate Pooling and Servicing Agreement (each, a "Pooling and Servicing
Agreement") with respect to such Series among the Company, as depositor, a
servicer to be identified in the prospectus supplement for each such Series (the
"Servicer") and a trustee to be identified in the prospectus supplement for each
such Series (the "Trustee"). The Certificates of each Series will evidence
specified interests in separate pools of Mortgage Loans (each a "Mortgage Pool")
or separate pools of Agency Securities, and certain other property held in trust
with respect to such Series (each, a "Trust Fund").
The Certificates are more fully described in a Registration Statement
which the Company has furnished to you. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and Servicing
Agreement. The term "you" as used herein, unless the context otherwise requires,
shall mean you and such persons as are named as co-managers in the applicable
Terms Agreement (defined below).
Whenever the Company determines to make an offering of Certificates
pursuant to this Agreement through you or through an underwriting syndicate
managed by you it will enter into an agreement (the "Terms Agreement") providing
for the sale of such Certificates to, and the purchase and offering thereof by,
you and such other underwriters, if any, selected by you as have authorized you
to enter into such Terms Agreement on their behalf (the "Underwriters," which
term shall include you whether acting alone in the sale of Certificates or as a
member of
<PAGE>
an underwriting syndicate; as the context requires, [Underwriter] is sometimes
referred to individually herein as ["Underwriter"]). The Terms Agreement
relating to each offering of Certificates shall specify, among other things, the
stated balance or balances of Certificates to be issued, the price or prices at
which the Certificates are to be purchased by the Underwriters from the Company
and the initial public offering price or prices or the method by which the price
or prices at which such Certificates are to be sold will be determined. A Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, may
take the form of an exchange of any standard form of written telecommunication
between you and the Company. Each such offering of Certificates which the
Company elects to make pursuant to this Agreement will be governed by this
Agreement, as supplemented by the applicable Terms Agreement, and this Agreement
and such Terms Agreement shall inure to the benefit of and be binding upon the
Underwriters participating in the offering of such Certificates.
SECTION 1. Representations and Warranties. The Company represents and
warrants to you as of the date hereof, and to the Underwriters named in the
applicable Terms Agreement, all as of the date of such Terms Agreement (in each
case, the "Representation Date"), as follows (any representations and warranties
so made to the Underwriters named in an applicable Terms Agreement respecting
the Certificates being deemed to relate only to the Certificates described
therein):
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
33-92950), relating to the offering of Certificates from time to time
in accordance with Rule 415 under the Securities Act of 1933, as
amended (the "1933 Act"), and has filed, and proposes to file, such
amendments thereto as may have been required to the date hereof and the
same has become effective under the 1933 Act and the rules of the
Commission thereunder (the "Regulations") and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceedings for that purpose have been initiated or, to the Company's
knowledge, threatened, by the Commission. Such registration statement,
including incorporated documents, exhibits and financial statements, as
amended at the time when it became effective under the 1933 Act, and
the prospectus relating to the sale of Certificates by the Company
constituting a part thereof, as from time to time each is amended or
supplemented pursuant to the 1933 Act or otherwise, are referred to
herein as the "Registration Statement" and the "Prospectus,"
respectively; provided, however, that a supplement to the Prospectus
contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall
be deemed to have supplemented the Prospectus only with respect to the
offering or offerings of Certificates to which it relates. Any
reference herein to the Registration Statement, a preliminary
prospectus, the Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "1934 Act") on or before the date
on which the Registration Statement, as amended, became effective or
the issue date of such preliminary prospectus, Prospectus, or
Prospectus Supplement, as the case may be; and
-2-
<PAGE>
any reference herein to the terms "amend," "amendment" or supplement
with respect to the Registration Statement, any preliminary prospectus,
the Prospectus or the Prospectus Supplement shall be deemed to refer to
and include the filing of any document under the 1934 Act after the
date on which the Registration Statement became effective or the issue
date of any preliminary prospectus, the Prospectus or the Prospectus
Supplement, as the case may be, deemed to be incorporated therein by
reference. The Registration Statement and Prospectus, at the time the
Registration Statement became effective did, and as of the applicable
Representation Date will, conform in all material respects to the
requirements of the 1933 Act and the Regulations. The Registration
Statement, at the time it became effective did not, and as of the
applicable Representation Date and the applicable Closing Time (as
defined in Section 2 hereof) will not, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Prospectus, as amended or supplemented as of the
applicable Representation Date and the applicable Closing Time (as
defined in Section 2 hereof), will not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to
statements in, or omissions from, (i) the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Underwriters expressly for
use in the Registration Statement or Prospectus or (ii) the
[Underwriter] Information (as defined in Section 10 hereof). The
conditions to the use by the Company of a registration statement on
Form S-3 under the 1933 Act, as set forth in the General Instructions
to Form S-3, have been satisfied with respect to the Registration
Statement and the Prospectus. There are no contracts or documents of
the Company which are required to be filed as exhibits to the
Registration Statement pursuant to the 1933 Act or the Regulations
which have not been so filed.
(2) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to enter into and
perform its obligations under this Agreement, the applicable Pooling
and Servicing Agreement, and with respect to a Series of Certificates,
the Certificates and the applicable Terms Agreement; and the Company is
duly qualified or registered as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the
ownership or lease of its properties or the conduct of its business
requires such qualification.
(3) The Company is not in violation of its certificate of
incorporation or by-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, loan agreement, note,
lease or other material instrument to which it is a party or by which
it or its properties may be bound, which default might result in any
material adverse change in the financial condition, earnings, affairs
or business of the Company or which
-3-
<PAGE>
might materially and adversely affect the properties or assets thereof
or the Company's ability to perform its obligations under this
Agreement, the applicable Terms Agreement or the applicable Pooling and
Servicing Agreement.
(4) The execution and delivery by the Company of this
Agreement, the applicable Terms Agreement and the applicable Pooling
and Servicing Agreement and the signing of the Registration Statement
by the Company are within the corporate power of the Company and have
been duly authorized by all necessary corporate action on the part of
the Company; and with respect to a Series of Certificates described in
the applicable Terms Agreement, neither the issuance and sale of the
Certificates to the Underwriters, nor the execution and delivery by the
Company of this Agreement, such Terms Agreement and the related Pooling
and Servicing Agreement, nor the consummation by the Company of the
transactions herein or therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company other than as contemplated by a Pooling and Servicing
Agreement, pursuant to any material indenture, mortgage, contract or
other material instrument to which the Company is a party or by which
it is bound or to which the property or assets of the Company are
subject, or result in the violation of the provisions of the
certificate of incorporation or by-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(5) This Agreement has been, and each applicable Terms
Agreement when executed and delivered as contemplated hereby and
thereby will have been, duly authorized, executed and delivered by the
Company, and each constitutes, or will constitute when so executed and
delivered, a legal, valid and binding instrument enforceable against
the Company in accordance with its terms (assuming due authorization,
execution and delivery by the other parties thereto), subject (a) to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting creditors' rights generally, (b) as to
enforceability to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (c) as
to enforceability with respect to rights of indemnity thereunder, to
limitations of public policy under applicable securities laws.
(6) Each applicable Pooling and Servicing Agreement when
executed and delivered as contemplated hereby and thereby will have
been duly authorized, executed and delivered by the Company, and will
constitute when so executed and delivered, a legal, valid and binding
instrument enforceable against the Company in accordance with its terms
(assuming due authorization, execution and delivery by the other
parties thereto), subject (a) to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and (b) as to enforceability to
-4-
<PAGE>
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law); and as of the Closing
Date, the representations and warranties made by the Company in the
applicable Pooling and Servicing Agreement will be true and correct as
of the date made.
(7) As of the Closing Time (as defined in Section 2 hereof)
with respect to a Series of Certificates, the Certificates will have
been duly and validly authorized by the Company, and, when executed and
authenticated as specified in the related Pooling and Servicing
Agreement, will be validly issued and outstanding and will be entitled
to the benefits of the related Pooling and Servicing Agreement.
(8) There are no actions, proceedings or investigations now
pending against the Company or, to the knowledge of the Company,
threatened against the Company, before any court, administrative agency
or other tribunal (i) asserting the invalidity of this Agreement, the
applicable Terms Agreement, the applicable Pooling and Servicing
Agreement or with respect to a Series of Certificates, the
Certificates, (ii) seeking to prevent the issuance of such Certificates
or the consummation of any of the transactions contemplated by this
Agreement, the applicable Terms Agreement or such Pooling and Servicing
Agreement, (iii) which would be likely to materially and adversely
affect the performance by the Company of its obligations under, or
which would if adversely determined materially and adversely affect the
validity or enforceability of, this Agreement, the applicable Terms
Agreement, such Pooling and Servicing Agreement or such Certificates or
(iv) seeking to adversely affect the federal income tax attributes of
such Certificates described in the Prospectus and the related
Prospectus Supplement.
(9) Any taxes, fees and other governmental charges that are
assessed and due in connection with the execution, delivery and
issuance of this Agreement, the applicable Terms Agreement, the
applicable Pooling and Servicing Agreement and with respect to a Series
of Certificates, the Certificates, shall have been paid at or prior to
the Closing Time.
(10) No filing or registration with, notice to or consent,
approval, authorization, order or qualification of or with any court or
governmental agency or body is required for the issuance and sale of
the Certificates or the consummation by the Company of the transactions
contemplated by this Agreement, the applicable Pooling and Servicing
Agreement or the applicable Terms Agreement, except the registration
under the 1933 Act of the Certificates, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Certificates by the Underwriters.
(11) The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies deemed by the Company
to be reasonably necessary to conduct the business now
-5-
<PAGE>
operated by it and as described in the Prospectus and the Company has
received no notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
conduct of the business, operations, financial condition or income of
the Company.
(12) As of the Closing Time, with respect to a Series of
Certificates described in the relevant Terms Agreement evidencing
interests in a Mortgage Pool, the Trustee will have either good and
marketable title, free and clear of all prior liens, charges and
encumbrances, to or a validly perfected first priority security
interest in the Mortgage Notes and the related Mortgages included in
the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery
thereof to the Trustee and (b) the Mortgages, upon delivery to the
Trustee of instruments of assignment in recordable form assigning each
Mortgage to the Trustee and the recording of each such instrument of
assignment in the appropriate recording office in which the Mortgaged
Property is located, or if supported by an opinion of counsel, without
recording.
(13) As of the Closing Time, with respect to a Series of
Certificates as to which there is a Reserve Fund, to the extent that
the Reserve Fund does not constitute part of the Trust Fund for such
Series, the Trustee will have acquired either good and marketable title
to or a duly and validly perfected security interest in the Reserve
Fund with respect to such Series, if any, subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance.
(14) As of the Closing Time, with respect to a Series of
Certificates, the Mortgage Pool will have substantially the
characteristics described in the Prospectus Supplement and in the Form
8-K of the Company prepared with respect to such Certificates, if the
Mortgage Pool is described in such Form 8-K.
(15) Neither the Company nor the Trust Fund created by the
applicable Pooling and Servicing Agreement will be subject to
registration as an "investment company" under the Investment Company
Act of 1940, as amended (the "1940 Act").
(16) The Certificates, the applicable Pooling and Servicing
Agreement, the applicable Terms Agreement and any Primary Insurance
Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance
Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy
Insurance and Alternate Credit Enhancement related to the Certificates
described in the relevant Terms Agreement conform in all material
respects to the descriptions thereof contained in the Prospectus.
SECTION 2. Purchase and Sale. The commitment of each Underwriter to
purchase Certificates pursuant to any Terms Agreement shall be several and not
joint and shall be deemed
-6-
<PAGE>
to have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth.
Payment of the purchase price for, and delivery of, any Certificates to
be purchased by the Underwriters shall be made at the offices of Morgan, Lewis &
Bockius LLP, New York, New York, or at such other place as shall be agreed upon
by you and the Company, at such time or date as shall be agreed upon by you and
the Company in the Terms Agreement (each such time and date being referred to as
a "Closing Time"). Unless otherwise specified in the applicable Terms Agreement,
payment shall be made to the Company in immediately available Federal funds
wired to such bank as may be designated by the Company. Such Certificates shall
be in such denominations and registered in such names as you may request in
writing at least two business days prior to the applicable Closing Time. Such
Certificates will be made available for examination and packaging by you no
later than 12:00 noon on the first business day prior to the applicable Closing
Time.
It is understood that the Underwriters intend to offer the Certificates
for sale to the public as set forth in the Prospectus Supplement.
SECTION 3. Covenants of the Company. The Company covenants with each of
you and each Underwriter participating in an offering of Certificates pursuant
to a Terms Agreement, with respect to such Certificates and such offering, as
follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Certificates covered thereby, the price
or prices at which the Certificates are to be purchased by the
Underwriters, either the initial public offering price or prices or the
method by which the price or prices by which the Certificates are to be
sold will be determined, the selling concession(s) and reallowance(s),
if any, any delayed delivery arrangements, and such other information
as you and the Company deem appropriate in connection with the offering
of the Certificates. The Company will promptly transmit copies of the
Prospectus Supplement to the Commission for filing pursuant to Rule 424
under the 1933 Act and will furnish to the Underwriters as many copies
of the Prospectus and such Prospectus Supplement as you shall
reasonably request.
(b) If the delivery of a prospectus is required at any time in
connection with the offering or sale of the Certificates described in
the relevant Terms Agreement and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period of time to
amend or supplement the Prospectus in order to comply with the 1933
Act, the Company agrees to notify you promptly and upon your request so
to amend or supplement the
-7-
<PAGE>
Prospectus and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance.
(c) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
give you reasonable notice of its intention to file any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus, whether pursuant to the 1933 Act or otherwise, and will
furnish you with copies of any such amendment or supplement or other
documents proposed to be filed a reasonable time in advance of filing.
(d) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
notify you promptly (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the
Commission for filing of any supplement to the Prospectus or any
document other than quarterly and annual reports to be filed pursuant
to the 1934 Act, (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement, the Prospectus
or any Prospectus Supplement, (iv) of any request by the Commission for
any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Certificates for sale in any
jurisdiction or the threat of any proceeding for that purpose and (vi)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order and, if any stop order is
issued, to obtain the lifting thereof as soon as possible.
(e) The Company will deliver to you as many conformed copies
of the Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith or incorporated
by reference therein and documents incorporated by reference in the
Prospectus) as you may reasonably request.
(f) The Company will endeavor, in cooperation with you, to
qualify the Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as you may designate, and will maintain or cause to be
maintained such qualifications in effect for as long as may be required
for the distribution of the Certificates, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction. The Company will file or cause the filing of such
statements
-8-
<PAGE>
and reports as may be required by the laws of each jurisdiction in
which the Certificates have been qualified as above provided.
(g) If the Company has elected to cause the applicable
Mortgage Pool to be treated as a real estate mortgage investment
conduit (a "REMIC"), the Company will prepare, or cause to be prepared,
and file, or cause to be filed a timely election to treat the Mortgage
Pool as a REMIC for federal income tax purposes and will file, or cause
to be filed, such tax returns and take such actions, all on a timely
basis, as are required to elect and maintain such status.
(h) With respect to a Series, so long as the Certificates of
such Series are outstanding, the Company will furnish, or cause to be
furnished, to you, copies of all reports and statements available to
Certificateholders pursuant to the Pooling and Servicing Agreement.
SECTION 4. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase Certificates pursuant to any Terms Agreement shall
be subject to the accuracy of the representations and warranties on the part of
the Company herein contained, to the accuracy of the statements of the Company's
officers made pursuant hereto, to the performance by the Company of all of its
obligations hereunder and to the following additional conditions precedent:
(a) At the applicable Closing Time (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission, (ii) the Certificates shall
have received the rating or ratings specified in the applicable Terms
Agreement, and (iii) there shall not have come to your attention any
facts that would cause you to believe that the Prospectus, together
with the applicable Prospectus Supplement at the time it was required
to be delivered to a purchaser of the Certificates, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances existing at such time, not misleading. No challenge by
the Commission shall have been made to the accuracy or adequacy of the
Registration Statement and any request of the Commission for inclusion
of additional information in the Registration Statement or the
Prospectus or the Prospectus Supplement shall have been complied with
and the Company shall not have filed with the Commission any amendment
or supplement to the Registration Statement, the Prospectus or the
Prospectus Supplement without the consent of the Underwriters.
(b) At the applicable Closing Time you shall have received:
-9-
<PAGE>
(1) The opinion, dated as of the applicable Closing
Time, of Morgan, Lewis & Bockius LLP, counsel for the Company, in form
and substance satisfactory to such of you as may be named in the
applicable Terms Agreement, to the effect that:
(i) The Company is validly existing as a
corporation in good standing under the laws of the State of
Delaware.
(ii) This Agreement and the applicable Terms
Agreement have been duly authorized, executed and delivered by
the Company, and each is a legal, valid and binding obligation
of the Company enforceable against the Company in accordance
with its terms, except that (A) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought,
and (C) the enforceability as to rights to indemnity
thereunder may be subject to limitations of public policy
under applicable securities laws.
(iii) The applicable Pooling and Servicing
Agreement has been duly authorized, executed and delivered by
the Company, and is a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except that (A) such enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms' of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor
may be brought.
(iv) The execution and delivery by the
Company of this Agreement, the applicable Terms Agreement and
applicable Pooling and Servicing Agreement and the signing of
the Registration Statement by the Company are within the
corporate power of the Company and have been duly authorized
by all necessary corporate action on the part of the Company;
and neither the issue and sale of the Certificates nor the
consummation of the transactions contemplated herein or
therein nor the fulfillment of the terms hereof or thereof
will, conflict with or constitute a breach or violation of any
of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, or other
instrument to which the Company is a party or by which it may
be bound of which such counsel is aware, other than the lien
or liens created by the applicable Pooling and Servicing
Agreement, nor will such action result in any violation of the
provisions
-10-
<PAGE>
of the certificate of incorporation or by-laws of the Company
or, any statute, rule or regulation to which the Company is
subject or by which it is bound or any writ, injunction or
decree of any court, governmental authority or regulatory body
to which it is subject or by which it is bound of which such
counsel is aware.
(v) The Certificates have been duly
authorized, executed and authenticated as specified in the
related Pooling and Servicing Agreement and when delivered and
paid for, will be validly issued and entitled to the benefits
of the related Pooling and Servicing Agreement.
(vi) To the best of such counsel's
knowledge, no filing or registration with or notice to or
consent, approval, authorization, order or qualification of or
with any court or governmental agency or body is required for
the issuance and sale of the Certificates or the consummation
by the Company of the transactions contemplated by this
Agreement, the applicable Pooling and Servicing Agreement or
the applicable Terms Agreement, except the registration under
the 1933 Act of the Certificates, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the
Certificates by the Underwriters.
(vii) To the best of such counsel's
knowledge, there is no action, suit or proceeding of which
such counsel is aware before or by any court or governmental
agency or body, domestic or foreign, now pending or threatened
against the Company which might result in any material adverse
change in the financial condition, earnings, affairs or
business of the Company, or which might materially and
adversely affect the properties or assets thereof or might
materially and adversely affect the performance by the Company
of its obligations under, or the validity or enforceability
of, the Certificates, this Agreement or the Pooling and
Servicing Agreement, or which is required to be disclosed in
the Registration Statement.
(viii) The Registration Statement is
effective under the 1933 Act and, to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.
(ix) The applicable Pooling and Servicing
Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended.
(x) The Registration Statement and the
Prospectus (other than the financial statements and other
financial and statistical information included therein, as to
which no opinion need be rendered) as of their respective
effective
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or issue dates, complied as to form in all material respects
with the requirements of the 1933 Act and the Regulations
thereunder.
(xi) The statements in the Prospectus under
the headings "ERISA Considerations" and "Federal Income Tax
Consequences" and the statements in the applicable Prospectus
Supplement under the headings "Federal Income Tax
Considerations" and "ERISA Considerations", to the extent that
they describe matters of United States federal income tax law
or ERISA or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are accurate in all
material respects with respect to those consequences or
matters discussed therein.
(xii) The statements in the Prospectus and
the applicable Prospectus Supplement under the caption
"Description of the Certificates", insofar as they purport to
summarize certain terms of the Certificates and the applicable
Pooling and Servicing Agreement, constitute a fair summary of
the provisions purported to be summarized.
(xiii) The Trust Fund created by the
applicable Pooling and Servicing Agreement is not, and will
not as a result of the offer and sale of the Certificates as
contemplated in the Prospectus and in this Agreement become,
an "investment company" required to be registered under the
1940 Act.
(xiv) The Classes of Certificates so
designated in the Prospectus Supplement will be "mortgage
related securities", as defined in ss.3(a)(41) of the 1934
Act, so long as the Certificates are rated in one of the two
highest grades by at least one nationally recognized
statistical rating organization.
(xv) If a REMIC election is to be made with
respect to the Trust Fund, assuming (a) ongoing compliance
with all of the provisions of the Pooling and Servicing
Agreement and (b) the filing of an election, in accordance
with the Pooling and Servicing Agreement, to be treated as a
"real estate mortgage investment conduit" (a "REMIC") pursuant
to Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code") for Federal income tax purposes, the
Trust Fund will qualify as a REMIC as of the Closing Date and
will continue to qualify as a REMIC for so long as it complies
with amendments after the date hereof to any applicable
provisions of the Code and applicable Treasury Regulations.
Such counsel shall deliver to you such additional opinions addressed to
you addressing the transfer by the Company to the Trustee of its right, title
and interest in and to the Mortgage Loans and other property included in the
Trust Fund at the Closing Time as may be required by each Rating Agency rating
the Certificates.
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Such counsel shall state that it has participated in conferences with
officers and other representatives of the Company, your counsel, representatives
of the independent accountants for the Company and you at which the contents of
the Registration Statement and the Prospectus and related matters were discussed
and, although such counsel is not passing upon and does not assume
responsibility for, the factual accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus (except as
stated in paragraphs (xi) and (xii) above) and has made no independent check or
verification thereof for the purpose of rendering its opinion, on the basis of
the foregoing, nothing has come to their attention that leads such counsel to
believe that either the Registration Statement, at the time it became effective
and at the applicable Closing Time, contained, an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or that the Prospectus
contained or contains as of the date thereof and at the applicable Closing Time
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that such counsel need
express no view with respect to the financial statements, schedules and other
financial and statistical data included in or incorporated by reference into the
Registration Statement, the Prospectus or the Prospectus Supplement.
Such counsel may state that their opinions relate only to laws of the
State of New York, the Federal laws of the United States and the General
Corporation Law of the State of Delaware.
In rendering such opinions, such counsel may rely, as to matters of
fact, to the extent deemed proper and stated therein, on certificates of
responsible officers of the Company, the Trustee or public officials.
(2) The favorable opinion of counsel to the Trustee,
dated as of the applicable Closing Time, addressed to you and
in form and scope satisfactory to your counsel, to the effect
that:
(i) The Trustee is a national banking
association, duly authorized and validly existing in good
standing under the laws of the United States, and has all
requisite power and authority to enter into the Pooling and
Servicing Agreement and to perform its obligations thereunder.
(ii) To the knowledge of such counsel, there
is no action, suit, proceeding or investigation pending or
threatened against the Trustee that could materially adversely
affect the ability of the Trustee to perform its obligations
under the Pooling and Servicing Agreement.
(iii) The Trustee has duly authorized,
executed and delivered the applicable Pooling and Servicing
Agreement and such Pooling and Servicing Agreement will
constitute the legal, valid and binding obligation of the
Trustee.
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(iv) The Trustee has full power and
authority to execute and deliver the applicable Pooling and
Servicing Agreement and to perform its obligations thereunder.
(v) No consent, approval or authorization
of, or registration, declaration or filing with, any court or
governmental agency or body of the jurisdiction of its
organization is required for the execution, delivery or
performance by the Trustee of the Pooling and Servicing
Agreement.
(vi) The performance by the Trustee of its
duties pursuant to the Pooling and Servicing Agreement does
not conflict with or result in a breach or violation of any
term or provision of, or constitute a default under, any
statute or regulation currently governing the Trustee.
In rendering such opinion, such counsel may rely, as to
matters of fact, to the extent deemed proper and stated therein, on certificates
of responsible officers of the Trustee or public officials.
(3) The favorable opinion of counsel to the Servicer,
dated as of the applicable Closing Time, addressed to you and
in form and scope satisfactory to your counsel, to the effect
that:
(i) The Servicer is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation.
(ii) The execution and delivery by the
Servicer of the applicable Pooling and Servicing Agreement is
within the corporate power of the Servicer and has been duly
authorized by all necessary corporate action on the part of
the Servicer; and to the knowledge of such counsel, neither
the execution and delivery of such instrument, nor the
consummation of the transactions provided for therein, nor
compliance with the provisions thereof, will conflict with or
constitute a breach of, or default under, any contract,
indenture, mortgage, loan agreement, note, lease, deed of
trust, or other instrument to which the Servicer is a party or
by which it may be bound, nor will such action result in any
violation of the provisions of the charter or by-laws of the
Servicer or to the knowledge of such counsel, any law,
administrative regulation or administrative or court decree.
(iii) The applicable Pooling and Servicing
Agreement has been duly executed and delivered by the Servicer
and constitutes a valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms,
except that such enforceability thereof may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally
and subject, as to enforceability, to general
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principles of equity (regardless whether enforcement is sought
in a proceeding in equity or at law).
(iv) To the knowledge of such counsel, the
execution, delivery and performance by the Servicer of the
applicable Pooling and Servicing Agreement do not require the
consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in
respect of any federal, state or other governmental agency or
authority which has not previously been effected.
(v) To the knowledge of such counsel, there
is no action, suit or proceeding of which such counsel is
aware before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against the
Servicer which might materially and adversely affect the
performance by the Servicer under, or the validity or
enforceability of, the applicable Pooling and Servicing
Agreement.
(vi) The description of the Servicer in the
applicable Prospectus Supplement is true and correct in all
material respects.
(4) The favorable opinion or opinions, dated as of
the applicable Closing Time, of counsel for the Underwriters,
acceptable to the Underwriters.
(c) At the applicable Closing Time you shall have received a
certificate of the President or a Vice President and the Treasurer or
the Secretary of the Company, dated as of such Closing Time, to the
effect that the representations and warranties of the Company contained
in Section 1 are true and correct with the same force and effect as
though such Closing Time were a Representation Date and that the
Company has complied with all agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Time.
(d) You shall have received from Price Waterhouse LLP, or
other independent certified public accountants acceptable to you,
letters, dated as of the date of the applicable Terms Agreement and as
of the applicable Closing Time, delivered at such times, in the form
and substance reasonably satisfactory to you.
(e) At the applicable Closing Time, with respect to a Series
of Certificates, each of the representations and warranties of the
Servicer set forth in the related Pooling and Servicing Agreement will
be true and correct and you shall have received a Certificate of an
Executive Vice President, Senior Vice President or Vice President of
the Servicer, dated as of such Closing Time, to such effect.
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(f) At the applicable Closing Time, with respect to a Series
of Certificates, the Certificates shall have received the certificate
rating or ratings specified in the related Terms Agreement.
(g) At the applicable Closing Time, counsel for the
Underwriters shall have been furnished with such other documents and
opinions as they may reasonably require for the purpose of enabling
them to pass upon the issuance and sale of the Certificates as herein
contemplated and related proceedings or in order to evidence the
accuracy and completeness of any of the representations and warranties,
or the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and
sale of the Certificates as herein contemplated shall be reasonably
satisfactory in form and substance to you and counsel for the
Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to the
applicable Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 5.
SECTION 5. Payment of Expenses. The Company covenants and agrees with
the Underwriters that the Company will pay or cause to be paid all expenses
incident to the performance of its obligations under this Agreement, including
without limitation: (i) expenses related to the preparation and filing of the
Registration Statement and all amendments thereto, (ii) the cost of printing and
delivery to the Underwriters, in such quantities as you may reasonably request,
of copies of this Agreement, each Terms Agreement, any agreements among
Underwriters and selling agreement and the Underwriters' questionnaires and
powers of attorney, (iii) the cost of preparation, issuance and delivery of the
Certificates to the Underwriters, (iv) the fees and disbursements of the
Company's counsel and accountants for the Company, (v) all expenses (other than
legal fees) in connection with the qualification of the Certificates under
securities and Blue Sky laws and the determination of the eligibility of the
Certificates for investment in accordance with the provisions of Section 3(f),
including filing fees, (vi) the cost of printing and delivery to the
Underwriters, in such quantities as you may reasonably request, hereinabove
stated, of copies of the Registration Statement and Prospectus and all
amendments and supplements thereto, and of any Blue Sky survey and legal
investment survey, (vii) the cost of printing and delivery to the Underwriters,
in such quantities as you may reasonably request, of copies of each Pooling and
Servicing Agreement, (viii) the fees charged by not more than two investment
rating agencies for rating the Certificates, (ix) the fees and expenses, if any,
incurred in connection with the listing of the Certificates on any national
securities exchange, (x) any filing fees and expenses incident to any required
review by the National Association of Securities Dealers, Inc., and (xi) the
fees and expenses of the Trustee and its counsel. It is understood, however,
that except as provided in this Section and Section 6 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of counsel,
transfer taxes on resale of any of the Certificates by them and any advertising
expenses connected with any offers they may make.
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If a Terms Agreement is terminated by you in accordance with the
provisions of Section 4 or Section 8(i), the Company shall reimburse you for all
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in each case in respect of the relevant
Certificates, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by such Underwriter or controlling person in connection with
investigating or defending any such action or claim; provided, however,
that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any such document in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter expressly for use therein. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) [Underwriter] will indemnify and hold harmless the
Company, each of its officers who signed the Registration Statement,
its respective directors, and any person controlling the Company within
the meaning of the 1933 Act against any losses, claims, damages or
liabilities to which the Company or any such officer, director or
controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of [Underwriter] expressly for use therein and will reimburse
the Company or any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company, any such
officer, director or controlling person in connection with
investigating or defending any such action or claim. This
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indemnity agreement is in addition to any liability which [Underwriter]
may otherwise have. The Company acknowledges that, unless otherwise set
forth in the applicable Terms Agreement, the statements set forth [in
the last paragraph of the cover page, the first and second sentences of
the third paragraph under the caption "Underwriting" and in the third
to last paragraph of the cover page relating to [Underwriter]'s
intention to create a secondary market], each as included in the
applicable Prospectus Supplement relating to a Series of Certificates,
together with the [Underwriter] Information (as defined in Section 10
hereof) relating to a Series of Certificates constitute the only
information furnished in writing by or on behalf of [Underwriter]
expressly for use in the Registration Statement relating to such Series
of Certificates as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify such indemnifying party
in writing of the commencement thereof; but the omission so to notify
the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section. In
case any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying
party); and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case and the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel
shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party
shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the
action, or (iii) the indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them and/or
other indemnified parties which are different from or additional to
those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party). Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was
not unreasonably withheld.
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(d) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Certificates to which such loss, claim, damage or
liability (or actions in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions (or in the case of a public
offering in negotiated transactions, the difference between the
proceeds to the Company and the aggregate price received from the
public) received by such Underwriters. The relative fault of the
Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or such Underwriters on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding anything to the contrary in this Section 6(d), if the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in this Section 6(d) arise out of an untrue statement or
alleged untrue statement of a material fact contained in any
[Underwriter] 8-K (as such term is defined in Section 10 hereof) then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Underwriters on the other (determined in accordance with
the preceding sentence) in connection with the statements or omissions
in such [Underwriter] 8-K which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other equitable considerations. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation even if the
Underwriters were treated as one entity for such purpose or by any
other method of allocation which does not take account of the equitable
considerations referred to in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above in
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this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigation or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Certificates underwritten by it and
distributed to the public were sold to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Underwriters to contribute
pursuant to this subsection (d) are several in proportion to their
respective underwriting obligations with respect to such Certificates
and not joint.
SECTION 7. Representations, Warranties, and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any termination of this Agreement, or the applicable Terms Agreement or any
investigation made by or on behalf of the Underwriters or any controlling person
thereof, or by or on behalf of the Company, its officers or directors and shall
survive delivery of any Certificates to the Underwriters.
SECTION 8. Termination of Agreement. This Agreement may be terminated
for any reason at any time by either the Company or you upon the giving of
thirty days' notice of such termination to the other party hereto; provided,
however, that if a Terms Agreement has been entered into with respect to a
particular transaction, this Agreement and the Terms Agreement may not be
terminated in the manner set forth in this sentence with respect to such
particular transaction. You, as Representative of the Underwriters named in any
Terms Agreement may also terminate such Terms Agreement, immediately upon notice
to the Company, at any time at or prior to the applicable Closing Time (i) if
there has been, since the date of such Terms Agreement or since the respective
dates as of which information is given in the Registration Statement or
Prospectus, any change, or any development involving a prospective change, in or
affecting the condition, financial or otherwise, earnings, affairs or business
of the Company, whether or not arising in the ordinary course of business, which
in your judgment would materially impair the market for, or the investment
quality of, the Certificates, or (ii) if there has occurred any material
outbreak or escalation of hostilities or other calamity or crisis the effect of
which on the financial markets of the United States is such as to make it, in
your reasonable judgment, impracticable to market the Certificates or enforce
contracts for the sale of the Certificates, or (iii) if trading in securities
generally on either the New York Stock Exchange or the American Stock Exchange
has been suspended or any setting of minimum prices shall have been established,
or (iv) if a general moratorium of commercial banking activities has been
declared by either Federal or New York State authorities. In the event of any
such termination, (A) the covenants set forth in Section 3 with respect to any
offering of Certificates shall remain in effect so long as the Underwriters own
any such Certificates purchased from the Company
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pursuant to the applicable Terms Agreement and (B) the covenant set forth in
Section 3(c), the provisions of Section 5, the indemnity agreement and
contribution provisions set forth in Section 6, and the provisions of Sections 7
and 12 shall remain in effect.
SECTION 9. Default by One or More of the Underwriters.
(a) If one or more of the Underwriters participating in an
offering of Certificates shall fail at the applicable Closing Time to
purchase the Certificates which it or they are obligated to purchase
hereunder and under the applicable Terms Agreement (the "Defaulted
Certificates"), then such of you as are named therein may in your
discretion arrange for you or another party or other parties to
purchase the Defaulted Certificates upon the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do
not arrange for the purchase of such Defaulted Certificates, then the
Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to
you to purchase such Defaulted Certificates on the terms contained
herein. In the event that, within the respective prescribed periods,
you notify the Company that you have so arranged for the purchase of
such Defaulted Certificates, or the Company notifies you that it has so
arranged for the purchase of such Defaulted Certificates, you or the
Company shall have the right to postpone the Closing Time for a period
of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been party to this Agreement with respect to the
Certificate.
(b) If, after giving effect to any arrangements for the
purchase of Defaulted Certificates of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted Certificates
which remains unpurchased does not exceed __% of the aggregate
principal amount of the Certificates to be purchased pursuant to the
applicable Terms Agreement, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the principal
amount of Certificates which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of
Certificates which such Underwriter agreed to purchase pursuant to the
applicable Terms Agreement) of the Defaulted Certificates of the
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Defaulted Certificates of the defaulting Underwriter or
Underwriters by you and the
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Company as provided in subsection (a) above, the aggregate principal
amount of such Defaulted Certificates which remains unpurchased exceeds
__% of the aggregate principal amount of the Certificates to be
purchased pursuant to the applicable Terms Agreement, or if the Company
shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Defaulted Certificates
of a defaulting Underwriter or Underwriters, then this Agreement shall
thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to
be borne by the Company and the Underwriters as provided in Section 5
hereof and the indemnity agreement and contribution provisions in
Section 6 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
SECTION 10. Computational Materials and ABS Term Sheets.
(a) The parties acknowledge that, subsequent to the date on
which the Registration Statement became effective and up to and
including the date on which the Prospectus Supplement and Prospectus
with respect to a Series of Certificates is first made available to the
Underwriters, the Underwriters may furnish to various potential
investors in such Series of Certificates, in writing: (i)
"Computational Materials", as defined in a no-action letter (the
"Kidder No-Action Letter") issued by the staff of the Commission on May
20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as
modified by a no-action letter (the "First PSA No-Action Letter")
issued by the staff of the Commission on May 27, 1994 to the Public
Securities Association (the "PSA") and as further modified by a
no-action letter (the "Second PSA No-Action Letter", and together with
the Kidder No-Action Letter and the First PSA No-Action Letter, the
"No-Action Letters") issued by the staff of the Commission on February
17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the
Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as
defined in the Second PSA No-Action Letter.
(b) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the 1933 Act, all Computational Materials used by [Underwriter]
and required to be filed with the Commission in order for [Underwriter]
to avail itself of the relief granted in the No-Action Letters (such
Computational Materials, the "[Underwriter] Furnished Computational
Materials").
(c) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the Act, all Structural Term Sheets used by [Underwriter] and
required to be filed with the Commission in order for [Underwriter] to
avail itself of the relief granted in the No-Action Letters (such
Structural Term Sheets, the "[Underwriter] Furnished Structural Term
Sheets").
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(d) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, within one (1) business day
after the first use thereof, all Collateral Term Sheets used by
[Underwriter] and required to be filed with the Commission in order for
[Underwriter] to avail itself of the relief granted in the No-Action
Letters (such Collateral Term Sheets, the "[Underwriter] Furnished
Collateral Term Sheets") and shall advise the Company of the date on
which each such Collateral Term Sheet was first used.
(e) [Underwriter] covenants to prepare for signature by the
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission one or more current reports on
Form 8-K (collectively, together with any amendments and supplements
thereto, the "[Underwriter] 8-K," and each a "[Underwriter] 8-K") such
that [Underwriter] may avail itself of the relief granted in the
No-Action Letters. In particular, [Underwriter] covenants to cause to
be filed with the Commission (i) all [Underwriter] Furnished
Computational Materials and all [Underwriter] Furnished Structural Term
Sheets on a [Underwriter] 8-K concurrently with the filing of the
Prospectus Supplement and Prospectus with respect to the related Series
of Certificates pursuant to Rule 424 under the 1933 Act; and (ii) all
[Underwriter] Furnished Collateral Term Sheets on a [Underwriter] 8-K
not later than two (2) business days after the first use thereof. Any
[Underwriter] 8-K containing Furnished Structural Term Sheets and/or
Furnished Collateral Term Sheets shall be filed electronically via
EDGAR. Any [Underwriter] 8-K containing Furnished Computational
Materials shall be filed in paper under cover of Form SE in accordance
with Rule 311(i) of Resolution S-T.
(f) [Underwriter] shall cooperate with the Company and with
Price Waterhouse LLP in obtaining a letter, in form and substance
satisfactory to the Company and [Underwriter], of Price Waterhouse LLP
regarding the information in any [Underwriter] 8-K consisting of
[Underwriter] Furnished Computational Materials and/or [Underwriter]
Furnished Structural Term Sheets. Any such letter shall be obtained
prior to the filing of any such [Underwriter] 8-K with the Commission
at [Underwriter]'s sole expense.
(g) [Underwriter] represents and warrants to, and covenants
with, the Company that as presented in the [Underwriter] 8-K, the
[Underwriter] Information (defined below) is not misleading and not
inaccurate in any material respect and that any Pool Information
(defined below) contained in any [Underwriter] 8-K which is not
otherwise inaccurate in any material respect is not presented in the
[Underwriter] 8-K in a way that is either misleading or inaccurate in
any material respect. [Underwriter] further covenants with the Company
that if any Computational Materials or ABS Term Sheets (as such term is
defined in the Second PSA No-Action Letter) contained in any
[Underwriter] 8-K are found to include any information that is
misleading or inaccurate in any material respect, [Underwriter]
promptly shall inform the Company of such finding, provide the Company
with revised and/or corrected Computational Materials or ABS Term
Sheets, as the case may be, and promptly prepare for signature by the
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Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission in accordance herewith, revised
and/or corrected Computational Materials or ABS Term Sheets, as the
case may be.
(h) [Underwriter] covenants that all Computational Materials
and ABS Term Sheets used by it shall contain a legend substantially in
the form of the following legend:
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE
UNDERWRITER] AND NOT BY CHASE FUNDING, INC. ("CFI") OR ANY
OF ITS AFFILIATES. [THE UNDERWRITER] IS NOT ACTING AS CFI'S
AGENT."
(i) [Underwriter] covenants that all Collateral Term Sheets
used by it shall contain the following additional legend:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY
THE DESCRIPTION OF THE MORTGAGE LOANS CONTAINED IN THE
PROSPECTUS SUPPLEMENT."
(j) [Underwriter] covenants that all Collateral Term Sheets
(other than the initial Collateral Term Sheet) shall contain the
following additional legend:
"THE INFORMATION CONTAINED HEREIN SUPERSEDES THE
INFORMATION IN ALL PRIOR COLLATERAL TERM SHEETS, IF ANY."
(k) [Underwriter] shall deliver to the Company a copy of each
[Underwriter] 8-K (including written evidence of filing) promptly upon
filing the same with the Commission (but in any event not later than
the earlier to occur of (i) the second business day after filing and
(ii) the Closing Time).
(l) For purposes of this Agreement, the term "[Underwriter]
Information" means such portion, if any, of the information contained
in the [Underwriter] 8-K that is not Pool Information. "Pool
Information" means the information furnished to the Underwriters by the
Company regarding the Mortgage Loans; provided, however, that if any
information that would otherwise constitute Pool Information is
presented in the [Underwriter] 8-K in a way that is either inaccurate
or misleading in any material respect, such information shall not be
Pool Information.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed,
delivered, telexed, or telegraphed and confirmed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to you
at the respective addresses set forth on the first page hereof, to the attention
of [the General Counsel]. Notices to the Company shall be directed to Chase
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<PAGE>
Funding, Inc., c/o Chase Manhattan Mortgage Corporation, 300 Tice Boulevard,
Woodcliff Lake, New Jersey 07645, Attention: Michael D. Katz.
SECTION 12. Parties. This Agreement shall be binding upon and inure
solely to the benefit of you and the Company and to the extent provided in
Section 6 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter and their respective heirs, executors,
administrators, successors and assigns and any Terms Agreement shall be binding
upon and inure solely to the benefit of the Company and any Underwriter who
becomes a party to a Terms Agreement and to the extent provided in Section 6
hereof, the officers and directors of the Company and each person who controls
the Company or any Underwriter and their respective heirs, executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement or a Terms Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto or thereto and their
respective successors and the controlling person and officers and directors
referred to in Section 6 hereof and their heirs any legal or equitable right,
remedy or claim under or with respect to this Agreement or a Terms Agreement or
any provision herein or therein contained.
SECTION 13. Governing Law and Time. This Agreement and each Terms
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. Specified times of day refer to New York City time.
SECTION 14. Counterparts. This Agreement and any Terms Agreement may be
executed in any number of counterparts (which execution may take the form of an
exchange of any standard form of written telecommunication between you and the
Company), each of which shall constitute an original of any party whose
signature appears on it, and all of which shall together constitute a single
instrument.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
CHASE FUNDING, INC.
By: _______________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
[UNDERWRITER]
By: _________________________
Name:
Title:
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<PAGE>
EXHIBIT A
PASS-THROUGH CERTIFICATES
CHASE FUNDING, INC., SELLER
TERMS AGREEMENT
Dated: _________, 19__
To: Chase Funding, Inc.
Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting Agreement")
Ladies and Gentlemen:
The undersigned (being herein called the "Underwriters"), understand
that Chase Funding, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell $_________ original principal amount of Pass-Through Certificates
described below (the "Certificates"). The Certificates will be issued under a
Pooling and Servicing Agreement dated as of _______________ among the Company,
as seller, _______________, as servicer and _____________ as trustee. The terms
of the Certificates are summarized below and are more fully described in the
Company's Prospectus supplement prepared with respect to the Certificates.
All the provisions (including defined terms) contained in the
Underwriting Agreement are incorporated by reference herein in their entirety
and shall be deemed to be part of this Terms Agreement to the same extent as if
such provisions had been set forth in full herein. The Closing Time referred to
in Section 2 of the Underwriting Agreement shall be _______ a.m., New York City
time, on _____________. Subject to the terms and conditions set forth or
incorporated by reference herein, the Company hereby agrees to sell and the
Underwriters agree to purchase [, severally and not jointly,] the [respective]
original principal amount[ s] of Certificates set forth opposite [its] [their]
name[s] in Exhibit I hereto at the purchase price set forth below.
The Underwriters will offer the Certificates for sale upon the terms
and conditions set forth in the Prospectus.
Subject to the terms and conditions set forth or incorporated by
reference herein, the Underwriters will pay for the Certificates at the time and
place and in the manner set forth in the Underwriting Agreement.
Series Designation: ____________
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<PAGE>
Terms of the Certificates and Underwriting Compensation:
Original
Principal Remittance Price to
Classes Amount* Rate Public
- ------- --------- ---------- --------
**
* Approximate. Subject to permitted variance in each case of plus or
minus __%.
** The [Class A] Certificates are being offered by the
Underwriter from time to time in negotiated transactions or
otherwise at varying prices to be determined, in each case, at
the time of sale.
Certificate Rating:
_____ by [Rating Agency]
_____ by [Rating Agency]
REMIC Election:
The Company [does not] intend[s] to cause the Mortgage Pool to be
treated as a REMIC.
Credit Enhancement:
Cut-off Date:
The Cut-off Date is ___________, 19__.
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Remittance Date:
The ____ day of each month (or, if such ____ day is not a business day,
the business day immediately following) commencing __________, 19__.
Purchase Price:
The purchase price payable by the Underwriter for the [Class A]
Certificates is ___% of the aggregate principal balance of the [Class A]
Certificates as of the Closing Date plus accrued interest at the per annum rate
of ___% from __________, 19__ up to but not including the Closing Date.
Underwriting Commission:
Notwithstanding anything to the contrary in the Underwriting Agreement,
no additional underwriting commission shall be payable by the Company to the
Underwriter in connection with the purchase of the Certificates.
Information Provided by Underwriter:
Closing Date and Location:
__________ 19__ at the offices of Morgan, Lewis & Bockius LLP.
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<PAGE>
Please confirm your agreement by having an authorized Officer sign a
copy of this Agreement in the space set forth below and returning a signed copy
to us.
[UNDERWRITER]
By: ______________________
Name:
Title:
ACCEPTED:
CHASE FUNDING, INC.
By: ____________________
Name:
Title:
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<PAGE>
Exhibit I
Original
Principal
Amount of
Name Certificates
- ---- ------------
Total ==============
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<PAGE>
CHASE MANHATTAN ACCEPTANCE CORPORATION
Pass-Through Certificates
UNDERWRITING AGREEMENT
[DATE]
[Underwriter]
[Address]
Ladies and Gentlemen:
Chase Manhattan Acceptance Corporation (the "Company"), a Delaware
corporation, has authorized the issuance and sale of Pass-Through Certificates
(such certificates evidencing interests in pools of Mortgage Loans, the
"Certificates") evidencing interests in pools of mortgage loans (the "Mortgage
Loans"). The Certificates may be issued in various series, and, within each
series, in one or more classes, and, within each class, in one or more
sub-classes, in one or more offerings on terms determined at the time of sale
(each such series, a "Series" and each such class, a "Class"). Each Series of
the Certificates will be issued under a separate Pooling and Servicing Agreement
(each, a "Pooling and Servicing Agreement") with respect to such Series among
the Company, as depositor, a servicer to be identified in the prospectus
supplement for each such Series (the "Servicer") and a trustee to be identified
in the prospectus supplement for each such Series (the "Trustee"). The
Certificates of each Series will evidence specified interests in separate pools
of Mortgage Loans (each a "Mortgage Pool") or separate pools of Agency
Securities, and certain other property held in trust with respect to such Series
(each, a "Trust Fund").
The Certificates are more fully described in a Registration Statement
which the Company has furnished to you. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and Servicing
Agreement. The term "you" as used herein, unless the context otherwise requires,
shall mean you and such persons as are named as co-managers in the applicable
Terms Agreement (defined below).
Whenever the Company determines to make an offering of Certificates
pursuant to this Agreement through you or through an underwriting syndicate
managed by you it will enter into an agreement (the "Terms Agreement") providing
for the sale of such Certificates to, and the purchase and offering thereof by,
you and such other underwriters, if any, selected by you as have authorized you
to enter into such Terms Agreement on their behalf (the "Underwriters," which
term shall include you whether acting alone in the sale of Certificates or as a
member of
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<PAGE>
an underwriting syndicate; as the context requires, [Underwriter] is sometimes
referred to individually herein as ["Underwriter"]). The Terms Agreement
relating to each offering of Certificates shall specify, among other things, the
stated balance or balances of Certificates to be issued, the price or prices at
which the Certificates are to be purchased by the Underwriters from the Company
and the initial public offering price or prices or the method by which the price
or prices at which such Certificates are to be sold will be determined. A Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, may
take the form of an exchange of any standard form of written telecommunication
between you and the Company. Each such offering of Certificates which the
Company elects to make pursuant to this Agreement will be governed by this
Agreement, as supplemented by the applicable Terms Agreement, and this Agreement
and such Terms Agreement shall inure to the benefit of and be binding upon the
Underwriters participating in the offering of such Certificates.
SECTION 1. Representations and Warranties. The Company represents and
warrants to you as of the date hereof, and to the Underwriters named in the
applicable Terms Agreement, all as of the date of such Terms Agreement (in each
case, the "Representation Date"), as follows (any representations and warranties
so made to the Underwriters named in an applicable Terms Agreement respecting
the Certificates being deemed to relate only to the Certificates described
therein):
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
33-92950), relating to the offering of Certificates from time to time
in accordance with Rule 415 under the Securities Act of 1933, as
amended (the "1933 Act"), and has filed, and proposes to file, such
amendments thereto as may have been required to the date hereof and the
same has become effective under the 1933 Act and the rules of the
Commission thereunder (the "Regulations") and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceedings for that purpose have been initiated or, to the Company's
knowledge, threatened, by the Commission. Such registration statement,
including incorporated documents, exhibits and financial statements, as
amended at the time when it became effective under the 1933 Act, and
the prospectus relating to the sale of Certificates by the Company
constituting a part thereof, as from time to time each is amended or
supplemented pursuant to the 1933 Act or otherwise, are referred to
herein as the "Registration Statement" and the "Prospectus,"
respectively; provided, however, that a supplement to the Prospectus
contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall
be deemed to have supplemented the Prospectus only with respect to the
offering or offerings of Certificates to which it relates. Any
reference herein to the Registration Statement, a preliminary
prospectus, the Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "1934 Act") on or before the date
on which the Registration Statement, as amended, became effective or
the issue date of such preliminary prospectus, Prospectus, or
Prospectus Supplement, as the case may be; and
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<PAGE>
any reference herein to the terms "amend," "amendment" or supplement
with respect to the Registration Statement, any preliminary prospectus,
the Prospectus or the Prospectus Supplement shall be deemed to refer to
and include the filing of any document under the 1934 Act after the
date on which the Registration Statement became effective or the issue
date of any preliminary prospectus, the Prospectus or the Prospectus
Supplement, as the case may be, deemed to be incorporated therein by
reference. The Registration Statement and Prospectus, at the time the
Registration Statement became effective did, and as of the applicable
Representation Date will, conform in all material respects to the
requirements of the 1933 Act and the Regulations. The Registration
Statement, at the time it became effective did not, and as of the
applicable Representation Date and the applicable Closing Time (as
defined in Section 2 hereof) will not, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Prospectus, as amended or supplemented as of the
applicable Representation Date and the applicable Closing Time (as
defined in Section 2 hereof), will not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to
statements in, or omissions from, (i) the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Underwriters expressly for
use in the Registration Statement or Prospectus or (ii) the
[Underwriter] Information (as defined in Section 10 hereof). The
conditions to the use by the Company of a registration statement on
Form S-3 under the 1933 Act, as set forth in the General Instructions
to Form S-3, have been satisfied with respect to the Registration
Statement and the Prospectus. There are no contracts or documents of
the Company which are required to be filed as exhibits to the
Registration Statement pursuant to the 1933 Act or the Regulations
which have not been so filed.
(2) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to enter into and
perform its obligations under this Agreement, the applicable Pooling
and Servicing Agreement, and with respect to a Series of Certificates,
the Certificates and the applicable Terms Agreement; and the Company is
duly qualified or registered as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the
ownership or lease of its properties or the conduct of its business
requires such qualification.
(3) The Company is not in violation of its certificate of
incorporation or by-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, loan agreement, note,
lease or other material instrument to which it is a party or by which
it or its properties may be bound, which default might result in any
material adverse change in the financial condition, earnings, affairs
or business of the Company or which
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<PAGE>
might materially and adversely affect the properties or assets thereof
or the Company's ability to perform its obligations under this
Agreement, the applicable Terms Agreement or the applicable Pooling and
Servicing Agreement.
(4) The execution and delivery by the Company of this
Agreement, the applicable Terms Agreement and the applicable Pooling
and Servicing Agreement and the signing of the Registration Statement
by the Company are within the corporate power of the Company and have
been duly authorized by all necessary corporate action on the part of
the Company; and with respect to a Series of Certificates described in
the applicable Terms Agreement, neither the issuance and sale of the
Certificates to the Underwriters, nor the execution and delivery by the
Company of this Agreement, such Terms Agreement and the related Pooling
and Servicing Agreement, nor the consummation by the Company of the
transactions herein or therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company other than as contemplated by a Pooling and Servicing
Agreement, pursuant to any material indenture, mortgage, contract or
other material instrument to which the Company is a party or by which
it is bound or to which the property or assets of the Company are
subject, or result in the violation of the provisions of the
certificate of incorporation or by-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(5) This Agreement has been, and each applicable Terms
Agreement when executed and delivered as contemplated hereby and
thereby will have been, duly authorized, executed and delivered by the
Company, and each constitutes, or will constitute when so executed and
delivered, a legal, valid and binding instrument enforceable against
the Company in accordance with its terms (assuming due authorization,
execution and delivery by the other parties thereto), subject (a) to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting creditors' rights generally, (b) as to
enforceability to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (c) as
to enforceability with respect to rights of indemnity thereunder, to
limitations of public policy under applicable securities laws.
(6) Each applicable Pooling and Servicing Agreement when
executed and delivered as contemplated hereby and thereby will have
been duly authorized, executed and delivered by the Company, and will
constitute when so executed and delivered, a legal, valid and binding
instrument enforceable against the Company in accordance with its terms
(assuming due authorization, execution and delivery by the other
parties thereto), subject (a) to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and (b) as to enforceability to
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<PAGE>
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law); and as of the Closing
Date, the representations and warranties made by the Company in the
applicable Pooling and Servicing Agreement will be true and correct as
of the date made.
(7) As of the Closing Time (as defined in Section 2 hereof)
with respect to a Series of Certificates, the Certificates will have
been duly and validly authorized by the Company, and, when executed and
authenticated as specified in the related Pooling and Servicing
Agreement, will be validly issued and outstanding and will be entitled
to the benefits of the related Pooling and Servicing Agreement.
(8) There are no actions, proceedings or investigations now
pending against the Company or, to the knowledge of the Company,
threatened against the Company, before any court, administrative agency
or other tribunal (i) asserting the invalidity of this Agreement, the
applicable Terms Agreement, the applicable Pooling and Servicing
Agreement or with respect to a Series of Certificates, the
Certificates, (ii) seeking to prevent the issuance of such Certificates
or the consummation of any of the transactions contemplated by this
Agreement, the applicable Terms Agreement or such Pooling and Servicing
Agreement, (iii) which would be likely to materially and adversely
affect the performance by the Company of its obligations under, or
which would if adversely determined materially and adversely affect the
validity or enforceability of, this Agreement, the applicable Terms
Agreement, such Pooling and Servicing Agreement or such Certificates or
(iv) seeking to adversely affect the federal income tax attributes of
such Certificates described in the Prospectus and the related
Prospectus Supplement.
(9) Any taxes, fees and other governmental charges that are
assessed and due in connection with the execution, delivery and
issuance of this Agreement, the applicable Terms Agreement, the
applicable Pooling and Servicing Agreement and with respect to a Series
of Certificates, the Certificates, shall have been paid at or prior to
the Closing Time.
(10) No filing or registration with, notice to or consent,
approval, authorization, order or qualification of or with any court or
governmental agency or body is required for the issuance and sale of
the Certificates or the consummation by the Company of the transactions
contemplated by this Agreement, the applicable Pooling and Servicing
Agreement or the applicable Terms Agreement, except the registration
under the 1933 Act of the Certificates, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Certificates by the Underwriters.
(11) The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies deemed by the Company
to be reasonably necessary to conduct the business now
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<PAGE>
operated by it and as described in the Prospectus and the Company has
received no notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
conduct of the business, operations, financial condition or income of
the Company.
(12) As of the Closing Time, with respect to a Series of
Certificates described in the relevant Terms Agreement evidencing
interests in a Mortgage Pool, the Trustee will have either good and
marketable title, free and clear of all prior liens, charges and
encumbrances, to or a validly perfected first priority security
interest in the Mortgage Notes and the related Mortgages included in
the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery
thereof to the Trustee and (b) the Mortgages, upon delivery to the
Trustee of instruments of assignment in recordable form assigning each
Mortgage to the Trustee and the recording of each such instrument of
assignment in the appropriate recording office in which the Mortgaged
Property is located, or if supported by an opinion of counsel, without
recording.
(13) As of the Closing Time, with respect to a Series of
Certificates as to which there is a Reserve Fund, to the extent that
the Reserve Fund does not constitute part of the Trust Fund for such
Series, the Trustee will have acquired either good and marketable title
to or a duly and validly perfected security interest in the Reserve
Fund with respect to such Series, if any, subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance.
(14) As of the Closing Time, with respect to a Series of
Certificates, the Mortgage Pool will have substantially the
characteristics described in the Prospectus Supplement and in the Form
8-K of the Company prepared with respect to such Certificates, if the
Mortgage Pool is described in such Form 8-K.
(15) Neither the Company nor the Trust Fund created by the
applicable Pooling and Servicing Agreement will be subject to
registration as an "investment company" under the Investment Company
Act of 1940, as amended (the "1940 Act").
(16) The Certificates, the applicable Pooling and Servicing
Agreement, the applicable Terms Agreement and any Primary Insurance
Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance
Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy
Insurance and Alternate Credit Enhancement related to the Certificates
described in the relevant Terms Agreement conform in all material
respects to the descriptions thereof contained in the Prospectus.
SECTION 2. Purchase and Sale. The commitment of each Underwriter to
purchase Certificates pursuant to any Terms Agreement shall be several and not
joint and shall be deemed
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to have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth.
Payment of the purchase price for, and delivery of, any Certificates to
be purchased by the Underwriters shall be made at the offices of Morgan, Lewis &
Bockius LLP, New York, New York, or at such other place as shall be agreed upon
by you and the Company, at such time or date as shall be agreed upon by you and
the Company in the Terms Agreement (each such time and date being referred to as
a "Closing Time"). Unless otherwise specified in the applicable Terms Agreement,
payment shall be made to the Company in immediately available Federal funds
wired to such bank as may be designated by the Company. Such Certificates shall
be in such denominations and registered in such names as you may request in
writing at least two business days prior to the applicable Closing Time. Such
Certificates will be made available for examination and packaging by you no
later than 12:00 noon on the first business day prior to the applicable Closing
Time.
It is understood that the Underwriters intend to offer the Certificates
for sale to the public as set forth in the Prospectus Supplement.
SECTION 3. Covenants of the Company. The Company covenants with each of
you and each Underwriter participating in an offering of Certificates pursuant
to a Terms Agreement, with respect to such Certificates and such offering, as
follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Certificates covered thereby, the price
or prices at which the Certificates are to be purchased by the
Underwriters, either the initial public offering price or prices or the
method by which the price or prices by which the Certificates are to be
sold will be determined, the selling concession(s) and reallowance(s),
if any, any delayed delivery arrangements, and such other information
as you and the Company deem appropriate in connection with the offering
of the Certificates. The Company will promptly transmit copies of the
Prospectus Supplement to the Commission for filing pursuant to Rule 424
under the 1933 Act and will furnish to the Underwriters as many copies
of the Prospectus and such Prospectus Supplement as you shall
reasonably request.
(b) If the delivery of a prospectus is required at any time in
connection with the offering or sale of the Certificates described in
the relevant Terms Agreement and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period of time to
amend or supplement the Prospectus in order to comply with the 1933
Act, the Company agrees to notify you promptly and upon your request so
to amend or supplement the
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Prospectus and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance.
(c) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
give you reasonable notice of its intention to file any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus, whether pursuant to the 1933 Act or otherwise, and will
furnish you with copies of any such amendment or supplement or other
documents proposed to be filed a reasonable time in advance of filing.
(d) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
notify you promptly (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the
Commission for filing of any supplement to the Prospectus or any
document other than quarterly and annual reports to be filed pursuant
to the 1934 Act, (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement, the Prospectus
or any Prospectus Supplement, (iv) of any request by the Commission for
any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Certificates for sale in any
jurisdiction or the threat of any proceeding for that purpose and (vi)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order and, if any stop order is
issued, to obtain the lifting thereof as soon as possible.
(e) The Company will deliver to you as many conformed copies
of the Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith or incorporated
by reference therein and documents incorporated by reference in the
Prospectus) as you may reasonably request.
(f) The Company will endeavor, in cooperation with you, to
qualify the Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as you may designate, and will maintain or cause to be
maintained such qualifications in effect for as long as may be required
for the distribution of the Certificates, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction. The Company will file or cause the filing of such
statements
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<PAGE>
and reports as may be required by the laws of each jurisdiction in
which the Certificates have been qualified as above provided.
(g) If the Company has elected to cause the applicable
Mortgage Pool to be treated as a real estate mortgage investment
conduit (a "REMIC"), the Company will prepare, or cause to be prepared,
and file, or cause to be filed a timely election to treat the Mortgage
Pool as a REMIC for federal income tax purposes and will file, or cause
to be filed, such tax returns and take such actions, all on a timely
basis, as are required to elect and maintain such status.
(h) With respect to a Series, so long as the Certificates of
such Series are outstanding, the Company will furnish, or cause to be
furnished, to you, copies of all reports and statements available to
Certificateholders pursuant to the Pooling and Servicing Agreement.
SECTION 4. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase Certificates pursuant to any Terms Agreement shall
be subject to the accuracy of the representations and warranties on the part of
the Company herein contained, to the accuracy of the statements of the Company's
officers made pursuant hereto, to the performance by the Company of all of its
obligations hereunder and to the following additional conditions precedent:
(a) At the applicable Closing Time (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission, (ii) the Certificates shall
have received the rating or ratings specified in the applicable Terms
Agreement, and (iii) there shall not have come to your attention any
facts that would cause you to believe that the Prospectus, together
with the applicable Prospectus Supplement at the time it was required
to be delivered to a purchaser of the Certificates, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances existing at such time, not misleading. No challenge by
the Commission shall have been made to the accuracy or adequacy of the
Registration Statement and any request of the Commission for inclusion
of additional information in the Registration Statement or the
Prospectus or the Prospectus Supplement shall have been complied with
and the Company shall not have filed with the Commission any amendment
or supplement to the Registration Statement, the Prospectus or the
Prospectus Supplement without the consent of the Underwriters.
(b) At the applicable Closing Time you shall have received:
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<PAGE>
(1) The opinion, dated as of the applicable Closing
Time, of Morgan, Lewis & Bockius LLP, counsel for the Company, in form
and substance satisfactory to such of you as may be named in the
applicable Terms Agreement, to the effect that:
(i) The Company is validly existing as a
corporation in good standing under the laws of the State of
Delaware.
(ii) This Agreement and the applicable Terms
Agreement have been duly authorized, executed and delivered by
the Company, and each is a legal, valid and binding obligation
of the Company enforceable against the Company in accordance
with its terms, except that (A) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought,
and (C) the enforceability as to rights to indemnity
thereunder may be subject to limitations of public policy
under applicable securities laws.
(iii) The applicable Pooling and Servicing
Agreement has been duly authorized, executed and delivered by
the Company, and is a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except that (A) such enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms' of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor
may be brought.
(iv) The execution and delivery by the
Company of this Agreement, the applicable Terms Agreement and
applicable Pooling and Servicing Agreement and the signing of
the Registration Statement by the Company are within the
corporate power of the Company and have been duly authorized
by all necessary corporate action on the part of the Company;
and neither the issue and sale of the Certificates nor the
consummation of the transactions contemplated herein or
therein nor the fulfillment of the terms hereof or thereof
will, conflict with or constitute a breach or violation of any
of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, or other
instrument to which the Company is a party or by which it may
be bound of which such counsel is aware, other than the lien
or liens created by the applicable Pooling and Servicing
Agreement, nor will such action result in any violation of the
provisions
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of the certificate of incorporation or by-laws of the Company
or, any statute, rule or regulation to which the Company is
subject or by which it is bound or any writ, injunction or
decree of any court, governmental authority or regulatory body
to which it is subject or by which it is bound of which such
counsel is aware.
(v) The Certificates have been duly
authorized, executed and authenticated as specified in the
related Pooling and Servicing Agreement and when delivered and
paid for, will be validly issued and entitled to the benefits
of the related Pooling and Servicing Agreement.
(vi) To the best of such counsel's
knowledge, no filing or registration with or notice to or
consent, approval, authorization, order or qualification of or
with any court or governmental agency or body is required for
the issuance and sale of the Certificates or the consummation
by the Company of the transactions contemplated by this
Agreement, the applicable Pooling and Servicing Agreement or
the applicable Terms Agreement, except the registration under
the 1933 Act of the Certificates, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the
Certificates by the Underwriters.
(vii) To the best of such counsel's
knowledge, there is no action, suit or proceeding of which
such counsel is aware before or by any court or governmental
agency or body, domestic or foreign, now pending or threatened
against the Company which might result in any material adverse
change in the financial condition, earnings, affairs or
business of the Company, or which might materially and
adversely affect the properties or assets thereof or might
materially and adversely affect the performance by the Company
of its obligations under, or the validity or enforceability
of, the Certificates, this Agreement or the Pooling and
Servicing Agreement, or which is required to be disclosed in
the Registration Statement.
(viii) The Registration Statement is
effective under the 1933 Act and, to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.
(ix) The applicable Pooling and Servicing
Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended.
(x) The Registration Statement and the
Prospectus (other than the financial statements and other
financial and statistical information included therein, as to
which no opinion need be rendered) as of their respective
effective
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<PAGE>
or issue dates, complied as to form in all material respects
with the requirements of the 1933 Act and the Regulations
thereunder.
(xi) The statements in the Prospectus under
the headings "ERISA Considerations" and "Federal Income Tax
Consequences" and the statements in the applicable Prospectus
Supplement under the headings "Federal Income Tax
Considerations" and "ERISA Considerations", to the extent that
they describe matters of United States federal income tax law
or ERISA or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are accurate in all
material respects with respect to those consequences or
matters discussed therein.
(xii) The statements in the Prospectus and
the applicable Prospectus Supplement under the caption
"Description of the Certificates", insofar as they purport to
summarize certain terms of the Certificates and the applicable
Pooling and Servicing Agreement, constitute a fair summary of
the provisions purported to be summarized.
(xiii) The Trust Fund created by the
applicable Pooling and Servicing Agreement is not, and will
not as a result of the offer and sale of the Certificates as
contemplated in the Prospectus and in this Agreement become,
an "investment company" required to be registered under the
1940 Act.
(xiv) The Classes of Certificates so
designated in the Prospectus Supplement will be "mortgage
related securities", as defined in ss.3(a)(41) of the 1934
Act, so long as the Certificates are rated in one of the two
highest grades by at least one nationally recognized
statistical rating organization.
(xv) If a REMIC election is to be made with
respect to the Trust Fund, assuming (a) ongoing compliance
with all of the provisions of the Pooling and Servicing
Agreement and (b) the filing of an election, in accordance
with the Pooling and Servicing Agreement, to be treated as a
"real estate mortgage investment conduit" (a "REMIC") pursuant
to Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code") for Federal income tax purposes, the
Trust Fund will qualify as a REMIC as of the Closing Date and
will continue to qualify as a REMIC for so long as it complies
with amendments after the date hereof to any applicable
provisions of the Code and applicable Treasury Regulations.
Such counsel shall deliver to you such additional opinions addressed to
you addressing the transfer by the Company to the Trustee of its right, title
and interest in and to the Mortgage Loans and other property included in the
Trust Fund at the Closing Time as may be required by each Rating Agency rating
the Certificates.
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<PAGE>
Such counsel shall state that it has participated in conferences with
officers and other representatives of the Company, your counsel, representatives
of the independent accountants for the Company and you at which the contents of
the Registration Statement and the Prospectus and related matters were discussed
and, although such counsel is not passing upon and does not assume
responsibility for, the factual accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus (except as
stated in paragraphs (xi) and (xii) above) and has made no independent check or
verification thereof for the purpose of rendering its opinion, on the basis of
the foregoing, nothing has come to their attention that leads such counsel to
believe that either the Registration Statement, at the time it became effective
and at the applicable Closing Time, contained, an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or that the Prospectus
contained or contains as of the date thereof and at the applicable Closing Time
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that such counsel need
express no view with respect to the financial statements, schedules and other
financial and statistical data included in or incorporated by reference into the
Registration Statement, the Prospectus or the Prospectus Supplement.
Such counsel may state that their opinions relate only to laws of the
State of New York, the Federal laws of the United States and the General
Corporation Law of the State of Delaware.
In rendering such opinions, such counsel may rely, as to matters of
fact, to the extent deemed proper and stated therein, on certificates of
responsible officers of the Company, the Trustee or public officials.
(2) The favorable opinion of counsel to the Trustee,
dated as of the applicable Closing Time, addressed to you and
in form and scope satisfactory to your counsel, to the effect
that:
(i) The Trustee is a national banking
association, duly authorized and validly existing in good
standing under the laws of the United States, and has all
requisite power and authority to enter into the Pooling and
Servicing Agreement and to perform its obligations thereunder.
(ii) To the knowledge of such counsel, there
is no action, suit, proceeding or investigation pending or
threatened against the Trustee that could materially adversely
affect the ability of the Trustee to perform its obligations
under the Pooling and Servicing Agreement.
(iii) The Trustee has duly authorized,
executed and delivered the applicable Pooling and Servicing
Agreement and such Pooling and Servicing Agreement will
constitute the legal, valid and binding obligation of the
Trustee.
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<PAGE>
(iv) The Trustee has full power and
authority to execute and deliver the applicable Pooling and
Servicing Agreement and to perform its obligations thereunder.
(v) No consent, approval or authorization
of, or registration, declaration or filing with, any court or
governmental agency or body of the jurisdiction of its
organization is required for the execution, delivery or
performance by the Trustee of the Pooling and Servicing
Agreement.
(vi) The performance by the Trustee of its
duties pursuant to the Pooling and Servicing Agreement does
not conflict with or result in a breach or violation of any
term or provision of, or constitute a default under, any
statute or regulation currently governing the Trustee.
In rendering such opinion, such counsel may rely, as to
matters of fact, to the extent deemed proper and stated therein, on certificates
of responsible officers of the Trustee or public officials.
(3) The favorable opinion of counsel to the Servicer,
dated as of the applicable Closing Time, addressed to you and
in form and scope satisfactory to your counsel, to the effect
that:
(i) The Servicer is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation.
(ii) The execution and delivery by the
Servicer of the applicable Pooling and Servicing Agreement is
within the corporate power of the Servicer and has been duly
authorized by all necessary corporate action on the part of
the Servicer; and to the knowledge of such counsel, neither
the execution and delivery of such instrument, nor the
consummation of the transactions provided for therein, nor
compliance with the provisions thereof, will conflict with or
constitute a breach of, or default under, any contract,
indenture, mortgage, loan agreement, note, lease, deed of
trust, or other instrument to which the Servicer is a party or
by which it may be bound, nor will such action result in any
violation of the provisions of the charter or by-laws of the
Servicer or to the knowledge of such counsel, any law,
administrative regulation or administrative or court decree.
(iii) The applicable Pooling and Servicing
Agreement has been duly executed and delivered by the Servicer
and constitutes a valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms,
except that such enforceability thereof may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally
and subject, as to enforceability, to general
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principles of equity (regardless whether enforcement is sought
in a proceeding in equity or at law).
(iv) To the knowledge of such counsel, the
execution, delivery and performance by the Servicer of the
applicable Pooling and Servicing Agreement do not require the
consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in
respect of any federal, state or other governmental agency or
authority which has not previously been effected.
(v) To the knowledge of such counsel, there
is no action, suit or proceeding of which such counsel is
aware before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against the
Servicer which might materially and adversely affect the
performance by the Servicer under, or the validity or
enforceability of, the applicable Pooling and Servicing
Agreement.
(vi) The description of the Servicer in the
applicable Prospectus Supplement is true and correct in all
material respects.
(4) The favorable opinion or opinions, dated as of
the applicable Closing Time, of counsel for the Underwriters,
acceptable to the Underwriters.
(c) At the applicable Closing Time you shall have received a
certificate of the President or a Vice President and the Treasurer or
the Secretary of the Company, dated as of such Closing Time, to the
effect that the representations and warranties of the Company contained
in Section 1 are true and correct with the same force and effect as
though such Closing Time were a Representation Date and that the
Company has complied with all agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Time.
(d) You shall have received from Price Waterhouse LLP, or
other independent certified public accountants acceptable to you,
letters, dated as of the date of the applicable Terms Agreement and as
of the applicable Closing Time, delivered at such times, in the form
and substance reasonably satisfactory to you.
(e) At the applicable Closing Time, with respect to a Series
of Certificates, each of the representations and warranties of the
Servicer set forth in the related Pooling and Servicing Agreement will
be true and correct and you shall have received a Certificate of an
Executive Vice President, Senior Vice President or Vice President of
the Servicer, dated as of such Closing Time, to such effect.
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(f) At the applicable Closing Time, with respect to a Series
of Certificates, the Certificates shall have received the certificate
rating or ratings specified in the related Terms Agreement.
(g) At the applicable Closing Time, counsel for the
Underwriters shall have been furnished with such other documents and
opinions as they may reasonably require for the purpose of enabling
them to pass upon the issuance and sale of the Certificates as herein
contemplated and related proceedings or in order to evidence the
accuracy and completeness of any of the representations and warranties,
or the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and
sale of the Certificates as herein contemplated shall be reasonably
satisfactory in form and substance to you and counsel for the
Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to the
applicable Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 5.
SECTION 5. Payment of Expenses. The Company covenants and agrees with
the Underwriters that the Company will pay or cause to be paid all expenses
incident to the performance of its obligations under this Agreement, including
without limitation: (i) expenses related to the preparation and filing of the
Registration Statement and all amendments thereto, (ii) the cost of printing and
delivery to the Underwriters, in such quantities as you may reasonably request,
of copies of this Agreement, each Terms Agreement, any agreements among
Underwriters and selling agreement and the Underwriters' questionnaires and
powers of attorney, (iii) the cost of preparation, issuance and delivery of the
Certificates to the Underwriters, (iv) the fees and disbursements of the
Company's counsel and accountants for the Company, (v) all expenses (other than
legal fees) in connection with the qualification of the Certificates under
securities and Blue Sky laws and the determination of the eligibility of the
Certificates for investment in accordance with the provisions of Section 3(f),
including filing fees, (vi) the cost of printing and delivery to the
Underwriters, in such quantities as you may reasonably request, hereinabove
stated, of copies of the Registration Statement and Prospectus and all
amendments and supplements thereto, and of any Blue Sky survey and legal
investment survey, (vii) the cost of printing and delivery to the Underwriters,
in such quantities as you may reasonably request, of copies of each Pooling and
Servicing Agreement, (viii) the fees charged by not more than two investment
rating agencies for rating the Certificates, (ix) the fees and expenses, if any,
incurred in connection with the listing of the Certificates on any national
securities exchange, (x) any filing fees and expenses incident to any required
review by the National Association of Securities Dealers, Inc., and (xi) the
fees and expenses of the Trustee and its counsel. It is understood, however,
that except as provided in this Section and Section 6 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of counsel,
transfer taxes on resale of any of the Certificates by them and any advertising
expenses connected with any offers they may make.
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If a Terms Agreement is terminated by you in accordance with the
provisions of Section 4 or Section 8(i), the Company shall reimburse you for all
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in each case in respect of the relevant
Certificates, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by such Underwriter or controlling person in connection with
investigating or defending any such action or claim; provided, however,
that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any such document in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter expressly for use therein. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) [Underwriter] will indemnify and hold harmless the
Company, each of its officers who signed the Registration Statement,
its respective directors, and any person controlling the Company within
the meaning of the 1933 Act against any losses, claims, damages or
liabilities to which the Company or any such officer, director or
controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto), or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of [Underwriter] expressly for use therein and will reimburse
the Company or any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company, any such
officer, director or controlling person in connection with
investigating or defending any such action or claim. This
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indemnity agreement is in addition to any liability which [Underwriter]
may otherwise have. The Company acknowledges that, unless otherwise set
forth in the applicable Terms Agreement, the statements set forth [in
the last paragraph of the cover page, the first and second sentences of
the third paragraph under the caption "Underwriting" and in the third
to last paragraph of the cover page relating to [Underwriter]'s
intention to create a secondary market], each as included in the
applicable Prospectus Supplement relating to a Series of Certificates,
together with the [Underwriter] Information (as defined in Section 10
hereof) relating to a Series of Certificates constitute the only
information furnished in writing by or on behalf of [Underwriter]
expressly for use in the Registration Statement relating to such Series
of Certificates as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify such indemnifying party
in writing of the commencement thereof; but the omission so to notify
the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section. In
case any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying
party); and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case and the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel
shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party
shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the
action, or (iii) the indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them and/or
other indemnified parties which are different from or additional to
those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party). Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was
not unreasonably withheld.
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(d) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Certificates to which such loss, claim, damage or
liability (or actions in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions (or in the case of a public
offering in negotiated transactions, the difference between the
proceeds to the Company and the aggregate price received from the
public) received by such Underwriters. The relative fault of the
Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or such Underwriters on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding anything to the contrary in this Section 6(d), if the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in this Section 6(d) arise out of an untrue statement or
alleged untrue statement of a material fact contained in any
[Underwriter] 8-K (as such term is defined in Section 10 hereof) then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Underwriters on the other (determined in accordance with
the preceding sentence) in connection with the statements or omissions
in such [Underwriter] 8-K which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other equitable considerations. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation even if the
Underwriters were treated as one entity for such purpose or by any
other method of allocation which does not take account of the equitable
considerations referred to in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above in
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<PAGE>
this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigation or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Certificates underwritten by it and
distributed to the public were sold to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Underwriters to contribute
pursuant to this subsection (d) are several in proportion to their
respective underwriting obligations with respect to such Certificates
and not joint.
SECTION 7. Representations, Warranties, and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any termination of this Agreement, or the applicable Terms Agreement or any
investigation made by or on behalf of the Underwriters or any controlling person
thereof, or by or on behalf of the Company, its officers or directors and shall
survive delivery of any Certificates to the Underwriters.
SECTION 8. Termination of Agreement. This Agreement may be terminated
for any reason at any time by either the Company or you upon the giving of
thirty days' notice of such termination to the other party hereto; provided,
however, that if a Terms Agreement has been entered into with respect to a
particular transaction, this Agreement and the Terms Agreement may not be
terminated in the manner set forth in this sentence with respect to such
particular transaction. You, as Representative of the Underwriters named in any
Terms Agreement may also terminate such Terms Agreement, immediately upon notice
to the Company, at any time at or prior to the applicable Closing Time (i) if
there has been, since the date of such Terms Agreement or since the respective
dates as of which information is given in the Registration Statement or
Prospectus, any change, or any development involving a prospective change, in or
affecting the condition, financial or otherwise, earnings, affairs or business
of the Company, whether or not arising in the ordinary course of business, which
in your judgment would materially impair the market for, or the investment
quality of, the Certificates, or (ii) if there has occurred any material
outbreak or escalation of hostilities or other calamity or crisis the effect of
which on the financial markets of the United States is such as to make it, in
your reasonable judgment, impracticable to market the Certificates or enforce
contracts for the sale of the Certificates, or (iii) if trading in securities
generally on either the New York Stock Exchange or the American Stock Exchange
has been suspended or any setting of minimum prices shall have been established,
or (iv) if a general moratorium of commercial banking activities has been
declared by either Federal or New York State authorities. In the event of any
such termination, (A) the covenants set forth in Section 3 with respect to any
offering of Certificates shall remain in effect so long as the Underwriters own
any such Certificates purchased from the Company
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<PAGE>
pursuant to the applicable Terms Agreement and (B) the covenant set forth in
Section 3(c), the provisions of Section 5, the indemnity agreement and
contribution provisions set forth in Section 6, and the provisions of Sections 7
and 12 shall remain in effect.
SECTION 9. Default by One or More of the Underwriters.
(a) If one or more of the Underwriters participating in an
offering of Certificates shall fail at the applicable Closing Time to
purchase the Certificates which it or they are obligated to purchase
hereunder and under the applicable Terms Agreement (the "Defaulted
Certificates"), then such of you as are named therein may in your
discretion arrange for you or another party or other parties to
purchase the Defaulted Certificates upon the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do
not arrange for the purchase of such Defaulted Certificates, then the
Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to
you to purchase such Defaulted Certificates on the terms contained
herein. In the event that, within the respective prescribed periods,
you notify the Company that you have so arranged for the purchase of
such Defaulted Certificates, or the Company notifies you that it has so
arranged for the purchase of such Defaulted Certificates, you or the
Company shall have the right to postpone the Closing Time for a period
of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been party to this Agreement with respect to the
Certificate.
(b) If, after giving effect to any arrangements for the
purchase of Defaulted Certificates of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted Certificates
which remains unpurchased does not exceed __% of the aggregate
principal amount of the Certificates to be purchased pursuant to the
applicable Terms Agreement, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the principal
amount of Certificates which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of
Certificates which such Underwriter agreed to purchase pursuant to the
applicable Terms Agreement) of the Defaulted Certificates of the
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Defaulted Certificates of the defaulting Underwriter or
Underwriters by you and the
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<PAGE>
Company as provided in subsection (a) above, the aggregate principal
amount of such Defaulted Certificates which remains unpurchased exceeds
__% of the aggregate principal amount of the Certificates to be
purchased pursuant to the applicable Terms Agreement, or if the Company
shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Defaulted Certificates
of a defaulting Underwriter or Underwriters, then this Agreement shall
thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to
be borne by the Company and the Underwriters as provided in Section 5
hereof and the indemnity agreement and contribution provisions in
Section 6 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
SECTION 10. Computational Materials and ABS Term Sheets.
(a) The parties acknowledge that, subsequent to the date on
which the Registration Statement became effective and up to and
including the date on which the Prospectus Supplement and Prospectus
with respect to a Series of Certificates is first made available to the
Underwriters, the Underwriters may furnish to various potential
investors in such Series of Certificates, in writing: (i)
"Computational Materials", as defined in a no-action letter (the
"Kidder No-Action Letter") issued by the staff of the Commission on May
20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as
modified by a no-action letter (the "First PSA No-Action Letter")
issued by the staff of the Commission on May 27, 1994 to the Public
Securities Association (the "PSA") and as further modified by a
no-action letter (the "Second PSA No-Action Letter", and together with
the Kidder No-Action Letter and the First PSA No-Action Letter, the
"No-Action Letters") issued by the staff of the Commission on February
17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the
Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as
defined in the Second PSA No-Action Letter.
(b) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the 1933 Act, all Computational Materials used by [Underwriter]
and required to be filed with the Commission in order for [Underwriter]
to avail itself of the relief granted in the No-Action Letters (such
Computational Materials, the "[Underwriter] Furnished Computational
Materials").
(c) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the Act, all Structural Term Sheets used by [Underwriter] and
required to be filed with the Commission in order for [Underwriter] to
avail itself of the relief granted in the No-Action Letters (such
Structural Term Sheets, the "[Underwriter] Furnished Structural Term
Sheets").
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(d) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, within one (1) business day
after the first use thereof, all Collateral Term Sheets used by
[Underwriter] and required to be filed with the Commission in order for
[Underwriter] to avail itself of the relief granted in the No-Action
Letters (such Collateral Term Sheets, the "[Underwriter] Furnished
Collateral Term Sheets") and shall advise the Company of the date on
which each such Collateral Term Sheet was first used.
(e) [Underwriter] covenants to prepare for signature by the
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission one or more current reports on
Form 8-K (collectively, together with any amendments and supplements
thereto, the "[Underwriter] 8-K," and each a "[Underwriter] 8-K") such
that [Underwriter] may avail itself of the relief granted in the
No-Action Letters. In particular, [Underwriter] covenants to cause to
be filed with the Commission (i) all [Underwriter] Furnished
Computational Materials and all [Underwriter] Furnished Structural Term
Sheets on a [Underwriter] 8-K concurrently with the filing of the
Prospectus Supplement and Prospectus with respect to the related Series
of Certificates pursuant to Rule 424 under the 1933 Act; and (ii) all
[Underwriter] Furnished Collateral Term Sheets on a [Underwriter] 8-K
not later than two (2) business days after the first use thereof. Any
[Underwriter] 8-K containing Furnished Structural Term Sheets and/or
Furnished Collateral Term Sheets shall be filed electronically via
EDGAR. Any [Underwriter] 8-K containing Furnished Computational
Materials shall be filed in paper under cover of Form SE in accordance
with Rule 311(i) of Resolution S-T.
(f) [Underwriter] shall cooperate with the Company and with
Price Waterhouse LLP in obtaining a letter, in form and substance
satisfactory to the Company and [Underwriter], of Price Waterhouse LLP
regarding the information in any [Underwriter] 8-K consisting of
[Underwriter] Furnished Computational Materials and/or [Underwriter]
Furnished Structural Term Sheets. Any such letter shall be obtained
prior to the filing of any such [Underwriter] 8-K with the Commission
at [Underwriter]'s sole expense.
(g) [Underwriter] represents and warrants to, and covenants
with, the Company that as presented in the [Underwriter] 8-K, the
[Underwriter] Information (defined below) is not misleading and not
inaccurate in any material respect and that any Pool Information
(defined below) contained in any [Underwriter] 8-K which is not
otherwise inaccurate in any material respect is not presented in the
[Underwriter] 8-K in a way that is either misleading or inaccurate in
any material respect. [Underwriter] further covenants with the Company
that if any Computational Materials or ABS Term Sheets (as such term is
defined in the Second PSA No-Action Letter) contained in any
[Underwriter] 8-K are found to include any information that is
misleading or inaccurate in any material respect, [Underwriter]
promptly shall inform the Company of such finding, provide the Company
with revised and/or corrected Computational Materials or ABS Term
Sheets, as the case may be, and promptly prepare for signature by the
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<PAGE>
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission in accordance herewith, revised
and/or corrected Computational Materials or ABS Term Sheets, as the
case may be.
(h) [Underwriter] covenants that all Computational Materials
and ABS Term Sheets used by it shall contain a legend substantially in
the form of the following legend:
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE
UNDERWRITER] AND NOT BY CHASE MANHATTAN ACCEPTANCE
CORPORATION ("CMAC") OR ANY OF ITS AFFILIATES. [THE
UNDERWRITER] IS NOT ACTING AS CMAC'S AGENT."
(i) [Underwriter] covenants that all Collateral Term Sheets
used by it shall contain the following additional legend:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY
THE DESCRIPTION OF THE MORTGAGE LOANS CONTAINED IN THE
PROSPECTUS SUPPLEMENT."
(j) [Underwriter] covenants that all Collateral Term Sheets
(other than the initial Collateral Term Sheet) shall contain the
following additional legend:
"THE INFORMATION CONTAINED HEREIN SUPERSEDES THE
INFORMATION IN ALL PRIOR COLLATERAL TERM SHEETS, IF ANY."
(k) [Underwriter] shall deliver to the Company a copy of each
[Underwriter] 8-K (including written evidence of filing) promptly upon
filing the same with the Commission (but in any event not later than
the earlier to occur of (i) the second business day after filing and
(ii) the Closing Time).
(l) For purposes of this Agreement, the term "[Underwriter]
Information" means such portion, if any, of the information contained
in the [Underwriter] 8-K that is not Pool Information. "Pool
Information" means the information furnished to the Underwriters by the
Company regarding the Mortgage Loans; provided, however, that if any
information that would otherwise constitute Pool Information is
presented in the [Underwriter] 8-K in a way that is either inaccurate
or misleading in any material respect, such information shall not be
Pool Information.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed,
delivered, telexed, or telegraphed and confirmed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to you
at the respective addresses set forth on the first page hereof, to the attention
of [the General Counsel]. Notices to the Company shall be directed to Chase
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Manhattan Acceptance Corporation, c/o Chase Manhattan Mortgage Corporation, 300
Tice Boulevard, Woodcliff Lake, New Jersey 07645, Attention: Michael D. Katz.
SECTION 12. Parties. This Agreement shall be binding upon and inure
solely to the benefit of you and the Company and to the extent provided in
Section 6 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter and their respective heirs, executors,
administrators, successors and assigns and any Terms Agreement shall be binding
upon and inure solely to the benefit of the Company and any Underwriter who
becomes a party to a Terms Agreement and to the extent provided in Section 6
hereof, the officers and directors of the Company and each person who controls
the Company or any Underwriter and their respective heirs, executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement or a Terms Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto or thereto and their
respective successors and the controlling person and officers and directors
referred to in Section 6 hereof and their heirs any legal or equitable right,
remedy or claim under or with respect to this Agreement or a Terms Agreement or
any provision herein or therein contained.
SECTION 13. Governing Law and Time. This Agreement and each
Terms Agreement shall be governed by and construed in accordance with the laws
of the State of New York Specified times of day refer to New York City time.
SECTION 14. Counterparts. This Agreement and any Terms Agreement may be
executed in any number of counterparts (which execution may take the form of an
exchange of any standard form of written telecommunication between you and the
Company), each of which shall constitute an original of any party whose
signature appears on it, and all of which shall together constitute a single
instrument.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: _______________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
[UNDERWRITER]
By: ________________________________
Name:
Title:
-26-
PH02A/5810.2
<PAGE>
EXHIBIT A
PASS-THROUGH CERTIFICATES
CHASE MANHATTAN ACCEPTANCE CORPORATION, SELLER
TERMS AGREEMENT
---------------
Dated: _________, 19__
To: Chase Manhattan Acceptance Corporation
Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting Agreement")
Ladies and Gentlemen:
The undersigned (being herein called the "Underwriters"), understand
that Chase Manhattan Acceptance Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell $_________ original principal amount of
Pass-Through Certificates described below (the "Certificates"). The Certificates
will be issued under a Pooling and Servicing Agreement dated as of
_______________ among the Company, as seller, _______________, as servicer and
_____________ as trustee. The terms of the Certificates are summarized below and
are more fully described in the Company's Prospectus supplement prepared with
respect to the Certificates.
All the provisions (including defined terms) contained in the
Underwriting Agreement are incorporated by reference herein in their entirety
and shall be deemed to be part of this Terms Agreement to the same extent as if
such provisions had been set forth in full herein. The Closing Time referred to
in Section 2 of the Underwriting Agreement shall be _______ a.m., New York City
time, on _____________. Subject to the terms and conditions set forth or
incorporated by reference herein, the Company hereby agrees to sell and the
Underwriters agree to purchase [, severally and not jointly,] the [respective]
original principal amount[ s] of Certificates set forth opposite [its] [their]
name[s] in Exhibit I hereto at the purchase price set forth below.
The Underwriters will offer the Certificates for sale upon the terms
and conditions set forth in the Prospectus.
Subject to the terms and conditions set forth or incorporated by
reference herein, the Underwriters will pay for the Certificates at the time and
place and in the manner set forth in the Underwriting Agreement.
Series Designation: ____________
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Terms of the Certificates and Underwriting Compensation:
Original
Principal Remittance Price to
Classes Amount* Rate Public
**
* Approximate. Subject to permitted variance in each case of plus or minus
__%.
** The [Class A] Certificates are being offered by the Underwriter from time to
time in negotiated transactions or otherwise at varying prices to be
determined, in each case, at the time of sale.
Certificate Rating:
_____ by [Rating Agency]
_____ by [Rating Agency]
REMIC Election:
The Company [does not] intend[s] to cause the Mortgage Pool to be treated as
a REMIC.
Credit Enhancement:
Cut-off Date:
The Cut-off Date is ___________, 19__.
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Remittance Date:
The ____ day of each month (or, if such ____ day is not a business day, the
business day immediately following) commencing __________, 19__.
Purchase Price:
The purchase price payable by the Underwriter for the [Class A] Certificates
is ___% of the aggregate principal balance of the [Class A] Certificates as of
the Closing Date plus accrued interest at the per annum rate of ___% from
__________, 19__ up to but not including the Closing Date.
Underwriting Commission:
Notwithstanding anything to the contrary in the Underwriting Agreement, no
additional underwriting commission shall be payable by the Company to the
Underwriter in connection with the purchase of the Certificates.
Information Provided by Underwriter:
Closing Date and Location:
__________ 19__ at the offices of Morgan, Lewis & Bockius LLP.
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Please confirm your agreement by having an authorized Officer sign a copy of
this Agreement in the space set forth below and returning a signed copy to us.
[UNDERWRITER]
By: _________________________________
Name:
Title:
ACCEPTED:
CHASE MANHATTAN ACCEPTANCE CORPORATION
By ___________________________________
Name:
Title:
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<PAGE>
Exhibit I
Original
Principal
Amount of
Name Certificates
Total ==============
-5-
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CHASE FUNDING, INC.,
Depositor
ADVANTA MORTGAGE CORP. USA,
Subservicer
CHASE MANHATTAN MORTGAGE CORPORATION
Master Servicer
and
[TRUSTEE],
Trustee
--------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of [DATE]
--------------------------------------
MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES [___________]
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS..............................................................................................1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES..............................................................................................42
SECTION 2.01. Conveyance of Mortgage Loans..........................................................42
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans...........................................45
SECTION 2.03. Representations, Warranties and Covenants of the Depositor............................47
SECTION 2.04. Representations and Warranties of the Subservicer.....................................56
SECTION 2.05. Delivery of Opinion of Counsel in Connection with Substitutions
and Repurchases.......................................................................58
SECTION 2.06. Authentication and Delivery of Certificates...........................................59
SECTION 2.07. REMIC Election........................................................................59
SECTION 2.08. Covenants of the Subservicer..........................................................60
SECTION 2.09. Representations of the Master Servicer................................................61
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS..........................................................62
SECTION 3.01. Subservicer to Service Mortgage Loans.................................................62
SECTION 3.02. Subservicing; Enforcement of the Obligations of Subservicer...........................63
SECTION 3.03. Rights of the Depositor, the Master Servicer and the Trustee in
Respect of the Subservicer............................................................64
SECTION 3.04. Trustee to Act as Subservicer.........................................................64
SECTION 3.05. Collection of Mortgage Loan Payments; Collection Account;
Certificate Account; Distribution Account.............................................64
SECTION 3.06. Collection of Taxes, Assessments and Similar Items; Escrow
Accounts..............................................................................68
SECTION 3.07. Access to Certain Documentation and Information Regarding the
Mortgage Loans........................................................................69
SECTION 3.08. Permitted Withdrawals from the Collection Account, Certificate
Account and Distribution Account......................................................69
SECTION 3.09. [Reserved.]...........................................................................71
SECTION 3.10. Maintenance of Hazard Insurance.......................................................71
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 3.11. Enforcement of Due-On-Sale Clauses; Assumption
Agreements............................................................................72
SECTION 3.12. Realization Upon Defaulted Mortgage Loans; Determination of
Excess Proceeds; Repurchase of Certain Mortgage Loans.................................74
SECTION 3.13. Trustee to Cooperate; Release of Mortgage Files.......................................76
SECTION 3.14. Documents, Records and Funds in Possession of Subservicer to be
Held for the Trustee..................................................................78
SECTION 3.15. Servicing Compensation................................................................78
SECTION 3.16. Access to Certain Documentation.......................................................79
SECTION 3.17. Annual Statement as to Compliance.....................................................79
SECTION 3.18. Annual Independent Public Accountants' Servicing Statement;
Financial Statements..................................................................80
ARTICLE IV
DISTRIBUTIONS; ADVANCES BY THE SUBSERVICER..............................................................81
SECTION 4.01. Advances..............................................................................81
SECTION 4.02. Reduction of Servicing Compensation in Connection with
Prepayment Interest Shortfalls........................................................82
SECTION 4.03. Distributions on the Subsidiary REMIC.................................................82
SECTION 4.04. Distributions.........................................................................82
SECTION 4.05. Monthly Statements to Certificateholders..............................................88
ARTICLE V
THE CERTIFICATES........................................................................................91
SECTION 5.01. The Certificates......................................................................91
SECTION 5.02. Certificate Register; Registration of Transfer and Exchange of
Certificates..........................................................................92
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.....................................96
SECTION 5.04. Persons Deemed Owners.................................................................96
SECTION 5.05. Access to List of Certificateholders' Names and Addresses.............................97
SECTION 5.06. Book-Entry Certificates...............................................................97
SECTION 5.07. Notices to Depository.................................................................98
SECTION 5.08. Definitive Certificates...............................................................98
SECTION 5.09. Maintenance of Office or Agency.......................................................99
SECTION 5.10. Authenticating Agents.................................................................99
SECTION 5.11. Appointment of Paying Agent..........................................................100
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI
THE DEPOSITOR, THE SUBSERVICER AND THE MASTER SERVICER.................................................101
SECTION 6.01. Respective Liabilities of the Depositor, the Subservicer and the
Master Servicer......................................................................101
SECTION 6.02. Merger or Consolidation of the Depositor, the Subservicer or the
Master Servicer......................................................................101
SECTION 6.03. Limitation on Liability of the Depositor, the Master Servicer, the
Subservicer and Others...............................................................101
SECTION 6.04. Limitation on Resignation of Subservicer.............................................102
SECTION 6.05. Errors and Omissions Insurance; Fidelity Bonds.......................................102
SECTION 6.06. Compensation to the Master Servicer..................................................103
ARTICLE VII
DEFAULT; TERMINATION OF SUBSERVICER....................................................................103
SECTION 7.01. Events of Default....................................................................103
SECTION 7.02. Trustee to Act; Appointment of Successor.............................................106
SECTION 7.03. Notification to Certificateholders...................................................107
ARTICLE VIII
CONCERNING THE TRUSTEE.................................................................................107
SECTION 8.01. Duties of Trustee....................................................................107
SECTION 8.02. Certain Matters Affecting the Trustee................................................108
SECTION 8.03. Trustee Not Liable for Mortgage Loans................................................109
SECTION 8.04. Trustee May Own Certificates.........................................................110
SECTION 8.05. Master Servicer to Pay Trustee's Fees and Expenses...................................110
SECTION 8.06. Eligibility Requirements for Trustee.................................................110
SECTION 8.07. Resignation and Removal of Trustee...................................................111
SECTION 8.08. Successor Trustee....................................................................112
SECTION 8.09. Merger or Consolidation of Trustee...................................................112
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee........................................113
SECTION 8.11. Tax Matters..........................................................................114
ARTICLE IX
TERMINATION............................................................................................116
SECTION 9.01. Termination upon Liquidation or Repurchase of all Mortgage
Loans................................................................................116
SECTION 9.02. Final Distribution on the Certificates...............................................117
SECTION 9.03. Additional Termination Requirements..................................................118
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE X
MISCELLANEOUS PROVISIONS...............................................................................119
SECTION 10.01. Amendment............................................................................119
SECTION 10.02 Counterparts.........................................................................121
SECTION 10.03 Governing Law........................................................................121
SECTION 10.04 Intention of Parties.................................................................121
SECTION 10.05 Notices..............................................................................122
SECTION 10.06 Severability of Provisions...........................................................123
SECTION 10.07 Assignment...........................................................................123
SECTION 10.08 Limitation on Rights of Certificateholders...........................................123
SECTION 10.09 Inspection and Audit Rights..........................................................124
SECTION 10.10 Certificates Nonassessable and Fully Paid............................................124
EXHIBIT A FORM OF CERTIFICATES
EXHIBIT B [RESERVED]
EXHIBIT C [RESERVED]
EXHIBIT D FORM OF CLASS R CERTIFICATE
EXHIBIT E [RESERVED]
EXHIBIT F MORTGAGE LOAN SCHEDULE
EXHIBIT G [RESERVED]
EXHIBIT H FORM OF TRUSTEE CERTIFICATION
EXHIBIT I FORM OF TRANSFEREE'S LETTER AND AFFIDAVIT
EXHIBIT J FORM OF TRANSFEROR CERTIFICATE
EXHIBIT K FORM OF INVESTMENT LETTER
EXHIBIT L FORM OF RULE 144A LETTER
EXHIBIT M REQUEST FOR RELEASE
</TABLE>
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<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of [DATE], among
CHASE FUNDING, INC., a Delaware corporation, as depositor (the "Depositor"),
ADVANTA MORTGAGE CORP. USA, a Delaware corporation, as subservicer (the
"Subservicer"), CHASE MANHATTAN MORTGAGE CORPORATION, a New Jersey corporation,
as Master Servicer (the "Master Servicer") and [TRUSTEE], a national banking
association, as trustee (the "Trustee").
The Depositor is the owner of the Trust Fund that is hereby
conveyed to the Trustee in return for the Certificates. The Trust Fund for
federal income tax purposes will consist of two REMICs. The Subsidiary REMIC
will consist of all of the assets constituting the Trust Fund and will be
evidenced by the Subsidiary REMIC Regular Interests (which will be
uncertificated and will represent the "regular interests" in the Subsidiary
REMIC) and the SR Interest as the single "residual interest" in the Subsidiary
REMIC. The Trustee will hold the Subsidiary REMIC Regular Interests. The Master
REMIC will consist of the Subsidiary REMIC Regular Interests and will be
evidenced by the Regular Certificates (which will represent the "regular
interests" in the Master REMIC) and the MR Interest as the single "residual
interest" in the Master REMIC. The Class R Certificates initially will represent
beneficial ownership of the SR Interest and the MR Interest. The "latest
possible maturity date" for federal income tax purposes of all interests created
hereby will be the Latest Possible Maturity Date.
In consideration of the mutual agreements herein contained,
the Depositor, the Subservicer, the Master Servicer and the Trustee agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
Accepted Servicing Practices: The Subservicer's normal
servicing practices, which will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgages Loans in the jurisdictions in
which the related Mortgage Properties are located.
Accrual Period: With respect to the Group I Certificates and
the Class IIA-2 Certificates and any Distribution Date, the calendar month
immediately preceding such Distribution Date. With respect to the Group II
Certificates (other than the Class IIA-2 Certificates) and any Distribution
Date, the period commencing on the immediately preceding Distribution Date (or,
in the case of the first Distribution Date, the Closing Date) and ending on the
day immediately preceding such Distribution Date. All calculations of interest
on the Group I Certificates and the Class IIA-2 Certificates will be made on the
basis of a 360-day year consisting of twelve 30-day months, and all calculations
of interest on the Group II Certificates
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<PAGE>
(other than the Class IIA-2 Certificates) will be made on the basis of the
actual number of days elapsed in the related Accrual Period and in a 360 day
year.
Adjustment Date: As to each Group II Mortgage Loan, each date
on which the related Mortgage Rate is subject to adjustment, as provided in the
related Mortgage Note.
Advance: The aggregate of the advances required to be made by
the Subservicer with respect to any Distribution Date pursuant to Section 4.01,
the amount of any such advances being equal to the sum of (A) the aggregate of
payments of principal (except with respect to the Final Scheduled Payment on any
Balloon Loan) and interest (net of the Servicing Fees) on the Mortgage Loans
that were due on the related Due Date and not received as of the close of
business on the related Determination Date and (B) with respect to each REO
Property that has not been liquidated, an amount equal to the excess, if any, of
(x) one month's interest (adjusted to the Net Mortgage Rate) on the Stated
Principal Balance of the related Mortgage Loan over (y) the net monthly rental
income (if any) from such REO Property deposited in the Collection Account for
such Distribution Date pursuant to Section 3.12, less the aggregate amount of
any such delinquent payments that the Subservicer has determined would
constitute a NonRecoverable Advance were an advance to be made with respect
thereto.
Agreement: This Pooling and Servicing Agreement and any and
all amendments or supplements hereto made in accordance with the terms herein.
Amount Held for Future Distribution: As to any Distribution
Date, the aggregate amount held in the Collection Account at the close of
business on the immediately preceding Determination Date on account of (i) all
Scheduled Payments or portions thereof received in respect of the Mortgage Loans
due after the related Due Date and (ii) Principal Prepayments and Liquidation
Proceeds received in respect of such Mortgage Loans after the last day of the
related Prepayment Period.
Applied Realized Loss Amount: With respect to any Distribution
Date, the amount, if any, by which, (i) with respect to the Group I
Certificates, the Group I Certificate Principal Balance after distributions of
principal on such Distribution Date exceeds the aggregate Stated Principal
Balance of the Group I Mortgage Loans as of the end of the preceding Due Period,
and (ii) with respect to the Group II Certificates, the Group II Certificate
Principal Balance after distributions of principal on such Distribution Date
exceeds the aggregate Stated Principal Balance of the Group II Mortgage Loans as
of the end of the preceding Due Period.
Appraised Value: The appraised value of the Mortgaged Property
based upon the appraisal made for the Seller by a fee appraiser at the time of
the origination of the related Mortgage Loan, or the sales price of the
Mortgaged Property at the time of such origination, whichever is less, or with
respect to any Mortgage Loan originated in connection with a refinancing, the
appraised value of the Mortgaged Property based upon the appraisal made at the
time of such refinancing.
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<PAGE>
Assignment of Mortgage: An assignment of the Mortgage, notice
of transfer or equivalent instrument, in recordable form, sufficient under the
laws of the jurisdiction where the related Mortgaged Property is located to
reflect of record the sale and assignment of the Mortgage Loan to the Trustee,
which assignment, notice of transfer or equivalent instrument may, if permitted
by law, be in the form of one or more blanket assignments covering Mortgages
secured by Mortgaged Properties located in the same county.
Authenticating Agent: As defined in Section 5.10 hereof.
Available Funds Cap: As of any Distribution Date with respect
to Loan Group II, a per annum rate equal to 12 times the quotient of (i) the
total scheduled interest on the Mortgage Loans in such Loan Group less the
related Servicing Fee and Master Servicer Fee for such Distribution Date divided
by the Group II Certificate Principal Balance.
Balloon Loan: A Mortgage Loan having an original term to
stated maturity of 15 years which provides for level monthly payments of
principal and interest based on a 30 year amortization schedule, with a balloon
payment of the remaining outstanding principal balance due on such Mortgage Loan
at its stated maturity.
Book-Entry Certificates: Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.06). As of the Closing
Date, each Class of Regular Certificates constitutes a Class of Book-Entry
Certificates.
Business Day: Any day other than (i) a Saturday or a Sunday,
or (ii) a day on which banking institutions in the City of New York, New York or
the city in which the Master Servicer or Subservicer is located are authorized
or obligated by law or executive order to be closed.
Certificate: Any one of the certificates of any Class executed
by the Depositor and authenticated by the Authenticating Agent in substantially
the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account created and
initially maintained by the Master Servicer pursuant to Section 3.05(c) in the
name of the Trustee for the benefit of the Certificateholders and designated
"[TRUSTEE], as trustee, in trust for registered holders of Chase Funding
Mortgage Loan Asset-Backed Certificates, Series [_______]". Funds in the
Certificate Account shall be held in trust for the Certificateholders for the
uses and purposes set forth in this Agreement.
Certificate Group: Either of the Group I Certificates or the
Group II Certificates.
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Certificate Owner: With respect to a Book-Entry Certificate,
the person that is the beneficial owner of such Book-Entry Certificate.
Certificate Principal Balance: As to any Certificate and as of
any Distribution Date, the Initial Certificate Principal Balance of such
Certificate less the sum of (i) all amounts distributed with respect to such
Certificate in reduction of the Certificate Principal Balance thereof on
previous Distribution Dates pursuant to Section 4.04, and (ii) any Applied
Realized Loss Amounts allocated to such Certificate on previous Distribution
Dates pursuant to (i) Section 4.04(h) for the Group I Certificates and (ii)
Section 4.04(i) for the Group II Certificates.
Certificate Register: The register maintained pursuant to
Section 5.02 hereof.
Certificateholder or Holder: The person in whose name a
Certificate is registered in the Certificate Register (initially, Cede & Co.),
as nominee for the Depository, in the case of any Class of Regular Certificates,
except that solely for the purpose of giving any consent pursuant to this
Agreement, any Certificate registered in the name of the Depositor or any
affiliate of the Depositor shall be deemed not to be Outstanding and the
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to
effect such consent has been obtained; provided, however, that if any such
Person (including the Depositor) owns 100% of the Percentage Interests evidenced
by a Class of Certificates, such Certificates shall be deemed to be Outstanding
for purposes of any provision hereof that requires the consent of the Holders of
Certificates of a particular Class as a condition to the taking of any action
hereunder. The Trustee is entitled to rely conclusively on a certification of
the Depositor or any affiliate of the Depositor in determining which
Certificates are registered in the name of an affiliate of the Depositor.
Class: All Certificates bearing the same Class designation as
set forth in Section 5.01 hereof.
Class IA-1 Certificate: Any Certificate designated as a "Class
IA-1 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IA-1 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IA-1
Certificates.
Class IA-1 Current Interest: As of any Distribution Date, the
interest accrued on the Class IA-1 Certificate Principal Balance during the
related Accrual Period at the Class IA-1 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IA-1 Certificates.
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Class IA-1 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IA-1 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IA-1 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IA-1
Pass-Through Rate for the related Accrual Period.
Class IA-1 Pass-Through Rate: ____% per annum.
Class IA-2 Certificate: Any Certificate designated as a "Class
IA-2 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IA-2 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IA-2
Certificates.
Class IA-2 Current Interest: As of any Distribution Date, the
interest accrued on the Class IA-2 Certificate Principal Balance during the
related Accrual Period at the Class IA-2 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IA-2 Certificates.
Class IA-2 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IA-2 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IA-2 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IA-2
Pass-Through Rate for the related Accrual Period.
Class IA-2 Pass-Through Rate: ____% per annum.
Class IA-3 Certificate: Any Certificate designated as a "Class
IA-3 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IA-3 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IA-3
Certificates.
Class IA-3 Current Interest: As of any Distribution Date, the
interest accrued on the Class IA-3 Certificate Principal Balance during the
related Accrual Period at the Class IA-3 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IA-3 Certificates.
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Class IA-3 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IA-3 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IA-3 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IA-3
Pass-Through Rate for the related Accrual Period.
Class IA-3 Pass-Through Rate: ____% per annum.
Class IA-4 Certificate: Any Certificate designated as a "Class
IA-4 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IA-4 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IA-4
Certificates.
Class IA-4 Current Interest: As of any Distribution Date, the
interest accrued on the Class IA-4 Certificate Principal Balance during the
related Accrual Period at the Class IA-4 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IA-4 Certificates.
Class IA-4 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IA-4 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IA-4 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IA-4
Pass-Through Rate for the related Accrual Period.
Class IA-4 Pass-Through Rate: ____% per annum.
Class IA-5 Certificate: Any Certificate designated as a "Class
IA-5 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IA-5 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IA-5
Certificates.
Class IA-5 Current Interest: As of any Distribution Date, the
interest accrued on the Class IA-5 Certificate Principal Balance during the
related Accrual Period at the Class IA-5 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IA-5 Certificates.
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Class IA-5 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IA-5 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IA-5 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IA-5
Pass-Through Rate for the related Accrual Period.
Class IA-5 Pass-Through Rate: As of any Distribution Date up
to and including the Optional Termination Date for the Group I Certificates,
____% per annum and, as of any Distribution Date after the Optional Termination
Date for the Group I Certificates,____% per annum.
Class IA-6 Certificate: Any Certificate designated as a "Class
IA-6 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IA-6 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IA-6
Certificates.
Class IA-6 Current Interest: As of any Distribution Date, the
interest accrued on the Class IA-6 Certificate Principal Balance during the
related Accrual Period at the Class IA-6 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IA-6 Certificates.
Class IA-6 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IA-6 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IA-6 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IA-6
Pass-Through Rate for the related Accrual Period.
Class IA-6 Pass-Through Rate: ____% per annum.
Class IA-6 Principal Distribution Amount: As of any
Distribution Date, the principal to be distributed to the Class IA-6
Certificates equal to the product of (i) a fraction, the numerator of which is
the Certificate Principal Balance of the Class IA-6 Certificates on such
Distribution Date and the denominator of which is the Group I Class A
Certificate Principal Balance, (ii) the Group I Class A Principal Distribution
Amount for such Distribution Date and (iii) the Class IA-6 PDA Factor for such
Distribution Date.
Class IA-6 PDA Factor: As of any Distribution Date set forth
below, the Percentage set forth across from such Distribution Date:
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Distribution Date Occurring in Percentage
------------------------------ ----------
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE] and thereafter............................................ ___%
Class IIA-1 Certificate: Any Certificate designated as a
"Class IIA-1 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IIA-1 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IIA-1
Certificates.
Class IIA-1 Interest Carryover Amount: As of any Distribution
Date, the sum of (A) if on such Distribution Date the Pass-Through Rate for the
Class IIA-1 Certificates is based upon the Available Funds Cap for the Group II
Certificates, the excess of (i) the amount of interest the Class IIA-1
Certificates would otherwise be entitled to receive on such Distribution Date
had such rate been calculated as the sum of One-Month LIBOR and the applicable
Class IIA-1 Pass-Through Margin for such Distribution Date, up to the Weighted
Maximum Rate Cap, over (ii) the amount of interest payable on the Class IIA-1
Certificates at the Available Funds Cap for such Distribution Date and (B) the
Class IIA-1 Interest Carryover Amount for all previous Distribution Dates not
previously paid pursuant to Section 4.04(f)(viii), together with interest
thereon at a rate equal to the sum of One-Month LIBOR and the applicable Class
IIA-1 Pass-Through Margin for such Distribution Date.
Class IIA-1 Current Interest: As of any Distribution Date, the
interest accrued on the Class IIA-1 Certificate Principal Balance during the
related Accrual Period at the Class IIA-1 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IIA-1 Certificates.
Class IIA-1 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IIA-1 Current
Interest with respect to prior Distribution Dates (excluding any IIA-1 Interest
Carryover Amount) over (b) the amount actually distributed to the Class IIA-1
Certificates with respect to interest and (ii) interest thereon (to the extent
permitted by applicable law) at the Class IIA-1 Pass-Through Rate for the
related Accrual Period.
Class IIA-1 Margin: As of any Distribution Date up to and
including the Optional Termination Date for the Group II Certificates, ____% per
annum and, as of any Distribution Date after such Optional Termination Date,
____% per annum.
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Class IIA-1 Pass-Through Rate: For the first Distribution
Date, ____% per annum. As of any Distribution Date thereafter, the least of (i)
One-Month LIBOR plus the Class IIA-1 Margin, (ii) the Weighted Maximum Rate Cap
and (iii) the Available Funds Cap for the Group II Certificates for such
Distribution Date.
Class IIA-2 Certificate: Any Certificate designated as a
"Class IIA-2 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IIA-2 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IIA-2
Certificates.
Class IIA-2 Current Interest: As of any Distribution Date, the
interest accrued on the Class IIA-2 Certificate Principal Balance during the
related Accrual Period at the Class IIA-2 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IIA-2 Certificates.
Class IIA-2 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IIA-2 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IIA-2 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IIA-2
Pass-Through Rate for the related Accrual Period.
Class IIA-2 Pass-Through Rate: ____% per annum.
Class IIA-2 Principal Distribution Amount: As of any
Distribution Date prior to the Distribution Date occurring in September 2001,
the principal to be distributed to the Class IIA-2 Certificates equal to the
product of (i) a fraction, the numerator of which is the Certificate Principal
Balance of the Class IIA-2 Certificates on such Distribution Date and the
denominator of which is the Group II Class A Certificate Principal Balance, (ii)
the Group II Class A Principal Distribution Amount for such Distribution Date
and (iii) the Class IIA-2 PDA Factor for such Distribution Date. With respect to
the Distribution Date in [DATE] and each Distribution Date thereafter until the
Class IIA-2 Certificate Principal Balance has been reduced to zero, the Class
IIA-2 Principal Distribution Amount will be the Group II Class IIA Principal
Distribution Amount for such Distribution Date.
Class IIA-2 PDA Factor: As of any Distribution Date set forth
below, the Percentage set forth across from such Distribution Date:
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Distribution Date Occurring in Percentage
------------------------------ ----------
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
Class IB Applied Realized Loss Amount: As of any Distribution
Date, the sum of all Applied Realized Loss Amounts with respect to the Group I
Mortgage Loans which have been applied to the reduction of the Certificate
Principal Balance of the Class IB Certificates.
Class IB Certificate: Any Certificate designated as a "Class
IB Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IB Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IB
Certificates.
Class IB Current Interest: As of any Distribution Date, the
interest accrued on the Class IB Certificate Principal Balance during the
related Accrual Period at the Class IB Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IB Certificates.
Class IB Interest Carryforward Amount: As of any Distribution
Date, the sum of (i) the excess of (a) the Class IB Current Interest with
respect to prior Distribution Dates over (b) the amount actually distributed to
the Class IB Certificates with respect to interest and (ii) interest thereon (to
the extent permitted by applicable law) at the Class IB Pass- Through Rate for
the related Accrual Period.
Class IB Pass-Through Rate: The lesser of (i) ____% per annum
and (ii) the weighted average Net Mortgage Rate of the Mortgage Loans in Loan
Group I.
Class IB Unpaid Realized Loss Amount: As of any Distribution
Date, the excess of (i) the Class IB Applied Realized Loss Amount over (ii) the
sum of all distributions in reduction of the Class IB Applied Realized Loss
Amount on all previous Distribution Dates.
Class IIB Applied Realized Loss Amount: As of any Distribution
Date, the sum of all Applied Realized Loss Amounts with respect to the Group II
Mortgage Loans which have been applied to the reduction of the Certificate
Principal Balance of the Class IIB Certificates.
Class IIB Certificate: Any Certificate designated as a "Class
IIB Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
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Class IIB Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IIB
Certificates.
Class IIB Current Interest: As of any Distribution Date, the
interest accrued on the Class IIB Certificate Principal Balance during the
related Accrual Period at the Class IIB Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IIB Certificates.
Class IIB Interest Carryforward Amount: As of any Distribution
Date, the sum of (i) the excess of (a) the Class IIB Current Interest with
respect to prior Distribution Dates (excluding any Class IIB Interest Carryover
Amount) over (b) the amount actually distributed to the Class IIB Certificates
with respect to interest and (ii) interest thereon (to the extent permitted by
applicable law) at the Class IIB Pass-Through Rate for the related Accrual
Period.
Class IIB Interest Carryover Amount: As of any Distribution
Date, the sum of (A) if on such Distribution Date the Pass-Through Rate for the
Class IIB Certificates is based upon the Available Funds Cap for the Group II
Certificates, the excess of (i) the amount of interest the Class IIB
Certificates would otherwise be entitled to receive on such Distribution Date
had such rate been calculated as the sum of One-Month LIBOR and the applicable
Class IIB Pass-Through Margin for such Distribution Date, up to the Weighted
Maximum Rate Cap, over (ii) the amount of interest payable on the Class IIB
Certificates at the Available Funds Cap for such Distribution Date and (B) the
Class IIB Interest Carryover Amount for all previous Distribution Dates not
previously paid pursuant to Section 4.04(f)(ix), together with interest thereon
at a rate equal to the sum of One-Month LIBOR and the applicable Class IIB
Pass-Through Margin for such Distribution Date.
Class IIB Margin: For any Distribution Date up to and
including the Optional Termination Date for the Group II Certificates, ____% per
annum and, as of any Distribution Date after such Optional Termination Date,
____% per annum.
Class IIB Pass-Through Rate: For the first Distribution
Date,____% per annum. As of any Distribution Date thereafter, the least of (i)
One-Month LIBOR plus the Class IIB Margin, (ii) the Weighted Maximum Rate Cap
for the Group II Certificates and (iii) the Available Funds Cap for such
Distribution Date.
Class IIB Unpaid Realized Loss Amount: As of any Distribution
Date, the excess of (i) the Class IIB Applied Realized Loss Amount over (ii) the
sum of all distributions in reduction of the Class IIB Applied Realized Loss
Amounts on all previous Distribution Dates.
Class IM-1 Applied Realized Loss Amount: As of any
Distribution Date, the sum of all Applied Realized Loss Amounts with respect to
the Group I Mortgage Loans which have been applied to the reduction of the
Certificate Principal Balance of the Class IM-1 Certificates.
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Class IM-1 Certificate: Any Certificate designated as a "Class
IM 1 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IM-1 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IM-1
Certificates.
Class IM-1 Current Interest: As of any Distribution Date, the
interest accrued on the Class IM-1 Certificate Principal Balance during the
related Accrual Period at the Class IM-1 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IM-1 Certificates.
Class IM-1 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IM Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IM Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IM-1
Pass- Through Rate for the related Accrual Period.
Class IM-1 Pass-Through Rate: ____% per annum.
Class IM-1 Unpaid Realized Loss Amount: As of any Distribution
Date, the excess of (i) the Class IM Applied Realized Loss Amount over (ii) the
sum of all distributions in reduction of the Class IM-1 Applied Realized Loss
Amount on all previous Distribution Dates.
Class IM-2 Applied Realized Loss Amount: As of any
Distribution Date, the sum of all Applied Realized Loss Amounts with respect to
the Group I Mortgage Loans which have been applied to the reduction of the
Certificate Principal Balance of the Class IM-2 Certificates.
Class IM-2 Certificate: Any Certificate designated as a "Class
IM 2 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IM-2 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IM-2
Certificates.
Class IM-2 Current Interest: As of any Distribution Date, the
interest accrued on the Class IM-2 Certificate Principal Balance during the
related Accrual Period at the Class IM-2 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IM-2 Certificates.
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Class IM-2 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IM-2 Current
Interest with respect to prior Distribution Dates over (b) the amount actually
distributed to the Class IM-2 Certificates with respect to interest and (ii)
interest thereon (to the extent permitted by applicable law) at the Class IM-2
Pass- Through Rate for the related Accrual Period.
Class IM-2 Pass-Through Rate: ____% per annum.
Class IM-2 Unpaid Realized Loss Amount: As of any Distribution
Date, the excess of (i) the Class IM-2 Applied Realized Loss Amount over (ii)
the sum of all distributions in reduction of the Class IM-2 Applied Realized
Loss Amount on all previous Distribution Dates.
Class IIM-1 Applied Realized Loss Amount: As of any
Distribution Date, the sum of all Applied Realized Loss Amounts with respect to
the Group II Mortgage Loans which have been applied to the reduction of the
Certificate Principal Balance of the Class IIM-1 Certificates.
Class IIM-1 Certificate: Any Certificate designated as a
"Class IIM 1 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IIM-1 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IIM-1
Certificates.
Class IIM-1 Current Interest: As of any Distribution Date, the
interest accrued on the Class IIM Certificate Principal Balance during the
related Accrual Period at the Class IIM Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IIM-1 Certificates.
Class IIM-1 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IIM Current
Interest with respect to prior Distribution Dates (excluding any Class IIM-1
Interest Carryover Amount) over (b) the amount actually distributed to the Class
IIM-1 Certificates with respect to interest and (ii) interest thereon (to the
extent permitted by applicable law) at the Class IIM-1 Pass-Through Rate for the
related Accrual Period.
Class IIM-1 Interest Carryover Amount: As of any Distribution
Date, the sum of (A) if on such Distribution Date the Pass-Through Rate for the
Class IIM-1 Certificates is based upon the Available Funds Cap for the Group II
Mortgage Loans, the excess of (i) the amount of interest the Class IIM-1
Certificates would otherwise be entitled to receive on such Distribution Date
had such rate been calculated as the sum of One-Month LIBOR and the applicable
Class IIM-1 Pass-Through Margin for such Distribution Date, up to the Weighted
Maximum Rate Cap,
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over (ii) the amount of interest payable on the Class IIM-1 Certificates at the
Available Funds Cap for the Group II Mortgage Loans for such Distribution Date
and (B) the Class IIM-1 Interest Carryover Amount for all previous Distribution
Dates not previously paid pursuant to Section 4.04(f)(ix), together with
interest thereon at a rate equal to the sum of One-Month LIBOR and the
applicable Class IIM-1 Pass-Through Margin for such Distribution Date.
Class IIM-1 Margin: As of any Distribution Date up to and
including the Optional Termination Date for the Group II Certificates, ____% per
annum and, as of any Distribution Date after such Optional Termination Date,
____% per annum.
Class IIM-1 Pass-Through Rate: For the first Distribution
Date,____% per annum. As of any Distribution Date thereafter, the least of (i)
One-Month LIBOR plus the Class IIM-1 Margin, (ii) the Weighted Maximum Rate Cap
and (iii) the Available Funds Cap for the Group II Mortgage Loans for such
Distribution Date.
Class IIM-1 Unpaid Realized Loss Amount: As of any
Distribution Date, the excess of (i) the Class IIM-1 Applied Realized Loss
Amount over (ii) the sum of all distributions in reduction of the Class IIM-1
Applied Realized Loss Amounts on all previous Distribution Dates.
Class IIM-2 Applied Realized Loss Amount: As of any
Distribution Date, the sum of all Applied Realized Loss Amounts with respect to
the Group II Mortgage Loans which have been applied to the reduction of the
Certificate Principal Balance of the Class IIM-2 Certificates.
Class IIM-2 Certificate: Any Certificate designated as a
"Class IIM-2 Certificate" on the face thereof, in the form of Exhibit A hereto,
representing the right to distributions as set forth herein.
Class IIM-2 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class IIM-2
Certificates.
Class IIM-2 Current Interest: As of any Distribution Date, the
interest accrued on the Class IIM-2 Certificate Principal Balance during the
related Accrual Period at the Class IIM-2 Pass-Through Rate plus the interest
portion of any previous distributions on such Class that is recovered as a
voidable preference by a trustee in bankruptcy, less any Non-Supported Interest
Shortfall allocated on such Distribution Date to the Class IIM-2 Certificates.
Class IIM-2 Interest Carryforward Amount: As of any
Distribution Date, the sum of (i) the excess of (a) the Class IIM-2 Current
Interest with respect to prior Distribution Dates (excluding any Class IIM-2
Interest Carryover Amount) over (b) the amount actually distributed to the Class
IIM-2 Certificates with respect to interest and (ii) interest thereon (to the
extent
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permitted by applicable law) at the Class IIM-2 Pass-Through Rate for the
related Accrual Period.
Class IIM-2 Interest Carryover Amount: As of any Distribution
Date, the sum of (A) if on such Distribution Date the Pass-Through Rate for the
Class IIM-2 Certificates is based upon the Available Funds Cap for the Group II
Mortgage Loans, the excess of (i) the amount of interest the Class IIM-2
Certificates would otherwise be entitled to receive on such Distribution Date
had such rate been calculated as the sum of One-Month LIBOR and the applicable
Class IIM-2 Pass-Through Margin for such Distribution Date, up to the Weighted
Maximum Rate Cap, over (ii) the amount of interest payable on the Class IIM-2
Certificates at the Available Funds Cap for the Group II Mortgage Loans for such
Distribution Date and (B) the Class IIM-2 Interest Carryover Amount for all
previous Distribution Dates not previously paid pursuant to Section 4.04(f)(ix),
together with interest thereon at a rate equal to the sum of One-Month LIBOR and
the applicable Class IIM-2 Pass-Through Margin for such Distribution Date.
Class IIM-2 Margin: As of any Distribution Date up to and
including the Optional Termination Date for the Group II Certificates, ____% per
annum and, as of any Distribution Date after such Optional Termination Date,
____% per annum.
Class IIM-2 Pass-Through Rate: For the first Distribution
Date,____% per annum. As of any Distribution Date thereafter, the least of (i)
One-Month LIBOR plus the Class IIM-2 Margin, (ii) the Weighted Maximum Rate Cap
and (iii) the Available Funds Cap for the Group II Mortgage Loans for such
Distribution Date.
Class IIM-2 Unpaid Realized Loss Amount: As of any
Distribution Date, the excess of (i) the Class IIM-2 Applied Realized Loss
Amount over (ii) the sum of all distributions in reduction of the Class IIM-2
Applied Realized Loss Amounts on all previous Distribution Dates.
Class R Certificate: Any one of the Class R Certificates
executed by the Depositor and authenticated by the Authenticating Agent in
substantially the form set forth in Exhibit D.
Closing Date: [DATE]
Code: The Internal Revenue Code of 1986, including any
successor or amendatory provisions.
Collection Account: The separate Eligible Account created and
initially maintained by the Subservicer pursuant to Section 3.05(b) in the name
of the Trustee for the benefit of the Certificateholders and designated
"[TRUSTEE], as trustee, in trust for registered holders of Chase Funding
Mortgage Loan Asset-Backed Certificates, Series [_______]". Funds
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in the Collection Account shall be held in trust for the Certificateholders for
the uses and purposes set forth in this Agreement.
Compensating Interest: With respect to any Mortgage Loan, an
amount equal to the amount set forth in Section 4.02 hereof, to be applied to
the interest portion of a Prepayment Interest Shortfall on such Mortgage Loan
pursuant to Section 4.02 hereof.
Corporate Trust Office: The designated office of the Trustee
in the State of New York where at any particular time its corporate trust
business with respect to this Agreement shall be administered, which office at
the date of the execution of this Agreement is located at _____________________.
Corresponding Classes: With respect to Subsidiary REMIC
Interest I, the Group I Certificates. With respect to Subsidiary REMIC Interest
II, the Group II Certificates.
Current Interest: Any of the Class IA-1 Current Interest, the
Class IA-2 Current Interest, the Class IA-3 Current Interest, the Class IA-4
Current Interest, the Class IA-5 Current Interest, the Class IA-6 Current
Interest, the Class IIA-1 Current Interest, the Class IIA-2 Current Interest,
the Class IM-1 Current Interest, the Class IIM-1 Current Interest, the Class
IM-2 Current Interest, the Class IIM-2 Current Interest, the Class IB Current
Interest or the Class IIB Current Interest.
Cut-off Date: [DATE].
Cut-off Date Principal Balance: As to any Mortgage Loan, the
unpaid principal balance thereof as of the close of business on the calendar day
immediately preceding the Cut-off Date after application of all payments of
principal due on or prior to the Cut-off Date, whether or not received, and all
Principal Prepayments received prior to the Cut-off Date, but without giving
effect to any installments of principal received in respect of Due Dates on and
after the Cut-off Date.
Definitive Certificates: As defined in Section 5.06.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be
replaced by a Replacement Mortgage Loan.
Delinquent: A Mortgage Loan is "delinquent" if any payment due
thereon is not made pursuant to the terms of such Mortgage Loan by the close of
business on the day such payment is scheduled to be due. A Mortgage Loan is "30
days delinquent" if such payment has not been received by the close of business
on the corresponding day of the month immediately succeeding the month in which
such payment was due, or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was due on the 31st
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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.
Denomination: With respect to each Certificate, the amount set
forth on the face thereof as the "Initial Principal Balance of this
Certificate".
Depositor: Chase Funding, Inc., a New York corporation, or its
successor in interest.
Depository: The initial Depository shall be The Depository
Trust Company ("DTC"), the nominee of which is Cede & Co., or any other
organization registered as a "clearing agency" pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. The Depository shall initially be
the registered Holder of the Book-Entry Certificates. The Depository shall at
all times be a "clearing corporation" as defined in Section 8-102(3) of the
Uniform Commercial Code of the State of New York.
Depository Agreement: With respect to the Class of Book-Entry
Certificates, the agreement among the Depositor, the Trustee and the initial
Depository.
Depository Participant: A broker, dealer, bank or other
financial institution or other person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
Determination Date: With respect to any Distribution Date, the
15th day of the month of such Distribution Date or, if such 15th day is not a
Business Day, the immediately preceding Business Day.
Distribution Account: The separate Eligible Account created
and maintained by the Master Servicer pursuant to Section 3.05 in the name of
the Trustee for the benefit of the Certificateholders and designated "[TRUSTEE],
as trustee, in trust for registered holders of Chase Funding Mortgage Loan
Asset-Backed Certificates, Series [_______]". Funds in the Distribution Account
shall be held in trust for the Certificateholders for the uses and purposes set
forth in this Agreement.
Distribution Date: The 25th day of each calendar month after
the initial issuance of the Certificates, or if such 25th day is not a Business
Day, the next succeeding Business Day, commencing in [DATE].
Due Date: With respect to any Distribution Date and any
Mortgage Loan, the day during the related Due Period on which a Scheduled
Payment is due.
Due Period: With respect to any Distribution Date, the period
beginning on the second day of the calendar month preceding the calendar month
in which such Distribution Date
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occurs (or, in the case of the first Distribution Date, beginning on the Cut-off
Date) and ending on the first day of the month in which such Distribution Date
occurs.
Eligible Account: An account that is (i) maintained with a
depository institution the long-term unsecured debt obligations of which are
rated by each Rating Agency in one of its two highest rating categories, or (ii)
maintained with the corporate trust department of a bank which has a rating of
at least BBB- or A-2 by [RATING AGENCY], or (iii) an account or accounts the
deposits in which are fully insured by the FDIC, or (iv) an account or accounts
in a depository institution in which such accounts are insured by the FDIC (to
the limit established by the FDIC), the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
and acceptable to the Trustee and each Rating Agency, the Certificateholders
have a claim with respect to the funds in such account and a perfected first
security interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
maintained, or (v) otherwise acceptable to each Rating Agency without reduction
or withdrawal of the rating of any Class of Certificates, as evidenced by a
letter from each Rating Agency.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Restricted Certificate: Each of the Class IM-1, Class
IM-2, Class IB, Class IIM-1, Class IIM-2, Class IIB and Class R Certificates.
Event of Default: As defined in Section 7.01 hereof.
Excess Proceeds: With respect to any Liquidated Loan, any
Liquidation Proceeds that are in excess of the sum of (i) the unpaid principal
balance of such Liquidated Loan as of the date of such liquidation plus (ii)
interest at the Mortgage Rate from the Due Date as to which interest was last
paid or advanced to Certificateholders (and not reimbursed to the Subservicer)
up to the Due Date in the month in which such Liquidation Proceeds are required
to be distributed on the Stated Principal Balance of such Liquidated Loan
outstanding during each Due Period as to which such interest was not paid or
advanced.
FDIC: The Federal Deposit Insurance Corporation, or any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FNMA: The Federal National Mortgage Association, a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
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Gross Margin: The percentage set forth in the related Mortgage
Note for the Mortgage Loans in Loan Group II to be added to the index for use in
determining the Mortgage Rate on each Adjustment Date, and which is set forth in
the Mortgage Loan Schedule for the Group II Mortgage Loans.
Group I Certificate Principal Balance: The sum of the Class
IA-1 Certificate Principal Balance, the Class IA-2 Certificate Principal
Balance, the Class IA-3 Certificate Principal Balance, the Class IA-4
Certificate Principal Balance, the Class IA-5 Certificate Principal Balance, the
Class IA-6 Certificate Principal Balance, the Class IM-1 Certificate Principal
Balance, the Class IM-2 Certificate Principal Balance and the Class IB
Certificate Principal Balance.
Group I Certificates: Any of the Class IA-1, Class IA-2, Class
IA-3, Class IA-4, Class IA-5, Class IA-6, Class IM-1, Class IM-2 or Class IB
Certificates.
Group I Class A Certificate Principal Balance: The sum of the
Class IA-1 Certificate Principal Balance, the Class IA-2 Certificate Principal
Balance, the Class IA-3 Certificate Principal Balance, the Class IA-4
Certificate Principal Balance, the Class IA-5 Certificate Principal Balance and
the Class IA-6 Certificate Principal Balance.
Group I Class A Certificates: Any of the Class IA-1, Class
IA-2, Class IA-3, Class IA-4, Class IA-5 or Class IA-6 Certificates.
Group I Class A Principal Distribution Amount: With respect to
any Distribution Date (i) prior to the Group I Stepdown Date or any Distribution
Date on which a Group I Trigger Event has occurred, 100% of the Group I
Principal Distribution Amount for such Distribution Date and (ii) on or after
the Group I Stepdown Date where a Group I Trigger Event has not occurred, the
excess of (A) the Group I Class A Certificate Principal Balance immediately
prior to such Distribution Date over (B) the lesser of (I) _____% of the Stated
Principal Balance of the Group I Mortgage Loans as of the end of the immediately
preceding Due Period and (II) the Stated Principal Balance of the Group I
Mortgage Loans as of the end of the immediately preceding Due Period less
$________.
Group I Class B Principal Distribution Amount: With respect to
any Distribution Date on or after the Group I Stepdown Date and as long as a
Group I Trigger Event has not occurred and continuing, the excess of (i) the sum
of (A) the Group I Class A Certificate Principal Balance (after taking into
account distribution of the Group I Class A Principal Distribution Amount on
such Distribution Date), (B) the Class IM-1 Certificate Principal Balance (after
taking into account distribution of the Group I Class IM-1 Distribution Amount
on such Distribution Date), (C) the Class IM-2 Certificate Principal Balance
(after taking into account distribution of the Group I Class IM-2 Principal
Distribution Amount for such Distribution Date), and (D) the Class IB
Certificate Principal Balance immediately prior to such Distribution Date over
(ii) the lesser of (A) ___% of the Stated Principal Balance of the Group I
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Mortgage Loans as of the end of the preceding Due Period and (B) the Stated
Principal Balances of the Group I Mortgage Loans as of the end of the preceding
Due Period less $________, provided, however, that after the Group I Class A
Certificate Principal Balance, the Class IM-1 Certificate Principal Balance and
the Class IM-2 Certificate Principal Balance has been reduced to zero, the Group
I Class B Principal Distribution Amount for such Distribution Date will equal
100% of the Group I Principal Distribution Amount for such Distribution Date.
Group I Class IM-1 Principal Distribution Amount: With respect
to any Distribution Date on or after the Group I Stepdown Date, 100% of the
Group I Principal Distribution Amount for such Distribution Date if the Group I
Class A Certificate Principal Balance has been reduced to zero and a Group I
Trigger Event has occurred and is continuing, or, if any of the Group I Class A
Certificates are still outstanding and as long as a Group I Trigger Event has
not occurred and is not continuing, the excess of (i) the sum of (A) the Group I
Class A Certificate Principal Balance (after taking into account distributions
of the Group I Class A Principal Distribution Amount on such Distribution Date)
and (B) the Class IM-1 Certificate Principal Balance immediately prior to such
Distribution Date over (ii) the lesser of (A) ____% of the Stated Principal
Balances of the Group I Mortgage Loans as of the end of the preceding Due Period
and (B) the Stated Principal Balances for the Group I Mortgage Loans as of the
end of the preceding Due Period less $_______. Notwithstanding the foregoing, on
any Distribution Date prior to the Stepdown Date on which the Certificate
Principal Balance of each Class of Group I Class A Certificates has been reduced
to zero, the Group I Class IM-1 Principal Distribution Amount will equal the
lesser of (A) the outstanding Certificate Principal Balance of the Class IM-1
Certificates and (B) 100% of the Group I Principal Distribution Amount.
Group I Class IM-2 Principal Distribution Amount: With respect
to any Distribution Date on or after the Group I Stepdown Date, 100% of the
Group I Principal Distribution Amount for such Distribution Date if the Group I
Class A Certificate Principal Balance and the Class IM-1 Certificate Principal
Balance have been reduced to zero and a Group I Trigger Event has occurred and
is continuing, or, if any of the Group I Class A or Class IM-1 Certificates are
still outstanding and as long as a Group I Trigger Event has not occurred and is
not continuing, the excess of (i) the sum of (A) the Group I Class A Certificate
Principal Balance (after taking into account distributions of the Group I Class
A Principal Distribution Amount on such Distribution Date), (B) the Class IM-1
Certificate Principal Balance (after taking into account distributions of the
Group I Class IM-1 Principal Distribution Amount on such Distribution Date) and
(C) the Class IM-2 Certificate Principal Balance immediately prior to such
Distribution Date over (ii) the lesser of (A) ___% of the Stated Principal
Balances of the Group I Mortgage Loans as of the end of the preceding Due Period
and (B) the Stated Principal Balances for the Group I Mortgage Loans as of the
end of the preceding Due Period less $________. Notwithstanding the foregoing,
on any Distribution Date prior to the Stepdown Date on which the Certificate
Principal Balance of each Class of Group I Class A Certificates and the Class
IM-1 Certificates has been reduced to zero, the Group I Class IM-2 Principal
Distribution Amount will equal the lesser of (A) the outstanding Certificate
Principal Balance of the Class IM-2 Certificates and (B) 100% of the Group I
Principal Distribution Amount.
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Group I Extra Principal Distribution: With respect to any
Distribution Date, the lesser of (a) the Group I Interest Funds and Group II
Interest Funds available for the purpose set forth in Section 4.04(e) and (f)
hereof, and (b) an amount equal to (i) prior to the Group I Stepdown Date, the
excess of (A) the sum of (I) the Group I Certificate Principal Balance and (II)
$_______ over (B) the Stated Principal Balance of the Group I Mortgage Loans as
of the end of the preceding Due Period and (ii) on and after the Group I
Stepdown Date, the excess of (A) the sum of (I) the Group I Certificate
Principal Balance and (II) the greater of (x) ___% of the Stated Principal
Balance of the Group I Mortgage Loans as of the end of the preceding Due Period
and (y) $_______ over (B) the Stated Principal Balance of the Group I Mortgage
Loans.
Group I Interest Funds: With respect to Group I Mortgage Loans
and any Servicer Advance Date, the sum, without duplication, of (i) all
scheduled interest collected during the related Due Period with respect to the
Group I Mortgage Loans less the sum of (a) the Servicing Fee and (b) the Master
Servicer Fee, (ii) all Advances relating to interest with respect to the Group I
Mortgage Loans, (iii) all Compensating Interest with respect to the Group I
Mortgage Loans and (iv) Liquidation Proceeds with respect to the Group I
Mortgage Loans (to the extent such Liquidation Proceeds relate to interest) less
all Non-Recoverable Advances relating to interest reimbursed during the related
Due Period.
Group I Mortgage Loans: The pool of Mortgage Loans identified
in the Mortgage Loan Schedule as having a Mortgage Rate which is fixed for the
life of the related Mortgage, including any Mortgage Loans delivered in
replacement thereof.
Group I Net Rate: The weighted average Net Mortgage Rate for
Mortgage Loans in Loan Group I.
Group I Principal Distribution Amount: With respect to each
Distribution Date, the sum of (i) the Group I Principal Funds for such
Distribution Date and (ii) any Group I Extra Principal Distribution Amount for
such Distribution Date.
Group I Principal Funds: With respect to the Group I Mortgage
Loans, the sum, without duplication, of (i) the scheduled principal collected
during the related Due Period or Advanced on or before the related Servicer
Advance Date, (ii) prepayments collected in the related Prepayment Period, (iii)
the Stated Principal Balance of each Mortgage Loans that was repurchased by the
Depositor, (iv) the amount, if any, by which the aggregate unpaid principal
balance of any Replacement Mortgage Loan is less than the aggregate unpaid
principal balance of the related Deleted Mortgage Loans delivered by the
Depositor in connection with a substitution of a Mortgage Loan pursuant to
Section 2.03(c) and (v) all Liquidation Proceeds collected during the related
Due Period (to the extent such Liquidation Proceeds related to principal) less
all Non-Recoverable Advances relating to principal reimbursed and all
NonRecoverable Servicing Advances reimbursed during the related Due Period.
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Group I Required Percentage: As of any Distribution Date
following a Group I Stepdown Date, the quotient of (i) the excess of (A) the
Stated Principal Balances of the Group I Mortgage Loans over (B) the Certificate
Principal Balance of the most senior Class of Group I Certificates outstanding
as of the preceding Servicer Advance Date and (ii) the Certificate Principal
Balance of the most senior Class of Group I Certificates outstanding on such
Distribution Date.
Group I Stepdown Date: The later to occur of (i) the
Distribution Date in [DATE] or (ii) the first Distribution Date on which (A) the
Group I Class A Certificate Principal Balance is less than or equal to (B) ____%
of the Stated Principal Balances of the Group I Mortgage Loans as of the end of
the preceding Due Period.
Group I Subordinated Certificates: The Class IM-1, Class IM-2
and Class IB Certificates.
Group I Trigger Event: With respect to the Group I
Certificates after a Group I Stepdown Date, the Distribution Date on which (A)
the product of two times the quotient of (i) the aggregate Stated Principal
Balance of all Group I Mortgage Loans which are 60 or more days delinquent
(including, for the purposes of this calculation, Group I Mortgage Loans in
foreclosure and REO Properties) and (ii) the Stated Principal Balance of the
Group I Mortgage Loans as of the preceding Servicer Advance Date equals or
exceeds (b) the Group I Required Percentage.
Group II Certificates: Any of the Class IIA-1, Class IIA-2,
Class IIM-1, Class IIM-2 and Class IIB Certificates.
Group II Certificate Principal Balance: The sum of the Class
IIA-1, Class IIA-2, Class IIM-1, Class IIM-2 and Class IIB Certificate Principal
Balances.
Group II Class A Certificate Principal Balance: The sum of the
Class IIA-1 Certificate Principal Balance and the Class IIA-2 Certificate
Principal Balance.
Group II Class A Certificates: Either of the Class IIA-1 or
Class IIA-2 Certificates.
Group II Class A Principal Distribution Amount: With respect
to any Distribution Date (i) prior to the Group II Stepdown Date or any
Distribution Date on which a Group II Trigger Event has occurred, 100% of the
Group II Principal Distribution Amount for such Distribution Date and (ii) on or
after the Group II Stepdown Date where a Group II Trigger Event has not
occurred, the excess of (A) the Group II Class A Certificate Principal Balance
immediately prior to such Distribution Date over (B) the lesser of (I) ___% (or
___%, if a Stepup Trigger Event has occurred) of the Stated Principal Balance of
the Group II Mortgage Loans as of the end of the immediately preceding Due
Period and (II) the Stated Principal
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Balance of the Group II Mortgage Loans as of the end of the immediately
preceding Due Period less $________.
Group II Class B Principal Distribution Amount: With respect
to any Distribution Date on or after the Group II Stepdown Date and as long as a
Group II Trigger Event has not occurred and continuing, the excess of (i) the
sum of (A) the Group II Class A Certificate Principal Balance (after taking into
account distribution of the Group II Class A Principal Distribution Amount on
such Distribution Date), (B) the Class IIM-1 Certificate Principal Balance after
taking into account distribution of the Group II Class IIM-1 Distribution Amount
on such Distribution Date), (C) the Class IIM-2 Certificate Principal Balance
(after taking into account distribution of the Group II Class IIM-2 Principal
Distribution Amount for such Distribution Date), and (D) the Class IIB
Certificate Principal Balance immediately prior to such Distribution Date over
(ii) the lesser of (A) ____% (or ____%, if a Stepup Trigger Event has occurred)
of the Stated Principal Balance of the Group II Mortgage Loans as of the end of
the preceding Due Period and (B) the Stated Principal Balances of the Group II
Mortgage Loans as of the end of the preceding Due Period less $________,
provided, however, that after the Group II Class A Certificate Principal
Balance, the Class IIM-1 Certificate Principal Balance and the Class IIM-2
Certificate Principal Balance has been reduced to zero, the Group II Class B
Principal Distribution Amount for such Distribution Date will equal 100% of the
Group II Principal Distribution Amount for such Distribution Date.
Group II Class IIM-1 Principal Distribution Amount: With
respect to any Distribution Date on or after the Group II Stepdown Date, 100% of
the Group II Principal Distribution Amount for such Distribution Date if the
Group II Class A Certificate Principal Balance has been reduced to zero and a
Group II Trigger Event has occurred and is continuing, or, if any of the Group
II Class A Certificates are still outstanding and as long as a Group II Trigger
Event has not occurred and is not continuing, the excess of (i) the sum of (A)
the Group II Class A Certificate Principal Balance (after taking into account
distributions of the Group II Class A Principal Distribution Amount on such
Distribution Date) and (B) the Class IIM-1 Certificate Principal Balance
immediately prior to such Distribution Date over (ii) the lesser of (A) ___% (or
___%, if a Stepup Trigger Event has occurred) of the Stated Principal Balances
of the Group II Mortgage Loans as of the end of the preceding Due Period and (B)
the Stated Principal Balances for the Group II Mortgage Loans as of the end of
the preceding Due Period less $________. Notwithstanding the foregoing, on any
Distribution Date prior to the Stepdown Date on which the Certificate Principal
Balance of each Class of Group II Class A Certificates has been reduced to zero,
the Group II Class IIM-1 Principal Distribution Amount will equal the lesser of
(A) the outstanding Certificate Principal Balance of the Class IIM-1
Certificates and (B) 100% of the Group II Principal Distribution Amount.
Group II Class IIM-2 Principal Distribution Amount: With
respect to any Distribution Date on or after the Group II Stepdown Date, 100% of
the Group II Principal Distribution Amount for such Distribution Date if the
Group II Class A Certificate Principal Balance and the Class IIM-1 Certificate
Principal Balance have been reduced to zero and a
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Group II Trigger Event has occurred and is continuing, or, if any of the Group
II Class A or Class IIM-1 Certificates are still outstanding and as long as a
Group II Trigger Event has not occurred and is not continuing, the excess of (i)
the sum of (A) the Group II Class A Certificate Principal Balance (after taking
into account distributions of the Group II Class A Principal Distribution Amount
on such Distribution Date), (B) the Class IIM-1 Certificate Principal Balance
(after taking into account distributions of the Group II Class IIM-1 Principal
Distribution Amount on such Distribution Date) and (C) the Class IIM-2
Certificate Principal Balance immediately prior to such Distribution Date over
(ii) the lesser of (A) ___% (or, ___%, if a Stepup Trigger Event has occurred)
of the Stated Principal Balances of the Group II Mortgage Loans as of the end of
the preceding Due Period and (B) the Stated Principal Balances of the Group II
Mortgage Loans as of the end of the preceding Due Period less $_______.
Notwithstanding the foregoing, on any Distribution Date prior to the Stepdown
Date on which the Certificate Principal Balance of each Class of Group II Class
A Certificates and the Class IIM-1 Certificates has been reduced to zero, the
Group II Class IIM-2 Principal Distribution Amount will equal the lesser of (A)
the outstanding Certificate Principal Balance of the Class IIM-2 Certificates
and (B) 100% of the Group II Principal Distribution Amount.
Group II Extra Principal Distribution: With respect to any
Distribution Date, the lesser of (a) the Group I Interest Funds and Group II
Interest Funds available for the purpose set forth in Section 4.04(e) and (f)
hereof, and (b) an amount equal to (i) prior to the Group II Stepdown Date, the
excess of (A) the sum of (I) the Group II Certificate Principal Balance and (II)
$________ (or, $_______, if a Stepup Trigger Event has occurred) over (B) the
Stated Principal Balance of the Group II Mortgage Loans as of the end of the
preceding Due Period and (ii) on and after the Group II Stepdown Date, the
excess of (A) the sum of (I) the Group II Certificate Principal Balance and (II)
the greater of (x) ___% (or ___%, if a Stepup Trigger Event has occurred) of the
Stated Principal Balance of the Group II Mortgage Loans as of the end of the
preceding Due Period and (y) $_________ over (B) the Stated Principal Balance of
the Group II Mortgage Loans.
Group II Interest Funds: With respect to Group II Mortgage
Loans and any Servicer Advance Date, the sum, without duplication, of (i) all
scheduled interest collected during the related Due Period with respect to the
Group II Mortgage Loans less the sum of (a) the Servicing Fee and (b) the Master
Servicer Fee, (ii) all Advances relating to interest with respect to the Group
II Mortgage Loans, (iii) all Compensating Interest with respect to the Group II
Mortgage Loans and (iv) Liquidation Proceeds with respect to the Group II
Mortgage Loans (to the extent such Liquidation Proceeds relate to interest) less
all Non-Recoverable Advances relating to interest reimbursed during the related
Due Period.
Group II Mortgage Loans: The pool of Mortgage Loans identified
in the Mortgage Loan Schedule as having a Mortgage Rate which is adjustable,
including any Mortgage Loans delivered in replacement thereof.
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Group II Net Rate: The weighted average Net Mortgage Rate for
Group II Mortgage Loans.
Group II Principal Distribution Amount: With respect to each
Distribution Date, the sum of (i) the Group II Principal Funds for such
Distribution Date and (ii) any Group II Extra Principal Distribution Amount for
such Distribution Date.
Group II Principal Funds: With respect to the Group II
Mortgage Loans, the sum, without duplication, of (i) the scheduled principal
collected during the related Due Period or Advanced on or before the related
Servicer Advance Date, (ii) prepayments collected in the related Prepayment
Period, (iii) the Stated Principal Balance of each Mortgage Loans that was
repurchased by the Depositor, (iv) the amount, if any, by which the aggregate
unpaid principal balance of any Replacement Mortgage Loan is less than the
aggregate unpaid principal of the related Deleted Mortgage Loans delivered by
the Depositor in connection with a substitution of a Mortgage Loan pursuant to
Section 2.03(c) and (v) all Liquidation Proceeds collected during the related
Due Period (to the extent such Liquidation Proceeds related to principal) less
all Non-Recoverable Advances relating to principal reimbursed and all
Non-Recoverable Servicing Advances reimbursed during the related Due Period.
Group II Required Percentage: As of any Distribution Date
following a Group II Stepdown Date, the quotient of (i) the excess of (A) the
Stated Principal Balances of the Group II Mortgage Loans over (B) the
Certificate Principal Balance of the most senior Class of Group II Certificates
outstanding as of the preceding Servicer Advance Date and (ii) the Certificate
Principal Balance of the most senior Class of Group II Certificates outstanding
on such Distribution Date.
Group II Stepdown Date: The later to occur of (i) the
Distribution Date in [DATE] or (ii) the first Distribution Date on which (A) the
Group II Class A Certificate Principal Balance is less than or equal to (B) ___%
(or ___%, if a Stepup Trigger Event has occurred) of the Stated Principal
Balances of the Group II Mortgage Loans as of the end of the preceding Due
Period.
Group II Subordinated Certificates: The Class IIM-1, Class
IIM-2 and Class IIB Certificates.
Group II Trigger Event: With respect to the Group II
Certificates after a Group II Stepdown Date, the Distribution Date on which (A)
the product of ___ times the quotient of (i) the aggregate Stated Principal
Balance of all Group II Mortgage Loans which are 60 or more days delinquent
(including, for the purposes of this calculation, Group II Mortgage Loans in
foreclosure and REO Properties) and (ii) the Stated Principal Balance of the
Group II Mortgage Loans as of the preceding Servicer Advance Date equals or
exceeds (b) the Group II Required Percentage.
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Initial Adjustment Date: As to any Mortgage Loan in Loan Group
II, the first Adjustment Date following the origination of such Mortgage Loan.
Initial Collection Account Deposit: An amount equal to the
aggregate of all amounts in respect of (i) principal of the Mortgage Loans due
on or after the Cut-off Date and received by the Subservicer before the Closing
Date and not applied in computing the Cut-off Date Principal Balance thereof and
(ii) interest on the Mortgage Loans due on and after the Cut-off Date and
received by the Subservicer before the Closing Date.
Initial Certificate Principal Balance: With respect to any
Certificate, the Certificate Principal Balance of such Certificate or any
predecessor Certificate on the Closing Date.
Initial Mortgage Rate: As to each Mortgage Loan, the Mortgage
Rate in effect prior to the Initial Adjustment Date.
Insurance Policy: With respect to any Mortgage Loan included
in the Trust Fund, any insurance policy, including all riders and endorsements
thereto in effect with respect to such Mortgage Loan, including any replacement
policy or policies for any Insurance Policies.
Insurance Proceeds: Proceeds paid in respect of the Mortgage
Loans pursuant to any Insurance Policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are payable to the mortgagee under
the Mortgage, the Subservicer or the trustee under the deed of trust and are not
applied to the restoration of the related Mortgaged Property or released to the
Mortgagor in accordance with the procedures that the Subservicer would follow in
servicing mortgage loans held for its own account, in each case other than any
amount included in such Insurance Proceeds in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or
any other insurance policy with respect to the Mortgage Loans.
Interest Determination Date: With respect to the Group II
Certificates (other than the Class IIA-2 Certificates) for any Accrual Period
other than the first Accrual Period, the second LIBOR Business Day preceding the
commencement of such Accrual Period.
Latest Possible Maturity Date: The Distribution Date following
the third anniversary of the scheduled maturity date of the Mortgage Loan in the
Trust Fund having the latest scheduled maturity date as of the Cut-off Date.
LIBOR Business Day: Any day on which banks in the City of
London, England and New York City, U.S.A. are open and conducting transactions
in foreign currency and exchange.
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Liquidated Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan that has been liquidated through deed-in-lieu of
foreclosure, foreclosure sale, trustee's sale or other realization as provided
by applicable law governing the real property subject to the related Mortgage
and any security agreements and as to which the Subservicer has certified (in
accordance with Section 3.12) in the related Prepayment Period that it has
received all amounts it expects to receive in connection with such liquidation.
Liquidation Proceeds: Amounts, including Insurance Proceeds,
received in connection with the partial or complete liquidation of Mortgage
Loans, whether through trustee's sale, foreclosure sale or otherwise or amounts
received in connection with any condemnation or partial release of a Mortgaged
Property and any other proceeds received in connection with an REO Property,
less the sum of related unreimbursed Advances, Servicing Fees and Servicing
Advances.
Loan Group: Either of the Group I Mortgage Loans or the Group
II Mortgage Loans.
Loan Group I: The Group I Mortgage Loans.
Loan Group II: The Group II Mortgage Loans.
Loan-to-Value Ratio: The fraction, expressed as a percentage,
the numerator of which is the original principal balance of the related Mortgage
Loan and the denominator of which is the lesser of (X) the Appraised Value of
the related Mortgaged Property and (Y) the sales price of the related Mortgaged
Property at the time of origination.
Master REMIC: As described in the Preliminary Statement.
Master Servicer: Chase Manhattan Mortgage Corporation, a New
Jersey corporation, or its successor in interest.
Master Servicer Fee: With respect to any Mortgage Loan and any
Distribution Date, the fee payable to the Master Servicer pursuant to Section
6.06 equal to the product of (a) 1/12th of the Master Servicer Fee Rate and (b)
the principal balance of such Mortgage Loan immediately prior to such
Distribution Date.
Master Servicer Fee Rate: A per annum rate equal to _______%.
Maximum Mortgage Rate: With respect to each Group II Mortgage
Loan, the maximum rate of interest set forth as such in the related Mortgage
Note.
Minimum Mortgage Rate: With respect to each Group II Mortgage
Loan, the minimum rate of interest set forth as such in the related Mortgage
Note.
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Monthly Statement: The statement delivered to the
Certificateholders pursuant to Section 4.05.
Mortgage: The mortgage, deed of trust or other instrument
creating a first lien on or first priority ownership interest in an estate in
fee simple in real property securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.01
hereof pertaining to a particular Mortgage Loan and any additional documents
delivered to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loans: Such of the Group I Mortgage Loans and Group
II Mortgage Loans transferred and assigned to the Trustee pursuant to the
provisions hereof as from time to time are held as a part of the Trust Fund
(including any REO Property), the mortgage loans so held being identified in the
Mortgage Loan Schedule, notwithstanding foreclosure or other acquisition of
title of the related Mortgaged Property. Any mortgage loan that was intended by
the parties hereto to be transferred to the Trust Fund as indicated by such
Mortgage Loan Schedule which is in fact not so transferred for any reason shall
continue to be a Mortgage Loan hereunder until the Purchase Price with respect
thereto has been paid to the Trust Fund.
Mortgage Loan Repurchase Price: The price, calculated as set
forth in Section 9.01, to be paid in connection with the repurchase of the
Mortgage Loans pursuant to Section 9.01.
Mortgage Loan Schedule: The list of Mortgage Loans (as from
time to time amended by the Trustee to reflect the deletion of Deleted Mortgage
Loans and the addition of Replacement Mortgage Loans pursuant to the provisions
of this Agreement) transferred to the Trustee as part of the Trust Fund and from
time to time subject to this Agreement, attached hereto as Exhibit F, setting
forth the following information with respect to each Mortgage Loan:
(i) the loan number;
(ii) the Appraised Value;
(iii) the Initial Mortgage Rate;
(iv) the maturity date;
(v) the original principal balance;
(vi) the Cut-off Date Principal Balance;
(vii) the first payment date of the Mortgage Loan;
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(xiii) the Scheduled Payment in effect as of the Cut-off Date;
(ix) the Loan-to-Value Ratio at origination;
(x) a code indicating whether the residential dwelling at the
time of origination was represented to be owner-occupied;
(xi) a code indicating the property type;
(xii) with respect to each Group II Mortgage Loan;
(a) the frequency of each Adjustment Date;
(b) the next Adjustment Date;
(c) the Maximum Mortgage Rate;
(d) the Minimum Mortgage Rate; and
(e) the Mortgage Rate as of the Cut-off Date;
(f) the related Periodic Rate Cap; and
(g) the Gross Margin; and
(xii) the purpose of the Mortgage Loan.
Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Pool: The aggregate of the Mortgage Loans identified
in the Mortgage Loan Schedule.
Mortgage Rate: The annual rate of interest borne by a Mortgage
Note from time to time.
Mortgaged Property: The underlying property securing a
Mortgage Loan.
Mortgagor: The obligor on a Mortgage Note.
MR Interest: The sole class of "residual interest" in the
Master REMIC.
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<PAGE>
Net Mortgage Rate: As to each Mortgage Loan, and at any time,
the per annum rate equal to the Mortgage Rate less the sum of (a) the Servicing
Fee Rate and (b) the Master Servicer Fee Rate.
Non-Book-Entry Certificate: Any Certificate other than a Book
Entry Certificate.
Non-Recoverable Advance: Any portion of an Advance previously
made or proposed to be made by the Subservicer that, in the good faith judgment
of the Subservicer, will not or, in the case of a current delinquency, would
not, be ultimately recoverable by the Subservicer from the related Mortgagor,
related Liquidation Proceeds or otherwise.
Non-Recoverable Servicing Advance: Any portion of a Servicing
Advance previously made or proposed to be made by the Subservicer that, in the
good faith judgment of the Subservicer, will not be ultimately recoverable by
the Subservicer from the related Mortgagor, related Liquidation Proceeds or
otherwise.
Non-Supported Interest Shortfall: As defined in Section 4.02.
Officer's Certificate: A certificate (i) signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a vice
president (however denominated), an Assistant Vice President, the Treasurer, the
Secretary, or one of the assistant treasurers or assistant secretaries of the
Depositor, the Master Servicer or the Subservicer (or any other officer
customarily performing functions similar to those performed by any of the above
designated officers and also to whom, with respect to a particular matter, such
matter is referred because of such officer's knowledge of and familiarity with a
particular subject) or (ii), if provided for in this Agreement, signed by a
Servicing Officer, as the case may be, and delivered to the Depositor, the
Master Servicer and the Trustee, as the case may be, as required by this
Agreement.
One-Month LIBOR: With respect to any Accrual Period, the rate
determined by the Master Servicer on the related Interest Determination Date on
the basis of (a) the offered rates for one-month United States dollar deposits,
as such rates appear on Telerate page 3750, as of 11:00 a.m. (London time) on
such Interest Determination Date or (b) if such rate does not appear on Telerate
Page 3750 as of 11:00 a.m. (London time), the offered rates of the Reference
Banks for one-month United States dollar deposits, as such rates appear on the
Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest
Determination Date. If One-Month LIBOR is determined pursuant to clause (b)
above, on each Interest Determination Date, One-Month LIBOR for the related
Accrual Period will be established by the Master Servicer as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations,
One-Month LIBOR for the related Accrual Period
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shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole
multiple of 0.03125%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations,
One-Month LIBOR for the related Accrual Period shall be
the higher of (i) One-Month LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve
Interest Rate.
Opinion of Counsel: A written opinion of counsel, who may be
counsel for the Depositor, the Master Servicer or the Subservicer, reasonably
acceptable to each addressee of such opinion; provided, however, that with
respect to Section 6.04 or 10.01, or the interpretation or application of the
REMIC Provisions, such counsel must (i) in fact be independent of the Depositor,
the Master Servicer and the Subservicer, (ii) not have any direct financial
interest in the Depositor, the Master Servicer or the Subservicer or in any
affiliate of either, and (iii) not be connected with the Depositor, the Master
Servicer or the Subservicer as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
Optional Termination: The termination of either Loan Group
hereunder pursuant to the purchase of the Mortgage Loans pursuant to the last
sentence of Section 9.01 hereof.
Optional Termination Date: With respect to either Loan Group,
the Distribution Date on which the aggregate Stated Principal Balances of the
Mortgage Loans in such Loan Group is equal to or less than __% of the Stated
Principal Balance of the Mortgage Loans in such Loan Group as of the Cut-off
Date.
Original Mortgage Loan: The mortgage loan refinanced in
connection with the origination of a Refinancing Mortgage Loan.
Original Value: The value of the property underlying a
Mortgage Loan based, in the case of the purchase of the underlying Mortgaged
Property, on the lower of an appraisal satisfactory to the Seller or the sales
price of such property or, in the case of a refinancing, on an appraisal
satisfactory to the Seller.
OTS: The Office of Thrift Supervision.
Outstanding: With respect to the Certificates as of any date
of determination, all Certificates theretofore executed and authenticated under
this Agreement except: (i) Certificates theretofore canceled by the Master
Servicer or delivered to the Master Servicer for cancellation; and (ii)
Certificates in exchange for which or in lieu of which other Certificates have
been executed by the Depositor and delivered by the Master Servicer pursuant to
this Agreement.
Outstanding Mortgage Loan: As of any Distribution Date, a
Mortgage Loan with a Stated Principal Balance greater than zero that was not the
subject of a Principal Prepayment in
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full, and that did not become a Liquidated Loan, prior to the end of the related
Prepayment Period.
Ownership Interest: As to any Certificate, any ownership
interest in such Certificate including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial.
Percentage Interest: With respect to:
(i) any Class, the percentage interest in the undivided
beneficial ownership interest in the related Certificate Group
evidenced by such Class which shall be equal to the Class Certificate
Principal Balance of such Class divided by the Class Principal Balance
of all Classes in such Certificate Group; and
(ii) any Certificate, the Percentage Interest evidenced
thereby of the related Class shall equal the percentage obtained by
dividing the Denomination of such Certificate by the aggregate of the
Denominations of all Certificates of such Class.
Periodic Rate Cap: As to each Group II Mortgage Loan and the
related Mortgage Note, the provision therein that limits permissible increases
and decreases in the Mortgage Rate on any Adjustment Date.
Permitted Investments: At any time, any one or more of the
following obligations and securities:
(i) obligations of the United States or any agency thereof,
provided such obligations are backed by the full faith and credit of
the United States;
(ii) general obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving the
highest long-term debt rating of each Rating Agency rating the
Certificates, or such lower rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency;
(iii)commercial or finance company paper which is then
receiving the highest commercial or finance company paper rating of
each such Rating Agency, or such lower rating as will not result in
the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency;
(iv) certificates of deposit, demand or time deposits, or
bankers' acceptances issued by any depository institution or trust
company incorporated under the laws of the United States or of any
state thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the commercial paper
and/or long
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term unsecured debt obligations of such depository institution or
trust company (or in the case of the principal depository institution
in a holding company system, the commercial paper or long-term
unsecured debt obligations of such holding company, but only if S&P is
not a Rating Agency) are then rated one of the two highest long-term
and the highest short-term ratings of each such Rating Agency for such
securities, or such lower ratings as will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates by any such Rating Agency;
(v) demand or time deposits or certificates of deposit issued
by any bank or trust company or savings institution to the extent that
such deposits are fully insured by the FDIC;
(vi) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation containing, at the time of the
issuance of such agreements, such terms and conditions as will not
result in the downgrading or withdrawal of the rating then assigned to
the Certificates by any such Rating Agency;
(vii) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into
with a depository institution or trust company (acting as principal)
described in clause (v) above;
(viii) securities (other than stripped bonds, stripped coupons
or instruments sold at a purchase price in excess of 115% of the face
amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any
state thereof which, at the time of such investment, have one of the
two highest long term ratings of each Rating Agency or such lower
rating as will not result in the downgrading or withdrawal of the
rating then assigned to the Certificates by any such Rating Agency, as
evidenced by a signed writing delivered by each such Rating Agency;
(ix) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time such
interests are held in such fund has the highest applicable long term
rating by each such Rating Agency or such lower rating as will not
result in the downgrading or withdrawal of the ratings then assigned
to the Certificates by each such Rating Agency;
(x) short term investment funds sponsored by any trust company
or national banking association incorporated under the laws of the
United States or any state thereof which on the date of acquisition
has been rated by each such Rating Agency in their respective highest
applicable rating category or such lower rating as will not result in
the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency; and
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<PAGE>
(xi) such other investments having a specified stated maturity
and bearing interest or sold at a discount acceptable to each Rating
Agency as will not result in the downgrading or withdrawal of the
rating then assigned to the Certificates by any such Rating Agency, as
evidenced by a signed writing delivered by each such Rating Agency;
provided, that no such instrument shall be a Permitted Investment if such
instrument (i) evidences the right to receive interest only payments with
respect to the obligations underlying such instrument, (ii) is purchased at a
premium or (iii) is purchased at a deep discount; provided, further, that no
such instrument shall be a Permitted Investment (A) if such instrument evidences
principal and interest payments derived from obligations underlying such
instrument and the interest payments with respect to such instrument provide a
yield to maturity of greater than 120% of the yield to maturity at par of such
underlying obligations, or (B) if it may be redeemed at a price below the
purchase price (the foregoing clause (B) not to apply to investments in units of
money market funds pursuant to clause (ix) above); and provided, further, that
no amount beneficially owned by any REMIC (including, without limitation, any
amounts collected by the Subservicer but not yet deposited in the Collection
Account) may be invested in investments (other than money market funds) treated
as equity interests for Federal income tax purposes, unless the Master Servicer
shall receive an Opinion of Counsel, at the expense of Master Servicer, to the
effect that such investment will not adversely affect the status of the Trust
Fund as a REMIC under the Code or result in imposition of a tax on the Trust
Fund. Permitted Investments that are subject to prepayment or call may not be
purchased at a price in excess of par.
Permitted Transferee: Any person other than (i) the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
International Organization or any agency or instrumentality of either of the
foregoing, (iii) an organization (except certain farmers' cooperatives described
in section 521 of the Code) that is exempt from tax imposed by Chapter 1 of the
Code (including the tax imposed by section 511 of the Code on unrelated business
taxable income) on any excess inclusions (as defined in section 860E(c)(1) of
the Code) with respect to any Class R Certificate, (iv) rural electric and
telephone cooperatives described in section 1381(a)(2)(C) of the Code, and (v) a
Person that is not a citizen or resident of the United States, a corporation,
partnership, or other entity created or organized in or under the laws of the
United States or any State thereof or the District of Columbia, or an estate
whose income from sources without the United States is includable in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States, or
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have authority to control all substantial decisions of the trust, unless
such Person has furnished the transferor, the Master Servicer and the Trustee
with a duly completed Internal Revenue Service Form 4224. The terms "United
States," "State" and "International Organization" shall have the meanings set
forth in section 7701 of the Code or successor provisions. A corporation will
not be treated as an instrumentality of the United States or of any State
thereof for these purposes if all of its activities are subject to tax and, with
the
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<PAGE>
exception of the Federal Home Loan Mortgage Corporation, a majority of its board
of directors is not selected by such government unit.
Person: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Pool Stated Principal Balance: As to any Distribution Date,
the aggregate of the Stated Principal Balances, as of such Distribution Date, of
the Mortgage Loans that were Outstanding Mortgage Loans as of such date.
Prepayment Assumption: A rate of prepayment, as described in
the Prospectus Supplement relating to the Certificates in a Certificate Group.
Prepayment Interest Shortfall: With respect to any
Distribution Date, for each Mortgage Loan that was the subject of a partial
Principal Prepayment, a Principal Prepayment in full (other than a Principal
Prepayment in full resulting from the purchase of a Mortgage Loan pursuant to
Section 2.02, 2.03, 3.12 or 9.01 hereof), the amount, if any, by which (i) one
month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such Mortgage Loan immediately prior to such prepayment or in the
case of a partial Principal Prepayment on the amount of such prepayment exceeds
(ii) the amount of interest paid or collected in connection with such Principal
Prepayment.
Prepayment Period: As to any Distribution Date, the period
beginning with the opening of business on the first day of the calendar month
preceding the month in which such Distribution Date occurs and ending on the
close of business on the last day of such month.
Principal Prepayment: Any Mortgagor payment or other recovery
of (or proceeds with respect to) principal on a Mortgage Loan (including loans
purchased or repurchased under Sections 2.02, 2.03, 3.12 and 9.01 hereof) that
is received in advance of its scheduled Due Date and is not accompanied by an
amount as to interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment. Partial Principal
Prepayments shall be applied by the Subservicer in accordance with the terms of
the related Mortgage Note.
Prospectus Supplement: The Prospectus Supplement dated [DATE]
relating to the public offering of the Group I Certificates and the Group II
Certificates.
PUD: A Planned Unit Development.
Purchase Price: With respect to any Mortgage Loan (x) required
to be repurchased by the Depositor, pursuant to Section 2.02, 2.03 or 3.12
hereof or (y) that the Depositor has a right to purchase pursuant to Section
3.12 hereof, an amount equal to the sum of
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(i) 100% of the unpaid principal balance of the Mortgage Loan as of the date of
such purchase together with any unreimbursed Servicing Advances and (ii) accrued
interest thereon at the applicable Net Mortgage Rate from (a) the date through
which interest was last paid by the Mortgagor to (b) the Due Date in the month
in which the Purchase Price is to be distributed to Certificateholders.
Rating Agency: [RATING AGENCY], and [RATING AGENCY]. If any
such organization or its successor is no longer in existence, "Rating Agency"
shall be a nationally recognized statistical rating organization, or other
comparable Person, designated by the Depositor, notice of which designation
shall be given to the Trustee. References herein to a given rating category of a
Rating Agency shall mean such rating category without giving effect to any
modifiers.
Realized Loss: With respect to (i) a Liquidated Loan, the
amount, if any, by which the Stated Principal Balance and accrued interest
thereon at the Net Mortgage Rate exceeds the amount actually recovered by the
Subservicer with respect thereto (net of reimbursement of Advances and Servicing
Advances) at the time such Mortgage Loan became a Liquidated Loan or (ii) with
respect to a Mortgage Loan which is not a Liquidated Loan, any amount of
principal that the Mortgagor is no longer legally required to pay (except for
the extinguishment of debt that results from the exercise of remedies due to
default by the Mortgagor).
Record Date: With respect to any Distribution Date, the close
of business on the last Business Day of the month preceding the month in which
the applicable Distribution Date occurs.
Reference Banks: Barclays Bank PLC, Chase Manhattan Mortgage
Corporation, [TRUSTEE] and NatWest, N.A.; provided that if any of the foregoing
banks are not suitable to serve as a Reference Bank, then any leading banks
selected by the Master Servicer which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, England, (ii) whose quotations appear on the Reuters
Screen LIBO Page on the relevant Interest Determination Date and (iii) which
have been designated as such by the Master Servicer.
Refinancing Mortgage Loan: Any Mortgage Loan originated in
connection with the refinancing of an existing mortgage loan.
Regular Certificate: Any one of the Group I Certificates or
the Group II Certificates.
REMIC: A "real estate mortgage investment conduit" within the
meaning of section 860D of the Code. References herein to "the REMIC" shall mean
either of (or, as the context requires, both of) the Master REMIC or the
Subsidiary REMIC created hereunder.
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REMIC Provisions: Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at sections
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and proposed, temporary and final regulations and published rulings,
notices and announcements promulgated thereunder, as the foregoing may be in
effect from time to time as well as provisions of applicable state laws.
REO Property: A Mortgaged Property acquired by the Subservicer
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
Replacement Mortgage Loan: A Mortgage Loan substituted by the
Depositor for a Deleted Mortgage Loan, which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the form
of Exhibit M, (i) have a Stated Principal Balance, after deduction of the
principal portion of the Scheduled Payment due in the month of substitution, not
in excess of, and not less than 90% of the Stated Principal Balance of the
Deleted Mortgage Loan; (ii) with respect to any Group I Mortgage Loan, have a
Mortgage Rate not less than or no more than 1% per annum higher than the
Mortgage Rate of the Deleted Mortgage Loan and, with respect to any Group II
Mortgage Loan: (a) have a Maximum Mortgage Rate no more than 1% per annum higher
or lower than the Maximum Mortgage Rate of the Deleted Mortgage Loan; (b) have a
Minimum Mortgage Rate no more than 1% per annum higher or lower than the Minimum
Mortgage Rate of the Deleted Mortgage Loan; (c) have the same index and Periodic
Rate Cap as that of the Deleted Mortgage Loan and a Gross Margin not more than
1% per annum higher or lower than that of the Deleted Mortgage Loan; and (d) not
permit conversion of the related Mortgage Rate to a fixed Mortgage Rate; (iii)
have the same or higher credit quality characteristics than that of the Deleted
Mortgage Loan; (iv) be accruing interest at a rate not more than 1% per annum
higher or lower than that of the Deleted Mortgage Loan; (v) have a Loan-to-Value
Ratio no higher than that of the Deleted Mortgage Loan; (vi) have a remaining
term to maturity no greater than (and not more than one year less than) that of
the Deleted Mortgage Loan; (vii) provide for a prepayment charge on terms
substantially similar to those of the prepayment charge, if any, of the Deleted
Mortgage Loan; (viii) have the same lien priority as the Deleted Mortgage Loan;
(ix) constitute the same occupancy type as the Deleted Mortgage Loan; and (x)
comply with each representation and warranty set forth in Section 2.03 hereof.
Request for Release: The Request for Release submitted by the
Subservicer to the Trustee, substantially in the form of Exhibits M and N, as
appropriate.
Required Insurance Policy: With respect to any Mortgage Loan,
any insurance policy that is required to be maintained from time to time under
this Agreement.
Reserve Interest Rate: With respect to any Interest
Determination Date for the Group II Certificates, the rate per annum that the
Master Servicer determines to be either (i) the arithmetic mean (rounded upwards
if necessary to the nearest whole multiple of 0.03125%) of the one-month United
States dollar lending rates which New York City banks selected by the
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Master Servicer are quoting on the relevant Interest Determination Date to the
principal London offices of leading banks in the London interbank market or in
the event that the Master Servicer can determine no such arithmetic mean or (ii)
the lowest one-month United States dollar lending rate which New York City banks
selected by the Master Servicer are quoting on such Interest Determination Date
to leading European banks.
Responsible Officer: When used with respect to the Trustee,
any Vice President, any Assistant Vice President, the Secretary, 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 also to whom, with respect to a particular matter, such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
Reuters Screen LIBO Page: The display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as may
replace such LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks.
Sale Agreement: The Mortgage Loan Sale Agreement dated as of
[DATE] between the Depositor and the Seller.
Scheduled Payment: The scheduled monthly payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such Mortgage
Loan.
Securities Act: The Securities Act of 1933, as amended.
Seller: Chase Manhattan Mortgage Corporation, a New Jersey
corporation, or its successor in interest.
Servicer Advance Date: As to any Distribution Date, the
Business Day immediately preceding the related Servicer Remittance Date.
Servicer Remittance Date: With respect to any Distribution
Date, the 18th day of the month in which such Distribution Date occurs, or if
such 18th day is not a Business Day, the Business Day preceding such 18th day.
Servicing Advances: All customary, reasonable and necessary
"out of pocket" costs and expenses incurred in the performance by the
Subservicer of its servicing obligations hereunder, including, but not limited
to, the cost of (i) the preservation, restoration and protection of a Mortgaged
Property, including without limitation advances in respect of real estate taxes
and assessments, (ii) any collection, enforcement or judicial proceedings,
including without limitation foreclosures, collections and liquidations, (iii)
the conservation, management, sale and liquidation of any REO Property and (iv)
compliance with the obligations under Section 3.10.
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Servicing Fee: As to each Mortgage Loan and any Distribution
Date, an amount equal to one month's interest at the Servicing Fee Rate on the
Stated Principal Balance of such Mortgage Loan or, in the event of any payment
of interest that accompanies a Principal Prepayment in full made by the
Mortgagor, interest at the Servicing Fee Rate on the Stated Principal Balance of
such Mortgage Loan for the period covered by such payment of interest.
Servicing Fee Rate: With respect to each Mortgage Loan, 0.50%
per annum.
Servicing Officer: Any officer of the Subservicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee and the Master Servicer by the Subservicer on the Closing Date
pursuant to this Agreement, as such list may from time to time be amended.
SR Interest: The sole class of "residual interest" in the
Subsidiary REMIC.
Startup Date: As defined in Section 2.07 hereof.
Stated Principal Balance: With respect to any Mortgage Loan or
related REO Property (i) as of the Cut-off Date and each day thereafter to and
including the first Distribution Date, the Cut-off Date Principal Balance
thereof, and (ii) as of any Distribution Date after the first Distribution Date,
such Cut-off Date Principal Balance minus the sum of (a) the principal portion
of the Scheduled Payments (x) due with respect to such Mortgage Loan during each
Due Period ending prior to the immediately preceding Distribution Date and (y)
that were received by the Subservicer as of the close of business on the
Determination Date related to such preceding Distribution Date or with respect
to which Advances were made on each Servicer Advance Date prior to such
preceding Distribution Date and (b) all Principal Prepayments with respect to
such Mortgage Loan received prior to the preceding Prepayment Period, and all
Liquidation Proceeds to the extent applied by the Subservicer as recoveries of
principal in accordance with Section 3.12 with respect to such Mortgage Loan,
that were received by the Subservicer as of the close of business on the
Determination Date related to such preceding Distribution Date. The Stated
Principal Balance of any Mortgage Loan immediately following a given
Distribution Date shall be deemed to equal the Stated Principal Balance of such
Mortgage Loan as of the immediately following Distribution Date, and, in
particular, the Stated Principal Balance of any Mortgage Loan that becomes a
Liquidated Loan will be zero immediately following the Distribution Date
following the Prepayment Period in which such Mortgage Loan becomes a Liquidated
Loan.
Stepup Trigger Event: Any Distribution Date on or after the
occurrence of either of the following:
(A) Realized Losses as a percentage of the aggregate Stated Principal Balance of
the Group II Mortgage Loans as of such Distribution Date equals or exceeds the
following percentages:
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Distribution Date Occurring in Percentage
------------------------------ ----------
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE] and thereafter............................................ ___%
or (B) the Three Month Rolling Average of Group II Mortgage Loans that are 60
days or more Delinquent as of such Distribution Date as a percentage of the
aggregate Stated Principal Balances of the Group II Mortgage Loans equals or
exceeds the following percentages
Distribution Date Occurring in Percentage
------------------------------ ----------
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE]-[DATE].................................................... ___%
[DATE] and thereafter............................................ ___%
Subservicer: Advanta Mortgage Corp. USA, a Delaware
corporation, or its successor in interest.
Subservicing Agreement: As defined in Section 3.02(a).
Subsidiary REMIC: As described in Section 2.07.
Subsidiary REMIC Interest: Any one of the Subsidiary REMIC
Regular Interests or the SR Interest.
Subsidiary REMIC Regular Interest: Any one of the "regular
interests" in the Subsidiary REMIC described in Section 2.07.
Substitution Adjustment Amount: The meaning ascribed to such
term pursuant to Section 2.03(c).
Substitution Amount: With respect to any Mortgage Loan
substituted pursuant to Section 2.03(c), the excess of (x) the principal balance
of the Mortgage Loan that is substituted for, over (y) the principal balance of
the related substitute Mortgage Loan, each balance being determined as of the
date of substitution.
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Tax Matters Person: The person designated as "tax matters
person" in the manner provided under Treasury regulation Section 1.860F-4(d) and
temporary Treasury regulation Section 301.6231(a)(7)-1T.
Three Month Rolling Average: As of any Distribution Date, the
average percentage (based on Stated Principal Balance) of Group II Mortgage
Loans which are 60 days or more Delinquent (including Mortgage Loans in
foreclosure and real estate owned) as of the last day of each of the three (or
one and two in the case of the first two Distribution Dates) most recently ended
months.
Transfer: Any direct or indirect transfer or sale of any
Ownership Interest in a Certificate.
Trust Fund: The corpus of the trust created hereunder
consisting of (i) the Mortgage Loans and all interest and principal received on
or with respect thereto on and after the Cut-off Date to the extent not applied
in computing the Cut-off Date Principal Balance thereof, exclusive of interest
not required to be deposited in the Collection Account pursuant to Section
3.05(b)(ii); (ii) the Collection Account, the Certificate Account and the
Distribution Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iii) property that secured a Mortgage
Loan and has been acquired by foreclosure, deed in lieu of foreclosure or
otherwise; (iv) the mortgagee's rights under the Insurance Policies with respect
to the Mortgage Loan; and (v) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.
Trustee: [TRUSTEE], a national banking association, not in its
individual capacity, but solely in its capacity as trustee for the benefit of
the Certificateholders under this Agreement, and any successor thereto, and any
corporation or national banking association resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee as may from time to time be serving as successor trustee
hereunder.
Voting Rights: The portion of the voting rights of all the
Certificates that is allocated to any Certificates for purposes of the voting
provisions hereunder. Voting Rights allocated to each Class of Certificates
shall be allocated 95% to the Group I Certificates and Group II Certificates,
and 5% to the Class R Certificates, with the allocation among the Group I
Certificates and Group II Certificates to be in proportion to the Class
Certificate Principal Balance of each Class relative to the Class Certificate
Principal Balance of all other Classes. Voting Rights will be allocated among
the Certificates of each such Class in accordance with their respective
Percentage Interests.
Weighted Maximum Rate Cap: As of any Distribution Date, a rate
equal to (i) the weighted average of the Maximum Mortgage Rates on the Group II
Mortgage Loans on such Distribution Date minus (ii) the sum of (a) the Servicing
Fee Rate and (b) the Master Servicer Fee Rate.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery hereof,
does hereby sell, transfer, assign, set over and convey to the Trustee without
recourse all the right, title and interest of the Depositor in and to the
Mortgage Loans, including all interest and principal received on or with respect
to the Mortgage Loans on or after the Cut-off Date (other than Monthly Payments
due on the Mortgage Loans on or before the Cut-off Date).
In connection with such assignment, the Depositor does hereby deliver
to, and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan so assigned:
(A) (I) Original Mortgage Note (or a lost note affidavit
(including a copy of the original Mortgage Note)) or (II) original
Consolidation, Extension and Modification Agreement (or a lost note
affidavit (including a copy of the original Consolidation, Extension
and Modification Agreement), in either case endorsed, "Pay to the
order of [TRUSTEE], as trustee, without recourse."
(B) The original Mortgage (including all riders thereto) with
evidence of recording thereon, or a copy thereof certified by the
public recording office in which such mortgage has been recorded or,
if the original Mortgage has not been returned from the applicable
public recording office, a true certified copy, certified by the
Seller, of the original Mortgage together with a certificate of the
Seller certifying that the original Mortgage has been delivered for
recording in the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located.
(C) The original Assignment of Mortgage to "[TRUSTEE], as
trustee," which assignment shall be in form and substance acceptable
for recording, or a copy certified by the Seller as a true and correct
copy of the original Assignment which has been sent for recordation.
Subject to the foregoing, such assignments may, if permitted by law,
be by blanket assignments for Mortgage Loans covering Mortgaged
Properties situated within the same county. If the Assignment of
Mortgage is in blanket form, a copy of the Assignment of Mortgage
shall be included in the related individual Mortgage File.
(D) The original policy of title insurance, including riders
and endorsements thereto, or if the policy has not yet been issued, a
written commitment or interim binder or preliminary report of title
issued by the title insurance or escrow company.
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(E) Originals of all recorded intervening Assignments of
Mortgage, or copies thereof, certified by the public recording office
in which such Assignments or Mortgage have been recorded showing a
complete chain of title from the originator to the Depositor, with
evidence of recording, thereon, or a copy thereof certified by the
public recording office in which such Assignment of Mortgage has been
recorded or, if the original Assignment of Mortgage has not been
returned from the applicable public recording office, a true certified
copy, certified by the Seller of the original Assignment of Mortgage
together with a certificate of the Seller certifying that the original
Assignment of Mortgage has been delivered for recording in the
appropriate public recording office of the jurisdiction in which the
Mortgaged Property is located.
(F) Originals, or copies thereof certified by the public
recording office in which such documents have been recorded, of each
assumption, extension, modification, written assurance or substitution
agreements, if applicable, or if the original of such document has not
been returned from the applicable public recording office, a true
certified copy, certified by the Seller, of such original document
together with certificate of Seller certifying the original of such
document has been delivered for recording in the appropriate recording
office of the jurisdiction in which the Mortgaged Property is located.
(G) If the Mortgaged Note or Mortgage or any other material
document or instrument relating to the Mortgaged Loan has been signed
by a person on behalf of the Mortgagor, the original power of attorney
or other instrument that authorized and empowered such person to sign
bearing evidence that such instrument has been recorded, if so
required in the appropriate jurisdiction where the Mortgaged Property
is located (or, in lieu thereof, a duplicate or conformed copy of such
instrument, together with a certificate of receipt from the recording
office, certifying that such copy represents a true and complete copy
of the original and that such original has been or is currently
submitted to be recorded in the appropriate governmental recording
office of the jurisdiction where the Mortgaged Property is located),
or if the original power of attorney or other such instrument has been
delivered for recording in the appropriate public recording office of
the jurisdiction in which the Mortgaged Property is located.
If in connection with any Mortgage Loan the Depositor cannot
deliver the Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, with evidence of recording thereon
concurrently with the execution and delivery of this Agreement solely because of
a delay caused by the public recording office where such Mortgage, Assignments
of Mortgage or assumption, consolidation or modification, as the case may be,
has been delivered for recordation, the Depositor shall deliver or cause to be
delivered to the Trustee written notice stating that such Mortgage, Assignments
of Mortgage or assumption, consolidation or modification, as the case may be,
has been delivered to the appropriate public recording office for recordation.
Thereafter, the Depositor shall deliver or cause to be delivered to the Trustee
such Mortgage, Assignments of Mortgage or assumption, consolidation or
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modification, as the case may be, with evidence of recording indicated thereon
upon receipt thereof from the public recording office.
The Master Servicer shall cause to be recorded in the
appropriate public recording office for real property records each Assignment of
Mortgage referred to in this Section 2.01 as soon as practicable. While each
Assignment of Mortgage to be recorded is being recorded, the Master Servicer
shall deliver to the Trustee a photocopy of such document. If any such
Assignment of Mortgage is returned unrecorded to the Master Servicer because of
any defect therein, the Master Servicer shall cause such defect to be cured and
such document to be recorded in accordance with this paragraph. The Depositor
shall deliver or cause to be delivered each original recorded Assignment of
Mortgage and intermediate assignment to the Trustee within 270 days of the
Closing Date or shall deliver to the Trustee on or before such date an Officer's
Certificate stating that such document has been delivered to the appropriate
public recording office for recordation, but has not been returned solely
because of a delay caused by such recording office. In any event, the Depositor
shall use all reasonable efforts to cause each such document with evidence of
recording thereon to be delivered to the Trustee within 300 days of the Closing
Date.
The ownership of each Mortgage Note, the Mortgage and the
contents of the related Mortgage File is vested in the Trustee. Neither the
Depositor, the Subservicer nor the Master Servicer shall take any action
inconsistent with such ownership and shall not claim any ownership interest
therein. The Depositor, the Subservicer and the Master Servicer shall respond to
any third party inquiries with respect to ownership of the Mortgage Loans by
stating that such ownership is held by the Trustee on behalf of the
Certificateholders. Mortgage documents relating to the Mortgage Loans not
delivered to the Trustee are and shall be held in trust by the Subservicer, for
the benefit of the Trustee as the owner thereof, and the Subservicer's
possession of the contents of each Mortgage File so retained is for the sole
purpose of servicing the related Mortgage Loan, and such retention and
possession by the Subservicer is in a custodial capacity only. The Depositor
agrees to take no action inconsistent with the Trustee's ownership of the
Mortgage Loans, to promptly indicate to all inquiring parties that the Mortgage
Loans have been sold and to claim no ownership interest in the Mortgage Loans.
It is the intention of this Agreement that the conveyance of
the Depositor's right, title and interest in and to the Trust Fund pursuant to
this Agreement shall constitute a purchase and sale and not a loan. If a
conveyance of Mortgage Loans from the Seller to the Depositor is characterized
as a pledge and not a sale, then the Depositor shall be deemed to have
transferred to the Trustee all of the Depositor's right, title and interest in,
to and under the obligations of the Seller deemed to be secured by said pledge;
and it is the intention of this Agreement that the Depositor shall also be
deemed to have granted to the Trustee a first priority security interest in all
of the Depositor's right, title, and interest in, to and under the obligations
of the Seller to the Depositor deemed to be secured by said pledge and that the
Trustee shall be deemed to be an independent custodian for purposes of
perfection of the security interest granted to the Depositor. If the conveyance
of the Mortgage Loans from the Depositor to the Trustee is characterized as a
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pledge, it is the intention of this Agreement that this Agreement shall
constitute a security agreement under applicable law, and that the Depositor
shall be deemed to have granted to the Trustee a first priority security
interest in all of the Depositor's right, title and interest in, to and under
the Mortgage Loans, all payments of principal of or interest on such Mortgage
Loans, all other rights relating to and payments made in respect of the Trust
Fund, and all proceeds of any thereof. If the trust created by this Agreement
terminates prior to the satisfaction of the claims of any Person in any
Certificates, the security interest created hereby shall continue in full force
and effect and the Trustee shall be deemed to be the collateral agent for the
benefit of such Person.
In addition to the conveyance made in the first paragraph of
this Section 2.01, the Depositor does hereby convey, assign and set over to the
Trustee all of its right, title and interest assigns to the Trustee for the
benefit of the Certificateholders those representations and warranties of the
Seller contained in the Sale Agreement and the benefit of the repurchase
obligations and the obligations of the Seller contained in the Sale Agreement to
take, at the request of the Depositor or the Trustee, all action on its part
which is reasonably necessary to ensure the enforceability of a Mortgage Loan.
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans.
Except as set forth in the Exception Report delivered
contemporaneously herewith (the "Exception Report"), the Trustee acknowledges
receipt of the Mortgage Note for each Mortgage Loan and delivery of a Mortgage
File (but does not acknowledge receipt of all documents required to be included
in such Mortgage File) with respect to each Mortgage Loan and declares that it
holds and will hold such documents and any other documents constituting a part
of the Mortgage Files delivered to it in trust for the use and benefit of all
present and future Certificateholders. The Depositor will cause the Seller to
repurchase any Mortgage Loans to which an exception was taken in the Exception
Report unless such exception is cured to the satisfaction of the Trustee within
45 Business Days of the Closing Date.
The Trustee agrees, for the benefit of Certificateholders, to
review each Mortgage File delivered to it within 270 days after the Closing Date
to ascertain that all documents required by Section 2.01 have been executed and
received, and that such documents relate to the Mortgage Loans identified in
Exhibit F that have been conveyed to it. If the Trustee finds any document or
documents constituting a part of a Mortgage File to be missing or defective
(that is, mutilated, damaged, defaced or unexecuted) in any material respect,
the Trustee shall promptly (and in any event within no more than five Business
Days) after such finding so notify the Subservicer, the Seller and the
Depositor. In addition, the Trustee shall also notify the Subservicer, the
Seller and the Depositor, if (a) in examining the Mortgage Files, the
documentation shows on its face (i) any adverse claim, lien or encumbrance, (ii)
that any Mortgage Note was overdue or had been dishonored, (iii) any evidence on
the face of any Mortgage Note or Mortgage of any security interest or other
right or interest therein, or (iv) any defense against or claim to the Mortgage
Note by any party or (b) the original Mortgage with
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evidence of recording thereon with respect to a Mortgage Loan is not received
within 270 days of the Closing Date. The Trustee shall request that the Seller
correct or cure such omission, defect or other irregularity, or substitute a
Mortgage Loan pursuant to the provisions of Section 2.03(c), within 90 days from
the date the Seller was notified of such omission or defect and, if the Seller
does not correct or cure such omission or defect within such period, that the
Seller purchase such Mortgage Loan from the Trustee within 90 days from the date
the Trustee notified the Seller of such omission, defect or other irregularity
at the Purchase Price of such Mortgage Loan. The Purchase Price for any Mortgage
Loan purchased pursuant to this Section 2.02 shall be paid to the Subservicer
and deposited by the Subservicer in the Collection Account promptly upon
receipt, and, upon receipt by the Trustee of written notification of such
deposit signed by a Servicing Officer, the Trustee shall promptly release to the
Seller the related Mortgage File and the Trustee shall execute and deliver such
instruments of transfer or assignment, without recourse, as shall be necessary
to vest in the Seller or its designee, as the case may be, any Mortgage Loan
released pursuant hereto, and the Trustee shall have no further responsibility
with regard to such Mortgage Loan. It is understood and agreed that the
obligation of the Seller to purchase, cure or substitute any Mortgage Loan as to
which a material defect in or omission of a constituent document exists shall
constitute the sole remedy respecting such defect or omission available to the
Trustee on behalf of Certificateholders. The Trustee shall be under no duty or
obligation to inspect, review and examine such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable or
appropriate to the represented purpose, or that they have actually been
recorded, or that they are other than what they purport to be on their face. The
Trustee and the Subservicer each shall keep confidential the name of each
Mortgagor and neither the Trustee nor the Subservicer shall solicit any such
Mortgagor for the purpose of refinancing the related Mortgage Loan. Without
limiting the generality of the foregoing, from and after the Closing Date, the
Subservicer agrees that it will not take any action of permit or cause any
action to be taken by the Subservicer, any of its agents or affiliates, or by an
independent contractors on the Subservicer's behalf, to personally, by telephone
or mail, solicit the borrower or Mortgagor under any Mortgage Loan to refinance
the Mortgage Loan, in whole or in part. Notwithstanding the foregoing, it is
understood and agreed that promotions undertaken by the Subservicer or any
affiliate thereof which are directed to the general public at large, including
without limitation, mass mailing based on commercially acquired mailing lists,
newspaper, radio and television advertisements shall not constitute solicitation
under this paragraph, nor is the Subservicer or any affiliate thereof prohibited
from responding to unsolicited requests or inquiries made by a Mortgagor or
agent of a Mortgagor; provided, however that neither the Subservicer nor any
affiliate thereof may respond to any such unsolicited request or inquiry if such
unsolicited request or inquiry (including, without limitation, any verification
of mortgage, payoff request or refinance inquiry) was directed to the
Subservicer in the Subservicer's capacity as servicer of the related Mortgage
Loan. It is understood and agreed that all rights and benefits relating to the
solicitation of any Mortgagors and the attendant rights, title and interest in
and to the list of Mortgagors and data relating to their Mortgages shall be
retained by the Master Servicer.
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Within 280 days of the Closing Date, the Trustee shall deliver
to the Depositor and the Master Servicer the Trustee's Certification,
substantially in the form of Exhibit H attached hereto, setting forth the status
of the Mortgage Files as of such date.
SECTION 2.03. Representations, Warranties and Covenants of the
Depositor.
(a) The Depositor hereby represents and warrants to the
Subservicer and the Trustee as follows, as of the date hereof:
(i) The Depositor is duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware and has full power and authority (corporate and other)
necessary to own or hold its properties and to conduct its business as
now conducted by it and to enter into and perform its obligations
under this Agreement.
(ii) The Depositor has the full corporate power and
authority to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by, this Agreement and has
duly authorized, by all necessary corporate action on its part, the
execution, delivery and performance of this Agreement; and this
Agreement, assuming the due authorization, execution and delivery
hereof by the other parties hereto, constitutes a legal, valid and
binding obligation of the Depositor, enforceable against the Depositor
in accordance with its terms, subject, as to enforceability, to (i)
bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting creditors' rights generally and (ii) general principles
of equity, regardless of whether enforcement is sought in a proceeding
in equity or at law.
(iii) The execution and delivery of this Agreement by the
Depositor, the consummation of the transactions contemplated by this
Agreement, and the fulfillment of or compliance with the terms hereof
are in the ordinary course of business of the Depositor and will not
(A) result in a material breach of any term or provision of the
charter or by-laws of the Depositor or (B) materially conflict with,
result in a violation or acceleration of, or result in a material
default under, the terms of any other material agreement or instrument
to which the Depositor is a party or by which it may be bound or (C)
constitute a material violation of any statute, order or regulation
applicable to the Depositor of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
the Depositor; and the Depositor is not in breach or violation of any
material indenture or other material agreement or instrument, or in
violation of any statute, order or regulation of any court, regulatory
body, administrative agency or governmental body having jurisdiction
over it which breach or violation may materially impair the
Depositor's ability to perform or meet any of its obligations under
this Agreement.
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(iv) No litigation is pending, or, to the best of the
Depositor's knowledge, threatened, against the Depositor that would
materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Depositor to
perform its obligations under this Agreement in accordance with the
terms hereof.
(v) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by the Depositor of, or compliance by the
Depositor with, this Agreement or the consummation of the transactions
contemplated hereby, or if any such consent, approval, authorization
or order is required, the Depositor has obtained the same. The
Depositor hereby represents and warrants to the Trustee with respect
to each Mortgage Loan as of the Closing Date, and following the
transfer of the Mortgage Loans to it by the Seller, the Depositor had
good title to the Mortgage Loans and the Mortgage Notes were subject
to no offsets, claims, defenses or counterclaims.
(vi) The Depositor hereby represents and warrants to the
Trustee for the benefit of the Certificateholders that on the Closing
Date it has entered into the Sale Agreement with the Seller, that the
Seller has made the following representations and warranties with
respect to each Mortgage Loan in such Sale Agreement as of the Closing
Date, which representations and warranties run to and are for the
benefit of the Depositor and the Trustee for the benefit of the
Certificateholders, and as to which the Depositor has assigned to the
Trustee for the benefit of the Certificateholders, pursuant to Section
2.01 hereof, the right to cause the Seller to repurchase a Mortgage
Loan as to which there has occurred an uncured breach of
representations and warranties in accordance with the provisions of
the Sale Agreement.
(1) The Seller is an approved seller of
conventional mortgage loans for FNMA or FHLMC
and is a mortgagee approved by the Secretary
of Housing and Urban Development pursuant to
sections 203 and 211 of the National Housing
Act.
(2) The information set forth on the Mortgage
Loan Schedule is true and correct in all
material respects as of the Closing Date.
(3) The Seller will treat the transfer of the
Mortgage Loans to the Depositor as a sale of
the Mortgage Loans for all accounting and tax
purposes.
(4) No Mortgage Loan is more than 59 days
delinquent in payment of principal and
interest, and no more than 1.24% of the
Mortgage Loans are 30-59 days delinquent in
the payment of principal and interest.
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(5) No Group I Mortgage Loan had a Loan-to-Value
Ratio at origination in excess of 95.00% and
no Group II Mortgage Loan had a Loan-to-Value
Ratio at origination in excess of 95.00%.
(6) Each Mortgage is a valid and enforceable
first lien on the Mortgaged Property subject
only to (a) the lien of non-delinquent real
property taxes and assessments not yet due
and payable, (b) covenants, conditions and
restrictions, rights of way, easements and
other matters of public record as of the date
of recording of such Mortgage, such
exceptions appearing of record being
acceptable to mortgage lending institutions
generally, specifically referred to in the
lender's title insurance policy referred to
in (19) below or referred to or otherwise
considered in the appraisal made in
connection with the origination of the
related Mortgage Loan, and (c) other matters
to which like properties are commonly subject
that do not materially interfere with the
benefits of the security intended to be
provided by such Mortgage.
(7) Immediately prior to the assignment of the
Mortgage Loans to the Depositor, the Seller
had good title to, and was the sole owner of,
each Mortgage Loan free and clear of any
pledge, lien, encumbrance or security
interest and had full right and authority,
subject to no interest or participation of,
or agreement with, any other party, to sell
and assign the same pursuant to this
Agreement.
(8) There is no delinquent tax or assessment lien
against any Mortgaged Property.
(9) There is no valid offset, claim, defense or
counterclaim to any Mortgage Note or
Mortgage, including the obligation of the
Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note.
(10) There are no mechanics' liens or claims for
work, labor or material affecting any
Mortgaged Property that are or may be a lien
prior to, or equal with, the lien of such
Mortgage, except those that are insured
against by the title insurance policy
referred to in item (14) below.
(11) As of the Closing Date, to the best of the
Seller's knowledge, each Mortgaged Property
is undamaged by waste, fire, earthquake or
earth movement, windstorm, flood, tornado or
other casualty so as to affect adversely the
value of the Mortgaged Property as security
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for the Mortgage Loan or the use for which
the premises were intended.
(12) Each Mortgage Loan at origination complied in
all material respects with applicable state
and federal laws, including, without
limitation, usury, equal credit opportunity,
real estate settlement procedures,
truth-in-lending and disclosure laws, and
consummation of the transactions contemplated
hereby will not involve the violation of any
such laws.
(13) As of the Closing Date, neither the Seller
nor any prior holder of any Mortgage has
modified the Mortgage in any material respect
(except that a Mortgage Loan may have been
modified by a written instrument that has
been recorded or submitted for recordation,
if necessary, to protect the interests of the
Certificateholders and the original or a copy
of which has been delivered to the Trustee);
satisfied, canceled or subordinated such
Mortgage in whole or in part; released the
related Mortgaged Property in whole or in
part from the lien of such Mortgage; or
executed any instrument of release,
cancellation, modification (except as
expressly permitted above) or satisfaction
with respect thereto.
(14) A lender's policy of title insurance together
with a condominium endorsement and extended
coverage endorsement, if applicable, in an
amount at least equal to the Cut-off Date
Stated Principal Balance of each such
Mortgage Loan or a commitment (binder) to
issue the same was effective on the date of
the origination of each Mortgage Loan, each
such policy is valid and remains in full
force and effect, and each such policy was
issued by a title insurer qualified to do
business in the jurisdiction where the
Mortgaged Property is located and acceptable
to FNMA or FHLMC and is in a form acceptable
to FNMA or FHLMC, which policy insures the
Seller and successor owners of indebtedness
secured by the insured Mortgage, as to the
first priority lien, of the Mortgage subject
to the exceptions set forth in paragraph (19)
above; to the best of the Seller's knowledge,
no claims have been made under such mortgage
title insurance policy and no prior holder of
the related Mortgage, including the Seller,
has done, by act or omission, anything that
would impair the coverage of such mortgage
title insurance policy.
(15) To the best of the Seller's knowledge, as of
the date of origination all of the
improvements that were included for the
purpose of determining the Appraised Value of
the Mortgaged Property lie
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wholly within the boundaries and building
restriction lines of such property, and no
improvements on adjoining properties encroach
upon the Mortgaged Property.
(16) To the best of the Seller's knowledge, as of
the date of origination no improvement
located on or being part of the Mortgaged
Property is in violation of any applicable
zoning law or regulation. To the best of the
Seller's knowledge, as of the date of
origination all inspections, licenses and
certificates required to be made or issued
with respect to all occupied portions of the
Mortgaged Property and, with respect to the
use and occupancy of the same, including but
not limited to certificates of occupancy and
fire underwriting certificates, have been
made or obtained from the appropriate
authorities, unless the lack thereof would
not have a material adverse effect on the
value of such Mortgaged Property, and the
Mortgaged Property is lawfully occupied under
applicable law.
(17) The Mortgage Note and the related Mortgage
are genuine, and each is the legal, valid and
binding obligation of the maker thereof,
enforceable in accordance with its terms and
under applicable law, except that (a) the
enforceability thereof may be limited by
bankruptcy, insolvency, moratorium,
receivership and other similar laws relating
to creditors' rights generally and (b) the
remedy of specific performance and injunctive
and other forms of equitable relief may be
subject to equitable defenses and to the
discretion of the court before which any
proceeding therefor may be brought. To the
best of the Seller's knowledge, all parties
to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note
and the Mortgage and each Mortgage Note and
Mortgage have been duly and properly executed
by such parties.
(18) The proceeds of the Mortgage Loan have been
fully disbursed, there is no requirement for
future advances thereunder and 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 the Mortgage Loans were paid.
(19) The related Mortgage contains customary and
enforceable provisions that render the rights
and remedies of the holder thereof adequate
for the realization against the Mortgaged
Property of the benefits of the security,
including, (i) in the case of a Mortgage
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designated as a deed of trust, by trustee's
sale, and (ii) otherwise by judicial
foreclosure.
(20) 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 Certificateholders to the trustee
under the deed of trust, except in connection
with a trustee's sale after default by the
Mortgagor.
(21) There exist no deficiencies with respect to
escrow deposits and payments, if such are
required, for which customary arrangements
for repayment thereof have not been made, and
no escrow deposits or payments of other
charges or payments due the Seller have been
capitalized under the Mortgage or the related
Mortgage Note.
(22) The origination and underwriting practices
used by the Seller with respect to each
Mortgage Loan have been in all respects legal
and customary in the mortgage lending
business.
(23) There is no pledged account or other security
other than real estate securing the
Mortgagor's obligations.
(24) Each Mortgage Loan contains a customary "due
on sale" clause.
(25) At the Cut-off Date, the improvements upon
each Mortgaged Property are covered by a
valid and existing hazard insurance policy
with a generally acceptable carrier that
provides for fire and extended coverage and
coverage for such other hazards as are
customary in the area where the Mortgaged
Property is located in an amount that is at
least equal to the lesser of (i) the maximum
insurable value of the improvements securing
such Mortgage Loan or (ii) the greater of (a)
the outstanding principal balance of the
Mortgage Loan and (b) an amount such that the
proceeds of such policy shall be sufficient
to prevent the Mortgagor and/or the mortgagee
from becoming a co-insurer. If the Mortgaged
Property is a condominium unit, it is
included under the coverage afforded by a
blanket policy for the condominium unit. All
such individual insurance policies and all
flood policies referred to in item (26) below
contain a standard mortgagee clause naming
the Seller or the original mortgagee, and its
successors in interest, as mortgagee, and the
Seller has received no notice that any
premiums due and payable thereon have not
been paid; the Mortgage obligates the
Mortgagor
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thereunder to maintain all such insurance,
including flood insurance, at the Mortgagor's
cost and expense, and upon the Mortgagor's
failure to do so, authorizes the holder of
the Mortgage to obtain and maintain such
insurance at the Mortgagor's cost and expense
and to seek reimbursement therefor from the
Mortgagor.
(26) If the Mortgaged 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 Mortgaged Property with a generally
acceptable carrier in an amount representing
coverage not less than the least of (A) the
original outstanding principal balance of the
Mortgage Loan, (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, as
amended.
(27) To the best of the Seller's knowledge, there
is no proceeding occurring, pending or
threatened for the total or partial
condemnation of the Mortgaged Property.
(28) There is no material monetary default
existing under any Mortgage or the related
Mortgage Note and, to the best of the
Seller's knowledge, there is no material
event that, with the passage of time or with
notice and the expiration of any grace or
cure period, would constitute a default,
breach, violation or event of acceleration
under the Mortgage or the related Mortgage
Note; and the Seller has not waived any
default, breach, violation or event of
acceleration.
(29) Each Mortgaged Property is of a type
described in the Prospectus Supplement.
(30) Each Mortgage Loan is being serviced by the
Sub-Servicer.
(31) Any future advances made prior to the Cut-Off
date have been consolidated with the
outstanding principal amount secured by the
Mortgage, and the secured principal amount,
as consolidated, bears a single interest rate
and single repayment term. The lien of the
Mortgage securing the consolidated principal
amount is expressly insured as having first
lien priority by a title insurance policy, an
endorsement to the policy insuring the
mortgagee's consolidated interest or by other
title evidence acceptable to FNMA and
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FHLMC. The consolidated principal amount does
not exceed the original principal amount of
the Mortgage Loan.
(32) Prior to the approval of the Mortgage Loan
application, an appraisal of the related
Mortgaged Property was obtained from a
qualified appraiser, duly appointed by the
originator, who had no interest, direct or
indirect, in the Mortgaged Property or in any
loan made on the security thereof, and whose
compensation is not affected by the approval
or disapproval of the Mortgage Loan; such
appraisal is in a form acceptable to FNMA and
FHLMC.
(33) None of the Mortgage Loans is a graduated
payment mortgage loan or a growing equity
mortgage loan, and no Mortgage Loan is
subject to a buydown or similar arrangement.
(34) The Mortgage Loans were selected from among
the outstanding one- to four-family mortgage
loans in the Seller's portfolio at the
Closing Date as to which the representations
and warranties made as to the Mortgage Loans
set forth in this Section 2.03(a)(vi) can be
made.
(35) The Mortgage Loans, individually and in the
aggregate, conform in all material respects
to the descriptions thereof in the Prospectus
Supplement.
(36) None of the Mortgage Loans are second
mortgage loans.
(37) Each Mortgage Loan represents a "qualified
mortgage" within the meaning of Section
860G(a)(3) of the Code (but without regard to
the rule in Treasury Regulation Section
1.860G-2(f)(2) that treats a defective
obligation as a qualified mortgage, or any
substantially similar successor provision)
and applicable Treasury regulations
promulgated thereunder.
(b) [Reserved]
(c) Upon discovery by any of the parties hereto of a breach of
a representation or warranty set forth in Section 2.03(a) that materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the party discovering such breach shall give prompt notice thereof to the other
parties and to the Seller. Pursuant to the Sale Agreement, the Seller shall
within 90 days of the earlier of the discovery by or receipt of written notice
by the Seller from any party of a breach of any representation or warranty set
forth herein made that materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, it shall cure
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such breach in all material respects and, if such breach is not so cured, shall,
(i) if such 90- day period expires prior to the second anniversary of the
Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from the
Trust Fund and substitute in its place a Replacement Mortgage Loan, in the
manner and subject to the conditions set forth in this Section; or (ii)
repurchase the affected Mortgage Loan or Mortgage Loans from the Trustee at the
Purchase Price in the manner set forth below; provided, however, that any such
substitution pursuant to (i) above or repurchase pursuant to (ii) above shall
not be effected prior to the delivery to the Trustee of the Opinion of Counsel
required by Section 2.05 hereof and any such substitution pursuant to (i) above
shall not be effected prior to the additional delivery to the Trustee of a
Request for Release substantially in the form of Exhibit M. The Seller shall
promptly reimburse the Trustee for any expenses reasonably incurred by the
Trustee in respect of enforcing the remedies for such breach. To enable the
Subservicer to amend the Mortgage Loan Schedule, unless it cures such breach in
a timely fashion pursuant to this Section 2.03, the Seller shall promptly notify
the Subservicer whether the Seller intends either to repurchase, or to
substitute for, the Mortgage Loan affected by such breach. With respect to the
representations and warranties described in this Section that are made to the
best of the Seller's knowledge, if it is discovered by any of the Seller, the
Subservicer, the Master Servicer or the Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan, notwithstanding the
Seller's lack of knowledge with respect to the substance of such representation
or warranty, such inaccuracy shall be deemed a breach of the applicable
representation or warranty.
With respect to any Replacement Mortgage Loan or Loans, the
Seller shall deliver to the Trustee for the benefit of the Certificateholders
the related Mortgage Note, Mortgage and assignment of the Mortgage, and such
other documents and agreements as are required by Section 2.01, with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01. No
substitution will be made in any calendar month after the Determination Date for
such month. Scheduled Payments due with respect to Replacement Mortgage Loans in
the Due Period related to the Distribution Date on which such proceeds are to be
distributed shall not be part of the Trust Fund and will be retained by the
Seller on such Distribution Date. For the month of substitution, distributions
to Certificateholders will include the Scheduled Payment due on any Deleted
Mortgage Loan for the related Due Period and thereafter the Seller shall be
entitled to retain all amounts received in respect of such Deleted Mortgage
Loan. The Trustee shall amend the Mortgage Loan Schedule for the benefit of the
Certificateholders to reflect the removal of such Deleted Mortgage Loan and the
substitution of the Replacement Mortgage Loan or Loans. Upon such substitution,
the Replacement Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have made with
respect to such Replacement Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties set forth in Section 2.03(a)
with respect to such Mortgage Loan. Upon any such substitution and the deposit
to the Collection Account of the amount required to be deposited therein in
connection with such substitution as described in the following paragraph, the
Trustee shall release to the Seller the Mortgage File relating to such Deleted
Mortgage Loan and held for the benefit of the Certificateholders and shall
execute and deliver at
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the Seller's direction such instruments of transfer or assignment as have been
prepared by the Seller, in each case without recourse, as shall be necessary to
vest in the Seller, or its respective designee, title to the Trustee's interest
in any Deleted Mortgage Loan substituted for pursuant to this Section 2.03.
For any month in which the Seller substitutes one or more
Replacement Mortgage Loans for one or more Deleted Mortgage Loans, the Master
Servicer will determine the amount (if any) by which the aggregate principal
balance of all such Replacement Mortgage Loans as of the date of substitution is
less than the aggregate Stated Principal Balance (after application of the
principal portion of the Scheduled Payment due in the month of substitution) of
all such Deleted Mortgage Loans. An amount equal to the aggregate of the
deficiencies described in the preceding sentence (such amount, the "Substitution
Adjustment Amount") shall be deposited into the Collection Account by the Seller
on the Determination Date for the Distribution Date relating to the Prepayment
Period during which the related Mortgage Loan became required to be purchased or
replaced hereunder.
In the event that a Seller shall have repurchased a Mortgage
Loan, the Purchase Price therefor shall be deposited in the Collection Account
pursuant to Section 3.08 on the Determination Date for the Distribution Date in
the month following the month during which the Seller became obligated to
repurchase or replace such Mortgage Loan and upon such deposit of the Purchase
Price, the delivery of the Opinion of Counsel required by Section 2.05, if any,
and the receipt of a Request for Release in the form of Exhibit M hereto, the
Trustee shall release the related Mortgage File held for the benefit of the
Certificateholders to the Seller, and the Trustee shall execute and deliver at
such Person's direction the related instruments of transfer or assignment
prepared by the Seller, in each case without recourse, as shall be necessary to
transfer title from the Trustee for the benefit of the Certificateholders and
transfer the Trustee's interest to the Seller to any Mortgage Loan purchased
pursuant to this Section 2.03. It is understood and agreed that the obligation
under this Agreement of the Seller to cure, repurchase or replace any Mortgage
Loan as to which a breach has occurred and is continuing shall constitute the
sole remedy against the Depositor respecting such breach available to
Certificateholders, the Depositor or the Trustee.
(d) The representations and warranties set forth in Section
2.03 hereof shall survive delivery of the respective Mortgage Files to the
Trustee for the benefit of the Certificateholders.
SECTION 2.04. Representations and Warranties of the
Subservicer.
The Subservicer hereby represents and warrants to the
Depositor, the Master Servicer and the Trustee as follows, as of the date
hereof:
(i) The Subservicer is a duly organized
corporation and is validly existing and in good standing under the
laws of the state of its incorporation and
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is duly authorized and qualified to transact any and all business
contemplated by this Agreement to be conducted by the Subservicer in
any state in which a Mortgaged Property is located or is otherwise not
required under applicable law to effect such qualification and, in any
event, is in compliance with the doing business laws of any such
state, to the extent necessary to ensure its ability to enforce each
Mortgage Loan, to service the Mortgage Loans in accordance with the
terms of this Agreement and to perform any of its other obligations
under this Agreement in accordance with the terms hereof.
(ii) The Subservicer has the full corporate
power and authority to service each Mortgage Loan, and to execute,
deliver and perform, and to enter into and consummate the transactions
contemplated by this Agreement and has duly authorized by all
necessary corporate action on the part of the Subservicer the
execution, delivery and performance of this Agreement; and this
Agreement, assuming the due authorization, execution and delivery
hereof by the other parties hereto, constitutes a legal, valid and
binding obligation of the Subservicer, enforceable against the
Subservicer in accordance with its terms, except that (a) the
enforceability hereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors'
rights generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(iii) The execution and delivery of this
Agreement by the Subservicer, the servicing of the Mortgage Loans by
the Subservicer under this Agreement, the consummation of any other of
the transactions contemplated by this Agreement, and the fulfillment
of or compliance with the terms hereof are in the ordinary course of
business of the Subservicer and will not (A) result in a material
breach of any term or provision of the charter or by-laws of the
Subservicer or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to
which the Subservicer is a party or by which it may be bound, or (C)
constitute a material violation of any statute, order or regulation
applicable to the Subservicer of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
the Subservicer; and the Subservicer is not in breach or violation of
any material indenture or other material agreement or instrument, or
in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it which breach or violation may materially impair
the Subservicer's ability to perform or meet any of its obligations
under this Agreement.
(iv) The Subservicer is an approved Subservicer
of conventional mortgage loans for FNMA or FHLMC.
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(v) No litigation is pending or, to the best of
the Subservicer's knowledge, threatened, against the Subservicer that
would materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Subservicer to
service the Mortgage Loans or to perform any of its other obligations
under this Agreement in accordance with the terms hereof.
(vi) No consent, approval, authorization or
order of any court or governmental agency or body is required for the
execution, delivery and performance by the Subservicer of, or
compliance by the Subservicer with, this Agreement or the consummation
of the transactions contemplated hereby, or if any such consent,
approval, authorization or order is required, the Subservicer has
obtained the same.
(vii) The Subservicer's computer and other
systems used in servicing the Mortgage Loans currently are capable of
operating in a manner so that on and after January 1, 2000 (A) the
Subservicer can service the Mortgage Loans in accordance with the
terms of this Agreement and (B) the Subservicer can operate its
business in the same manner as it is operating on the date hereof.
SECTION 2.05. Delivery of Opinion of Counsel in Connection
with Substitutions and Repurchases.
(a) Notwithstanding any contrary provision of this Agreement,
with respect to any Mortgage Loan that is not in default or as to which default
is not imminent, no repurchase or substitution pursuant to Sections 2.02 or 2.03
shall be made unless the Person making such repurchase or substitution delivers
to the Trustee an Opinion of Counsel, addressed to the Trustee, to the effect
that such repurchase or substitution would not (i) result in the imposition of
the tax on "prohibited transactions" of the Trust Fund or contributions after
the Startup Date, as defined in sections 860F(a)(2) and 860G(d) of the Code,
respectively or (ii) cause the Trust Fund to fail to qualify as a REMIC at any
time that any Certificates are outstanding. Any Mortgage Loan as to which
repurchase or substitution was delayed pursuant to this paragraph shall be
repurchased or the substitution therefor shall occur (subject to compliance with
Sections 2.02 or 2.03) upon the earlier of (a) the occurrence of a default or
imminent default with respect to such loan and (b) receipt by the Trustee of an
Opinion of Counsel to the effect that such repurchase or substitution, as
applicable, will not result in the events described in clause (i) or clause (ii)
of the preceding sentence.
(b) Upon discovery by the Depositor, the Subservicer, the
Master Servicer or the Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of section 860G(a)(3) of the Code, the
party discovering such fact shall promptly (and in any event within 5 Business
Days of discovery) give written notice thereof to the other parties. In
connection therewith, the Trustee shall require the Depositor, at the
Depositor's option, to either (i) substitute, if the conditions in Section
2.03(c) with respect to substitutions are satisfied, a Replacement Mortgage Loan
for the affected Mortgage Loan, or (ii) repurchase the affected
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Mortgage Loan within 90 days of such discovery in the same manner as it would a
Mortgage Loan for a breach of representation or warranty contained in Section
2.03. The Trustee shall reconvey to the Depositor the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Section 2.03.
SECTION 2.06. Authentication and Delivery of Certificates.
The Trustee acknowledges the transfer and assignment to it of
the Trust Fund and, concurrently with such transfer and assignment, has caused
to be authenticated and delivered to or upon the order of the Depositor, in
exchange for the Mortgage Loans, Certificates duly authenticated by the
Authenticating Agent in authorized denominations evidencing ownership of the
entire Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the
rights referred to above for the benefit of all present and future Holders of
the Certificates and to perform the duties set forth in this Agreement to the
best of its ability, to the end that the interests of the Holders of the
Certificates may be adequately and effectively protected.
SECTION 2.07. REMIC Election.
(a) The Depositor hereby instructs and authorizes the Trustee
to make an appropriate election to treat each of the Master REMIC and the
Subsidiary REMIC as a REMIC. This Agreement shall be construed so as to carry
out the intention of the parties that the Master REMIC and the Subsidiary REMIC
each be treated as a REMIC at all times prior to the date on which the Trust
Fund is terminated.
(b) The Preliminary Statement sets forth the designations and
"latest possible maturity date" for federal income tax purposes of all interests
created hereby. The "Startup Date" for purposes of the REMIC Provisions shall be
the Closing Date. Each REMIC's fiscal year shall be the calendar year.
The Subsidiary REMIC will consist of all of the assets of the
Trust Fund (other than the uncertificated interests issued by such REMIC). The
Subsidiary REMIC will issue two interests, Subsidiary REMIC Interest I and
Subsidiary REMIC Interest II, that shall be designated as regular interests of
such REMIC and shall issue the SR Interest that shall be designated as the sole
class of residual interest in the Subsidiary REMIC.
Subsidiary REMIC Interest I shall have an initial principal
balance equal to the principal balance of the Group I Mortgage Loans as of the
Cut Off Date, an interest rate equal to the weighted average Mortgage Rate of
the Group I Mortgage Loans (net of the Servicing Fee Rate and Master Servicer
Fee Rate), and pay on each Distribution Date. All Realized Losses from the Group
I Mortgage Loans shall be allocated to Subsidiary Interest I and all payments of
principal and interest (net of fees and expenses) received from the Group I
Mortgage Loans shall be paid to Subsidiary REMIC Interest I in payment of
accrued interest and principal until the
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principal balance of such interest is reduced to zero and any losses allocated
to such interest have been reimbursed. Any excess funds shall first be applied
to reimburse prior losses on the Group II Mortgage Loans and then distributed to
the SR Interest.
Subsidiary REMIC Interest II shall have an initial principal
balance equal to the principal balance of the Group II Mortgage Loans as of the
Cut Off Date, an interest rate equal to the weighted average Mortgage Rate (net
of the Servicing Fee Rate and the Master Servicing Fee Rate) of the Group II
Mortgage Loans, and pay on each Distribution Date. All Realized Losses from the
Group II Mortgage Loans shall be allocated to Subsidiary Interest II and all
payments of principal and interest (net of fees and expenses) received from the
Group II Mortgage Loans shall be paid to Subsidiary REMIC Interest II in payment
of accrued interest and principal until the principal balance of such interest
is reduced to zero and any losses allocated to such interest have been
reimbursed. Any excess funds shall first be applied to reimburse prior losses on
the Group I Mortgage Loans and then distributed to the SR Interest.
The SR Interest shall have no principal balance and shall not
bear interest.
The assets of the Master REMIC shall be Subsidiary Interest I
and Subsidiary Interest II. Each Class of Group I Certificates and each Class of
Group II Certificates shall be designated as regular interests in such REMIC and
the MR Interest shall be designated as the sole class of residual interests in
the Master REMIC.
The beneficial ownership of the SR Interest and the MR
Interest shall be represented by the Class R Certificate.
(c) The "tax matters person" with respect to each REMIC for
purposes of the REMIC provisions shall be the beneficial owner of the Class R
Certificate; provided, however, that the Holder of a Class R Certificate, by its
acceptance thereof, irrevocably appoints the Master Servicer as its agent and
attorney-in-fact to act as "tax matters person" with respect to each REMIC for
purposes of the REMIC provisions.
SECTION 2.08. Covenants of the Subservicer.
The Subservicer hereby covenants to the Depositor, the Master
Servicer and the Trustee as follows:
(a) the Subservicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and requirements of
the insurer under each Required Insurance Policy; and
(b) no written information, certificate of an officer,
statement furnished in writing or written report delivered to the Depositor, the
Master Servicer or the Trustee, any
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affiliate of the Depositor, the Master Servicer or the Trustee and prepared by
the Subservicer pursuant to this Agreement will be inaccurate in any material
respect.
SECTION 2.09. Representations of the Master Servicer.
The Master Servicer represents and warrants to, and covenants with,
the Trustee for the benefit of the Certificateholders that as of the Closing
Date:
(a) The Master Servicer is a corporation duly chartered and
validly existing in good standing under the laws of the State of New
Jersey;
(b) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
Agreement will not violate the Master Servicer's corporate charter or
by-laws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result
in the breach of, any material contract, agreement or other instrument
to which the Master Servicer is a party or which may be applicable to
the Master Servicer or any of its assets;
(c) This Agreement, assuming due authorization, execution and
delivery by the Trustee, the Subservicer and the Depositor,
constitutes a valid, legal and binding obligation of the Master
Servicer, enforceable against it in accordance with the terms hereof
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors'
rights generally and the rights of insured depository institutions
specifically and to general principles of equity, regardless of
whether such enforcement is considered in a proceeding in equity or at
law;
(d) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Master Servicer or
its properties or might have consequences that would affect its
performance hereunder; and
(e) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which
would prohibit its entering into this Agreement or performing its
obligations under this Agreement.
It is understood and agreed that the representations and
warranties set forth in this Section 2.09 shall survive the issuance and
delivery of the Certificates and shall be continuing as long as any Certificate
shall be outstanding or this Agreement has been terminated.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Subservicer to Service Mortgage Loans.
For and on behalf of the Certificateholders, the Subservicer
shall service and administer the Mortgage Loans in accordance with Accepted
Servicing Practices. In connection with such servicing and administration, the
Subservicer shall have full power and authority, acting alone and/or through
Subservicers as provided in Section 3.02 hereof, to do or cause to be done any
and all things that it may deem necessary or desirable in connection with such
servicing and administration, including but not limited to, the power and
authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) subject to Section 3.12(a), to
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing any Mortgage Loan; provided that the Subservicer shall take no
action that is inconsistent with or prejudices the interests of the Trust Fund
or the Certificateholders in any Mortgage Loan or the rights and interests of
the Depositor, the Master Servicer and the Trustee under this Agreement. The
Subservicer shall represent and protect the interest of the Trust Fund in the
same manner as it currently protects its own interest in mortgage loans in its
own portfolio in any claim, proceeding or litigation regarding a Mortgage Loan
and shall not make or permit any modification, waiver or amendment of any term
of any Mortgage Loan which would cause the Trust Fund to fail to qualify as a
REMIC or result in the imposition of any tax under Section 860G(a) or 860G(d) of
the Code, but in any case not in any manner that is a lesser standard than that
provided in the first sentence of this Section 3.01. Without limiting the
generality of the foregoing, the Subservicer, in its own name or in the name of
the Depositor and the Trustee, is hereby authorized and empowered by the
Depositor and the Trustee, when the Subservicer believes it appropriate in its
reasonable judgment, to execute and deliver, on behalf of the Trustee, the
Depositor, the Certificateholders or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans, and with
respect to the Mortgaged Properties held for the benefit of the
Certificateholders. The Subservicer shall prepare and deliver to the Depositor
and/or the Trustee such documents requiring execution and delivery by any or all
of them as are necessary or appropriate to enable the Subservicer to service and
administer the Mortgage Loans, including without limitation, any powers of
attorney. Upon receipt of such documents, the Depositor and/or the Trustee shall
execute such documents and deliver them to the Subservicer.
In accordance with the standards of the preceding paragraph,
the Subservicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of
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taxes and assessments on the Mortgaged Properties, which advances shall be
reimbursable in the first instance from related collections from the Mortgagors
pursuant to Section 3.06, and further as provided in Section 3.08. All costs
incurred by the Subservicer, if any, in effecting the timely payments of taxes
and assessments on the Mortgaged Properties and related insurance premiums shall
not, for the purpose of calculating monthly distributions to the
Certificateholders, be added to the Stated Principal Balance under the related
Mortgage Loans, notwithstanding that the terms of such Mortgage Loans so permit.
The Subservicer shall deliver a list of Servicing Officers to
the Trustee and the Master Servicer by the Closing Date.
SECTION 3.02. Subservicing; Enforcement of the Obligations of
Subservicer.
(a) The Subservicer may arrange for the subservicing of any
Mortgage Loan by a subservicer (each, a "subservicer") pursuant to a
subservicing agreement (each, a "Subservicing Agreement"); provided, however,
that such subservicing arrangement and the terms of the related subservicing
agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder.
Notwithstanding the provisions of any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Subservicer and a subservicer or reference to actions taken through a
subservicer or otherwise, the Subservicer shall remain obligated and liable to
the Depositor, the Trustee and the Certificateholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the
subservicer and to the same extent and under the same terms and conditions as if
the Subservicer alone were servicing and administering the Mortgage Loans. Every
subservicing agreement entered into by the Subservicer shall contain a provision
giving the successor Subservicer the option to terminate such agreement in the
event a successor Subservicer is appointed. All actions of each subservicer
performed pursuant to the related subservicing agreement shall be performed as
an agent of the Subservicer with the same force and effect as if performed
directly by the Subservicer.
(b) For purposes of this Agreement, the Subservicer shall be
deemed to have received any collections, recoveries or payments with respect to
the Mortgage Loans that are received by a subservicer regardless of whether such
payments are remitted by the subservicer to the Subservicer.
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SECTION 3.03. Rights of the Depositor, the Master Servicer and
the Trustee in Respect of the Subservicer.
Neither the Trustee, the Master Servicer nor the Depositor
shall have any responsibility or liability for any action or failure to act by
the Subservicer, and none of them is obligated to supervise the performance of
the Subservicer hereunder or otherwise.
SECTION 3.04. Trustee to Act as Subservicer.
In the event that the Subservicer shall for any reason no
longer be the Subservicer hereunder (including by reason of an Event of
Default), the Trustee or its designee shall thereupon assume all of the rights
and obligations of the Subservicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Subservicer pursuant to
Section 3.10 hereof or any acts or omissions of the predecessor Subservicer
hereunder, (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder, including pursuant to Section 2.02 or 2.03 hereof,
(iv) responsible for expenses of the Subservicer pursuant to Section 2.03 or (v)
deemed to have made any representations and warranties hereunder, including
pursuant to Section 2.03 or the first paragraph of Section 6.02 hereof). If the
Subservicer shall for any reason no longer be the Subservicer (including by
reason of any Event of Default), the Trustee (or any other successor servicer)
may, at its option, succeed to any rights and obligations of the Subservicer
under any subservicing agreement in accordance with the terms thereof; provided,
however, that the Trustee (or any other successor servicer) shall not incur any
liability or have any obligations in its capacity as servicer under a
subservicing agreement arising prior to the date of such succession unless it
expressly elects to succeed to the rights and obligations of the Subservicer
thereunder; and the Subservicer shall not thereby be relieved of any liability
or obligations under the subservicing agreement arising prior to the date of
such succession.
The Subservicer shall, upon request of the Trustee, but at the
expense of the Subservicer, deliver to the assuming party all documents and
records relating to each subservicing agreement and the Mortgage Loans then
being serviced and otherwise use its best efforts to effect the orderly and
efficient transfer of the subservicing agreement to the assuming party.
SECTION 3.05. Collection of Mortgage Loan Payments; Collection
Account; Certificate Account; Distribution
Account.
(a) The Subservicer shall make reasonable efforts in
accordance with Accepted Servicing Practices to collect all payments called for
under the terms and provisions of the Mortgage Loans to the extent such
procedures shall be consistent with this Agreement and the terms and provisions
of any related Required Insurance Policy. Consistent with the foregoing, the
Subservicer may in its discretion (i) waive any late payment charge or any
prepayment charge or penalty interest in connection with the prepayment of a
Mortgage Loan (provided that the
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Subservicer shall not waive any prepayment charge or penalty interest in
connection with the prepayment of a Mortgage Loan without the prior written
consent of the Master Servicer; provided, further, that if the Master Servicer
does not respond within 3 Business Days after notice from the Subservicer, the
Master Servicer shall be deemed to have consented to any action taken by the
Subservicer with respect to such prepayment charges or penalty interest) and
(ii) extend the due dates for payments due on a Mortgage Note for a period not
greater than 270 days. In the event of any such arrangement, the Subservicer
shall make Advances on the related Mortgage Loan during the scheduled period in
accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements. The Subservicer shall not
be required to institute or join in litigation with respect to collection of any
payment (whether under a Mortgage, Mortgage Note or otherwise or against any
public or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.
(b) The Subservicer shall establish and initially maintain, on
behalf of the Certificateholders, the Collection Account. The Subservicer shall
deposit into the Collection Account daily, within two Business Days of receipt
thereof, in immediately available funds, the following payments and collections
received or made by it on and after the Cut-Off Date (to the extent not applied
in computing the Cut-off Date Principal Balance thereof):
(i) all payments on account of principal,
including Principal Prepayments, on the Mortgage Loans;
(ii) (a) all payments on account of interest on
the Mortgage Loans net of the related Servicing Fee permitted
under Section 3.15, other than interest accrued on the
Mortgage Loans prior to [DATE], and (b) the Initial Collection
Account Deposit;
(iii) all Liquidation Proceeds, other than
proceeds to be applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance
with the Subservicer's normal servicing procedures;
(iv) all Compensating Interest;
(v) any amount required to be deposited by the
Subservicer pursuant to Section 3.05(e) in connection with any
losses on Permitted Investments;
(vi) any amounts required to be deposited by
the Subservicer pursuant to Section 3.10 hereof;
(vii) the Purchase Price and any Substitution
Adjustment Amount;
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(viii) all Advances made by the Subservicer
pursuant to Section 4.01; and
(ix) any other amounts required to be deposited
hereunder.
The foregoing requirements for remittance by the Subservicer
into the Collection Account shall be exclusive, it being understood and agreed
that, without limiting the generality of the foregoing, payments in the nature
of prepayment penalties, late payment charges or assumption fees, if collected,
need not be remitted by the Subservicer. In the event that the Subservicer shall
remit any amount not required to be remitted and not otherwise subject to
withdrawal pursuant to Section 3.08 hereof, it may at any time withdraw or
direct the Trustee, or such other institution maintaining the Collection
Account, to withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding. Such withdrawal or direction may be
accomplished by delivering written notice thereof to the Trustee, or such other
institution maintaining the Collection Account, that describes the amounts
deposited in error in the Collection Account. The Subservicer shall maintain
adequate records with respect to all withdrawals made pursuant to this Section.
All funds deposited in the Collection Account shall be held in trust for the
Certificateholders until withdrawn in accordance with Section 3.08. In no event
shall the Trustee incur liability for withdrawals from the Collection Account at
the direction of the Subservicer.
(c) The Master Servicer shall establish and maintain, on
behalf of the Certificateholders, the Certificate Account. The Master Servicer
shall, promptly upon receipt, deposit in the Certificate Account and retain
therein the following:
(i) the aggregate amount withdrawn from the
Collection Account and required to be deposited into the
Certificate Account pursuant to the second paragraph of
Section 3.08(a); and
(ii) any amount required to be deposited by the
Master Servicer pursuant to Section 3.05(e) in connection with
any losses on Permitted Investments.
The foregoing requirements for deposit by the Master Servicer
into the Certificate Account shall be exclusive. In the event that the Master
Servicer shall remit any amount not required to be remitted and not otherwise
subject to withdrawal pursuant to Section 3.08 hereof, it may at any time
withdraw such amount from the Certificate Account, any provision herein to the
contrary notwithstanding. All funds deposited in the Certificate Account shall
be held by the Trustee in trust for the Certificateholders until disbursed in
accordance with this Agreement or withdrawn in accordance with Section 3.08. In
no event shall the Trustee incur liability for withdrawals from the Certificate
Account at the direction of the Master Servicer.
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(d) The Master Servicer shall establish and maintain, on
behalf of the Certificateholders, the Distribution Account. The Master Servicer
shall, promptly upon receipt, deposit in the Distribution Account and retain
therein the following:
(i) the aggregate amount withdrawn by the
Master Servicer pursuant to the second paragraph of Section
3.08(b); and
(ii) any amount required to be deposited by the
Master Servicer pursuant to Section 3.05(e) in connection with
any losses on Permitted Investments.
The foregoing requirements for remittance by the Master
Servicer and deposit by the Master Servicer into the Distribution Account shall
be exclusive. In the event that the Master Servicer shall remit any amount not
required to be remitted and not otherwise subject to withdrawal pursuant to
Section 3.08 hereof, it may at any time withdraw such amount from the
Distribution Account, any provision herein to the contrary notwithstanding. All
funds deposited in the Distribution Account shall be held by the Trustee in
trust for the Certificateholders until disbursed in accordance with this
Agreement or withdrawn in accordance with Section 3.08. In no event shall the
Trustee incur liability for withdrawals from the Distribution Account at the
direction of the Master Servicer.
(e) Each institution that maintains the Collection Account,
the Certificate Account or the Distribution Account may invest the funds in each
such account, as directed by the Subservicer with respect to the Collation
Account and as directed by the Master Servicer with respect to the Certificate
Account and the Distribution Account, in Permitted Investments, which shall
mature not later than (i) in the case of the Collection Account, the Business
Day preceding the related Servicer Remittance Date (except that if such
Permitted Investment is an obligation of the institution that maintains such
Collection Account or is otherwise immediately available, then such Permitted
Investment shall mature not later than such Servicer Remittance Date), (ii) in
the case of the Certificate Account, the second preceding Business Day preceding
the Distribution Date that follows the date of such investment (except that if
such Permitted Investment is an obligation of the institution that maintains
such Certificate Account or is otherwise immediately available, then such
Permitted Investment shall mature not later than the Business Day immediately
preceding such Distribution Date) and, in each case, shall not be sold or
disposed of prior to its maturity and (iii) in the case of the Distribution
Account, the Business Day immediately preceding the first Distribution Date that
follows the date of such investment (except that if such Permitted Investment is
an obligation of the institution that maintains such Distribution Account or is
otherwise immediately available, then such Permitted Investment shall mature not
later than such Distribution Date) and, in each case, shall not be sold or
disposed of prior to its maturity. All such Permitted Investments shall be made
in the name of the Trustee, for the benefit of the Certificateholders. All
income and gain net of any losses realized from amounts on deposit in the
Collection Account shall be for the benefit of the Subservicer as servicing
compensation and shall be remitted to it monthly as provided herein. The amount
of
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any losses incurred in the Collection Account in respect of any such investments
shall be deposited by the Subservicer in the Collection Account out of the
Subservicer's own funds immediately as realized. All income and gain net of any
losses realized from amounts on deposit in the Certificate Account and the
Distribution Account shall be for the benefit of the Master Servicer as
compensation and shall be remitted to it monthly as provided herein. The amount
of any losses incurred in the Certificate Account and the Distribution Account
in respect of any such investments shall be deposited by the Master Servicer, or
the Trustee upon receipt from the Master Servicer, in the Certificate Account or
the Distribution Account out of the Master Servicer's own funds immediately as
realized. The Trustee shall not be liable for the amount of any loss incurred in
respect of any investment or lack of investment of funds held in the Collection
Account, the Certificate Account or the Distribution Account and made in
accordance with this Section 3.05.
(f) The party maintaining the Collection Account, the
Certificate Account or the Distribution Account, as the case may be, shall give
at least 30 days advance notice to each of the other parties to this Agreement
and each Rating Agency of any proposed change of the location of the Collection
Account, the Certificate Account or the Distribution Account prior to any change
thereof.
SECTION 3.06. Collection of Taxes, Assessments and Similar
Items; Escrow Accounts.
To the extent required by the related Mortgage Note, the
Subservicer shall establish and maintain one or more accounts (each, an "Escrow
Account") and deposit and retain therein all collections from the Mortgagors (or
advances by the Subservicer) for the payment of taxes, assessments, hazard
insurance premiums or comparable items for the account of the Mortgagors.
Nothing herein shall require the Subservicer to compel a Mortgagor to establish
an Escrow Account in violation of applicable law.
Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable items, to
reimburse the Subservicer out of related collections for any payments made
pursuant to Sections 3.01 hereof (with respect to taxes and assessments and
insurance premiums) and 3.10 hereof (with respect to hazard insurance), to
refund to any Mortgagors any sums as may be determined to be overages, to pay
interest, if required by law or the terms of the related Mortgage or Mortgage
Note, to Mortgagors on balances in the Escrow Account or to clear and terminate
the Escrow Account at the termination of this Agreement in accordance with
Section 9.01 hereof. The Escrow Accounts shall not be a part of the Trust Fund.
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SECTION 3.07. Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Subservicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage Loans
and all accounts, insurance policies and other matters relating to this
Agreement, such access being afforded without charge, but only upon reasonable
request and during normal business hours at the offices of the Subservicer
designated by it.
Upon reasonable advance notice in writing if required by
federal regulation, the Subservicer will provide to each Certificateholder that
is a savings and loan association, bank or insurance company certain reports and
reasonable access to information and documentation regarding the Mortgage Loans
sufficient to permit such Certificateholder to comply with applicable
regulations of the OTS or other regulatory authorities with respect to
investment in the Certificates; provided, that the Subservicer shall be entitled
to be reimbursed by each such Certificateholder for actual expenses incurred by
the Subservicer in providing such reports and access.
SECTION 3.08. Permitted Withdrawals from the Collection
Account, Certificate Account and Distribution
Account.
(a) The Subservicer (or the Depositor in the case of clauses
(vi) and (vii) below) may from time to time, make withdrawals from the
Collection Account for the following purposes:
(i) to pay to the Subservicer (to the extent
not previously paid to or withheld by the Subservicer), as
servicing compensation in accordance with Section 3.15, that
portion of any payment of interest that equals the Servicing
Fee for the period with respect to which such interest payment
was made, and, as additional servicing compensation, those
other amounts set forth in Section 3.15;
(ii) to reimburse the Subservicer for Advances
made by it with respect to the Mortgage Loans, such right of
reimbursement pursuant to this subclause (ii) being limited to
amounts received on particular Mortgage Loan(s) (including,
for this purpose, Liquidation Proceeds) that represent late
recoveries of payments of principal and/or interest on such
particular Mortgage Loan(s) in respect of which any such
Advance was made;
(iii) to reimburse the Subservicer for any
Non-Recoverable Advance previously made and any
Non-Recoverable Servicing Advance;
(iv) to reimburse the Subservicer from
Insurance Proceeds for Insured Expenses covered by the related
Insurance Policy;
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(v) to pay the Subservicer any unpaid Servicing
Fees and to reimburse it for any unreimbursed Servicing
Advances, the Subservicer's right to reimbursement of
Servicing Advances pursuant to this subclause (v) with respect
to any Mortgage Loan being limited to amounts received on
particular Mortgage Loan(s)(including, for this purpose,
Liquidation Proceeds and purchase and repurchase proceeds)
that represent late recoveries of the payments for which such
advances were made pursuant to Section 3.01 or Section 3.06;
(vi) to pay to the Depositor or the
Subservicer, as applicable, with respect to each Mortgage Loan
or property acquired in respect thereof that has been
purchased pursuant to Section 2.02, 2.03 or 3.12, all amounts
received thereon and not taken into account in determining the
related Stated Principal Balance of such repurchased Mortgage
Loan;
(vii) to reimburse the Subservicer, the Master
Servicer or the Depositor for expenses incurred by any of them
in connection with the Mortgage Loans or Certificates and
reimbursable pursuant to Section 6.03 hereof;
(viii) to withdraw pursuant to Section 3.05 any
amount deposited in the Collection Account and not required to
be deposited therein; and
(ix) to clear and terminate the Collection
Account upon termination of this Agreement pursuant to Section
9.01 hereof.
In addition, no later than 1:00 p.m. California Time on the
Servicer Remittance Date, the Subservicer shall cause to be withdrawn from the
Collection Account the Group I Interest Funds, the Group I Principal Funds, the
Group II Interest Funds, the Group II Principal Funds and the Master Servicer
Fee, to the extent on deposit, and such amount shall be deposited in the
Certificate Account.
The Subservicer shall keep and maintain separate accounting,
on a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to subclauses (i), (ii), (iv),
(v) and (vi) above.
(b) The Master Servicer may, from time to time, make
withdrawals from the Certificate Account for the following purposes:
(i) to pay the Master Servicer the Master
Servicer Fee;
(ii) to pay to the Master Servicer, as
additional compensation, earnings on or investment income with
respect to funds in or credited to the Certificate Account;
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(iii) to withdraw pursuant to Section 3.05 any
amount deposited in the Certificate Account and not required
to be deposited therein; and
(iv) to clear and terminate the Certificate
Account upon termination of the Agreement pursuant to Section
9.01 hereof.
In addition, no later than 1:00 p.m. California Time on the
Business Day preceding the Distribution Date, the Master Servicer shall cause to
be withdrawn from the Certificate Account the Group I Interest Funds, the Group
I Principal Funds, the Group II Interest Funds and the Group II Principal Funds,
to the extent on deposit, and such amount shall be deposited in the Distribution
Account.
(c) The Master Servicer shall withdraw funds from the
Distribution Account for distribution to the Certificateholders in the manner
specified in this Agreement (and to withhold from the amounts so withdrawn, the
amount of any taxes that it is authorized to retain pursuant to the last
paragraph of Section 8.11). In addition, the Master Servicer may from time to
time make withdrawals from the Distribution Account for the following purposes:
(i) to pay to the Master Servicer, as
additional compensation, earnings on or investment income with
respect to funds in or credited to the Distribution Account,
as well as any amounts in respect of prepayment penalties or
late payment charges, to the extent not previously remitted to
the Master Servicer by the Subservicer in accordance with
Section 3.15;
(ii) to withdraw pursuant to Section 3.05 any
amount deposited in the Distribution Account and not required
to be deposited therein; and
(iii) to clear and terminate the Distribution
Account upon termination of the Agreement pursuant to Section
9.01 hereof.
SECTION 3.09. [Reserved.]
SECTION 3.10. Maintenance of Hazard Insurance.
The Subservicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is at
least equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan and (ii) the greater of (a) the outstanding
principal balance of the Mortgage Loan and (b) an amount such that the proceeds
of such policy shall be sufficient to prevent the related Mortgagor and/or
mortgagee from becoming a co-insurer. Each such policy of standard hazard
insurance shall contain, or have an accompanying endorsement that contains, a
standard mortgagee clause. The Subservicer shall also cause flood insurance to
be maintained on property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, to the extent described below. Pursuant to
Section
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3.05 hereof, any amounts collected by the Subservicer under any such policies
(other than the amounts to be applied to the restoration or repair of the
related Mortgaged Property or property thus acquired or amounts released to the
Mortgagor in accordance with the Subservicer's normal servicing procedures)
shall be deposited in the Collection Account. Any cost incurred by the
Subservicer in maintaining any such insurance shall not, for the purpose of
calculating monthly distributions to the Certificateholders or remittances to
the Trustee for their benefit, be added to the principal balance of the Mortgage
Loan, notwithstanding that the terms of the Mortgage Loan so permit. Such costs
shall be recoverable by the Subservicer out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section 3.08
hereof. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired
in respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time of
origination of the Mortgage Loan in a federally designated special flood hazard
area and such area is participating in the national flood insurance program, the
Subservicer shall cause flood insurance to be maintained with respect to such
Mortgage Loan. Such flood insurance shall be in an amount equal to the lesser of
(i) the original principal balance of the related Mortgage Loan, (ii) the
replacement value of the improvements that are part of such Mortgaged Property,
or (iii) the maximum amount of such insurance available for the related
Mortgaged Property under the Flood Disaster Protection Act of 1973, as amended.
In the event that the Subservicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section 3.10, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Subservicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section 3.10, and there shall have
been a loss that would have been covered by such policy, deposit in the
Collection Account the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as servicer
of the Mortgage Loans, the Subservicer agrees to present, on behalf of itself,
the Depositor, the Master Servicer and the Trustee for the benefit of the
Certificateholders, claims under any such blanket policy.
SECTION 3.11. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
(a) Except as otherwise provided in this Section 3.11(a), when
any property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor, the Subservicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing, the
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Subservicer is not required to exercise such rights with respect to a Mortgage
Loan if the Person to whom the related Mortgaged Property has been conveyed or
is proposed to be conveyed satisfies the terms and conditions contained in the
Mortgage Note and Mortgage related thereto and the consent of the mortgagee
under such Mortgage Note or Mortgage is not otherwise so required under such
Mortgage Note or Mortgage as a condition to such transfer. In the event that the
Subservicer is prohibited by law from enforcing any such due-on-sale clause, or
if coverage under any Required Insurance Policy would be adversely affected, or
if nonenforcement is otherwise permitted hereunder, the Subservicer is
authorized, subject to Section 3.11(b), to take or enter into an assumption and
modification agreement from or with the person to whom such property has been or
is about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if so covered before the Subservicer enters such agreement) by the
applicable Required Insurance Policies. The Subservicer, subject to Section
3.11(b), is also authorized with the prior approval of the insurers under any
Required Insurance Policies to enter into a substitution of liability agreement
with such Person, pursuant to which the original Mortgagor is released from
liability and such Person is substituted as Mortgagor and becomes liable under
the Mortgage Note. Notwithstanding the foregoing, the Subservicer shall not be
deemed to be in default under this Section 3.11(a) by reason of any transfer or
assumption that the Subservicer reasonably believes it is restricted by law from
preventing.
(b) Subject to the Subservicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3.11(a) hereof, in any
case in which a Mortgaged Property has been conveyed to a Person by a Mortgagor,
and such Person is to enter into an assumption agreement or modification
agreement or supplement to the Mortgage Note or Mortgage that requires the
signature of the Trustee, or if an instrument of release signed by the Trustee
is required releasing the Mortgagor from liability on the Mortgage Loan, the
Subservicer shall prepare and deliver or cause to be prepared and delivered to
the Trustee for signature and shall direct, in writing, the Trustee to execute
the assumption agreement with the Person to whom the Mortgaged Property is to be
conveyed and such modification agreement or supplement to the Mortgage Note or
Mortgage or other instruments as are reasonable or necessary to carry out the
terms of the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the Mortgaged Property
to such Person. In connection with any such assumption, no material term of the
Mortgage Note (including, but not limited to, the Mortgage Rate, the amount of
the Scheduled Payment, the Maximum Rate, the Minimum Rate, the Gross Margin, the
Periodic Rate Cap, the Adjustment Date and any other term affecting the amount
or timing of payment on the Mortgage Loan) may be changed. The Subservicer shall
notify the Trustee that any such substitution or assumption agreement has been
completed by forwarding to the Trustee the original of such substitution or
assumption agreement, which in the case of the original shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. Any fee collected by the Subservicer for entering
into an
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assumption or substitution of liability agreement will be retained by the
Subservicer as additional servicing compensation.
SECTION 3.12. Realization Upon Defaulted Mortgage Loans;
Determination of Excess Proceeds; Repurchase of
Certain Mortgage Loans.
(a) The Subservicer shall use reasonable efforts to foreclose
upon or otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Subservicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
the requirements of the insurer under any Required Insurance Policy; provided,
however, that the Subservicer shall not be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Collection Account pursuant to Section 3.08
hereof). The Subservicer shall be responsible for all other costs and expenses
incurred by it in any such proceedings; provided, however, that it shall be
entitled to reimbursement thereof from the proceeds of liquidation of the
related Mortgaged Property, as contemplated in Section 3.08 hereof. If the
Subservicer has knowledge that a Mortgaged Property that the Subservicer is
contemplating acquiring in foreclosure or by deed-in-lieu of foreclosure is
located within a one-mile radius of any site with environmental or hazardous
waste risks known to the Subservicer, the Subservicer will, prior to acquiring
the Mortgaged Property, consider such risks and only take action in accordance
with Accepted Servicing Practices.
With respect to any REO Property, the deed or certificate of
sale shall be taken in the name of the Trustee for the benefit of the
Certificateholders (or the Trustee's nominee on behalf of the
Certificateholders). The Trustee's name shall be placed on the title to such REO
Property solely as the Trustee hereunder and not in its individual capacity. The
Subservicer shall ensure that the title to such REO Property references this
Agreement and the Trustee's capacity thereunder. Pursuant to its efforts to sell
such REO Property, the Subservicer shall either itself or through an agent
selected by the Subservicer protect and conserve such REO Property in the same
manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Certificateholders, rent the same, or any part thereof, as the
Subservicer deems to be in the best interest of the Subservicer and the
Certificateholders for the period prior to the sale of such REO Property. The
Subservicer shall prepare for and deliver to the Trustee a statement with
respect to each REO Property that has been rented showing the aggregate rental
income received and all expenses incurred in connection with the management and
maintenance of such REO Property at such times as is necessary to enable the
Trustee to comply with the reporting requirements of the REMIC Provisions. The
net monthly rental income, if any, from such REO Property shall be
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deposited in the Collection Account no later than the close of business on each
Determination Date. The Subservicer shall perform the tax reporting and
withholding related to foreclosures, abandonments and cancellation of
indebtedness income as specified by Sections 1445, 6050J and 6050P of the Code
by preparing and filing such tax and information returns, as may be required.
In the event that the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, the Subservicer shall dispose of such Mortgaged
Property prior to two years after its acquisition by the Trust Fund or, at the
expense of the Trust Fund, request more than 60 days prior to the day on which
such two-year period would otherwise expire, an extension of the two-year grace
period unless the Trustee shall have been supplied with an Opinion of Counsel
(such Opinion not to be an expense of the Trustee) to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to such two-
year period will not result in the imposition of taxes on "prohibited
transactions" of the Trust Fund as defined in section 860F of the Code or cause
the Trust Fund to fail to qualify as a REMIC at any time that any Certificates
are outstanding, in which case the Trust Fund may continue to hold such
Mortgaged Property (subject to any conditions contained in such Opinion of
Counsel). Notwithstanding any other provision of this Agreement, no Mortgaged
Property acquired by the Trust Fund shall be rented (or allowed to continue to
be rented) or otherwise used for the production of income by or on behalf of the
Trust Fund in such a manner or pursuant to any terms that would (i) cause such
Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of section 860G(a)(8) of the Code or (ii) subject the Trust Fund to the
imposition of any federal, state or local income taxes on the income earned from
such Mortgaged Property under section 860G(c) of the Code or otherwise, unless
the Subservicer, the Master Servicer or the Depositor has agreed to indemnify
and hold harmless the Trust Fund with respect to the imposition of any such
taxes.
The decision of the Subservicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Subservicer that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any Mortgaged
Properties acquired through foreclosure or other judicial proceeding, net of
reimbursement to the Subservicer for expenses incurred (including any property
or other taxes) in connection with such management and net of unreimbursed
Servicing Fees, Advances, Servicing Advances and any management fee paid or to
be paid with respect to the management of such Mortgaged Property, shall be
applied to the payment of principal of, and interest on, the related defaulted
Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Collection Account. To the extent
the income received during a Prepayment Period is in excess of the amount
attributable to amortizing principal and accrued interest at the related
Mortgage Rate on the related Mortgage Loan, such excess shall be considered to
be a partial Principal Prepayment for all purposes hereof.
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The Liquidation Proceeds from any liquidation of a Mortgage
Loan, net of any payment to the Subservicer as provided above, shall be
deposited in the Collection Account on the next succeeding Determination Date
following receipt thereof for distribution on the related Distribution Date.
The proceeds of any Liquidated Loan, as well as any recovery
resulting from a partial collection of Liquidation Proceeds or any income from
an REO Property, will be applied in the following order of priority: first, to
reimburse the Subservicer for any related unreimbursed Servicing Advances and
Servicing Fees, pursuant to Section 3.08(a)(v) or this Section 3.12; second, to
reimburse the Subservicer for any unreimbursed Advances, pursuant to Section
3.08(a)(ii) or this Section 3.12; third, to accrued and unpaid interest (to the
extent no Advance has been made for such amount) on the Mortgage Loan or related
REO Property, at the Net Mortgage Rate to the Due Date occurring in the month in
which such amounts are required to be distributed; and fourth, as a recovery of
principal of the Mortgage Loan.
(b) On each Determination Date, the Subservicer shall
determine the respective aggregate amounts of Excess Proceeds, if any, that
occurred in the related Prepayment Period.
(c) The Master Servicer, in its sole discretion, shall have
the right to elect (by written notice sent to the Trustee) to purchase for its
own account from the Trust Fund any Mortgage Loan that is 91 days or more
delinquent at a price equal to the Purchase Price. The Purchase Price for any
Mortgage Loan purchased hereunder shall be delivered to the Trustee for deposit
in the Collection Account and the Trustee, upon receipt of such deposit and a
Request for Release from the Depositor in the form of Exhibit M hereto, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
SECTION 3.13. Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt
by the Subservicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Subservicer will promptly notify the
Trustee by delivering a Request for Release substantially in the form of Exhibit
M. Upon receipt of such request, the Trustee shall promptly release the related
Mortgage File to the Subservicer, and the Trustee shall at the Subservicer's
direction execute and deliver to the Subservicer the request for reconveyance,
deed of reconveyance or release or satisfaction of mortgage or such instrument
releasing the lien of the
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Mortgage in each case provided by the Subservicer, together with the Mortgage
Note with written evidence of cancellation thereon. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Collection Account, the Certificate Account, the Distribution
Account or the related subservicing account. From time to time and as shall be
appropriate for the servicing or foreclosure of any Mortgage Loan, including for
such purpose, collection under any policy of flood insurance, any fidelity bond
or errors or omissions policy, or for the purposes of effecting a partial
release of any Mortgaged Property from the lien of the Mortgage or the making of
any corrections to the Mortgage Note or the Mortgage or any of the other
documents included in the Mortgage File, the Trustee shall, upon delivery to the
Trustee of a Request for Release in the form of Exhibit M signed by a Servicing
Officer, release the Mortgage File to the Subservicer. Subject to the further
limitations set forth below, the Subservicer shall cause the Mortgage File or
documents so released to be returned to the Trustee when the need therefor by
the Subservicer no longer exists, unless the Mortgage Loan is liquidated and the
proceeds thereof are deposited in the Collection Account, in which case the
Trustee shall deliver the Request for Release to the Subservicer.
Each Request for Release may be delivered to the Trustee (i)
via mail or courier, (ii) via facsimile or (iii) by such other means, including,
without limitation, electronic or computer readable medium, as the Subservicer
and the Trustee shall mutually agree. The Trustee shall promptly release the
related Mortgage File(s) within five (5) to seven (7) Business Days of receipt
of a properly completed Request for Release pursuant to clauses (i), (ii) or
(iii) above. Receipt of a properly completed Request for Release shall be
authorization to the Trustee to release such Mortgage Loan Files, provided the
Trustee has determined that such Request for Release has been executed, with
respect to clauses (i) or (ii) above, or approved, with respect to clause (iii)
above, by an authorized Servicing Officer of the Subservicer, and so long as the
Trustee complies with its duties and obligations under the agreement. If the
Trustee is unable to release the Mortgage Files within the period previously
specified, the Trustee shall immediately notify the Subservicer indicating the
reason for such delay, but in no event shall such notification be later than
five Business Days after receipt of a Request for Release. If the Subservicer is
required to pay penalties or damages due to the Trustee's negligent failure to
release the related Trustee's Mortgage File or the Trustee's negligent failure
to execute and release documents in a timely manner, the Trustee shall be liable
for such penalties or damages.
On each day that the Subservicer remits to the Trustee
Requests for Releases pursuant to clauses (ii) or (iii) above, the Subservicer
shall also submit to the Trustee a summary of the total amount of such Requests
for Releases requested on such day by the same method as described in such
clauses (ii) and (iii) above.
If the Subservicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Subservicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to
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obtain a deficiency judgment or to enforce any other remedies or rights provided
by the Mortgage Note or the Mortgage or otherwise available at law or in equity.
Notwithstanding the foregoing, the Subservicer shall cause possession of any
Mortgage File or of the documents therein that shall have been released by the
Trustee to be returned to the Trustee promptly after possession thereof shall
have been released by the Trustee unless (i) the Mortgage Loan has been
liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been
deposited in the Collection Account, and the Subservicer shall have delivered to
the Trustee a Request for Release in the form of Exhibit M or (ii) the Mortgage
File or document shall have been delivered to an attorney or to a public trustee
or other public official as required by law for purposes of initiating or
pursuing legal action or other proceedings for the foreclosure of the Mortgaged
Property and the Subservicer shall have delivered to the Trustee an Officer's
Certificate of a Servicing Officer certifying as to the name and address of the
Person to which the Mortgage File or the documents therein were delivered and
the purpose or purposes of such delivery.
SECTION 3.14. Documents, Records and Funds in Possession of
Subservicer to be Held for the Trustee.
All Mortgage Files and funds collected or held by, or under
the control of, the Subservicer in respect of any Mortgage Loans, whether from
the collection of principal and interest payments or from Liquidation Proceeds,
including but not limited to, any funds on deposit in the Collection Account,
shall be held by the Subservicer for and on behalf of the Trustee and shall be
and remain the sole and exclusive property of the Trustee, subject to the
applicable provisions of this Agreement. The Subservicer also agrees that it
shall not create, incur or subject any Mortgage File or any funds that are
deposited in the Collection Account, the Certificate Account or Distribution
Account or in any Escrow Account (as defined in Section 3.06), or any funds that
otherwise are or may become due or payable to the Trustee for the benefit of the
Certificateholders, to any claim, lien, security interest, judgment, levy, writ
of attachment or other encumbrance, or assert by legal action or otherwise any
claim or right of set off against any Mortgage File or any funds collected on,
or in connection with, a Mortgage Loan, except, however, that the Subservicer
shall be entitled to set off against and deduct from any such funds any amounts
that are properly due and payable to the Subservicer under this Agreement.
SECTION 3.15. Servicing Compensation.
As compensation for its activities hereunder, the Subservicer
shall be entitled to retain or direct the Trustee to withdraw from the
Collection Account out of each payment of interest on a Mortgage Loan included
in the Trust Fund an amount equal to interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of the related Mortgage Loan for the period
covered by such interest payment.
Additional servicing compensation in the form of any Excess
Proceeds, assumption fees and other similar charges, and all income and gain net
of any losses realized from Permitted Investments in the Collection Account
shall be retained by the Subservicer to the
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extent not required to be deposited in the Collection Account pursuant to
Section 3.05 or 3.12(a) hereof. Prepayment penalties and late payment charges
received by the Subservicer shall be remitted on the related Servicer Remittance
Date by the Subservicer to the Master Servicer as part of the Master Servicer's
compensation in accordance with Section 6.06. The Subservicer shall be required
to pay all expenses incurred by it in connection with its servicing activities
hereunder (including payment of any premiums for hazard insurance, as required
by Section 3.10 hereof and maintenance of the other forms of insurance coverage
required by Section 3.10 hereof) and shall not be entitled to reimbursement
therefor except as specifically provided in Sections 3.08 and 3.12 hereof.
SECTION 3.16. Access to Certain Documentation.
The Subservicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of the Certificates and
the examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices of the Subservicer designated by it.
Nothing in this Section shall limit the obligation of the Subservicer to observe
any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Subservicer to provide access as provided in
this Section as a result of such obligation shall not constitute a breach of
this Section.
SECTION 3.17. Annual Statement as to Compliance.
The Subservicer shall deliver to the Depositor and the Trustee
on or before March 31 of each year commencing [DATE], an Officer's Certificate
stating, as to the signer thereof, that (i) a review of the activities of the
Subservicer during the preceding calendar year and of the performance of the
Subservicer under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Subservicer has fulfilled all its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof and (iii) to the best of such officer's knowledge, each
subservicer has fulfilled all its obligations under its Subservicing Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation specifying each such default known to such officer and the
nature and status thereof. The Trustee shall forward a copy of each such
statement to each Rating Agency. Copies of such statement shall be provided by
the Trustee to any Certificateholder upon request at the Certificateholder's
expense, provided such statement is delivered by the Subservicer to the Trustee.
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SECTION 3.18. Annual Independent Public Accountants' Servicing
Statement; Financial Statements.
On or before the later of (i) April 15 of each year, beginning
with [DATE], or (ii) within 30 days of the issuance of the annual audited
financial statements beginning with the audit for the period ending in [DATE],
the Subservicer at its expense shall cause a nationally recognized firm of
independent public accountants (who may also render other services to the
Subservicer or any affiliate thereof) that is a member of the American Institute
of Certified Public Accountants to furnish a report to the Trustee and the
Depositor in compliance with the Uniform Single Attestation Program for Mortgage
Bankers. Copies of such report shall be provided by the Trustee to any
Certificateholder upon request at the Certificateholder's expense, provided such
report is delivered by the Subservicer to the Trustee. Upon written request, the
Subservicer shall provide to the Certificateholders its publicly available
annual financial statements (or, for so long as Advanta Mortgage Corp. USA is
the Subservicer hereunder, the Subservicer's parent company's publicly available
annual financial statements), if any, promptly after they become available.
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ARTICLE IV
DISTRIBUTIONS;
ADVANCES BY THE SUBSERVICER
SECTION 4.01. Advances.
Subject to the conditions of this Article IV, the Subservicer,
as required below, shall make an Advance and deposit such Advance in the
Collection Account. Each such Advance shall be remitted to the Collection
Account no later than 1:00 p.m. California time on the Servicer Advance Date in
immediately available funds. The Subservicer shall be obligated to make any such
Advance only to the extent that such advance would not be a Non-Recoverable
Advance. If the Subservicer shall have determined that it has made a
Non-Recoverable Advance or that a proposed Advance or a lesser portion of such
Advance would constitute a NonRecoverable Advance, the Subservicer shall deliver
(i) to the Trustee for the benefit of the Certificateholders funds constituting
the remaining portion of such Advance, if applicable, and (ii) to the Depositor,
the Master Servicer, each Rating Agency and the Trustee an Officer's Certificate
setting forth the basis for such determination. The Subservicer may, in its sole
discretion, make an Advance with respect to the principal portion of the final
Scheduled Payment on a Balloon Loan, but the Subservicer is under no obligation
to do so; provided, however, that nothing in this sentence shall affect the
Subservicer's obligation under this Section 4.01 to Advance the interest portion
of the final Scheduled Payment with respect to a Balloon Loan as if such Balloon
Loan were a fully amortizing Mortgage Loan. If a Mortgagor does not pay its
final Scheduled Payment on a Balloon Loan when due, the Subservicer shall
Advance (unless it determines in its good faith judgment that such amounts would
constitute a Non-Recoverable Advance) a full month of interest (net of the
Servicing Fee) on the Stated Principal Balance thereof each month until its
Stated Principal Balance is reduced to zero.
In lieu of making all or a portion of such Advance from its
own funds, the Subservicer may (i) cause to be made an appropriate entry in its
records relating to the Collection Account that any Amount Held for Future
Distributions has been used by the Subservicer in discharge of its obligation to
make any such Advance and (ii) transfer such funds from the Collection Account
to the Certificate Account. Any funds so applied and transferred shall be
replaced by the Subservicer by deposit in the Collection Account no later than
the close of business on the Business Day immediately preceding the Distribution
Date on which such funds are required to be distributed pursuant to this
Agreement. The Subservicer shall be entitled to be reimbursed from the
Collection Account for all Advances of its own funds made pursuant to this
Section as provided in Section 3.08. The obligation to make Advances with
respect to any Mortgage Loan shall continue until such Mortgage Loan is paid in
full or the related Mortgaged Property or related REO Property has been
liquidated or until the purchase or repurchase thereof (or substitution
therefor) from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section 4.01.
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SECTION 4.02. Reduction of Servicing Compensation in
Connection with Prepayment Interest Shortfalls.
In the event that any Mortgage Loan is the subject of a
Prepayment Interest Shortfall, the Subservicer shall, from amounts in respect of
the Servicing Fee for such Distribution Date, deposit into the Collection
Account, as a reduction of the Servicing Fee for such Distribution Date, no
later than the Servicer Advance Date immediately preceding such Distribution
Date, an amount up to the Prepayment Interest Shortfall; provided, however, that
with respect to any Distribution Date, the Servicer's obligation to deposit any
such amount is limited to an amount equal to the product of (i) one-twelfth of
____% and (ii) the aggregate Stated Principal Balance of the Mortgage loans with
respect to such Distribution Date; and in case of such deposit, the Subservicer
shall not be entitled to any recovery or reimbursement from the Depositor, the
Master Servicer, the Trustee, the Trust Fund or the Certificateholders. With
respect to any Distribution Date, to the extent that the Prepayment Interest
Shortfall exceeds Compensating Interest (such excess, a "Non-Supported Interest
Shortfall"), such Non-Supported Interest Shortfall shall reduce the Current
Interest with respect to each Class of Group I Certificates and Group II
Certificates, pro rata based upon the amount of interest each such Class would
otherwise be entitled to receive on such Distribution Date.
SECTION 4.03. Distributions on the Subsidiary REMIC.
On each Distribution Date, amounts on deposit in the
Distribution Account shall be applied to distributions on the Subsidiary REMIC
Regular Interests, in each case in an amount sufficient to make the
distributions on the respective Corresponding Classes of Certificates on such
Distribution Date in accordance with the provisions of Section 4.04.
SECTION 4.04. Distributions.
(a) On each Distribution Date, the Paying Agent shall make the
following distributions from the Distribution Account of an amount equal to the
Group I Interest Funds in the following order of priority:
(i) to each Class of Group I Class A
Certificates, the Current Interest and any Interest Carryforward
Amount with respect to such Class; provided, however, if such amount
is not sufficient to make a full distribution of the Current Interest
and any Interest Carryforward Amount with respect to all the Group I
Class A Certificates, such amount will be distributed pro rata among
each Class of the Group I Class A Certificates based on the ratio of
(x) the Current Interest and Interest Carry Forward Amount for each
Class of the Group I Class A Certificates to (y) the total amount of
Current Interest and any Interest Carryforward Amount for the Group I
Class A Certificates;
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(ii) to the Class IM-1 Certificates, the Class
IM-1 Current Interest and any Class IM-1 Interest Carryforward Amount;
(iii) to the Class IM-2 Certificates, the Class
IM-2 Current Interest and any Class IM-2 Interest Carryforward Amount;
(iv) to the Class IB Certificates, the Class IB
Current Interest and any Class IB Interest Carryforward Amount; and
(v) any remainder pursuant to Section 4.04(e)
hereof.
(b) On each Distribution Date, the Paying Agent shall make the
following distributions from the Distribution Account of an amount equal to the
Group II Interest Funds in the following order of priority:
(i) to each Class of Group II Class A
Certificates, the Current Interest and any Interest Carryforward
Amount with respect to such Class; provided, however, if such amount
is not sufficient to make a full distribution of the Current Interest
and any Interest Carryforward Amount with respect to all the Group II
Class A Certificates, such amount will be distributed pro rata among
each Class of the Group II Class A Certificates based on the ratio of
(x) the Current Interest and Interest Carry Forward Amount for each
Class of the Group II Class A Certificates to (y) the total amount of
Current Interest and any Interest Carryforward Amount for the Group II
Class A Certificates;
(ii) to the Class IIM-1 Certificates, the Class
IIM-1 Current Interest and any Class IIM-1 Interest Carryforward
Amount;
(iii) to the Class IIM-2 Certificates, the
Class IIM-2 Current Interest and any Class IIM-2 Interest Carryforward
Amount;
(iv) to the Class IIB Certificates, the Class
IIB Current Interest and any Class IIB Interest Carryforward Amount;
and
(v) any remainder pursuant to Section 4.04(f)
hereof.
(c) On each Distribution Date, the Paying Agent shall make the
following distributions from the Distribution Account of an amount equal to the
Group I Principal Distribution Amount in the following order of priority, and
each such distribution shall be made only after all distributions pursuant to
Section 4.04(a) above shall have been made until such amount shall have been
fully distributed for such Distribution Date:
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(i) to the Group I Class A Certificates, the
Group I Class A Principal Distribution Amount to be distributed first,
to the Class IA-6 Certificates, the Class IA-6 Principal Distribution
Amount, and then the remainder sequentially to the Class IA-1, Class
IA-2, Class IA-3, Class IA-4, Class IA-5 and Class IA-6 Certificates,
until the Certificate Principal Balances thereof have been reduced to
zero; provided, however, that, on any Distribution Date on which the
Group I Class A Principal Balance is equal to or greater than the
Stated Principal Balances of Group I Mortgage Loans, the Group I Class
A Principal Distribution Amount will be distributed pro rata and not
sequentially;
(ii) to the Class IM-1 Certificates, the Class
IM-1 Principal Distribution Amount;
(iii) to the Class IM-2 Certificates, the Class
IM-2 Principal Distribution Amount;
(iv) to the Class IB Certificates, the Class IB
Principal Distribution Amount; and
(v) any remainder pursuant to Section 4.04(e)
hereof.
(d) On each Distribution Date, the Paying Agent shall make the
following distributions from the Distribution Account of an amount equal to the
Group II Principal Distribution Amount in the following order of priority, and
each such distribution shall be made only after all distributions pursuant to
Section 4.04(b) above shall have been made until such amount shall have been
fully distributed for such Distribution Date:
(i) to the Group II Class A Certificates, the
Group II Class A Principal Distribution Amount to be distributed
first, to the Class IIA-2 Certificates, the Class IIA-2 Principal
Distribution Amount, and then the remainder sequentially to the Class
IIA-1 and Class IIA-2 Certificates, until the Certificate Principal
Balances thereof have been reduced to zero; provided, however, that,
on any Distribution Date on which the Group II Class A Principal
Balance is equal to or greater than the Stated Principal Balances of
Group II Mortgage Loans, the Group II Class A Principal Distribution
Amount will be distributed pro rata and not sequentially;
(ii) to the Class IIM-1 Certificates, the Class
IIM-1 Principal Distribution Amount;
(iii) to the Class IIM-2 Certificates, the
Class IIM-2 Principal Distribution Amount;
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(iv) to the Class IIB Certificates, the Class
IIB Principal Distribution Amount; and
(v) any remainder pursuant to Section 4.04(f)
hereof.
(e) On each Distribution Date, the Paying Agent shall make the
following distributions from the Distribution Account of the remainders pursuant
to Section 4.04(a)(v) and (c)(v) and, to the extent required to make the
distributions set forth below in clauses (i) through (vii) of this Section
4.04(e), Section 4.04(f)(xiii) hereof in the following order of priority, and
each such distribution shall be made only after all distributions pursuant to
Sections 4.04(a) and (c) above shall have been made until such remainders shall
have been fully distributed for such Distribution Date:
(i) for distribution as part of the Group I
Principal Distribution Amount, the Group I Extra Principal
Distribution Amount;
(ii) to the Class IM-1 Certificates, the Class
IM-1 Interest Carryforward Amount;
(iii) to the Class IM-1 Certificates, the Class
IM-1 Unpaid Realized Loss Amount;
(iv) to the Class IM-2 Certificates, the Class
IM-2 Interest Carryforward Amount;
(v) to the Class IM-2 Certificates, the Class
IM-2 Unpaid Realized Loss Amount;
(vi) to the Class IB Certificates, the Class IB
Interest Carryforward Amount;
(vii) to the Class IB Certificates, the Class
IB Unpaid Realized Loss Amount;
(viii) to the extent required to make the
allocations set forth in clauses (i) through (vii) of Section 4.04(f)
hereof, pursuant to Section 4.04(f) hereof; and
(ix) the remainder pursuant to Section 4.04(g)
hereof.
(f) On each Distribution Date, the Paying Agent shall make the
following distributions from the Distribution Account of the remainders pursuant
to Section 4.04(b)(v) and (d)(v) hereof and, to the extent required to make the
distributions set forth below in clauses (i) through (vii) of this Section
4.04(f), Section 4.04(e)(viii) hereof in the following order of
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priority, and each such distribution shall be made only after all distributions
pursuant to Sections 4.04(b) and (d) above shall have been made until such
remainders shall have been fully distributed for such Distribution Date:
(i) for distribution as part of the Group II
Principal Distribution Amount, the Group II Extra Principal
Distribution Amount;
(ii) to the Class IIM-1 Certificates, the Class
IIM-1 Interest Carryforward Amount;
(iii) to the Class IIM-1 Certificates, the
Class IIM-1 Unpaid Realized Loss Amount;
(iv) to the Class IIM-2 Certificates, the Class
IIM-2 Interest Carryforward Amount;
(v) to the Class IIM-2 Certificates, the Class
IIM-2 Unpaid Realized Loss Amount;
(vi) to the Class IIB Certificates, the Class
IIB Interest Carryforward Amount;
(vii) to the Class IIB Certificates, the Class
IIB Unpaid Realized Loss Amount;
(viii) to the extent required to make the
allocations set forth in clauses (i) through (vii) of Section 4.04(e)
hereof, pursuant to Section 4.04(e) hereof;
(ix) to the (i) Group II Class A Certificates,
the Interest Carryover Amount for the Group II Class A Certificates;
provided, however, if such amount is not sufficient to make a full
distribution of the Interest Carryover Amount with respect to all the
Group II Class A Certificates, such amount will be distributed pro
rata among each Class of the Group II Class A Certificates based on
the ratio of (x) the Current Interest and Interest Carryover Amount
for each Class of the Group II Class A Certificates to (y) the total
amount of Current Interest and any Interest Carryover Amount for the
Group II Class A Certificates, (ii) Class IIM-1 Certificates, the
Class IIM-1 Certificate Interest Carryover Amount, (iii) Class IIM-2
Certificates, the Class IIM-2 Certificate Interest Carryover Amount,
and (iv) Class IIB Certificates, the Class IIB Certificate Interest
Carryover Amount, on a pro rata basis; and
(x) the remainder pursuant to Section 4.04(g)
hereof.
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(g) On each Distribution Date, the Paying Agent shall allocate
the remainders pursuant to Section 4.04(e)(ix) and (f)(x) hereof, to the Class R
Certificates, in respect of the Residual Interest, any remaining funds, and such
distribution shall be made only after all preceding distributions shall have
been made until such remainders shall have been fully distributed.
(h) On each Distribution Date, the Paying Agent shall allocate
the Applied Realized Loss Amount for the Group I Certificates to reduce the
Certificate Principal Balances of the Group I Subordinated Certificates in the
following order of priority:
(i) to the Class IB Certificates until the
Class IB Certificate Principal Balance is reduced to zero;
(ii) to the Class IM-2 Certificates until the
Class IM-2 Certificate Principal Balance is reduced to zero; and
(iii) to the Class IM-1 Certificates until the
Class IM-1 Certificate Principal Balance is reduced to zero.
(i) On each Distribution Date, the Paying Agent shall allocate
the Applied Realized Loss Amount for the Group II Certificates to reduce the
Certificate Principal Balances of the Group II Subordinated Certificates in the
following order of priority:
(i) to the Class IIB Certificates until the
Class IIB Certificate Principal Balance is reduced to zero;
(ii) to the Class IIM-2 Certificates until the
Class IIM-2 Certificate Principal Balance is reduced to zero; and
(iii) to the Class IIM-1 Certificates until the
Class IIM-1 Certificate Principal Balance is reduced to zero.
(j) Subject to Section 9.02 hereof respecting the final
distribution, on each Distribution Date the Paying Agent shall make
distributions to each Certificateholder of record on the preceding Record Date
either by wire transfer in immediately available funds to the account of such
holder at a bank or other entity having appropriate facilities therefor, if (i)
such Holder has so notified the Trustee at least 5 Business Days prior to the
related Record Date and (ii) such Holder shall hold 100% of a Class of Regular
Certificates or Certificates with an aggregate Initial Certificate Balance of
$1,000,000 or more, or, if not, by check mailed by first Class mail to such
Certificateholder at the address of such holder appearing in the Certificate
Register. Notwithstanding the foregoing, but subject to Section 9.02 hereof
respecting the final distribution, distributions with respect to Certificates
registered in the name of a Depository shall be made to such Depository in
immediately available funds.
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On or before 5:00 p.m. California Time on the second Business
Day following each Determination Date, the Subservicer shall deliver a report to
the Master Servicer in the form of a computer readable magnetic tape (or by such
other means as the Subservicer and the Master Servicer may agree from time to
time) containing such data and information as agreed to by the Subservicer and
the Master Servicer such as to permit the Master Servicer to prepare the Monthly
Statement to Certificateholders and make the required distributions for the
related Distribution Date (the "Remittance Report").
SECTION 4.05. Monthly Statements to Certificateholders.
(a) Not later than each Distribution Date, the Master Servicer
shall prepare and cause to be forwarded by first Class mail to each Holder of a
Class of Certificates of the Trust Fund, the Subservicer and the Depositor a
statement setting forth for the Certificates:
(i) the amount of the related distribution to
Holders of each Class allocable to principal, separately identifying
(A) the aggregate amount of any Principal Prepayments included therein
and(B) the aggregate of all scheduled payments of principal included
therein and (C) the Extra Principal Distribution Amount, if any;
(ii) the amount of such distribution to Holders
of each Class allocable to interest;
(iii) any Interest Carryforward Amount;
(iv) the Class Certificate Principal Balance of
each Class after giving effect (i) to all distributions allocable to
principal on such Distribution Date and (ii) the allocation of any
Applied Realized Loss Amounts for such Distribution Date;
(v) the Pool Stated Principal Balance for the
following Distribution Date;
(vi) the related amount of the Servicing Fee
paid to or retained by the Subservicer;
(vii) the related amount of the Master Servicer
Fee paid to or retained by the Master Servicer;
(viii) the Pass-Through Rate for each Class of
Certificates for such Distribution Date;
(ix) the Net Mortgage Rates for each of the
Group I Mortgage Loans and the Group II Mortgage Loans;
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(x) the amount of Advances for each Certificate
Group included in the distribution on such Distribution Date;
(xi) the cumulative amount of Applied Realized
Loss Amounts for each Certificate Group to date;
(xii) the number and aggregate principal
amounts of Mortgage Loans in each Loan Group (A) delinquent (exclusive
of Mortgage Loans in foreclosure) (1) 30 days, (2) 31 to 60 days, (3)
61 to 90 days and (4) 91 or more days, and (B) in foreclosure and
delinquent (1) 30 days, (2) 31 to 60 days, (3) 61 to 90 days and (4)
91 or more days, in each case as of the close of business on the last
day of the calendar month preceding such Distribution Date;
(xiii) with respect to any Mortgage Loan that
became an REO Property during the preceding calendar month in each
Loan Group, the loan number and Stated Principal Balance of such
Mortgage Loan as of the close of business on the Determination Date
preceding such Distribution Date and the date of acquisition thereof;
(xiv) the total number and principal balance of
any REO Properties in each Loan Group as of the close of business on
the Determination Date preceding such Distribution Date;
(xv) the aggregate Stated Principal Balance of
all Liquidated Loans in each Loan Group; and
(xvi) with respect to any Liquidated Loan in
each Loan Group, the loan number and Stated Principal Balance relating
thereto;
(xvii) with respect to each Loan Group, whether
a Group I Trigger Event or a Group II Trigger Event has occurred; and
(xviii) with respect to the Group II
Certificates, any Class IIA-1 Interest Carryover Amount, any Class
IIM-1 Interest Carryover Amount, any Class IIM-2 Interest Carryover
Amount or any Class IIB Interest Carryover Amount.
(b) The Master Servicer's responsibility for disbursing the
above information to the Certificateholders is limited to the availability,
timeliness and accuracy of the information derived from the Subservicer. The
Master Servicer will send a copy of each statement provided pursuant to this
Section 4.05 to each Rating Agency.
(c) Within a reasonable period of time after the end of each
calendar year, the Master Servicer shall cause to be furnished to each Person
who at any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i) and
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(a)(ii) of this Section 4.05 aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder. Such
obligation of the Master Servicer shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the Master
Servicer pursuant to any requirements of the Code as from time to time in
effect.
(d) Upon filing with the Internal Revenue Service, the Master
Servicer shall furnish to the Holders of the Class R Certificates the Form 1066
and each Form 1066Q and shall respond promptly to written requests made not more
frequently than quarterly by any Holder of Class R Certificates with respect to
the following matters:
(i) The original projected principal and
interest cash flows on the Closing Date on each Class of regular and
residual interests created hereunder and on the Mortgage Loans, based
on the Prepayment Assumption;
(ii) The projected remaining principal and
interest cash flows as of the end of any calendar quarter with respect
to each Class of regular and residual interests created hereunder and
the Mortgage Loans, based on the Prepayment Assumption;
(iii) The Prepayment Assumption and any
interest rate assumptions used in determining the projected principal
and interest cash flows described above;
(iv) The original issue discount (or, in the
case of the Mortgage Loans, market discount) or premium accrued or
amortized through the end of such calendar quarter with respect to
each Class of regular or residual interests created hereunder and to
the Mortgage Loans, together with each constant yield to maturity used
in computing the same;
(v) The treatment of losses realized with
respect to the Mortgage Loans or the regular interests created
hereunder, including the timing and amount of any cancellation of
indebtedness income of the REMIC with respect to such regular
interests or bad debt deductions claimed with respect to the Mortgage
Loans;
(vi) The amount and timing of any non-interest
expenses of the REMIC; and
(vii) Any taxes (including penalties and
interest) imposed on the REMIC, including, without limitation, taxes
on "prohibited transactions," "contributions" or "net income from
foreclosure property" or state or local income or franchise taxes.
The information pursuant to clauses (i), (ii), (iii) and (iv)
above shall be provided by the Depositor pursuant to Section 8.11.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
The Certificates shall be substantially in the forms attached
hereto as exhibits. The Certificates shall be issuable in registered form, in
the minimum dollar denominations, integral dollar multiples in excess thereof
(except that one Certificate in of each Class may be issued in a different
amount which must be in excess of the applicable minimum dollar denomination)
and aggregate dollar denominations as set forth in the following table:
Minimum Integral Multiples in Original certificate
Class Denomination Excess of Minimum Principal Balance
- ----- ------------ --------------------- --------------------
IA-1 $________ $1,000.00 $________
IA-2 $________ $1,000.00 $________
IA-3 $________ $1,000.00 $________
IA-4 $________ $1,000.00 $________
IA-5 $________ $1,000.00 $________
IA-6 $________ $1,000.00 $________
IM-1 $________ $1,000.00 $________
IM-2 $________ $1,000.00 $________
IB $________ $1,000.00 $________
IIA-1 $________ $1,000.00 $________
IIA-2 $________ $1,000.00 $________
IIM-1 $________ $1,000.00 $________
IIM-2 $________ $1,000.00 $________
IIB $________ $1,000.00 $________
R 100% N/A N/A
The Certificates shall be executed by manual or facsimile
signature on behalf of the Depositor by an authorized officer. Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Depositor
shall bind the Depositor, notwithstanding that such individuals or any of them
have ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of such authentication and
delivery. No Certificate shall be entitled to any benefit under this Agreement,
or be valid for any purpose, unless there appears on such Certificate a
certificate of authentication substantially in the form set forth as attached
hereto executed by the Authenticating Agent by manual signature, and such
certificate of authentication upon any Certificate shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication. On the Closing Date, the Authenticating Agent shall
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authenticate the Certificates to be issued at the written direction of the
Depositor, or any affiliate thereof.
SECTION 5.02. Certificate Register; Registration of Transfer
and Exchange of Certificates.
(a) The Master Servicer shall maintain, or cause to be
maintained in accordance with the provisions of Section 5.09 hereof, a
Certificate Register for the Trust Fund in which, subject to the provisions of
subsections (b) and (c) below and to such reasonable regulations as it may
prescribe, the Master Servicer shall provide for the registration of
Certificates and of Transfers and exchanges of Certificates as herein provided.
Upon surrender for registration of Transfer of any Certificate, the
Authenticating Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and of like aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Master Servicer.
Whenever any Certificates are so surrendered for exchange, the Depositor shall
execute and the Authenticating Agent shall authenticate and deliver the
Certificates that the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of Transfer
or exchange shall be accompanied by a written instrument of Transfer in form
satisfactory to the Master Servicer duly executed by the holder thereof or his
attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for
any registration of Transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any Transfer or exchange of Certificates may be required. All
Certificates surrendered for registration of Transfer or exchange shall be
canceled and subsequently destroyed by the Master Servicer in accordance with
the Master Servicer's customary procedures.
(b) No Transfer of a Class R Certificate shall be made unless
such Transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under the Securities Act and such state securities
laws. In the event that a Transfer is to be made in reliance upon an exemption
from the Securities Act and such laws, in order to assure compliance with the
Securities Act and such laws, the Certificateholder desiring to effect such
Transfer and such Certificateholder's prospective transferee shall each certify
to the Master Servicer in writing the facts surrounding the Transfer in
substantially the forms set forth in Exhibit J (the "Transferor Certificate")
and (i) deliver a letter in substantially the form of either Exhibit K (the
"Investment Letter") or Exhibit L (the "Rule 144A Letter") or (ii) there shall
be delivered to the Master
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Servicer an Opinion of Counsel that such Transfer may be made pursuant to an
exemption from the Securities Act, which Opinion of Counsel shall not be an
expense of the Depositor, the Master Servicer, the Subservicer or the Trustee.
The Depositor shall provide to any Holder of a Private Certificate and any
prospective transferee designated by any such Holder, information regarding the
related Certificates and the Mortgage Loans and such other information as shall
be necessary to satisfy the condition to eligibility set forth in Rule
144A(d)(4) for Transfer of any such Certificate without registration thereof
under the Securities Act pursuant to the registration exemption provided by Rule
144A. The Master Servicer shall cooperate with the Depositor in providing the
Rule 144A information referenced in the preceding sentence, including providing
to the Depositor such information regarding the Certificates, the Mortgage Loans
and other matters regarding the Trust Fund as the Depositor shall reasonably
request to meet its obligation under the preceding sentence. Each Holder of a
Private Certificate desiring to effect such Transfer shall, and does hereby
agree to, indemnify the Trustee, the Depositor, the Master Servicer and the
Subservicer 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.
No Transfer of a Class IM-1, Class IM-2, Class IB, Class
IIM-1, Class IIM-2, Class IIB or Class R Certificate (an "ERISA Restricted
Security") shall be made unless the Master Servicer shall have received either
(i) a representation from the transferee of such Certificate acceptable to and
in form and substance satisfactory to the Master Servicer, to the effect that
such transferee is not an employee benefit plan subject to Section 406 of ERISA
or a plan subject to Section 4975 of the Code, or a Person acting on behalf of
any such plan or using the assets of any such plan, (ii) if such purchaser is an
insurance company, a representation that the purchaser is an insurance company
that is purchasing such Certificates with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and
holding of such Certificates are covered under PTCE 95-60, or (iii) in the case
of any such ERISA Restricted Certificate presented for registration in the name
of an employee benefit plan subject to ERISA, or a plan subject to Section 4975
of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan or any other person acting on behalf of any such plan,
an Opinion of Counsel satisfactory to the Master Servicer and the Subservicer to
the effect that the purchase or holding of such ERISA Restricted Certificate
will not result in the assets of the Trust Fund being deemed to be "plan assets"
and subject to the prohibited transaction provisions of ERISA and the Code and
will not subject the Master Servicer or the Subservicer to any obligation in
addition to those expressly undertaken in this Agreement, which Opinion of
Counsel shall not be an expense of the Master Servicer or the Subservicer. For
purposes of clause (i) of the preceding sentence, such representation shall be
deemed to have been made to the Master Servicer by the transferee's acceptance
of an ERISA Restricted Certificate (or the acceptance by a Certificate Owner of
the beneficial interest in any such Class of ERISA Restricted Certificates)
unless the Master Servicer shall have received from the transferee an
alternative representation acceptable in form and substance to the Subservicer
and the Master Servicer. Notwithstanding anything else to the contrary herein,
any purported transfer of an ERISA Restricted Certificate to or on behalf of an
employee benefit plan subject to Section 406
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of ERISA or a plan subject to Section 4975 of the Code without the delivery to
the Master Servicer and the Subservicer of an Opinion of Counsel satisfactory to
the Master Servicer and the Subservicer as described above shall be void and of
no effect; provided, however, that the restriction set forth in this sentence
shall not be applicable if there has been delivered to the Master Servicer and
the Subservicer an Opinion of Counsel satisfactory to the Master Servicer and
the Subservicer to the effect that the purchase or holding of an ERISA
Restricted Certificate will not result in the assets of the Trust Fund being
deemed to be "plan assets" and subject to the prohibited transaction provisions
of ERISA and the Code and will not subject the Master Servicer or the
Subservicer to any obligation in addition to those expressly undertaken in this
Agreement. The Master Servicer shall be under no liability to any Person for any
registration of transfer of any ERISA Restricted Certificate that is in fact not
permitted by this Section 5.02(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Master Servicer in accordance with the foregoing requirements.
The Master Servicer shall be entitled, but not obligated, to recover from any
Holder of any ERISA Restricted Certificate that was in fact an employee benefit
plan subject to Section 406 of ERISA or a plan subject to Section 4975 of the
Code or a Person acting on behalf of any such plan at the time it became a
Holder or, at such subsequent time as it became such a plan or Person acting on
behalf of such a plan, all payments made on such ERISA Restricted Certificate at
and after either such time. Any such payments so recovered by the Master
Servicer shall be paid and delivered by the Master Servicer to the last
preceding Holder of such Certificate that is not such a plan or Person acting on
behalf of a plan.
(c) Each Person who has or who acquires any Ownership Interest
in a Class R Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions,
and the rights of each Person acquiring any Ownership Interest in a Class R
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any
Ownership Interest in a Class R Certificate shall be a Permitted
Transferee and shall promptly notify the Master Servicer of any change
or impending change in its status as a Permitted Transferee.
(ii) No Ownership Interest in a Class R
Certificate may be registered on the Closing Date or thereafter
transferred, and the Master Servicer shall not register the Transfer
of any Class R Certificate unless, in addition to the certificates
required to be delivered to the Master Servicer under subparagraph (b)
above, the Master Servicer shall have been furnished with an affidavit
(a "Transfer Affidavit") of the initial owner or the proposed
transferee in the form attached hereto as Exhibit I.
(iii) Each Person holding or acquiring any
Ownership Interest in a Class R Certificate shall agree (A) to obtain
a Transfer Affidavit from any other Person to whom such Person
attempts to Transfer its Ownership Interest in a Class R Certificate,
(B) to obtain a Transfer Affidavit from any Person for whom such
Person is acting as
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nominee, trustee or agent in connection with any Transfer of a Class R
Certificate and (C) not to Transfer its Ownership Interest in a Class
R Certificate or to cause the Transfer of an Ownership Interest in a
Class R Certificate to any other Person if it has actual knowledge
that such Person is not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any
Ownership Interest in a Class R Certificate in violation of the
provisions of this Section 5.02(c) shall be absolutely null and void
and shall vest no rights in the purported Transferee. If any purported
transferee shall become a Holder of a Class R Certificate in violation
of the provisions of this Section 5.02(c), then the last preceding
Permitted Transferee shall be restored to all rights as Holder thereof
retroactive to the date of registration of Transfer of such Class R
Certificate. The Master Servicer shall be under no liability to any
Person for any registration of Transfer of a Class R Certificate that
is in fact not permitted by Section 5.02(b) and this Section 5.02(c)
or for making any payments due on such Certificate to the Holder
thereof or taking any other action with respect to such Holder under
the provisions of this Agreement so long as the Transfer was
registered after receipt of the related Transfer Affidavit, Transferor
Certificate and either the Rule 144A Letter or the Investment Letter.
The Master Servicer shall be entitled but not obligated to recover
from any Holder of a Class R Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted Transferee, all
payments made on such Class R Certificate at and after either such
time. Any such payments so recovered by the Master Servicer shall be
paid and delivered by the Master Servicer to the last preceding
Permitted Transferee of such Certificate.
(v) The Subservicer shall use its best efforts
to make available, upon receipt of written request from the Master
Servicer, all information necessary to compute any tax imposed under
Section 860E(e) of the Code as a result of a Transfer of an Ownership
Interest in a Class R Certificate to any Holder who is not a Permitted
Transferee.
(vi) At the option of the Holder of the Class R
Certificate, the SR Interest and the MR Interest may be severed and
represented by separate certificates; provided, however, that such
separate certification may not occur until the Trustee receives an
Opinion of Counsel to the effect that separate certification in the
form and manner proposed would not result in the imposition of federal
tax upon either REMIC Pool or cause either REMIC Pool to fail to
qualify as a REMIC; and provided further, that the provisions of
Sections 5.02(b) and (c) will apply to each such separate certificate
as if the separate certificate were a Class R Certificate. If, as
evidenced by an Opinion of Counsel, it is necessary to preserve the
REMIC status of either REMIC Pool, the SR Interest and the MR Interest
shall be severed and represented by separate Certificates.
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The restrictions on Transfers of a Class R Certificate set
forth in this Section 5.02(c) shall cease to apply (and the applicable portions
of the legend on a Class R Certificate may be deleted) with respect to Transfers
occurring after delivery to the Master Servicer of an Opinion of Counsel, which
Opinion of Counsel shall not be an expense of the Master Servicer, the Depositor
or the Subservicer to the effect that the elimination of such restrictions will
not cause the Trust Fund to fail to qualify as a REMIC at any time that the
Certificates are outstanding or result in the imposition of any tax on the Trust
Fund, a Certificateholder or another Person. Each Person holding or acquiring
any Ownership Interest in a Class R Certificate hereby consents to any amendment
of this Agreement that, based on an Opinion of Counsel furnished to the Master
Servicer, is reasonably necessary (a) to ensure that the record ownership of, or
any beneficial interest in, a Class R Certificate is not transferred, directly
or indirectly, to a Person that is not a Permitted Transferee and (b) to provide
for a means to compel the Transfer of a Class R Certificate that is held by a
Person that is not a Permitted Transferee to a Holder that is a Permitted
Transferee.
(d) The preparation and delivery of all certificates and
opinions referred to above in this Section 5.02 shall not be an expense of the
Trust Fund, the Master Servicer, the Depositor, the Trustee or the Subservicer.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (a) any mutilated Certificate is surrendered to the Master
Servicer, or the Master Servicer receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and of the ownership thereof and
(b) there is delivered to Master Servicer such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Master Servicer that such Certificate has been acquired by a bona fide
purchaser, the Master Servicer shall execute, authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Class, tenor and Percentage Interest. In
connection with the issuance of any new Certificate under this Section 5.03, the
Master Servicer may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Master Servicer) connected
therewith. Any replacement Certificate issued pursuant to this Section 5.03
shall constitute complete and indefeasible evidence of ownership in the Trust
Fund, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time. All Certificates surrendered to the
Master Servicer under the terms of this Section 5.03 shall be canceled and
destroyed by the Master Servicer in accordance with its standard procedures
without liability on its part.
SECTION 5.04. Persons Deemed Owners.
The Subservicer, the Master Servicer and any agent of the
Subservicer or the Master Servicer may treat the person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions as provided in this Agreement and for
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all other purposes whatsoever, and neither the Subservicer, the Master Servicer
nor any agent of the Subservicer or the Master Servicer shall be affected by any
notice to the contrary.
SECTION 5.05. Access to List of Certificateholders' Names and
Addresses.
If three or more Certificateholders (a) request such
information in writing from the Master Servicer, (b) state that such
Certificateholders desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Certificates, and (c)
provide a copy of the communication that such Certificateholders propose to
transmit or if the Depositor or Subservicer shall request such information in
writing from the Master Servicer, then the Master Servicer shall, within ten
Business Days after the receipt of such request, provide the Depositor, the
Subservicer or such Certificateholders at such recipients' expense the most
recent list of the Certificateholders of the Trust Fund held by the Master
Servicer, if any. The Depositor and every Certificateholder, by receiving and
holding a Certificate, agree that the Master Servicer shall not be held
accountable by reason of the disclosure of any such information as to the list
of the Certificateholders hereunder, regardless of the source from which such
information was derived.
SECTION 5.06. Book-Entry Certificates.
The Regular Certificates, upon original issuance, shall be
issued in the form of one or more typewritten Certificates representing the
Book- Entry Certificates, to be delivered to the Depository by or on behalf of
the Depositor. Such Certificates shall initially be registered on the
Certificate Register in the name of the Depository or its nominee, and no
Certificate Owner will receive a definitive certificate representing such
Certificate Owner's interest in such Certificates, except as provided in Section
5.08. Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to the Certificate Owners of such Certificates
pursuant to Section 5.08:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Depositor, the Subservicer, the Trustee and the Master
Servicer may deal with the Depository and the Depository Participants for all
purposes (including the making of distributions) as the authorized
representative of the respective Certificate Owners of such Certificates;
(c) registration of the Book-Entry Certificates may not be
transferred by the Master Servicer except to another Depository;
(d) the rights of the respective Certificate Owners of such
Certificates shall be exercised only through the Depository and the Depository
Participants and shall be limited to those established by law and agreements
between the Owners of such Certificates and the Depository and/or the Depository
Participants. Pursuant to the Depository Agreement, unless
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and until Definitive Certificates are issued pursuant to Section 5.08, the
Depository will make book-entry transfers among the Depository Participants and
receive and transmit distributions of principal and interest on the related
Certificates to such Depository Participants;
(e) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants;
(f) the Master Servicer may rely and shall be fully protected
in relying upon information furnished by the Depository with respect to its
Depository Participants; and
(g) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this Section
shall control.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of,
Certificateholders evidencing a specified percentage of the aggregate unpaid
principal amount of any Class of Certificates, such direction or consent may be
given by Certificate Owners (acting through the Depository and the Depository
Participants) owning Book-Entry Certificates evidencing the requisite percentage
of principal amount of such Class of Certificates.
SECTION 5.07. Notices to Depository.
Whenever any notice or other communication is required to be
given to Certificateholders of the Class with respect to which Book-Entry
Certificates have been issued, unless and until Definitive Certificates shall
have been issued to the related Certificate Owners, the Master Servicer and the
Trustee shall give all such notices and communications to the Depository.
SECTION 5.08. Definitive Certificates.
If, after Book-Entry Certificates have been issued with
respect to any Certificates, (a) the Depositor advises the Master Servicer that
the Depository is no longer willing or able to discharge properly its
responsibilities under the Depository Agreement with respect to such
Certificates and the Master Servicer or the Depositor is unable to locate a
qualified successor, (b) the Depositor, at its sole option, advises the Master
Servicer that it elects to terminate the book-entry system with respect to such
Certificates through the Depository or (c) after the occurrence and continuation
of an Event of Default, Certificate Owners of such Book-Entry Certificates
having not less than 51% of the Voting Rights evidenced by any Class of
Book-Entry Certificates advise the Master Servicer and the Depository in writing
through the Depository Participants that the continuation of a book-entry system
with respect to Certificates of such Class through the Depository (or its
successor) is no longer in the best interests of the Certificate Owners of such
Class, then the Master Servicer shall notify all Certificate Owners of such
Certificates, through the Depository, of the occurrence of any such event and of
the availability
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of Definitive Certificates to Certificate Owners of such Class requesting the
same. The Depositor shall provide the Master Servicer with an adequate inventory
of certificates to facilitate the issuance and transfer of Definitive
Certificates. Upon surrender to the Master Servicer or the Master Servicer of
any such Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Authenticating Agent
shall authenticate and the Master Servicer shall deliver such Definitive
Certificates. Neither the Depositor nor the Master Servicer shall be liable for
any delay in delivery of such instructions and each may conclusively rely on,
and shall be protected in relying on, such instructions. Upon the issuance of
such Definitive Certificates, all references herein to obligations imposed upon
or to be performed by the Depository shall be deemed to be imposed upon and
performed by the Master Servicer, to the extent applicable with respect to such
Definitive Certificates and the Master Servicer shall recognize the Holders of
such Definitive Certificates as Certificateholders hereunder.
SECTION 5.09. Maintenance of Office or Agency.
The Master Servicer will maintain or cause to be maintained at
its expense an office or offices or agency or agencies in New York City where
Certificates may be surrendered for registration of transfer or exchange. The
Master Servicer initially designates its offices at c/o The Chase Manhattan
Bank, 450 West 33rd Street, New York, New York 10001, as offices for such
purposes. The Master Servicer will give prompt written notice to the
Certificateholders of any change in such location of any such office or agency.
SECTION 5.10. Authenticating Agents. (a) The Trustee may
appoint one or more Authenticating Agents (each, an "Authenticating Agent")
which shall be authorized to act on behalf of the Trustee in authenticating the
Certificates. Wherever reference is made in this Agreement to the authentication
of Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
must be an entity organized and doing business under the laws of the United
States of America or of any state, having a combined capital and surplus of at
least $15,000,000, authorized under such laws to do a trust business and subject
to supervision or examination by federal or state authorities. If the
Authenticating Agent is a party other than the Trustee, the Trustee shall have
no liability in connection with the performance or failure of performance of the
Authenticating Agent. The Trustee hereby appoints The Chase Manhattan Bank as
the initial Authenticating Agent. The Trustee shall be the Authenticating Agent
during any such time as no other Authenticating Agent has been appointed.
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the
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Authenticating Agent without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee and the Depositor.
The Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Depositor. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance within the provisions of this Section 5.10, the Trustee may appoint a
successor Authenticating Agent, shall give written notice of such appointment to
the Depositor and shall mail notice of such appointment to all Holders of
Certificates. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section 5.10. No
Authenticating Agent shall have responsibility or liability for any action taken
by it as such at the direction of the Trustee. Any Authenticating Agent shall be
entitled to reasonable compensation for its services and any such compensation
shall be payable solely by the Trustee, without any right of reimbursement from
the Depositor, the Subservicer or the Trust Fund.
SECTION 5.11. Appointment of Paying Agent. The Master Servicer
may appoint a Paying Agent hereunder. In the event of any such appointment, the
Master Servicer shall cause the Paying Agent to perform each of the obligations
of the Paying Agent set forth herein and shall be liable to the Trustee and the
Certificateholders for failure of the Paying Agent to perform such obligations.
If the Paying Agent is a party other than the Trustee, the Trustee shall have no
liability in connection with the performance or failure of performance of the
Paying Agent. The Master Servicer designates the Corporate Trust Department of
The Chase Manhattan Bank as the initial Paying Agent.
The Master Servicer shall cause each Paying Agent other than
the Trustee to execute and deliver to the Master Servicer and the Trustee on the
Closing Date or, if subsequently appointed, on the date of appointment, a
written instrument executed by an officer of the Paying Agent in which such
Paying Agent shall agree with the Master Servicer and the Trustee that such
Paying Agent will hold all sums held by it for the payment to Certificateholders
in trust for the benefit of the Certificateholders entitled thereto until such
sums shall be paid to such Certificateholders.
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ARTICLE VI
THE DEPOSITOR, THE SUBSERVICER AND
THE MASTER SERVICER
SECTION 6.01. Respective Liabilities of the Depositor, the
Subservicer and the Master Servicer.
The Depositor, the Subservicer and the Master Servicer shall
each be liable in accordance herewith only to the extent of the obligations
specifically and respectively imposed upon and undertaken by them herein.
SECTION 6.02. Merger or Consolidation of the Depositor, the
Subservicer or the Master Servicer.
The Depositor, the Subservicer and the Master Servicer will
each keep in full effect its existence, rights and franchises as a corporation
under the laws of the United States or under the laws of one of the States
thereof and will each obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Agreement, or
any of the Mortgage Loans and to perform its respective duties under this
Agreement.
Any Person into which the Depositor, the Subservicer or the
Master Servicer may be merged or consolidated, or any Person resulting from any
merger or consolidation to which the Depositor, the Subservicer or the Master
Servicer shall be a party, or any person succeeding to the business of the
Depositor, the Subservicer or the Master Servicer, shall be the successor of the
Depositor, the Subservicer or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Subservicer shall be qualified to sell mortgage loans to, and to service
mortgage loans on behalf of, FNMA or FHLMC.
SECTION 6.03. Limitation on Liability of the Depositor, the
Master Servicer, the Subservicer and Others.
None of the Depositor, the Master Servicer, the Subservicer
nor any of the directors, officers, employees or agents of the Depositor, the
Master Servicer or the Subservicer shall be under any liability to the Trust
Fund or the Certificateholders for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the
Depositor, the Master Servicer, the Subservicer or any such Person against any
breach of representations or warranties made by it herein or protect the
Depositor, the Master Servicer, the Subservicer or any such Person from any
liability that would otherwise be imposed by reasons of willful misfeasance, bad
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faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Depositor, the Master
Servicer, the Subservicer and any director, officer, employee or agent of the
Depositor, the Master Servicer or the Subservicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer,
the Subservicer and any director, officer, employee or agent of the Depositor,
the Master Servicer or the Subservicer shall be indemnified by the Trust Fund
and held harmless against any loss, liability or expense incurred in connection
with any audit, controversy or judicial proceeding relating to a governmental
taxing authority or any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. None of the Depositor, the Master
Servicer nor the Subservicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
duties hereunder and that in its opinion may involve it in any expense or
liability; provided, however, that any of the Depositor, the Master Servicer or
the Subservicer may, in its discretion undertake any such action that it may
deem necessary or desirable in respect of this Agreement and the rights and
duties of the parties hereto and interests of the Trustee and the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be, expenses, costs and
liabilities of the Trust Fund, and the Depositor, the Master Servicer and the
Subservicer shall be entitled to be reimbursed therefor out of the Collection
Account as provided by Section 3.08 hereof.
SECTION 6.04. Limitation on Resignation of Subservicer.
The Subservicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination
permitting the resignation of the Subservicer shall be evidenced by an Opinion
of Counsel to such effect delivered to the Trustee. No such resignation shall
become effective until the Trustee or a successor servicer to such appointment
shall have assumed the Subservicer's responsibilities, duties, liabilities and
obligations hereunder.
SECTION 6.05. Errors and Omissions Insurance; Fidelity Bonds.
The Subservicer shall, for so long as it acts as servicer
under this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
servicer hereunder, and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Subservicer shall use
its reasonable best efforts to obtain a comparable
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replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement.
SECTION 6.06. Compensation to the Master Servicer. The Master
Servicer shall be entitled to receive the Master Servicer Fee as compensation
for services rendered by the Master Servicer under this Agreement. The Master
Servicer shall pay itself such Master Servicer Fee monthly from amounts on
deposit in the Certificate Account. The Master Servicer shall also be entitled
to all income and gain net of any losses realized from Permitted Investments in
the Certificate Account and the Distribution Account, as well as any amounts in
respect of prepayment penalties or late payment charges.
ARTICLE VII
DEFAULT; TERMINATION OF SUBSERVICER
SECTION 7.01. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events:
(i) any failure by the Subservicer to deposit
in the Collection Account or the Certificate Account or remit to the
Trustee any payment (excluding a payment required to be made under
Section 4.01 hereof) required to be made under the terms of this
Agreement, which failure shall continue unremedied for five calendar
days and, with respect to a payment required to be made under Section
4.01 hereof, for one calendar day, after the date on which written
notice of such failure shall have been given to the Subservicer by the
Trustee or the Depositor, or to the Trustee and the Subservicer by the
Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates; or
(ii) any failure by the Subservicer to observe
or perform in any material respect any other of the covenants or
agreements on the part of the Subservicer contained in this Agreement
or any representation or warranty shall prove to be untrue, which
failure or breach shall continue unremedied for a period of 60 days
after the date on which written notice of such failure shall have been
given to the Subservicer by the Trustee or the Depositor, or to the
Trustee by the Holders of Certificates evidencing not less than 25% of
the Voting Rights evidenced by the Certificates; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs,
shall have been
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entered against the Subservicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 60
consecutive days; or
(iv) the Subservicer shall consent to the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Subservicer or all or substantially
all of the property of the Subservicer;
(v) the Subservicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of, or commence a voluntary case under, any
applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of
its obligations; or
(vi) If either of the following events shall
occur:
(A) With respect to the Group I Mortgage Loans, the sum
(without duplication) of:
(1) the aggregate Stated Principal Balance of the Group I
Mortgage Loans that are 30 days Delinquent multiplied by _____%;
(2) the aggregate Stated Principal Balance of the Group I
Mortgage Loans that are 60 days Delinquent multiplied by _____%;
(3) the aggregate Stated Principal Balance of the Group I
Mortgage Loans that are at least 90 days Delinquent (including Group I Mortgage
Loans that are in foreclosure and REO Properties) multiplied by _____%; and
(4) the cumulative Realized Losses on the Mortgage Pool.
exceeds the product of (a) (i) on any date on or prior to [DATE], _____% and
(ii) on any date after [DATE], _____% and (b) the aggregate Cut-Off Date
Principal Balance with respect to the Group I Mortgage Loans; or
(B) With respect to the Group II Mortgage Loans, the sum
(without duplication) of:
(1) the aggregate Stated Principal Balance of the Group II
Mortgage Loans that are 30 days Delinquent multiplied by _____%;
(2) the aggregate Stated Principal Balance of the Group II
Mortgage Loans that are 60 days Delinquent multiplied by _____%;
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(3) the aggregate Stated Principal Balance of the Group II
Mortgage Loans that are at least 90 days Delinquent (including Mortgage Loans
that are in foreclosures and REO Properties) multiplied by _____%; and
(4) the Applied Realized Loss Amount;
exceeds the product of (a) (i) on any date on or prior to [DATE], _____% and
(ii) on any date after [DATE], _____% and (b) the aggregate Cut-Off Date
Principal Balance with respect to the Group II Mortgage Loans.
If an Event of Default shall occur, then, and in each and
every such case, so long as such Event of Default shall not have been remedied,
the Trustee shall, but only at the direction of the Holders of Certificates
evidencing not less than 25% (or 51%, in the case of the Event of Default
specified in (vi) above) of the Voting Rights evidenced by the Certificates, by
notice in writing to the Subservicer (with a copy to each Rating Agency),
terminate all of the rights and obligations of the Subservicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, other than
its rights as a Certificateholder hereunder. On or after the receipt by the
Subservicer of such written notice, all authority and power of the Subservicer
hereunder, whether with respect to the Mortgage Loans or otherwise, shall pass
to and be vested in the Trustee. The Trustee shall thereupon make any Advance
described in Section 4.01 hereof subject to Section 3.04 hereof. The Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
Subservicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Subservicer to
pay amounts owed pursuant to Article VIII. The Subservicer agrees to cooperate
with the Trustee in effecting the termination of the Subservicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee of all cash amounts which shall at the time be credited
to the Collection Account, or thereafter be received with respect to the
Mortgage Loans. The Trustee shall promptly notify the Rating Agencies of the
occurrence of an Event of Default.
Notwithstanding any termination of the activities of a Subservicer
hereunder, such Subservicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan that was due prior to the
notice terminating such Subservicer's rights and obligations as Subservicer
hereunder and received after such notice, that portion thereof to which such
Subservicer would have been entitled pursuant to Sections 3.08(a)(i) through
(viii), and any other amounts payable to such Subservicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder.
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SECTION 7.02. Trustee to Act; Appointment of Successor.
On and after the time the Subservicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall, to the extent
provided in Section 3.04, be the successor to the Subservicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Subservicer by the terms and provisions hereof
and applicable law including the obligation to make advances pursuant to Section
4.01. As compensation therefor, the Trustee shall be entitled to all fees, costs
and expenses relating to the Mortgage Loans that the Subservicer would have been
entitled to if the Subservicer had continued to act hereunder. Notwithstanding
the foregoing, if the Trustee has become the successor to the Subservicer in
accordance with Section 7.01 hereof, the Trustee may, if it shall be unwilling
to so act, or shall, if it is prohibited by applicable law from making Advances
pursuant to Section 4.01 hereof or if it is otherwise unable to so act, appoint,
or petition a court of competent jurisdiction to appoint, any established
mortgage loan servicing institution the appointment of which does not adversely
affect the then current rating of the Certificates by each Rating Agency as the
successor to the Subservicer hereunder in the assumption of all or any part of
the responsibilities, duties or liabilities of the Subservicer hereunder. Any
successor Subservicer shall be an institution that is a FNMA and FHLMC approved
seller/servicer in good standing, that has a net worth of at least $15,000,000,
and that is willing to service the Mortgage Loans and executes and delivers to
the Depositor and the Trustee an agreement accepting such delegation and
assignment, that contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Subservicer (other
than liabilities of the Subservicer under Section 6.03 hereof incurred prior to
termination of the Subservicer under Section 7.01), with like effect as if
originally named as a party to this Agreement; and provided further that each
Rating Agency acknowledges that its rating of the Certificates in effect
immediately prior to such assignment and delegation will not be qualified or
reduced as a result of such assignment and delegation. No appointment of a
successor to the Subservicer hereunder shall be effective until the Trustee
shall have consented thereto, and written notice of such proposed appointment
shall have been provided by the Trustee to each Certificateholder. The Trustee
shall not resign as servicer until a successor servicer has been appointed and
has accepted such appointment. Pending appointment of a successor to the
Subservicer hereunder, the Trustee, unless the Trustee is prohibited by law from
so acting, shall, subject to Section 3.04 hereof, act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Subservicer hereunder. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Neither the Trustee nor any other successor servicer shall be deemed
to be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the Subservicer to deliver or
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provide, or any delay in delivering or providing, any cash, information,
documents or records to it.
Any successor to the Subservicer as servicer shall give notice
to the Mortgagors of such change of servicer and shall, during the term of its
service as servicer maintain in force the policy or policies that the
Subservicer is required to maintain pursuant to Section 6.05.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of or appointment of a successor to
the Subservicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.
(b) Within 60 days after the occurrence of any Event of
Default, the Trustee shall transmit by mail to all Certificateholders notice of
each such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default has occurred and remains
uncured, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement shall examine them to determine whether they conform
to the requirements of this Agreement. If any such instrument is found not to
conform to the requirements of this Agreement in a material manner, the Trustee
shall take action as it deems appropriate to have the instrument corrected.
No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own misconduct, its negligent failure to perform its
obligations in compliance with this Agreement, or any liability that would be
imposed by reason of its willful misfeasance or bad faith; provided, however,
that:
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(i) prior to the occurrence of an Event of
Default, and after the curing of all such Events of Default that may
have occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable, individually or as Trustee, except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be
read into this Agreement against the Trustee and the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Agreement that it reasonably believed in good
faith to be genuine and to have been duly executed by the proper
authorities respecting any matters arising hereunder;
(ii) the Trustee shall not be liable,
individually or as Trustee, for an error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee,
unless the Trustee was grossly negligent or acted in bad faith or with
willful misfeasance; and
(iii) the Trustee shall not be liable,
individually or as Trustee, with respect to any action taken, suffered
or omitted to be taken by it in good faith in accordance with the
direction of Holders of each Class of Certificates evidencing not less
than 25% of the Voting Rights of such Class 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.
SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) the Trustee may request and rely upon and
shall be protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and
any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of
Counsel;
(iii) the Trustee shall not be liable,
individually or as Trustee, for any action taken, suffered or omitted
by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement;
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(iv) prior to the occurrence of an Event of
Default hereunder and after the curing of all Events of Default that
may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Holders of each Class of Certificates
evidencing not less than 25% of the Voting Rights of such Class;
(v) the Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or
by or through agents, accountants or attorneys;
(vi) the Trustee shall not be required to
expend its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such liability is not assured to it;
(vii) the Trustee shall not be liable,
individually or as Trustee, for any loss on any investment of funds
pursuant to this Agreement (other than as issuer of the investment
security);
(viii) the Trustee shall not be deemed to have
knowledge of an Event of Default until a Responsible Officer of the
Trustee shall have received written notice thereof; and
(ix) the Trustee shall be under no obligation
to exercise any of the trusts or powers vested in it by this Agreement
or to make any investigation of matters arising hereunder or to
institute, conduct or defend any litigation hereunder or in relation
hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by the Trustee
without the possession of any of the Certificates, or the production thereof at
the trial or other proceeding relating thereto, and any such suit, action or
proceeding instituted by the Trustee shall be brought in its name for the
benefit of all the Holders of the Certificates, subject to the provisions of
this Agreement.
SECTION 8.03. Trustee Not Liable for Mortgage Loans.
The recitals contained herein shall be taken as the statements
of the Depositor or the Subservicer, as the case may be, and the Trustee assumes
no responsibility for their
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correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of any Mortgage Loan or related document other
than with respect to the Trustee's execution and authentication of the
Certificates. The Trustee shall not be accountable for the use or application by
the Depositor or the Subservicer of any funds paid to the Depositor or the
Subservicer in respect of the Mortgage Loans or deposited in or withdrawn from
the Collection Account, Certificate Account or Distribution Account by the
Depositor or the Subservicer.
SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.
SECTION 8.05. Master Servicer to Pay Trustee's Fees and
Expenses.
The Master Servicer covenants and agrees (i) to pay to the
Trustee from time to time, and the Trustee shall be entitled to, such
compensation as shall be agreed in writing by the Master Servicer and the
Trustee (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee and (ii) to
pay or reimburse the Trustee, upon its request, for all reasonable expenses,
disbursements and advances incurred or made by the Trustee on behalf of the
Trust Fund in accordance with any of the provisions of this Agreement
(including, without limitation: (A) the reasonable compensation and the expenses
and disbursements of its counsel, but only for representation of the Trustee
acting in its capacity as Trustee hereunder and (B) to the extent that the
Trustee must engage persons not regularly in its employ to perform acts or
services on behalf of the Trust Fund, which acts or services are not in the
ordinary course of the duties of a trustee, paying agent or certificate
registrar, in the absence of a breach or default by any party hereto, the
reasonable compensation, expenses and disbursements of such persons, except any
such expense, disbursement or advance as may arise from its negligence, bad
faith or willful misconduct). The Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Master Servicer and held
harmless against any loss, liability or expense (i) incurred in connection with
any legal action relating to this Agreement or the Certificates, or in
connection with the performance of any of the Trustee's duties hereunder, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of any of the Trustee's duties
hereunder or by reason of reckless disregard of the Trustee's obligations and
duties hereunder and (ii) resulting from any error in any tax or information
return prepared by the Master Servicer. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Trustee
hereunder.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall, at all times, be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under
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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
federal or state authority and with a credit rating that would not cause any of
the Rating Agencies to reduce their respective ratings of any Class of
Certificates below the ratings issued on the Closing Date (or having provided
such security from time to time as is sufficient to avoid such reduction). If
such corporation or association publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 8.06 the combined
capital and surplus of such corporation or association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 8.06, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.07 hereof.
The corporation or national banking association serving as Trustee may have
normal banking and trust relationships with the Depositor, the Master Servicer
and the Subservicer and their respective affiliates; provided, however, that
such corporation cannot be an affiliate of the Subservicer other than the
Trustee in its role as successor to the Subservicer.
SECTION 8.07. Resignation and Removal of Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by (1) giving written notice of resignation to the
Depositor and the Subservicer and by mailing notice of resignation by first
Class mail, postage prepaid, to the Certificateholders at their addresses
appearing on the Certificate Register and each Rating Agency, not less than 60
days before the date specified in such notice when, subject to Section 8.08,
such resignation is to take effect, and (2) acceptance of appointment by a
successor trustee in accordance with Section 8.08 and meeting the qualifications
set forth in Section 8.06. If no successor trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of such notice or
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time (i) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 hereof and shall fail to resign
after written request thereto by the Depositor, (ii) the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
(iii)(A) a tax is imposed with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee and (C) the Trustee fails
to indemnify the Trust Fund against such tax, then the Depositor may remove the
Trustee and appoint a successor trustee by written instrument, in triplicate,
one copy of which instrument shall be delivered to the Trustee, one copy of
which shall be delivered to the Subservicer and one copy of which shall be
delivered to the successor trustee.
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The Holders evidencing at least 51% of the Voting Rights of
each Class of Certificates may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized, one complete set of
which instruments shall be delivered by the successor Trustee to the
Subservicer, one complete set to the Trustee so removed and one complete set to
the successor so appointed. Notice of any removal of the Trustee shall be given
to each Rating Agency by the Successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07
hereof shall execute, acknowledge and deliver to the Depositor and to its
predecessor trustee and the Subservicer an instrument accepting such appointment
hereunder and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein.
No successor trustee shall accept appointment as provided in
this Section 8.08 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.06 hereof and its
appointment shall not adversely affect the then current rating of the
Certificates.
Upon acceptance of appointment by a successor trustee as
provided in this Section 8.08, the Depositor shall mail notice of the succession
of such trustee hereunder to all Holders of Certificates. 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 Depositor.
SECTION 8.09. Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be eligible under the provisions of Section
8.06 hereof without the execution or filing of any paper or further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
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SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust Fund or property securing any Mortgage Note may at
the time be located, the Subservicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the
Subservicer and the Trustee may consider necessary or desirable. The Trustee
shall be ultimately liable for the actions of any co-trustee. If the Subservicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request to do so, or in the case an Event of Default shall have occurred
and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 8.06 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations
conferred or imposed upon the Trustee, except for the obligation of
the Trustee under this Agreement to advance funds on behalf of the
Subservicer, 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 Subservicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) No trustee hereunder shall be held
personally liable by reason of any act or omission of any other
trustee hereunder; and
(iii) The Trustee may at any time accept the
resignation 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
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of them. Every instrument appointing any separate trustee or co-trustee shall
refer to this Agreement and the conditions of this Article VIII. 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 Subservicer and the
Depositor.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 8.11. Tax Matters.
It is intended that each of the Master REMIC and Subsidiary
REMIC shall constitute, and that the affairs of the Trust Fund shall be
conducted so as to qualify as, a "real estate mortgage investment conduit" as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Master Servicer covenants and agrees that it shall act as agent
(and the Master Servicer is hereby appointed to act as agent) on behalf of each
of the Master REMIC and Subsidiary REMIC and that in such capacity it shall: (a)
prepare and file, or cause to be prepared and filed, in a timely manner, a U.S.
Real Estate Mortgage Investment Conduit Income Tax Return (Form 1066 or any
successor form adopted by the Internal Revenue Service) and prepare and file or
cause to be prepared and filed with the Internal Revenue Service and applicable
state or local tax authorities income tax or information returns for each
taxable year with respect to each of the Master REMIC and Subsidiary REMIC,
containing such information and at the times and in the manner as may be
required by the Code or state or local tax laws, regulations, or rules, and
furnish or cause to be furnished to Certificateholders the schedules, statements
or information at such times and in such manner as may be required thereby; (b)
within thirty days of the Closing Date, furnish or cause to be furnished to the
Internal Revenue Service, on Forms 8811 or as otherwise may be required by the
Code, the name, title, address, and telephone number of the person that the
holders of the Certificates may contact for tax information relating thereto,
together with such additional information as may be required by such Form, and
update such information at the time or times in the manner required by the Code
for each of the Master REMIC and Subsidiary REMIC; (c) make or cause to be made
elections, on behalf of each of the Master REMIC and Subsidiary REMIC to be
treated as a REMIC on the federal tax return of each of the Master REMIC and
Subsidiary REMIC for its first taxable year (and, if necessary, under applicable
state law); (d) prepare and forward, or cause to be prepared and forwarded, to
the Certificateholders and to the Internal Revenue Service and, if necessary,
state tax authorities, all information returns and
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reports as and when required to be provided to them in accordance with the REMIC
Provisions, including without limitation, the calculation of any original issue
discount using the Prepayment Assumption; (e) provide information necessary for
the computation of tax imposed on the transfer of a Class R Certificate to a
Person that is not a Permitted Transferee, or an agent (including a broker,
nominee or other middleman) of a Non-Permitted Transferee, or a pass-through
entity in which a Non-Permitted Transferee is the record holder of an interest
(the reasonable cost of computing and furnishing such information may be charged
to the Person liable for such tax); (f) to the extent that they are under its
control conduct the affairs of each of the Master REMIC and Subsidiary REMIC at
all times that any Certificates are outstanding so as to maintain the status of
each of the Master REMIC and Subsidiary REMIC as a REMIC under the REMIC
Provisions; (g) not knowingly or intentionally take any action or omit to take
any action that would cause the termination of the REMIC status of each of the
Master REMIC and Subsidiary REMIC; (h) pay, from the sources specified in the
last paragraph of this Section 8.11, the amount of any federal, state and local
taxes, including prohibited transaction taxes as described below, imposed on
each of the Master REMIC and Subsidiary REMIC prior to the termination of the
Trust Fund when and as the same shall be due and payable (but such obligation
shall not prevent the Trustee or any other appropriate Person from contesting
any such tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings); (i) sign or cause to be signed federal, state or local income
tax or information returns; (j) maintain records relating to each of the Master
REMIC and Subsidiary REMIC, including but not limited to the income, expenses,
assets and liabilities of each of the Master REMIC and Subsidiary REMIC, and the
fair market value and adjusted basis of the Trust Fund property determined at
such intervals as may be required by the Code, as may be necessary to prepare
the foregoing returns, schedules, statements or information; and (k) as and when
necessary and appropriate, represent each of the Master REMIC and Subsidiary
REMIC in any administrative or judicial proceedings relating to an examination
or audit by any governmental taxing authority, request an administrative
adjustment as to any taxable year of each of the Master REMIC and Subsidiary
REMIC, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of either the
Subsidiary REMIC or the Master REMIC, and otherwise act on behalf of either the
Subsidiary REMIC or the Master REMIC in relation to any tax matter involving
either the Subsidiary REMIC or the Master REMIC or controversy involving the
Trust Fund.
In order to enable the Master Servicer to perform its duties
as set forth herein, the Depositor shall provide, or cause to be provided, to
the Master Servicer within 10 days after the Closing Date all information or
data that the Master Servicer requests in writing and determines to be relevant
for tax purposes to the valuations and offering prices of the Certificates,
including, without limitation, the price, yield, prepayment assumption and
projected cash flows of the Certificates and the Mortgage Loans. Thereafter, the
Depositor shall provide to the Master Servicer promptly upon written request
therefor, any such additional information or data that the Master Servicer may,
from time to time, request in order to enable the Master Servicer to perform its
duties as set forth herein. The Depositor hereby agrees to indemnify the Master
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Servicer for any losses, liabilities, damages, claims or expenses of the Master
Servicer arising from any errors or miscalculations of the Master Servicer that
result from any failure of the Depositor to provide, or to cause to be provided,
accurate information or data to the Master Servicer on a timely basis.
In the event that any tax is imposed on "prohibited
transactions" of either the Subsidiary REMIC or the Master REMIC as defined in
Section 860F(a)(2) of the Code, on the "net income from foreclosure property" of
the Trust Fund as defined in Section 860G(c) of the Code, on any contribution to
the Trust Fund after the Startup Day pursuant to Section 860G(d) of the Code, or
any other tax is imposed, if not paid as otherwise provided for herein, such tax
shall be paid by (i) the Master Servicer, if any such other tax arises out of or
results from a breach by the Master Servicer of any of its obligations under
this Agreement, (ii) (x) the Subservicer, in the case of any such minimum tax,
and (y) any party hereto (other than the Master Servicer) to the extent any such
other tax arises out of or results from a breach by such other party of any of
its obligations under this Agreement or (iii) in all other cases, or in the
event that any liable party here fails to honor its obligations under the
preceding clauses (i) or (ii), any such tax will be paid first with amounts
otherwise to be distributed to the Class R Certificateholders (pro rata), and
second with amounts otherwise to be distributed to all other Certificateholders
in the following order of priority: first, to the Class IB and Class IIB
Certificates (pro rata), second, to the Class IM-2 and IIM-2 Certificates (pro
rata), third, to the Class IM-1 and IIM-1 Certificates (pro rata), and fourth,
to the Group I Class A Certificates and the Group II Class A Certificates (pro
rata). Notwithstanding anything to the contrary contained herein, to the extent
that such tax is payable by the Class R Certificates, the Trustee is hereby
authorized to retain on any Distribution Date, from the Holders of the Class R
Certificates (and, if necessary, second, from the Holders of the all other
Certificates in the priority specified in the preceding sentence), funds
otherwise distributable to such Holders in an amount sufficient to pay such tax.
The Trustee agrees to promptly notify in writing the party liable for any such
tax of the amount thereof and the due date for the payment thereof.
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Repurchase of
all Mortgage Loans.
Subject to Section 9.03, the obligations and responsibilities
of the Depositor, the Subservicer, the Master Servicer and the Trustee created
hereby with respect to the Trust Fund shall terminate upon the earlier of (a)
the repurchase by the Master Servicer of all of the Mortgage Loans (and REO
Properties) remaining in the each Loan Group at the price equal to the sum of
(i) 100% of the Stated Principal Balance of each Mortgage Loan in such Loan
Group (other than in respect of REO Property), (ii) accrued interest thereon at
the applicable Mortgage Rate, (iii) the appraised value of any REO Property in
such Loan Group (up to the Stated
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Principal Balance of the related Mortgage Loan), such appraisal to be conducted
by an appraiser mutually agreed upon by the Depositor and the Trustee and (iv)
any unreimbursed Servicing Fees, Advances and Servicing Advances, and the
principal portion of any unreimbursed Advances, made on the Mortgage Loans in
such Loan Group prior to the exercise of such repurchase, together with any
unreimbursed Master Servicing Fees, and (b) the later of (i) the maturity or
other liquidation (or any Advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund and the disposition of all REO Property and
(ii) the distribution to Certificateholders of all amounts required to be
distributed to them pursuant to this Agreement, as applicable. In no event shall
the trusts created hereby continue beyond the earlier of (i) the expiration of
21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the Court of St. James's,
living on the date hereof and (ii) the Latest Possible Maturity Date.
The right to repurchase all Mortgage Loans and REO Properties
in a Loan Group pursuant to clause (a) above shall be conditioned upon the
aggregate Stated Principal Balance of the Mortgage Loans in such Loan Group, at
the time of any such repurchase, aggregating ten percent or less of the
aggregate Cut-off Date Principal Balance of the Mortgage Loans in such Loan
Group.
SECTION 9.02. Final Distribution on the Certificates.
If on any Determination Date, (i) the Master Servicer
determines that there are no Outstanding Mortgage Loans and no other funds or
assets in the Trust Fund other than the funds in the Collection Account, the
Trustee shall send a final distribution notice promptly to each
Certificateholder or (ii) the Master Servicer determines that a Class of
Certificates shall be retired after a final distribution on such Class, the
Trustee shall notify the Certificateholders within seven (7) Business Days after
such Determination Date that the final distribution in retirement of such Class
of Certificates is scheduled to be made on the immediately following
Distribution Date. Any final distribution made pursuant to the immediately
preceding sentence will be made only upon presentation and surrender of the
related Certificates at the office of the Master Servicer. If the Master
Servicer elects to terminate the Trust Fund pursuant to clause (a) of Section
9.01, at least 10 days prior to the date notice is to be mailed to the affected
Certificateholders, the Master Servicer shall notify the Depositor, the
Subservicer and the Trustee of the date such electing party intends to terminate
the Trust Fund and of the applicable repurchase price of the Mortgage Loans and
REO Properties.
Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 10th
day and no later than the 15th day of the month immediately preceding the month
of such final distribution. Any such notice shall specify (a) the Distribution
Date upon which final distribution on the Certificates will be made upon
presentation and surrender of Certificates at the office therein designated, (b)
the location of the office or agency at which such
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presentation and surrender must be made, and (c) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.
In the event such notice is given, the Master Servicer shall
cause all funds in the Collection Account and the Certificate Account to be
deposited in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the Trust
Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Master Servicer the Mortgage Files for the
Mortgage Loans.
Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders of each Class the
amounts allocable to such Certificates held in the Distribution Account in the
order and priority set forth in Section 4.04 hereof on the final Distribution
Date and in proportion to their respective Percentage Interests.
In the event that any affected Certificateholders shall not
surrender Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice all the applicable
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets that remain a part of the Trust Fund. If within one year after the second
notice all Certificates shall not have been surrendered for cancellation, the
Class R Certificateholders shall be entitled to all unclaimed funds and other
assets of the Trust Fund that remain subject hereto.
SECTION 9.03. Additional Termination Requirements.
(a) In the event the Master Servicer exercises its purchase
option on both of the Group I Mortgage Loans and the Group II Mortgage Loans as
provided in Section 9.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the effect that
the failure of the Trust Fund to comply with the requirements of this Section
9.03 will not (i) result in the imposition of taxes on "prohibited transactions"
of the Trust Fund as defined in section 860F of the Code, or (ii) cause the
Trust Fund to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
The Depositor shall establish a 90-day liquidation period
and notify the Trustee thereof, which shall in turn specify the first
day of such period in a statement attached to the Trust Fund's final
Tax Return pursuant to Treasury Regulation Section
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1.860F-1. The Depositor shall satisfy all the requirements of a
qualified liquidation under Section 860F of the Code and any
regulations thereunder, as evidenced by an Opinion of Counsel obtained
at the expense of the Subservicer;
During such 90-day liquidation period, and at or prior to
the time of making the final payment on the Certificates, the
Depositor as agent of the Trustee shall sell all of the assets of the
Trust Fund for cash; and
At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Class R Certificateholders all cash on
hand (other than cash retained to meet claims), and the Trust Fund
shall terminate at that time.
(b) By their acceptance of the Certificates, the Holders
thereof hereby authorize the Depositor to specify the 90-day liquidation period
for the Trust Fund, which authorization shall be binding upon all successor
Certificateholders.
(c) The Master Servicer as agent for each REMIC hereby agrees
to adopt and sign such a plan of complete liquidation upon the written request
of the Depositor, and the receipt of the Opinion of Counsel referred to in
Section 9.03(a)(1) and to take such other action in connection therewith as may
be reasonably requested by the Depositor.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment.
This Agreement may be amended from time to time by the
Depositor, the Subservicer, the Master Servicer and the Trustee, without the
consent of any of the Certificateholders to cure any ambiguity, to correct or
supplement any provisions herein, or to make such other provisions with respect
to matters or questions arising under this Agreement, as shall not be
inconsistent with any other provisions herein if such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any Certificateholder; provided, however, that any such amendment
shall be deemed not to adversely affect in any material respect the interests of
the Certificateholders and no such Opinion of Counsel shall be required if the
Person requesting such amendment obtains a letter from each Rating Agency
stating that such amendment would not result in the downgrading or withdrawal of
the respective ratings then assigned to the Certificates, it being understood
and agreed that any such letter in and of itself will not represent a
determination as to the materiality of any such amendment and will represent a
determination only as to the credit issues affecting any such rating.
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Notwithstanding the foregoing, without the consent of the
Certificateholders, the Trustee, the Depositor, the Subservicer and the Master
Servicer may at any time and from time to time amend this Agreement to modify,
eliminate or add to any of its provisions to such extent as shall be necessary
or appropriate to maintain the qualification of the Trust Fund as a REMIC under
the Code or to avoid or minimize the risk of the imposition of any tax on the
Trust Fund pursuant to the Code that would be a claim against the Trust Fund at
any time prior to the final redemption of the Certificates, provided that the
Trustee have been provided an Opinion of Counsel, which opinion shall be an
expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee, to the effect that such action is necessary or
appropriate to maintain such qualification or to avoid or minimize the risk of
the imposition of such a tax.
This Agreement may also be amended from time to time by the
Depositor, the Subservicer, the Master Servicer and the Trustee and the Holders
of each Class of Certificates affected thereby evidencing not less than 51% of
the Voting Rights of such Class for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments required to be distributed on any Certificate
without the consent of the Holder of such Certificate, (ii) adversely affect in
any material respect the interests of the Holders of any Class of Certificates
in a manner other than as described in (i), without the consent of the Holders
of Certificates of such Class evidencing 66% or more of the Voting Rights of
such Class or (iii) reduce the aforesaid percentages of Certificates the Holders
of which are required to consent to any such amendment without the consent of
the Holders of all such Certificates then outstanding.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, which opinion shall be an expense of
the party requesting such amendment but in any case shall not be an expense of
the Trustee, to the effect that such amendment will not cause the imposition of
any tax on the Trust Fund or the Certificateholders or cause the Trust Fund to
fail to qualify as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any amendment to this
Agreement requiring the consent of Certificateholders, the Trustee shall furnish
written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of
Certificateholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
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<PAGE>
Nothing in this Agreement shall require the Trustee to enter
into an amendment without receiving an Opinion of Counsel, satisfactory to the
Trustee that (i) such amendment is permitted and is not prohibited by this
Agreement and that all requirements for amending this Agreement have been
complied with; and (ii) either (A) the amendment does not adversely affect in
any material respect the interests of any Certificateholder or (B) the
conclusion set forth in the immediately preceding clause (A) is not required to
be reached pursuant to this Section 10.01.
SECTION 10.02 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 10.03 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE
CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT
REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 10.04 Intention of Parties.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Notes, Mortgages, assignments of Mortgages, title
insurance policies and any modifications, extensions and/or assumption
agreements and private mortgage insurance policies relating to the Mortgage
Loans by the Depositor to the Trustee be, and be construed as, an absolute sale
thereof to the Trustee. It is, further, not the intention of the parties that
such conveyance be deemed a pledge thereof by the Depositor to the Trustee.
However, in the event that, notwithstanding the intent of the parties, such
assets are held to be the property of the Depositor, or if for any other reason
this Agreement is held or deemed to create a security interest in such assets,
then (i) this Agreement shall be deemed to be a security agreement within the
meaning of the Uniform Commercial Code of the State of New York and (ii) the
conveyance provided for in this Agreement shall be deemed to be an assignment
and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.
The Depositor for the benefit of the Certificateholders shall,
to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the assets of the Trust Fund, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of the Agreement. The Depositor
shall
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arrange for filing any Uniform Commercial Code continuation statements in
connection with any security interest granted or assigned to the Trustee for the
benefit of the Certificateholders.
SECTION 10.05 Notices.
(a) The Master Servicer shall use its best efforts to promptly
provide notice to each Rating Agency with respect to each of the following of
which it has actual knowledge:
(i) Any material change or amendment to this
Agreement;
(ii) The occurrence of any Event of Default
that has not been cured;
(iii) The resignation or termination of the
Master Servicer, the Subservicer or the Trustee and the appointment of
any successor;
(iv) The repurchase or substitution of Mortgage
Loans pursuant to Sections 2.02, 2.03 and 3.12; and
(v) The final payment to Certificateholders.
The Master Servicer shall promptly furnish to each Rating
Agency copies of the following:
(i) Each report to Certificateholders described
in Section 4.04;
(ii) Each annual statement as to compliance
described in Section 3.17; and
(iii) Each annual independent public
accountants' servicing report described in Section 3.18.
(b) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in the
case of the Depositor, Chase Funding, Inc., 300 Tice Boulevard, 3rd Floor North,
Woodcliff Lake, New Jersey 07675, Attention: Structured Finance; (b) in the case
of the Subservicer, Advanta Mortgage Corp. USA, 16875 West Bernardo Drive, San
Diego, California 92127, Attention: Senior Vice President, Loan Servicing; (c)
in the case of the Trustee, [TRUSTEE], _____________________________
______________, Attention: Structured Finance Department; (d) in the case of the
Master Servicer, 343 Thornall Street, Edison, New Jersey 08837, Attention:
Structured Finance (with a copy to The Chase Manhattan Bank, 450 West 33rd
Street, New York, New York, 10001, Attention: Structured Finance Services); (e)
in the case of the Rating Agencies, (i) [RATING AGENCY] and (ii) [RATING
AGENCY]; and (f) in the case of any of the foregoing persons,
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such other addresses as may hereafter be furnished by any such persons to the
other parties to this Agreement. Notices to Certificateholders shall be deemed
given when mailed, first Class postage prepaid, to their respective addresses
appearing in the Certificate Register.
SECTION 10.06 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 10.07 Assignment.
Notwithstanding anything to the contrary contained herein,
except as provided pursuant to Section 6.02, this Agreement may not be assigned
by the Subservicer without the prior written consent of the Trustee and
Depositor.
SECTION 10.08 Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the Trust Fund, or otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
provided herein) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto, nor shall anything
herein set forth or contained in the terms of the Certificates be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third party by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, the Holders of Certificates evidencing not less than 25%
of the Voting Rights evidenced by the Certificates shall also have made written
request to the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses, and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request
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and offer of indemnity shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 10.08, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 10.09 Inspection and Audit Rights.
The Subservicer agrees that, on reasonable prior notice, it
will permit any representative of the Depositor or the Trustee during the
Subservicer's normal business hours, to examine all the books of account,
records, reports and other papers of the Subservicer relating to the Mortgage
Loans, to make copies and extracts therefrom, to cause such books to be audited
by independent certified public accountants selected by the Depositor or the
Trustee and to discuss its affairs, finances and accounts relating to the
Mortgage Loans with its officers, employees and independent public accountants
(and by this provision the Subservicer hereby authorizes such accountants to
discuss with such representative such affairs, finances and accounts), all at
such reasonable times and as often as may be reasonably requested. Any
out-of-pocket expense incident to the exercise by the Depositor or the Trustee
of any right under this Section 10.09 shall be borne by the party requesting
such inspection; all other such expenses shall be borne by the Subservicer.
SECTION 10.10 Certificates Nonassessable and Fully Paid.
It is the intention of the Depositor that Certificateholders
shall not be personally liable for obligations of the Trust Fund, that the
interests in the Trust Fund represented by the Certificates shall be
nonassessable for any reason whatsoever, and that the Certificates, upon due
authentication thereof by the Authenticating Agent pursuant to this Agreement,
are and shall be deemed fully paid.
* * *
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<PAGE>
IN WITNESS WHEREOF, the Depositor, the Subservicer, the Master
Servicer and the Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first above
written.
CHASE FUNDING, INC.,
as Depositor
By:_______________________________________________
Name:
Title:
ADVANTA MORTGAGE CORP. USA,
as Subservicer
By:_______________________________________________
Name:
Title:
CHASE MANHATTAN MORTGAGE CORPORATION,
as Master Servicer
By:_______________________________________________
Name:
Title:
[TRUSTEE],
not in its individual capacity,
but solely as Trustee
By:_______________________________________________
Name:
Title:
<PAGE>
EXHIBIT A
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE
FUNDING, INC. ("CHASE FUNDING"), THE MASTER SERVICER, THE SUBSERVICER OR THE
TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE,
THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED OR INSURED BY CHASE FUNDING, CHASE MANHATTAN MORTGAGE
CORPORATION, ADVANTA MORTGAGE CORP., USA THE TRUSTEE OR BY ANY OF THEIR
AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN BELOW.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY
INQUIRY OF THE MASTER SERVICER.
CLASS IA-1 CERTIFICATE
Number ______-IA-1-1 Original Denomination
$
Cut-off Date: [DATE] Final Scheduled
Distribution Date:
First Distribution Date: Aggregate Initial Certificate
[DATE] Balance of all Class IA-1
Certificates: $
Pass-Through Rate: CUSIP:
<PAGE>
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
Series [_______]
evidencing an ownership interest in distributions allocable to the Class IA-1-1
Certificates with respect to a pool of conventional, sub-prime mortgage loans
formed and sold by
CHASE FUNDING, INC.
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Trustee for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co. has an interest herein.
This certifies that CEDE & CO. is the registered owner of the
ownership interest (the "Ownership Interest") evidenced by this Certificate
(obtained by dividing the Original Denomination of this Certificate by the
aggregate Original Denomination of all Class IA-1 Certificates) in certain
distributions with respect to a pool of conventional, sub-prime mortgage loans
(the "Mortgage Loans") formed and sold by Chase Funding, Inc. (hereinafter
called the "Depositor"), and certain other property held in trust for the
benefit of Certificateholders (collectively, the "Trust Fund"). The Mortgage
Loans are serviced by Advanta Mortgage Corp., USA (the "Subservicer") and are
secured by first mortgages on Mortgaged Properties. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of
[DATE] among the Depositor, the Subservicer, Chase Manhattan Mortgage
Corporation (the "Master Servicer") and [TRUSTEE], as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Mortgage Loan Asset-Based Certificates, Series [
]-1, Class IA-1 (the "Class IA-1 Certificates") and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which Agreement such Holder is bound. Also issued under the
Agreement are Certificates designated as Mortgage Loan Asset-Backed
Certificates, Series [_______], Class IA- 2, Class IA-3, Class IA-4, Class IA-5
and Class IA-6 Certificates (collectively, with the Class IA-1 Certificates, the
"Group I Class A Certificates"), Class IIA-1 and Class IIA-2 Certificates
(together, the "Group II Class A Certificates"), Class IM-1 and Class IM-2
Certificates (together, the "Mezzanine Group I Certificates"), Class IIM-1 and
Class IIM-2 Certificates (together the "Mezzanine Group II Certificates"), Class
IB Certificates (the "Class IB Certificates") and Class IIB Certificates (the
"Class IIB Certificates").
<PAGE>
The Group I Class A Certificates, the Group II Class A Certificates,
the Mezzanine Group I Certificates, the Mezzanine Group II Certificates, the
Class IB Certificates and the Class IIB Certificates are collectively referred
to herein as the "Certificates".
Pursuant to the terms of the Agreement, the Master Servicer will
distribute from funds in the Distribution Account the amount as described on the
reverse hereof on the 25th day of each month or, if such 25th day is not a
Business Day, the Business Day immediately following (the "Distribution Date"),
commencing on [DATE]. Such distributions will be made to the Person in whose
name this Certificate is registered at the close of business on the last
Business Day of the month preceding the month in which such payment is made, or
if such last day is not a Business Day, the Business Day immediately preceding
such last day.
Distributions on this Certificate will be made either by check mailed
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, or by wire transfer in immediately available
funds to the account of such Holder at a bank or other financial or depository
institution having appropriate facilities therefor, if such Holder has so
notified the Master Servicer in writing at least 5 Business Days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
and such Holder's Certificates evidence an aggregate original principal balance
of not less than $1,000,000 or such Holder holds a 100% Percentage Interest of
such Class. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Master Servicer, of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office of the Master Servicer or at such other office as may
be designated by such notice of final distribution.
The Master Servicer will maintain or cause to be maintained a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Master Servicer will provide for the registration of Certificates
and of transfers and exchanges of Certificates. Upon surrender for registration
of transfer of any Certificate at any office or agency of the Master Servicer,
or, if an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, maintained for such purpose, the Master Servicer, or, if
an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like class and dated the date of authentication
by the Authenticating Agent. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Master Servicer, of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Master Servicer, for that
purpose and specified in such notice of final distribution.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof which further provisions shall for
all purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly
executed.
Dated: [DATE] CHASE FUNDING, INC.
By:_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class IA-1
Certificates referred to
in the within-mentioned
Agreement.
THE CHASE MANHATTAN BANK
as Authenticating Agent
By:_______________________________
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE LOAN ASSET-BACKED CERTIFICATE
SERIES [ ]-1
This Certificate is one of a duly authorized issue of
Certificates, designated as Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [ ]-1, issued in six Classes of Group I Class A
Certificates, two Classes of Group II Class A Certificates, two Classes of
Mezzanine Group I Certificates, two Classes of Mezzanine Group II Certificates,
one Class of Class IB Certificates and one Class of Class IIB Certificates, each
evidencing an interest in certain distributions with respect to a pool of
conventional, sub-prime Mortgage Loans formed and sold by the Depositor and
certain other property conveyed by the Depositor to the Trustee.
Following the initial issuance of the Certificates, the
Principal Balance of this Certificate will be different from the Original
Denomination shown above. Anyone acquiring this Certificate may ascertain its
current Principal Balance by inquiry of the Master Servicer.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Master Servicer will maintain or cause to be maintained a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Master Servicer will provide for the registration of Certificates
and of transfers and exchanges of Certificates. Upon surrender for registration
of transfer of any Certificate at any office or agency of the Master Servicer,
or, if an Authenticating Agent has been appointed under the Agreement, the
Authenticating Agent, maintained for such purpose, the Master Servicer, or, if
an Authenticating Agent has been appointed under Section 5.10, the
Authenticating Agent, will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like class and dated the date of authentication
by the Authenticating Agent. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Master Servicer of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office of the Master Servicer or at such other office as may
be designated by such notice of final distribution.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Master Servicer may require payment of a
sum sufficient to cover any tax or
<PAGE>
governmental charge that may be imposed in connection with any transfer or
exchange of the Certificate. Prior to due presentation of a Certificate for
registration of transfer, the Depositor, the Subservicer, the Master Servicer
and the Trustee may treat the person in whose name any Certificate is registered
as the owner of such Certificate and the Percentage Interest in the Trust Fund
evidenced thereby for the purpose of receiving distributions pursuant to the
Agreement and for all other purposes whatsoever, and neither the Depositor, the
Subservicer, the Master Servicer nor the Trustee will be affected by notice to
the contrary.
The Agreement may be amended from time to time by the
Depositor, the Subservicer, the Master Servicer and the Trustee, without the
consent of any of the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions therein which may be inconsistent with the other
provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC,
or to make any other provisions with respect to matters or questions arising
under the Agreement which are not materially inconsistent with the provisions of
the Agreement, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Depositor, the Subservicer, the Master Servicer and the Trustee with the consent
of the Holders of Certificates evidencing in the aggregate not less than 51% of
the Percentage Interests of each Class of Certificates affected thereby for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Holders of Certificates of such Class; provided, however, that no such
amendment may (i) reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the third paragraph of Section 10.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
For federal income tax purposes, the Trust Fund includes two
segregated asset pools. The Depositor intends to make an election to treat each
as a "real estate mortgage investment conduit" (a "REMIC"). As described more
fully herein and in the Prospectus, the Certificates, other than the Residual
Certificates, will constitute "regular interests" in the Master REMIC. The
Residual Certificates will represent the sole class of "residential interests"
in both the Master REMIC and the Subsidiary REMIC.
The respective obligations and responsibilities of the
Depositor, the Subservicer, the Master Servicer and the Trustee under the
Agreement will terminate upon (i) the later of the final payment or other
liquidation (or any Advance with respect thereto) of the last Mortgage Loan or
the disposition of all property acquired upon the foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and the remittance of all funds due thereunder;
or (ii) at the option of the Master Servicer, on any Distribution Date on which
the aggregate Stated Principal Balances of the Mortgage
<PAGE>
Loans; such Loan Group is equal to or less than 10% of the Stated Principal
Balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-Off
Date, so long as the Master Servicer deposits or causes to be deposited in the
Distribution Account during the Principal Prepayment Period related to such
Distribution Date an amount equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan in such Loan Group (other than in respect of REO
Property), (ii) accrued interest thereon at the applicable Mortgage Rate, (iii)
the appraised value of any REO Property in such Loan Group (up to the Stated
Principal Balance of the related Mortgage Loan), such appraisal to be conducted
by an appraiser mutually agreed upon by the Depositor and the Trustee and (iv)
any unreimbursed Servicing Fees, Advances and Servicing Advances, and the
principal portion of any unreimbursed Advances, made on the Mortgage Loans in
such Loan Group prior to such Distribution Date; provided, however, that in no
event shall the trust created hereby continue beyond the earlier of (i) 32 years
after the Closing Date and (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James's, living on the date hereof.
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
__________________________________________
_____________________________________________________________
(Please Print or Type Name and Address of Assignee)
_____________________________________________________________
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon
the face of the within Certificate in every
particular, without alteration or enlargement
or any change whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT B
[RESERVED]
<PAGE>
EXHIBIT C
[RESERVED]
<PAGE>
EXHIBIT D
FORM OF CLASS R CERTIFICATE
<PAGE>
EXHIBIT E
[RESERVED]
<PAGE>
EXHIBIT F
SCHEDULE OF MORTGAGE LOANS
<PAGE>
EXHIBIT G
[RESERVED]
<PAGE>
EXHIBIT H
FORM OF TRUSTEE CERTIFICATION
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Re: Pooling and Servicing Agreement dated as of [DATE] among Chase
Funding, Inc. as depositor, Advanta Mortgage Corp., USA, as
subservicer, Chase Manhattan Mortgage Corporation, as master
servicer and [TRUSTEE], as trustee, Chase Funding, Inc., Chase
Funding Mortgage Loan Asset-Backed Certificates, Series [ ]-1
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in
the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that:
(i) All documents in the Mortgage File required to be
delivered to the Trustee pursuant to Section 2.01 of the Pooling and Servicing
Agreement are in its possession;
(ii) In connection with each Mortgage Loan or Assignment
thereof as to which documentary evidence of recording was not received on the
Closing Date, it has received evidence of such recording; and
(iii) Such documents have been reviewed by it and such
documents do not contain any material omissions or defects within the meaning of
Section 2.01 or 2.02.
The Trustee further certifies that as to each Mortgage Loan,
the Trustee holds the Mortgage Note without any Responsible Officer of the
Trustee having received written notice (a) of any adverse claims, liens or
encumbrances, (b) that any Mortgage Note was overdue or has been dishonored, (c)
of evidence on the face of any Mortgage Note or Mortgage of any security
interest therein, or (d) of any defense against or claim to the Mortgage Note by
any other party.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond confirming (i) that the
Mortgage Loan number and the name of the
<PAGE>
Mortgagor in each Mortgage File conform to the respective Mortgage Loan number
and name listed on the Mortgage Loan Schedule and (ii) the existence in each
Mortgage File of each of the documents listed in subparagraphs (i)(A) through
(G), inclusive, of Section 2.01 in the Agreement. The Trustee makes no
representations or warranties as to the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
Loan or the collectibility, insurability, effectiveness or suitability of any
such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
[TRUSTEE],
as Trustee
By:_____________________________
Name: _______________________
Title:_______________________
<PAGE>
EXHIBIT I
FORM OF TRANSFEREE'S LETTER
CHASE FUNDING, INC., CHASE FUNDING MORTGAGE LOAN
ASSET-BACKED CERTIFICATES, SERIES [ ]-1
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Ladies and Gentlemen:
We propose to purchase Chase Funding, Inc., Chase Funding Mortgage
Loan Asset-Backed Certificates, Series [ ]-1, Class R, described in the
Prospectus Supplement, dated [DATE], and Prospectus, dated [DATE].
1. We certify that (a) we are not a disqualified organization and
(b) we are not purchasing such Class R Certificates on behalf of a disqualified
organization; for this purpose the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.
2. We certify that (a) we have historically paid our debts as they
became due, (b) we intend, and believe that we will be able, to continue to pay
our debts as they become due in the future, (c) we understand that, as
beneficial owner of the Class R Certificates, we may incur tax liabilities in
excess of any cash flows generated by the Class R Certificates, and (d) we
intend to pay any taxes associated with holding the Class R Certificates as they
become due.
3. We acknowledge that we will be the beneficial owner of the
Class R Certificates and:(1)
______ The Class R Certificates will be registered in our name.
______ The Class R Certificates will be held in the name of our
nominee, _________________, which is not a disqualified
organization.
<PAGE>
4. Unless Chase Funding, Inc. ("Chase Funding") has consented to
the transfer to us by executing the form of Consent affixed hereto as Appendix
B, we certify that we are a U.S. person; for this purpose the term "U.S. person"
means a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, an estate that is subject to United States
federal income tax regardless of the source of its income, or any trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more such U.S. persons have the authority
to control all substantial decisions of the trust. We agree that any breach by
us of this certification shall render the transfer of any interest in the Class
R Certificates to us absolutely null and void and shall cause no rights in the
Class R Certificates to vest in us.
5. We agree that in the event that at some future time we wish to
transfer any interest in the Class R Certificates, we will transfer such
interest in the Class R Certificates only (a) to a transferee that (i) is not a
disqualified organization and is not purchasing such interest in the Class R
Certificates on behalf of a disqualified organization, (ii) is a U.S. person and
(iii) has delivered to Chase Funding a letter in the form of this letter
(including the affidavit appended hereto) and, if requested by Chase Funding, an
opinion of counsel (in a form acceptable to Chase Funding) that the proposed
transfer will not cause the interest in the Class R Certificates to be held by a
disqualified organization or a person who is not a U.S. person or (b) with the
written consent of Chase Funding.
6. We hereby designate Chase Manhattan Mortgage Corporation as our
fiduciary to act as the tax matters person for the Chase Funding, Inc., Chase
Funding Mortgage Loan Asset-Backed Certificates, Series [ ]-1 REMIC.
Very truly yours,
[PURCHASER]
By:_______________________________
Name:
Title:
Accepted as of __________ __, 199_
CHASE FUNDING, INC.
By:__________________________ __________________________
Name:
Title:
________________________
(1) Check appropriate box and if necessary fill in the name of the Transferee's
nominee.
<PAGE>
APPENDIX A
Affidavit pursuant to (i) Section 860E(e)(4) of the Internal Revenue Code of
1986, as amended, and (ii) certain provisions of the Pooling and Servicing
Agreement
Under penalties of perjury, the undersigned declares that the following is true:
(1) He or she is an officer of _________________________ (the
"Transferee"),
(2) the Transferee's Employee Identification number is __________,
(3) the Transferee is not a "disqualified organization" (as defined below),
has no plan or intention of becoming a disqualified organization, and
is not acquiring any of its interest in the Chase Funding, Inc., Chase
Funding Mortgage Loan Asset-Backed Certificates, Series [ ]-1, Class R
on behalf of a disqualified organization or any other entity,
(4) unless Chase Funding, Inc. ("Chase Funding") has consented to the
transfer to the Transferee by executing the form of Consent affixed as
Appendix B to the Transferee's Letter to which this Certificate is
affixed as Appendix A, the Transferee is a "U.S. person" (as defined
below),
(5) that no purpose of the transfer is to avoid or impede the assessment or
collection of tax,
(6) the Transferee has historically paid its debts as they became due,
(7) the Transferee intends, and believes that it will be able, to continue
to pay its debts as they become due in the future,
(8) the Transferee understands that, as beneficial owner of the Class R
Certificates, it may incur tax liabilities in excess of any cash flows
generated by the Class R Certificates,
(9) the Transferee intends to pay any taxes associated with holding the
Class R Certificates as they become due, and
(10) the Transferee consents to any amendment of the Pooling and Servicing
Agreement that shall be deemed necessary by Chase Funding (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the
Class R Certificates will not be owned directly or indirectly by a
disqualified organization;
For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as
<PAGE>
amended (the "Code")), any organization (other than a cooperative described in
Section 521 of the Code) that is exempt from taxation under the Code (unless
such organization is subject to tax on excess inclusions) and any organization
that is described in Section 1381(a)(2)(C) of the Code and the term "U.S.
person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or any
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more such U.S.
persons fiduciaries have the authority to control all substantial decisions of
the trust
_________________________________
By:________________
_________________________________
Address of Investor for receipt of distribution:
Address of Investor for receipt of tax information:
(Corporate Seal)
Attest:
___________________________
________________________, Secretary
<PAGE>
Personally appeared before me the above-named ______________, known or proved to
me to be the same person who executed the foregoing instrument and to be the
_______ of the Investor, and acknowledged to me that he executed the same as his
free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ____ day of ____________, 19__.
___________________________
Notary Public
County of ______
State of _______
My commission expires the _____ day of _______
By:__________________________
Name: ___________________
Title: ___________________
Dated: _____________
<PAGE>
APPENDIX B
CONSENT
_________________________ (Transferee)
_________________________
_________________________
Ladies and Gentlemen:
Chase Funding, Inc. ("Chase Funding") hereby consents to the
transfer to, and registration in the name of, the Transferee (or, if applicable,
registration in the name of such Transferee's nominee of the Chase Funding Inc.,
Chase Funding Mortgage Loan Asset-Backed Certificates, Series [ ]-1, Class R
described in the Transferee's Letter to which this Consent is appended,
notwithstanding Chase Funding's knowledge that the Transferee is not a U.S.
person (as defined in such Transferee's Letter).
CHASE FUNDING, INC.
Dated:______________________ By:________________________
<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE FOR
CLASS R CERTIFICATES
Chase Funding, Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675
[TRUSTEE], as Trustee
_______________________
_______________________
_______________________
RE: Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [_______]
Ladies and Gentlemen:
In connection with our disposition of the Class R Certificates, we
certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action that would result in, a violation of Section 5 of the Act and
(c) if we are disposing of a Class R Certificate, we have no knowledge the
Transferee is not a Permitted Transferee. All capitalized terms used herein but
not defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement dated as of [ ], among Chase Funding, Inc., as Depositor,
Advanta Mortgage Corp., USA as Subservicer, Chase Manhattan Mortgage Corporation
as Master Servicer and [TRUSTEE], as Trustee.
Very truly yours,
___________________________________
Name of Transferor
By:________________________________
Name:
Title
<PAGE>
EXHIBIT K
FORM OF INVESTMENT LETTER
(Accredited Investor)
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Re: Pooling and Servicing Agreement dated as of [DATE] among Chase Funding,
Inc. as depositor, Advanta Mortgage Corp., USA, as subservicer, Chase
Manhattan Mortgage Corporation, as master servicer and [TRUSTEE], as
trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [ ]-1 [Class B-]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Mortgage Loan Asset-Backed Certificates, Series [
]-1, [Class B-] (the "Certificates"), issued pursuant to a pooling and servicing
agreement, dated as of [DATE] (the "Pooling and Servicing Agreement"), among
Chase Funding, Inc. as depositor (the "Depositor"), Advanta Mortgage Corp., USA
as subservicer (the "Subservicer"), Chase Manhattan Mortgage Corporation, as
master servicer (the AMaster Servicer@) and [TRUSTEE], as trustee (the
"Trustee"). [The Purchaser intends to register the Transferred Certificate in
the name of ____________________, as nominee for _________________.] All terms
used and not otherwise defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have
not been registered or qualified under the Securities Act of 1933, as amended
(the "Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.
<PAGE>
2. The Certificates will bear a legend to the following
effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE "1940 ACT") OR ANY STATE
SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT, DIRECTLY OR
INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR
SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION
UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING
AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE
UNLESS THE MASTER SERVICER SHALL HAVE RECEIVED, IN FORM AND
SUBSTANCE SATISFACTORY TO THE MASTER SERVICER (A) AN
INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR; AND (B)
REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE OFFERING AND
SALE OF THE CERTIFICATES.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE
DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION
LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT
THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT
PLAN (A APLAN@) WITHIN THE MEANING OF SECTION 406 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY
CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED
FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE
ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS
FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY
GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY
12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND
SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE
PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS
CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A
PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE ACODE@) (OR
COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A
TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION
OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS
CERTIFICATE WILL NOT
<PAGE>
RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE
"PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET
REGULATIONS SET FORTH IN 29 CFR ss.2510.3-101 AND TO BE
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR
THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT
CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975
OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
SUBSERVICER, THE MASTER SERVICER, THE DEPOSITOR OR ANY OF
THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING
OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE
CODE) RELATING TO THE CERTIFICATES.
3. The Purchaser is acquiring the Transferred Certificates for
its own account [for investment only]**/ and not with a view to or for sale or
other transfer in connection with any distribution of the Transferred
Certificates in any manner that would violate the Securities Act or any
applicable state securities laws, subject, nevertheless, to the understanding
that disposition of the Purchaser's property shall at all times be and remain
within its control.
4. The Purchaser (a) is a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters, and in particular in such matters related to securities
similar to the Certificates, such that it is capable of evaluating the merits
and risks of investment in the Certificates, (b) is able to bear the economic
risks of such an investment and (c) is an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Securities Act.
5. The Purchaser will not nor has it authorized nor will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
advertising or in any other manner with respect to the Certificates. The
Purchaser will not sell or otherwise transfer any of the Certificates, except in
compliance with the provisions of the Pooling and Servicing Agreement.
__________________________
(**) Not required of a broker/dealer purchaser.
<PAGE>
6. [This paragraph may be deleted if the Purchaser provides
the Opinion of Counsel referred to in clause (ii) of Section 5.02(b) of the
Pooling and Servicing Agreement.] The Purchaser either (A) is not an employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or a plan within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")
(each, a "Plan"), and is not directly or indirectly purchasing any Certificate
on behalf of, as investment manager of, as named fiduciary of, as trustee of or
with assets of a Plan or directly or indirectly purchasing any certificates with
the assets of any insurance company separate account or of any Plan or (B) is an
insurance company and the source of funds for the purchase of the certificates
is an "insurance company general account" within the meaning of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995), and the conditions set forth in Section I and III of PTCE 95-60 are
satisfied with respect to the purchase and holding of the Certificates.
7. Prior to the sale or transfer by the Purchaser of any of
the Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit L to the Pooling and Servicing Agreement.
8. The Purchaser agrees to indemnify the Trustee, the Master
Servicer, the Subservicer and the Depositor against any liability that may
result from any misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:__________________________________________
Name:
Title:
<PAGE>
EXHIBIT L
FORM OF RULE 144A INVESTMENT LETTER
(Qualified Institutional Buyer)
[DATE]
Chase Funding, Inc.
300 Tice Boulevard, 3rd Floor North
Woodcliff Lake, New Jersey 07675
Chase Manhattan Mortgage Corporation
c/o The Chase Manhattan Bank
Global Trust Services
450 West 33rd Street, 15th Floor
New York, New York 10001
Re: Pooling and Servicing Agreement dated as of [DATE] among Chase Funding,
Inc. as depositor, Advanta Mortgage Corp., USA, as subservicer, Chase
Manhattan Mortgage Corporation, as master servicer and [TRUSTEE], as
trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed
Certificates, Series [ ]-1 [Class B-]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Asset-Backed Certificates, Series [ ]-1, [Class
B-] (the "Certificates"), issued pursuant to a pooling and servicing agreement,
dated as of [DATE] (the "Pooling and Servicing Agreement"), among Chase Funding,
Inc. as depositor (the "Depositor"), Advanta Mortgage Corp., USA, as subservicer
(the "Subservicer"), Chase Manhattan Mortgage Corporation, as master servicer
(AMaster Servicer@), and [TRUSTEE], as trustee (the "Trustee"). [The Purchaser
intends to register the Transferred Certificate in the name of
____________________, as nominee for __________________.] All terms used and not
otherwise defined herein shall have the meanings set forth in the Trust
Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
In connection with our acquisition of the above Transferred
Certificates we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a
<PAGE>
transaction that is exempt from the registration requirements of the Act and any
such laws, (b) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of investments in
the Certificates, (c) we have had the opportunity to ask questions of and
receive answers from the Depositor concerning the purchase of the Transferred
Certificates and all matters relating thereto or any additional information
deemed necessary to our decision to purchase the Transferred Certificates, (d)
we are not an employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, or a plan within
the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended
(each, a "Plan"), nor are we directly or indirectly purchasing any Certificate
on behalf of, as investment manager of, as named fiduciary of, as trustee of or
with assets of a Plan or directly or indirectly purchasing any certificates with
the assets of any insurance company separate account or of any Plan [or
alternatively, in the case of an insurance company, is an insurance company and
the source of funds for the purchase of the certificates] is an "insurance
company general account" within the meaning of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60"), 50 Fed. Reg. 35925 (July 12, 1995), and the
conditions set forth in Section I and Section III of PTCE 95-60 are satisfied
with respect to the purchase and holding of the Certificates, (e) we have not,
nor has anyone acting on our behalf offered, transferred, pledged, sold or
otherwise disposed of the Certificates, any interest in the Certificates or any
other similar security to, or solicited any offer to buy or accept a transfer,
pledge or other disposition of the Certificates, any interest in the
Certificates or any other similar security from, or otherwise approached or
negotiated with respect to the Certificates, any interest in the Certificates or
any other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken
any other action, that would constitute a distribution of the Certificates under
the Securities Act or that would render the disposition of the Certificates a
violation of Section 5 of the Securities Act or require registration pursuant
thereto, nor will act, nor has authorized or will authorize any person to act,
in such manner with respect to the Certificates, (f) we are a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act and have completed one of the forms of certification to that effect attached
hereto as Annex 1 or Annex 2. We are aware that the sale of the Transferred
Certificates to us is being made in reliance on Rule 144A. We are acquiring the
Transferred Certificates for our own account or for resale pursuant to Rule 144A
and further understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed by us, based upon
certifications of such purchaser or information we have in our possession, to be
a qualified institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.
<PAGE>
We agree to indemnify the Trustee, the Master Servicer, the Subservicer
and the Depositor against any liability that may result from any
misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:__________________________________________
Name:
Title:
<PAGE>
ANNEX 1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with the purchases by the Buyer, the Buyer is
a "qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $____________*/ in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
____ Corporation, etc. The Buyer is a corporation (other
than a bank, savings and loan association or similar
institution), Massachusetts or similar business
trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended.
____ Bank. The Buyer (a) is a national bank or banking
institution organized under the laws of any State,
territory or the District of Columbia, the business
of which is substantially confined to banking and is
supervised by Federal, State or territorial banking
commission or similar official or is a foreign bank
or equivalent institution, and (b) has an audited net
worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which
is attached hereto.
____ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association,
cooperative bank, homestead association or similar
institution, which is supervised and examined by a
State or Federal authority having supervision over
such institution or is a foreign savings and loan
_________________________
* Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
<PAGE>
association or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial statements, a
copy of which is attached hereto.
____ Broker-dealer. The Buyer is a dealer registered
pursuant to Section 15 of the Securities Exchange Act
of 1934, as amended.
____ Insurance Company. The Buyer is an insurance company
whose primary and predominant business activity is
the writing of insurance or the reinsuring of risks
underwritten by insurance companies and which is
subject to supervision by the insurance commissioner
or a similar official or agency of the State,
territory or the District of Columbia.
____ State or Local Plan. The Buyer is a plan established
and maintained by a State, its political
subdivisions, or any agency or instrumentality of the
State or its political subdivisions, for the benefit
of its employees.
____ ERISA Plan. The Buyer is an employee benefit plan
within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
____ Investment Advisor. The Buyer is an investment
advisor registered under the Investment Advisors Act
of 1940, as amended.
____ Small Business Investment Company. Buyer is a small
business investment company licensed by the U.S.
Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958, as
amended.
____ Business Development Company. Buyer is a business
development company as defined in Section 202(a)(22)
of the Investment Advisors Act of 1940, as amended.
3. The term "securities" as used for purposes of the
calculation of the dollar amount in paragraph 2 excludes: (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph, except (i) where the
Buyer reports its securities holdings in its financial statements on the basis
of their market value, and (ii) no current information with respect to the cost
of those securities has been published.
<PAGE>
If clause (ii) in the preceding sentence applies, the securities may be valued
at market. Further, in determining such aggregate amount, the Buyer may have
included securities owned by subsidiaries of the Buyer, but only if such
subsidiaries are consolidated with the Buyer in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Buyer's direction.
However, such securities were not included if the Buyer is a majority-owned,
consolidated subsidiary of another enterprise and the Buyer is not itself a
reporting company under the Securities Exchange Act of 1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A
and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
6. Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan as provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
By: _____________________________________
Name:
Title:
Date:_____________________________________
<PAGE>
ANNEX 2
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is
an investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
____ The Buyer owned $___________ in securities (other
than the excluded securities referred to below) as of
the end of the Buyer's most recent fiscal year (such
amount being calculated in accordance with Rule
144A).
____ The Buyer is part of a Family of Investment Companies
which owned in the aggregate $__________ in
securities (other than the excluded securities
referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
By: __________________________________________
Name:
Title:
IF AN ADVISER:
_______________________________________________
Print Name of Buyer
Date:__________________________________________
<PAGE>
EXHIBIT M
REQUEST FOR RELEASE OF DOCUMENTS
To: [TRUSTEE]
__________________
__________________
__________________
Re:
In connection with the administration of the Mortgage Loans held by
you, as Trustee, pursuant to the above-captioned Pooling and Servicing
Agreement, we request the release, and hereby acknowledge receipt, of the
Mortgage File for the Mortgage Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_______ 1. Mortgage Paid in Full
_______ 2. Foreclosure
_______ 3. Substitution
_______ 4. Other Liquidation
_______ 5. Nonliquidation Reason:_________________________
By:_____________________________
(authorized signer)
Issuer:_________________________
Address:________________________
Date:___________________________
Trustee
[TRUSTEE]
Please acknowledge the execution of the above request by your signature and date
below:
____________________________ __________________
Signature Date
Documents returned to Trustee:
____________________________ __________________
Trustee Date
<PAGE>
CHASE MANHATTAN ACCEPTANCE CORPORATION,
DEPOSITOR,
CHASE MANHATTAN MORTGAGE CORPORATION,
SERVICER
and
[TRUSTEE]
TRUSTEE
POOLING AND SERVICING AGREEMENT
Dated as of [DATE]
$----------------
Multi-Class Mortgage Pass-Through Certificates
Series [ ]
<PAGE>
TABLE OF CONTENTS
Page
----
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS...............................................................................................
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND..................................................................
<S> <C>
Section 2.01. Conveyance of Mortgage Loans.......................................................
Section 2.02. Acceptance by Trustee..............................................................
Section 2.03. Trust Fund; Authentication of Certificates.........................................
Section 2.04. REMIC Election.....................................................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS................................................................
Section 3.01. Representations and Warranties of the Depositor with respect to the
Mortgage Loans.....................................................................
Section 3.02. Representations and Warranties of the Servicer.....................................
Section 3.03. Option to Substitute...............................................................
ARTICLE IV
THE CERTIFICATES..........................................................................................
Section 4.01. The Certificates...................................................................
Section 4.02. Registration of Transfer and Exchange of Certificates..............................
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates..................................
Section 4.04. Persons Deemed Owners..............................................................
Section 4.05. Appointment of Paying Agent; Certificate Account...................................
Section 4.06. Authenticating Agents..............................................................
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS............................................................
Section 5.01. Servicer to Service Mortgage Loans.................................................
Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers;
Enforcement of Sub-Servicer's Obligations..........................................
Section 5.03. Successor Sub-Servicers............................................................
Section 5.04. Liability of the Servicer..........................................................
Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee or
Certificateholders.................................................................
Section 5.06. Termination of Sub-Servicing Agreement.............................................
Section 5.07. Collection of Mortgage Loan Payments...............................................
Section 5.08. Establishment of Collection Account; Deposit in Collection Account.................
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.09. Permitted Withdrawals from the Collection Account...................................
Section 5.10. Establishment of Escrow Account; Deposits in Escrow Account.........................
Section 5.11. Permitted Withdrawals from Escrow Account...........................................
Section 5.12. Payment of Taxes, Insurance and Other Charges.......................................
Section 5.13. Transfer of Accounts................................................................
Section 5.14. [Reserved]..........................................................................
Section 5.15. Maintenance of the Primary Insurance Policies.......................................
Section 5.16. Maintenance of Standard Hazard Policies.............................................
Section 5.17. [Reserved]..........................................................................
Section 5.18. [Reserved]..........................................................................
Section 5.19. Fidelity Bond and Errors and Omissions Insurance....................................
Section 5.20. Collections under Insurance Policies; Enforcement of Due-On-Sale
Clauses; Assumption Agreements......................................................
Section 5.21. Income and Realization from Defaulted Mortgage Loans................................
Section 5.22. Trustee to Cooperate; Release of Mortgage Files.....................................
Section 5.23. Servicing and Other Compensation....................................................
Section 5.24. 1934 Act Reports....................................................................
Section 5.25. Annual Statement as to Compliance...................................................
Section 5.26. Annual Independent Public Accountants' Servicing Report.............................
Section 5.27. Access to Certain Documentation; Rights of the Depositor in Respect of
the Servicer........................................................................
Section 5.28. REMIC-Related Covenants.............................................................
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS....................................................................
Section 6.01. Distributions.......................................................................
Section 6.02. Statements to the Certificateholders................................................
Section 6.03. Advances by the Servicer............................................................
Section 6.04. Allocation of Realized Losses.......................................................
Section 6.05. Compensating Interest; Allocation of Certain Interest Shortfalls....................
Section 6.06. Subordination.......................................................................
Section 6.07. Determination of LIBOR..............................................................
ARTICLE VII
REPORTS TO BE PREPARED BY THE SERVICER................................................................
Section 7.01. Servicer Shall Provide Information as Reasonably Required...........................
Section 7.02. Federal Information Returns and Reports to Certificateholders.......................
ARTICLE VIII
THE DEPOSITOR AND THE SERVICER........................................................................
Section 8.01. Indemnification; Third Party Claims.................................................
Section 8.02. Merger or Consolidation of the Depositor or the Servicer............................
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 8.03. Limitation on Liability of the Depositor, the Servicer, the Trustee and
Others.............................................................................
Section 8.04. Depositor and Servicer Not to Resign...............................................
Section 8.05. Successor to the Servicer..........................................................
Section 8.06. Maintenance of Ratings.............................................................
ARTICLE IX
DEFAULT..................................................................................................
Section 9.01. Events of Default..................................................................
Section 9.02. Waiver of Defaults.................................................................
Section 9.03. Trustee to Act; Appointment of Successor...........................................
Section 9.04. Notification to Certificateholders and the Rating Agencies.........................
ARTICLE X
CONCERNING THE TRUSTEE...................................................................................
Section 10.01. Duties of Trustee..................................................................
Section 10.02. Certain Matters Affecting the Trustee..............................................
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans..............................
Section 10.04. Trustee May Own Certificates.......................................................
Section 10.05. Fees and Expenses..................................................................
Section 10.06. Eligibility Requirements for Trustee...............................................
Section 10.07. Resignation and Removal of the Trustee.............................................
Section 10.08. Successor Trustee..................................................................
Section 10.09. Merger or Consolidation of Trustee.................................................
Section 10.10. Appointment of Co-Trustee or Separate Trustee......................................
Section 10.11. Appointment of Office or Agency....................................................
ARTICLE XI
TERMINATION..............................................................................................
Section 11.01. Termination........................................................................
ARTICLE XII
MISCELLANEOUS PROVISIONS.................................................................................
Section 12.01. Severability of Provisions.........................................................
Section 12.02. Limitation on Rights of Certificateholders.........................................
Section 12.03. Amendment..........................................................................
Section 12.04. Counterparts.......................................................................
Section 12.05. Duration of Agreement..............................................................
Section 12.06. Governing Law......................................................................
Section 12.07. Notices............................................................................
</TABLE>
iii
<PAGE>
EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B CONTENTS OF MORTGAGE FILE
EXHIBIT C FORMS OF CLASS A CERTIFICATES
EXHIBIT D FORM OF CLASS M CERTIFICATE
EXHIBIT E FORMS OF CLASS B CERTIFICATES
EXHIBIT F FORM OF CLASS A-R CERTIFICATE
EXHIBIT G FORM OF TRUSTEE CERTIFICATION
EXHIBIT H FORM OF INVESTMENT LETTER
EXHIBIT I FORM OF RULE 144A INVESTMENT LETTER
EXHIBIT J FORM OF SPECIAL SERVICING AGREEMENT
EXHIBIT K FORM OF CLASS A-R TRANSFER LETTER
EXHIBIT L REQUEST FOR RELEASE
iv
<PAGE>
This Pooling and Servicing Agreement, dated as of [DATE], is executed
among Chase Manhattan Acceptance Corporation, as depositor (together with its
permitted successors and assigns, the "Depositor"), Chase Manhattan Mortgage
Corporation, as servicer (together with its permitted successors and assigns,
the "Servicer") and [TRUSTEE], as trustee (together with its permitted
successors and assigns, the "Trustee").
In consideration of the premises and the mutual agreements hereinafter
set forth, the Depositor, the Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
ACCEPTED SERVICING PRACTICES: With respect to any Mortgage Loan, those
mortgage servicing practices (including collection procedures) of prudent
mortgage banking institutions which service mortgage loans of the same type as
such Mortgage Loan in the jurisdiction where the related Mortgaged Property is
located, and which are in accordance with FNMA servicing practices and
procedures, for MBS pool mortgages, as defined in the FNMA Guides including
future updates.
ADJUSTED LOCK-OUT PERCENTAGE: Equals (i) for any Distribution Date
prior to the Distribution Date in [MONTH/YEAR], 0% and (ii) for any Distribution
Date on or after the Distribution Date in [MONTH/YEAR], the Lock-out Percentage.
ADVANCE: The aggregate of the advances made by the Servicer with
respect to a particular Distribution Date pursuant to Section 6.03.
AGGREGATE CLASS A INTEREST ACCRUAL AMOUNT: On any Distribution Date, an
amount equal to the sum of the Class A-1 Interest Accrual Amount, the Class A-2
Interest Accrual Amount, the Class A-3 Interest Accrual Amount, the Class A-4
Interest Accrual Amount, the Class A-5 Interest Accrual Amount, the Class A-6
Interest Accrual Amount, the Class A-7 Interest Accrual Amount, the Class A-R
Interest Accrual Amount and the Class A-X Interest Accrual Amount.
AGGREGATE CLASS A INTEREST SHORTFALL: On any Distribution Date, an
amount equal to the sum of the Class A-1 Shortfall, the Class A-2 Shortfall, the
Class A-3 Shortfall, the Class A-4 Shortfall, the Class A-5 Shortfall, the Class
A-6 Shortfall, the Class A-7 Shortfall, the Class A-R Shortfall and the Class
A-X Shortfall.
1
<PAGE>
AGREEMENT: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
APPRAISED VALUE: The value set forth in an appraisal made in connection
with the origination of the related Mortgage Loan as the value of the Mortgaged
Property.
ASSIGNMENT OF MORTGAGE: An assignment of the Mortgage, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction where the related Mortgaged Property is located to reflect
of record the sale and assignment of the Mortgage Loan to the Trustee, which
assignment, notice of transfer or equivalent instrument may, if permitted by
law, be in the form of one or more blanket assignments covering Mortgages
secured by Mortgaged Properties located in the same county.
AUTHENTICATING AGENT: The meaning specified in Section 4.06.
AVAILABLE DISTRIBUTION AMOUNT: On any Distribution Date, an amount
equal to the amount on deposit in the Certificate Account as of the close of
business on the related Determination Date except:
(a) amounts received on particular Mortgage Loans as late payments or
other recoveries of principal or interest (including Liquidation Proceeds,
Insurance Proceeds and condemnation awards) and respecting which the Servicer
previously made an unreimbursed Advance of such amounts;
(b) reimbursement for Nonrecoverable Advances and other amounts
permitted to be withdrawn by the Servicer pursuant to Section 5.09 from, or not
required to be deposited in, the Collection Account;
(c) amounts representing the Servicing Fee with respect to such
Distribution Date;
(d) amounts representing all or part of a Monthly Payment due (i) after
the related Due Period or (ii) on or prior to the Cut-off Date;
(e) all Repurchase Proceeds, Principal Prepayments, Liquidation
Proceeds, Insurance Proceeds and condemnation awards with respect to Mortgage
Loans received after the related Principal Prepayment Period, and all related
payments of interest representing interest for any period of time after the last
day of the related Due Period for such Mortgage Loans; and
(f) all income from Eligible Investments held in the Collection Account
for the account of the Servicer.
2
<PAGE>
BANKRUPTCY AMOUNT: As of any date of determination, $_________ minus
all Bankruptcy Losses on the Mortgage Loans, if any, previously allocated to the
Certificates in accordance with Section 6.04.
BANKRUPTCY LOSS: With respect to any Mortgage Loan, a Realized Loss
resulting from a Deficient Valuation or Debt Service Reduction.
BOOK-ENTRY CERTIFICATES: The Class A Certificates (other than the Class
A-R and Class A-X Certificates), referred to collectively.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, (b) a legal
holiday in the State of New York or (c) a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
be closed.
CARRY-OVER SUBORDINATED PRINCIPAL AMOUNT: As of any Distribution Date,
with respect to any Class of Subordinated Certificates, an amount, if any, equal
to the amount of principal distributable to such Class on any prior Distribution
Date that has not been so distributed.
CASH LIQUIDATION: Recovery of all cash proceeds by the Servicer with
respect to the liquidation of any Mortgage Loan, including Insurance Proceeds
and other payments or recoveries (whether made at one time or over a period of
time) which the Servicer deems to be finally recoverable, in connection with the
sale, assignment or satisfaction of such Mortgage Loan, trustee's sale,
foreclosure sale or otherwise, but only if title to the related Mortgaged
Property was not acquired by foreclosure or deed in lieu of foreclosure by the
Servicer pursuant to Section 5.21.
CERTIFICATE: Any Class A, Class M or Class B Certificate.
CERTIFICATE ACCOUNT: The account created and maintained pursuant to
Section 4.05.
CERTIFICATEHOLDER or HOLDER: The person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purposes of
giving any consent, waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Depositor, the Servicer, any
Sub-Servicer, or any of their respective affiliates shall be disregarded and the
undivided Percentage Interest evidenced thereby shall not be taken into account
in determining whether the requisite amount of Percentage Interests necessary to
effect any such consent, waiver, request or demand has been obtained. The
Trustee shall be entitled to conclusively rely upon the certificate of the
Depositor or the Servicer as to the determination of which Certificates are
registered in the name of such affiliates.
3
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CERTIFICATE OWNER: Any Person who is the beneficial owner of a Book-
Entry Certificate registered in the name of the Depository or its nominee.
CERTIFICATE RATE: The per annum rate of interest borne by each Class of
Certificates (other than the Class A-P Certificates), which rate shall equal
___% with respect to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-7,
Class A-R, Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5
Certificates. In the case of the Class A-5 Certificates, the Certificate Rate
shall equal _____% with respect to the [DATE] Distribution Date, and with
respect to any Distribution Date thereafter, the Certificate Rate with respect
to the Class A-5 Certificates shall equal the lesser of (i) ____% plus LIBOR and
(ii) _____%. In the case of the Class A-6 Certificates, the Certificate Rate
shall equal _______% with respect to the [DATE] Distribution Date, and with
respect to any Distribution Date thereafter, the Certificate Rate with respect
to the Class A-6 Certificates shall equal____% minus the product of (i) 3.000
and (ii) LIBOR, but not less than _____%. In the case of the Class A-X
Certificates, the Certificate Rate shall equal, with respect to any Distribution
Date, the weighted average, expressed as a percentage, of the Stripped Interest
Rate on each Mortgage Loan having a Stripped Interest Rate exceeding zero as of
the Due Date in the month immediately preceding the month in which such
Distribution Date occurs, weighted on the basis of the respective Principal
Balances of the Mortgage Loans, which Principal Balances shall be the Principal
Balances of the Mortgage Loans at the close of business on the immediately
preceding Distribution Date after giving effect to distributions thereon
allocable to principal (or, in the case of the Certificate Rate for the initial
Distribution Date, at the close of business on the Cut-off Date). With respect
to any Distribution Date, (i) interest will accrue on each Class of Certificates
(other than the Class A-5 and Class A-6 Certificates) from the first day of the
calendar month preceding the month in which such Distribution Date occurs
through the last day of the month preceding the month in which such Distribution
Date occurs and (ii) interest will accrue on the Class A-5 and Class A-6
Certificates from the 25th day of the month preceding the month in which such
Distribution Date occurs through the 24th day of the month in which such
Distribution Date occurs (except that with respect to the [DATE] Distribution
Date, interest will accrue on the Class A-5 and Class A-6 Certificates from
[DATE] through [DATE]). Interest with respect to each Class of Certificates
(other than the Class A-P Certificates) at the Certificate Rate shall be
calculated based on a year of 360 days comprised of twelve 30-day months.
CERTIFICATE REGISTER: The register maintained pursuant to Section 4.02.
CHASE: The Chase Manhattan Bank, a New York State banking corporation,
or its successor in interest.
CLASS: Pertaining to the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-P, Class A-R, Class A-X, Class M, Class
B-1, Class B-2, Class B-3, Class B-4 or Class B-5 Certificates, as the case may
be.
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CLASS A, CLASS M OR CLASS B: Pertaining to Class A Certificates, Class
M Certificates or Class B Certificates, as the case may be.
CLASS A-P AMOUNT: With respect to any Distribution Date, the applicable
PO Percentage of (i) all principal received on or in respect of each Discount
Mortgage Loan (exclusive of any amounts in respect of any Monthly Payment)
during the related Principal Prepayment Period and (ii) all principal received
as part of a Monthly Payment on or in respect of a Discount Mortgage Loan during
the related Due Period.
CLASS A CERTIFICATES: The Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-P, Class A-R and Class A-X
Certificates, referred to collectively.
CLASS A-1 CERTIFICATE: Any one of the Class A-1 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-2 CERTIFICATE: Any one of the Class A-2 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-3 CERTIFICATE: Any one of the Class A-3 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-4 CERTIFICATE: Any one of the Class A-4 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-5 CERTIFICATE: Any one of the Class A-5 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-6 CERTIFICATE: Any one of the Class A-6 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-7 CERTIFICATE: Any one of the Class A-7 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
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CLASS A-P CERTIFICATE: Any one of the Class A-P Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-R CERTIFICATE: The Class A-R Certificate executed by the
Trustee and authenticated by the Trustee, which represents the Residual
Interest, substantially in the form of the Class A-R Certificate set forth in
Exhibit F hereto.
CLASS A-X CERTIFICATE: Any one of the Class A-X Certificates executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS A-P DISTRIBUTION AMOUNT: With respect to any Distribution Date,
the amounts distributed to the Class A-P Certificates pursuant to Sections
6.01(b)(ii) and 6.01(b)(iii).
CLASS A-1 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-1 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-1 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-1 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-2 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-2 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-2 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-2 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-3 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-3 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-3 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-3 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-4 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-4 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-4 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-4 Certificates on such Distribution
Date pursuant to Section 6.05(c).
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CLASS A-5 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-5 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-5 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-5 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-6 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-6 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-6 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-6 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-7 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-7 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-7 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-7 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-R INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class A-R Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class A-R Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class A-R Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS A-X INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Class A-X Notional
Balance minus (i) any Compensating Interest Shortfall allocated to the Class A-X
Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any
Realized Loss Interest Shortfall allocated to the Class A-X Certificates on such
Distribution Date pursuant to Section 6.05(c).
CLASS A-X NOTIONAL BALANCE: With respect to any Distribution Date, an
amount equal to the aggregate Scheduled Principal Balance of the Non-Discount
Mortgage Loans.
CLASS A PERCENTAGE: As of any Distribution Date, the percentage
obtained by dividing the Class A Principal Balance by the Mortgage Pool
Principal Balance, but not more than 100%.
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CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class A
Principal Balance for the immediately preceding Distribution Date less (b)
amounts distributed to the Class A Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class A Certificates pursuant to Section 6.04); provided that
the Class A Principal Balance on the first Distribution Date shall be the
Original Class A Principal Balance.
CLASS A-1 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-1 Interest Accrual Amount over the
amount actually distributed to the Class A-1 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(A).
CLASS A-2 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-2 Interest Accrual Amount over the
amount actually distributed to the Class A-2 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(B).
CLASS A-3 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-3 Interest Accrual Amount over the
amount actually distributed to the Class A-3 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(C).
CLASS A-4 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-4 Interest Accrual Amount over the
amount actually distributed to the Class A-4 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(D).
CLASS A-5 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-5 Interest Accrual Amount over the
amount actually distributed to the Class A-5 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(E).
CLASS A-6 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-6 Interest Accrual Amount over the
amount actually distributed to the Class A-6 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(F).
CLASS A-7 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-7 Interest Accrual Amount over the
amount actually distributed to the Class A-7 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(G).
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CLASS A-R SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-R Interest Accrual Amount over the
amount actually distributed to the Class A-R Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(H).
CLASS A-X SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-X Interest Accrual Amount over the
amount actually distributed to the Class A-X Certificates on such Distribution
Date pursuant to Section 6.01(b)(i)(I).
CLASS A-P SHORTFALL AMOUNT: With respect to any Distribution Date prior
to and including the Credit Support Depletion Date, to the extent of amounts
available to pay the Subordinated Optimal Principal Amount (without regard to
clause (b)(2) of the definition of such term), an amount equal to the sum of (i)
the applicable PO Percentage of any Realized Loss (other than an Excess Loss)
with respect to a Discount Mortgage Loan and (ii) the sum of amounts, if any, by
which the amounts specified in clause (i) with respect to each prior
Distribution Date exceeded the amount actually distributed in respect thereof on
such prior Distribution Date and not subsequently distributed to the Class A-P
Certificateholders.
CLASS B CERTIFICATES: The Class B-1, Class B-2, Class B-3, Class B-4
and Class B-5 Certificates, referred to collectively.
CLASS B-1 CERTIFICATE: Any one of the Class B-1 Certificates executed
by the Trustee and authenticated by the Trustee, subordinated in right of
payment to the Class A and Class M Certificates, substantially in the form of
the Class B Certificate set forth in Exhibit E hereto.
CLASS B-2 CERTIFICATE: Any one of the Class B-2 Certificates executed
by the Trustee and authenticated by the Trustee, subordinated in right of
payment to the Class A, Class M and Class B-1 Certificates, substantially in the
form of the Class B Certificate set forth in Exhibit E hereto.
CLASS B-3 CERTIFICATE: Any one of the Class B-3 Certificates executed
by the Trustee and authenticated by the Trustee, subordinated in right of
payment to the Class A, Class M, Class B-1 and Class B-2 Certificates,
substantially in the form of the Class B Certificate set forth in Exhibit E
hereto.
CLASS B-4 CERTIFICATE: Any one of the Class B-4 Certificates executed
by the Trustee and authenticated by the Trustee, subordinated in right of
payment to the Class A, Class M, Class B-1, Class B-2 and Class B-3
Certificates, substantially in the form of the Class B Certificate set forth in
Exhibit E hereto.
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CLASS B-5 CERTIFICATE: Any one of the Class B-5 Certificates executed
by the Trustee and authenticated by the Trustee, subordinated in right of
payment to the Class A, Class M, Class B-1, Class B-2, Class B-3 and Class B-4
Certificates, substantially in the form of the Class B Certificate set forth in
Exhibit E hereto.
CLASS B-1 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class B-1 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class B-1 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-1 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-2 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class B-2 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class B-2 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-2 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-3 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class B-3 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class B-3 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-3 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-4 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class B-4 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class B-4 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-4 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-5 INTEREST ACCRUAL AMOUNT: With respect to any Distribution
Date, one month's interest at the Certificate Rate on the Outstanding
Certificate Principal Balance of the Class B-5 Certificates minus (i) any
Compensating Interest Shortfall allocated to the Class B-5 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class B-5 Certificates on such Distribution
Date pursuant to Section 6.05(c).
CLASS B-1 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-1 Interest Accrual Amount over the
amount actually
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distributed to the Class B-1 Certificates on such Distribution Date pursuant to
Section 6.01(d)(i)(1) (A) and (B).
CLASS B-2 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-2 Interest Accrual Amount over the
amount actually distributed to the Class B-2 Certificates on such Distribution
Date pursuant to Section 6.01(d)(i)(2) (A) and (B).
CLASS B-3 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-3 Interest Accrual Amount over the
amount actually distributed to the Class B-3 Certificates on such Distribution
Date pursuant to Section 6.01(d)(i)(3) (A) and (B).
CLASS B-4 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-4 Interest Accrual Amount over the
amount actually distributed to the Class B-4 Certificates on such Distribution
Date pursuant to Section 6.01(d)(i)(4) (A) and (B).
CLASS B-5 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-5 Interest Accrual Amount over the
amount actually distributed to the Class B-5 Certificates on such Distribution
Date pursuant to Section 6.01(d)(i)(5) (A) and (B).
CLASS B PERCENTAGE: As of any Distribution Date, the difference between
100% and the sum of (i) the Class A Percentage and (ii) the Class M Percentage
for such Distribution Date.
CLASS B PRINCIPAL BALANCE: As of any Distribution Date, the excess of
the Mortgage Pool Principal Balance (together with the principal portion of any
Monthly Payment due but not paid with respect to which an Advance has not been
made) over the sum of (i) the Class A Principal Balance and (ii) the Class M
Principal Balance.
CLASS M CERTIFICATE: Any one of the Class M Certificates executed by
the Trustee and authenticated by the Trustee, subordinated in right of payment
to the Class A Certificates, substantially in the form of the Class M
Certificate set forth in Exhibit D hereto.
CLASS M INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class M Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class M Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class M Certificates on such Distribution Date pursuant to
Section 6.05(c).
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CLASS M PERCENTAGE: As of any Distribution Date, the percentage
obtained by dividing the Class M Principal Balance by the Mortgage Pool
Principal Balance, but not more than 100%; provided, however, that on any
Distribution Date on which the Class B Percentage equals 0%, the Class M
Percentage shall equal 100% minus the Class A Percentage.
CLASS M PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class M
Principal Balance for the immediately preceding Distribution Date less (b)
amounts distributed to the Class M Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class M Certificates pursuant to Section 6.04); provided that
the Class M Principal Balance on the first Distribution Date shall be the
Original Class M Principal Balance, and provided further that if the aggregate
Outstanding Certificate Principal Balance of the Class B Certificates has been
reduced to zero, as of any Distribution Date, the Class M Principal Balance will
equal the excess of the Mortgage Pool Principal Balance (together with the
portion of any Monthly Payment due but not paid with respect to which an Advance
has not been made) over the Class A Principal Balance.
CLASS M SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class M Interest Accrual Amount over the
amount actually distributed to the Class M Certificateholders on such
Distribution Date pursuant to Section 6.01(c)(i) (A) and (B).
CLOSING DATE: [DATE].
CMMC: Chase Manhattan Mortgage Corporation, a New Jersey corporation,
or its successor in interest.
CODE: The Internal Revenue Code of 1986, as amended from time to time,
and any successor statutes thereto, and applicable U.S. Department of Treasury
temporary or final regulations promulgated thereunder.
COLLECTION ACCOUNT: The account created and maintained pursuant to
Section 5.08.
COMPENSATING INTEREST: The meaning specified in Section 6.05(a).
COMPENSATING INTEREST SHORTFALL: The meaning specified in Section
6.05(b).
CORPORATE TRUST OFFICE: The principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office at the date of execution of this instrument is located at [ADDRESS]
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CREDIT SUPPORT: With respect to each Class of Subordinated Certificates
(other than the Class B-5 Certificates), the level of credit support supporting
such Class, expressed as a percentage of the aggregate Outstanding Certificate
Principal Balance of all Classes of Certificates (other than the Class A-P
Certificates). With respect to each Distribution Date, Credit Support for each
such Class will equal in each case the percentage, rounded to two decimal
places, obtained by dividing the aggregate Outstanding Certificate Principal
Balances immediately prior to such Distribution Date of all Classes of
Subordinated Certificates having higher numerical class designations than such
Class (for this purpose, each Class of Class M Certificates shall be deemed to
have a lower numerical class designation than each Class of Class B
Certificates) by the aggregate Outstanding Certificate Principal Balance of all
Classes of Certificates (other than the Class A-P Certificates) immediately
prior to such Distribution Date.
CREDIT SUPPORT DEPLETION DATE: The first Distribution Date on which the
aggregate outstanding principal balance of the Subordinated Certificates has
been or will be reduced to zero.
CUT-OFF DATE: [DATE].
DCR: Duff & Phelps Credit Rating Co. or its successor in interest.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction
in the scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, other than such a
reduction resulting from a Deficient Valuation.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of
the related Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding principal balance of the Mortgage Loan, which
valuation results from a proceeding initiated under the Bankruptcy Code.
DEFINITIVE CERTIFICATES: The Certificates referred to in Section
4.01(c).
DEPOSITOR: Chase Manhattan Acceptance Corporation, a Delaware
corporation, or its successor in interest or any successor under this Agreement
appointed as herein provided.
DEPOSITORY: The Depository Trust Company, the nominee of which is Cede
& Co.
DEPOSITORY AGREEMENT: The agreement referred to in Section 4.01(b).
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DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: The sixteenth day of the month in which the related
Distribution Date occurs (or, if such sixteenth day is not a Business Day, the
preceding Business Day).
DISCOUNT MORTGAGE LOAN: Any Mortgage Loan having a Net Mortgage Rate
less than the Remittance Rate.
DISQUALIFIED ORGANIZATION: An organization referred to in section
860E(e)(5) of the Code.
DISTRIBUTION DATE: The 25th day of any month, or if such 25th day is
not a Business Day, the first Business Day immediately following, beginning with
[DATE].
DUE DATE: The first day of each month, being the day of the month on
which each Monthly Payment is due on a Mortgage Loan, exclusive of any days of
grace.
DUE PERIOD: With respect to any Distribution Date, the period from the
second day of the month preceding the month in which such Distribution Date
occurs through the first day of the month in which such Distribution Date
occurs.
ELIGIBLE ACCOUNT: An account that is (i) maintained with a depository
institution the long-term unsecured debt obligations of which are rated by each
Rating Agency in one of its two highest rating categories, or (ii) maintained
with the corporate trust department of a national bank which has a rating of at
least BBB- or A-2 by S&P, or (iii) an account or accounts the deposits in which
are fully insured by the FDIC, or (iv) an account or accounts in a depository
institution in which such accounts are insured by the FDIC (to the limit
established by the FDIC), the uninsured deposits in which accounts are otherwise
secured such that, as evidenced by an Opinion of Counsel delivered to and
acceptable to the Trustee and each Rating Agency, the Certificateholders have a
claim with respect to the funds in such account and a perfected first security
interest against any collateral (which shall be limited to Eligible Investments)
securing such funds that is superior to claims of any other depositors or
creditors of the depository institution with which such account is maintained,
or (v) otherwise acceptable to each Rating Agency without reduction or
withdrawal of the rating of any Class of Certificates, as evidenced by a letter
from each Rating Agency.
ELIGIBLE INVESTMENTS: One or more of the following:
(i) obligations of, or guaranteed as to principal and interest by, the
United States or obligations of any agency or instrumentality thereof when such
obligations are
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backed by the full faith and credit of the United States; provided that any such
obligation held as a "cash flow investment" within the meaning of section
860G(a)(6) of the Code shall not have a remaining maturity of more than 45 days;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than two months from the date of acquisition
thereof, provided that the long-term unsecured obligations of the
party agreeing to repurchase such obligations are at the time rated by
each Rating Agency in one of its two highest rating categories and the
short-term debt obligations of the party agreeing to repurchase are
rated A-1 by S&P and D-1 by DCR if rated by DCR;
(iii) federal funds, certificates of deposit, time deposits and
bankers' acceptances (which shall each have an original maturity of
not more than 60 days and, in the case of bankers' acceptances, shall
in no event have an original maturity of more than 365 days) of any
United States depository institution or trust company incorporated
under the laws of the United States or any state, provided that the
long-term unsecured debt obligations of such depository institution or
trust company at the date of acquisition thereof have been rated by
each Rating Agency in one of its two highest rating categories and the
short-term obligations of such depository institution or trust company
are rated A- 1 by S&P and D-1 by DCR if rated by DCR;
(iv) commercial paper (having original maturities of not more
than 365 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition
has been rated by each Rating Agency in its highest short-term
unsecured commercial paper rating category; provided that such
commercial paper shall have a remaining maturity of not more than 45
days;
(v) units of taxable money market funds (including those for
which the Trustee or the Servicer or any affiliate thereof receives
compensation with respect to such investment) which funds have been
rated by each Rating Agency in its highest rating category or which
have been designated in writing by each Rating Agency as Eligible
Investments with respect to this definition;
(vi) other obligations or securities that are "permitted
investments" within the meaning of Section 860G(a)(5) of the Code and
acceptable to each Rating Agency rating the Certificates as an
Eligible Investment hereunder and will not result in a reduction or
withdrawal in the then current rating of any Class of Certificates, as
evidenced by a letter to such effect from each Rating Agency.
provided that no such instrument shall be an Eligible Investment if such
instrument evidences either (a) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (b) both principal and
interest payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a
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yield to maturity of greater than 120% of the yield to maturity at par of such
underlying obligations.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
ESCROW ACCOUNT: The account or accounts created and maintained pursuant
to Section 5.10.
ESCROW PAYMENTS: The amounts constituting applicable ground rents,
taxes, assessments, water rates, Standard Hazard Policy premiums and other
payments required to be escrowed by the Mortgagor with the mortgagee pursuant to
a Mortgage Loan.
EVENT OF DEFAULT: Any of the events specified in Section 9.01.
EXCEPTION REPORT: The report of the Trustee referred to in Section
2.02.
EXCESS BANKRUPTCY LOSS: Any Bankruptcy Loss, or portion thereof, which
exceeds the then applicable Bankruptcy Amount.
EXCESS FRAUD LOSS: Any Fraud Loss, or portion thereof, which exceeds
the then applicable Fraud Loss Amount.
EXCESS LOSSES: Excess Bankruptcy Losses, Excess Fraud Losses and Excess
Special Hazard Losses, referred to collectively.
EXCESS PROCEEDS: All amounts (net of the related Servicing Advances)
received on any Mortgage Loan (whether as regular principal payments, Principal
Prepayments, Repurchase Proceeds, Liquidation Proceeds, Insurance Proceeds,
condemnation awards, or with respect to a disposition of a Mortgaged Property
which has been acquired by foreclosure or deed in lieu of foreclosure or
otherwise) in excess of the Principal Balance at the Cut-off Date of such
Mortgage Loan and accrued interest thereon at its Mortgage Rate to the Due Date
immediately succeeding the date of prepayment, repurchase or liquidation, as the
case may be.
EXCESS SPECIAL HAZARD LOSS: Any Special Hazard Loss, or portion
thereof, that exceeds the then applicable Special Hazard Amount.
FDIC: The Federal Deposit Insurance Corporation or any successor
organization.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
organization.
FIDELITY BOND: A fidelity bond and errors and omissions insurance to be
maintained by the Servicer pursuant to Section 5.19.
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FNMA: The Federal National Mortgage Association, or any successor
organization.
FNMA GUIDES: The FNMA Sellers' Guide and the FNMA Servicers' Guide, and
all amendments or additions thereto.
FRAUD LOSS: Any Realized Loss or portion thereof sustained by reason of
a default arising from fraud, dishonesty or misrepresentation in connection with
the related Mortgage Loan, including by reason of the denial of coverage under
any related Primary Insurance Policy.
FRAUD LOSS AMOUNT: As of any date of determination after the Cut-off
Date, an amount equal to: (X) prior to the first anniversary of the Cut-off
Date,____% (initially, $___________) of the aggregate outstanding principal
balance of all of the Mortgage Loans as of the Cut-off Date minus the aggregate
amount of Fraud Loss on the Mortgage Loans allocated to the Certificates in
accordance with Section 6.04 since the Cut-off Date up to such date of
determination and (Y) from the first to the fifth anniversary of the Cut-off
Date, (1) ______% of the aggregate outstanding principal balance of all of the
Mortgage Loans as of the most recent anniversary of the Cut-off Date minus (2)
the Fraud Losses allocated to the Certificates in accordance with Section 6.04
since the most recent anniversary of the Cut-off Date up to such date of
determination. On and after the fifth anniversary of the Cut-off Date, the Fraud
Loss Amount shall be zero.
INDIRECT PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan, net of costs of collecting such
proceeds and net of amounts released to the Mortgagor or applied to the
restoration of the Mortgaged Property.
INSURED EXPENSES: Expenses covered by any insurance policy.
INTEREST ACCRUAL PERIOD: With respect to any Distribution Date and the
Class A-5 and Class A-6 Certificates, the period from the 25th day of the month
preceding the month in which such Distribution Date occurs through the 24th day
of the month in which such Distribution Date occurs.
LATE COLLECTIONS: With respect to any Mortgage Loan, all amounts
received during any Due Period, whether as late payments of Monthly Payments or
as Liquidation Proceeds, condemnation proceeds, Insurance Proceeds, or with
respect to a disposition of a Mortgaged Property which has been acquired by
foreclosure or deed in lieu of
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foreclosure or otherwise, which represent late payments or collections of
Monthly Payments due but delinquent for a previous Due Period and not previously
recovered.
LIBOR: With respect to any Distribution Date and the Certificate Rates
on the Class A-5 and Class A-6 Certificates, LIBOR as determined in accordance
with Section 6.07.
LIBOR BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the city of London, England are
required or authorized by law to be closed.
LIQUIDATED MORTGAGE LOAN: Any Mortgage Loan (a) as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Mortgage Loan or property acquired in respect thereof have been
recovered, (b) as to which a Cash Liquidation has taken place or (c) with
respect to which the Mortgaged Property has been acquired by foreclosure or deed
in lieu of foreclosure and a disposition (the term disposition shall include,
for purposes of a repurchase pursuant to Section 11.01, any repurchase of a
Mortgaged Property pursuant to such Section) of such Mortgaged Property has
occurred.
LIQUIDATION EXPENSES: Expenses which are incurred by the Servicer or
any Sub-Servicer in connection with the liquidation of any defaulted Mortgage
Loan or property acquired in respect thereof including, without limitation,
legal fees and expenses, any unreimbursed amount expended by the Servicer
pursuant to Sections 5.16 and 5.21 respecting the related Mortgage Loan and any
related and unreimbursed expenditures for real estate property taxes or for
property restoration or preservation.
LIQUIDATION PRINCIPAL: With respect to any Distribution Date, the
principal portion of Net Liquidation Proceeds received with respect to each
Mortgage Loan which became a Liquidated Mortgage Loan (but not in excess of the
Principal Balance thereof) during the calendar month preceding the month of such
Distribution Date, exclusive of the portion thereof attributable to the Class
A-P Amount.
LIQUIDATION PROCEEDS: Cash (including Insurance Proceeds) received by
the Servicer in connection with the liquidation of any Mortgage Loan or
Mortgaged Property acquired in respect thereof, whether through the sale or
assignment of such Mortgage Loan (other than pursuant to Section 5.21),
trustee's sale, foreclosure sale or otherwise, or the sale of the Mortgaged
Property if the Mortgaged Property is acquired in satisfaction of the Mortgage
Loan other than amounts required to be paid to the Mortgagor pursuant to law or
the terms of the applicable Mortgage Note.
LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the
numerator of which is the outstanding principal amount of the related Mortgage
Loan at the time of origination (or, (i) for purposes of Section 5.15, at the
time of determination and (ii) for purposes of a Mortgage Loan with respect to
which a conversion from adjustable rate to fixed
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rate has occurred, at the time of initial origination) and the denominator of
which is the appraised value of the related Mortgaged Property at the time of
origination or, in the case of a Mortgage Loan financing the acquisition of the
Mortgaged Property, the sales price of the Mortgaged Property, if such sales
price is less than such appraised value.
LOCK-OUT LIQUIDATION AMOUNT: With respect to any Distribution Date, the
aggregate, for each Mortgage Loan which became a Liquidated Mortgage Loan during
the calendar month preceding the month of such Distribution Date, of the lesser
of (i) the Lock-out Percentage of the PO Percentage of such Mortgage Loan and
(ii) the Lock-out Percentage on any Distribution Date occurring prior to the
fifth anniversary of the first Distribution Date, and the Lock-out Prepayment
Percentage on any Distribution Date thereafter, in each case, of the Net
Liquidation Proceeds with respect to such Mortgage Loan.
LOCK-OUT PERCENTAGE: With respect to any Distribution Date, the
outstanding principal balance of the Class A-7 Certificates divided by the
aggregate outstanding principal balance of the Certificates (other than the
Class A-P Certificates), in each case immediately prior to the Distribution
Date.
LOCK-OUT PREPAYMENT PERCENTAGE: The product of (a) the Lock-out
Percentage and (b) the Step Down Percentage.
LOCK-OUT PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the sum of (i) the Adjusted Lock-out Percentage of the
principal portion of Monthly Payments, whether or not received, which were due
on the related Due Date on outstanding Mortgage Loans as of such Due Date, (ii)
the Lock-out Prepayment Percentage of the applicable Non-PO Percentage of the
principal portion of Principal Prepayments, Insurance Proceeds, condemnation
awards and other cash proceeds from sources other than Mortgagors, and
Repurchase Proceeds, in each case received during the related Principal
Prepayment Period and (iii) the Lock-out Liquidation Amount.
MODIFIED MORTGAGE LOAN: Any Mortgage Loan which the Servicer has
modified pursuant to Section 5.01.
MONTHLY PAYMENT: The minimum required monthly payment of principal and
interest due on a Mortgage Loan as specified in the Mortgage Note for any Due
Date (before any adjustment to such scheduled amount by reason of any bankruptcy
or similar proceeding or any moratorium or similar waiver or grace period).
Monthly Payments shall be deemed due on an Outstanding Mortgage Loan until such
time as it becomes a Liquidated Mortgage Loan.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien or a first priority ownership interest in an estate in fee simple in
real property securing a Mortgage Note.
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MORTGAGE FILE: As to each Mortgage Loan, the items referred to in
Exhibit B annexed hereto.
MORTGAGE LOAN: An individual mortgage loan and all rights with respect
thereto, evidenced by a Mortgage and a Mortgage Note, sold and assigned by the
Depositor to the Trustee and which is subject to this Agreement and included in
the Trust Fund. The Mortgage Loans originally sold and subject to this Agreement
are identified on the Mortgage Loan Schedule.
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached hereto
as Exhibit A as it may be amended in accordance with Section 3.03, setting forth
the following information as to each Mortgage Loan: (i) the Mortgage Loan
identifying number; (ii) the street address of the Mortgaged Property including
the zip code; (iii) an indication of whether the Mortgaged Property is
owner-occupied; (iv) the property type of the Mortgaged Property; (v) the
original number of months to stated maturity; (vi) the number of months
remaining to stated maturity from the Cut-off Date; (vii) the original
Loan-to-Value Ratio; (viii) the original principal balance of the Mortgage Loan;
(ix) the unpaid principal balance of the Mortgage Loan as of the close of
business on the Cut-off Date; (x) the Mortgage Rate; (xi) the amount of the
current Monthly Payment; and (xii) the PO Percentage with respect to such
Mortgage Loan.
MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
MORTGAGE POOL: The pool of Mortgage Loans held in the Trust Fund.
MORTGAGE POOL PRINCIPAL BALANCE: As of any date of determination, the
aggregate of the Principal Balances of each Outstanding Mortgage Loan on such
date of determination less the principal portion of any Monthly Payment due but
not paid with respect to which an Advance has not been made.
MORTGAGED PROPERTY: The property securing a Mortgage Note.
MORTGAGE RATE: With respect to each Mortgage Loan, the per annum rate
of interest borne by the Mortgage Loan, as specified in the Mortgage Note.
MORTGAGOR: The obligor on a Mortgage Note.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
NET MORTGAGE RATE: With respect to each Mortgage Loan, a per annum rate
of interest for the applicable period equal to the Mortgage Rate less the
Servicing Fee.
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NON-DISCOUNT MORTGAGE LOANS: The Mortgage Loans having Net Mortgage
Rates in excess of the Remittance Rate.
NON-PO ALLOCATED AMOUNT: At the time of any determination, the amount
derived by (i) multiplying the Principal Balance of each Mortgage Loan on such
date of determination by the Non-PO Percentage with respect to such Mortgage
Loan and (ii) summing the results.
NON-PO CLASS A CERTIFICATES: The Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class A-R and Class A-X Certificates,
referred to collectively.
NON-PO CLASS A OPTIMAL PRINCIPAL AMOUNT: With respect to any
Distribution Date, the lesser of (a) the Non-PO Class A Principal Balance and
(b) the sum of:
(i) the Non-PO Class A Percentage of the applicable Non-PO
Percentage of the principal portion of all Monthly Payments, whether or
not received, which were due during the related Due Period on Mortgage
Loans which were outstanding during such Due Period;
(ii) the Non-PO Class A Prepayment Percentage of the
applicable Non-PO Percentage of all Principal Prepayments made on any
Mortgage Loan during the related Principal Prepayment Period;
(iii) with respect to each Mortgage Loan not described in (iv)
below, the Non-PO Class A Percentage of the applicable Non-PO
Percentage of the principal portion of all Insurance Proceeds,
condemnation awards and any other cash proceeds from a source other
than the applicable Mortgagor, to the extent required to be deposited
in the Collection Account pursuant to Section 5.08(iv) and (v), which
were received during the related Principal Prepayment Period, net of
related unreimbursed Servicing Advances and net of any portion thereof
which, as to any such Mortgage Loan, constitutes Late Collections that
have been the subject of an Advance on any prior Distribution Date;
(iv) with respect to each Mortgage Loan which has become a
Liquidated Mortgage Loan during the related Principal Prepayment
Period, the lesser of (A) the Non-PO Class A Percentage of applicable
Non-PO Percentage of an amount equal to the Principal Balance of such
Liquidated Mortgage Loan as of the Due Date immediately preceding the
date on which it became a Liquidated Mortgage Loan and (B) the Non-PO
Class A Prepayment Percentage of the applicable Non-PO Percentage of
the Net Liquidation Proceeds with respect to such liquidated Mortgage
Loan (net of any unreimbursed Advances);
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(v) with respect to each Mortgage Loan repurchased during the
related Principal Prepayment Period pursuant to Section 2.02, 3.01,
5.21 or 11.01, an amount equal to the Non-PO Class A Prepayment
Percentage of the applicable Non-PO Percentage of the principal portion
of the Purchase Price (net of amounts with respect to which a
distribution of principal has previously been made to the Non-PO Class
A Certificateholders); and
(vi) on or after the Credit Support Depletion Date, the excess
of the Non-PO Class A Principal Balance (calculated after giving effect
to reductions thereof on such Distribution Date with respect to the
amounts described in (i) - (v) above) over the Non-PO Allocated
Amount, if any, as of the preceding Distribution Date.
NON-PO CLASS A PERCENTAGE: As of any Distribution Date, the fraction,
expressed as a percentage (which shall never exceed 100%), the numerator of
which is the Non-PO Class A Principal Balance and the denominator of which is
the Non-PO Allocated Amount as of the immediately preceding Due Date.
NON-PO CLASS A PREPAYMENT PERCENTAGE: As of any Distribution Date up to
and including the Step-down Date, 100%; as of any Distribution Date during the
first year thereafter, the Non-PO Class A Percentage plus 70% of the
Subordinated Percentage for such Distribution Date; as of any Distribution Date
during the second year thereafter, the Non- PO Class A Percentage plus 60% of
the Subordinated Percentage for such Distribution Date; as of any Distribution
Date during the third year thereafter, the Non-PO Class A Percentage plus 40% of
the Subordinated Percentage for such Distribution Date; as of any Distribution
Date during the fourth year thereafter, the Non-PO Class A Percentage plus 20%
of the Subordinated Percentage for such Distribution Date; and as of any
Distribution Date after the fourth year thereafter, the Non-PO Class A
Percentage; provided that if the Non-PO Class A Percentage as of any such
Distribution Date is greater than the Non-PO Class A Percentage on the first
Distribution Date, the Non-PO Class A Prepayment Percentage shall be 100%; and
provided further that whenever the Non-PO Class A Percentage equals 0%, the
Non-PO Class A Prepayment Percentage shall equal 0%.
NON-PO CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a) the
Non-PO Class A Principal Balance for the immediately preceding Distribution Date
less (b) amounts distributed (or deemed distributed) to the Non-PO Class A
Certificateholders on such preceding Distribution Date allocable to principal
(including the principal portion of Advances of the Servicer made pursuant to
Section 6.03 and Realized Losses allocated to the Non-PO Class A Certificates
pursuant to Section 6.04); provided that the Non-PO Class A Principal Balance on
the first Distribution Date shall be the Original Non-PO Class A Principal
Balance.
NON-PO CLASS A PRINCIPAL PAYMENT RULES: [Describe payment methodology]
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NON-PO PERCENTAGE: With respect to each Mortgage Loan, the fraction,
expressed as a percentage (but not greater than 100%), the numerator of which
equals the applicable Net Mortgage Rate and the denominator of which equals the
Remittance Rate.
NONRECOVERABLE ADVANCE: Any Advance previously made or proposed to be
made in respect of a Mortgage Loan by the Servicer pursuant to Section 6.03
which, in the good faith judgment of the Servicer, will not or, in the case of a
proposed Advance, would not, ultimately be recoverable by the Servicer from Late
Collections or otherwise. The determination by the Servicer that it has made, or
would be making, a Nonrecoverable Advance shall be evidenced by a certificate of
a Servicing Officer of the Servicer delivered to the Trustee, any co-trustee and
the Depositor and detailing the reasons for such determination.
OFFICERS' CERTIFICATE: A certificate signed by two of the Chairman of
the Board, the Vice Chairman of the Board, the President or a Vice President,
the Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries or any other duly authorized officer of the Depositor or the
Servicer, and delivered to the Trustee.
OPINION OF COUNSEL: A written opinion of counsel, who may be counsel
for the Depositor or the Servicer and who is reasonably acceptable to the
Trustee.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: With respect to any Class of
Certificates, the amount specified for such Class in Section 4.01(d).
ORIGINAL CLASS A PRINCIPAL BALANCE: $_____________
ORIGINAL CLASS M PRINCIPAL BALANCE: $_____________
ORIGINAL CLASS B PRINCIPAL BALANCE: $_____________
ORIGINAL NON-PO CLASS A PRINCIPAL BALANCE $_____________
ORIGINAL CREDIT SUPPORT: With respect to any Class of Subordinated
Certificates (other than the Class B-5 Certificates), the level of Credit
Support indicated below:
Class M: %
Class B-1: %
Class B-2: %
Class B-3: %
Class B-4: %
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE: With respect to any Class
(other than the Class A-X Certificates) of Certificates and any Distribution
Date, the
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Original Certificate Principal Balance of such Class minus the sum of (i) any
distributions of principal made on such Class prior to such Distribution Date
and (ii) any Realized Losses allocated to such Class prior to such Distribution
Date; provided, however, that (I) with respect to the Class of Class B
Certificates then outstanding having the highest numerical class designation,
the Outstanding Certificate Principal Balance of such Class shall equal the
excess of the Mortgage Pool Principal Balance (together with the principal
portion of any Monthly Payment due but not paid with respect to which an Advance
has not been made) over the sum of the Outstanding Certificate Principal
Balances of all Classes of Certificates (other than the Class of Class B
Certificates then outstanding having the highest numerical class designation);
and (II) during such time as the Outstanding Certificate Principal Balance of
the Class B-1 Certificates equals zero, with respect to the Class M
Certificates, the Outstanding Certificate Principal Balance of such Class shall
equal the excess of the Mortgage Pool Principal Balance (together with the
principal portion of any Monthly Payment due but not paid with respect to which
an Advance has not been made) over the Class A Principal Balance.
OUTSTANDING MORTGAGE LOAN: As to any Distribution Date, a Mortgage Loan
which was not paid in full during the related or any previous Principal
Prepayment Period, which did not become a Liquidated Mortgage Loan during the
related or any previous Principal Prepayment Period and which was not
repurchased under Section 2.02, 3.01, 5.21 or 11.01 during the related or any
previous Principal Prepayment Period.
PASS-THRU ENTITY: A "Pass-Thru Entity" as defined in Section 860E(e)(6)
of the Code.
PAYING AGENT: The Person appointed by the Trustee as Paying Agent
pursuant to Section 4.05.
PERCENTAGE INTEREST: As to any Certificate (other than a Class A-X
Certificate), the percentage interest evidenced thereby in distributions
required to be made hereunder, such percentage interest being equal, with
respect to any Class, to the percentage obtained by dividing the denomination of
such Certificate by the aggregate of the denominations of all the Certificates
of such Class and with respect to all Certificates, the percentage obtained by
dividing the denomination of such Certificate by the aggregate of the
denominations of all the Certificates. With respect to any Class A-X
Certificate, the percentage interest specified on the face of such Certificate.
PERSON: Any individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
PO PERCENTAGE: The PO Percentage with respect to each Mortgage Loan as
identified on the Mortgage Loan Schedule, such percentage being equal to the
fraction, expressed as a percentage (but not less than 0%), the numerator of
which equals the excess of the
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Remittance Rate over the applicable Net Mortgage Rate and the denominator of
which equals the Remittance Rate.
PRIMARY INSURANCE POLICY: Each primary policy of mortgage guaranty
insurance or any replacement policy therefor referred to in Section 5.15 hereof.
PRINCIPAL BALANCE: At the time of any determination, the principal
balance of a Mortgage Loan remaining to be paid at the close of business on the
Cut-off Date (after deduction of all principal payments due on or before the
Cut-off Date whether or not paid) (or, in the case of a substitute Mortgage Loan
included in the Trust Fund pursuant to Section 3.04, the close of business as of
the date of substitution) reduced by all amounts previously distributed to
Certificateholders that are allocable to payments of principal on such Mortgage
Loan (including the principal portion of Advances of the Servicer made pursuant
to Section 6.03).
PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on a
Mortgage Loan (other than Late Collections) which is received other than as part
of a Monthly Payment; provided, however, that the term Principal Prepayment does
not include Insurance Proceeds, Liquidation Proceeds, condemnation awards or
other cash proceeds from a source other than the applicable Mortgagor.
PRINCIPAL PREPAYMENT PERIOD: With respect to any Distribution Date, the
period beginning on the first day of the month preceding the month in which such
Distribution Date occurs and ending on the last day of such month.
PURCHASE PRICE: With respect to any Mortgage Loan required to be
purchased on any date pursuant to Section 2.02, 3.01, 5.01, 5.21 or 11.01, an
amount equal to the sum of (a) 100% of the Principal Balance thereof, (b) unpaid
accrued interest at the Mortgage Rate thereon from the Due Date on which
interest was last paid by the Mortgagor or Advanced by the Servicer to the Due
Date next following the date of repurchase and (c) the aggregate of any
unreimbursed Advances.
QUALIFIED INSURER: An insurance company duly qualified as such under
the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, approved as an insurer by FNMA and
FHLMC and whose claims-paying ability is rated in the two highest rating
categories by S&P, Moody's and Fitch with respect to primary mortgage insurance
and in the two highest rating categories for general policyholder rating and
financial performance index rating by Best's with respect to hazard and flood
insurance.
RATE ADJUSTMENT DATE: The LIBOR Business Day prior to the first day of
each Interest Accrual Period after the initial Interest Accrual Period.
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RATING AGENCY: Any nationally recognized statistical rating
organization, or its successor, that rated one or more Classes of Certificates
at the request of the Depositor at the time of the initial issuance of the
Certificates. If such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, designated by the Depositor, notice of
which designation shall be given to the Trustee and the Servicer. References
herein to the two highest long-term debt rating categories of a Rating Agency
shall mean AA or better.
REALIZED LOSS: With respect to (i) a Liquidated Mortgage Loan, the
amount, if any, by which the unpaid Principal Balance and accrued interest
thereon at a rate equal to the Net Mortgage Rate exceeds the amount actually
recovered by the Servicer with respect thereto (net of reimbursement of Advances
and Servicing Advances) at the time such Mortgage Loan became a Liquidated
Mortgage Loan or (ii) with respect to a Mortgage Loan which is not a Liquidated
Mortgage Loan, any amount of principal that the Mortgagor is no longer legally
required to pay (except for the extinguishment of debt that results from the
exercise of remedies due to default by the Mortgagor).
REALIZED LOSS INTEREST SHORTFALL: The meaning specified in Section
6.05(c).
RECORD DATE: The close of business of the last Business Day of the
month preceding the month of the related Distribution Date.
REFERENCE BANK RATE: As of 11:00 A.M. London time, on the day that is
one LIBOR Business Day prior to the immediately preceding Distribution Date, the
rate at which deposits are offered by the reference banks (which shall be three
major banks engaged in transactions in the London interbank market, selected by
the Servicer) to prime banks in the London interbank market for a period of one
month in amounts approximately equal to the aggregate Outstanding Certificate
Principal Balance of the Class A-5 and Class A-6 Certificates in accordance with
the following procedures. The Servicer will request the principal London office
of each of the reference banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate will be the arithmetic mean of the
quotations. If on such date fewer than two quotations are provided as requested,
the rate will be the arithmetic mean of the rates quoted by one or more major
banks in New York City, selected by the Servicer as of 11:00 A.M., New York City
time, on such date for loans in U.S. Dollars to leading European banks for a
period of one month in amounts approximately equal to the aggregate Outstanding
Certificate Principal Balance of the Class A-5 and Class-6 Certificates. In the
event no such quotations can be obtained, the rate will be LIBOR for the prior
Distribution Date, or in the case of the first Rate Adjustment Date, _________%.
RELEVANT MORTGAGE LOAN: The meaning specified in Section 5.01.
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REMIC: A "real estate mortgage investment conduit," as such term is
defined in Section 860D of the Code. References herein to "the REMIC" shall mean
the REMIC created hereunder.
REMIC PROVISIONS: Provisions of the federal income tax law relating to
REMICs which appear at Sections 860A through 860G of Part IV of Subchapter M of
Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department
of the Treasury temporary, proposed or final regulations and rulings promulgated
thereunder, as the foregoing are in effect (or with respect to proposed
regulations, are proposed to be in effect) from time to time.
REMITTANCE RATE: ___% per annum.
REPURCHASE PROCEEDS: All proceeds of any Mortgage Loan or property
acquired in respect thereof repurchased pursuant to Section 2.02, 3.01, 5.01,
5.21 or 11.01.
RESIDUAL INTEREST: The interest in the Trust Fund represented by
amounts, if any, remaining in the Collection Account following termination of
the Trust Fund after payments to the Class A Certificateholders (other than the
Class A-R Certificateholders), the Class M Certificateholders and the Class B
Certificateholders.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any Senior
Vice President, any Vice President, any Assistant Vice President, any Senior
Trust Officer, any Trust Officer or any other officer of the Trustee in its
Corporate Trust Office customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer in its Corporate Trust Office to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. or its successor in interest.
SALE AGREEMENT: The Mortgage Loan Sale Agreement dated as of [DATE]
between the Depositor and CMMC.
SCHEDULED PRINCIPAL BALANCE: With respect to any Mortgage Loan as of
any Distribution Date, the unpaid principal balance of such Mortgage Loan as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such schedule by reason of bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) as of the Due Date in the month
preceding the month of such Distribution Date, or as the Cut-off Date, with
respect to the first Distribution Date, after giving effect to any previously
applied prepayments, the payment of principal due on such first day of the month
and any reduction of
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the principal balance of such Mortgage Loan by a bankruptcy court, irrespective
of any delinquency in payment by the related Mortgagor.
SELLER: [CMMC].
SERVICER: [CMMC] or any successor under this Agreement as herein
provided.
SERVICING ADVANCES: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations and which are "unanticipated expenses" of the REMIC, as
defined in the REMIC Provisions, including, but not limited to, the cost of (i)
the preservation, restoration and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the Mortgaged Property if the Mortgaged Property
is acquired in satisfaction of the Mortgage, (iv) taxes and assessments on the
Mortgaged Properties subject to the Mortgage Loans and (v) compliance with the
obligations under Section 5.21.
SERVICING FEE: The amount of the monthly fee paid for the servicing of
the Mortgage Loans, equal to, as of any Distribution Date, the total of, with
respect to each Mortgage Loan, one-twelfth of ______% per annum of the Principal
Balance thereof as of the Determination Date in the preceding month, subject to
adjustment as provided in Section 6.05. The Servicing Fee shall be payable only
at the time of and with respect to those Mortgage Loans for which payment is in
fact made of the entire amount of the Monthly Payments that shall have come due
and only at the time such Monthly Payment shall be made. The right to receive
the Servicing Fee is limited to, and the Servicing Fee is payable solely from,
the interest portion of such Monthly Payments (or the interest portion of any
Principal Prepayment in full) collected by the Servicer, or as otherwise
provided under Section 5.09 or 5.23.
SERVICING OFFICER: Any officer of the Servicer or any Sub-servicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans whose name appears on a written certificate listing servicing
officers furnished to the Trustee by the Servicer on or prior to the Closing
Date, and signed on behalf of the Servicer or any Sub-servicer by its President,
any Vice President or its Treasurer, as such certificate may from time to time
be amended.
SINGLE CERTIFICATE: A Certificate of any Class that evidences the
smallest permissible original denomination for such Class of Certificates as
specified in Section 4.01(d).
SPECIAL HAZARD AMOUNT: Initially, $__________. As of the first
anniversary of the Cut-off Date, the Special Hazard Amount shall be reduced, but
not increased, to the lesser of (i) the initial Special Hazard Amount less the
sum of all amounts allocated to the Subordinated Certificates in respect of
Special Hazard Losses on the Mortgage Loans during
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such year or (ii) the Adjustment Amount for such anniversary. As of each
subsequent anniversary of the Cut-off Date, the Special Hazard Amount on the
immediately preceding anniversary of the Cut-off Date less the sum of all
amounts allocated to the Subordinated Certificates in respect of Special Hazard
Losses on the Mortgage Loans during such year and (ii) the Adjustment Amount for
such anniversary. The "Adjustment Amount" with respect to each anniversary of
the Cut-off Date will be equal to the greatest of (i) ___% multiplied by the
aggregate outstanding principal balance of the Mortgage Loans, (ii) the
aggregate outstanding principal balance of the Mortgage Loans secured by
Mortgaged Properties located in the California postal zip code area in which the
highest percentage of Mortgage Loans by Principal Balance are located and (iii)
twice the outstanding principal balance of the Mortgage Loan having the largest
outstanding principal balance.
SPECIAL HAZARD LOSS: Any Realized Loss or portion thereof resulting
from direct physical loss or damage to the Mortgaged Property, which is not
insured against under the Standard Hazard Policy required to be maintained
hereunder.
STANDARD HAZARD POLICY: Each standard hazard insurance policy or
replacement therefor referred to in Section 5.16.
STARTUP DAY: The meaning specified in Section 2.04(a).
STEP-DOWN DATE: The earliest of the Distribution Date in [MONTH/YEAR]
or any succeeding Distribution Date on which the following conditions are
satisfied as of the last day of the month preceding such Distribution Date:
(a) the aggregate outstanding Principal Balance of Outstanding
Mortgage Loans 60 days or more delinquent (including loans in
foreclosure and with respect to owned real estate) does not exceed 50%
of the aggregate Outstanding Certificate Balance of the Subordinated
Certificates as of such date; and
(b) Realized Losses through the last day of the month preceding
such Distribution Date (including Nonrecoverable Advances) do not
exceed the following thresholds:
(i) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 30% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date;
(ii) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 35% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date;
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(iii) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 40% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date;
(iv) if such Distribution Date occurs between and
including [MONTH/YEAR] and [MONTH/YEAR], 45% of the
Subordinated Percentage of the Mortgage Pool Principal Balance
as of the Cut-off Date; and
(v) if such Distribution Date occurs after
[MONTH/YEAR], 50% of the Subordinated Percentage of the
Mortgage Pool Principal Balance as of the Cut-off Date.
STEP DOWN PERCENTAGE: With respect to any Distribution Date, the
percentage indicated below:
DISTRIBUTION DATE OCCURRING IN STEP DOWN PERCENTAGE
MONTH/DATE through MONTH DATE........................ %
STRIPPED INTEREST RATE: For each Mortgage Loan, the excess, if any, of
the Net Mortgage Rate for such Mortgage Loan over the Remittance Rate.
SUBORDINATED CERTIFICATES: The Class M and Class B Certificates,
referred to collectively.
SUBORDINATED OPTIMAL PRINCIPAL AMOUNT: With respect to any Distribution
Date, the lesser of (a) the aggregate Outstanding Certificate Principal Balance
of the Subordinated Certificates (before giving effect to any distributions of
principal on such Distribution Date) and (b)(1) the sum of: (i) the Subordinated
Percentage of the applicable Non- PO Percentage of the principal portion of all
Monthly Payments, whether or not received, which were due during the related Due
Period on Mortgage Loans which were outstanding during such Due Period; (ii) the
Subordinated Prepayment Percentage of the applicable Non-PO Percentage of all
Principal Prepayments made on any Mortgage Loan during the related Principal
Prepayment Period; (iii) with respect to each Mortgage Loan not described in
(iv) below, the Subordinated Percentage of the applicable Non-PO Percentage of
the principal portion of all Insurance Proceeds, condemnation awards and any
other cash proceeds from a source other than the applicable Mortgagor, to the
extent required to be deposited in the Collection Account pursuant to Section
5.08(iv) and (v), which were received during the related Principal
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Prepayment Period, net of related unreimbursed Servicing Advances and net of any
portion thereof which, as to any such Mortgage Loan, constitutes Late
Collections that have been the subject of an Advance on any prior Distribution
Date; (iv) with respect to each Mortgage Loan which has become a Liquidated
Mortgage Loan during the related Principal Prepayment Period, an amount equal to
the portion (if any) of the Net Liquidation Proceeds with respect to such
liquidated Mortgage Loan (net of any unreimbursed Advances) that was not
included in the Class A-P Amount or the Non-PO Class A Optimal Principal Amount
with respect to such Distribution Date; and (v) with respect to each Mortgage
Loan repurchased during the related Principal Prepayment Period pursuant to
Section 2.02, 3.01, 5.21 or 11.01, an amount equal to the Subordinated
Prepayment Percentage of the applicable Non-PO Percentage of the principal
portion of the Purchase Price (net of amounts with respect to which a
distribution of principal has previously been made to the Subordinated
Certificateholders) minus (2) the Class A-P Shortfall Amount with respect to
such Distribution Date.
SUBORDINATED PERCENTAGE: As of any Distribution Date, the difference
between 100% and the Non-PO Class A Percentage.
SUBORDINATED PREPAYMENT PERCENTAGE: As of any Distribution Date, the
difference between 100% and the Non-PO Class A Prepayment Percentage.
SUB-SERVICER: Any Person with whom the Servicer enters into a
Sub-Servicing Agreement.
SUB-SERVICING AGREEMENT: Any agreement between the Servicer and any
Sub-Servicer, relating to servicing or administration of certain Mortgage Loans
as provided in Section 5.02, in such form as has been approved by the Servicer
and the Depositor.
SUBSTITUTE EXCESS INTEREST: As defined in Section 3.04.
TELERATE SCREEN PAGE 3750: The display designated as page 3750 on the
Dow Jones Telerate Service or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks.
TRUST: The Trust created pursuant to this Agreement.
TRUST FUND: The corpus of the Trust consisting of (i) the Mortgage
Loans, (ii) such assets as shall from time to time be identified as deposited in
the Collection Account and the Certificate Account, (iii) property which secured
a Mortgage Loan and which has been acquired by foreclosure or deed in lieu of
foreclosure, (iv) Standard Hazard Policies and any other insurance policies, and
the proceeds thereof and (v) any proceeds of any of the foregoing.
TRUSTEE: [TRUSTEE], a ___________ and its successors and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a
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party, and any successor trustee at the time serving as successor trustee
hereunder, appointed as herein provided.
U.S. PERSON: A "United States Person" as defined in Section 7701(a)(30)
of the Code.
[End of Article I]
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND
Section 2.01. Conveyance of Mortgage Loans. The Depositor, concurrently
with the execution and delivery hereof, does hereby sell, transfer, assign, set
over and convey to the Trustee without recourse all the right, title and
interest of the Depositor in and to the Mortgage Loans, including all interest
and principal received on or with respect to the Mortgage Loans on or after the
Cut-off Date (other than Monthly Payments due on the Mortgage Loans on or before
the Cut-off Date).
In connection with such assignment, the Depositor does hereby deliver
to, and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan so assigned:
(A) (I) Original Mortgage Note (or a lost note affidavit
(including a copy of the original Mortgage Note)) or (II) original
Consolidation, Extension and Modification Agreement (or a lost note
affidavit (including a copy of the original Consolidation, Extension
and Modification Agreement), in either case endorsed, "Pay to the order
of [TRUSTEE], as trustee, without recourse."
(B) The original Mortgage (including all riders thereto) with
evidence of recording thereon, or a copy thereof certified by the
public recording office in which such mortgage has been recorded or, if
the original Mortgage has not been returned from the applicable public
recording office, a true certified copy, certified by the Seller, of
the original Mortgage together with a certificate of the Seller
certifying that the original Mortgage has been delivered for recording
in the appropriate public recording office of the jurisdiction in which
the Mortgaged Property is located.
(C) The original Assignment of Mortgage to "[TRUSTEE], as
trustee," which assignment shall be in form and substance acceptable
for recording, or a copy certified by the Seller as a true and correct
copy of the original Assignment which has been sent for recordation.
Subject to the foregoing, such assignments may, if permitted by law, be
by blanket assignments for Mortgage Loans covering Mortgaged Properties
situated within
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the same county. If the Assignment of Mortgage is in blanket form, a
copy of the Assignment of Mortgage shall be included in the related
individual Mortgage File.
(D) The original policy of title insurance, including riders
and endorsements thereto, or if the policy has not yet been issued, a
written commitment or interim binder or preliminary report of title
issued by the title insurance or escrow company.
(E) Originals of all recorded intervening Assignments of
Mortgage, or copies thereof, certified by the public recording office
in which such Assignments or Mortgage have been recorded showing a
complete chain of title from the originator to the Depositor, with
evidence of recording, thereon, or a copy thereof certified by the
public recording office in which such Assignment of Mortgage has been
recorded or, if the original Assignment of Mortgage has not been
returned from the applicable public recording office, a true certified
copy, certified by the Seller of the original Assignment of Mortgage
together with a certificate of the Seller certifying that the original
Assignment of Mortgage has been delivered for recording in the
appropriate public recording office of the jurisdiction in which the
Mortgaged Property is located.
(F) Originals, or copies thereof certified by the public
recording office in which such documents have been recorded, of each
assumption, extension, modification, written assurance or substitution
agreements, if applicable, or if the original of such document has not
been returned from the applicable public recording office, a true
certified copy, certified by the Seller, of such original document
together with certificate of Seller certifying the original of such
document has been delivered for recording in the appropriate recording
office of the jurisdiction in which the Mortgaged Property is located.
(G) If the Mortgaged Note or Mortgage or any other material
document or instrument relating to the Mortgaged Loan has been signed
by a person on behalf of the Mortgagor, the original power of attorney
or other instrument that authorized and empowered such person to sign
bearing evidence that such instrument has been recorded, if so required
in the appropriate jurisdiction where the Mortgaged Property is located
(or, in lieu thereof, a duplicate or conformed copy of such instrument,
together with a certificate of receipt from the recording office,
certifying that such copy represents a true and complete copy of the
original and that such original has been or is currently submitted to
be recorded in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located), or if the
original power of attorney or other such instrument has been delivered
for recording in the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located.
If in connection with any Mortgage Loan the Depositor cannot deliver
the Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, with evidence of recording thereon
concurrently with the execution and delivery of this
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Agreement solely because of a delay caused by the public recording office where
such Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, has been delivered for recordation, the
Depositor shall deliver or cause to be delivered to the Trustee written notice
stating that such Mortgage, Assignments of Mortgage or assumption, consolidation
or modification, as the case may be, has been delivered to the appropriate
public recording office for recordation. Thereafter, the Depositor shall deliver
or cause to be delivered to the Trustee such Mortgage, Assignments of Mortgage
or assumption, consolidation or modification, as the case may be, with evidence
of recording indicated thereon upon receipt thereof from the public recording
office.
The Servicer shall cause to be recorded in the appropriate public
recording office for real property records each Assignment of Mortgage referred
to in this Section 2.01 as soon as practicable. While each Assignment of
Mortgage to be recorded is being recorded, the Servicer shall deliver to the
Trustee a photocopy of such document. If any such Assignment of Mortgage is
returned unrecorded to the Servicer because of any defect therein, the Servicer
shall cause such defect to be cured and such document to be recorded in
accordance with this paragraph. The Depositor shall deliver or cause to be
delivered each original recorded Assignment of Mortgage and intermediate
assignment to the Trustee within 270 days of the Closing Date or shall deliver
to the Trustee on or before such date an Officer's Certificate stating that such
document has been delivered to the appropriate public recording office for
recordation, but has not been returned solely because of a delay caused by such
recording office. In any event, the Depositor shall use all reasonable efforts
to cause each such document with evidence of recording thereon to be delivered
to the Trustee within 300 days of the Closing Date.
The ownership of each Mortgage Note, the Mortgage and the contents of
the related Mortgage File is vested in the Trustee. Neither the Depositor nor
the Servicer shall take any action inconsistent with such ownership and shall
not claim any ownership interest therein. The Depositor and the Servicer shall
respond to any third party inquiries with respect to ownership of the Mortgage
Loans by stating that such ownership is held by the Trustee on behalf of the
Certificateholders. Mortgage documents relating to the Mortgage Loans not
delivered to the Trustee are and shall be held in trust by the Servicer or any
Sub-Servicer, for the benefit of the Trustee as the owner thereof, and the
Servicer's or such Sub-Servicer's possession of the contents of each Mortgage
File so retained is for the sole purpose of servicing the related Mortgage Loan,
and such retention and possession by the Servicer or such Sub-Servicer is in a
custodial capacity only. The Depositor agrees to take no action inconsistent
with the Trustee's ownership of the Mortgage Loans, to promptly indicate to all
inquiring parties that the Mortgage Loans have been sold and to claim no
ownership interest in the Mortgage Loans. Each Mortgage File and the mortgage
documents relating to the Mortgage Loans contain proprietary business
information of the Servicer and its customers. The Trustee and the Depositor
agree that they will not use such information for business purposes without the
express written consent of the Servicer and that all such information shall be
kept strictly confidential.
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It is the intention of this Agreement that the conveyance of the
Depositor's right, title and interest in and to the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan. If a conveyance
of Mortgage Loans from the Seller to the Depositor is characterized as a pledge
and not a sale, then the Depositor shall be deemed to have transferred to the
Trustee all of the Depositor's right, title and interest in, to and under the
obligations of the Seller deemed to be secured by said pledge; and it is the
intention of this Agreement that the Depositor shall also be deemed to have
granted to the Trustee a first priority security interest in all of the
Depositor's right, title, and interest in, to and under the obligations of the
Seller to the Depositor deemed to be secured by said pledge and that the Trustee
shall be deemed to be an independent custodian for purposes of perfection of the
security interest granted to the Depositor. If the conveyance of the Mortgage
Loans from the Depositor to the Trustee is characterized as a pledge, it is the
intention of this Agreement that this Agreement shall constitute a security
agreement under applicable law, and that the Depositor shall be deemed to have
granted to the Trustee a first priority security interest in all of the
Depositor's right, title and interest in, to and under the Mortgage Loans, all
payments of principal of or interest on such Mortgage Loans, all other rights
relating to and payments made in respect of the Trust Fund, and all proceeds of
any thereof. If the trust created by this Agreement terminates prior to the
satisfaction of the claims of any Person in any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of such Person.
In addition to the conveyance made in the first paragraph of this
Section 2.01, the Depositor does hereby convey, assign and set over to the
Trustee all of its right, title and interest in that portion of the Trust Fund
described in items (ii), (iii), (iv) and (v) of the definition thereof and
further assigns to the Trustee for the benefit of the Certificateholders those
representations and warranties of the Seller contained in the Sale Agreement and
described in Section 3.01 hereof and the benefit of the repurchase obligations
of the Seller described in Sections 2.02 and 3.01 hereof and the obligations of
the Seller contained in the Sale Agreement to take, at the request of the
Depositor or the Trustee, all action on its part which is reasonably necessary
to ensure the enforceability of a Mortgage Loan.
Section 2.02. Acceptance by Trustee. Except as set forth in the
Exception Report delivered contemporaneously herewith (the "Exception Report"),
the Trustee acknowledges receipt of the Mortgage Note for each Mortgage Loan and
delivery of a Mortgage File (but does not acknowledge receipt of all documents
required to be included in such Mortgage File) with respect to each Mortgage
Loan and declares that it holds and will hold such documents and any other
documents constituting a part of the Mortgage Files delivered to it in trust for
the use and benefit of all present and future Certificateholders. The Depositor
will cause the Seller to repurchase any Mortgage Loans to which an exception was
taken in the Exception Report unless such exception is cured to the satisfaction
of the Trustee within 45 Business Days of the Closing Date.
The Trustee agrees, for the benefit of Certificateholders, to review
each Mortgage File delivered to it within 270 days after the Closing Date to
ascertain that all documents
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required by Section 2.01 have been executed and received, and that such
documents relate to the Mortgage Loans identified in Exhibit A that have been
conveyed to it. If the Trustee finds any document or documents constituting a
part of a Mortgage File to be missing or defective (that is, mutilated, damaged,
defaced or unexecuted) in any material respect, the Trustee shall promptly (and
in any event within no more than five Business Days) after such finding so
notify the Servicer, the Seller and the Depositor. In addition, the Trustee
shall also notify the Servicer, the Seller and the Depositor, if (a) in
examining the Mortgage Files, the documentation shows on its face (i) any
adverse claim, lien or encumbrance, (ii) that any Mortgage Note was overdue or
had been dishonored, (iii) any evidence on the face of any Mortgage Note or
Mortgage of any security interest or other right or interest therein, or (iv)
any defense against or claim to the Mortgage Note by any party or (b) the
original Mortgage with evidence of recording thereon with respect to a Mortgage
Loan is not received within 270 days of the Closing Date. The Trustee shall
request that the Seller correct or cure such omission, defect or other
irregularity, or substitute a Mortgage Loan pursuant to the provisions of
Section 3.03, within 60 days from the date the Seller was notified of such
omission or defect and, if the Seller does not correct or cure such omission or
defect within such period, that the Seller purchase such Mortgage Loan from the
Trustee within 90 days from the date the Trustee notified the Seller of such
omission, defect or other irregularity at the Purchase Price of such Mortgage
Loan. The Purchase Price for any Mortgage Loan purchased pursuant to this
Section 2.02 shall be paid to the Servicer and deposited by the Servicer in the
Collection Account promptly upon receipt, and, upon receipt by the Trustee of
written notification of such deposit signed by a Servicing Officer, the Trustee
shall promptly release to the Seller the related Mortgage File and the Trustee
shall execute and deliver such instruments of transfer or assignment, without
recourse, as shall be necessary to vest in the Seller or its designee, as the
case may be, any Mortgage Loan released pursuant hereto, and the Trustee shall
have no further responsibility with regard to such Mortgage Loan. It is
understood and agreed that the obligation of the Seller to purchase, cure or
substitute any Mortgage Loan as to which a material defect in or omission of a
constituent document exists shall constitute the sole remedy respecting such
defect or omission available to the Trustee on behalf of Certificateholders. The
Trustee shall be under no duty or obligation to inspect, review and examine such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable or appropriate to the represented purpose, or that they
have actually been recorded, or that they are other than what they purport to be
on their face. The Trustee shall keep confidential the name of each Mortgagor
and shall not solicit any such Mortgagor for the purpose of refinancing the
related Mortgage Loan.
Within 280 days of the Closing Date, the Trustee shall deliver to the
Depositor and the Servicer the Trustee's Certification, substantially in the
form of Exhibit G attached hereto, setting forth the status of the Mortgage
Files as of such date.
Section 2.03. Trust Fund; Authentication of Certificates. The Trustee
acknowledges and accepts the assignment to it of the Trust Fund created pursuant
to this Agreement in trust for the use and benefit of all present and future
Certificateholders. The Trustee acknowledges the assignment to it for the
benefit of the Trust Fund of the Mortgage
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Loans and has caused to be authenticated and delivered to or upon the order of
the Depositor, in exchange for the Mortgage Loans, Certificates duly
authenticated by the Trustee or, if an Authenticating Agent has been appointed
pursuant to Section 4.06, the Authenticating Agent in authorized denominations
evidencing ownership of the entire Trust Fund.
Section 2.04. REMIC Election.
(a) The Depositor hereby instructs and authorizes the Trustee to make
an appropriate election to treat the Trust Fund as a REMIC. This Agreement shall
be construed so as to carry out the intention of the parties that the Trust Fund
be treated as a REMIC at all times prior to the date on which the Trust Fund is
terminated. The Closing Date is hereby designated as the "startup day" of the
REMIC within the meaning of Section 860G(a)(9) of the Code. The "regular
interests" (within the meaning of Section 860G(a)(1) of the Code) in the REMIC
shall consist of the Class A Certificates (exclusive of the Class A-R
Certificates), the Class M Certificates and the Class B Certificates, and the
"residual interest" (within the meaning of Section 860G(a)(2) of the Code) in
the REMIC shall consist of the Residual Interest, and all such interests shall
be designated as such on the Startup Day.
(b) The principal amount of the regular interests in the REMIC is equal
to the sum of the Original Class A Principal Balance, the Original Class M
Principal Balance and the Original Class B Principal Balance.
(c) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the
Treasury regulations, the "latest possible maturity date" by which the
Outstanding Certificate Principal Balance of each Class of Certificates
representing a regular interest in the REMIC would be reduced to zero is [DATE],
which is the Distribution Date immediately following the latest scheduled
maturity of any Mortgage Loan.
(d) The "tax matters person" with respect to the Trust Fund for
purposes of the REMIC provisions shall be the beneficial owner of the Class A-R
Certificate; provided, however, that the Holder of a Class A-R Certificate, by
its acceptance thereof, irrevocably appoints the Servicer as its agent and
attorney-in-fact to act as "tax matters person" with respect to the Trust Fund
for purposes of the REMIC provisions.
(e) It is intended that the Trust Fund shall constitute, and that the
affairs of the Trust Fund shall be conducted so as to qualify the Trust Fund as,
a "real estate mortgage investment conduit" as defined in and in accordance with
the REMIC Provisions. In furtherance of such intention, the Servicer covenants
and agrees that it shall act as agent (and the Servicer is hereby appointed to
act as agent) on behalf of the Trust Fund and the respective Holders of the
Class A-R Certificates and that in such capacity it shall:
(i) prepare and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income
Tax Return (Form
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1066) and prepare and file or cause to be prepared and filed with the
Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect
to the Trust Fund, using the calendar year as the taxable year and the
accrual method of accounting, containing such information and at the
times and in the manner as may be required by the Code or state or
local tax laws, regulations, or rules, and shall furnish or cause to
be furnished to Certificateholders the schedules, statements or
information at such times and in such manner as may be required
thereby;
(ii) within thirty days of the Closing Date, shall furnish or
cause to be furnished to the Internal Revenue Service, on Form 8811 or
as otherwise may be required by the Code, the name, title, address,
and telephone number of the person that the holders of the
Certificates may contact for tax information relating thereto (and the
Servicer shall act as the representative of the Trust Fund for this
purpose), together with such additional information as may be required
by such Form, and shall update such information at the time or times
in the manner required by the Code;
(iii) make or cause to be made an election, on behalf of the
Trust Fund, to be treated as a REMIC, and make the appropriate
designations, if applicable, in accordance with this Section 2.04 on
the federal tax return of the Trust Fund for its first taxable year
(and, if necessary, under applicable state law);
(iv) prepare and forward, or cause to be prepared and forwarded,
to the Certificateholders and to the Internal Revenue Service and, if
necessary, state tax authorities, all information returns or reports,
or furnish or cause to be furnished by telephone, mail, publication or
other appropriate method such information, as and when required to be
provided to them in accordance with the REMIC Provisions, including
without limitation, the calculation of any original issue discount;
(v) provide information necessary for the computation of tax
imposed on the transfer of the Class A-R Certificate to a Disqualified
Organization, or an agent (including a broker, nominee or other
middleman) of a Disqualified Organization, or a pass-through entity in
which a Disqualified Organization is the record holder of an interest
(the reasonable cost of computing and furnishing such information may
be charged to the Person liable for such tax);
(vi) ensure that federal, state or local income tax or
information returns shall be signed by the Trustee or such other
person as may be required to sign such returns by the Code or state or
local laws, regulations or rules; and
(vii) maintain such records relating to the Trust Fund, as may be
required by the Code and, as may be necessary to prepare the foregoing
returns, schedules, statements or information.
[End of Article II]
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS
Section 3.01. Representations and Warranties of the Depositor with
respect to the Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee for the
benefit of the Certificateholders that on the Closing Date it has entered into
the Sale Agreement with CMMC as Seller, that the Seller has made the following
representations and warranties with respect to each Mortgage Loan in such Sale
Agreement as of the Closing Date, which representations and warranties run to
and are for the benefit of the Depositor and the Trustee for the benefit of the
Certificateholders, and as to which the Depositor has assigned to the Trustee
for the benefit of the Certificateholders, pursuant to Section 2.01 hereof, the
right to cause the Seller to repurchase a Mortgage Loan as to which there has
occurred an uncured breach of representations and warranties in accordance with
the provisions of the Sale Agreement.
(a) The information set forth in the Mortgage Loan Schedule is
complete, true and correct in all material respects;
(b) The Mortgage creates a first lien or a first priority ownership
interest in an estate in fee simple in real property securing the related
Mortgage Note;
(c) All payments due prior to the Cut-off Date for such Mortgage Loan
have been made as of the Closing Date, the Mortgage Loan is not delinquent in
payment more than 30 days and has not been dishonored; to the best of the
Seller's knowledge, there are no material defaults under the terms of the
Mortgage Loan; the Seller has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the owner of the
Mortgaged Property subject to the Mortgage, directly or indirectly, for the
payment of any amount required by the Mortgage Loan; there has been no more than
one delinquency in excess of 30 days during the preceding twelve-month period;
(d) To the best of the Seller's knowledge, all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have been paid,
or escrow funds have been established in an amount sufficient to pay for every
such escrowed item which remains unpaid and which has been assessed but is not
yet due and payable;
(e) The terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments. No Mortgagor has been released, in whole or in part, from the terms
thereof except in connection
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with an assumption agreement and which assumption agreement is part of the
Mortgage File and the terms of which are reflected in the Mortgage Loan
Schedule;
(f) The Mortgage Note and the Mortgage are not subject to any right of
rescission, set-off, counterclaim or defense, including, without limitation, the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or Mortgage, or the exercise of any right thereunder, render the Mortgage
Note or Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto, and the Mortgagor was not a debtor in any state
or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was
originated;
(g) All buildings or other customarily insured improvements upon the
Mortgaged Property are insured by an insurer acceptable under the FNMA Guides
against loss by fire, hazards of extended coverage and such other hazards as are
provided for in the FNMA Guides or by FHLMC. All such standard hazard policies
are in full force and effect and on the date of origination contained a standard
mortgagee clause naming the Seller and its successors in interest and assigns as
loss payee and such clause is still in effect and all premiums due thereon have
been paid. If required by the Flood Disaster Protection Act of 1973, as amended,
the Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
which policy conforms to FNMA and FHLMC requirements. The Mortgage obligates the
Mortgagor thereunder to maintain all such insurance at the Mortgagor's cost and
expense, and on the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to maintain such insurance at the Mortgagor's cost and expense and to
seek reimbursement therefor from the Mortgagor;
(h) Any and all requirements of any federal, state or local law
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws applicable to the Mortgage Loan have been complied with in all material
respects;
(i) The Mortgage has not been satisfied, canceled or subordinated, in
whole or in part, or rescinded, and the Mortgaged Property has not been released
from the lien of the Mortgage, in whole or in part nor has any instrument been
executed that would effect any such release, cancellation, subordination or
rescission;
(j) The Mortgage is a valid, subsisting, enforceable and perfected
first lien on the Mortgaged Property, including, all buildings on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating and
air conditioning systems affixed to such buildings, and all additions,
alterations and replacements made at any time with respect to the foregoing
securing the Mortgage Note's original principal balance. The Mortgage and the
Mortgage Note do not contain any evidence of any security interest or other
interest or right thereto. Such lien is free and clear of all adverse claims,
liens and encumbrances having priority
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over the first lien of the Mortgage subject only to (1) the lien of
non-delinquent current real property taxes and assessments not yet due and
payable, (2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording which are
acceptable to mortgage lending institutions generally and either (A) which are
referred to or otherwise considered in the appraisal made for the originator of
the Mortgage Loan, or (B) which do not adversely affect the appraised value of
the Mortgaged Property as set forth in such appraisal, and (3) other matters to
which like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the Mortgage or the
use, enjoyment, value or marketability of the related Mortgaged Property. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting, enforceable and perfected first lien and first priority security
interest on the property described therein, and the Depositor has the full right
to sell and assign the same to the Trustee for the benefit of the
Certificateholders;
(k) The Mortgage Note and the related Mortgage are original and genuine
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in all respects in accordance with its terms subject to bankruptcy,
insolvency and other laws of general application affecting the rights of
creditors and the Depositor has taken all action necessary to transfer such
rights of enforceability to the Trustee for the benefit of the
Certificateholders. All parties to the Mortgage Note and the Mortgage had the
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage. The Mortgage Note and the Mortgage have been
duly and property executed by such parties. The proceeds of the Mortgage Loan
have been fully disbursed and there is no requirement for future advances
thereunder, and any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds therefor have
been complied with;
(1) The Depositor is the sole owner of record and holder of the
Mortgage Loan and the indebtedness evidenced by the Mortgage Note, except for
the Assignments of Mortgage which have been sent for recording, and upon
recordation the Depositor will be the owner of record of the Mortgage and the
indebtedness evidenced by the Mortgage Note, and upon the sale of the Mortgage
Loan to the Trust for the benefit of the Certificateholders, the Depositor will
retain the Mortgage File or any part thereof with respect thereto not delivered
to the Trust for the benefit of the Certificateholders or its designee in trust
only for the purpose of servicing and supervising the servicing of the Mortgage
Loan. Immediately prior to the transfer and assignment to the Trust for the
benefit of the Certificateholders, the Mortgage Loan, including the Mortgage
Note and the Mortgage, were not subject to an assignment or pledge, and the
Depositor had good and marketable title to and was the sole owner thereof and
had full right to transfer and sell the Mortgage Loan to the Trustee for the
benefit of the Certificateholders free and clear of any encumbrance, equity,
lien, pledge, charge, claim or security interest and has the full right and
authority subject to no interest or participation of, or agreement with, any
other party, to sell and assign the Mortgage Loan pursuant to this Agreement and
following the sale of the Mortgagee Loan, the Trustee for the benefit of the
Certificateholders will own such Mortgage
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Loan free and clear of any encumbrance, equity, participation interest, lien,
pledge, charge, claim or security interest;
(m) The Mortgage Loan is covered by an ALTA lender's title insurance
policy or other generally acceptable form of policy or insurance acceptable to
FNMA or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC and
qualified to do business in the jurisdiction where the Mortgaged Property is
located, insuring (subject to the exceptions contained in (j) (1), (2) and (3)
above) the Seller, its successors and assigns, as to the first priority lien of
the Mortgage in the original principal amount of the Mortgage Loan. Such
lender's title insurance policy insures ingress and egress by or upon the
Mortgaged Property or any interest therein. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the carrier
of the required mortgage title insurance. The Seller, its successors and
assigns, are the sole insureds of such lender's title insurance policy, such
title insurance policy has been duly and validly endorsed to the Trustee for the
benefit of the Certificateholders or the assignment to the Trustee for the
benefit of the Certificateholders of the Seller's interest therein does not
require the consent of or notification to the insurer and such lender's title
insurance policy is in full force and effect and will be in full force and
effect upon the consummation of the transactions contemplated by this Agreement.
No claims have been made under such lender's title insurance policy, and no
prior holder of the related Mortgage, including the Seller, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy;
(n) There is no default, breach, violation or event of acceleration
existent, under the Mortgage or the related Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event permitting
acceleration; and neither the Seller nor any prior mortgagee has waived any
default, breach, violation or event permitting acceleration;
(o) There are no mechanics', or similar liens or claims which have been
filed for work, labor or material (and no rights are outstanding that under law
could give rise to such liens) affecting the related Mortgaged Property which
are or may be liens prior to or equal to the lien of the related Mortgage;
(p) All improvements subject to the Mortgage which were considered in
determining the Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of the Mortgaged Property (and wholly
within the project with respect to a condominium unit) and no improvements on
adjoining properties encroach upon the Mortgaged Property except those which are
insured against by the title insurance policy referred to in clause (m) above
and all improvements on the property comply with all applicable zoning and
subdivision laws and ordinances; the Mortgaged Property is lawfully occupied
under applicable law;
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(q) The Mortgage Loan complies in all material respects with all the
terms, conditions and requirements of the Seller's underwriting standards in
effect at the time of origination of such Mortgage Loan. The Mortgage Notes and
Mortgages (exclusive of any riders) are on forms generally acceptable to FNMA or
FHLMC. Monthly Payments under the Mortgage Note are due and payable on the first
day of each month. The Mortgage contains the usual and enforceable provisions of
the originator at the time of origination for the acceleration of the payment of
the unpaid principal amount of the Mortgage Loan if the related Mortgaged
Property is sold without the prior consent of the mortgagee thereunder;
(r) To the best of the Seller's knowledge, the Mortgaged Property is
not subject to any material damage by waste, fire, earthquake, windstorm, flood
or other casualty. To the best of the Seller's knowledge, at origination of the
Mortgage Loan there was, and there currently is, no proceeding pending for the
total or partial condemnation of the Mortgaged Property;
(s) The related Mortgage contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (l) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (2) otherwise by judicial foreclosure. There is
no homestead or other exemption available to the Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee's sale or the right
to foreclose the Mortgage;
(t) If the Mortgage constitutes a deed of trust, a trustee, authorized
and duly qualified if required under applicable law to act as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses, except as may be required by local law, are or will become
payable by, the Purchaser to the trustee under the deed of trust, except in
connection with a trustee's sale or attempted sale after default by the
Mortgagor;
(u) The Mortgage File contains an appraisal of the related Mortgaged
Property signed prior to the final approval of the mortgage loan application by
an appraiser approved by the Seller who had no interest, direct or indirect, in
the Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan. The appraisal is in a form acceptable to FNMA or FHLMC;
(v) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (A) in substantial compliance
with any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located, and (B) (1) organized under the laws
of such state, or (2) qualified to do business in such state, or (3) federal
savings and loan associations or national banks or a Federal Home Loan Bank or
savings bank having principal offices in such state, or (4) not doing business
in such state;
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(w) The related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security interest of any applicable agreement or
chattel mortgage referred to above and such collateral does not serve as
security for any other obligation;
(x) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of such mortgage loans;
(y) The Mortgage Loan does not contain "graduated payment" features;
(z) The Mortgagor is not in bankruptcy and, to the best of the Seller's
knowledge, the Mortgagor is not insolvent;
(aa) The Mortgage Loans are fixed rate mortgage loans. The Mortgage
Loans have an original term to maturity of not more than thirty (30) years, with
interest payable in arrears on the first day of each month. Each Mortgage Note
is payable in equal monthly installments of principal and interest which is
sufficient to amortize the Mortgage Loan fully by the stated maturity date. No
Mortgage Loan contains terms or provisions which would result in negative
amortization;
(bb) Each Mortgage Note, each Mortgage, each Assignment of Mortgage and
any other documents required pursuant to this Agreement to be delivered to the
Trustee on behalf of the Certificateholders or its designee, or its assignee for
each Mortgage Loan, have been, on or before the Closing Date, delivered to the
Trustee on behalf of the Certificateholders or its designee, or its assignee;
(cc) All escrow payments have been collected in full compliance with
state and federal law and the provisions of the related Mortgage Note and
Mortgage. As to any Mortgage Loan that is the subject of an escrow, escrow of
funds is not prohibited by applicable law and has been established in an amount
sufficient to pay for every escrowed item that remains unpaid and has been
assessed but is not yet due and payable. No escrow deposits or other charges or
payments due under the Mortgage Note have been capitalized under any Mortgage or
the related Mortgage Note. Any interest required to be paid pursuant to state,
federal and local law has been properly paid and credited;
(dd) [Reserved];
(ee) In the event the Mortgage Loan has a Loan-to-Value Ratio greater
than 80%, the excess of the principal balance of the Mortgage Loan over 75% of
the Appraised Value, with respect to a refinanced Mortgage Loan, or the lesser
of the Appraised Value or the purchase price of the Mortgaged Property, with
respect to a purchase money Mortgage Loan, is and will be insured as to payment
defaults by a Primary Insurance Policy issued by a Qualified Insurer. All
provisions of such Primary Insurance Policy have been and are being complied
with such policy
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is in full force and effect, and all premiums due thereunder have been paid. No
action, inaction, or event has occurred and no state of facts exists that has,
or will result in the exclusion from, denial of, or defense to coverage. Any
Mortgage Loan subject to a Primary Insurance Policy obligates the Mortgagor
thereunder to maintain the Primary Insurance Policy and to pay all premiums and
charges in connection therewith. The Mortgage Rate for the Mortgage Loan as set
forth on the Mortgage Loan Schedule is net of any such insurance premium;
(ff) The assignment of Mortgage is in recordable form and is acceptable
for recording under the laws of the jurisdiction in which the Mortgaged Property
is located;
(gg) As to Mortgage Loans that are not secured by an interest in a
leasehold estate, the Mortgaged Property is located in the state identified in
the Mortgage Loan Schedule and consists of a single parcel of real property with
a detached single family residence erected thereon, or a two-to four-family
dwelling, or an individual condominium unit in a condominium project, or an
individual unit in an attached planned unit development or a detached planned
unit development, provided, however, that no residence or dwelling is a single
parcel of real property with a mobile home thereon. As of the date of
origination, no portion of the Mortgaged Property was used for commercial
purposes, and since the date of origination, to the best of the Seller's
knowledge, no portion of the Mortgaged Property is used for commercial purposes;
(hh) If the Mortgaged Property is a condominium unit or a planned unit
development (other than a de minimis planned unit development) such condominium
or planned unit development project meets the Seller's eligibility requirements,
as set forth in the Seller's underwriting guidelines;
(ii) To the best of the Seller's knowledge, there is no pending action
or proceeding directly involving the Mortgaged Property in which compliance with
any environmental law, rule or regulation is an issue;
(jj) The Mortgagor has not notified the Seller, and the Depositor has
no knowledge of any relief requested or allowed to the Mortgagor under the
Soldiers' and Sailors' Civil Relief Act of 1940;
(kk) No Mortgage Loan was made in connection with the construction or
rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange
of a Mortgaged Property;
(ll) No action has been taken or failed to be taken by Depositor, on or
prior to the Closing Date which has resulted or will result in an exclusion
from, denial of, or defense to coverage under any Primary Insurance Policy
(including, without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions,
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representations, errors, omissions, negligence, or fraud of the Depositor, or
for any other reason under such coverage;
(mm) The Mortgage Loan was originated by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of
the Act, a savings and loan association, a savings bank, a commercial bank,
credit union, insurance company or similar institution which is supervised and
examined by a federal or state authority;
(nn) Principal payments on the Mortgage Loan commenced no more than
sixty (60) days after funds were disbursed in connection with the Mortgage Loan.
The Mortgage Note is payable on the first day of each month in equal monthly
installments of principal and interest, with interest calculated and payable in
arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity
date, over an original term of not more than thirty years from commencement of
amortization; and
(oo) The Mortgage Loan is a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code (without regard to Treasury Regulations ss.
1.860G-2(f) or any similar rule that provides that a defective obligation is a
qualified mortgage for a temporary period);
Upon discovery by any of the Depositor, the Servicer or the Trustee of
a breach of any of the foregoing representations and warranties which materially
and adversely affects the value of a Mortgage Loan or the interest of the
Certificateholders (or which materially and adversely affects the interests of
the Certificateholders in the related Mortgage Loan in the case of a
representation and warranty relating to a particular Mortgage Loan), the party
discovering such breach shall give prompt written notice to the other parties
and to the Seller, which notice shall specify the date of discovery. Pursuant to
the Sale Agreement, the Seller shall within 90 days from the earlier of (i) the
date specified in the notice as the date of discovery of such breach or (ii) the
date the Seller otherwise discovers such breach, cure such breach, substitute a
Mortgage Loan pursuant to the provisions of Section 3.03 or, if the breach
relates to a particular Mortgage Loan, purchase such Mortgage Loan from the
Trustee at the Purchase Price. The Purchase Price for the purchased Mortgage
Loan shall be paid to the Servicer and shall be deposited by the Servicer in the
Collection Account promptly upon receipt, and, upon receipt by the Trustee of
written notification of such deposit signed by a Servicing Officer, the Trustee
shall promptly release to the Seller the related Mortgage File, and the Trustee
shall execute and deliver such instruments of transfer or assignment as may be
provided to it by the Servicer, without recourse, as shall be necessary to vest
in the Seller or its designee, as the case may be, any Mortgage Loan released
pursuant hereto, and the Trustee shall have no further responsibility with
regard to such Mortgage Loan. It is understood and agreed that the obligation of
the Seller to cure, substitute or purchase any Mortgage Loan as to which such a
breach has occurred shall constitute the sole remedy respecting such breach
available to Certificateholders or the Trustee on behalf of Certificateholders.
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Section 3.02. Representations and Warranties of the Servicer. The
Servicer represents and warrants to, and covenants with, the Trustee for the
benefit of the Certificateholders that as of the Closing Date:
(a) The Servicer is a corporation duly chartered and validly existing
in good standing under the laws of the State of New Jersey, and the Servicer is
duly qualified or registered as a foreign corporation in good standing in each
jurisdiction in which the ownership or lease or its properties or the conduct of
its business requires such qualification;
(b) The execution and delivery of this Agreement by the Servicer and
its performance and compliance with the terms of this Agreement will not violate
the Servicer's corporate charter or by-laws or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or result in the breach of, any material contract, agreement or other instrument
to which the Servicer is a party or which may be applicable to the Servicer or
any of its assets;
(c) This Agreement, assuming due authorization, execution and delivery
by the Trustee and the Depositor, constitutes a valid, legal and binding
obligation of the Servicer, enforceable against it in accordance with the terms
hereof subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(d) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of the Servicer or its properties or might have consequences that would affect
its performance hereunder; and
(e) No litigation is pending or, to the best of the Servicer's
knowledge, threatened against the Servicer which would prohibit its entering
into this Agreement or performing its obligations under this Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive the issuance and delivery of the
Certificates and shall be continuing as long as any Certificate shall be
outstanding or this Agreement has been terminated.
Section 3.03. Option to Substitute. If the Seller is required to
repurchase any Mortgage Loan pursuant to Section 2.02 or 3.01, the Seller may,
at its option, within two years from the Closing Date, remove such defective
Mortgage Loan from the terms of this Agreement and substitute another mortgage
loan for such defective Mortgage Loan, in lieu of repurchasing such defective
Mortgage Loan. Any substitute Mortgage Loan shall (a) have a Principal Balance
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at the time of substitution not in excess of the Principal Balance of the
removed Mortgage Loan (the amount of any difference, plus one month's interest
thereon at the Mortgage Rate borne by the removed Mortgage Loan, being paid by
the Seller and deemed to be a Principal Prepayment to be deposited by the
Servicer in the Collection Account), (b) have a Mortgage Rate not less than, and
not more than one percentage point greater than, the Mortgage Rate of the
removed Mortgage Loan (provided, however, that if the Mortgage Rate on the
substitute Mortgage Loan exceeds the Mortgage Rate on the removed Mortgage Loan,
the amount of that excess interest (the "Substitute Excess Interest") shall be
payable to the Residual Interest), (c) have a remaining term to stated maturity
not later than, and not more than one year less than, the remaining term to
stated maturity of the removed Mortgage Loan, (d) be, in the reasonable
determination of the Servicer, of the same type, quality and character
(including location of the Mortgaged Property) as the removed Mortgage Loan as
if the breach had not occurred, (e) have a Loan-to-Value Ratio at origination no
greater than that of the removed Mortgage Loan and (f) be, in the reasonable
determination of the Servicer, in material compliance with the representations
and warranties contained in the Sale Agreement and described in Section 3.01, as
of the date of substitution.
The Servicer shall amend the Mortgage Loan Schedule to reflect the
withdrawal of the removed Mortgage Loan from this Agreement and the substitution
of such substitute Mortgage Loan therefor and shall send a copy of such amended
Mortgage Loan Schedule to the Trustee. The Sale Agreement provides that upon
such amendment the Seller shall be deemed to have made as to such substitute
Mortgage Loan the representations and warranties set forth in Section 3.01 as of
the date of such substitution, which shall be continuing as long as any
Certificate shall be outstanding or this Agreement has not been terminated, and
the remedies for breach of any such representation or warranty shall be as set
forth in Section 3.01. Upon such amendment, the Trustee shall review the
Mortgage File delivered to it relating to the substitute Mortgage Loan, within
the time and in the manner and with the remedies specified in Section 2.02,
except that for purposes of this Section 3.03 (other than the two-year period
specified in the first sentence of this Section), such time shall be measured
from the date of the applicable substitution. In the event of such a
substitution, accrued interest on the substitute Mortgage Loan for the month in
which the substitution occurs and any Principal Prepayments made thereon during
such month shall be the property of the Trust Fund, and accrued interest for
such month on the Mortgage Loan for which the substitution is made and any
Principal Prepayments made thereon during such month shall be the property of
the Seller. The principal payment on a substitute Mortgage Loan due on the Due
Date in the month of substitution shall be the property of the Seller, and the
principal payment on the Mortgage Loan for which the substitution is made due on
such date shall be the property of the Trust Fund.
[End of Article III]
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ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates. (a) The Class A, Class M and Class B
Certificates shall be substantially in the forms thereof included within
Exhibits C, D, E and F and shall, on original issue, be executed by the
Depositor and authenticated by the Trustee (or, if an Authenticating Agent has
been appointed pursuant to Section 4.06, the Authenticating Agent) upon receipt
by the Trustee of the documents specified in Section 2.01, delivered to or upon
the order of the Depositor.
(b) The Depository, the Depositor, the Paying Agent and the Trustee
have entered into a Depository Agreement dated as of [DATE] (the "Depository
Agreement"). Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of the Book-Entry Certificates
may not be transferred as provided in Section 4.02 except to a successor to the
Depository; (ii) ownership and transfers of registration of the Book-Entry
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iii) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (iv)
the Trustee shall deal with the Depository, Depository Participants and Indirect
Participants as representatives of the Certificate Owners of the Book-Entry
Certificates for purposes of exercising the rights of such Holders under this
Agreement, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (v) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to Indirect Participants and persons shown on the books of such Indirect
Participants as direct or indirect Certificate Owners. The Depository Agreement
provides that the Depository shall maintain book-entry records with respect to
the Certificate Owners and with respect to ownership and transfers of such
Certificates.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book- Entry Certificates of Certificate Owners
it represents or of brokerage firms for which it acts as agent in accordance
with the Depository's normal procedures.
(c) If (i)(A) the Depositor advises the Depositor, the Paying Agent or
the Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities as Depository and (B) the Trustee, the
Paying Agent or the Depositor are unable after exercise of their reasonable best
efforts to locate a qualified successor or (ii) the Depositor at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository, the Trustee or, if a Paying Agent has been appointed
under Section 4.05,
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the Paying Agent, shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive, fully
registered Certificates (the "Definitive Certificates") to Certificate Owners
requesting the same. Upon surrender to the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, of the Book-Entry
Certificates by the Depository for registration and receipt by the Trustee or,
if a Paying Agent has been appointed under Section 4.05, the Paying Agent, of an
adequate supply of certificates from the Depositor, the Trustee or if the Paying
Agent is appointed under Section 4.05, the Paying Agent shall issue the
Definitive Certificates based on information received from the Depository.
Neither the Depositor, the Servicer, the Paying Agent nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions.
(d) The Certificates shall be issuable in the minimum original dollar
denominations (and integral multiples of $1,000 in excess of such amount) and
aggregate original dollar denominations per Class as set forth in the following
table (except that one Certificate of each of [Class A-5, Class A-6, Class A-P
and Class M and each of the Class B] Certificates may be issued in a different
denomination).
Aggregate Original Certificate
Minimum Principal Balance of all
Original Certificates of the CUSIP
Class Denomination Indicated Class Number
----- ------------ ------------------------------ ------
A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-P
A-R(1)
A-X(2) (2) (2)
M
B-1
B-2
B-3
B-4
B-5
- ---------------
(1) The Class A-R Certificate represents the Residual Interest.
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(2) The Class A-X Certificates have no Principal Balance, but accrue interest
on the Class A-X Notional Balance (initially, $________________).
The Certificates shall be signed by manual or facsimile signature on
behalf of the Depositor by an officer of the Depositor. Certificates bearing the
manual or facsimile signatures of individuals who were at the time of signature
officers of the Depositor shall bind the Depositor, notwithstanding that such
individuals or any of them have ceased to be an officer prior to the
authentication and delivery of such Certificate or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on such
Certificate a manual authentication by an officer of the Depositor and such
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 4.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee or, if a Paying Agent has been appointed hereunder pursuant to
Section 4.05, the Paying Agent, shall cause to be kept a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided.
(b) Upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, maintained for such purpose, the Depositor
shall execute and the Trustee or if an Authenticating Agent is appointed under
Section 4.06, the Authenticating Agent shall authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate of a like Class
and aggregate Percentage Interest and dated the date of authentication by the
Authenticating Agent.
(c) No transfer of a Class A-X, Class B-3, Class B-4 or Class B-5
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement or otherwise in accordance with the requirements under
the Securities Act of 1933, as amended. If such a transfer is to be made in
reliance upon an exemption from said Act, (i) the Depositor may require (except
with respect to the initial transfer of a Class B-3, Class B-4 or Class B-5
Certificate from Credit Suisse First Boston Corporation and except if the
transferee executes a certificate substantially in the form of Exhibit I hereto)
a written opinion of independent counsel acceptable to and in form and substance
satisfactory to the Depositor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
Act and laws or is being made pursuant to said Act and laws, which opinion of
counsel shall not be an expense of the Trust Fund, the Trustee, the Depositor or
the Servicer, and (ii) the Depositor shall require the transferee to execute a
certification substantially in the form of Exhibit H or Exhibit I.
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(d) No transfer of a Subordinated Certificate shall be made to any
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of such plan or using the assets of such
plan. No transfer of a Subordinated Certificate shall be made unless the
Depositor shall have received either (i) a representation letter from the
transferee of such Certificate acceptable to and in form and substance
satisfactory to the Depositor, to the effect that (A) such transferee is not an
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of any such plan or using the assets of such
plan, or, alternatively, in the case of an insurance company, the assets of any
separate accounts to effect such acquisition, or alternatively, (B) the source
of funds for the purchase of such Certificate is an "insurance company general
account" within the meaning of Prohibited Transaction Class Exemption 95-60
("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth
in Section I and III of PTCE 95-60 are satisfied with respect to the purchase
and holding of such Certificate, which representation letter shall not be an
expense of the Trustee, the Depositor or the Servicer, or (ii) in the case of a
Subordinated Certificate presented for registration in the name of an employee
benefit plan subject to ERISA or Section 4975 of the Code (or comparable
provisions of any subsequent enactments) or a trustee of any such plan or any
other Person who is using the assets of any such plan to effect such
acquisition, an Opinion of Counsel satisfactory to the Depositor to the effect
that the purchase or holding of such Subordinated Certificate will not result in
the assets of the Trust Fund being deemed to be "plan assets" pursuant to the
Department of Labor Plan Asset Regulations set forth in 29 C.F.R. ss.2510.3-101
and subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of the Code, will not constitute or result in
a prohibited transaction within the meaning of Section 406 or Section 407 of
ERISA or Section 4975 of the Code, and will not subject the Trustee, the
Depositor or the Servicer to any obligation in addition to those undertaken in
this Agreement, which opinion of counsel shall not be an expense of the Trustee,
the Depositor or the Servicer.
(e) At the option of a Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of authorized denominations of
a like Class, upon surrender of the Certificate to be exchanged at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose. Whenever the Certificate is
so surrendered for exchange, the Depositor shall execute and the Authenticating
Agent shall authenticate and deliver, the Certificate which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall (if so required by the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument of transfer in the form satisfactory to the Authenticating Agent duly
executed by, the Holder thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to the Holder for any transfer or
exchange of a Certificate, but the Servicer may require payment by the
Certificateholders of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of such
Certificate.
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(g) All Certificates surrendered for transfer or exchange shall be
destroyed by the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, in accordance with the Trustee's or, if a Paying Agent
has been appointed under Section 4.05, the Paying Agent's, standard procedures.
(h) [Reserved].
(i) A Disqualified Organization is prohibited from acquiring beneficial
ownership of a Class A-R Certificate. Notwithstanding anything to the contrary
contained herein, unless and until the Servicer shall have received an Opinion
of Counsel, satisfactory to it in form and substance, to the effect that the
absence of the conditions contained in this Section 4.02(i) would not result in
the imposition of federal tax upon the Trust Fund or cause the Trust Fund to
fail to qualify as a REMIC, no transfer, sale or other disposition of the Class
A-R Certificate (including for purposes of this section any beneficial interest
therein) may be made without the express written consent of the Servicer, which
consent is to be granted by the Servicer only upon compliance with the
requirements of this Section and a copy of which written consent shall be
supplied to the Servicer. As a condition to granting its consent to a transfer
of a Class A-R Certificate, the Servicer shall require the proposed transferee
of such Certificate (including, in the case of the initial issuance of the Class
A-R Certificate, the initial Holder thereof) to execute a letter and affidavit
substantially in the form attached hereto as Exhibit K.
As a condition to the granting of the consent referred to in this
Section 4.02(i), prior to the transfer, sale, pledge, hypothecation or other
disposition of the Class A-R Certificate or any interest therein, the Servicer
shall require that the proposed transferee deliver to it (1) its taxpayer
identification number and state, under penalties of perjury that such number is
the social security or employee identification number, as the case may be, of
the transferee or provide an affidavit under penalties of perjury stating that
as of the date of such transfer such transferee is not and has no intention of
becoming a Disqualified Organization, (2) an affidavit stating (i) that such
transferee is not acquiring such Class A-R Certificate as an agent, broker,
nominee, or middleman for a Disqualified Organization, (ii) if the Residual
Interest is a "non-economic residual interest" within the meaning of Treas. Reg.
ss.1.860E-1(c)(2), (X) that no purpose of the acquisition of the Class A-R
Certificate is to avoid or impede the assessment or collection of tax, (Y) that
such transferee has historically paid its debts as they came due and will
continue to pay its debts as they come due, and (Z) that such transferee
represents that it understands that, as the holder of the non-economic residual
interest, the transferee may incur tax liabilities in excess of any cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest, and (iii) unless the Servicer
consents to the transfer of the Class A-R Certificate to a Person who is not a
U.S. Person and who has furnished a duly completed and effective Form 4224, that
it is a U.S. Person, and (3) the transferor deliver to the Servicer a written
certification that as of the date of such transfer it has no knowledge and no
reason to know that the affirmations described in clauses (1) and (2) were
false. The Servicer shall not grant the consent referred to in this Section
4.02(i) if it has actual knowledge that any statement made in the affidavit
issued pursuant to the preceding sentence is not true.
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Notwithstanding any purported transfer, sale or other disposition of the Class
A-R Certificate to a Disqualified Organization, such transfer, sale or other
disposition shall be deemed to be of no legal force or effect whatsoever and
such Disqualified Organization shall not be deemed to be a Class A-R
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class A-R Certificate. If any purported
transfer shall be in violation of the provisions of this Section 4.02(i) then
the prior holder of the Class A-R Certificate shall, upon discovery that the
transfer of such Class A-R Certificate was not in fact permitted by this Section
4.02(i), be restored to all rights as a Holder thereof retroactive to the date
of the purported transfer of such Class A-R Certificate. The Trustee and the
Servicer shall be under no liability to any Person for any registration or
transfer of a Class A-R Certificate that is not permitted by this Section
4.02(i) or for making payments due on such Class A-R Certificate to the
purported Holder thereof or taking any other action with respect to such
purported Holder under the provisions of this Agreement so long as the transfer
was not registered under the written certification of the Servicer as described
in this Section 4.02(i). The prior Holder shall be entitled to recover from any
purported Holder of a Class A-R Certificate that was in fact not a permitted
purported transferee under this Section 4.02(i) at the time it became a
purported Holder all payments made to such purported Holder on such Class A-R
Certificate; provided that the Servicer shall not be responsible for such
recovery. Each Class A-R Certificateholder, by the acceptance of the Class A-R
Certificate, shall be deemed for all purposes to have consented to the
provisions of this Section 4.02(i) and to any amendment to this Agreement deemed
necessary by counsel of the Trustee or the Servicer to ensure that the Class A-R
Certificate is not transferred to a Disqualified Organization and that any
transfer of such Class A-R Certificate will not cause the imposition of a tax
upon the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC. The
restrictions on transfer of the Class A-R Certificate will cease to apply and be
void upon receipt by the Servicer of an Opinion of Counsel to the effect that
such restrictions on transfer are no longer necessary to avoid the risk of
material federal taxation to the Trust Fund or prevent the Trust Fund from
qualifying as a REMIC.
(j) The Servicer shall make available upon written request to each
Holder and each proposed transferee of a Class A-X, Class B-3, Class B-4 or
Class B-5 Certificate such information as may be required to permit the proposed
transfer to be effected pursuant to Rule 144A under the Securities Act of 1933.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate is surrendered to the Trustee or, if a Paying Agent
has been appointed under Section 4.05, the Paying Agent, or the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, such security or indemnity
as may be required by it to save it harmless, then, in the absence of notice to
the Trustee or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, that such Certificate has been acquired by a bona fide purchaser,
the Trustee or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, shall authenticate and deliver, in exchange for or in lieu of any
such mutilated,
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destroyed, lost or stolen Certificate, a new Certificate of like tenor and
Class. Upon the issuance of any new Certificate under this Section, the Trustee
or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent,
may require of the Certificateholder the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses connected therewith. Any replacement Certificate of any Class
issued pursuant to this Section shall constitute complete and indefeasible
evidence of ownership of the Percentage Interest in the distributions to which
the Certificateholders of such Class are entitled, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time, and such mutilated, destroyed, lost or stolen Certificate
shall be of no force or effect under this Agreement, to the extent permitted by
law.
Section 4.04. Persons Deemed Owners. Prior to due presentation of a
Certificate of any Class for registration of transfer, the Depositor, the
Servicer, the Paying Agent and the Trustee may treat the person in whose name
any Certificate is registered on the Record Date as the owner of such
Certificate and the Percentage Interest in the distributions to which the
Certificateholders of such Class are entitled on the relevant date as the Holder
of such Certificate and the Percentage Interest represented by such Certificate
for the purpose of receiving remittances pursuant to Section 6.01 and for all
other purposes whatsoever, and neither the Depositor, the Servicer nor the
Trustee shall be affected by notice to the contrary.
Section 4.05. Appointment of Paying Agent; Certificate Account. The
Trustee may appoint a Paying Agent hereunder, which Paying Agent shall not be
Depositor, the Seller, or an affiliate of the Depositor or the Seller unless
such Paying Agent is the Corporate Trust Department of Chase. In the event of
any such appointment, on the Business Day prior to each Distribution Date, the
Servicer shall deposit or cause to be deposited with the Paying Agent from funds
on deposit in the Collection Account a sum up to the Available Distribution
Amount, such sum to be held in trust for the benefit of Certificateholders in a
segregated account (the "Certificate Account") which shall be an Eligible
Account in the name of "[TRUSTEE], as Trustee, in trust for and for the benefit
of the Certificateholders of Multi-Class Mortgage Pass- Through Certificates,
Chase Manhattan Acceptance Corporation, Series [ ] - Certificate Account". The
Servicer shall cause the Paying Agent to perform each of the obligations of the
Paying Agent set forth herein and shall be liable to the Trustee and the
Certificateholders for failure of the Paying Agent to perform such obligations.
If the Paying Agent is a party other than the Trustee, the Trustee shall have no
liability in connection with the performance or failure of performance of the
Paying Agent. The Trustee designates the Corporate Trust Department of Chase as
the initial Paying Agent. Only the Trustee may remove the Paying Agent, and may
do so at will.
If, on any Distribution Date, the Paying Agent fails to distribute to
Certificateholders the amounts then on deposit in the Certificate Account for
the purposes specified herein, the Trustee shall be obligated promptly upon its
knowledge thereof to distribute such amounts to Certificateholders in the manner
and in such amounts based upon information provided by the Servicer; provided
that in no event shall the Trustee be obligated for purposes of
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<PAGE>
this paragraph to distribute to Certificateholders any amounts other than those
on deposit in the Certificate Account or expend any funds not reimbursable
pursuant to Section 10.05 hereof, except as otherwise provided herein.
Notwithstanding anything in this Agreement to the contrary, the Trustee shall be
liable to the Servicer and the Certificateholders only for its negligence in
connection with the withdrawal of funds from the Certificate Account by the
Trustee and the distribution of such funds by the Trustee to Certificateholders
pursuant to this paragraph.
The Servicer shall cause each Paying Agent other than the Trustee to
execute and deliver to the Servicer and the Trustee on the Closing Date or, if
subsequently appointed, on the date of appointment, a written instrument
executed by an officer of the Paying Agent in which such Paying Agent shall
agree with the Servicer and the Trustee that such Paying Agent will hold all
sums held by it for the payment to Certificateholders in trust for the benefit
of the Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders.
Section 4.06. Authenticating Agents. (a) The Trustee may appoint one or
more Authenticating Agents (each, an "Authenticating Agent") which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates.
Wherever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an Authenticating Agent and a certificate of authentication executed on behalf
of the Trustee by an Authenticating Agent. Each Authenticating Agent must be an
entity organized and doing business under the laws of the United States of
America or of any state, having a combined capital and surplus of at least
$15,000,000, authorized under such laws to do a trust business and subject to
supervision or examination by federal or state authorities. If the
Authenticating Agent is a party other than the Trustee, the Trustee shall have
no liability in connection with the performance or failure of performance of the
Authenticating Agent. [The Trustee hereby appoints Chase as the initial
Authenticating Agent.]
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee and the Depositor.
The Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Depositor. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance within the provisions of this Section 4.06, the Trustee may appoint a
successor Authenticating Agent, shall give written notice of such appointment to
the Depositor and shall
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mail notice of such appointment to all Holders of Certificates. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section 4.06. No Authenticating Agent shall have
responsibility or liability for any action taken by it as such at the direction
of the Trustee. Any Authenticating Agent shall be entitled to reasonable
compensation for its services and any such compensation shall be payable solely
by the Trustee, without any right of reimbursement from the Depositor, the
Servicer or the Trust Fund.
[End of Article IV]
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ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 5.01. Servicer to Service Mortgage Loans. The Servicer shall
service and administer the Mortgage Loans and shall have full power and
authority, acting alone or through Sub-Servicers as provided in Section 5.02, to
do any and all things which it may deem necessary or desirable in connection
with such servicing and administration, all in accordance with Accepted
Servicing Practices. Without limiting the generality of the foregoing, the
Servicer in its own name or in the name of a Sub-Servicer shall, pursuant to a
power of attorney granted hereby by the Trustee for such purposes, when the
Servicer or the Sub-Servicer, as the case may be, believes it appropriate in its
best judgment, to execute and deliver, on behalf of the Certificateholders and
the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Properties; provided, however, that subject to the provisions of
this paragraph, the Servicer may allow a modification with respect to a Mortgage
Loan if the Servicer would take such action in the ordinary course of its
business if it were the owner of the Mortgage Loan. The Servicer may agree to a
modification of any Mortgage Loan (the "Relevant Mortgage Loan") upon the
request of the related Mortgagor, provided that (i) the modification is in lieu
of a refinancing and the Mortgage Rate on the Relevant Mortgage Loan, as
modified, is approximately a prevailing market rate of newly- originated
mortgage loans having similar terms, (ii) the aggregate of the adjusted bases of
all Modified Mortgage Loans (including the Relevant Mortgage Loans) plus the
aggregate adjusted bases of any assets that are not qualified mortgages or
permitted investments under Section 860G(a) of the Code that are assets of the
Trust Fund established hereunder at all times on any day is less than one
percent of the aggregate of the adjusted bases of all assets of the Trust Fund
(including such Modified Mortgage Loans) on such day, and (iii) the Servicer
purchases the Relevant Mortgage Loan from the Trust Fund as described below.
Effective immediately after such modification, and, in any event, on the same
Business Day on which the modification occurs, all right, title and interest of
the Trustee in and to the Modified Mortgage Loan shall automatically be deemed
transferred and assigned to the Servicer and all benefits and burdens of
ownership thereof, including without limitation the right to accrued interest
thereon from and including the date of modification and the risk of default
thereon, shall pass to the Servicer. To confirm such transfer and assignment,
the Servicer, as servicer hereunder, as soon as practicable shall execute an
instrument of assignment of the Modified Mortgage Loan without recourse in
customary form to the Servicer in its individual capacity. The Servicer shall
deposit the Purchase Price for any Modified Mortgage Loan in the Collection
Account pursuant to Section 5.08. Upon receipt by the Trustee of written
notification of any such deposit signed by a Servicing Officer, the Trustee
shall release to the Servicer the related Mortgage File and shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary more fully to vest in the Servicer any Modified
Mortgage Loan previously transferred and assigned pursuant thereto.
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The Servicer shall furnish to the Trustee for execution and redelivery
to the Servicer or, at the request of the Servicer, a Sub-Servicer, such
documents necessary or appropriate to enable the Servicer to service and
administer the Mortgage Loans and the Trustee shall not be responsible for the
Servicer's application thereof. The Servicer agrees to remain eligible as either
a FNMA or FHLMC seller/servicer, or both, for so long as it is Servicer.
All Servicing Advances made by the Servicer in effecting the timely
payment of taxes, insurance and assessments on the properties subject to the
Mortgage Loans shall not, for the purpose of calculating monthly distributions
to Certificateholders, be added to the amount owing under the related Mortgage
Loans, notwithstanding that the terms of such Mortgage Loan so permit, and such
Servicing Advances shall be recoverable by the Servicer to the extent permitted
by Sections 5.09 and 5.23.
Section 5.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers; Enforcement of Sub-Servicer's Obligations. (a) The Servicer may
enter into Sub-Servicing Agreements with Sub-Servicers for the servicing and
administration of all or part of the Mortgage Loans. References in this
Agreement to actions taken or to be taken by the Servicer in servicing the
Mortgage Loans include actions taken or to be taken by a Sub-Servicer on behalf
of the Servicer. Each Sub-Servicing Agreement will be upon such terms and
conditions as are not inconsistent with this Agreement and as the Servicer and
the Sub-Servicer have agreed. The Servicer shall notify the Trustee in writing
promptly upon the appointment of any Sub-Servicer. For purposes of this
Agreement, the receipt by the Sub-Servicer of any amount with respect to a
Mortgage Loan (other than amounts representing servicing compensation or
reimbursement for an advance) shall be treated as the receipt by the Servicer of
such amount. The Sub-Servicer shall deposit all such funds in an Eligible
Account.
(b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Sub-Servicer under the related Sub-Servicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements as appropriate, and the pursuit of other
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense but shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement only to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loans or (ii) from a specific recovery of costs, expenses or attorneys'
fees against the party against whom such enforcement is directed.
Section 5.03. Successor Sub-Servicers. The Servicer shall be entitled
to terminate any Sub-Servicing Agreement that may exist in accordance with the
terms and conditions of such Sub-Servicing Agreement and without any limitation
by virtue of this Agreement.
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Section 5.04. Liability of the Servicer. Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or reference
to actions taken through a Sub-Servicer or otherwise, the Servicer shall remain
obligated and liable to the Trustee and Certificateholders for the servicing and
administering of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
Section 5.05. No Contractual Relationship Between Sub-Servicer and
Trustee or Certificateholders. Any Sub-Servicing Agreement that may be entered
into and any other transactions or services relating to the Mortgage Loans
involving a Sub-Servicer in its capacity as such and not as an originator shall
be deemed to be between the Sub-Servicer and the Servicer alone, and the Trustee
and Certificateholders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to the
Sub-Servicer.
Section 5.06. Termination of Sub-Servicing Agreement. If the Servicer
shall for any reason no longer be the Servicer hereunder (including by reason of
any Event of Default), the Servicer shall thereupon terminate each Sub-Servicing
Agreement that may have been entered into, and the Trustee, its designee or the
successor servicer and the Trustee shall not be deemed to have assumed any of
the Servicer's interest therein or to have replaced the Servicer as a party to
any such Sub-Servicing Agreement.
Section 5.07. Collection of Mortgage Loan Payments. Continuously from
the date hereof until the principal and interest on all Mortgage Loans are paid
in full, the Servicer will proceed diligently to collect all payments due under
each of the Mortgage Loans when the same shall become due and payable and shall,
to the extent such procedures shall be consistent with this Agreement, follow
such collection procedures as it follows with respect to conventional mortgage
loans held in its own portfolio. Any such arrangements shall not diminish or
otherwise affect the Servicer's obligation to make Advances pursuant to Section
6.03.
Section 5.08. Establishment of Collection Account; Deposit in
Collection Account. With respect to all of the Mortgage Loans, the Servicer
shall segregate and hold all funds collected and received pursuant to a Mortgage
Loan separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Collection Accounts for the benefit of the
Certificateholders (collectively, the "Collection Account") which are Eligible
Accounts, in the form of a trust account, in the name of "[TRUSTEE], as Trustee,
in trust for and for the benefit of the Certificateholders of Multi-Class
Mortgage Pass-Through Certificates, Chase Manhattan Acceptance Corporation,
Series [ ] - Collection Account." Such Collection Account shall be established
with a commercial bank, a savings bank or a savings and loan
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association. The Servicer may invest, or cause the institution maintaining the
Collection Account to invest, moneys in the Collection Account in Eligible
Investments, which shall mature not later than the Business Day next preceding
the Distribution Date next following the date of such investment and shall not
be sold or disposed of prior to its maturity. All income and gain realized from
any such investment shall be for the benefit of the Servicer as additional
compensation and shall be subject to its withdrawal or order from time to time.
The amount of any losses incurred in respect of any such investments (to the
extent not offset by income from other such investments) shall be deposited in
the Collection Account by the Servicer out of its own funds immediately as
realized; provided, however, that if the Trustee becomes Servicer, the Trustee
shall not be required to deposit the amount of any loss incurred prior to it
becoming Servicer.
The Servicer shall deposit or cause to be deposited in the Collection
Account on a daily basis (and not later than the second Business Day following
receipt), and retain therein:
(i) All payments which were received after the Cut-off Date on
account of principal of the Mortgage Loans (other than the principal
portion of Monthly Payments due on or before the Cut-off Date), and
all Principal Prepayments collected on or after the Cut-off Date;
(ii) All payments which were received after the Cut-off Date on
account of interest on the Mortgage Loans (net of the Servicing
Fee)(other than the interest portion of Monthly Payments due on or
before the Cut-off Date);
(iii) Net Liquidation Proceeds;
(iv) All Insurance Proceeds received by the Servicer under any
title, hazard or other insurance policy, including amounts required to
be deposited pursuant to Sections 5.16 and 5.20, other than proceeds
to be held in the Escrow Account or applied to the restoration or
repair of the Mortgaged Property or released to the Mortgagor in
accordance with the Servicer's normal servicing procedures or
otherwise applied or held as required by applicable law;
(v) All awards or settlements in respect of condemnation
proceedings affecting any Mortgaged Property which are not released to
the Mortgagor in accordance with the Servicer's normal servicing
procedures;
(vi) All Repurchase Proceeds;
(vii) All Advances made by the Servicer pursuant to Section 6.03;
(viii) All amounts representing revenues under the insurance
provided pursuant to Section 5.19 to the extent of any losses borne by
any Certificateholder;
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(ix) All revenues from any Mortgaged Property acquired by the
Servicer by foreclosure or deed in lieu of foreclosure net of any
Servicing Advances with respect to such Mortgaged Property; and
(x) Any other amounts required to be deposited therein pursuant
to this Agreement.
The Servicer shall maintain accounting records on a loan-by-loan basis
with respect to the Collection Account. The Servicer shall give notice to the
Trustee and the Depositor and each Rating Agency of any change in the location
of the Collection Account, prior to the use thereof. Notwithstanding anything to
the contrary herein, no Monthly Payment or any portion thereof shall be
permitted to remain in the Collection Account for more than 12 months. Any
Monthly Payment or any portion thereof that has remained in the Collection
Account for 12 months shall be deemed a Principal Prepayment and distributed to
Certificateholders pursuant to the provisions of this Agreement on the
Distribution Date immediately following the end of such 12 month period.
Section 5.09. Permitted Withdrawals from the Collection Account. The
Servicer may, from time to time, withdraw funds from the Collection Account for
the following purposes:
(i) to reimburse itself for Advances made pursuant to Section
6.03 (including amounts to reimburse the related Sub-Servicer for
advances made pursuant to the applicable Sub-Servicing Agreement), the
Servicer's and the Sub-Servicer's right to receive reimbursement
pursuant to this subclause (i) being limited to amounts received on
particular Mortgage Loans which represent Late Collections (net of the
Servicing Fees) with respect to those particular Mortgage Loans;
(ii) to pay itself the Servicing Fee;
(iii) to reimburse itself for unreimbursed Servicing Advances, or
to pay the related Sub-Servicer any unreimbursed Servicing Advances,
the Servicer's right to receive reimbursement or make payments to the
Sub-Servicer pursuant to this subclause (iii) with respect to any
Mortgage Loan being limited to related Liquidation Proceeds, Insurance
Proceeds, and condemnation awards;
(iv) to reimburse itself (or the related Sub-Servicer) or the
Depositor for expenses incurred by and recoverable by or reimbursable
to it pursuant to Section 5.01 or 5.16;
(v) to reimburse itself (or the related Sub-Servicer) for any
Nonrecoverable Advances;
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(vi) to pay to itself (or the related Sub-Servicer) income earned
on the investment of funds deposited in the Collection Account;
(vii) to make deposits into the Certificate Account in the
amounts and in the manner provided for herein;
(viii) to make payments to itself or others pursuant to any
provision of this Agreement, and to clear and terminate the Collection
Account upon the termination of this Agreement; and
(ix) to withdraw amounts deposited in error.
Section 5.10. Establishment of Escrow Account; Deposits in Escrow
Account. With respect to those Mortgage Loans on which the Servicer or any
Sub-Servicer collects Escrow Payments, if any, the Servicer shall, and shall
cause the Sub-Servicer to, segregate and hold all funds collected and received
pursuant to each such Mortgage Loan which constitute Escrow Payments separate
and apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts, in the form of trust accounts. Such Escrow
Accounts shall be established with a commercial bank, a mutual savings bank or a
savings and loan association the deposits of which are insured by the FDIC in a
manner which shall provide maximum available insurance thereunder, and which may
be drawn on by the Servicer. The Servicer shall give notice to the Trustee of
the location of any Escrow Account, and of any change thereof, prior to the use
thereof. Nothing in this paragraph shall be deemed to require the Servicer to
collect Escrow Payments in the absence of a provision in the related Mortgage
requiring such collection.
The Servicer shall deposit, or cause to be deposited, in any Escrow
Account or Accounts on a daily basis, and retain therein, (i) all Escrow
Payments collected on account of any Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of this
Agreement and (ii) all amounts representing proceeds of any hazard insurance
policy which are to be applied to the restoration or repair of any Mortgaged
Property. The Servicer shall make withdrawals therefrom only to effect such
payments as are required under this Agreement, and for such other purposes as
are set forth in Section 5.11. The Servicer shall be entitled to retain any
interest paid on funds deposited in the Escrow Account by the depository
institution other than interest on escrowed funds required by law to be paid to
the related Mortgagor and, to the extent required by law, the Servicer shall pay
interest on escrowed funds to the related Mortgagor notwithstanding that the
Escrow Account is non-interest-bearing or that interest paid thereon is
insufficient for such purposes.
Section 5.11. Permitted Withdrawals from Escrow Account. Withdrawals
from any Escrow Account or Accounts may be made by the Servicer only (i) to
effect timely payments of ground rents, taxes, assessments, water rates,
Standard Hazard Policy premiums, or other items constituting Escrow Payments for
the related Mortgage, (ii) to reimburse the Servicer for
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any Servicing Advance made by the Servicer, with respect to a related Mortgage
Loan but only from amounts received on the related Mortgage Loan which represent
late payments or collections of Escrow Payments thereunder, (iii) to refund to
any Mortgagor any funds found to be in excess of the amounts required under the
terms of the related Mortgage Loan or under applicable law, (iv) for application
to restoration or repair of the property subject to the related Mortgage, (v) to
pay to the Servicer, or to the Mortgagor to the extent required by law, any
interest paid on the funds deposited in the Escrow Account, (vi) to clear and
terminate the Escrow Account on the termination of this Agreement or (vii) to
withdraw amounts deposited in error.
Section 5.12. Payment of Taxes, Insurance and Other Charges. With
respect to each Mortgage Loan, the Servicer shall maintain, or cause to be
maintained, accurate records reflecting any delinquencies or nonpayments with
regard to taxes, assessments and Standard Hazard Policy premiums. The Servicer
assumes full responsibility for ensuring the payment of all such bills and shall
effect payments of all such bills irrespective of each Mortgagor's faithful
performance in the payment of same or the making of the Escrow Payments and
shall make advances from its own funds to effect such payments.
Section 5.13. Transfer of Accounts. The Servicer may transfer the
Collection Account or Escrow Account to an Eligible Account maintained with a
different depository institution from time to time.
Section 5.14. [Reserved].
Section 5.15. Maintenance of the Primary Insurance Policies. The
Servicer shall not take, or permit any Sub-Servicer to take, any action which
would result in non-coverage under any applicable Primary Insurance Policy of
any loss which, but for the actions of the Servicer or Sub-Servicer, would have
been covered thereunder. Except as otherwise required by applicable law, to the
extent coverage is available and until the Loan-to-Value Ratio of the related
Mortgage Loan is reduced to 80%, the Servicer shall keep or cause to be kept in
full force and effect each such Primary Insurance Policy in an amount equal to
the amount by which the unpaid principal balance of the related Mortgage Loan
exceeds 75% of the value (as described in the definition of Loan-to-Value Ratio)
of the related Mortgaged Property. The Servicer shall not cancel or refuse to
renew any such Primary Insurance Policy or consent to any Sub-Servicer canceling
or refusing to renew any such Primary Insurance Policy applicable to a Mortgage
Loan subserviced by it, that is in effect at the date of the initial issuance of
the Certificates and is required to be kept in force hereunder unless the
replacement Primary Insurance Policy for such canceled or non-renewed policy is
maintained with an insurer whose claims-paying ability is rated at least as high
as the original insurer or is acceptable to each Rating Agency as confirmed in
writing by each such Rating Agency, unless otherwise required by law.
Section 5.16. Maintenance of Standard Hazard Policies. (a) The Servicer
shall cause to be maintained for each Mortgage Loan a Standard Hazard Policy
with extended
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coverage as is prudent in the area where the Mortgaged Property is located in an
amount which is equal to the greater of (i) the lesser of (A) 100% of the
maximum insurable value of the improvements securing such Mortgage Loan or (B)
the principal balance owing on such Mortgage Loan, or (ii) such amount required
to prevent the Mortgagor or mortgagee from becoming a co-insurer. If the
Mortgaged Property is in an area identified at the time of origination in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and such flood insurance has been made available) the Servicer
will cause to be maintained a flood insurance policy meeting the requirements of
the current guidelines of the Federal Insurance Administration with a generally
acceptable insurance carrier, in an amount representing coverage not less than
the least of (i) the outstanding Principal Balance of the Mortgage Loan, (ii)
the full insurable value or (iii) the maximum amount of insurance which is
available under the Flood Disaster Protection Act of 1973. The Servicer shall
also maintain on property acquired upon foreclosure, or by deed in lieu of
foreclosure, of any Mortgage Loan, fire and hazard insurance with extended
coverage in an amount which is not less than the lesser of (i) the outstanding
principal balance of the Mortgage Loan or (ii) the maximum insurable value of
the improvements which are a part of such property, liability insurance, and, to
the extent available, flood insurance in an amount as provided above. Any
amounts collected by the Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the property subject to the related
Mortgage or property acquired in liquidation of the Mortgage Loan, or released
to the Mortgagor in accordance with the Servicer's normal servicing procedures)
shall be deposited, subject to applicable law, in the Collection Account. It is
understood and agreed that no earthquake or other additional insurance need be
required by the Servicer of any Mortgagor or maintained on property acquired in
respect of a Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. All such Standard Hazard Policies and other policies shall
be endorsed with standard mortgagee clauses with loss payable to the Servicer or
its designee. Any such Standard Hazard Policies or other policies may be in the
form of blanket policies; provided, however, that in the event of any claim
arising in connection with a hazard loss the Servicer shall be obligated, in the
case of blanket insurance policies, to deposit in the Collection Account any
amount not payable under such blanket policy because of a deductible clause in
such policy and not otherwise payable under an individual policy. The Servicer
shall not interfere with the Mortgagor's freedom of choice in selecting either
his insurance carrier or agent; provided, however, that the Servicer shall not
accept any such insurance policies from insurance companies unless such
companies are acceptable insurers in the discretion of the Servicer.
(b) Any cost incurred by the Servicer in maintaining any of the
foregoing insurance shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
Mortgage Loan, notwithstanding that the terms of the Mortgage Loan so permit.
Such costs (other than the costs of maintaining a blanket hazard insurance
policy not attributable to a specific Mortgaged Property) shall be recoverable
by the Servicer from the Mortgagor or out of Insurance Proceeds or Liquidation
Proceeds or to the extent permitted by Section 5.09.
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Section 5.17. [Reserved].
Section 5.18. [Reserved]
Section 5.19. Fidelity Bond and Errors and Omissions Insurance. The
Servicer shall maintain, at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, with broad coverage with responsible
companies on all officers, employees or other persons acting on behalf of the
Servicer in any capacity with regard to the Mortgage Loans to handle funds,
money, documents and papers relating to the Mortgage Loans. Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such persons and shall be maintained at a level
acceptable to FNMA. No provision of this Section 5.19 requiring such fidelity
bond and errors and omissions insurance shall diminish or relieve the Servicer
from its duties and obligations as set forth in this Agreement. Upon request of
the Trustee, the Servicer shall cause to be delivered to the Trustee a
certification evidencing coverage under such fidelity bond and insurance policy.
Promptly upon receipt of any notice from the surety or the insurer that such
fidelity bond or insurance policy has been terminated or modified in a
materially adverse manner, the Servicer shall notify the Trustee and each Rating
Agency of any such termination or modification.
Section 5.20. Collections under Insurance Policies; Enforcement of
Due-On-Sale Clauses; Assumption Agreements. (a) In connection with its
activities as administrator and servicer of the Mortgage Loans, the Servicer
agrees to present, on behalf of itself, the Trustee and the Certificateholders,
claims to the insurer under any Standard Hazard Policies and, in this regard, to
take such reasonable action as shall be necessary to permit recovery under any
insurance policies. Pursuant to Section 5.08, the Servicer shall deposit
Insurance Proceeds in the Collection Account.
(b) When any Mortgaged Property is conveyed by the Mortgagor, the
Servicer shall enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted by such Mortgage Note or Mortgage, applicable
law and governmental regulations. Subject to the foregoing, the Servicer is
authorized to take or enter into an assumption or substitution agreement from or
with the Person to whom such property has been or is about to be conveyed. In
connection with such assumption or substitution, the Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual and as it applies to mortgage loans owned solely by it.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any conveyance by the
Mortgagor of the Mortgaged Property or any assumption of a Mortgage Loan by
operation of law which the Servicer in good faith determines it may be
restricted by law from preventing, for any reason whatsoever.
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(c) Subject to the Servicer's duty to enforce any due-on-sale clause to
the effect set forth in Section 5.20(b), in any case in which a Mortgaged
Property is to be conveyed to a Person by a Mortgagor, and such Person is to
enter into an assumption agreement or modification agreement or supplement to
the Mortgage Note or Mortgage, the Servicer shall so notify the Trustee by
forwarding to the Trustee the original copy of such assumption or substitution
agreement, which copy shall be added by the Trustee to the related Mortgage File
and shall, for all purposes, be considered a part of such Mortgage File to the
same extent as all other documents and instruments constituting a part thereof.
In connection with any such assumption, modification agreement or substitution
agreement, the interest rate of the related Mortgage Note shall not be changed,
the principal amount of the Mortgage Note shall not be increased or decreased
and the maturity of the Mortgage Note shall not be extended, nor shall it be
shortened by more than one year. Any fee collected by the Servicer for entering
into an assumption or substitution of liability agreement with respect to such
Mortgage Loan shall be retained by the Servicer as additional servicing
compensation.
Section 5.21. Income and Realization from Defaulted Mortgage Loans. The
Servicer, on behalf of the Trustee, shall foreclose upon or otherwise comparably
convert the ownership of Mortgaged Properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 5.07, shall manage, conserve, protect and operate such Mortgaged
Properties for the purposes of their prompt disposition and sale, and shall
dispose of such Mortgaged Properties on such terms and conditions as it deems in
the best interests of the Certificateholders. The Servicer shall sell such
property prior to the close of the third calendar year beginning after the year
in which such foreclosure or conversion occurs or such longer period as would
not prevent such Mortgaged Property from constituting "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code. In connection with such
activities, the Servicer shall follow such practices and procedures as it shall
deem necessary or advisable, as shall be normal and usual in its general
mortgage servicing activities, including its management of foreclosed properties
for a temporary period as contemplated herein. The foregoing is subject to the
provisions of Section 5.28 of this Agreement and to the proviso that the
Servicer shall not be required to expend its own funds in connection with any
management, foreclosure or towards the restoration of any property unless it
shall determine that such management, restoration or foreclosure will increase
the Liquidation Proceeds of the Mortgage Loan to Certificateholders after
reimbursement to itself for such expenses (respecting which it shall have
priority for purposes of withdrawals from the Collection Account pursuant to
Section 5.09). The Servicer shall be permitted to earn income with respect to
any Mortgaged Properties, provided such income does not constitute "net income
from foreclosure property" within the meaning of Section 860G(c) of the Code.
The income earned from the management of such Mortgaged Properties, net of
reimbursement to the Servicer for expenses (including any taxes) incurred in
connection with such management, shall be applied to the payment of principal of
and interest on the related defaulted Mortgage Loans (with interest accruing and
principal amortizing as though such Mortgage Loans were still current) and all
such income shall be deemed, for all purposes in this Agreement, to be payments
on account of principal and interest on the related Mortgage
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Notes and shall be deposited into the Collection Account. To the extent the
income received is in excess of the amount attributable to amortizing principal
and accrued interest at the Net Mortgage Rate on the related Mortgage Loan, such
excess shall be deposited in the Collection Account.
The Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resources Conservation and Recovery Act of 1976, or other federal, state or
local environmental legislation, on a Mortgaged Property in determining whether
to foreclose upon or otherwise comparably convert the ownership of such
property. To the extent that the Servicer has actual knowledge of any such
substance or waste, it shall consult with the Trustee regarding the appropriate
course of action. The Servicer shall not institute foreclosure actions with
respect to a property containing substance or waste as described above if it
reasonably believes that such action would not be consistent with its servicing
standards, and in no event shall the Servicer manage, operate or take any other
action with respect thereto which the Servicer in good faith believes will
result in "clean-up" or other liability under applicable law. The net income
from the rental or sale of a REO Property shall be deposited in the Collection
Account within two (2) Business Days after receipt thereof by the Servicer.
The Servicer may enter into a special servicing agreement with an
unaffiliated holder of 100% Percentage Interest of a Class B Certificate or a
holder of a class of securities representing interests in such Class B
Certificate and/or other subordinate mortgage pass-through certificates, such
agreement to be (i) substantially in the form of Exhibit J hereto or (ii)
subject to each Rating Agency's acknowledgment that the ratings of the
Certificates in effect immediately prior to the entering into of such agreement
would not be qualified, downgraded or withdrawn and the Certificates wold not be
placed on credit review status (except for possible upgrading) as a result of
such agreement. Any such agreement may contain provisions whereby such holder
may instruct the Servicer to commence or delay foreclosure proceedings with
respect to delinquent Mortgage Loans and will contain provisions for the deposit
of cash by the holder that would be available for distribution to
Certificateholders if Liquidation Proceeds are less than they otherwise may have
been had the Servicer acted in accordance with its normal procedures.
Section 5.22. Trustee to Cooperate; Release of Mortgage Files. (a) Upon
becoming aware of the payment in full of any Mortgage Loan, or upon the receipt
by the Servicer of a notification that payment in full will be made in a manner
customary for such purposes, the Servicer shall immediately notify the Trustee
(if the Trustee holds the related Mortgage File) by a certification (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 5.08 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, within five
Business Days the Trustee shall release the related Mortgage File to the
Servicer and execute and deliver to the Servicer the request for reconveyance,
deed of
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reconveyance or release or satisfaction of mortgage or such other instruments
releasing the lien of the Mortgage as have been provided by the Servicer to the
Trustee, together with the Mortgage Note with written evidence of cancellation
thereon, and the Trustee shall have no further responsibility with respect to
said Mortgage File. Upon any such payment in full, or the receipt of such
notification, the Servicer is authorized to procure from the Trustee under the
deed of trust which secured the Mortgage Note, if any, a deed of full
reconveyance covering the property encumbered by such deed of trust, which
assignment of deed of trust, except as otherwise provided by any applicable law,
shall be recorded by the Servicer in the appropriate land records in the
jurisdiction in which the assignment of deed of trust is recorded, or, as the
case may be, to procure from the Trustee an instrument of satisfaction or, if
the Mortgagor so requests, an assignment without recourse, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person or Persons entitled thereto. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Collection Account or to the Trustee.
(b) From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, the Servicer shall deliver to the Trustee a
certificate of a Servicing Officer requesting that possession of the Mortgage
File be released to the Servicer and certifying as to the reason for such
release and that such release will not invalidate any insurance coverage
provided in respect of the Mortgage Loan under any of the insurance policies
required by this Agreement. With such certificate, the Servicer shall require
that the Trustee release the Mortgage File, and, within five Business Days, the
Trustee shall deliver the Mortgage File or any document therein to the Servicer.
The Servicer shall cause each Mortgage File so released to be returned to the
Trustee when the need therefor by the Servicer no longer exists, unless (i) the
Mortgage Loan has been liquidated and the Net Liquidation Proceeds relating to
the Mortgage Loan have been deposited in the Collection Account or (ii) the
Mortgage File has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Servicer has delivered to the Trustee a
certificate of a Servicing Officer in the form of Exhibit L hereto certifying as
to the name and address of the Person to which such Mortgage File was delivered
and the purpose or purposes of such delivery.
(c) Upon written request of the Servicer, the Trustee shall execute and
deliver to the Servicer any court pleadings, requests for trustee's sale or
other documents prepared by and delivered by the Servicer to the Trustee
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or to any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Mortgage Note or Mortgage
or otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that such pleadings or documents be executed by the
Trustee and certifying as to the reason such documents or pleadings are required
and that the execution and delivery thereof by the Trustee will not invalidate
any insurance coverage under
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the insurance policies required under this Agreement or invalidate or otherwise
affect the lien of the Mortgage, except for the termination of such a lien upon
completion of the foreclosure or trustee's sale.
Section 5.23. Servicing and Other Compensation. The Servicer, as
compensation for its activities hereunder, shall be entitled to receive, on or
prior to each Distribution Date, the amounts provided for as the Servicing Fee
and as reimbursement for Nonrecoverable Advances, Servicing Advances and
reimbursement for Advances, all as specified by Section 5.09. The amount of
compensation or reimbursement provided for shall be accounted for on a Mortgage
Loan-by-Mortgage Loan basis.
Additional servicing compensation in the form of assumption fees,
prepayment fees and late payment charges shall be retained by the Servicer, to
the extent permitted by applicable law. The Servicer shall be required to pay
all expenses incurred by it in connection with its servicing activities
hereunder (including the fees and expenses of the Trustee and any Sub-Servicer)
and shall not be entitled to reimbursement therefor except as specifically
provided in Sections 5.09 and 5.21.
Section 5.24. 1934 Act Reports. (a) The Servicer shall, on behalf of
the Trust, make all filings ("Periodic Reports") required to be made by the
Depositor or the Trust (other than the filings relating to the closing of this
transaction) with respect to the Class A Certificates, the Class M Certificates,
the Class B-1 Certificates and the Class B-2 Certificates pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations of the Securities and Exchange Commission (the "Commission")
thereunder.
(b) Within 30 days after the beginning of the first fiscal year during
which the Trust's obligation to file Periodic Reports pursuant to the Exchange
Act shall have been suspended, the Servicer shall prepare, or cause to be
prepared, a notice on Commission Form 15 ("Form 15") and is hereby authorized to
and shall execute such Form 15 on the Trust's behalf; provided, however, that
the Servicer shall be under no obligation to prepare such notice if the number
of Certificateholders exceeds 300. The Servicer shall file any notice on Form 15
with the Commission in accordance with the provisions of Rule 15d-6 under the
Exchange Act.
Section 5.25. Annual Statement as to Compliance.
The Servicer will deliver to the Depositor and the Trustee on or before
April 15 of each year, beginning with April 15 in the year which begins not less
than three months after the Closing Date, an Officers' Certificate stating, as
to each signer thereof, that (i) a review of the activities of the Servicer
during the preceding calendar year and of performance under this Agreement has
been made under such officer's supervision, (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof
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and (iii) to the best of such officer's knowledge, each Sub-Servicer has
fulfilled its obligations under its Sub-Servicing Agreement in all material
respects, or if there has been a material default in the fulfillment of such
obligations, specifying such default known to such officers and the nature and
status thereof. Copies of such statement shall be provided to each Rating Agency
by the Servicer. Copies of such statement shall also be provided by the Servicer
to any Certificateholder upon request. If the Servicer shall fail to provide
such copies and a Responsible Officer of the Trustee is aware that the Servicer
has not so provided copies, the Trustee shall provide such copies at the
Servicer's expense if the Trustee has received such statement.
Section 5.26. Annual Independent Public Accountants' Servicing Report.
On or before April 15 of each year, beginning with April 15 in the year which
begins not less than three months after the Closing Date, the Servicer at its
expense shall cause a firm of independent public accountants which is a member
of the American Institute of Certified Public Accountants to furnish a statement
to the Depositor and the Trustee to the effect that such firm has examined
certain documents and records relating to the servicing of the Mortgage Loans
and that, on the basis of such examination conducted substantially in compliance
with the Uniform Single Audit Program for Mortgage Bankers, such servicing has
been conducted in compliance with the manner of servicing set forth in pooling
and servicing agreements substantially similar to this Agreement, except for (i)
such exceptions as such firm shall believe to be immaterial and (ii) such other
exceptions as shall be set forth in such statement. Copies of such statement
shall be provided to each Rating Agency, and, upon request, to the
Certificateholders, by the Servicer, or by the Trustee at the Servicer's expense
if the Trustee has received such statement and the Servicer shall fail to
provide such copies and the Trustee is aware that the Servicer has not so
provided copies.
Section 5.27. Access to Certain Documentation; Rights of the Depositor
in Respect of the Servicer. The Servicer shall provide access to the Trustee,
Certificateholders which are savings and loan associations, banks or insurance
companies or examiners of any federal or state banking or insurance regulatory
authority to the documentation regarding the Mortgage Loans if so required by
applicable regulations of any regulatory authority, such access to be afforded
subject to reimbursement for expenses without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer under this Agreement and may, but is not obligated
to, appoint and cause a designee to perform, any defaulted obligations of the
Servicer hereunder or exercise the rights of the Servicer hereunder; provided
that the Servicer shall not be relieved of any of its obligations hereunder by
virtue of the appointment of a designee by the Depositor or its designee. The
Depositor shall not assume any responsibility or liability for any action or
failure to take action by the Servicer and is not obligated to supervise the
performance of the Servicer under this Agreement or otherwise.
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Section 5.28. REMIC-Related Covenants. For as long as the Trust Fund
shall exist, the Servicer and the Trustee shall act in accordance herewith to
assure continuing treatment of the Trust Fund as a REMIC. In particular:
(a) The Servicer shall not create, or permit the creation of, any
"interests" in the REMIC within the meaning of Section 860G(a) of the Code other
than the "regular interests" in the REMIC designated as such in Section 2.04(a)
and the Residual Interest;
(b) As of all times as may be required by the Code, the Servicer will
ensure that substantially all of the assets of the Trust Fund will consist of
"qualified mortgages" as defined in section 860G(a)(3) of the Code and
"permitted investments" as defined in section 860G(a)(5) of the Code. The
Servicer and the Trustee, upon the direction of the Servicer, also will maintain
records that are sufficient to indicate the Trust Fund's compliance with
applicable requirements of the Code (and applicable Proposed, Temporary or final
Treasury Regulations) relating to the assets held by the Trust Fund. Further,
the Servicer shall not permit and the Trustee shall not accept the transfer or
substitution of any Mortgage Loan other than pursuant to Section 3.03, 5.01 or
5.21 of this Agreement, and the Servicer shall, in any case, not permit
substitution later than two years from the Closing Date unless the Servicer and
the Trustee have received an Opinion of Counsel, which will not be an expense of
the Trust Fund, that such transfer or substitution would not adversely affect
the REMIC status of the Trust Fund or would not otherwise be prohibited by this
Agreement;
(c) The Servicer shall ensure that the Trust Fund does not receive a
fee or other compensation for services and that the Trust Fund does not receive
any income from assets other than "qualified mortgages" within the meaning of
section 860G(a)(3) of the Code or "permitted investments" within the meaning of
section 860G(a)(5) of the Code, and shall take whatever action it deems
necessary to avoid any material tax imposed by the Code on the Trust Fund;
(d) The Trustee shall not sell or permit the sale of all or any portion
of the Mortgage Loans or of any Eligible Investment unless such sale is as a
result of a repurchase of the Mortgage Loans pursuant to this Agreement or the
Trustee has received an Opinion of Counsel, which will not be an expense of the
Trust Fund or the Trustee, to the effect that such sale (i) is pursuant to a
"qualified liquidation" as defined in section 860F(a)(4) of the Code and as
described in Section 11.01 hereof, or (ii) would not be treated as a "prohibited
transaction" within the meaning of section 860F(a)(2) of the Code that results
in the realization of a material amount of gain or loss for federal income tax
purposes;
(e) The Trustee shall not accept any contribution to the Trust Fund
after the Startup Day without an Opinion of Counsel (which shall not be an
expense of the Trustee) that such contribution is included within the exceptions
provided in Section 860G(d)(2) of the Code and, therefore, will not be subject
to the tax imposed by Section 860G(d)(1) of the Code; and
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(f) Notwithstanding anything to the contrary in this Agreement, the
Servicer and the Trustee, at the direction of the Servicer, shall take any other
action or refuse to take any action otherwise required (including adjusting the
Purchase Price for any Mortgage Loan) where the Servicer deems such action or
inaction reasonably necessary to ensure the REMIC status of the Trust Fund under
the Code and applicable regulations or to avoid the imposition of any material
tax liability on the Trust Fund that will affect amounts distributable to the
Certificateholders.
(g) In the event that any applicable federal, state or local tax,
including interest, penalties or assessments, additional amounts or additions to
tax, is imposed on the Trust Fund, such tax shall be treated in the same manner
as a Realized Loss and shall be charged against amounts otherwise distributable
to the Holders of the Certificates, except as provided in the last sentence of
this Section 5.28 (g). The Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent shall withdraw from the Collection Account
sufficient funds to pay or provide for the payment of, and to actually pay, such
tax as is estimated to be legally owed by (but such authorization shall not
prevent the Trustee or, if a Paying Agent has been appointed under Section 4.05,
the Paying Agent from contesting, at the expense of the Trust Fund (other than
as a consequence of a breach of its obligations under this Agreement), any such
tax in appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent is hereby
authorized to and shall segregate, into a separate non-interest bearing account,
the net income from any "prohibited transaction" under Code Section 860F(a), the
amount of any taxable contribution to the Trust Fund after the Startup Day that
is subject to tax under Code Section 860G(d), and 35% of any estimated "net
income from foreclosure property" under Section 860G(c) and use such income or
amount, to the extent necessary, to pay such tax. To the extent that any such
tax is paid to the Internal Revenue Service or applicable state or local tax
authorities, the Trustee or a Paying Agent has been appointed under Section
4.05, the Paying Agent shall retain an equal amount from future amounts
otherwise distributable to the Holder of the Class A-R Certificate and shall
distribute such retained amounts to the Holders of the other Classes of
Certificates, to the extent they remain outstanding, until they are fully
reimbursed for any amount of such taxes previously charged to the then Holder of
the Class R Certificate. Neither the Trustee nor the Servicer shall be
responsible for any taxes imposed on the Trust Fund except to the extent such
taxes arise as a consequence of a breach of their respective obligations under
this Agreement.
[End of Article V]
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ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01. Distributions. (a) On each Distribution Date, the Paying
Agent shall apply an amount equal to the Available Distribution Amount in the
following order of priority:
(i) to the Non-PO Class A Certificateholders, all distributable
amounts up to the sum of (A) the Aggregate Class A Interest Accrual
Amount and (B) the Aggregate Class A Interest Shortfall;
(ii) the balance, if any, of the Available Distribution Amount
shall be allocated, first, pro rata (in accordance with the maximum
amounts distributable in accordance with this clause (ii)) between (A)
the Non-PO Class A Certificateholders, the amounts distributable
pursuant to (b)(ii)(A) below, up to the Non-PO Class A Optimal
Principal Amount and (B) the Class A-P Certificateholders, the Class
A-P Amount, in accordance with (b)(ii)(B) below and second, to the
Class A-P Certificateholders, the Class A-P Shortfall Amount, in
accordance with (b)(iii) below;
(iii) to the Class M Certificateholders, the balance, if any, of
the Available Distribution Amount after making the distributions
provided for in paragraphs (i) and (ii) above, in accordance with, and
up to the amount calculated pursuant to, Section 6.01(c) below;
(iv) to the Class B Certificateholders, the balance, if any, of
the Available Distribution Amount after making the distributions
provided for in paragraphs (i) through (iii) above, in accordance
with, and up to the amounts calculated pursuant to, Section 6.01(d)
below; and
(v) to the Class A-R Certificateholders the balance, if any, of
the Available Distribution Amount remaining after the distributions
provided for in paragraphs (i) through (iv) above.
(b) Amounts payable to the Class A Certificateholders on any
Distribution Date shall be distributed as follows:
(i) to the extent the amount available for distribution pursuant
to (a)(i) is sufficient:
(A) to the Class A-1 Certificateholders, (1) the Class A-1
Interest Accrual Amount plus (2) the Class A-1 Shortfall from the
preceding Distribution Date;
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(B) to the Class A-2 Certificateholders, (1) the Class A-2
Interest Accrual Amount plus (2) the Class A-2 Shortfall from the
preceding Distribution Date;
(C) to the Class A-3 Certificateholders, (1) the Class A-3
Interest Accrual Amount plus (2) the Class A-3 Shortfall from the
preceding Distribution Date;
(D) to the Class A-4 Certificateholders, (1) the Class A-4
Interest Accrual Amount plus (2) the Class A-4 Shortfall from the
preceding Distribution Date;
(E) to the Class A-5 Certificateholders, (1) the Class A-5
Interest Accrual Amount plus (2) the Class A-5 Shortfall from the
preceding Distribution Date;
(F) to the Class A-6 Certificateholders, (1) the Class A-6
Interest Accrual Amount plus (2) the Class A-6 Shortfall from the
preceding Distribution Date;
(G) to the Class A-7 Certificateholders, (1) the Class A-7
Interest Accrual Amount plus (2) the Class A-7 Shortfall from the
preceding Distribution Date;
(H) to the Class A-R Certificateholder, (1) the Class A-R
Interest Accrual Amount plus (2) the Class A-R Shortfall from the
preceding Distribution Date; and
(I) to the Class A-X Certificateholders, (1) the Class A-X
Interest Accrual Amount plus (2) the Class A-X Shortfall from the
preceding Distribution Date;
(ii) concurrently, (A) to the Non-PO Class A Certificateholders,
up to the Non-PO Class A Optimal Principal Amount, allocated among the
Non-PO Class A Certificates in accordance with the Non-PO Class A
Principal Payment Rules and (B) to the Class A-P Certificateholders,
the Class A-P Amount;
(iii) to the Class A-P Certificateholders, the Class A-P
Shortfall Amount; provided, however, that any amounts distributed
pursuant to this Section 6.01(b)(iii) shall not cause a further
reduction in the Outstanding Certificate Principal Balance of the
Class A-P Certificates.
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(iv) If the Available Distribution Amount is insufficient to make
the distributions set forth in (b)(i) above, the Paying Agent shall
distribute the Available Distribution Amount to the Non-PO Class A
Certificateholders pro rata in accordance with the amounts otherwise
distributable to them pursuant to (b)(i)(A)-(I) above.
(c) Amounts payable on any Distribution Date to the Class M
Certificateholders shall be distributed up to an amount equal to (A) the Class M
Interest Accrual Amount plus (B) the Class M Shortfall from the preceding
Distribution Date plus (C) the portion of the Subordinated Optimal Principal
Amount allocable (pursuant to Section 6.01(e)) to the Class M Certificates plus
(D) any Carry-over Subordinated Principal Amounts with respect to the Class M
Certificates.
(d) Amounts payable on any Distribution Date to the Class B
Certificateholders pursuant to Section 6.01(a)(iv) shall be distributed in the
following priority:
(1) first, to the Class B-1 Certificateholders, up to an amount
equal to (A) the Class B-1 Interest Accrual Amount plus (B) the Class
B-1 Shortfall from the preceding Distribution Date plus (C) the pro
rata portion, if any, of the Subordinated Optimal Principal Amount
allocable to the Class B-1 Certificates in accordance with Section
6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with
respect to the Class B-1 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class M
Certificates in excess of the Outstanding Certificate Principal
Balance of such Class;
(2) second, to the Class B-2 Certificateholders, up to an amount
equal to (A) the Class B-2 Interest Accrual Amount plus (B) the Class
B-2 Shortfall from the preceding Distribution Date plus (C) the pro
rata portion, if any, of the Subordinated Optimal Principal Amount
allocable to the Class B-2 Certificates in accordance with Section
6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with
respect to the Class B-2 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-1
Certificates in excess of the Outstanding Certificate Principal
Balance of such Class;
(3) third, to the Class B-3 Certificateholders, up to an amount
equal to (A) the Class B-3 Interest Accrual Amount plus (B) the Class
B-3 Shortfall from the preceding Distribution Date plus (C) the pro
rata portion, if any, of the Subordinated Optimal Principal Amount
allocable to the Class B-3 Certificates in accordance with Section
6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with
respect to the Class B-3 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-2
Certificates in excess of the Outstanding Certificate Principal
Balance of such Class;
(4) fourth, to the Class B-4 Certificateholders, up to an amount
equal to (A) the Class B-4 Interest Accrual Amount plus (B) the Class
B-4 Shortfall from the preceding Distribution Date plus (C) the pro
rata portion, if any, of the Subordinated Optimal Principal Amount
allocable to the Class B-4 Certificates in accordance with Section
6.01(e) plus (D) any
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Carry-over Subordinated Principal Amounts with respect to the Class
B-4 Certificates plus (E) any portion of the Subordinated Optimal
Principal Amount allocated to the Class B-3 Certificates in excess of
the Outstanding Certificate Principal Balance of such Class; and
(5) fifth, to the Class B-5 Certificateholders, up to an amount
equal to (A) the Class B-5 Interest Accrual Amount plus (B) the Class
B-5 Shortfall from the preceding Distribution Date plus (C) the pro
rata portion, if any, of the Subordinated Optimal Principal Amount
allocable to the Class B-5 Certificates in accordance with Section
6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with
respect to the Class B-5 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-4
Certificates in excess of the Outstanding Certificate Principal
Balance of such Class.
(e) On each Distribution Date, the Subordinated Optimal Principal
Amount shall be allocated among the Classes of Subordinated Certificates
entitled, pursuant to the next succeeding sentence, to an allocation of
principal on such Distribution Date, pro rata based upon the Outstanding
Certificate Principal Balances of all such Classes so entitled. With respect to
the Subordinated Certificates, on each Distribution Date, principal shall be
distributable to (1) any Class of Subordinated Certificates which has current
Credit Support (before giving effect to any distribution of principal and any
Realized Losses allocable on such Distribution Date) greater than or equal to
the Original Credit Support for such Class; (2) the Class having the lowest
numerical class designation of any outstanding Class of Subordinated
Certificates which does not meet the criteria in (1) above; and (3) the Class
B-5 Certificates if all other outstanding Classes of Subordinated Certificates
meet the criteria in (1) above or if no other Class of Subordinated Certificates
is outstanding; provided, however, that no Class of Subordinated Certificates
shall receive any distributions of principal if any Class of Subordinated
Certificates having a lower numerical class designation than such Class fails to
meet the criteria in (1) above. For purposes of this paragraph, the Class M
Certificates shall be deemed to have a lower numerical class designation than
each Class of Class B Certificates.
(f) The Servicer shall make all calculations necessary to make the
distributions described in this Section 6.01. All distributions made to
Certificateholders of any Class on each Distribution Date will be made to the
Certificateholders of the respective Class of record on the next preceding
Record Date, except that the final distribution with respect to each Class shall
be made as provided in the forms of Certificates. All distributions made to
Certificateholders shall be based on the Percentage Interest of the Class
represented by their respective Certificates, and shall be made either by
transfer in immediately available funds to the account of such Holder at a bank
or other financial or depository institution having appropriate facilities
therefor, if such Holder has so notified the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, in writing at least 10
Business Days prior to the first Distribution Date for which distribution by
wire transfer is to be made and such Holder's Certificates of such Class in the
aggregate evidence an original denomination of not less than $5,000,000 or such
Holder holds a 100% Percentage Interest of such Class or, if not, by check
mailed to the address of the Person entitled thereto as it appears on the
Certificate Register,
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except that the final distribution in retirement of the Certificates will be
made only upon presentation and surrender of the Certificates at the office
specified in the final Distribution Notice. If on any Determination Date, the
Servicer determines that there are no Mortgage Loans outstanding and no other
funds or assets in the Trust Fund other than the funds in the Certificate
Account, the Trustee or if a Paying Agent has been appointed under Section 4.05,
the Paying Agent shall promptly send the final distribution notice to each
Certificateholder specifying the manner in which the final distribution will be
made.
Section 6.02. Statements to the Certificateholders. (a) Not later than
the second Business Day prior to each Distribution Date, the Servicer shall send
to the Paying Agent and the Trustee the relevant information for purposes of
this Section 6.02. Not later than each Distribution Date, the Paying Agent shall
send to each Certificateholder, the Depositor, the Trustee (if other than the
Paying Agent), the Servicer, any co-trustee, and each Rating Agency a statement
setting forth the following information, after giving effect to the
distributions to be made by the Paying Agent pursuant to Section 6.01 on or as
of such Distribution Date:
(i) with respect to each Class of Certificates the amount of such
distribution to Holders of such Class allocable to principal;
(ii) with respect to each Class of Certificates the amount of
such distribution to Holders of such Class allocable to interest;
(iii) the aggregate amount of any Principal Prepayments and
Repurchase Proceeds included in the distributions to
Certificateholders;
(iv) the aggregate amount of any Advances by the Servicer
pursuant to Section 6.03;
(v) the number of Outstanding Mortgage Loans and the Mortgage
Pool Principal Balance as of the close of business as of the end of
the related Principal Prepayment Period;
(vi) the related amount of the Servicing Fees (as adjusted
pursuant to Section 6.05) retained or withdrawn from the Collection
Account by the Servicer;
(vii) the number and aggregate principal amounts of Mortgage
Loans (A) delinquent (1) one Monthly Payment, (2) two Monthly Payments
and (3) three or more Monthly Payments and (B) in foreclosure, in each
case, as of the end of the related Principal Prepayment Period;
(viii) the number and the principal balance of Mortgage Loans
with respect to any real estate acquired through foreclosure or grant
of a deed in lieu of foreclosure;
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(ix) the aggregate amount of all Advances recovered during the
related Due Period;
(x) with respect to the following Distribution Date, the Class A
Percentage, the Class M Percentage, the Class B Percentage, the Class
A Principal Balance, the Class M Principal Balance, the Class B
Principal Balance, the Non-PO Class A Percentage, the Non-PO Class A
Prepayment Percentage, and the level of Credit Support, if any, with
respect to each class of Subordinated Certificates;
(xi) the aggregate amount of Realized Losses during the related
Due Period and the aggregate amount of Realized Losses since the
Cut-off Date;
(xii) the allocation to each Class of Certificates of any
Realized Losses during the related Due Period;
(xiii) the Outstanding Certificate Principal Balance of each
Class of Certificates after giving effect to the distributions to each
Class on such Distribution Date; and
(xiv) the amount of any Compensating Interest Shortfalls on such
Distribution Date.
The Paying Agent's responsibility for sending the above information to
the Certificateholders is limited to the availability, timeliness and accuracy
of the information derived from the Servicer.
Upon reasonable advance notice in writing if required by federal
regulation, the Servicer will provide to each Certificateholder which is a
savings and loan association, bank or insurance company certain reports and
access during business hours to information and documentation regarding the
Mortgage Loans sufficient to permit such Certificateholder to comply with
applicable regulations of regulatory authorities with respect to investment in
the Certificates; provided, that the Servicer shall be entitled to be reimbursed
by each such Certificateholder for the Servicer's actual expenses incurred in
providing such reports and access.
(b) The Servicer shall cause to be prepared, and the Servicer or the
Trustee, as required by applicable law, shall file, any and all tax returns,
information statements or other filings required to be delivered to
Certificateholders and any governmental taxing authority pursuant to any
applicable law with respect to the Trust Fund and the transactions contemplated
hereby (the Servicer or the Trustee may, at its option but with the consent of
the other, which consent shall not be unreasonably withheld, appoint an
organization which regularly engages in the preparation and filing of such
documents on a continuous basis for profit and which represents itself to be
expert in such matters) and the Servicer shall maintain a record of the
information necessary for the application of Section 860E(e) of the Code and
shall make such information available as required by Section 860D(a)(6) of the
Code; provided, however, that the
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Servicer shall notify the Trustee of the Trustee's obligation to make any such
filings and that any fees of the organization appointed as provided above shall
be paid by the Servicer; and provided further that if an organization is
employed, as described above, to prepare and file any such filings, neither the
Trustee nor the Servicer shall be liable for any errors by such organization.
Section 6.03. Advances by the Servicer. If, on any Determination Date,
the Servicer determines that any Monthly Payments due on the immediately
preceding Due Date have not been received, the Servicer shall, unless it
determines in its sole discretion that such amounts will not be recoverable from
Late Collections, Liquidation Proceeds or otherwise, make an Advance on or
before the related Distribution Date in an amount equal to the amount of such
delinquent Monthly Payments, after adjustment of any delinquent interest payment
for the Servicing Fee. For purposes of this Section 6.03, the delinquent Monthly
Payments referred to in the preceding sentence shall be deemed to include an
amount equal to the Monthly Payments that would have been due on Mortgage Loans
which have been foreclosed or otherwise terminated and in connection with which
the Servicer acquired and continues to own the Mortgaged Properties on behalf of
the Certificateholders. If the Servicer makes an Advance, it shall on or prior
to such Distribution Date either (i) deposit in the Collection Account an amount
equal to such Advance, (ii) cause to be made an appropriate entry in the records
of the Collection Account that funds in such account being held for future
distribution or withdrawal have been, as permitted by this Section 6.03, used by
the Servicer to make such Advance or (iii) make Advances in the form of any
combination of clauses (i) and (ii) aggregating the amount of such Advance. Any
funds being held in the Collection Account for future distribution to
Certificateholders and so used pursuant to clause (ii) or (iii) above shall be
replaced by the Servicer from its own funds by deposit into the Collection
Account on or before any subsequent Distribution Date to the extent that funds
in the Collection Account on such Distribution Date shall be less than the
amount of payments required to be made to Certificateholders on such
Distribution Date. Any such Advance shall be included with the distribution to
the Certificateholders on the related Distribution Date. If the Servicer
determines not to make a Nonrecoverable Advance, it shall on the related
Determination Date furnish to the Trustee, any co-trustee, and each Rating
Agency notice of such determination. The Servicer shall be entitled to be
reimbursed from the Collection Account for all Advances and Nonrecoverable
Advances as provided in Section 5.09.
Section 6.04. Allocation of Realized Losses. (a) Prior to each
Determination Date, the Servicer shall determine (i) the total amount of
Realized Losses, if any, incurred during the related Principal Prepayment
Period; (ii) whether and to what extent such Realized Losses constitute Excess
Losses; and (iii) the respective portions of such Realized Losses allocable to
interest and to principal.
(b) The principal portion of any Realized Losses other than Excess
Losses shall be allocated as follows: first, to the Class B-5 Certificates until
the Outstanding Certificate Principal Balance of the Class B-5 Certificates has
been reduced to zero; second, to the Class B-4 Certificates until the
Outstanding Certificate Principal Balance of the Class B-4 Certificates has
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been reduced to zero; third, to Class B-3 Certificates until the Outstanding
Certificate Principal Balance of the Class B-3 Certificates has been reduced to
zero; fourth, to the Class B-2 Certificates until the Outstanding Certificate
Principal Balance of the Class B-2 Certificates has been reduced to zero; fifth,
to the Class B-1 Certificates until the Outstanding Certificate Principal
Balance of the Class B-1 Certificates has been reduced to zero; sixth, to the
Class M Certificates until the Outstanding Certificate Principal Balance of the
Class M Certificates has been reduced to zero; and seventh, to the Non-PO Class
A Certificates on a pro rata basis until the Outstanding Certificate Principal
Balance of the Non-PO Class A Certificates has been reduced to zero; provided,
however, that if a Realized Loss occurs with respect to a Discount Mortgage Loan
(A) the amount of such Realized Loss equal to the product of (i) the amount of
such Realized Loss and (ii) the PO Percentage with respect to such Discount
Mortgage Loan will be allocated to the Class A-P Certificates and (B) the
remainder of such Realized Loss will be allocated as described above. The
principal portion of any Excess Losses shall be allocated among all Classes of
Certificates on a pro rata basis; provided, however, that the applicable PO
Percentage of any Excess Losses on the Discount Mortgage Loans shall be
allocated to the Class A-P Certificates.
(c) As used herein, an allocation of a Realized Loss on a "pro rata
basis" among two or more specified Classes of Certificates means an allocation
on a pro rata basis, among the various Classes so specified, to each such Class
of Certificates on the basis of their then Outstanding Certificate Principal
Balances, prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.
(d) In the event that a recovery is made with respect to any Realized
Loss, the amount of such recovery shall be distributed on the next Distribution
Date first to the Class A Certificateholders, up to the amount to which such
Realized Loss was allocated to the Class A Certificateholders; second to the
Class M Certificateholders, up to the amount to which such Realized Loss was
allocated to the Class M Certificateholders; third to the Class B-1
Certificateholders, up to the amount to which such Realized Loss was allocated
to the Class B-1 Certificateholders; fourth to the Class B-2 Certificateholders,
up to the amount to which such Realized Loss was allocated to the Class B-2
Certificateholders; fifth to the Class B-3 Certificateholders, up to the amount
to which such Realized Loss was allocated to the Class B-3 Certificateholders;
sixth to the Class B-4 Certificateholders, up to the amount to which such
Realized Loss was allocated to the Class B-4 Certificateholders; and seventh to
the Class B-5 Certificateholders, up to the amount to which such Realized Loss
was allocated to the Class B-5 Certificateholders.
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Section 6.05. Compensating Interest; Allocation of Certain Interest
Shortfalls.
(a) Upon a Principal Prepayment of a Mortgage Loan, the Servicer shall
deposit into the Collection Account from its own funds, as a reduction of its
servicing compensation hereunder, an amount, if any, by which the amount of the
interest that would otherwise accrue with respect to such Mortgage Loan from the
date of prepayment to the Due Date in the related Due Period at the Net Mortgage
Rate exceeds the amount of the interest (adjusted to the Net Mortgage Rate)
collected from the Mortgagor with respect to such period (such amount,
"Compensating Interest"); provided, however, that with respect to any
Distribution Date, the Servicer's obligation to deposit any such amount is
limited to an amount equal to the product of (i) one-twelfth of 0.125% and (ii)
the aggregate Scheduled Principal Balance of the Mortgage loans with respect to
such Distribution Date.
(b) On any Distribution Date, the excess, if any, of (X) Compensating
Interest with respect to such Distribution Date over (Y) the amount deposited in
the Collection Account pursuant to (a) above for such Distribution Date shall
equal the "Compensating Interest Shortfall" with respect to such Distribution
Date. On any Distribution Date, the Compensating Interest Shortfall shall be
allocated pro rata among the outstanding Classes of Class A, Class M and Class B
Certificates based on the amount of interest to which each such Class would
otherwise be paid on such Distribution Date had there been no such Compensating
Interest Shortfall.
(c) The interest portion of any Realized Losses ("Realized Loss
Interest Shortfall") shall be allocated as follows: first, to the Class B-5
Certificates, second, to the Class B-4 Certificates, third, to the Class B-3
Certificates, fourth, to the Class B-2 Certificates, fifth, to the Class B-1
Certificates, sixth, to the Class M Certificates, in each case until the
Outstanding Certificate Principal Balance thereof has been reduced to zero, and
seventh, the remainder thereof shall be allocated to the Non-PO Class A
Certificates pro rata among the outstanding Classes of Non-PO Class A
Certificates based on the amount of interest to which each such Class would
otherwise be paid on such Distribution Date had there been no such Realized Loss
Interest Shortfall.
Section 6.06. Subordination. The rights of the Class B
Certificateholders to receive distributions in respect of the Class B
Certificates on any Distribution Date shall be subordinated to the rights of the
Class A and Class M Certificateholders to receive distributions in respect of
the Class A and Class M Certificates. The rights of the Class M
Certificateholders to receive distributions in respect of the Class M
Certificates on any Distribution Date shall be subordinated to the rights of the
Class A Certificateholders to receive distributions in respect of the Class A
Certificates. The rights of the Class B-1 Certificateholders to receive
distributions in respect of the Class B-1 Certificates on any Distribution Date
shall be subordinate to the rights of the Class A and Class M Certificateholders
to receive distributions in respect of such Class A and Class M Certificates.
Each Class of Class B Certificates (other than the Class B-1 Certificates) is
subordinated to the Class A Certificates, the Class M Certificates and each
Class
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of Class B Certificates having a lower numerical class designation than such
Class of Class B Certificates. The rights of the Servicer, as servicer, to
receive funds from the Collection Account, pursuant to Section 5.09, on account
of the Servicing Fee (except as provided in Section 6.05) in respect of each
Mortgage Loan, assumption fees, late payment charges and other mortgagor
charges, reimbursement of Advances and expenses or otherwise, shall not be
subordinated to the rights of the Class A, Class M or Class B
Certificateholders. Amounts held by the Servicer or the Trustee for future
distribution to the Class M or Class B Certificateholders, including, without
limitation, in the Collection Account, shall not be distributed in respect of
the Class M or Class B Certificates except in accordance with the terms of this
Agreement. The Class B Certificateholders are deemed to have granted a security
interest in such amounts to the Class A and Class M Certificateholders to secure
the rights of the Class A and Class M Certificateholders to receive
distributions in priority over the Class B Certificateholders. The Class M
Certificateholders are deemed to have granted a security interest in such
amounts to the Class A Certificateholders to secure the rights of the Class A
Certificateholders to receive distributions in priority over the Class A
Certificateholders.
Section 6.07. Determination of LIBOR.
LIBOR applicable to the calculation of the Certificate Rates on the
Class A-5 and Class A-6 Certificates for any Interest Accrual Period (other than
the initial Interest Accrual Period) will be determined by the Servicer on each
Rate Adjustment Date as follows:
For any Interest Accrual Period other than the first Interest Accrual
Period, the rate for United States dollar deposits for one month which appears
on the Telerate Screen Page 3750 as of 11:00 A.M., London, England time, on the
LIBOR Business Day prior to the first day of such Interest Accrual Period. For
the first Interest Accrual Period, LIBOR shall equal _________% with respect to
the Class A-5 and Class A-6 Certificates. If such rate does not appear on such
page (or such other page as may replace that page on that service, or if such
service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be reasonably selected by the Servicer), the rate will
be the Reference Bank Rate. If no such quotations can be obtained and no
Reference Bank Rate is available, LIBOR will be LIBOR applicable to the
preceding Distribution Date.
The establishment of LIBOR by the Servicer on any Rate Adjustment Date
on the Servicer's subsequent calculation of the Certificate Rates applicable to
the Class A-5 and Class A-6 Certificates for the relevant Interest Accrual
Period, in the absence of manifest error, will be final and binding.
[End of Article VI]
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ARTICLE VII
REPORTS TO BE PREPARED BY THE SERVICER
Section 7.01. Servicer Shall Provide Information as Reasonably
Required. The Servicer shall furnish to the Trustee, during the term of this
Agreement, such periodic, special, or other reports or information, whether or
not provided for herein, as shall be necessary, reasonable, or appropriate in
respect to the Trustee, or otherwise in respect to the purposes of this
Agreement, all such reports or information to be as provided by and in
accordance with such applicable instructions and directions as the Trustee may
reasonably require.
Section 7.02. Federal Information Returns and Reports to
Certificateholders.
(a) For Federal income tax purposes, the taxable year of the Trust Fund
shall be a calendar year and the Servicer shall maintain or cause the
maintenance of the books of the Trust Fund on the accrual method of accounting.
(b) The Servicer shall prepare and file or cause to be filed with the
Internal Revenue Service federal tax or information returns with respect to the
Trust Fund and the Certificates containing such information and at the times and
in the manner as may be required by the Code or applicable Treasury regulations,
and shall furnish to each Certificateholder at any time during the calendar year
for which such returns or reports are made such statements or information at the
times and in the manner as may be required thereby. Without limitation on any
other requirement of this Section 7.02, the Servicer shall make available the
information necessary for the application of Section 860E(e) of the Code within
60 days of such request. With respect to the Class A-R Certificate, the Servicer
shall provide such information or cause such information to be provided to (i)
the Internal Revenue Service, (ii) the transferor of a Class A-R Certificate to
a Disqualified Organization and (iii) a Pass-Thru Entity that holds a Class A-R
Certificate with one or more record holders that are Disqualified Organizations.
The Servicer also shall provide or cause to be provided promptly the above
described computation and information relating to the tax on transfers to
Disqualified Organizations or holdings by Pass-Thru Entities within 60 days
after becoming aware of the transfer to a Disqualified Organization or Pass-Thru
Entity with one or more Disqualified Organization owners, as the case may be. In
addition, except as may be provided in Treasury Regulations, any person holding
an interest in a Pass-Thru Entity as a nominee for another will, with respect to
such interest, be treated as a Pass-Thru Entity. In connection with the
foregoing, the Servicer shall provide the name, address and telephone number of
the person who can be contacted to obtain information required to be reported to
the holders of regular interests in the REMIC (the "REMIC Reporting Agent") as
required by IRS Form 8811. The Trustee hereby designates [NAME] to serve as the
REMIC Reporting Agent. The Servicer shall indicate the election to treat the
Trust Fund as a REMIC (which election shall apply to the taxable period ending
[DATE] and each calendar year thereafter) in such manner as the Code or
applicable Treasury regulations may prescribe. The Trustee shall sign all tax
information returns filed pursuant to this Section 7.02 and any other
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returns as may be required by the Code, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Servicer. The Servicer is hereby designated as the "tax matters
person" (within the meaning of Treas. Reg. ss.1.860F-4(d)) for the Trust Fund.
Any Holder of a Class A-R Certificate will by acceptance thereof so appoint the
Servicer as agent and attorney-in-fact for the purpose of acting as tax matters
person. In the event that the Code or applicable Treasury Regulations prohibit
the Trustee from signing tax or information returns or other statements, or the
Servicer from acting as tax matters person (as an agent or otherwise), the
Trustee or the Servicer, as the case may be, shall take whatever action that in
its sole good faith judgment is necessary for the proper filing of such
information returns or for the provision of a tax matters person, including
designation of the Holder of a Class A-R Certificate to sign such returns or act
as tax matters person. Each Holder of a Class A-R Certificate shall be bound by
this Section 7.02 by virtue of its acceptance of a Class A-R Certificate.
[End of Article VII]
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ARTICLE VIII
THE DEPOSITOR AND THE SERVICER
Section 8.01. Indemnification; Third Party Claims. The Servicer agrees
to indemnify the Depositor and the Trustee and hold the Depositor and the
Trustee, their officers, directors, employees and agents harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Depositor or
the Trustee may sustain in any way related to failure of the Servicer to perform
its duties and service the Mortgage Loans in compliance with the terms of this
Agreement; provided that no such indemnification shall be required with respect
to acts of a prior Servicer. The Servicer shall immediately notify the Depositor
and the Trustee if a claim is made by a third party with respect to this
Agreement or the Mortgage Loans, assume (with the consent of the Depositor and
the Trustee) the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against it, the Depositor or the Trustee
in respect of such claim. This right to indemnification shall survive the
termination of this Agreement.
Section 8.02. Merger or Consolidation of the Depositor or the Servicer.
The Depositor and the Servicer will each keep in full effect its existence,
rights and franchises as a corporation, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its duties under this Agreement. The Servicer will not sell all
or substantially all of its assets without the prior written consent of the
Depositor and the Trustee.
Any person into which the Depositor or the Servicer may be merged or
consolidated, or to whom the Depositor or the Servicer has sold substantially
all of its assets, or any corporation resulting from any merger, conversion or
consolidation to which the Depositor or the Servicer shall be a party, or any
Person succeeding to the business of the Depositor or the Servicer, shall be the
successor of the Depositor or the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person to the Servicer shall satisfy the requirements of
Section 8.05 with respect to the qualifications of a successor to the Servicer.
Notwithstanding anything else in this Section 8.02 and Section 8.04 to
the contrary, the Servicer may assign its rights and delegate its duties and
obligations under this Agreement; provided that the Person accepting such
assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is approved in advance in writing by
the Trustee and the Depositor, is willing to service the Mortgage Loans and
executes and delivers to the Depositor and the Trustee an agreement, in form and
substance reasonably satisfactory to the Depositor and the Trustee, which
contains an assumption by such
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Person of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this Agreement;
provided further that each Rating Agency's rating of any of the Classes of
Certificates that have been rated in effect immediately prior to such assignment
and delegation will not be qualified or reduced or withdrawn as a result of such
assignment and delegation. In the case of any such assignment and delegation,
the Servicer shall be released from its obligations as Servicer under this
Agreement, except that the Servicer shall remain liable for all liabilities and
obligations incurred by it as Servicer hereunder prior to the satisfaction of
the conditions to such assignment and delegation set forth in the next preceding
sentence.
Section 8.03. Limitation on Liability of the Depositor, the Servicer,
the Trustee and Others. Neither the Depositor, the Servicer nor any of the
directors, officers, employees or agents of the Depositor or the Servicer shall
be under any liability to the Trustee or the Certificateholders for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Depositor or the Servicer against any breach of
warranties or representations made herein, or failure to perform its obligations
in strict compliance with this Agreement, or any liability which would otherwise
be imposed by reason of any breach of the terms and conditions of this
Agreement. The Depositor, the Servicer, the Trustee, and any director, officer,
employee or agent of the Depositor, the Servicer or the Trustee may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. Neither the Depositor, the
Trustee nor the Servicer shall be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its respective duties to
service the Mortgage Loans in accordance with this Agreement and which in its
opinion may cause it to incur any expenses or liability; provided, however, that
the Depositor, the Trustee or the Servicer may in its discretion (and, in the
case of the Depositor or the Servicer, with the consent of the Trustee, which
consent shall not be unreasonably withheld) undertake any such action which it
may deem necessary or desirable with respect to this Agreement and the rights
and duties of the parties hereto. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities payable from the Collection Account and the Depositor, the Servicer
or the Trustee shall be entitled to be reimbursed therefor out of the Collection
Account as provided by Section 4.06; provided that no such right of
reimbursement shall exist with respect to the Servicer when such claim relates
to the failure of the Servicer to service the Mortgage Loans in strict
compliance with the terms of this Agreement or to a breach of a representation
or warranty made by the Servicer hereunder.
Section 8.04. Depositor and Servicer Not to Resign. Except as described
in Section 8.02, neither the Depositor nor the Servicer shall assign this
Agreement or resign from the obligations and duties hereby imposed on it except
by mutual consent of the Depositor, the Servicer and all of the
Certificateholders unless the determination is made that its duties hereunder
are no longer permissible under applicable law and such incapacity cannot be
cured by the Depositor or the Servicer. Any such determination permitting the
resignation of the
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Depositor or the Servicer shall be evidenced by an opinion of independent
counsel to such effect delivered to the Trustee which opinion of counsel shall
be in form and substance acceptable to the Trustee. Upon any such assignment or
resignation, the Depositor or the Servicer, as appropriate, shall send notice to
all Certificateholders of the effect of such assignment or resignation upon the
then current rating of the Class of Certificates by each Rating Agency whose
rating on such Class is then in effect. No such resignation shall become
effective until a successor shall have assumed the Depositor's or the Servicer's
responsibilities and obligations hereunder in the manner provided in Section
8.05. Any purported assignment or resignation which does not comply with the
requirements of this Section shall be of no effect.
Section 8.05. Successor to the Servicer. In connection with the
termination of the Servicer's responsibilities and duties under this Agreement
pursuant to Section 8.04 or 9.01, the Trustee shall (i) succeed to and assume
all of the Servicer's responsibilities, rights, duties and obligations as
Servicer (but not in any other capacity) under this Agreement (except that the
Trustee shall not be obligated to make Advances if prohibited by applicable law
nor to effectuate repurchases or substitutions of Mortgage Loans pursuant to
Section 2.02 and except that the Trustee makes no representations and warranties
pursuant to Sections 3.01 and 3.02). Prior to the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement, the Trustee may
appoint a successor having a net worth of not less than $15,000,000 and which is
a FNMA or FHLMC approved seller/servicer in good standing and which shall
succeed to all rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement, except as aforesaid, if the
Trustee receives a letter from each Rating Agency that such appointment would
not result in a reduction or withdrawal of the current rating of any Class of
Certificates that is rated by a Rating Agency. Any co-trustee appointed pursuant
to Section 10.10 for purposes of this Section 8.05 shall have an obligation to
make Advances pursuant to Section 6.03 during such time as the Trustee is the
Servicer, which obligation shall be joint and several with that of the Trustee
as Servicer. If the Trustee has become the successor to the Servicer in
accordance with this Section or Section 9.03, then notwithstanding the above,
the Trustee may, if it shall be unwilling to so act, or shall, if it is unable
to so act, appoint, or petition a court of competent jurisdiction to appoint,
any established housing and home finance institution having a net worth of not
less than $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in
good standing as the successor to the Servicer hereunder in the assumption of
all of the responsibilities, duties or liabilities of the Servicer hereunder. In
connection with any such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree or such court shall determine;
provided, however, that no such compensation shall be in excess of that
permitted under this Agreement without the consent of all of the
Certificateholders. If the Servicer's duties, responsibilities and liabilities
under this Agreement should be terminated pursuant to Section 8.02, 8.04 or
9.01, the Servicer shall discharge such duties and responsibilities during the
period from the date it acquires knowledge of such termination until the
effective date thereof with the same degree of diligence and prudence which it
is obligated to exercise under this Agreement, and shall take no action
whatsoever that might impair or prejudice the rights or financial condition of
its successor or the
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Trust Fund. The resignation or removal of the Servicer pursuant to Section 8.02,
8.04 or 9.01 shall not become effective until a successor shall be appointed
pursuant to this Section and shall in no event relieve the Servicer of liability
for breach of the representations and warranties made pursuant to Section 3.03.
Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Servicer and to the Trustee an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer, with like effect as if originally named as a party to this Agreement
and the Certificates. Any termination or resignation of the Servicer or this
Agreement pursuant to Section 8.02, 8.04, 9.01 or 11.01 shall not affect any
claims that the Trustee may have against the Servicer for events or actions
taken or not taken by the Servicer arising prior to any such termination or
resignation.
The Servicer shall timely deliver to the successor the funds that were,
or were required to be, in the Collection Account and the Escrow Account, if
any, and all Mortgage Files and related documents, statements and recordkeeping
held by it hereunder and the Servicer shall account for all funds and shall
execute and deliver such instruments and do such other things as may reasonably
be required to more fully and definitely vest and confirm in the successor all
such rights, powers, duties, responsibilities, obligations and liabilities of
the Servicer.
Upon a successor's acceptance of appointment as such, the Servicer
shall notify, in writing, the Trustee, the Certificateholders and each Rating
Agency of such appointment.
Section 8.06. Maintenance of Ratings. The Servicer shall cooperate with
the Depositor and take any action that may be reasonably necessary to maintain
the current rating or ratings on the Certificates.
[End of Article VIII]
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ARTICLE IX
DEFAULT
Section 9.01. Events of Default. If one or more of the following Events
of Default shall occur and be continuing, that is to say:
(i) any failure by the Servicer to remit any payment required to be
made or distributed under the terms of this Agreement which continues unremedied
for a period of three Business Days after the date upon which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee or the Depositor or to the Servicer, the Trustee and the
Depositor by the Holders of Certificates of any Class evidencing, as to such
Class, Percentage Interests aggregating not less than 25%; or
(ii) a breach by the Servicer in a material respect of any
representation or warranty set forth in Section 3.02, or failure on the part of
the Servicer duly to observe or perform in any material respect any other of the
covenants or agreements on the part of the Servicer set forth in this Agreement,
which continues unremedied for a period of 60 days after the date on which
written notice of such breach or failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee or the Depositor or to the
Servicer, the Trustee and the Depositor by the Holders of Certificates of any
Class evidencing, as to such Class, Percentage Interests aggregating not less
than 25%; or
(iii) the Servicer shall notify the Trustee in writing that it is
unable to make an Advance required to be made in accordance with Section 6.03;
or;
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period of 60 days;
or
(v) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to all or substantially all of the Servicer's property; or
(vi) the Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations.
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then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Trustee shall notify the Certificateholders and each
Rating Agency of such Event of Default. The Trustee may, and at the written
direction of the Holders of Certificates evidencing Percentage Interests
aggregating more than 50%, shall, by notice in writing to the Servicer,
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof. On or after the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the successor appointed pursuant to
Section 8.05. Upon written request from the Trustee, the Servicer shall prepare,
execute and deliver, any and all documents and other instruments, place in such
successor's possession all Mortgage Files, and do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise, at the Servicer's sole
expense. The Servicer agrees to cooperate with the Trustee and any co-trustee in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to such successor for
administration by it of all cash amounts which shall at the time be credited or
should have been credited by the Servicer to the Collection Account or Escrow
Account or thereafter received with respect to the Mortgage Loans. The Trustee
will have no obligation to take any action or institute, conduct or defend any
litigation under this Agreement at the request, order or direction of any of the
Holders of Certificates unless such Certificateholders have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which the Trustee may incur.
Section 9.02. Waiver of Defaults. The Trustee may waive any default by
the Servicer in the performance of its obligations hereunder and its
consequences, except that a default in the making of any required distribution
on any of the Certificates may only be waived by the holders of a majority of
the Percentage Interests of the affected Certificateholders. Upon any such
waiver of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
Section 9.03. Trustee to Act; Appointment of Successor. On and after
the time the Servicer receives a notice of termination pursuant to Section 9.01,
the Trustee or its appointed agent shall be the successor in all respects to the
Servicer to the extent provided in Section 8.05.
Section 9.04. Notification to Certificateholders and the Rating
Agencies.
(a) Upon any such termination pursuant to Section 9.01, the Trustee
shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register and to each Rating
Agency.
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(b) Within 60 days of a Responsible Officer of the Trustee having
received written notice of the occurrence of any Event of Default, the Trustee
shall transmit by mail to all Holders of Certificates notice of each such Event
of Default hereunder known to the Trustee, unless such Event of Default shall
have been cured or waived.
[End of Article IX]
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ARTICLE X
CONCERNING THE TRUSTEE
Section 10.01. Duties of Trustee. The Trustee, prior to the occurrence
of an Event of Default and after the curing of all Events of Default which may
have occurred, undertakes to, and is empowered to, perform such duties and only
such duties as are specifically set forth in this Agreement. Any permissive
right of the Trustee as enumerated in this Agreement shall not be construed as a
duty; provided that in case an Event of Default has occurred (which has not been
cured), the Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the conduct of such
man's own affairs.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, and, if the Trustee is acting as the
successor Servicer pursuant to Section 8.05 or 9.03, its own willful misconduct
with respect to its servicing obligations; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(ii) The Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) The Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction of Certificateholders of any Class holding Certificates which
evidence, as to such Class, Percentage Interests aggregating not less than 25%
as to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement.
Section 10.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 10.01:
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(a) The Trustee may rely upon and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) The Trustee may consult with counsel, and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Agreement or to institute, conduct or
defend any litigation hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (which has not been cured), to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent man would exercise or use under the circumstances in
the conduct of such man's own affairs;
(d) Neither the Trustee nor any of its directors, officers, employees
or agents shall be personally liable for any action taken, suffered or omitted
by it in good faith and believed by it or any of them to be authorized or within
the discretion or rights or powers conferred upon the Trustee by this Agreement;
(e) Prior to the occurrence of an Event of Default hereunder and after
the curing of all Events of Default which may have occurred, the Trustee shall
not be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by Holders of Certificates of any Class
evidencing, as to such Class, Percentage Interests aggregating not less than 25%
(in the case of conflicting requests by two or more 25% or greater Percentage
Interests, the Trustee shall act in accordance with the first such request);
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such expense or liability
as a condition to such proceeding. The reasonable expense of every such
examination shall be paid by the Servicer, if an Event of Default
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shall have occurred and is continuing, and otherwise by the Certificateholder
requesting the investigation;
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
subcontractors or attorneys; and
(g) Nothing in this Agreement shall be construed to require the Trustee
(acting in its capacity as Trustee) to expend its own funds.
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Certificates by an authorized signatory of the Trustee)
shall be taken as the statements of the Depositor or the Servicer, as the case
may be, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations or warranties as to the validity or sufficiency
of this Agreement or of the Certificates (except that (except as set forth
herein) the Certificates shall be duly and validly executed and authenticated by
it) or of any Mortgage Loan or related document. The Trustee shall not be
accountable for the use or application by the Depositor or the Servicer of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Depositor or the Servicer. The Trustee, in its capacity as trustee hereunder,
shall have no responsibility for the timeliness or the amount of payments made
by the Paying Agent to the Certificateholders.
Section 10.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee.
Section 10.05. Fees and Expenses. The Servicer covenants and agrees to
pay to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Trustee, and
the Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ, and the expenses incurred by the
Trustee in connection with the appointment of an office or agency pursuant to
Section 10.11) except any such expense, disbursement or advance as may arise
from its negligence or bad faith. Notwithstanding anything to the contrary in
this Agreement, this Section shall survive the termination of this Agreement.
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Section 10.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be an entity having its principal office in a state
and city acceptable to the Depositor and organized and doing business under the
laws of such state or the United States of America, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or state
authority. The Trustee shall not be an affiliate of either Seller or the
Depositor. If such entity publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 10.07.
Section 10.07. Resignation and Removal of the Trustee. The Trustee, and
any co-trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Depositor, the Servicer and each
Rating Agency. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor trustee or co-trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee; provided that such appointment
does not result in a reduction or withdrawal of the rating of any of the Classes
of Certificates that have been rated. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time, the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.06 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
The Holders of Certificates evidencing in the aggregate more than 50%
of Percentage Interest may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized, one complete set of
which instruments shall be delivered to the Depositor, one complete set to the
Trustee so removed and one complete set to the successor so appointed.
Any resignation or removal of the Trustee or any resignation of any
co-trustee and appointment of a successor trustee or co-trustee pursuant to any
of the provisions of this Section shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 10.08, or upon
acceptance of appointment by a co-trustee, as applicable, unless with
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respect to a co-trustee, the Trustee receives written notice from each Rating
Agency that the failure to appoint a successor co-trustee would not result in a
withdrawal or reduction of the rating of any of the Classes of Certificates that
have been rated, in which case the resignation of any co-trustee shall be
effective upon receipt of such written notice. Any co-trustee may not be removed
unless the Depositor and the Trustee each receive written notice from each
Rating Agency that such removal would not result in a withdrawal or reduction of
the rating of any of the Classes of Certificates that have been rated, in which
case the removal of any co-trustee shall be effective upon receipt of such
written notice.
Section 10.08. Successor Trustee. Any successor trustee appointed as
provided in Section 10.07 shall execute, acknowledge and deliver to the
Depositor and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective, and such successor trustee shall
become effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Depositor, the Servicer and the predecessor trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for more fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 10.06. Prior to the appointment of any
successor trustee becoming effective, the Depositor shall have received from
each Rating Agency written confirmation that such appointment would not result
in a reduction of the rating of the Class A or Class M Certificates.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register, to the Servicer, any Sub- Servicer and to each Rating
Agency. If the Depositor fails to mail such notice within 10 days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Depositor.
Section 10.09. Merger or Consolidation of Trustee. Any entity into
which the Trustee may be merged or converted or with which it may be
consolidated or any entity resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any entity succeeding to
the business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under the provisions of Section
10.06, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
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Section 10.10. Appointment of Co-Trustee or Separate Trustee. At any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust Fund or property securing the same may at the time
be located, the Depositor and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, of any part of the Trust Fund, and to vest in such Person or Persons,
in such capacity, such title to the Trust Fund, or any part thereof, and,
subject to the other provisions of this Section 10.10, such powers, duties,
obligations, rights and trusts as the Depositor and the Trustee may consider
necessary or desirable. If the Depositor shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 10.06, hereunder, and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 10.08 hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 10.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly and severally, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed (whether as
Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall
be incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
Every instrument appointing any separate trustee or co-trustee shall
refer to this Agreement and the conditions of this Article X. Each separate
trustee and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of appointment,
either jointly with the Trustee or separately, as may be provided therein,
subject to all the provisions of this Agreement, specifically including every
provision of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Every such instrument shall be
filed with the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name.
Section 10.11. Appointment of Office or Agency. The Trustee may appoint
an office or agency in The City of New York where Certificates may be
surrendered for registration of transfer or exchange. The Trustee will maintain
an office at the address stated in Section 12.07 hereof where notices and
demands to or upon the Trustee in respect of the Certificates may be served.
[End of Article X]
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ARTICLE XI
TERMINATION
Section 11.01. Termination. The respective obligations and
responsibilities of the Depositor, the Servicer (except the duty to pay the
Trustee's fees and expenses and indemnification hereunder) and the Trustee shall
terminate upon (i) the later of the final payment or other liquidation (or any
Advance with respect thereto) of the last Mortgage Loan or the disposition of
all property acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan and the remittance of all funds due hereunder; or (ii) at the
option of the Servicer, on any Distribution Date which occurs in the month next
following a Due Date on which the aggregate unpaid Principal Balance of all
Outstanding Mortgage Loans is less than 10% of the aggregate unpaid Principal
Balance of the Mortgage Loans on the Cut-off Date, so long as the Servicer
deposits or causes to be deposited in the Collection Account during the
Principal Prepayment Period related to such Distribution Date (and provides
notice to the Trustee of its intention to so deposit on or before the 20th day
of such Principal Prepayment Period) an amount equal to the Purchase Price for
each Outstanding Mortgage Loan, less any unreimbursed Advances made with respect
to any Mortgage Loan (which amount shall offset completely any unreimbursed
Advances for which the Servicer is otherwise entitled to reimbursement), and,
with respect to all property acquired in respect of any Mortgage Loan remaining
in the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to any Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof. Notwithstanding the foregoing, a termination may be effected by the
making of such optional repurchases only if the termination of the Trust Fund
satisfies the requirement for a "qualified liquidation" of the Trust Fund within
the meaning of Section 860F(a)(4) of the Code and that the purchases of the
Outstanding Mortgage Loans pursuant to the Section 11.01 will not constitute
"prohibited transactions" within the meaning of Section 860F(a)(2) of the Code.
Notice of any termination, specifying the Distribution Date upon which
all Certificateholders may surrender their Certificates to the Trustee or, if a
Paying Agent has been appointed pursuant to Section 4.05, the Paying Agent for
payment and cancellation, shall be given promptly by the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, (upon direction
by the Depositor 10 days prior to the date such notice is to be mailed) by
signed letter to Certificateholders and each Rating Agency mailed no later than
the 25th day of the month preceding the month of such final distribution
specifying (i) the Distribution Date upon which final payment on the
Certificates will be made upon presentation and surrender of Certificates at the
office or agency of the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, therein designated and (ii) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon
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presentation and surrender of the Certificates at the office or agency of the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, therein specified. The Servicer shall indicate the date of adoption of
the plan of qualified liquidation in a statement attached to the final federal
income tax return of the Trust Fund. After giving such notice, the Trustee or if
a Paying Agent has been appointed under Section 4.05, the Paying Agent shall not
register the transfer or exchange of any Certificates. If such notice is given
in connection with the Servicer's election to purchase the Outstanding Mortgage
Loans, the Servicer shall deposit in the Collection Account after adoption of
the plan during the applicable Principal Prepayment Period an amount equal to
the purchase price as determined as provided in clause (ii) of the preceding
paragraph and on the Distribution Date on which such termination is to occur,
Certificateholders will be entitled to the amount of such purchase price but not
amounts in excess thereof, all as provided herein. Upon presentation and
surrender of the Certificates, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, shall notify the Servicer and
the Servicer shall cause to be distributed to Certificateholders an amount equal
to (a) the amount otherwise distributable on such Distribution Date, if not in
connection with a purchase; or (b) if the Servicer elected to so purchase, the
purchase price determined as provided in clause (ii) of the preceding paragraph.
Following such final deposit the Trustee shall promptly release to the Servicer
the Mortgage Files for the remaining Mortgage Loans, and the Trustee shall
execute all assignments, endorsements and other instruments necessary to
effectuate such transfer and shall have no further responsibility with regard to
said Mortgage Files.
If all of the Certificateholders shall not surrender their Certificates
for cancellation within three months after the time specified in the
above-mentioned written notice, at the close of the 90 day period beginning
after the written notice is given, each remaining Certificateholder will be
credited with an amount that would have been otherwise distributed to such
Certificateholder, and the Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for cancellation
and receive the final distribution with respect thereto. If within three months
after the second notice all the Certificates shall not have been surrendered for
cancellation, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, shall appoint an agent to take appropriate and
reasonable steps to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets which remain in the Trust Fund hereunder.
[End of Article XI]
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 12.02. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding-up of the Trust Fund, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and the Holders of Certificates
of any Class evidencing in the aggregate not less than 25% of the Percentage
Interests of such Class shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
(in the case of conflicting requests by two or more 25% or greater Percentage
Interests, the Trustee shall act in accordance with the first such request) and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Trustee, for 60 days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding; it being understood and intended, and being expressly covenanted
by each Certificateholder with every other Certificateholder and the Trustee,
that no one or more Holders of Certificates of any Class shall have any right in
any manner whatever by virtue of any provision of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of such Certificates
of such Class or any other Class, or to obtain or seek to obtain priority over
or preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner herein provided and for the common benefit of
Certificateholders of such Class or all Classes, as the case may be.
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For the protection and enforcement of the provisions of this Section, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity.
Section 12.03. Amendment. This Agreement may be amended from time to
time by the Depositor, the Servicer and the Trustee, without the consent of any
of the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein, to
ensure continuing treatment of the Trust Fund as a REMIC to avoid or minimize
the risk of imposition of any tax on the Trust Fund pursuant to the Code, or to
make any other provisions with respect to matters or questions arising under
this Agreement which shall not be materially inconsistent with the provisions of
this Agreement, provided that such actions shall not, as evidenced by an Opinion
of Counsel, adversely affect in any material respect the interests of any
Certificateholder of a Class having an Outstanding Certificate Principal Balance
of greater than zero or cause the Trust Fund to fail to qualify as a REMIC.
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of
each Class of Certificates having an Outstanding Certificate Principal Balance
greater than zero and affected thereby for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01, without the consent of the Holders
of all Certificates of such Class then outstanding.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 12.03 to approve the particular form of any proposed amendment but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
Section 12.04. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
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Section 12.05. Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 12.06. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 12.07. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by first class or registered mail, postage
prepaid, to (i) in the case of the Depositor, Chase Manhattan Acceptance
Corporation, 300 Tice Boulevard, 3rd Floor North, Woodcliff Lake, New Jersey
07675, Attention: Structured Finance, (ii) in the case of the Servicer, Chase
Manhattan Mortgage Corporation, 3415 Vision Drive, Columbus, Ohio 43219,
Attention: Investor Accounting (with a copy to Chase Manhattan Mortgage
Corporation, 343 Thornall Street, Edison, New Jersey 08837, Attention:
Structured Finance), (iii) in the case of the Trustee, [TRUSTEE], [ADDRESS],
Attention: Corporate Trust Department, (iv) in the case of [Rating Agency],
[ADDRESS], (v) in the case of [Rating Agency], [ADDRESS], and (vi) in the case
of any of the foregoing persons, such other addresses as may hereafter be
furnished by any such persons to the other parties to this Agreement.
[End of Article XII]
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IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.
CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: _____________________________
Name:
Title:
CHASE MANHATTAN MORTGAGE
CORPORATION
By: _____________________________
Name:
Title:
[TRUSTEE],
as Trustee
By: _____________________________
Name:
Title:
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EXHIBIT A
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT B
CONTENTS OF MORTGAGE FILE
(A) (I) Original Mortgage Note (or a lost note affidavit (including a
copy of the original Mortgage Note)) or (II) original Consolidation, Extension
and Modification Agreement (or a lost note affidavit (including a copy of the
original Consolidation, Extension and Modification Agreement), in either case
endorsed, "Pay to the order of [TRUSTEE], as trustee, without recourse."
(B) The original Mortgage (including all riders thereto) with evidence
of recording thereon, or a copy thereof certified by the public recording office
in which such mortgage has been recorded or, if the original Mortgage has not
been returned from the applicable public recording office, a true certified
copy, certified by the Seller, of the original Mortgage together with a
certificate of the Seller certifying that the original Mortgage has been
delivered for recording in the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located.
(C) The original Assignment of Mortgage to "[TRUSTEE], as trustee,"
which assignment shall be in form and substance acceptable for recording, or a
copy certified by the Seller as a true and correct copy of the original
Assignment which has been sent for recordation. Subject to the foregoing, such
assignments may, if permitted by law, be by blanket assignments for Mortgage
Loans covering Mortgaged Properties situated within the same county. If the
Assignment of Mortgage is in blanket form, a copy of the Assignment of Mortgage
shall be included in the related individual Mortgage File.
(D) The original policy of title insurance, including riders and
endorsements thereto, or if the policy has not yet been issued, a written
commitment or interim binder or preliminary report of title issued by the title
insurance or escrow company.
(E) Originals of all recorded intervening Assignments of Mortgage, or
copies thereof, certified by the public recording office in which such
Assignments or Mortgage have been recorded showing a complete chain of title
from the originator to the Depositor, with evidence of recording, thereon, or a
copy thereof certified by the public recording office in which such Assignment
of Mortgage has been recorded or, if the original Assignment of Mortgage has not
been returned from the applicable public recording office, a true certified
copy, certified by the Seller of the original Assignment of Mortgage together
with a certificate of the Seller certifying that the original Assignment of
Mortgage has been delivered for recording in the appropriate public recording
office of the jurisdiction in which the Mortgaged Property is located.
<PAGE>
(F) Originals, or copies thereof certified by the public recording
office in which such documents have been recorded, of each assumption,
extension, modification, written assurance or substitution agreements, if
applicable, or if the original of such document has not been returned from the
applicable public recording office, a true certified copy, certified by the
Seller, of such original document together with certificate of Seller certifying
the original of such document has been delivered for recording in the
appropriate recording office of the jurisdiction in which the Mortgaged Property
is located.
(G) If the Mortgaged Note or Mortgage or any other material document or
instrument relating to the Mortgaged Loan has been signed by a person on behalf
of the Mortgagor, the original power of attorney or other instrument that
authorized and empowered such person to sign bearing evidence that such
instrument has been recorded, if so required in the appropriate jurisdiction
where the Mortgaged Property is located (or, in lieu thereof, a duplicate or
conformed copy of such instrument, together with a certificate of receipt from
the recording office, certifying that such copy represents a true and complete
copy of the original and that such original has been or is currently submitted
to be recorded in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located), or if the original power
of attorney or other such instrument has been delivered for recording in the
appropriate public recording office of the jurisdiction in which the Mortgaged
Property is located.
<PAGE>
EXHIBIT C
FORMS OF CLASS A CERTIFICATES
<PAGE>
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE
MANHATTAN ACCEPTANCE CORPORATION, THE SERVICER OR THE TRUSTEE REFERRED TO BELOW
OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST
REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED
BY CHASE MANHATTAN ACCEPTANCE CORPORATION, CHASE MANHATTAN MORTGAGE CORPORATION,
THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ] CLASS A-1
Number 98-[ ]-A-1 Original Denomination:
$____________________
Cut-off Date: [DATE] Final Scheduled Distribution
Date: __________________
First Distribution Date:
[DATE] Approximate Aggregate Original
Denomination of all Class A-1
Certificate Rate: ___% Certificates: $________________
evidencing an interest in distributions allocable to the Class A-1 Certificates
with respect to a pool of conventional one- to four-family mortgage loans formed
and sold by
CHASE MANHATTAN ACCEPTANCE CORPORATION CUSIP: ______________
<PAGE>
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Trustee for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
This certifies that Cede & Co. is the registered owner of the ownership
interest evidenced by this Certificate (obtained by dividing the Original
Denomination of this Certificate by the aggregate Original Denomination of all
Class A-1 Certificates) in certain monthly distributions with respect to a pool
(the "Mortgage Pool") of conventional one- to four-family adjustable rate
mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan
Acceptance Corporation (the "Company"), which Mortgage Loans are secured by
Mortgaged Properties, and in certain other property held in trust for the
benefit of the Certificate holders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (in such
capacity, the "Servicer"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of [DATE] (the "Agreement") among the Company, the
Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not defined
herein, the capitalized terms used herein shall have the meanings assigned in
the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class
A (the "Class A Certificates") and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. Also issued under the Agreement are Certificates designated as
Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class M (the "Class
M Certificates") and Class B (the "Class B Certificates"). The Class A
Certificates, the Class M Certificates and the Class B Certificates are
collectively referred to as the "Certificates".
Pursuant to the terms of the Agreement, the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, will distribute
from funds in the Certificate Account the amount as described on the reverse
hereof on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (the "Distribution Date"), commencing on
[DATE]. Such distributions will be made to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month in which such payment is made, or if such last day
is not a Business Day, the Business Day immediately preceding such last day (the
"Record Date").
Distributions on this Certificate will be made either by check mailed
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate
<PAGE>
Register, or by wire transfer in immediately available funds to the account of
such Holder at a bank or other financial or depository institution having
appropriate facilities therefor, if such Holder has so notified the Paying Agent
in writing at least 10 Business Days prior to the first Distribution Date for
which distribution by wire transfer is to be made, and such Holder's
Certificates evidence an aggregate original principal balance of not less than
$5,000,000 or such Holder holds a 100% Percentage Interest of such Class.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office of the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, or agency appointed by the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, for the purpose and specified in
such notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed.
Dated: [DATE] CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: ___________________________________
Certificate of Authentication
This is one of the Class A-1 Certificates
referred to in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: __________________________
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], issued
in ten Classes of Class A Certificates, one Class of Class M Certificates and
five Classes of Class B Certificates, each evidencing an interest in certain
distributions with respect to a pool of adjustable rate one- to four-family
first Mortgage Loans formed and sold by the Company and certain other property
conveyed by the Company to the Trustee. The Class A Certificates evidence in the
aggregate the Class A Percentage of distributions relating to repayments of
principal and interest on such Mortgage Loans. The Class M Certificates evidence
in the aggregate the Class M Percentage of distributions relating to repayments
of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the Principal
Balance of this Certificate will be different from the Original Denomination
shown above. Anyone acquiring this Certificate may ascertain its current
Principal Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that it will
look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust Office in New
York, New York, or at the office of any Paying Agent appointed under the
Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee (or any Paying Agent, as the case
may be) will provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like Class and dated the date of authentication
by the Authenticating Agent.
No service charge will be made to the Holder for any transfer or
exchange of the Certificate, but the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, may require payment of a sum
sufficient to cover any tax or governmental charge
<PAGE>
that may be imposed in connection with any transfer or exchange of the
Certificate. Prior to due presentation of a Certificate for registration of
transfer, the Company, the Servicer, the Paying Agent and the Trustee may treat
the person in whose name any Certificate is registered as the owner of such
Certificate and the Percentage Interest in the Trust Fund evidenced thereby for
the purpose of receiving distributions pursuant to the Agreement and for all
other purposes whatsoever, and neither the Company, the Servicer, the Paying
Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions therein which may
be inconsistent with the other provisions therein, to ensure continuing
treatment of the Trust Fund as a REMIC, or to make any other provisions with
respect to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Company, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
The respective obligations and responsibilities of the Company, the
Servicer and the Trustee under the Agreement will terminate upon (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon the
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less
than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the
Cut-off Date, so long as the Servicer deposits or causes to be deposited in the
Collection Account during the Principal Prepayment Period related to such
Distribution Date an amount equal to the Purchase Price for each Mortgage Loan,
less any unreimbursed Advances made with respect to any Mortgage Loan, and with
respect to all property acquired in respect of any Mortgage Loan remaining in
the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the earlier of (i) 32 years
<PAGE>
after the Closing Date and (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James's, living on the date hereof.
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
- -----------------------
- -----------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT D
FORM OF CLASS M CERTIFICATE
THIS CLASS M CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE COMPANY SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY
(INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE)
RELATING TO THE CERTIFICATES.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE
MANHATTAN ACCEPTANCE CORPORATION, THE SERVICER OR THE TRUSTEE REFERRED TO BELOW
OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST
REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED
BY CHASE MANHATTAN ACCEPTANCE CORPORATION, CHASE MANHATTAN MORTGAGE CORPORATION,
THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ], CLASS M
Number 98-[ ]-M-1 Original Denomination
$_____________________
Cut-off Date: [DATE] Final Scheduled Distribution
Date: _________________
First Distribution Date:
[DATE] Approximate Aggregate Original
Denomination of all Class M
Certificate Rate: ___% Certificates: $_______________
evidencing an interest in distributions allocable to the Class M Certificates
with respect to a pool of conventional one- to four-family mortgage loans formed
and sold by
CHASE MANHATTAN ACCEPTANCE CORPORATION CUSIP: ____________
This certifies that _______________________________ is the registered
owner of the ownership interest evidenced by this Certificate (obtained by
dividing the Original Denomination of this Certificate by the aggregate Original
Denomination of all Class M Certificates) in certain monthly distributions with
respect to a pool (the "Mortgage Pool") of conventional one- to four-family
adjustable rate mortgage loans (the "Mortgage Loans") formed and sold by Chase
Manhattan Acceptance Corporation (the "Company"), which Mortgage Loans are
secured by Mortgaged Properties, and in certain other property held in trust for
the benefit of the Certificate holders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (in such
capacity, the "Servicer"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of [DATE] (the "Agreement") among the Company, the
Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not defined
herein, the capitalized terms used herein shall have the meanings assigned in
the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class
M (the "Class M Certificates") and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. Also issued under the Agreement are Certificates designated as
Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class A (the "Class
A Certificates") and Class B (the "Class B Certificates"). The Class A
Certificates are senior to, and the Class B Certificates are subordinate to, the
Class M Certificates in right of payment to
<PAGE>
the extent described herein and in the Agreement. The Class A Certificates,
Class M Certificates and Class B Certificates are collectively referred to as
the "Certificates".
Pursuant to the terms of the Agreement, the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, will distribute
from funds in the Certificate Account the amount as described on the reverse
hereof on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (the "Distribution Date"), commencing on
[DATE]. Such distributions will be made to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month in which such payment is made, or if such last day
is not a Business Day, the Business Day immediately preceding such last day (the
"Record Date").
Distributions on this Certificate will be made either by check mailed
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, or by wire transfer in immediately available
funds to the account of such Holder at a bank or other financial or depository
institution having appropriate facilities therefor, if such Holder has so
notified the Paying Agent in writing at least 10 Business Days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
and such Holder's Certificates evidence an aggregate original principal balance
of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of
such Class. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee or, if a Paying Agent
has been appointed under Section 4.05, the Paying Agent, of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, or agency appointed by the Trustee or, if a Paying Agent
has been appointed under Section 4.05, the Paying Agent, for the purpose and
specified in such notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed.
Dated: [DATE] CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: ________________________________
Certificate of Authentication
This is one of the Class M Certificates
referred to in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: _____________________________
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], issued
in ten Classes of Class A Certificates, one Class of Class M Certificates and
five Classes of Class B Certificates, each evidencing an interest in certain
distributions with respect to a pool of adjustable rate one- to four-family
first Mortgage Loans formed and sold by the Company and certain other property
conveyed by the Company to the Trustee. The Class A Certificates evidence in the
aggregate the Class A Percentage of distributions relating to repayments of
principal and interest on such Mortgage Loans. The Class M Certificates evidence
in the aggregate the Class M Percentage of distributions relating to repayments
of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the Principal
Balance of this Certificate will be different from the Original Denomination
shown above. Anyone acquiring this Certificate may ascertain its current
Principal Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that it will
look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust Office in New
York, New York, or at the office of any Paying Agent appointed under the
Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee (or any Paying Agent, as the case
may be) will provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like Class and dated the date of authentication
by the Authenticating Agent.
No service charge will be made to the Holder for any transfer or
exchange of the Certificate, but the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Company, the
Servicer and the Trustee may treat the person in whose name any Certificate is
registered as the owner of such
<PAGE>
Certificate and the Percentage Interest in the Trust Fund evidenced thereby for
the purpose of receiving distributions pursuant to the Agreement and for all
other purposes whatsoever, and neither the Company, the Servicer, the Paying
Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions therein which may
be inconsistent with the other provisions therein, to ensure continuing
treatment of the Trust Fund as a REMIC, or to make any other provisions with
respect to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Company, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
The respective obligations and responsibilities of the Company, the
Servicer and the Trustee under the Agreement will terminate upon (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon the
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less
than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the
Cut-off Date, so long as the Servicer deposits or causes to be deposited in the
Collection Account during the Principal Prepayment Period related to such
Distribution Date an amount equal to the Purchase Price for each Mortgage Loan,
less any unreimbursed Advances made with respect to any Mortgage Loan, and with
respect to all property acquired in respect of any Mortgage Loan remaining in
the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the earlier of (i) 32 years
after the Closing Date and (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St.
James's, living on the date hereof.
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- -------------------
- -------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT E
FORMS OF CLASS B CERTIFICATES
THIS CLASS B-1 CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AND THE CLASS M CERTIFICATES AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
THIS CLASS B-1 CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS SOLD OR TRANSFERRED IN TRANSACTIONS
WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW
AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
CLASS B-1 CERTIFICATE
Original Denomination
$_______________________
Aggregate Original Principal
Balance of all Class B-1
Certificates: $______________
Cut-off Date: [DATE] Number 98-[ ]-B-1-1
First Distribution Date:
[DATE]
Certificate Rate: ___%
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
<PAGE>
evidencing an ownership interest in distributions allocable to a pool
of conventional one- to four-family mortgage loans formed and sold by
CHASE MANHATTAN ACCEPTANCE CORPORATION
This Certificate does not represent an obligation of or interest in
Chase Manhattan Acceptance Corporation ("CMAC" or the "Depositor"), the Servicer
or the Trustee referred to below or any of their affiliates. Neither this
Certificate, the REMIC regular interest represented hereby nor the underlying
Mortgage Loans are guaranteed or insured by CMAC, Chase Manhattan Mortgage
Corporation, the Trustee or by any of their affiliates or by any governmental
agency or instrumentality.
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY
INQUIRY OF THE TRUSTEE.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE COMPANY SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY
<PAGE>
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF
THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND
WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR
AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES
UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
This certifies that _____________________________ is the registered
owner of the ownership interest (the "Ownership Interest") evidenced by this
Certificate (obtained by dividing the Original Denomination of this Certificate
by the aggregate Original Denomination of all Class B-1 Certificates) in certain
distributions with respect to a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan
Acceptance Corporation (hereinafter called the "Depositor"), and certain other
property held in trust for the benefit of Certificate holders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage
Corporation (the "Servicer") and are secured by first mortgages on Mortgaged
Properties. The Trust Fund was created pursuant to a Pooling and Servicing
Agreement (the "Agreement"), dated as of [DATE] among the Depositor, the
Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class
B-1 (the "Class B-1 Certificate") and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the Holder
of this Certificate by virtue of the acceptance hereof assents and by which
Agreement such Holder is bound.
Distributions on this Certificate will be made either by check mailed
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, or by wire transfer in immediately available
funds to the account of such Holder at a bank or other financial or depository
institution having appropriate facilities therefor, if such Holder has so
notified the Paying Agent in writing at least 10 Business Days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
and such Holder's Certificates evidence an aggregate original principal balance
of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of
such Class.
The rights of the Class B Certificateholders to receive distributions
in respect of the Class B Certificates on any Distribution Date are subordinated
to the rights of the Class A and Class M Certificateholders and the holders of
any Class or Classes of Class B Certificates having a lower numerical class
designation to receive distributions in respect of the Class A and Class M
Certificates and such Class B Certificates to the extent, and only to the
extent, set forth in the Agreement. Amounts properly distributed to the Class B
Certificateholders pursuant to the
<PAGE>
Agreement will be deemed released from the Trust Fund, and the Class B
Certificateholders will not in any event be required to refund any such
distributed amounts. The final distribution on this Certificate will be made
after due notice by the Trustee of the pendency of such distribution and only
upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and specified in such notice of final
distribution.
The Trustee will cause to be kept at its Corporate Trust Office in New
York, New York, or at the office of any Paying Agent appointed under the
Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, will provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Upon surrender for registration of transfer of any Certificate at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose, the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, will, subject to
the limitations set forth in the Agreement, authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate of a like class
and dated the date of authentication by the Authenticating Agent.
No service charge will be made to the Holder for any transfer or
exchange of the Certificate, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Depositor, the
Servicer, the Paying Agent and the Trustee may treat the person in whose name
any Certificate is registered as the owner of such Certificate and the Ownership
Interest in the Trust Fund evidenced thereby for the purpose of receiving
distributions pursuant to the Agreement and for all other purposes whatsoever,
and neither the Depositor, the Servicer nor the Trustee will be affected by
notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions therein, which
may be inconsistent with any other provisions therein, to ensure continuing
treatment of the Trust Fund or its assets as a REMIC and to avoid the imposition
of certain tax liabilities, or to make any other provisions with respect to
matters or questions arising under the Agreement which are not materially
inconsistent with the provisions of the Agreement, provided that such action
does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Depositor,
the Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage Interest of each
Class of Certificates affected thereby for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any
<PAGE>
manner the amount of, or delay the timing of, payments received on the Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage
of Certificates of any Class the Holders of which are required to consent to any
such amendment or (iii) change the percentage specified in clause (ii) of the
first paragraph of Section 11.01 of the Agreement, without the consent of the
Holders of all Certificates of such Class then outstanding.
The respective obligations and responsibilities of the Depositor, the
Servicer and the Trustee under the Agreement will terminate upon: (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month next following a Due Date on
which the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans
is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans
on the Cut-off Date, so long as the Servicer deposits or causes to be deposited
in the Collection Account during the Principal Prepayment Period related to such
Distribution Date an amount equal to the Purchase Price for each Mortgage Loan,
less any unreimbursed Advances made with respect to any Mortgage Loan and, with
respect to all property acquired in respect of any Mortgage Loan remaining in
the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the earlier of (i) 32 years after
the Closing Date and (ii) the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James's, living on the date hereof.
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed.
Dated: [DATE] CHASE MANHATTAN ACCEPTANCE
CORPORATION
By: ______________________________
Authorized Officer
This is one of the Class B-1
Certificates referred to
in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: ________________________
Authorized Signatory
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- ----------------------
- ----------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT F
FORM OF CLASS A-R CERTIFICATE
AS MORE FULLY PROVIDED BY SECTION 4.02(i) OF THE AGREEMENT, CERTAIN SPECIFIED
ENTITIES INCLUDING (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION
THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY
OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY THAT
IS A CORPORATION ALL OF WHOSE ACTIVITIES ARE SUBJECT TO TAX UNDER CHAPTER 1 OF
SUBTITLE A OF THE CODE AND (EXCEPT IN THE CASE OF FHLMC) A MAJORITY OF WHOSE
BOARD OF DIRECTORS IS NOT SELECTED BY THE UNITED STATES, OR ANY STATE OR
POLITICAL SUBDIVISION THEREOF), (B) ANY ORGANIZATION THAT IS EXEMPT FROM TAX
IMPOSED BY CHAPTER 1 OF SUBTITLE A OF THE CODE, OTHER THAN (X) A TAX-EXEMPT
FARMERS' COOPERATIVE WITHIN THE MEANING OF SECTION 521 OF THE CODE OR (Y) AN
ORGANIZATION THAT IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE ON
"UNRELATED BUSINESS INCOME", (C) A CORPORATION OPERATING ON A COOPERATIVE BASIS
THAT IS ENGAGED IN FURNISHING ELECTRIC ENERGY OR PROVIDING TELEPHONE SERVICE TO
PERSONS IN RURAL AREAS (WITHIN THE MEANING OF SECTION 1381(a)(2)(C) OF THE CODE)
AND (D) CERTAIN FOREIGN PERSONS ARE PROHIBITED FROM ACQUIRING BENEFICIAL
OWNERSHIP OF A CLASS A-R CERTIFICATE.
CLASS A-R CERTIFICATE
Cut-off Date: [DATE] Original Denomination
$______________________
First Distribution Date: Aggregate Original Principal
[DATE] Balance of all Class A-R
Certificates: $__________
Cut-off Date: [DATE] Number 98-[ ]-A-R-1
Certificate Rate: ___%
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
evidencing an ownership interest in distributions allocable to
the Residual Interest Certificates with respect to a pool of
conventional one- to four-family first mortgage loans formed
and sold by
CHASE MANHATTAN ACCEPTANCE CORPORATION
<PAGE>
This Certificate does not represent an obligation of or interest in
Chase Manhattan Acceptance Corporation, the Servicer or the Trustee referred to
below or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by Chase Manhattan Acceptance
Corporation, Chase Manhattan Mortgage Corporation, the Trustee or by any of
their affiliates or by any governmental agency or instrumentality.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE DEPOSITOR SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY
(INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE)
RELATING TO THE CERTIFICATES.
<PAGE>
This certifies that ____________________ is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool (the
"Mortgage Pool) of conventional one- to four-family first mortgage loans (the
"Mortgage Loans") formed and sold by Chase Manhattan Acceptance Corporation
(hereinafter called the "Depositor", which term includes any successor entity
under the Agreement referred to below) and certain other property held in trust
for the benefit of Certificateholders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (the
"Servicer") and are secured by first mortgages on Mortgaged Properties. The
Trust Fund was created pursuant to a Pooling and Servicing Agreement (the
"Agreement") dated as of [DATE] among the Depositor, the Servicer and [TRUSTEE],
as trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class
A-R (the "Class A-R Certificate") and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the Holder
of this Certificate by virtue of the acceptance hereof assents and by which
Agreement such Holder is bound. All payments made under this Certificate will be
made in accordance with the terms of the Agreement. Also issued under the
Agreement are Certificates designated as Multi-Class Mortgage Pass-Through
Certificates Series [ ], Class A, Class M, Class B-1, Class B-2, Class B-3,
Class B-4 and Class B-5 Certificates. The Class A Certificates, the Class M
Certificates, the Class B Certificates and the Class A-R Certificates are
collectively referred to as the "Certificates".
The final distribution on this Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, for that purpose and specified in such notice of final
distribution.
The Trustee will cause to be kept at its Corporate Trust Office in New
York, New York, or at the office of any Paying Agent appointed under the
Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, will provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Upon surrender for registration of transfer of any Certificate at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose, the Trustee will, subject
to the limitations set forth in the Agreement, authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate of a like class
and dated the date of authentication by the Trustee.
No service charge will be made to the Holder for any transfer or
exchange of the Certificate, but the Trustee may require payment of a sum
sufficient to cover any tax or
<PAGE>
governmental charge that may be imposed in connection with any transfer or
exchange of the Certificate. Prior to due presentation of a Certificate for
registration of transfer, the Depositor, the Servicer, the Paying Agent and the
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the Ownership Interest in the Trust Fund evidenced
thereby for the purpose of receiving distributions pursuant to the Agreement and
for all other purposes whatsoever, and neither the Depositor, the Servicer, the
Paying Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions therein, which
may be inconsistent with any other provisions therein, to ensure continuing
treatment of the Trust Fund or its assets as a REMIC and to avoid the imposition
of certain tax liabilities, or to make any other provisions with respect to
matters or questions arising under the Agreement which are not materially
inconsistent with the provisions of the Agreement, provided that such action
does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Depositor,
the Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
the Mortgage Loans which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
An election will be made to treat the Trust Fund as a REMIC for federal
income tax purposes. The Class A Certificates, the Class M Certificates, the
Class B Certificates will represent regular interests in the REMIC. The Class
A-R Certificate constitutes the Residual Interest in the REMIC.
The respective obligations and responsibilities of the Depositor, the
Servicer and the Trustee under the Agreement will terminate upon: (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month next following a Due Date on
which the aggregate unpaid Principal Balance of all Outstanding Mortgage Loans
is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans
on the Cut-off Date, so long as the Servicer
<PAGE>
deposits or causes to be deposited in the Collection Account during the
Principal Prepayment Period related to such Distribution Date an amount equal to
the Purchase Price for each Mortgage Loan, less unreimbursed Advances made with
respect to any Mortgage Loan and, with respect to all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the
fair market value of such property, as determined by an appraisal to be
conducted by an appraiser selected by the Trustee, less any Advances made with
respect to the Mortgage Loan with respect to which property has been acquired;
provided, however, that in no event shall the trust created hereby continue
beyond the earlier of (i) 32 years after the Closing Date and (ii) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St.
James's, living on the date hereof.
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed.
Dated: [DATE] CHASE MANHATTAN MORTGAGE
CORPORATION
By: ______________________________
Authorized Officer
This is the Class A-R
Certificate referred to
in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By: ________________________
Authorized Signatory
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- -----------------
- -----------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT G
FORM OF TRUSTEE CERTIFICATION
[DATE]
Chase Manhattan Acceptance Corporation
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Re: Pooling and Servicing Agreement dated as of [DATE] among
Chase Manhattan Acceptance Corporation, Chase Manhattan
Mortgage Corporation as servicer and [TRUSTEE], as trustee,
Multi-Class Mortgage Pass-Through Certificates, Series [ ]
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in
the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that:
(i) All documents in the Mortgage File required to be delivered to the
Trustee pursuant to Section 2.01 of the Pooling and Servicing Agreement are in
its possession;
(ii) In connection with each Mortgage Loan or Assignment thereof as to
which documentary evidence of recording was not received on the Closing Date, it
has received evidence of such recording; and
(iii) Such documents have been reviewed by it and such documents do not
contain any material omissions or defects within the meaning of Section 2.01 or
2.02.
The Trustee further certifies that as to each Mortgage Loan, the
Trustee holds the Mortgage Note without any Responsible Officer of the Trustee
having received written notice (a) of any adverse claims, liens or encumbrances,
(b) that any Mortgage Note was overdue or has been dishonored, (c) of evidence
on the face of any Mortgage Note or Mortgage of any security interest therein,
or (d) of any defense against or claim to the Mortgage Note by any other party.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond confirming (i) that the Mortgage Loan
number and the name of the Mortgagor in each Mortgage File conform to the
respective Mortgage Loan number and name
<PAGE>
listed on the Mortgage Loan Schedule and (ii) the existence in each Mortgage
File of each of the documents listed in subparagraphs (i)(A) through (G),
inclusive, of Section 2.01 in the Agreement. The Trustee makes no
representations or warranties as to the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
Loan or the collectibility, insurability, effectiveness or suitability of any
such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
[TRUSTEE],
as Trustee
By: ______________________________
Name: ______________________________
Title: ______________________________
<PAGE>
EXHIBIT H
FORM OF INVESTMENT LETTER
(Accredited Investor)
[DATE]
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
Re: Chase Manhattan Acceptance Corporation
Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B- ]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
_________________________ (the "Transferor") $_______ by original principal
balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B- ] (the "Certificates"), issued pursuant to a
pooling and servicing agreement, dated as of [DATE] (the "Pooling and Servicing
Agreement"), among Chase Manhattan Acceptance Corporation (the "Depositor"),
Chase Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and
[TRUSTEE], as trustee (the "Trustee"). [The Purchaser intends to register the
Transferred Certificate in the name of ____________________, as nominee for
__________________.] All terms used and not otherwise defined herein shall have
the meanings set forth in the Pooling and Servicing Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Purchaser certifies, represents and warrants
to, and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.
<PAGE>
2. The Certificates will bear a legend to the following effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "1940 ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS,
AND MAY NOT, DIRECTLY OR INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED,
OR OFFERED FOR SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO
REGISTRATION UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER
PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT. NO
TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL
HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO THE SERVICER AND
THE TRUSTEE (A) AN INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR;
AND (B) REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE OFFERING AND
SALE OF THE CERTIFICATES.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE DEPOSITOR
SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE
TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE
EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE
MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY
PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS
NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE
CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO
EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF
THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE
95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET
FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH
RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF
THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY
SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER
PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH
ACQUISITION, AN
<PAGE>
OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS
CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING
DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN
ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406
OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT
SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR
AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR
LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE
CERTIFICATES.
3. The Purchaser is acquiring the Transferred Certificates for its own
account [for investment only]*/ and not with a view to or for sale or other
transfer in connection with any distribution of the Transferred Certificates in
any manner that would violate the Securities Act or any applicable state
securities laws, subject, nevertheless, to the understanding that disposition of
the Purchaser's property shall at all times be and remain within its control.
4. The Purchaser (a) is a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business matters,
and in particular in such matters related to securities similar to the
Certificates, such that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) is able to bear the economic risks of such
an investment and (c) is an "accredited investor" within the meaning of Rule
501(a) promulgated pursuant to the Securities Act.
5. The Purchaser will not nor has it authorized nor will it authorize
any person to (a) offer, pledge, sell, dispose of or otherwise transfer any
Certificate, any interest in any Certificate or any other similar security to
any person in any manner, (b) solicit any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
advertising or in
- --------
*/ Not required of a broker/dealer purchaser.
<PAGE>
any other manner with respect to the Certificates. The Purchaser will not sell
or otherwise transfer any of the Certificates, except in compliance with the
provisions of the Pooling and Servicing Agreement.
6. [This paragraph may be deleted if the Purchaser provides the Opinion
of Counsel referred to in clause (ii) of Section 4.02(d) of the Pooling and
Servicing Agreement.] The Purchaser either (A) is not an employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or a plan within the meaning of Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code") (each, a "Plan"),
and is not directly or indirectly purchasing any Certificate on behalf of, as
investment manager of, as named fiduciary of, as trustee of or with assets of a
Plan or directly or indirectly purchasing any certificates with the assets of
any insurance company separate account or of any Plan or (B) is an insurance
company and the source of funds for the purchase of the certificates is an
"insurance company general account" within the meaning of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and
the conditions set forth in Section I and III of PTCE 95-60 are satisfied with
respect to the purchase and holding of the Certificates.
7. Prior to the sale or transfer by the Purchaser of any of the
Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit I to the Pooling and Servicing Agreement.
8. The Purchaser agrees to indemnify the Trustee, the Servicer and the
Depositor against any liability that may result from any misrepresentation made
herein.
Very truly yours,
[PURCHASER]
By: ______________________
Name: ______________________
Title: ______________________
<PAGE>
Chase Manhattan Mortgage Corporation
[TRUSTEE]
[DATE]
Page 1
EXHIBIT I
FORM OF RULE 144A INVESTMENT LETTER
(Qualified Institutional Buyer)
[DATE]
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
The Chase Manhattan Bank
Global Trust Services
15th Floor
450 West 33rd Street
New York, NY 10001
Re: Chase Manhattan Acceptance Corporation,
Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B- ]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
_________________________ (the "Transferor") $_______ by original principal
balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through
Certificates, Series [ ], [Class B-] (the "Certificates"), issued pursuant to a
pooling and servicing agreement, dated as of [DATE] (the "Pooling and Servicing
Agreement"), among Chase Manhattan Acceptance Corporation (the "Depositor"),
Chase Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and
[TRUSTEE], as trustee (the "Trustee"). [The Purchaser intends to register the
Transferred Certificate in the name of ____________________, as nominee for
__________________.] All terms used and not otherwise defined herein shall have
the meanings set forth in the Trust Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Purchaser certifies, represents and warrants
to, and covenants with, the Depositor and the Trustee that:
In connection with our acquisition of the above Transferred
Certificates we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of
<PAGE>
Chase Manhattan Mortgage Corporation
[TRUSTEE]
[DATE]
Page 2
1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we have such knowledge and
experience in financial and business matters that we are capable of evaluating
the merits and risks of investments in the Certificates, (c) we have had the
opportunity to ask questions of and receive answers from the Depositor
concerning the purchase of the Transferred Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Transferred Certificates, (d) we are not an employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, or a plan within the meaning of Section 4975 of the
Internal Revenue Code of 1986, as amended (each, a "Plan"), nor are we directly
or indirectly purchasing any Certificate on behalf of, as investment manager of,
as named fiduciary of, as trustee of or with assets of a Plan or directly or
indirectly purchasing any certificates with the assets of any insurance company
separate account or of any Plan [OR ALTERNATIVELY, IN THE CASE OF AN INSURANCE
COMPANY, IS AN INSURANCE COMPANY AND THE SOURCE OF FUNDS FOR THE PURCHASE OF THE
CERTIFICATES] is an "insurance company general account" within the meaning of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 50 Fed. Reg. 35925
(July 12, 1995), and the conditions set forth in Section I and Section III of
PTCE 95-60 are satisfied with respect to the purchase and holding of the
Certificates, (e) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Securities Act or that would render
the disposition of the Certificates a violation of Section 5 of the Securities
Act or require registration pursuant thereto, nor will act, nor has authorized
or will authorize any person to act, in such manner with respect to the
Certificates, (f) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act and have completed one of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale of the Transferred Certificates to us is being made in
reliance on Rule 144A. We are acquiring the Transferred Certificates for our own
account or for resale pursuant to Rule 144A and further understand that such
Certificates may be resold, pledged or transferred only (i) to a person
reasonably believed by us, based upon certifications of such purchaser or
information we have in our possession, to be a qualified institutional buyer
that purchases for its own account or
<PAGE>
Chase Manhattan Mortgage Corporation
[TRUSTEE]
[DATE]
Page 3
for the account of a qualified institutional buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.
We agree to indemnify the Trustee, the Servicer and the Depositor
against any liability that may result from any misrepresentation made herein.
Very truly yours,
[PURCHASER]
By: ________________________
Name: ________________________
Title: ________________________
<PAGE>
ANNEX 1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with the purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $____________*/ in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
____ Corporation, etc. The Buyer is a corporation (other
than a bank, savings and loan association or similar
institution), Massachusetts or similar business
trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended.
____ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District
of Columbia, the business of which is substantially confined to
banking and is supervised by Federal, State or territorial
banking commission or similar official or is a foreign bank or
equivalent institution, and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
____ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association,
cooperative bank, homestead association or similar
institution, which is supervised and examined by a
State or Federal authority having supervision over
such institution or is a foreign savings and loan
association or equivalent institution and (b) has an
audited net
- --------------
* Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
<PAGE>
worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which
is attached hereto.
____ Broker-dealer. The Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
____ Insurance Company. The Buyer is an insurance company
whose primary and predominant business activity is
the writing of insurance or the reinsuring of risks
underwritten by insurance companies and which is
subject to supervision by the insurance commissioner
or a similar official or agency of the State,
territory or the District of Columbia.
____ State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any agency
or instrumentality of the State or its political subdivisions,
for the benefit of its employees.
____ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security
Act of 1974, as amended.
____ Investment Advisor. The Buyer is an investment advisor
registered under the Investment Advisors Act of 1940, as
amended.
____ Small Business Investment Company. Buyer is a small business
investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958, as amended.
____ Business Development Company. Buyer is a business development
company as defined in Section 202(a)(22) of the Investment
Advisors Act of 1940, as amended.
3. The term "securities" as used for purposes of the calculation of the
dollar amount in paragraph 2 excludes: (i) securities of issuers that are
affiliated with the Buyer, (ii) securities that are part of an unsold allotment
to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities
issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank
deposit notes and certificates of deposit, (v) loan participations, (vi)
repurchase agreements, (vii) securities owned but subject to a repurchase
agreement and (viii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph,
<PAGE>
except (i) where the Buyer reports its securities holdings in its financial
statements on the basis of their market value, and (ii) no current information
with respect to the cost of those securities has been published. If clause (ii)
in the preceding sentence applies, the securities may be valued at market.
Further, in determining such aggregate amount, the Buyer may have included
securities owned by subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared in accordance
with generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Buyer's direction. However, such securities
were not included if the Buyer is a majority-owned, consolidated subsidiary of
another enterprise and the Buyer is not itself a reporting company under the
Securities Exchange Act of 1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
6. Until the date of purchase of the Rule 144A Securities, the Buyer
will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan as provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
By: ____________________
Name: ____________________
Title: ____________________
Date: ____________________
<PAGE>
ANNEX 2
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
____ The Buyer owned $___________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $__________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
<PAGE>
4. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer or are part of the Buyer's Family
of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificates, the undersigned will
notify the parties listed in the Rule 144A Transferee Certificate to which this
certification relates of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of the Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.
By: ________________________
Name: ________________________
Title: ________________________
IF AN ADVISER:
----------------------------------
Print Name of Buyer
Date: ____________________________
<PAGE>
EXHIBIT J
FORM OF SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT
This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the "Agreement")
is made and entered into as of [DATE], between Chase Manhattan Mortgage
Corporation, (the "Company") and _____________________ (the "Purchaser").
PRELIMINARY STATEMENT
__________________ (the "Owner") is the holder of the entire interest
in Chase Manhattan Acceptance Corporation Multi-Class Mortgage Pass-Through
Certificates, Series [ ], Class B-5 (the "Class B-5 Certificates"). The Class
B-5 Certificates were issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") among Chase Manhattan Acceptance Corporation,
(the "Company"), Chase Manhattan Mortgage Corporation as servicer thereunder
(the "Servicer") and [TRUSTEE], as trustee (the "Trustee").
The Owner intends to resell all of the Class B-5 Certificates directly
to the Purchaser on or promptly after the date hereof.
In connection with such sale, the parties hereto have agreed that the
Company, as Servicer, will engage in certain special servicing procedures
relating to foreclosures for benefit of the Purchaser, and that the Purchaser
will deposit funds in a collateral fund to cover any losses attributable to such
procedures as well as all advances and costs in connection therewith, as set
forth herein.
In consideration of the mutual agreements herein contained, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Purchaser
agree to the following:
ARTICLE I.
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the State of New York are required or
authorized by law or executive order to be closed.
<PAGE>
Collateral Fund: The fund established and maintained pursuant to
Section 3.01 hereof.
Collateral Fund Permitted Investments: Either: (i) obligations of, or
obligations fully guaranteed as to principal and interest by, the United States,
or any agency or instrumentality thereof, provided such obligations are backed
by the full faith and credit of the United States, (ii) a money market fund
rated in the highest rating category by a nationally recognized rating agency
selected by the Company, (iii) cash, (iv) mortgage pass-through certificates
issued or guaranteed by GNMA, FNMA or FHLMC, (v) commercial paper (including
both non-interest bearing discount obligations and interest bearing obligations
payable on demand or on a specified date), the issuer of which may be an
affiliate of the Company, having at the time of such investment a rating of at
least A-1 by Standard and Poor's Corporation ("S&P") or at least D-1 by Duff &
Phelps Credit Rating Co. ("DCR") and (vi) demand and time deposits in,
certificates of deposit of, any depository institution or trust company (which
may be an affiliate of the Company) incorporated under the laws of the United
States of America or any state thereof and subject to supervision and
examination by federal and/or state banking authorities, so long as at the time
of such investment either (x) the long-term debt obligations of such depository
institution or trust company have a rating of at least AA by S&P or DCR or (y)
the certificate of deposit or other unsecured short-term debt obligations of
such depository institution or trust company have a rating of at least D-1 by
DCR or A-1 by S&P and, for each of the preceding clauses (i), (iv), (v) and
(vi), the maturity thereof shall be not later than the earlier to occur of (A)
30 days from the date of the related investment and (B) the next succeeding
Distribution Date.
Commencement of Foreclosure: The first official action required under
local law in order to commence foreclosure proceedings or to schedule a
trustee's sale under a deed of trust, including (i) in the case of a mortgage,
any filing or service of process necessary to commence an action to foreclose,
or (ii) in the case of a deed of trust, the posting, publishing, filing or
delivery of a notice of sale, but not including in either case (x) any notice of
default, notice of intent to foreclose or sell or any other action prerequisite
to the actions specified in (i) or (ii) above and upon the consent of the
Purchaser which will be deemed given unless expressly withheld within two
Business Days of notification, (y) the acceptance of a deed-in-lieu of
foreclosure (whether in connection with a sale of the related property or
otherwise) or (z) initiation and completion of a short pay-off.
Current Appraisal: With respect to any Mortgage Loan as to which the
Purchaser has made an Election to Delay Foreclosure, an appraisal of the related
Mortgaged Property obtained by the Purchaser at its expense from an appraiser
(which shall not be an affiliate of the Purchaser) acceptable to the Company as
nearly contemporaneously as practicable to the time of the Purchaser's election,
prepared based on the Company's customary requirements for such appraisals.
<PAGE>
Election to Delay Foreclosure: Any election by the Purchaser to delay
the Commencement of Foreclosure, made in accordance with Section 2.02(b).
Election to Foreclose: Any election by the Purchaser to proceed with
the Commencement of Foreclosure, made in accordance with Section 2.03(a).
Required Collateral Fund Balance: As of any date of determination, an
amount equal to the aggregate of all amounts previously required to be deposited
in the Collateral Fund pursuant to Section 2.02(d) (after adjustment for all
withdrawals and deposits pursuant to Section 2.02(e)) and Section 2.03(b) (after
adjustment for all withdrawals and deposits pursuant to Section 2.03(c)) and
Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section
2.02(g) and Section 2.03(d).
Section 1.02. Definitions Incorporated by Reference.
All capitalized terms not otherwise defined in this Agreement shall
have the meanings assigned in the Pooling and Servicing Agreement.
ARTICLE II.
SPECIAL SERVICING PROCEDURES
Section 2.01. Reports and Notices.
(a) In connection with the performance of its duties under the Pooling
and Servicing Agreement relating to the realization upon defaulted Mortgage
Loans, the Company, as Servicer, shall provide to the Purchaser the following
notices and reports:
(i) Within five Business Days after each Distribution Date (or
included in or with the monthly statement to Certificateholders
pursuant to the Pooling and Servicing Agreement), the Company shall
provide to the Purchaser a report indicating for the Trust the number
of Mortgage Loans that are (A) thirty days, (B) sixty days, (C) ninety
days or more delinquent or (D) in foreclosure, and indicating for each
such Mortgage Loan the outstanding principal balance.
(ii) Prior to the Commencement of Foreclosure in connection with
any Mortgage Loan, the Company shall provide the Purchaser with a
notice (sent by telecopier) of such proposed and imminent foreclosure,
stating the loan number and the aggregate amount owing under the
Mortgage Loan.
(b) If requested by the Purchaser, the Company shall make its servicing
personnel available (during their normal business hours) to respond to
reasonable
<PAGE>
inquiries by the Purchaser in connection with any Mortgage Loan identified in a
report under subsection (a)(i)(B), (a)(i)(C), (a)(i)(D) or (a)(ii) which has
been given to the Purchaser; provided, that (1) the Company shall only be
required to provide information that is readily accessible to its servicing
personnel and is non-confidential and (2) the Company shall not be required to
provide any written information under this subsection.
(c) In addition to the foregoing, the Company shall provide to the
Purchaser such information as the Purchaser may reasonably request concerning
each Mortgage Loan that is at least sixty days delinquent and each Mortgage Loan
which has become real estate owned, through the final liquidation thereof;
provided that the Company shall only be required to provide information that is
readily accessible to its servicing personnel and is non-confidential.
(d) With respect to all Mortgage Loans which are serviced at any time
by the Company through a Subservicer, the Company shall be entitled to rely for
all purposes hereunder, including for purposes of fulfilling its reporting
obligations under this Section 2.01 on the accuracy and completeness of any
information provided to it by the applicable Subservicer.
Section 2.02. Purchaser's Election to Delay Foreclosure Proceedings.
(a) The Purchaser directs the Company that in the event that the
Company does not receive written notice of the Purchaser's election pursuant to
subsection (b) below within 24 hours (exclusive of any intervening non-Business
Days) of transmission of the notice provided by the Company under Section
2.01(a)(ii), subject to extension as set forth in Section 2.02(b), the Company
shall proceed with the Commencement of Foreclosure in respect of such Mortgage
Loan in accordance with its normal foreclosure policies without further notice
to the Purchaser. Any foreclosure that has been initiated may be discontinued
(i) without notice to the Purchaser, if the Mortgage Loan has been brought
current or if a refinancing or prepayment occurs with respect to the Mortgage
Loan (including by means of a short payoff approved by the Company) (ii) with
notice to the Purchaser if the Company has reached the terms of a forbearance
agreement with the borrower. In such latter case the Company may complete such
forbearance agreement unless instructed otherwise by the Purchaser within one
Business Day of notification.
(b) In connection with any Mortgage Loan with respect to which a notice
under Section 2.01(a)(ii) has been given to the Purchaser, the Purchaser may
elect, for reasonable cause as determined by the Purchaser, to instruct the
Company to delay the Commencement of Foreclosure until such term as the
Purchaser determines that the Company may proceed with the Commencement of
Foreclosure. Such election must be evidenced by written notice received within
24 hours (exclusive of any intervening non-Business Days) of transmission of the
notice provided by the Company under Section 2.01(a)(ii). Such 24 hour period
shall be extended for no longer than an additional four Business Days after the
receipt of the information if the Purchaser requests additional information
related to such foreclosure; provided, however that the Purchaser will have at
least one Business Day to respond to any
<PAGE>
requested additional information. Any such additional information shall (i) not
be confidential in nature and (ii) be obtainable by the Company from existing
reports, certificates or statements or otherwise be readily accessible to its
servicing personnel. The Purchaser agrees that it has no right to deal with the
mortgagor. If the Company's normal foreclosure policy includes acceptance of a
deed-in-lieu of foreclosure or short payoff, the Purchaser will be notified and
given one Business Day to respond.
(c) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Purchaser shall obtain a Current
Appraisal as soon as practicable, and shall provide the Company with a copy of
such Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Purchaser shall remit by wire transfer to the Company, for
deposit in the Collateral Fund, an amount, as calculated by the Company, equal
to the sum of (i) 125% of the greater of the outstanding Principal Balance of
the Mortgage Loan and the value shown in the Current Appraisal referred to in
subsection (c) above (or, if such Current Appraisal has not yet been obtained,
the Company's estimate thereof, in which case the required deposit under this
subsection shall be adjusted upon obtaining of such Current Appraisal), and (ii)
three months' interest on the Mortgage Loan at the applicable Mortgage Rate. If
any Election to Delay Foreclosure extends for a period in excess of three months
(such excess period being referred to herein as the "Excess Period"), the
Purchaser shall remit by wire transfer in advance to the Company for deposit in
the Collateral Fund the amount, as calculated by the Company, equal to interest
on the Mortgage Loan at the applicable Mortgage Rate for the Excess Period. The
terms of this Agreement shall no longer apply to the servicing of any Mortgage
Loan upon the failure of the Purchaser to deposit the above amounts relating to
the Mortgage Loan within two Business Days of the Election to Delay Foreclosure.
(e) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Company may withdraw from the
Collateral Fund from time to time amounts necessary to reimburse the Company for
all Advances and Liquidation Expenses thereafter made by the Company as Servicer
in accordance with the Pooling and Servicing Agreement. To the extent that the
amount of any such Liquidation Expense is determined by the Company based on
estimated costs, and the actual costs are subsequently determined to be higher,
the Company may withdraw the additional amount from the Collateral Fund. In the
event that the Mortgage Loan is brought current by the Mortgagor and the
foreclosure action is discontinued, the amounts so withdrawn from the Collateral
Fund shall be redeposited therein as and to the extent that reimbursement
therefor from amounts paid by the Mortgagor is not prohibited pursuant to the
Pooling and Servicing Agreement. Except as provided in the preceding sentence,
amounts withdrawn from the Collateral Fund to cover Advances and Liquidation
Expenses shall not be redeposited therein or otherwise reimbursed to the
Purchaser. If and when any such Mortgage Loan is brought current by the
Mortgagor, all amounts remaining in the Collateral Fund in respect of such
Mortgage Loan (after adjustment for all withdrawals and deposits pursuant to
this subsection) shall be released to the Purchaser.
<PAGE>
(f) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Company shall continue to service the
Mortgage Loan in accordance with its customary procedures (other than the delay
in Commencement of Foreclosure as provided herein). If and when the Purchaser
shall notify the Company that it believes that it is appropriate to do so, the
Company shall proceed with the Commencement of Foreclosure. In any event, if the
Mortgage Loan is not brought current by the mortgagor by the time the loan
becomes 6 months delinquent, the Purchaser's election shall no longer be
effective and at the Purchaser's option, either (i) the Purchaser shall purchase
the Mortgage Loan from the Trust Fund at a purchase price equal to the fair
market value as shown on the Current Appraisal, to be paid by (x) applying any
balance in the Collateral Fund to such purchase price, and (y) to the extent of
any deficiency, by wire transfer of immediately available funds to the Company
or Trustee; or (ii) the Company shall proceed with the Commencement of
Foreclosure.
(g) Upon the occurrence of a liquidation with respect to any Mortgage
Loan as to which the Purchaser made an Election to Delay Foreclosure and as to
which the Company proceeded with the Commencement of Foreclosure in accordance
with subsection (f) above, the Company shall calculate the amount, if any, by
which the value shown on the Current Appraisal obtained under subsection (c)
exceeds the actual sales price obtained for the related Mortgaged Property (net
of Liquidation Expenses and accrued interest related to the extended foreclosure
period), and the Company shall withdraw the amount of such excess from the
Collateral Fund, shall remit the same to the Trust Fund and in its capacity as
Servicer shall apply such amount as additional Liquidation Proceeds pursuant to
the Pooling and Servicing Agreement. After making such withdrawal, all amounts
remaining in the Collateral Fund in respect of such Mortgage Loan (after
adjustment for all withdrawals and deposits pursuant to subsection (e)) shall be
released to the Purchaser.
Section 2.03. Purchaser's Election to Commence Foreclosure Proceedings.
(a) In connection with any Mortgage Loan identified in a report under
Section 2.01(a)(i)(B), the Purchaser may elect, for reasonable cause as
determined by the Purchaser, to instruct the Company to proceed with the
Commencement of Foreclosure as soon as practicable. Such election must be
evidenced by written notice received by the Company by 5:00 p.m., New York City
time, on the third Business Day following the delivery of such report under
Section 2.01(a)(i).
(b) Within two Business Days of making any Election to Foreclose, the
Purchaser shall remit to the Company, for deposit in the Collateral Fund, an
amount, as calculated by the Company, equal to 125% of the current Principal
Balance of the Mortgage Loan and three months' interest on the Mortgage Loan at
the applicable Mortgage Rate. If and when any such Mortgage Loan is brought
current by the Mortgagor, all amounts in the Collateral Fund in respect of such
Mortgage Loan shall be released to the Purchaser. The terms of this Agreement
shall no longer apply to the servicing of any Mortgage Loan upon the failure of
the
<PAGE>
Purchaser to deposit the above amounts relating to the Mortgage Loans within two
Business Days at the Election to Foreclose.
(c) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Foreclose, the Company shall continue to service the
Mortgage Loan in accordance with its customary procedures (other than to proceed
with the Commencement of Foreclosure as provided herein). In connection
therewith, the Company shall have the same rights to make withdrawals for
Advances and Liquidation Expenses from the Collateral Fund as are provided under
Section 2.02(e), and the Company shall make reimbursements thereto to the
limited extent provided under such subsection. The Company shall not be required
to proceed with the Commencement of Foreclosure if (i) the same is stayed as a
result of the Mortgagor's bankruptcy or is otherwise barred by applicable law,
or to the extent that all legal conditions precedent thereto have not yet been
complied with or (ii) the Company believes there is a breach of representation
or warranties by the Company, which may result in a repurchase or substitution
of such Mortgage Loan, or (iii) the Company reasonably believes the Mortgaged
Property may be contaminated with or affected by hazardous wastes or hazardous
substances (and the Company supplies the Purchaser with information supporting
such belief). The Company will repurchase or substitute a Mortgage Loan pursuant
to the preceding clause (ii) within the time period specified in the Pooling and
Servicing Agreement. Any foreclosure that has been initiated may be discontinued
(i) without notice to the Purchaser if the Mortgage Loan has been brought
current or if a refinancing or prepayment occurs with respect to the Mortgage
Loan (including by means of a short payoff approved by the Company), or (ii)
with notice to the Purchaser if the Company has reached the terms of a
forbearance agreement unless instructed otherwise by the Purchaser within two
Business Days of notification.
(d) Upon the occurrence of a liquidation with respect to any Mortgage
Loan as to which the Purchaser made an Election to Foreclose and as to which the
Company proceeded with the Commencement of Foreclosure in accordance with
subsection (c) above, the Company shall calculate the amount, if any, by which
the Principal Balance of the Mortgage Loan at the time of liquidation (plus all
unreimbursed Advances and Liquidation Expenses in connection therewith other
than those paid from the Collateral Fund) exceeds the actual sales price
obtained for the related Mortgaged Property, and the Company shall withdraw the
amount of such excess from the Collateral Fund, shall remit the same to the
Trust Fund and in its capacity as Servicer shall apply such amount as additional
Liquidation Proceeds pursuant to the Pooling and Servicing Agreement. After
making such withdrawal, all amounts remaining in the Collateral Fund (after
adjustment for all withdrawals and deposits pursuant to subsection (c)) in
respect of such Mortgage Loan shall be released to the Purchaser.
Section 2.04. Termination.
(a) With respect to all Mortgage Loans included in the Trust Fund, the
Purchaser's rights to make any Election to Delay Foreclosure or any Election to
Foreclose and the Company's obligations under Section 2.01 shall terminate (i)
at such time as the Certificate
<PAGE>
Principal Balance of the Class B-5 Certificates has been reduced to zero, (ii)
if the greater of (x) 43% (or such lower or higher percentages that represents
the Company's actual historical loss experience with respect to the Mortgage
Loans in the related pool) of the aggregate principal balance of all Mortgage
Loans that are in foreclosure or are more than 90 days delinquent on a
contractual basis and REO properties or if the aggregate amount that the Company
estimates will be required to be withdrawn from the Collateral Fund with respect
to Mortgage Loans as to which the Purchaser has made an Election to Delay
Foreclosure or an Election to Foreclose exceeds (z) the Outstanding Certificate
Principal Balance of the Class B-5 Certificates, or (iii) upon any transfer by
the Purchaser of any interest (other than the minority interest therein, but
only if the transferee provides written acknowledgment to the Company of the
Purchaser's right hereunder and that such transferee will have no rights
hereunder) in the Class B-5 Certificates (whether or not such transfer is
registered under the Pooling and Servicing Agreement), including any such
transfer in connection with a termination of the Trust Fund. Except as set forth
above, this Agreement and the respective rights, obligations and
responsibilities of the Purchaser and the Company hereunder shall terminate upon
the later to occur of (i) the final liquidation of the last Mortgage Loan as to
which the Purchaser made any Election to Delay Foreclosure or any Election to
Foreclose and the withdrawal of all remaining amounts in the Collateral Fund as
provided herein and (ii) ten (10) Business Day's notice.
(b) Purchaser's rights pursuant to Section 2.02 or 2.03 of this
Agreement shall terminate with respect to a Mortgage loan as to which the
Purchaser has exercised its rights under Section 2.02 or 2.03 hereof, upon
Purchaser's failure to deposit any amounts required pursuant to Section 2.02(d)
or 2.03(b).
(c) Neither the Servicer nor any of its directors, officers, employees
or agents shall be under any liability for any action taken or for refraining
from the taking of any action in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Servicer and any director, officer, employee or agent
thereof may rely in good faith on any document of any kind prima facie properly
executed and submitted by an Person respecting any matters arising hereunder.
ARTICLE III.
COLLATERAL FUND; SECURITY INTEREST
Section 3.01. Collateral Fund.
Upon receipt from the Purchaser of the initial amount required to be
deposited in the Collateral Fund pursuant to Article 11, the Company shall
establish and maintain with itself
<PAGE>
as a segregated account on its books and records an account (the "Collateral
Fund"), entitled "Chase Manhattan Mortgage Corporation, as Servicer, for the
benefit of registered holders of Chase Manhattan Acceptance Corporation
Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class B-5." Amounts
in the Collateral Fund shall continue to be the property of the Purchaser,
subject to the first priority security interest granted hereunder for the
benefit of the Certificate holders, until withdrawn from the Collateral Fund
pursuant to Section 2.02 or 2.03 hereof.
Upon the termination of this Agreement and the liquidation of all
Mortgage Loans as to which the Purchaser has made any Election to Delay
Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof, the
Company shall distribute to the Purchaser all amounts remaining in the
Collateral Fund together with any investment earnings thereon.
The Collateral Fund shall be an "outside reserve fund" within the
meaning of the REMIC Provisions, beneficially owned by the Purchaser. In no
event shall the Purchaser (i) take or cause the Trustee or the Company to take
any action that could cause any REMIC established under the Trust Agreement to
fail to qualify as a REMIC or cause the imposition on any such REMIC of any
"prohibited transaction" or "prohibited contribution" taxes or (ii) cause the
Trustee or the Company to fail to take any action necessary to maintain the
status of any such REMIC as a REMIC.
Section 3.02. Collateral Fund Permitted Investments.
The Company shall, at the written direction of the Purchaser invest the
funds in the Collateral Fund in Collateral Fund Permitted Investments. Such
direction shall not be changed more frequently than quarterly. In the absence of
any direction, the Company shall select such investments in accordance with the
definition of Collateral Fund Permitted Investments in its discretion.
All income and gain realized from any investment as well as any
interest earned on deposits in the Collateral Fund (net of any losses on such
investments) and any payments of principal made in respect of any Collateral
Fund Permitted Investment shall be deposited in the Collateral Fund upon
receipt. All costs and realized losses associated with the purchase and sale of
Collateral Fund Permitted Investments shall be borne by the Purchaser and the
amount of net realized losses shall be deposited by the Purchaser in the
Collateral Fund. The Company shall periodically (but not more frequently than
monthly) distribute to the Purchaser upon request an amount of cash, to the
extent cash is available therefor in the Collateral Fund, equal to the amount by
which the balance of the Collateral Fund, after giving effect to all other
distributions to be made from the Collateral Fund on such date, exceeds the
Required Collateral Fund Balance. Any amounts so distributed shall be released
from the lien and security interest of this Agreement.
Section 3.03. Grant of Security Interest.
<PAGE>
The Purchaser grants to the Company and the Trustee for the benefit of
the Certificateholders a security interest in and lien on all of the Purchaser's
right, title and interest, whether now owned or hereafter acquired, in and to:
(1) the Collateral Fund, (2) all amounts deposited in the Collateral Fund and
Collateral Fund Permitted Investments in which such amounts are invested (and
the distributions and proceeds of such investments) and (3) all cash and
non-cash proceeds of any of the foregoing, including proceeds of the voluntary
or involuntary conversion thereof (all of the foregoing collectively, the
"Collateral").
The Purchaser acknowledges the lien on and security interest in the
Collateral for the benefit of the Certificateholders. The Purchaser shall take
all actions requested by the Company or the Trustee as may be reasonably
necessary to perfect the security interest created under this Agreement in the
Collateral and cause it to be prior to all other security interests and liens,
including the execution and delivery to the Company for filing of appropriate
financing statements in accordance with applicable law. The Company shall file
appropriate continuation statements, or appoint an agent on its behalf to file
such statements, in accordance with applicable law.
Section 3.04. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Fund at any time
are insufficient to cover any withdrawals therefrom that the Company or the
Trustee is then entitled to make hereunder, the Purchaser shall be obligated to
pay such amounts to the Company or the Trustee immediately upon demand. Such
obligation shall constitute a general corporate obligation of the Purchaser.
ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section 4.01. Amendment.
This Agreement may be amended from time to time by the Company and the
Purchaser by written agreement signed by the Company and the Purchaser.
Section 4.02. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 4.03. Governing Law.
<PAGE>
This Agreement shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 4.04. Notices.
All demands, notices and direction hereunder shall be in writing or by
telecopy and shall be deemed effective upon receipt to:
(a) in the case of the Company,
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
or such other address as may hereafter be furnished in writing by the Company,
or
(b) in the case of the Purchaser, with respect to notices pursuant to
Section 2.01,
[PURCHASER]
[ADDRESS]
Attn: ________________
Phone: ________________
Fax: ________________
with respect to all other notices pursuant to this Agreement,
---------------------------
[ADDRESS]
Attn: _________________
Phone: _________________
Fax: _________________
or such other address as may hereafter be furnished in writing by the Purchaser.
Section 4.05. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever, including regulatory, held
invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
<PAGE>
Section 4.06. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the Certificateholders; provided,
however, that the rights under this Agreement cannot be assigned by the
Purchaser without the consent of the Company.
Section 4.07. Article and Section Headings.
The article and section headings herein are for convenience of
reference only, and shall not limit or otherwise affect the meaning hereof.
Section 4.08. Confidentiality.
The Purchaser agrees that all information supplied by or on behalf of
the Company pursuant to Sections 2.01 or 2.02, including individual account
information, is the property of the Company and the Purchaser agrees to hold
such information confidential and not to disclose such information.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
CHASE MANHATTAN MORTGAGE
CORPORATION
By: ____________________
Name: ____________________
Title: ____________________
-------------------------
By: ____________________
Name: ____________________
Title: ____________________
<PAGE>
EXHIBIT K
FORM OF TRANSFEREE'S LETTER
CHASE MANHATTAN ACCEPTANCE CORPORATION Series [ ]
[DATE]
Chase Manhattan Acceptance Corporation
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Ladies and Gentlemen:
We propose to purchase Chase Manhattan Acceptance Corporation's
Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class A-R, described
in the Prospectus Supplement, dated [DATE], and Prospectus, dated [DATE].
1. We certify that (a) we are not a disqualified organization and (b)
we are not purchasing such Class A-R Certificates on behalf of a disqualified
organization; for this purpose the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.
2. We certify that (a) we have historically paid our debts as they
became due, (b) we intend, and believe that we will be able, to continue to pay
our debts as they become due in the future, (c) we understand that, as
beneficial owner of the Class A-R Certificates, we may incur tax liabilities in
excess of any cash flows generated by the Class A-R Certificates, and (d) we
intend to pay any taxes associated with holding the Class A-R Certificates as
they become due.
3. We acknowledge that we will be the beneficial owner of the Class A-R
Certificates and:*/
- -------------
*/ Check appropriate box and if necessary fill in the name of the Transferee's
nominee.
<PAGE>
______ The Class A-R Certificates will be registered in our name.
______ The Class A-R Certificates will be held in the name of our
nominee,
____________________, which is not a disqualified organization.
4. Unless Chase Manhattan Acceptance Corporation ("CMAC") has consented
to the transfer to us by executing the form of Consent affixed hereto as
Appendix B, we certify that we are a U.S. person; for this purpose the term
"U.S. person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or any
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all sunstantial decisions of the
trust. We agree that any breach by us of this certification shall render the
transfer of any interest in the Class A-R Certificates to us absolutely null and
void and shall cause no rights in the Class A-R Certificates to vest in us.
5. We agree that in the event that at some future time we wish to
transfer any interest in the Class A-R Certificates, we will transfer such
interest in the Class A-R Certificates only (a) to a transferee that (i) is not
a disqualified organization and is not purchasing such interest in the Class A-R
Certificates on behalf of a disqualified organization, (ii) is a U.S. person and
(iii) has delivered to CMAC a letter in the form of this letter (including the
affidavit appended hereto) and, if requested by CMAC, an opinion of counsel (in
a form acceptable to CMAC) that the proposed transfer will not cause the
interest in the Class A-R Certificates to be held by a disqualified organization
or a person who is not a U.S. person or (b) with the written consent of CMAC.
6. We hereby designate Chase Manhattan Mortgage Corporation as our
fiduciary to act as the tax matters person for the Series [ ] REMIC.
Very truly yours,
[PURCHASER]
By: __________________________
Name: __________________________
Title: __________________________
Accepted as of __________ __, 199_
CHASE MANHATTAN ACCEPTANCE CORPORATION
By: _________________________________
Name: ______________________________
Title: ______________________________
<PAGE>
APPENDIX A
Affidavit pursuant to (i) Section 860E(e)(4) of the Internal
Revenue Code of 1986, as amended, and (ii) certain
provisions of the Pooling and Servicing Agreement
Under penalties of perjury, the undersigned declares that the following
is true:
(1) He or she is an officer of _________________________ (the "Transferee"),
(2) the Transferee's Employee Identification number is __________,
(3) the Transferee is not a "disqualified organization" (as defined below), has
no plan or intention of becoming a disqualified organization, and is not
acquiring any of its interest in the Chase Manhattan Acceptance
Corporation, Multiclass Mortgage Pass-Through Certificates, Series [ ],
Class A-R on behalf of a disqualified organization or any other entity,
(4) unless Chase Manhattan Acceptance Corporation ("CMAC") has consented to the
transfer to the Transferee by executing the form of Consent affixed as
Appendix B to the Transferee's Letter to which this Certificate is affixed
as Appendix A, the Transferee is a "U.S. person" (as defined below),
(5) that no purpose of the transfer is to avoid or impede the assessment or
collection of tax,
(6) the Transferee has historically paid its debts as they became due,
(7) the Transferee intends, and believes that it will be able, to continue to
pay its debts as they become due in the future,
(8) the Transferee understands that, as beneficial owner of the Class A-R
Certificates, it may incur tax liabilities in excess of any cash flows
generated by the Class A-R Certificates,
(9) the Transferee intends to pay any taxes associated with holding the Class
A-R Certificates as they become due, and
(10) The Transferee consents to any amendment of the Pooling and Servicing
Agreement that shall be deemed necessary by CMAC (upon advice of counsel)
to constitute a reasonable arrangement to ensure that the Class A-R
Certificates will not be owned directly or indirectly by a disqualified
organization;
<PAGE>
For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code and the term
"U.S. person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject to
United States federal income tax regardless of the source of its income, or any
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all sunstantial decisions of the trust
---------------------------------
By: _________________________
----------------------------------
Address of Investor for receipt of distribution:
Address of Investor for receipt of tax information:
(Corporate Seal)
Attest:
________________________
________________________, Secretary
<PAGE>
Personally appeared before me the above-named ______________, known or proved to
me to be the same person who executed the foregoing instrument and to be the
_______ of the Investor, and acknowledged to me that he executed the same as his
free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ____ day of ______, 19__ .
- --------------------------
Notary Public
County of ______
State of _______
My commission expires the ___________ day of ____________
By: __________________________
Name: __________________________
Title: __________________________
Dated: _____________
<PAGE>
APPENDIX B
CONSENT
_________________________ (Transferee)
_________________________
_________________________
Ladies and Gentlemen:
Chase Manhattan Acceptance Corporation ("CMAC") hereby consents to the
transfer to, and registration in the name of, the Transferee (or, if applicable,
registration in the name of such Transferee's nominee of the Multiclass Mortgage
Pass-Through Certificates, Series [ ], Class A-R described in the Transferee's
Letter to which this Consent is appended, notwithstanding CMAC's knowledge that
the Transferee is not a U.S. person (as defined in such Transferee's Letter).
CHASE MANHATTAN ACCEPTANCE
CORPORATION
Dated: _______________ By: ______________________________
<PAGE>
EXHIBIT L
REQUEST FOR RELEASE OF DOCUMENTS
To: [TRUSTEE]
[ADDRESS]
Re:
In connection with the administration of the Mortgage Loans held by you, as
Trustee, pursuant to the above-captioned Pooling and Servicing Agreement, we
request the release, and hereby acknowledge receipt, of the Mortgage File for
the Mortgage Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_______ 1. Mortgage Paid in Full
_______ 2. Foreclosure
_______ 3. Substitution
_______ 4. Other Liquidation
_______ 5. Nonliquidation Reason: _________________________
By: _____________________________
(authorized signer)
Issuer: _________________________
Address: ________________________
________________________
Date: ___________________________
Trustee
[TRUSTEE]
Please acknowledge the execution of the above request by your signature and
date below:
____________________________ ________________
Signature Date
Documents returned to Trustee:
____________________________ ________________
Trustee Date
<PAGE>
September 18, 1998
Chase Funding, Inc.
Chase Manhattan Acceptance Corporation
343 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
We have acted as counsel to Chase Funding, Inc., a New York corporation, and
Chase Manhattan Acceptance Corporation, a Delaware corporation, (each, a
"Seller") in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed on September 18, 1998 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act") in respect of Mortgage Pass-Through Certificates ("Certificates") which
the Sellers plan to offer in series, each series to be issued under a separate
pooling and servicing agreement (a "Pooling and Servicing Agreement"), in all
material respects relevant hereto substantially in the form of Exhibit 4.1 or
Exhibit 4.2 to the Registration Statement, among a Seller, Chase Manhattan
Mortgage Corporation or another servicer to be identified in the prospectus
supplement for such series of Certificates (the ("Servicer" for such series),
and a bank, trust company or other entity with trust powers, to be identified
in the prospectus supplement for such series of Certificates, as trustee (the
"Trustee" for such series).
We have examined originals or copies certified or otherwise identified to our
satisfaction of such documents and records of each Seller, and such public
documents and records, as we have deemed necessary as a basis for the opinions
hereinafter expressed.
Based on the foregoing and having regard for such legal considerations as we
have deemed relevant, we are of the opinion that:
1. When, in respect of a series of Certificates, a Pooling and Servicing
Agreement has been duly authorized by all necessary action and duly executed and
delivered by a Seller, the
<PAGE>
Chase Funding, Inc.
Chase Manhattan Acceptance Corporation
September 18, 1998
Page 2
Servicer and the Trustee for such series, such Pooling and Servicing Agreement
will be a legal and valid obligation of such Seller; and
2. When a Pooling and Servicing Agreement for a series of Certificates has been
duly authorized by all necessary action and duly executed and delivered by a
Seller, the Servicer and the Trustee for such series, and when the certificates
of such series of Certificates have been duly executed, countersigned, issued
and sold as contemplated in the Registration Statement and the prospectus
delivered pursuant to Section 5 of the Act in connection therewith, such
Certificates will be legally and validly issued, fully paid and nonassessable,
and the holders of such Certificates will be entitled to the benefits of such
Pooling and Servicing Agreement.
The form of Pooling and Servicing Agreement indicates that it is governed by the
laws of the State of New York. We express no opinion as to the law of any
jurisdiction other than the law of the State of New York, the General
Corporation Law of the State of Delaware and the federal law of the United
States of America.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm in the Registration
Statement and the related prospectus under the heading "Legal Matters", without
admitting that we are "experts" within the meaning of the Act or the rules and
regulations of the Securities and Exchange Commission issued thereunder with
respect to any part of the Registration Statement including this Exhibit.
Very truly yours,
MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
September 18, 1998
Chase Funding, Inc.
Chase Manhattan Acceptance Corporation
343 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
We have acted as counsel to Chase Funding, Inc., a New York corporation, and
Chase Manhattan Acceptance Corporation, a Delaware corporation, (each, a
"Seller") in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission on
September 18, 1998, pursuant to the Securities Act of 1933, as amended (the
"Act") in respect of Mortgage Pass-Through Certificates ("Certificates") that
the Sellers plan to offer in series. We hereby confirm that the discussion of
federal income tax consequences appearing in the Prospectus under the heading
"Federal Income Tax Consequences" and in the Prospectus Supplement under the
headings "Terms of the Certificates -- Federal Income Tax Consequences" and
"Federal Income Tax Consequences" is our opinion as to the material federal
income tax consequences of purchasing, owning and disposing of Certificates and
we adopt it as such.
Our opinion is based upon existing federal income tax laws, regulations,
administrative pronouncements and judicial decisions. All such authorities are
subject to change, either prospectively or retroactively. No assurance can be
provided as to the effect of any such change upon our opinion. In addition, our
opinion is based on the facts and circumstances set forth in the Prospectus and
the Prospectus Supplement and in the other documents reviewed by us. Our opinion
as to the matters set forth herein could change with respect to a particular
Series of Certificates as a result of changes in facts and circumstances,
changes in the terms of the documents reviewed by us, or changes in the law
subsequent to the date hereof. As the Registration Statement contemplates Series
of Certificates with numerous different characteristics, the particular
characteristics of each Series of Certificates must be considered in determining
the applicability of this opinion to a particular Series of Certificates. The
opinion
<PAGE>
Chase Funding, Inc.
Chase Manhattan Acceptance Finance Corporation
September 18, 1998
Page 2
contained in each Prospectus Supplement and Prospectus prepared pursuant to the
Registration Statement is, accordingly, deemed to be incorporated herein.
The opinion set forth herein has no binding effect on the Internal Revenue
Service or any court. No assurance can be given that, if the matter were
contested, a court would agree with the opinion set forth herein.
In giving the foregoing opinion, we express no opinion other than as to the
federal income tax law.
We hereby consent to the filing of this letter as an Exhibit to the Registration
Statement and to the reference to this firm in the Registration Statement under
the heading "Federal Income Tax Consequences", without admitting that we are
"experts" within the meaning of the Act or the rules and regulations of the
Securities and Exchange Commission issued thereunder.
Very truly yours,
MORGAN, LEWIS & BOCKIUS LLP
