<PAGE>
As filed with the Securities and Exchange Commission on June 4, 1998
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHASE MORTGAGE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 343 Thornall Street 52-1495132
(State or other jurisdiction of Edison, New Jersey 08837 (I.R.S. Employer
incorporation or organization) (732) 205-0600 Identification Number)
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
PAUL E. MULLINGS
Chase Mortgage Finance Corporation
343 Thornall Street
Edison, New Jersey 08837
(732) 205-0600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
STEVEN J. MOLITOR, ESQ.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection 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.
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<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 JUNE 4, 1998
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus dated [DATE])
$[__________] (Approximate)
Chase Mortgage Finance Corporation
Seller
Multi-Class Mortgage Pass-Through Certificates, Series [___]
<TABLE>
<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 Certificates
$__________ ________% Class A-4 Certificates $_________ ________% Class M Certificates
$__________ Adjustable Rate (1) Class A-5 Certificates $_________ ________% Class B-1 Certificates
$__________ Adjustable Rate (2) Class A-6 Certificates $_________ ________% Class B-2 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."
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 Mortgage Finance 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
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.
---------------------------
<PAGE>
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 Offered Class A 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:
- 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;
- 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;
- 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;
- 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
- 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.
<TABLE>
<S> <C>
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 Mortgage Finance Corporation (the
"Seller"). See "Chase Mortgage Finance
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."
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Initial Principal Amount of
Offered Certificates.............$[__________]. (Approximate; subject to a
permitted variance of plus or minus 5%.) In
addition, the original principal amount of any
Class of Certificates may be adjusted if
necessary to obtain the required ratings on the
Offered Certificates. Accordingly, any
investors' commitments with respect to the
Offered Certificates may be increased or
decreased correspondingly.
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 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."
</TABLE>
S-6
<PAGE>
Selected Mortgage Loan Data
(Approximate as of the Cut-off Date)
<TABLE>
<S> <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.
<TABLE>
<S> <C>
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.
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.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
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.
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.
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
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.
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
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.]
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
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."
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
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 generally 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.
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
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.
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
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. Section 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.
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
Legal Investment.................The Class A and Class M Certificates will
constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act
of 1984 ("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.
</TABLE>
S-15
<PAGE>
<TABLE>
<S> <C>
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."
</TABLE>
S-16
<PAGE>
RISK FACTORS
General
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
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
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
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:
- 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;
- 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;
- 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
- 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>
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 Mortgage Finance 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
Certain 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
_________. "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>
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
----- -------------- ---------------------- -------------------
<S> <C> <C> <C>
$
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
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
----- -------------- ---------------------- -------------------
<S> <C> <C> <C>
-------- ------------ ------
Totals.................. $ %
-------- ------------ ------
-------- ------------ ------
</TABLE>
S-23
<PAGE>
Original Principal Balance(2)
<TABLE>
<CAPTION>
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
----------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$ %
------- ------------
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>
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
----------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$ %
------ ---------- ------
Total............ $ %
------ ---------- ------
------ ---------- ------
</TABLE>
Original Loan-to-Value Ratio(3)
<TABLE>
<CAPTION>
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
------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$ %
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>
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
------------ -------------- ------------ -------------------
<S> <C> <C> <C>
Purchase......................... $ %
Cash-out Refinance...............
Rate/Term Refinance..............
------ ---------- ------
Totals..................
$ %
------ ---------- ------
------ ---------- ------
</TABLE>
Remaining Terms to Stated Maturity(4)
<TABLE>
<CAPTION>
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
---------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$ %
------ ---------- ------
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>
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
---------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$ %
------ ---------- ------
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>
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
------------- -------------- ------------ -----------------
<S> <C> <C> <C>
$ %
------ ---------- ------
Totals.................................... $ %
------ ---------- ------
------ ---------- ------
</TABLE>
- ------------
S-27
<PAGE>
Occupancy(7)
<TABLE>
<CAPTION>
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
--------- -------------- ----------------- -------------------
<S> <C> <C> <C>
$ %
------ ---------- ------
Totals..................... $ %
------ ---------- ------
------ ---------- ------
</TABLE>
- ---------------
(7) Based on representations by the Mortgagors at the time of origination
of the related Mortgage Loans.
Loan Documentation
<TABLE>
<CAPTION>
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
------------------ --------- ----------------- -------------------
<S> <C> <C> <C>
$ %
------ ---------- ------
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 Seller believes that the information set
forth herein will be representative of the characteristics of the Mortgage Pool
as it will be constituted at the time the Certificates are issued.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Offered Certificates, the
aggregate amount of each interest payment on the Offered Certificates (other
than the [Class A-P] Certificates) and the yield to maturity of such
Certificates are related to the rate and timing of payments of principal on the
underlying Mortgage Loans. The principal payments on such Mortgage Loans may be
in the form of scheduled principal payments or prepayments (for this purpose,
the term "prepayment" includes prepayments in full, curtailments and
liquidations due to default, casualty, condemnation and the like, as well as
repurchases by a mortgage loan seller). Any such prepayments will result in
distributions to holders of Certificates ("Certificateholders") of principal
amounts which would otherwise be distributed over the remaining terms of the
Mortgage Loans. In addition, because, for at least nine years after the issuance
of the Certificates, the Offered Class A Certificateholders (other than the
[Class A-7] and [Class A-P] Certificateholders) will be entitled to receive a
percentage of certain amounts, including principal prepayments, which is greater
than their proportionate interest in the Trust Fund, the rate of principal
prepayments on the Mortgage Loans will have a greater effect on the rate of
principal payments and the amount of interest payments on, and the yield to
maturity of, such Certificates than if such Certificateholders were entitled
only to their proportionate interest in such amounts. In general, the prepayment
rate may be influenced by a number of factors, including general economic
conditions and homeowner mobility. Mortgagors are permitted to prepay the
Mortgage Loans, in whole or in part, at any time without penalty. The rate of
payment of principal may also be affected by any repurchase of the Mortgage
Loans as to which there has been a material breach of a representation or
warranty or defect in documentation, or by a purchase by the Servicer of certain
Mortgage Loans modified at the request of a Mortgagor (including Mortgagors with
respect to which the Servicer has solicited such a request), or by the exercise
by the Servicer of its right to purchase a defaulted Mortgage Loan. See "The
Mortgage Pool -- General" and "The Pooling and Servicing Agreement -- Optional
Termination." In such event, the repurchase price will be passed through to the
Certificateholders as a prepayment of principal in the month following the month
of such repurchase.
The rate of prepayments with respect to mortgage loans on one- to
four-family residences has fluctuated significantly in recent years. The Seller
believes that in a fluctuating interest rate environment a predominant factor
affecting the prepayment rate on a large pool of mortgage loans is the
difference between the interest rates on the mortgage loans (giving
consideration to the cost of any refinancing) and prevailing mortgage rates. In
general, if mortgage interest rates were to fall below the interest rates on the
Mortgage Loans, the rate of prepayment would be expected to increase.
Conversely, in general, if mortgage interest rates were to rise above the
interest rates on the Mortgage Loans, the rate of prepayment would be expected
to decrease. Other factors affecting prepayment of mortgage loans include
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors'
net equity in the mortgaged properties and servicing decisions. Additionally, in
general, mortgage loans having relatively high principal balances and/or
relatively 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
S-29
<PAGE>
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.
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
S-30
<PAGE>
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 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.
S-31
<PAGE>
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>
Class A-1 Class A-2
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
Class A-3 Class A-4
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
Class A-5 Class A-6
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
Class A-7 Class A-P
---------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
Class A-R Class M, Class B-1 and Class B-2
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date % % % % % % % % % %
--- ---- ---- ---- ---- -- ---- ---- ---- ----
</TABLE>
- ---------------
(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.
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<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
<TABLE>
<S> <C> <C> <C> <C>
% % % % %
--- --- --- --- ---
-----% -----% -----% -----% -----%
</TABLE>
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
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<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
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<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 [DATE] As of December 31,
[YEAR] [YEAR] [YEAR]
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...................... % % % % % %
60 to 89 days......................
90 days or more....................
--------- -------- -------- --------- ---------- -----------
Total..................... % % % % % %
--------- -------- -------- --------- ---------- -----------
--------- -------- -------- --------- ---------- -----------
Foreclosure........................ % % % % % %
</TABLE>
There can be no assurance that the delinquency and foreclosure
experience on the Mortgage Loans will correspond to the delinquency and
foreclosure experience set forth in the foregoing table. In general, during
periods in which the residential real estate market is experiencing an overall
decline in property values such that the principal balances of the Mortgage
Loans and any secondary financing on the related Mortgaged Properties become
equal to or greater than the value of the related Mortgaged Properties, rates of
delinquencies, foreclosure and losses could be significantly higher than might
otherwise be the case. In addition, adverse economic conditions (which may
affect real property values) may affect the timely payment by Mortgagors of
Monthly Payments, and accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to the Mortgage Pool.
Underwriting Policies. [Description of Underwriting Criteria]
Servicing Activities. As of [DATE], Chase Manhattan Mortgage serviced
approximately $____ billion of one- to four-family residential mortgage loans.
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<PAGE>
THE POOLING AND SERVICING AGREEMENT
The Certificates will be issued pursuant to the Agreement. The
following summaries describe certain provisions of the Agreement. See "The
Pooling and Servicing Agreement" in the accompanying Prospectus for summaries of
certain other 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.
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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<PAGE>
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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<PAGE>
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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<PAGE>
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 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, in each case less any unreimbursed Advances made with respect to
such Mortgage Loans. Upon any such repurchase, the Offered Certificateholders
generally 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 they otherwise may have been had the Servicer
acted pursuant to its normal servicing procedures.
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 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
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<PAGE>
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 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.
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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 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.
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<PAGE>
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 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
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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
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,
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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:
[Describe payment methodology]
"Class A Certificates" means the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R and Class A-X
Certificates, referred to collectively.
The Class A Certificates (exclusive of the Class A-X Certificates),
Class M Certificates, Class B-1 Certificates and Class B-2 Certificates are
sometimes collectively referred to herein as the "Offered Certificates."
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The Class A Certificates (exclusive of the Class A-P Certificates) are
sometimes collectively referred to herein as the "Non-PO Class A Certificates."
"Class B Certificates" means the Class B-1, Class B-2, Class B-3, Class
B-4 and Class B-5 Certificates, referred to collectively.
"Non-Offered Class B Certificates" means the Class B-3, Class B-4 and
Class B-5 Certificates, referred to collectively.
"Subordinated Certificates" means the Class M and Class B Certificates,
referred to collectively.
The "Credit Support Depletion Date" is the first Distribution Date on
which the aggregate outstanding principal balance of the Subordinated
Certificates has been or will be reduced to zero.
With respect to each Mortgage Loan, the "PO Percentage" will equal a
fraction, expressed as a percentage (but not less than 0%), the numerator of
which will equal the excess, if any, of _____% per annum (the "Remittance Rate")
over the applicable Net Mortgage Rate (defined herein) and the denominator of
which will equal the Remittance Rate. The PO Percentage will 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.
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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.
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 _____%.
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[Determination of LIBOR
LIBOR for any Interest Accrual Period (other than the first Interest
Accrual Period) after the initial Interest Accrual Period will be determined as
described below.
On each Distribution Date, LIBOR shall be established by the Servicer
and as to any Interest Accrual Period (other than the first Interest Accrual
Period), LIBOR will equal the rate for United States dollar deposits for one
month which appears on the Dow Jones Telerate Screen Page 3750 as of 11:00 A.M.,
London time, on the 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
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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 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
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as of any such Distribution Date is greater than the initial Non-PO Class A
Percentage, the Non-PO Class A Prepayment Percentage shall be 100%; and provided
further, however, that no reduction of the Non-PO Class A Prepayment Percentage
below the level in effect for the most recent period shall occur with respect to
any Distribution Date unless, as of the last day of the month preceding such
Distribution Date, (i) the aggregate outstanding principal balance of Mortgage
Loans delinquent 60 days or more (including for this purpose any Mortgage Loans
in foreclosure and Mortgage Loans with respect to which the related Mortgaged
Property has been acquired by the Trust Fund) does not exceed _____% of the
aggregate principal balance of the Subordinated Certificates as of such date and
(ii) cumulative Realized Losses do not exceed (a) _____% of the aggregate
principal balance of the Subordinated Certificates as of the date of issuance of
the Certificates (the "Original Subordinated Principal Balance") if such
Distribution Date occurs 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
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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 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
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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 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
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Certificates pro rata based upon their respective outstanding principal balances
until the principal balance of the Non-PO Class A Certificates has been reduced
to zero; provided, however, that if a Realized Loss occurs with respect to a
Discount Mortgage Loan (A) the amount of such Realized Loss equal to the product
of (i) the amount of such Realized Loss and (ii) the PO Percentage with respect
to such Discount Mortgage Loan will be allocated to the Class A-P Certificates
and (B) the remainder of such Realized Loss will be allocated as described
above.
A "Realized Loss" is generally the amount, if any, with respect to any
defaulted Mortgage Loan which has been liquidated in accordance with the
Agreement, by which the unpaid principal balance and accrued interest thereon at
a rate equal to the Net Mortgage Rate exceeds the amount actually recovered by
the Servicer with respect thereto (net of reimbursement of certain expenses) at
the time such defaulted Mortgage Loan was liquidated.
Excess Fraud Losses, Excess Bankruptcy Losses and Excess Special Hazard
Losses (collectively, "Excess Losses") will be allocated to all Classes 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)
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from the first to the fifth anniversary of the Cut-off Date, an amount equal to
(1) _____% of the aggregate principal balance of all of the Mortgage Loans as of
the most recent anniversary of the Cut-off Date minus (2) the aggregate amounts
allocated to the Certificates with respect to Fraud Losses on the Mortgage Loans
since the most recent anniversary of the Cut-off Date up to such date of
determination. On and after the fifth anniversary of the Cut-off Date, the Fraud
Loss Amount will be zero.
"Excess Fraud Losses" are Fraud Losses in excess of the Fraud Loss
Amount.
The aggregate amount of Realized Losses which may be allocated in
connection with Bankruptcy Losses on the Mortgage Loans (the "Bankruptcy
Amount") to the Subordinate Certificates will initially be equal to
approximately $_________. As of any date of determination, the Bankruptcy Amount
will equal approximately $_______ less the sum of any amounts allocated to the
Certificates for such losses up to such date of determination.
A "Bankruptcy Loss" is a Deficient Valuation or a Debt Service
Reduction. With respect to any Mortgage Loan, A "Deficient Valuation" is a
valuation by a court of competent jurisdiction of the 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.
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The Offered Certificates will be treated as (i) assets described in
section 7701(a)(19)(C) of the Code and (ii) "real estate assets" within the
meaning of section 856(c)(5)(B) of the Code, in each case to the extent
described herein and in the Prospectus. Interest on the Offered Certificates
will be treated as "interest on obligations secured by mortgages on real
property" within the meaning of section 856(c)(3)(B) of the Code to the same
extent that the Offered Certificates are treated as "real estate assets" within
the meaning of section 856(c)(5)(B) of the Code.
Class A-R Certificate
The holder of the Class A-R Certificate must include the taxable income
or loss of the REMIC in determining its federal taxable income. The Class A-R
Certificate will remain outstanding for federal income tax purposes until there
are no Certificates of any other Class outstanding. Prospective investors are
cautioned that the Class A-R Certificateholder's REMIC taxable income and the
tax liability thereon may exceed, and may substantially exceed, cash
distributions to such holder during certain periods, in which event, the holder
thereof must have sufficient alternative sources of funds to pay such tax
liability. Furthermore, it is anticipated that all or a substantial portion of
the taxable income of the REMIC includible by the holder of the Class A-R
Certificate will be treated as "excess inclusion" income, resulting in (i) the
inability of such holder to use net operating losses to offset such income from
the REMIC, (ii) the treatment of such income as "unrelated business taxable
income" to certain holders who are otherwise tax-exempt, and (iii) the treatment
of such income as subject to 30% withholding tax to certain non-U.S.
investors, with no exemption or treaty reduction.
The Class A-R Certificate will be considered a "noneconomic residual
interest," with the result that transfers thereof would be disregarded for
federal income tax purposes if any significant purpose of the transferor was to
impede the assessment or collection of tax. Accordingly, the transferee
affidavit used for transfer of the Class A-R Certificate will require the
transferee to affirm that it (i) historically has paid its debts as they have
come due and intends to do so in the future, (ii) understands that it may incur
tax liabilities with respect to the Class A-R Certificate in excess of cash
flows generated thereby, (iii) intends to pay taxes associated with holding the
Class A-R Certificate as such taxes become due and (iv) will not transfer the
Class A-R Certificate to any person or entity that does not provide a similar
affidavit. The transferor must certify in writing to the Trustee that, as of the
date of the transfer, it had no knowledge or reason to know that the
affirmations made by the transferee pursuant to the preceding sentence were
false. Additionally, the Class A-R Certificate generally may not be transferred
to certain persons who are not U.S. Persons (as defined herein). See
"Description of the Certificates -- Restrictions on Transfer of the Class A-R,
Class M and Offered Class B Certificates" herein and "Federal Income Tax
Consequences -- REMIC Certificates; -- Income from Residual Certificates;
Taxation of Certain Foreign Investors; -- Transfers of Residual Certificates" in
the Prospectus.
An individual, trust or estate that holds the Class A-R Certificate
(whether such Certificate is held directly or indirectly through certain
pass-through entities) also may have additional gross income with respect to,
but may be subject to limitations on the deductibility of, Servicing Fees on the
Mortgage Loans and other administrative expenses of the Trust Fund in computing
such holder's regular tax liability, and may not be able to deduct such fees or
expenses to any extent in computing such holder's alternative minimum tax
liability. In addition, some portion of a purchaser's basis, if any, in the
Class A-R Certificate may not be recovered until termination of the Trust Fund.
Furthermore, the federal income tax consequences of any consideration paid to a
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
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respect to the federal tax treatment of such consideration. Any transferee
receiving consideration with respect to the Class A-R Certificate should consult
its tax advisors.
Due to the special tax treatment of residual interests, the effective
after-tax return of the Class A-R Certificate may be significantly lower than
would be the case if the Class A-R Certificate were taxed as a debt instrument,
or may be negative.
For further information regarding the federal income tax consequences
of investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or section 4975 of
the Code, including an individual retirement account (each, a "Plan"), or any
other person investing "plan assets" of any Plan, should carefully review with
its legal advisors whether the purchase or holding of Class A Certificates could
give rise to a transaction prohibited or not otherwise permissible under ERISA
or the Code. See "ERISA Considerations" in the Prospectus.
The Class A-R Certificate may not be purchased by or transferred to a
Plan or any other person investing "plan assets" of any Plan. Accordingly, the
following discussion does not purport to discuss any considerations under ERISA
with respect to the purchase, acquisition or resale of the Class A-R Certificate
and for purposes of the following discussion all references to the Offered
Certificates are deemed to exclude the Class A-R Certificate.
The U.S. Department of Labor ("DOL") has issued Prohibited Transaction
Class Exemption 83-1 ("PTCE 83-1") exempting certain transactions involving
mortgage pool investment entities holding mortgages on certain residential
property from the prohibited transaction provisions of ERISA and the Code. See
"ERISA Considerations" in the Prospectus for a discussion of PTCE 83-1 and the
prohibited transaction provisions of ERISA and the Code.
Prohibited Transaction Exemption _____, __ Fed. Reg. _____ ([DATE])
granted by the DOL 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
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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 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
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transfer and the Agreement will provide that any attempted or purported transfer
in violation of these transfer restrictions will be null and void and will vest
no rights in any purported transferee.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1, the
Exemption or other exemptions, and the potential consequences to their specific
circumstances prior to making an investment in the Class A Certificates.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment procedure and diversification an investment in
the Class A Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
The sale of Certificates to a Plan is in no respect a representation by
the Seller or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or by any particular
Plan, or that this investment is appropriate for Plans generally or for any
particular Plan.
LEGAL INVESTMENT MATTERS
[The Class A and Class M Certificates offered hereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("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.]
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USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Offered Certificates will be applied by the Seller to the purchase price of
the Mortgage Loans.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement 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, 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
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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.
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
<TABLE>
<CAPTION>
Page
<S> <C>
Act................................................................................................................
Adjusted Lockout Percentage........................................................................................
Adjustment Amount..................................................................................................
Advances...........................................................................................................
Agreement..........................................................................................................
Available Distribution Amount......................................................................................
Bankruptcy Amount..................................................................................................
Bankruptcy Loss....................................................................................................
Book-Entry Certificates............................................................................................
Cede...............................................................................................................
Certificate Account................................................................................................
Certificate Owner..................................................................................................
Certificate Rate...................................................................................................
Certificateholders.................................................................................................
Certificates.......................................................................................................
Chase..............................................................................................................
Chase Manhattan Mortgage...........................................................................................
Class A Certificates...............................................................................................
Class A Percentage.................................................................................................
Class A-P Distribution Amount......................................................................................
Class A-P Shortfall Amount.........................................................................................
Class A-X Notional Amount..........................................................................................
Class B Certificates...............................................................................................
Class B-1 Percentage...............................................................................................
Class B-2 Percentage...............................................................................................
Class M Percentage.................................................................................................
Code...............................................................................................................
Collection Account.................................................................................................
Commission.........................................................................................................
Co-op Loan.........................................................................................................
Cooperative Units..................................................................................................
Corporate Trust Office.............................................................................................
Credit Support.....................................................................................................
Credit Support Depletion Date......................................................................................
Cut-off Date.......................................................................................................
Debt Service Reduction.............................................................................................
Defaulted Mortgage Loan............................................................................................
Deficient Valuation................................................................................................
Definitive Certificates............................................................................................
Discount Mortgage Loans............................................................................................
Distribution Date..................................................................................................
DOL................................................................................................................
DTC................................................................................................................
</TABLE>
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<TABLE>
<S> <C>
Due Date...........................................................................................................
ERISA..............................................................................................................
Excess Bankruptcy Losses...........................................................................................
Excess Fraud Losses................................................................................................
Excess Losses......................................................................................................
Excess Special Hazard Losses.......................................................................................
Exemption..........................................................................................................
FHLMC..............................................................................................................
FNMA...............................................................................................................
Fraud Loss Amount..................................................................................................
Fraud Losses.......................................................................................................
Indirect Participants..............................................................................................
Interest Accrual Amount............................................................................................
Interest Accrual Period............................................................................................
Interest Shortfall.................................................................................................
LIBOR..............................................................................................................
LIBOR Business Day.................................................................................................
Liquidated Mortgage Loan...........................................................................................
Liquidation Principal..............................................................................................
Lockout Liquidation Amount.........................................................................................
Lockout Percentage.................................................................................................
Lockout Prepayment Percentage......................................................................................
Lockout Principal Distribution Amount..............................................................................
Modeling Assumptions...............................................................................................
Monthly Payments...................................................................................................
Mortgage Loans.....................................................................................................
Mortgage Loan Schedule.............................................................................................
Mortgage Note......................................................................................................
Mortgage Pool......................................................................................................
Mortgaged Properties...............................................................................................
Mortgage Rates.....................................................................................................
Net Mortgage Rate..................................................................................................
Non-Discount Mortgage Loans........................................................................................
Non-Offered Class B Certificates...................................................................................
Non-Offered Class B Percentage.....................................................................................
Non-PO Allocated Amount............................................................................................
Non-PO Class A Certificates........................................................................................
Non-PO Class A Optimal Principal Amount............................................................................
Non-PO Class A Percentage..........................................................................................
Non-PO Class A Prepayment Percentage...............................................................................
Non-PO Class A Principal Balance...................................................................................
Non-PO Percentage..................................................................................................
Non-recoverable Advance............................................................................................
Non-Supported Interest Shortfall...................................................................................
Offered Certificates...............................................................................................
Offered Class A Certificates.......................................................................................
Offered Class B Certificates.......................................................................................
</TABLE>
S-66
<PAGE>
<TABLE>
<S> <C>
Original Subordinated Principal Balance............................................................................
Participant........................................................................................................
Plan...............................................................................................................
PO Percentage......................................................................................................
Prepayment Interest Shortfall......................................................................................
Prepayment Model...................................................................................................
Principal Prepayment Period........................................................................................
Prospectus.........................................................................................................
PTCE 83-1..........................................................................................................
Rate Adjustment Date...............................................................................................
Realized Loss......................................................................................................
Record Date........................................................................................................
Reference Bank Rate................................................................................................
REMIC..............................................................................................................
Remittance Rate....................................................................................................
Rules..............................................................................................................
Seller.............................................................................................................
Servicer...........................................................................................................
Servicer Remittance Date...........................................................................................
Servicing Fee......................................................................................................
Servicing Fee Rate.................................................................................................
SMMEA..............................................................................................................
Special Hazard Amount..............................................................................................
Special Hazard Loss................................................................................................
Step Down Percentage...............................................................................................
Stripped Interest Rate.............................................................................................
Subordinated Certificates..........................................................................................
Subordinated Optimal Principal Amount..............................................................................
Subordinated Percentage............................................................................................
Subordinated Prepayment Percentage.................................................................................
Subservicers.......................................................................................................
Telerate Screen Page 3750..........................................................................................
Trustee............................................................................................................
Trust Fund.........................................................................................................
Underwriting Agreement.............................................................................................
Underwriter........................................................................................................
</TABLE>
S-67
<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
<TABLE>
Page
<S> <C>
Terms of the Certificates..........................................
Risk Factors.......................................................
The Mortgage Pool..................................................
Prepayment and Yield Considerations................................
Chase Manhattan Mortgage Corporation...............................
The Pooling and Servicing Agreement................................
Description of the Certificates....................................
Federal Income Tax Considerations..................................
ERISA Considerations...............................................
Legal Investment Matters...........................................
Use of Proceeds....................................................
Underwriting.......................................................
Legal Matters......................................................
Ratings............................................................
Glossary...........................................................
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 Average Life Considerations...........
Chase Mortgage Finance Corporation.................................
Chase Manhattan Mortgage Corporation...............................
Servicing of the Mortgage Loans....................................
The Pooling and Servicing Agreement................................
Certain Legal Aspects of the Mortgage Loans........................
Legal Investment Matters...........................................
ERISA Considerations...............................................
Federal Income Tax Consequences....................................
Plan of Distribution...............................................
Use of Proceeds....................................................
Financial Information..............................................
Legal Matters......................................................
===================================================================
</TABLE>
Chase Mortgage
Finance Corporation
Seller
$[__________]
Multi-Class Mortgage
Pass-Through Certificates,
Series [___]
[LOGO]
Chase Manhattan
Mortgage Corporation
Servicer
-----------------------------------------------------------
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.
SUBJECT TO COMPLETION DATED JUNE 4, 1998
PROSPECTUS
Chase Mortgage Finance Corporation, Seller
Mortgage Pass-Through Certificates
(Issuable in Series)
Each Certificate offered hereby will evidence a beneficial ownership
interest in one of a number of trust funds (each a "Trust Fund") created by
Chase Mortgage Finance Corporation (the "Seller"), from time to time. As
specified in the related Prospectus Supplement, the property of each Trust Fund
will consist of a pool of one- to four-family residential mortgage loans (the
"Mortgage Loans") and related property and interests (such as amounts received
as Monthly Payments or principal prepayments which are on deposit in the
Collection Account from time to time, property which secured a Mortgage Loan
which has been acquired by foreclosure or proceeds of the liquidation of a
Mortgaged Property) conveyed to such Trust Fund by the Seller, or of mortgage
pass-through securities issued or guaranteed by FHLMC, FNMA or GNMA ("Agency
Certificates"). Unless otherwise indicated in the related Prospectus Supplement,
each pool will consist entirely of fixed-rate, first-lien Mortgage Loans or
entirely of adjustable-rate, first-lien Mortgage Loans originated by Chase
Manhattan Mortgage Corporation ("Chase Manhattan Mortgage" or the "Servicer"),
either directly or through correspondent originators, or originated by other
originators and, in any such case, acquired by the Seller. Information regarding
the size, composition and other characteristics of the mortgage pool relating to
such Series, will be furnished in the related Prospectus Supplement at the time
such Series is offered. 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.
The Certificates may be sold from time to time in one or more series on
terms determined at the time of sale and specified in the Prospectus Supplement
relating to such series. 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 of the Certificates in the amount
of the aggregate original principal balance, if any, of such class of
Certificates as specified in the related Prospectus Supplement and (ii) any
distributions in respect of the assets of the Trust Fund that are allocable to
interest on the principal balance or notional principal balance of such
Certificates at the interest rate, if any, applicable to such class of
Certificates as specified in the related Prospectus Supplement. One or more
classes of each series (i) may be entitled to receive distributions allocable to
principal, principal prepayments, interest or any combination thereof prior to
one or more other classes of Certificates of such series or after the occurrence
of certain events and (ii) may be subordinated in the right to receive such
distributions on such Certificates to one or more senior classes of
Certificates, in each case as specified in the related Prospectus Supplement.
Interest on each class of Certificates entitled to distributions allocable to
interest will accrue at a fixed rate or at a rate that is subject to change from
time to time as specified in the related Prospectus Supplement on an actual or
notional principal amount, may represent a specified portion of interest
received on some or all of the assets of the Trust Fund or may otherwise be
determined as specified in the related Prospectus Supplement.
Distributions on the Certificates of a series will be made only from
the assets of the related Trust Fund. The Certificates of any series will not be
insured or guaranteed by any governmental entity or by any other person.
THE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
CHASE MORTGAGE FINANCE CORPORATION, CHASE MANHATTAN MORTGAGE CORPORATION, THE
CHASE MANHATTAN BANK OR ANY OF THEIR AFFILIATES. THE CERTIFICATES WILL NOT BE
SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY NOR HAS THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY PASSED
UPON THE ACCURACY OF THE INFORMATION CONTAINED IN THIS PROSPECTUS.
Except as otherwise specifically provided in the applicable Prospectus
Supplement (which may also provide that a party other than the Seller shall have
some or all of the following obligations), the Seller's only obligations with
<PAGE>
respect to the Certificates will be (i) its obligation, as described herein (see
"The Pooling and Servicing Agreement-- Repurchase or Substitution"), to
repurchase Mortgage Loans under certain circumstances if either documentation
with respect to one or more Mortgage Loans required to be delivered by the
Seller to the Trustee is missing or defective or a representative or warranty
with respect to one or more Mortgage Loans is breached and such breach
materially and adversely affects the interests of the Certificateholders in a
Mortgage Loan, and (ii) its obligations, if any, as principal obligor in
connection with certain credit enhancements that may be described in the
Prospectus Supplement. Except as otherwise specifically provided in the
applicable Prospectus Supplement and except for certain representations and
warranties relating to the Servicer, the Servicer's obligations with respect to
each Series of Certificates will be limited to its contractual servicing
obligations, including any obligation it may have to advance, under the
circumstances specified in the Prospectus Supplement, delinquent payments on the
Mortgage Loans included in the related Trust Fund, and its obligations pursuant
to certain representations and warranties made by it.
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 6.
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.
The date of this Prospectus is [DATE]
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 or Agency Certificates 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 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
3
<PAGE>
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.
------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
RISK FACTORS...............................................................6
DESCRIPTION OF THE CERTIFICATES............................................8
General ..................................................................8
Classes of Certificates....................................................9
Distributions of Principal and Interest...................................10
THE MORTGAGE POOLS........................................................11
CREDIT SUPPORT............................................................13
General .................................................................13
Limited Guarantee of the Guarantor........................................14
Subordination.............................................................14
Cross-Support.............................................................15
Pool Insurance............................................................15
Special Hazard Insurance..................................................16
Bankruptcy Bond...........................................................17
Repurchase Bond...........................................................17
Guaranteed Investment Contracts...........................................18
Reserve Accounts..........................................................18
Other Insurance, Guarantees and Similar Instruments or Agreements.........18
YIELD, MATURITY AND WEIGHTED AVERAGE LIFE CONSIDERATIONS..................18
CHASE MORTGAGE FINANCE CORPORATION........................................20
UNDERWRITING POLICIES.....................................................20
SERVICING OF THE MORTGAGE LOANS...........................................21
Collection and Other Servicing Procedures.................................21
Private Mortgage Insurance................................................23
Hazard Insurance..........................................................23
Advances .................................................................24
Servicing and Other Compensation and Payment of Expenses..................24
Resignation, Succession and Indemnification of the Servicer...............25
THE POOLING AND SERVICING AGREEMENT.......................................25
Assignment of Mortgage Loans; Warranties..................................26
Payments on Mortgage Loans; Collection Account............................27
Repurchase or Substitution................................................28
Certain Modifications and Refinancings....................................29
Evidence as to Compliance.................................................29
The Trustee...............................................................29
Reports to Certificateholders.............................................30
Events of Default.........................................................30
Rights Upon Event of Default..............................................31
Amendment.................................................................32
Termination; Purchase of Mortgage Loans...................................32
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS...............................32
General .................................................................33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Foreclosure...............................................................33
Right of Redemption.......................................................34
Anti-Deficiency Legislation and Other Limitations on Lenders..............35
Consumer Protection Laws..................................................35
Enforceability of Due-on-Sale Clauses.....................................36
Applicability of Usury Laws...............................................37
Soldiers' and Sailors' Civil Relief Act...................................37
Late Charges, Default Interest and Limitations on Prepayment..............37
Environmental Considerations..............................................38
Forfeiture in Drug and RICO Proceedings...................................39
LEGAL INVESTMENT MATTERS..................................................39
ERISA CONSIDERATIONS......................................................40
FEDERAL INCOME TAX CONSEQUENCES...........................................42
General .................................................................42
REMIC Elections...........................................................42
REMIC Certificates........................................................43
Tax Opinion...............................................................43
Status of Certificates....................................................43
Income from Regular Certificates..........................................43
Income from Residual Certificates.........................................47
Sale or Exchange of Certificates..........................................49
Taxation of Certain Foreign Investors.....................................49
Transfers of Residual Certificates........................................50
Servicing Compensation and Other REMIC Pool Expenses......................52
Reporting and Administrative Matters......................................52
Non-REMIC Certificates....................................................53
Trust Fund as Grantor Trust...............................................53
Status of the Certificates................................................53
Possible Application of Stripped Bond Rules...............................54
Taxation of Certificates if Stripped Bond Rules Do Not Apply..............54
Taxation of Certificates if Stripped Bond Rules Apply.....................55
Sales of Certificates.....................................................55
Foreign Investors.........................................................55
Backup Withholding........................................................56
PLAN OF DISTRIBUTION......................................................56
USE OF PROCEEDS...........................................................57
LEGAL MATTERS.............................................................57
</TABLE>
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. 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.
1
<PAGE>
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."
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."
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Purchase of Mortgage Loans............. As described in the applicable
Prospectus Supplement, the Agreement for
each series may permit, but not require,
the Seller, the Servicer or another
party to purchase from the Trust Fund
for such series all remaining Mortgage
Loans and all property acquired in
respect of the Mortgage Loans, at a
price described in the Prospectus
Supplement, subject to the condition
that the aggregate outstanding principal
balance of the Mortgage Loans for such
series at the time of purchase shall be
less than a percentage of the aggregate
principal balance at the Cut-Off Date
specified in the Prospectus Supplement.
The exercise of such right will result
in the early retirement of the
Certificates of that series. See "The
Pooling and Servicing
Agreement--Termination; Purchase of
Mortgage Loans."
Collection Account..................... With respect to each Trust Fund, the
Servicer will be obligated to establish
an account into which it will deposit on
the dates specified in the related
Prospectus Supplement payments received
in respect of the assets in such Trust
Fund. See "The Pooling and Servicing
Agreement--Payments on Mortgage Loans;
Collection Account."
Advances............................... If specified in the Prospectus
Supplement, the Servicer, as Servicer or
master servicer of the Mortgage Loans,
will be obligated to advance, using its
own funds, delinquent installments of
principal and interest (the latter
adjusted to the applicable Remittance
Rate) 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.
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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."
C. 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."
D. Pool and Special Hazard In order to decrease the likelihood that
Insurance.............................. 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."
E. Reserve Accounts, Other In order to decrease the likelihood that
Insurance, Guarantees and Similar Certificateholders will experience
Instruments and Agreements............. 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."
Agency Certificates.................... If specified in the Prospectus
Supplement, a Trust Fund may include
mortgage pass- through securities issued
or guaranteed by the Federal Home Loan
Mortgage Corporation ("FHLMC), the
Federal National Mortgage Association
("FNMA"), or the Government National
Mortgage Association ("GNMA")
(collectively, "Agency Certificates").
Any Agency Certificates will be
described in the related Prospectus
Supplement.
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".
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<PAGE>
ERISA Considerations................... A fiduciary of any employee benefit plan
subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or a plan subject to Section
4975 of the Code should carefully review
with its own legal advisors whether the
purchase or holding of Certificates
could give rise to a transaction
prohibited or otherwise impermissible
under ERISA or the Code. See "ERISA
Considerations".
Legal Investment Matters............... The Prospectus Supplement for each
series of Certificates will specify
which, if any, of the classes of
Certificates offered thereby will
constitute "mortgage related securities"
under the Secondary Mortgage Market
Enhancement Act of 1984 ("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".
5
<PAGE>
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 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
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<PAGE>
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. Unless otherwise
specified in the Prospectus Supplement, the Seller's only obligations with
respect to the Certificates will consist of its obligations pursuant to certain
representations and warranties made by it. Unless otherwise specified in the
Prospectus Supplement, the Servicer's only obligations with respect to the
Certificates will consist of its contractual servicing and/or master servicing
obligations, including any obligation to make advances under certain limited
circumstances specified herein of delinquent installments of principal and
interest (adjusted to the applicable Remittance Rate), and its obligations
pursuant to certain representations and warranties made by it.
The Mortgage Loans will not be insured or guaranteed by any
governmental entity or, except as specified in the Prospectus Supplement, by any
other person. To the extent that delinquent payments on or losses in respect of
defaulted Mortgage Loans are not advanced by the Servicer or any other entity or
paid from any applicable credit support arrangement, such delinquencies may
result in delays in the distribution of payments to the holders of one or more
classes of Certificates, and such losses will be borne by the holders of one or
more classes of Certificates.
General
The Certificates of each series will be issued in fully-registered form
only. The minimum original Certificate Principal Balance or Notional Principal
Balance that may be represented by a Certificate (the "denomination") will be
specified in the Prospectus Supplement. The original Certificate Principal
Balance of each Certificate will equal the aggregate distributions allocable to
principal to which such Certificate is entitled. Distributions allocable to
interest on each Certificate that is not entitled to distributions allocable to
principal will be calculated based on the Notional Principal Balance of such
Certificate. The Notional Principal Balance of a Certificate will not evidence
an interest in or entitlement to distributions allocable to principal but will
be used solely for convenience in expressing the calculation of interest and for
certain other purposes.
The Certificates of a series will be transferable and exchangeable on a
Certificate Register to be maintained at the corporate trust office of the
Trustee for the related series or such other office or agency maintained for
such purposes by the Trustee in New York City (or at the office of the
certificate registrar specified in the related Prospectus Supplement). Unless
otherwise specified in the Prospectus Supplement, under each Agreement, the
Servicer will initially be appointed as the Certificate Registrar. Unless
otherwise specified in the Prospectus Supplement, no service
8
<PAGE>
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
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.
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<PAGE>
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 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. Unless otherwise specified in the
Prospectus Supplement, the aggregate Certificate Principal Balance of any class
of Certificates entitled to distributions of principal 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,
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<PAGE>
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 ("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.
The applicable Prospectus Supplement will contain information concerning the
originators of the Mortgage Loans and the underwriting standards employed by
such originators.
Unless otherwise specified in the applicable Prospectus Supplement, all
Mortgage Loans will (i) have monthly payments due on the first of each month,
(ii) be secured by Mortgaged Properties located in one of the states of the
United States or the District of Columbia, and (iii) 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, which may
include loans providing for negative amortization.
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. Unless otherwise specified in
the applicable Prospectus Supplement, each Mortgage Loan will also be covered by
a Standard Hazard Insurance Policy, as described under "Servicing of the
Mortgage Loans--Hazard Insurance" below.
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In addition, other credit enhancements acceptable to the rating agency
(or agencies) rating the Certificates may be provided for coverage of certain
risks of default or losses. See "Credit Support" herein.
If specified in the applicable Prospectus Supplement, a Mortgage Pool
may contain Mortgage Loans subject to buy-down plans ("Buy-Down Mortgage Loans")
pursuant to which the monthly payments made by the Borrower will be less than
the scheduled monthly payments on the Buy-Down Mortgage Loan, the resulting
difference to be drawn from an amount contributed by the seller of the Mortgaged
Property or another source at the time of origination of the Buy-Down Mortgage
Loan and placed in a trust or custodial account (the "Buy-Down Fund") (such
amount hereinafter referred to as the "Buy-Down Reserve"). The applicable
Prospectus Supplement or Current Report (as defined below) will contain
information, with respect to any Buy-Down Mortgage Loans, concerning limitations
on the interest rate payable by the Borrower initially, on annual increases in
the interest rate, on the length of the buy-down period, and on the Buy-Down
Fund. The repayment of a temporary Buy-Down Mortgage Loan is dependent on the
ability of the Borrower to make larger monthly payments after the Buy-Down
Reserves have been depleted and, for certain Buy-Down Mortgage Loans, while such
funds are being depleted. The inability of the Borrower to make larger monthly
payments may lead to a default on the Buy-Down Mortgage Loan or, if the Borrower
is able to obtain refinancing on favorable terms, a prepayment of such loan. See
"Yield, Maturity and Weighted Average Life Considerations."
The Prospectus Supplement for a series of Certificates may specify that
the related Mortgage Pool contains Mortgage Loans that have been used for
refinancing for the purpose of removing equity from the related Mortgaged
Properties ("Cash-Out Refinance Loans").
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. Unless otherwise specified in the applicable Prospectus
Supplement, the Seller or another party identified in such 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.
Unless otherwise specified in the applicable Prospectus Supplement, 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
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payment of premiums on certain insurance policies and bonds. See "The Pooling
and Servicing Agreement--Assignment of Mortgage Loans; Warranties."
In addition, to the extent specified in the applicable Prospectus
Supplement, in the event of delinquencies in payments of principal and interest
on the Mortgage Loans in any Mortgage Pool, the Servicer (or, if so indicated in
the applicable Prospectus Supplement, another entity) will advance cash in
amounts described herein under "The Pooling and Servicing Agreement-Advances"
and "--Payments on Mortgage Loans; Collection Account." The Servicer is not
required to make any advance which it determines in its good faith judgment not
to be ultimately recoverable under any applicable policy of insurance
("Insurance Proceeds") or out of the proceeds of liquidation of a Mortgage Loan
("Liquidation Proceeds"). Each month, the Trustee (or such other paying agent as
may be specified in the applicable Prospectus Supplement) will be obligated to
remit to Certificateholders of each series all amounts relating to the Mortgage
Loans due to the Certificateholders to the extent such amounts have been
collected or advanced by the Servicer or such other entity and remitted to the
Trustee pursuant to the terms of the Agreement for such series. See "Description
of the Certificates--Distributions of Principal and Interest."
There can be no assurance that real estate values will remain at
present levels in the areas in which the Mortgaged Properties will be located.
If the residential real estate market should experience an overall decline in
property values such that the outstanding balances of the Mortgage Loans, and
any secondary financing on the Mortgaged Properties, in a particular Mortgage
Pool become equal to or greater than the value of the properties subject to the
Mortgage Loans included in such Mortgage Pool, the actual rates of
delinquencies, foreclosures and losses could be significantly higher than those
now generally experienced in the mortgage lending industry. To the extent that
such delinquencies, foreclosures and losses are not covered by applicable credit
enhancements described in the Prospectus Supplement, the losses resulting
therefrom will be borne by holders of the Certificates of the series evidencing
interests in such Mortgage Pool. With respect to any series as to which
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. Unless
otherwise specified in the Prospectus Supplement, 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.
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Limited Guarantee of the Guarantor
If specified in the Prospectus Supplement, certain obligations of the
Servicer under the related Agreement may be covered by a Limited Guarantee,
limited in scope and amount, issued by the Guarantor. If so specified, the
Guarantor may be obligated to take either or both of the following actions in
the event the Servicer fails to do so: make deposits to the Collection Account
(a "Deposit Guarantee"); or make advances (an "Advance Guarantee"). Any such
Limited Guarantee will be limited in amount and a portion of the coverage of any
such Limited Guarantee may be separately allocated to certain events. The scope,
amount and, if applicable, the allocation of any Limited Guarantee will be
described in the related Prospectus Supplement.
Subordination
If so specified in the Prospectus Supplement, distributions in respect
of scheduled principal, Principal Prepayments, interest or any combination
thereof that otherwise would have been payable to one or more classes of
Certificates of a series (the "subordinated Certificates") will instead be
payable to holders of one or more other classes of such series (the "senior
Certificates") under the circumstances and to the extent specified in the
Prospectus Supplement. If specified in the Prospectus Supplement, delays in
receipt of scheduled payments on the Mortgage Loans and losses on defaulted
Mortgage Loans will be borne first by the various classes of subordinated
Certificates and thereafter by the various classes of senior Certificates, in
each case under the circumstances and subject to the limitations specified in
the Prospectus Supplement. The aggregate distributions in respect of delinquent
payments on the Mortgage Loans over the lives of the Certificates or at any
time, the aggregate losses in respect of defaulted Mortgage Loans which must be
borne by the subordinated Certificates by virtue of subordination and the amount
of the distributions otherwise distributable to the subordinated
Certificateholders that will be distributable to senior Certificateholders on
any Distribution Date may be limited as specified in the Prospectus Supplement.
If aggregate distributions in respect of delinquent payments on the Mortgage
Loans or aggregate losses in respect of such Mortgage Loans were to exceed the
total amounts payable and available for distribution to holders of subordinated
Certificates or, if applicable, were to exceed the specified maximum amount,
holders of senior Certificates could experience losses on the Certificates.
In addition to or in lieu of the foregoing, if so specified in the
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of subordinated Certificates on any Distribution Date may instead be
deposited into one or more reserve accounts (a "Reserve Account") established by
the Trustee. If so specified in the Prospectus Supplement, such deposits may be
made on each Distribution Date, on each Distribution Date for specified periods
or until the balance in the Reserve Account has reached a specified amount and,
following payments from the Reserve Account to holders of senior Certificates or
otherwise, thereafter to the extent necessary to restore the balance in the
Reserve Account to required levels, in each case as specified in the Prospectus
Supplement. If so specified in the Prospectus Supplement, amounts on deposit in
the Reserve Account may be released to the Servicer or the holders of any class
of Certificates at the times and under the circumstances specified in the
Prospectus Supplement.
If specified in the Prospectus Supplement, one or more classes of
Certificates may bear the risk of certain losses on defaulted Mortgage Loans not
covered by other forms of credit support prior to other classes of Certificates.
Such subordination might be effected by reducing the Certificate Principal
Balance of the subordinated Certificates on account of such losses, thereby
decreasing the proportionate share of distributions allocable to such
Certificates, or by another means specified in the Prospectus Supplement.
If specified in the Prospectus Supplement, various classes of senior
Certificates and subordinated Certificates may themselves be subordinate in
their right to receive certain distributions to other classes of senior and
subordinated Certificates, respectively, through a cross-support mechanism or
otherwise.
As between classes of senior Certificates and as between classes of
subordinated Certificates, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events, or
(iv) otherwise, in each case as specified in the
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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.
Cross-Support
If specified in the Prospectus Supplement, the beneficial ownership of
separate groups of assets included in a Trust Fund may be evidenced by separate
classes of the related series of Certificates. In such case, credit support may
be provided by a cross-support feature which may require that distributions be
made with respect to Certificates evidencing beneficial ownership of one or more
asset groups prior to distributions to subordinated Certificates evidencing a
beneficial ownership interest in other asset groups within the same Trust Fund.
The Prospectus Supplement for a series which includes a cross-support feature
will describe the manner and conditions for applying such cross-support feature.
If specified in the Prospectus Supplement, the coverage provided by one
or more forms of credit support may apply concurrently to two or more separate
Trust Funds. If applicable, the Prospectus Supplement will identify the Trust
Funds to which such credit support relates and the manner of determining the
amount of the coverage provided thereby and of the application of such coverage
to the identified Trust Funds.
Pool Insurance
In order to decrease the likelihood that Certificateholders will
experience losses in respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one or more pool insurance
policies. Any such policies may be in lieu of or in addition to any obligations
of the Seller or the Servicer in respect of the Mortgage Loans. Such pool
insurance policy will, subject to the limitations described below and in the
Prospectus Supplement, cover loss by reason of default in payments on the
Mortgage Loans up to the amounts specified in the Prospectus Supplement or the
Detailed Description and for the periods specified in the Prospectus Supplement.
The Servicer will agree to use its best reasonable efforts to maintain in effect
any such pool insurance policy and to present claims thereunder to the pool
insurer on behalf of itself, the Trustee and the Certificateholders. The pool
insurance policy, however, is not a blanket policy against loss, since claims
thereunder may only be made respecting particular defaulted Mortgage Loans and
only upon satisfaction of certain conditions precedent described below. The pool
insurance policy, if any, will not cover losses due to a failure to pay or
denial of a claim under a primary mortgage insurance policy, irrespective of the
reason therefor. The related Prospectus Supplement will describe any provisions
of a pool insurance policy that are materially different from those described
below.
Any pool insurance policy may provide that no claims may be validly
presented thereunder unless (i) any required primary mortgage insurance policy
is in effect for the defaulted Mortgage Loan and a claim thereunder has been
submitted and settled; (ii) hazard insurance on the related Mortgaged Property
has been kept in force and real estate taxes and other protection and
preservation expenses have been paid; (iii) if there has been physical loss or
damage to the Mortgaged Property, it has been restored to its condition
(reasonable wear and tear excepted) at the Cut-Off Date; (iv) the insured has
acquired good and merchantable title to the Mortgaged Property free and clear of
liens, except certain permitted encumbrances; and (v) the Servicer has advanced
foreclosure costs. Upon satisfaction of these conditions, the pool insurer will
have the option either (a) to purchase the Mortgaged Property at a price equal
to the Principal Balance thereof plus accrued and unpaid interest at the
Mortgage Rate to the date of purchase and certain expenses incurred by the
Servicer on behalf of the Trustee and the Certificateholders, or (b) to pay the
amount by which the sum of the Principal Balance of the defaulted Mortgage Loan
plus accrued and unpaid interest at the Mortgage Rate to the date of payment of
the claim and the aforementioned expenses exceeds the proceeds received from an
approved sale of the Mortgaged Property, in either case net of certain amounts
paid or assumed to have been paid under any related primary mortgage insurance
policy. If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy or any applicable
special hazard insurance policy are insufficient to restore the damaged property
to a condition sufficient to permit recovery under the pool insurance policy,
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the Servicer will not be required to expend its own funds to restore the damaged
property unless it determines (i) that such restoration will increase the
proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Servicer for its expenses, and (ii) that such expenses will
be recoverable by it through proceeds of the sale of the property or proceeds of
the pool insurance policy or any primary mortgage insurance policy.
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 "Certain
Legal Aspects of the Mortgage Loans --Foreclosure". Accordingly, if aggregate
net claims paid under any pool insurance policy reach the original policy limit,
coverage under that pool insurance policy will be exhausted and any further
losses will be borne by one or more classes of Certificateholders unless assumed
by some other entity, if and to the extent specified in the Prospectus
Supplement.
Since any mortgage pool insurance policy may require that the property
subject to a defaulted Mortgage Loan be restored to its original condition prior
to claiming against the pool insurer, such policy may not provide coverage
against hazard losses. The hazard policies concerning the Mortgage Loans
typically exclude from coverage physical damage resulting from a number of
causes and, even when the damage is covered, may afford recoveries which are
significantly less than the full replacement cost of such losses. Even if
special hazard insurance is applicable as specified in the Prospectus
Supplement, no coverage in respect of special hazard losses will cover all
risks, and the amount of any such coverage will be limited. See "Special Hazard
Insurance" below. As a result, certain hazard risks will not be insured against
and will therefore be borne by Certificateholders, unless otherwise assumed by
some other entity, as specified in the Prospectus Supplement.
Special Hazard Insurance
In order to decrease the likelihood that Certificateholders will
experience losses in respect of the Mortgage Loans, if specified in the
Prospectus Supplement, the Seller will obtain one or more special hazard
insurance policies with respect to the Mortgage Loans. Such a special hazard
insurance policy will, subject to limitations described below and in the
Prospectus Supplement, protect holders of Certificates from (i) loss by reason
of damage to Mortgaged Properties caused by certain hazards (including
earthquakes and, to a limited extent, tidal waves and related water damage) not
covered by the standard form of hazard insurance policy for the respective
states in which the Mortgaged Properties are located or under flood insurance
policies, if any, covering the Mortgaged Properties, and (ii) loss from partial
damage caused by reason of the application of the co-insurance clause contained
in hazard insurance policies. See "Servicing of the Mortgage Loans--Hazard
Insurance" below. Any special hazard insurance policy may not cover losses
occasioned by war, civil insurrection, certain governmental actions, errors in
design, faulty workmanship or materials (except under certain circumstances),
nuclear reaction, flood (if the Mortgaged Property is located in a federally
designated flood area), chemical contamination and certain other risks.
Aggregate claims under each special hazard insurance policy may be limited to a
specified percentage of the aggregate principal balance as of the Cut-Off Date
of the Mortgage Loans. Any special hazard insurance policy may also provide that
no claim may be paid unless hazard and, if applicable, flood insurance on the
Mortgaged Property has been kept in force and other protection and preservation
expenses have been paid by the Servicer.
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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 "Certain Legal Aspects of the Mortgage
Loans -- Enforceability of Certain Provisions". If so provided in the related
Prospectus Supplement, the Servicer will obtain a bankruptcy bond or similar
insurance contract (the "bankruptcy bond") for proceedings with respect to
borrowers under the Bankruptcy Code. Any such bankruptcy bond will cover certain
losses resulting from a reduction by a bankruptcy court of scheduled payments of
principal of and interest on a Mortgage Loan or a reduction by such court of the
secured principal amount of a Mortgage Loan and will cover certain unpaid
interest on the amount of such a principal reduction from the date of the filing
of a bankruptcy petition.
Any such bankruptcy bond will provide coverage in the aggregate amount
specified in the related Prospectus Supplement. Such amount will be reduced by
payments made under such bankruptcy bond in respect of the related Mortgage
Loans, to the extent specified in the related Prospectus Supplement, and will
not be restored.
In lieu of a bankruptcy bond, the Servicer may obtain a Limited
Guarantee to cover such bankruptcy-related losses.
Repurchase Bond
If so specified in the related Prospectus Supplement, the Servicer will
be obligated to purchase any Mortgage Loan up to an aggregate dollar amount
specified in the related Prospectus Supplement) for which insurance coverage is
denied due to dishonesty, misrepresentation or fraud in connection with the
origination or sale of such Mortgage Loan. Such obligation may be secured by a
surety bond or other instrument or mechanism guaranteeing payment of the amount
to be paid by the Servicer.
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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. Unless otherwise specified in the Prospectus Supplement, any
instrument deposited therein will name the Trustee, in its capacity as trustee
for the holders of the related Certificates, as beneficiary and will be issued
by an entity acceptable to each rating agency that rates the Certificates.
Additional information with respect to such instruments deposited in the Reserve
Accounts will be set forth in the Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will
be available for withdrawal from the Reserve Account for distribution to the
holders of Certificates for the purposes, in the manner and at the times
specified in the Prospectus Supplement.
Other Insurance, Guarantees and Similar Instruments or Agreements
If specified in the Prospectus Supplement, the related Trust Fund may
also include insurance, guarantees, letters of credit or similar arrangements
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
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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 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, unless otherwise specified in the related Prospectus Supplement, 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
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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.
CHASE MORTGAGE FINANCE CORPORATION
Chase Mortgage Finance Corporation (the "Seller") was incorporated in
the State of Delaware on December 4, 1986 as a wholly-owned, limited-purpose
finance subsidiary of The Chase Manhattan Corporation. The Seller maintains its
principal office at 343 Thornall Street, Edison, New Jersey 08837. Its telephone
number is (732) 205- 0600.
As described herein under "The Mortgage Pools," "Underwriting
Policies," and "The Pooling and Servicing Agreement -- Assignment of Mortgage
Loans; Warranties," the only obligations, if any, of the Seller with respect to
a Series of Certificates may be pursuant to certain limited representations and
warranties and limited undertakings to repurchase or substitute Mortgage Loans
or Agency Securities under certain circumstances. The Seller will have no
ongoing servicing obligations or responsibilities with respect to any Mortgage
Pool or pool of Agency Certificates. The Seller does not have, nor is it
expected in the future to have, any significant assets.
As specified in the related Prospectus Supplement, the Servicer with
respect to any Series of Certificates evidencing interests in Mortgage Loans may
be an affiliate of the Company. The Seller anticipates that it will acquire
Mortgage Loans in the open market or in privately negotiated transactions, which
may be through or from an affiliate.
Unless otherwise specifically provided in the related Prospectus
Supplement, none of the Company, the Chase Manhattan Corporation, The Chase
Manhattan Bank, Chase Manhattan Mortgage Corporation, nor any of their
affiliates, will insure or guarantee the Certificates of any Series.
UNDERWRITING POLICIES
Except as otherwise set forth in the related Prospectus Supplement, the
Seller expects that the originator of a Mortgage Loan will have applied, in a
standard procedure which complies with applicable federal and state laws and
regulations, underwriting standards which are intended to evaluate the
Mortgagor's credit standing and repayment ability and the value and adequacy of
the Mortgaged Property as collateral. FHA Mortgage Loans and VA Mortgage Loans
will comply with the underwriting policies of FHA and VA, respectively. Except
as described below or in the related Prospectus Supplement, the Seller believes
that these policies were consistent with those utilized by mortgage lenders
generally during the period of origination.
Certain states where the Mortgaged Properties are located may have
"anti-deficiency" laws requiring, in general, that lenders providing credit on
one- to four-family properties look solely to the property for repayment in the
event of foreclosure. The Seller expects that the underwriting standards applied
with respect to the Mortgage Loans (including in states with anti-deficiency
laws) will require that the underwriting officers be satisfied that the value of
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the property being financed, as indicated by an appraisal, currently supports
and is anticipated to support in the future the outstanding loan balance, and
provides sufficient value to mitigate the effects of adverse shifts in real
estate values. See "Certain Legal Aspects of the Mortgage Loans--Anti-Deficiency
Legislation and Other Limitations on Lenders." The general appreciation of real
estate values experienced in the past has been a factor in limiting the general
loss experience on conventional mortgage loans. There can be no assurance,
however, that the past pattern of appreciation in value of the real property
securing these loans will continue.
The adequacy of a Mortgaged Property as security will be determined by
appraisal. With respect to a Mortgage Loan made in connection with the
borrower's purchase of the Mortgaged Property, the "appraised value" is the
lower of the purchase price or the amount determined by the appraiser. The
appraiser must personally inspect the property and will prepare a report which
customarily includes a market data analysis based on recent sales of comparable
homes and, when deemed applicable, a replacement cost analysis based on the
current cost of constructing a similar home. The Loan-to-Value Ratio of a
Mortgage Loan is equal to the original principal amount of the Mortgage Loan
divided by the appraised value of the related Mortgaged Property.
The Seller expects that each prospective borrower will be required to
complete an application which will include information with respect to the
applicant's assets, liabilities, income, credit history, employment history and
personal information, and furnish an authorization to apply for a credit report
which summarizes the borrower's credit history with local merchants and lenders
and any record of bankruptcy. With respect to establishing the applicant's
ability to make timely payments on the loans given his or her income and fixed
obligations other than housing expenses, the Company expects that each
originator will have followed procedures generally acceptable to FNMA and FHLMC,
except as otherwise described in this Prospectus or a Prospectus Supplement.
The Seller will obtain representations and warranties from the seller
of the Mortgage Loan (which may or may not be the originator) that the Mortgage
Loan was originated in accordance with the underwriting guidelines described
above or such other policies as the Seller may require from time to time. Unless
otherwise specified in the applicable Prospectus Supplement, the Seller, not
later than 90 days following delivery of a Series of Certificates, will review
or cause to be reviewed, all or a representative sample of the Mortgage Loans,
and perform such other reviews as it deems appropriate to determine compliance
with such standards. Any Mortgage Pool must be repurchased or substituted for by
the seller, unless such Mortgage Loan is otherwise demonstrated to be includible
in the Mortgage Pool to the satisfaction of the Company. See "The Pooling and
Servicing Agreement -- Assignment of Mortgage Loans; Warranties,"
The foregoing underwriting policies may be varied for particular Series
of Certificates to the extent set forth in the related Prospectus Supplement.
SERVICING OF THE MORTGAGE LOANS
Unless otherwise specified in the Prospectus Supplement, with respect
to each series of Certificates, the related Mortgage Loans will be serviced by
Chase Manhattan Mortgage, acting alone or, as master servicer, through one or
more direct servicers. Unless otherwise specified in the Prospectus Supplement,
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
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Servicing Guide, as amended or supplemented from time to time, and, to the
extent such procedures are unavailable, in accordance with the mortgage
servicing practices of prudent mortgage lending institutions.
The Servicer will be responsible for using its best reasonable efforts
to collect all payments called for under the Mortgage Loans and shall,
consistent with each Agreement, follow such collection procedures as it deems
necessary and advisable with respect to the Mortgage Loans. Consistent with the
above, the Servicer, may, in its discretion, (i) waive any late payment charge
and (ii) if a default on the related Mortgage Loan has occurred or is reasonably
foreseeable, arrange with the mortgagor a schedule for the liquidation of a
delinquency. In the event of any such arrangement the Servicer will be
responsible for distributing funds with respect to such Mortgage Loan during the
scheduled period in accordance with the original amortization schedule thereof
and without regard to the temporary modification thereof.
The Servicer will be obligated to use it best reasonable efforts to
realize upon a defaulted Mortgage Loan in such manner as will maximize the
payments to Certificateholders. In this regard, the Servicer may (directly or
through a local assignee) sell the property at a foreclosure or trustee's sale,
negotiate with the mortgagor for a deed in lieu of foreclosure or, in the event
a deficiency judgment is available against the mortgagor or other person,
foreclose against such property and proceed for the deficiency against the
appropriate person. See "Certain 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 "Certain 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
Unless otherwise specified in the Prospectus Supplement, each Agreement
will obligate the Servicer to exercise its best reasonable efforts to maintain
and keep in full force and effect a private mortgage insurance policy on all
Mortgage Loans that have a Loan-to-Value Ratio in excess of 80%.
A private mortgage insurance policy may provide that, as an alternative
to paying a claim thereunder, the mortgage insurer will have the right to
purchase the Mortgage Loan following the receipt of a notice of default, at a
purchase price equal to the sum of the principal balance of the Mortgage Loan,
accrued interest thereon and the amount of certain advances made by the Servicer
with respect to the Mortgage Loan. The mortgage insurer may have such purchase
right after the borrower has failed to make three scheduled monthly payments (or
one payment if it is the first payment due on the Mortgage Loan) or after any
foreclosure or other proceeding affecting the Mortgage Loan or the Mortgaged
Property has been commenced. The proceeds of any such purchase will be
distributed to Certificateholders on the applicable Distribution Date. A
mortgage insurer may be more likely to exercise such purchase option when
prevailing interest rates are low relative to the interest rate borne by the
defaulted Mortgage Loan, in order to reduce the aggregate amount of accrued
interest that the insurer would be obligated to pay upon payment of a claim.
Hazard Insurance
The Servicer will cause to be maintained for each Mortgaged Property a
standard hazard insurance policy. The coverage of such policy is required to be
in an amount at least equal to the maximum insurable value of the improvements
which are a part of such property from time to time or the principal balance
owing on such Mortgage Loan from time to time, whichever is less. All amounts
collected by the Servicer under any hazard policy (except for amounts to be
applied to the restoration or repair of property subject to the related Mortgage
or property acquired by foreclosure or amounts released to the related mortgagor
in accordance with the Servicer's normal servicing procedures) will be deposited
in the Collection Account.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Mortgage Loans will be
underwritten by different insurers and, therefore, will not contain identical
terms and conditions, the basic terms thereof are dictated by state law. Such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other water-related
causes, earth movement (including earthquakes, landslides and mud flow), nuclear
reactions, pollution, wet or dry rot, vermin, rodents, insects or domestic
animals, theft and, in certain cases, vandalism. The foregoing list is merely
indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. If the property securing a Mortgage Loan is located in a
federally designated flood area, the Agreement will require that flood insurance
be maintained in an amount representing coverage not less than the least of (i)
the principal balance owing on such Mortgage Loan from time to time, (ii) the
maximum insurable value of the improvements which are a part of such property
from time to time or (iii) the maximum amount of insurance which is available
under the Flood Disaster Protection Act of 1973, as amended. The Seller may also
purchase special hazard insurance against certain of the uninsured risks
described above. See "Credit Support--Special Hazard Insurance."
Most of the properties securing the Mortgage Loans will be covered by
homeowners' insurance policies, which, in addition to the standard form of fire
and extended coverage, provide coverage for certain other risks. These
homeowners' policies typically contain a "coinsurance" clause which in effect
requires the insured at all 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
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damaged or destroyed, or (ii) such proportion of the loss as the amount of
insurance carried bears to the specified percentage of the full replacement cost
of such improvements.
Since the amount of hazard insurance the Servicer is required to cause
to be maintained on the improvements securing the Mortgage Loans declines as the
principal balances owing thereon decrease, if the residential properties
securing the Mortgage Loans appreciate in value over time, the effect of
coinsurance in the event of partial loss may be that hazard insurance proceeds
will be insufficient to restore fully the damaged property.
The Servicer will cause to be maintained on any Mortgaged Property
acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to the lesser of (i)
the maximum insurable value from time to time of the improvements which are a
part of such property or (ii) the unpaid principal balance of the related
Mortgage Loan at the time of such foreclosure or deed in lieu of foreclosure,
plus accrued interest and the Servicer's good-faith estimate of the related
liquidation expenses to be incurred in connection therewith.
The Servicer may maintain, in lieu of causing individual hazard
insurance policies to be maintained with respect to each Mortgage Loan, one or
more blanket insurance policies covering hazard losses on the Mortgage Loans.
The Servicer will pay the premium for such policy on the basis described therein
and will pay any deductible amount with respect to claims under such policy
relating to the Mortgage Loans.
Advances
To the extent specified in the Prospectus Supplement, in the event that
any borrower fails to make any payment of principal or interest required under
the terms of a Mortgage Loan, the Servicer will be obligated to advance the
entire amount of such payment adjusted in the case of any delinquent interest
payment to the applicable Net Mortgage Rate. This obligation to advance will be
limited to amounts which the Servicer reasonably believes will be recoverable by
it out of liquidation proceeds or otherwise in respect of such Mortgage Loan.
The Servicer will be entitled to reimbursement for any such advance from related
late payments on the Mortgage Loan as to which such advance was made.
Furthermore, the Servicer will be entitled to reimbursement for any such advance
(i) from Liquidation Proceeds or Insurance Proceeds received if such Mortgage
Loan is foreclosed prior to any payment to Certificateholders in respect of the
repossession or foreclosure and (ii) from receipts or recoveries on all other
Mortgage Loans or from any other assets of the Trust Fund, for all or any
portion of such advance which the Servicer determines, in good faith, may not be
ultimately recoverable from such liquidation or insurance proceeds (a
"Nonrecoverable Advance"). Any Nonrecoverable Advance will be reimbursable out
of the assets of the Trust Fund. The amount of any scheduled payment required to
be advanced by the Servicer will not be affected by any agreement between the
Servicer and a borrower providing for the postponement or modification of the
due date or amount of such scheduled payment. If specified in the Prospectus
Supplement, the Trustee for the related series will make advances of delinquent
payments of principal and interest in the event of a failure by the Servicer to
perform such obligation.
Any such obligation to make advances may be limited to amounts due
holders of certain classes of Certificates of the related series or may be
limited to specified periods or otherwise as specified in the Prospectus
Supplement.
Servicing and Other Compensation and Payment of Expenses
Unless otherwise specified in the Prospectus Supplement, the Servicer's
primary compensation for its servicing activities will come from the payment to
it, with respect to each interest payment on a Mortgage Loan, of all or a
portion of the difference between the Mortgage Rate for such Mortgage Loan and
the related Remittance Rate. In addition to its primary compensation, the
Servicer will retain all assumption fees, late payment charges and other
miscellaneous charges, all to the extent collected from borrowers. In the event
the Servicer is acting as master servicer under an Agreement, it will receive
compensation with respect to the performance of its activities as master
servicer.
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Unless otherwise specified in the Prospectus Supplement, the Servicer
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. Unless otherwise specified in the Prospectus Supplement, the
Servicer may assign any of its primary servicing compensation in excess of that
amount customarily retained as servicing compensation for similar assets.
Resignation, Succession and Indemnification of the Servicer
The Agreement will provide that the Servicer may not resign from its
obligations and duties as servicer or master servicer thereunder, except upon
determination that its performance of such duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or a
successor has assumed the Servicer's servicing obligations and duties under such
Agreement. The Guarantor's obligations under any Advance Guarantee or Deposit
Guarantee will, upon issuance thereof, be irrevocable, subject to certain
limited rights of assignment as described in the Prospectus Supplement if
applicable.
The Agreement will provide that neither the Seller nor the Servicer
nor, if applicable, the Guarantor, nor any of their respective directors,
officers, employees or agents, shall be under any liability to the Trust Fund or
the Certificateholders of the related series for taking any action, or for
refraining from taking any action, in good faith pursuant to such Agreement, or
for errors in judgment; provided, however, that neither the Servicer nor, if
applicable, the Guarantor, nor any such person, will be protected against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties thereunder. The Agreement will also provide
that the Seller, the Servicer and, if applicable, the Guarantor and their
respective directors, officers, employees and agents are entitled to
indemnification by the related Trust Fund and will be held harmless against any
loss, liability or expense incurred in connection with any legal action relating
to the Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, each Agreement will provide that
neither the Seller nor the Servicer nor, if applicable, the Guarantor is under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to the Servicer's servicing responsibilities under such Agreement or
the Guarantor's payment obligations under any Limited Guarantee, respectively,
and which in its respective opinion may involve it in any expense or liability.
Each of the Seller, the Servicer and, if applicable, the Guarantor may, however,
in its respective discretion undertake any such action which it may deem
necessary or desirable in respect of such Agreement and the rights and duties of
the parties thereto and the interests of the Certificateholders thereunder. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust Fund,
and the Seller, the Servicer and, if applicable, the Guarantor, will be entitled
to be reimbursed therefor from amounts deposited in the Collection Account.
Any corporation into which the Servicer may be merged or consolidated
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer is a party, or any corporation succeeding to the business of
the Servicer, which assumes the obligations of the Servicer, will be the
successor of the Servicer under each Agreement.
THE POOLING AND SERVICING AGREEMENT
The following summaries describe certain provisions of the Agreements.
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
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to a particular series of Certificates. Where particular provisions or terms
used in the Agreements are referred to, such provisions or terms are as
specified in the Agreements.
Assignment of Mortgage Loans; Warranties
At the time of issuance of each series of Certificates, the Seller will
cause the Mortgage Loans in the Trust Fund represented by that series of
Certificates to be assigned to the Trustee, together with all principal and
interest due on or with respect to such Mortgage Loans, other than principal and
interest due on or before the Cut-Off Date and prepayments of principal received
before the Cut-Off Date. The Trustee, concurrently with such assignment, will
execute and deliver Certificates evidencing such Trust Fund to the Seller in
exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the Agreement for that series (the "Mortgage
Loan Schedule"). The Mortgage Loan Schedule will include, as to each Mortgage
Loan, information as to the outstanding principal balance as of the close of
business on the Cut-Off Date, as well as information respecting the Mortgage
Rate, the current scheduled monthly payment, the number of months remaining
until the stated maturity date of each Note and the location of the related
Mortgaged Property.
In addition, the Seller will, as to each Mortgage Loan, deliver to the
Trustee (i) the Note, endorsed to the order of the Trustee by the holder/payee
thereof without recourse; (ii) the "buy-down" agreement (if applicable); (iii) a
Mortgage and Mortgage assignment meeting the requirements of the Agreement; (iv)
all Mortgage assignments from the original holder of the Mortgage Loan, through
any subsequent transferees to the transferee to the Trustee; (v) the original
Lender's Title Insurance Policy, or other evidence of title, or if a policy has
not been issued, a written commitment or interim binder or preliminary report of
title issued by the title insurance or escrow company ; (vi) as to each Mortgage
Loan, an original certificate of Primary Mortgage Insurance Policy (or copy
certified to be true by the originator) to the extent required under the
applicable requirements for the Mortgage Pool; and (vii) such other documents as
may be described in the applicable Prospectus Supplement. Except as expressly
permitted by the Agreement, all documents so delivered are to be original
executed documents; provided, however, that in instances where the original
recorded document has been retained by the applicable jurisdiction or has not
yet been returned from recordation, the Seller may deliver a photocopy
containing a certification of the appropriate judicial or other governmental
authority of the jurisdiction, and the Servicer shall cause the originals of
each Mortgage and Mortgage assignment which is so unavailable to be delivered to
the Trustee as soon as available.
The Trustee will hold such documents for each series of Certificates in
trust for the benefit of all Certificateholders of such series. The Trustee is
obligated to review such documents for each Mortgage Loan within 270 days after
the conveyance of the Mortgage Loan to it. If any document is found by the
Trustee not to have been executed or received or to be unrelated to the Mortgage
Loan identified in the Agreement, the Trustee will promptly notify the Seller.
The Seller, or another party specified in the applicable Prospectus Supplement,
will be required to cure such defect or to repurchase the Mortgage Loan or to
provide a substitute Mortgage Loan. See "Repurchase or Substitution" below.
In the Agreement for each series, the Seller or another party described
in the Agreement (the "Representing Party") will make certain representations
and warranties with respect to the Mortgage Loans. Unless otherwise specified in
the applicable Prospectus Supplement, 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
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(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.
Unless otherwise indicated in the applicable Prospectus Supplement, this
obligation to repurchase or substitute constitutes the sole remedy available to
the Certificateholders or the Trustee for any such breach of representations and
warranties.
The Agreement for a Series of Certificates may provide that the
Servicer may, at its sole option, purchase from the Trust Fund, at the price
specified in the Agreement, any Mortgage Loan as to which the related Borrower
has failed to make full payments as required under the related Note for three
consecutive months.
Payments on Mortgage Loans; Collection Account
It is expected that the Agreement for each series of Certificates will
provide that the Servicer will establish and maintain a trust account or
accounts (the "Collection Account") in the name of the Trustee for the benefit
of the Certificateholders. The amount at any time credited to the Collection
Account will be fully-insured to the maximum coverage possible or shall be
invested in Permitted Investments, all as described in the applicable Prospectus
Supplement. In addition, a Certificate Account may be established for the
purpose of making distributions to Certificateholders if and as described in the
applicable Prospectus Supplement.
The Servicer will deposit in the Collection Account, as described more
fully in the applicable Prospectus Supplement, amounts representing the
following collections and payments (other than in respect of principal of or
interest on the Mortgage Loans due on or before the Cut-Off Date and prepayments
of principal received before the CutOff 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.
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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. Unless otherwise specified in the Prospectus
Supplement, 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. Unless otherwise specified in the Prospectus
Supplement, 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.
Unless otherwise specified in the Prospectus Supplement, 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. Unless otherwise specified in the Prospectus Supplement, 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, unless otherwise specified in the
related Prospectus Supplement, 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.
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Certain Modifications and Refinancings
The Agreement will permit the Servicer to modify any Mortgage Loan upon
the request of the related Mortgagor, and will also permit the Servicer to
solicit such requests by offering Mortgagors the opportunity to refinance their
Mortgage Loans, provided in either case that the Servicer purchases such
Mortgage Loan from the Trust Fund immediately following such modification. Any
such modification may not be made unless the modification includes a change in
the interest rate on the related Mortgage Loan to approximately a prevailing
market rate. Any such purchase will be for a price equal to 100% of the
Principal Balance of such Mortgage Loan, plus accrued and unpaid interest
thereon to the date of purchase at the applicable Remittance Rate, net of any
unreimbursed advances of principal and interest thereon made by the Servicer.
Such purchases may occur when prevailing interest rates are below the interest
rates on the Mortgage Loans and Mortgagors request (and/or the Servicer offers)
modifications as an alternative to refinancings through other mortgage
originators. If a REMIC election is made with respect to all or a portion of the
related Trust Fund, the Servicer will indemnify the REMIC against liability for
any prohibited transactions taxes and any related interest, additions or
penalties imposed on the REMIC as a result of any such modification or purchase.
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.
Evidence as to Compliance
The Agreement will provide that a firm of independent public
accountants will furnish to the Trustee on or before April 15 of each year,
beginning with April 15 in the fiscal year which begins not less than three
months after the date of the initial issue of Certificates, a statement as to
compliance by the Servicer with certain standards relating to the servicing of
the Mortgage Loans.
The Agreement will also provide for delivery to the Trustee on or
before April 15 of each fiscal year, beginning with April 15 in the fiscal year
which begins not less than three months after the date of the initial issue of
the Certificates, a statement signed by an officer of the Servicer to the effect
that, to the best of such officer's knowledge, the Servicer has fulfilled its
obligations under the Agreement throughout the preceding year or, if there has
been a default in the fulfillment of any such obligation, describing each such
default.
The Trustee
Any commercial bank or trust company serving as Trustee may have normal
banking relationships with the Seller and the Servicer. In addition, the Seller
and the Trustee acting jointly will have the power and the responsibility for
appointing co-trustees or separate trustees of all or any part of the Trust Fund
relating to a particular series of Certificates. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the
Trustee.
The Trustee will make no representations as to the validity or
sufficiency of the Agreement, the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) or of any Mortgage Loan or
related document, and will not be accountable for the use or application by the
Seller or Servicer of any funds paid to the Seller or Servicer in respect of the
Certificates or the related assets, or amounts deposited into the Collection
Account. If no Event of Default has occurred, the Trustee will be required to
perform only those duties specifically required of it under the Agreement.
However, upon receipt of the various certificates, reports or other instruments
required to be furnished
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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;
(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
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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.
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
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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 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.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because such legal aspects are
governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the Mortgage Loans is situated. The summaries are qualified in
their entirety by reference to the applicable federal and state laws governing
the Mortgage Loans.
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General
The Mortgages will be either deeds of trust or mortgages. A mortgage
creates a lien upon the real property encumbered by the mortgage. It is not
prior to the lien for real estate taxes and assessments. Priority between
mortgages depends on their terms and generally on the order of filing with a
state or county office. There are two parties to a mortgage: the mortgagor, who
is the borrower and homeowner or the land trustee or the trustee of an inter
vivos revocable trust (as described below), and the mortgagee, who is the
lender. Under the mortgage instrument, the mortgagor delivers to the mortgagee a
note or bond and the mortgage. In the case of a land trust, there are three
parties because title to the property is held by a land trustee under a land
trust agreement of which the borrower/homeowner is the beneficiary; at
origination of a mortgage loan, the borrower executes a separate undertaking to
make payments on the mortgage note. In the case of an inter vivos revocable
trust, there are three parties because title to the property is held by the
trustee under the trust instrument of which the home occupant is the primary
beneficiary; at origination of a mortgage loan, the primary beneficiary and the
trustee execute a mortgage note and the trustee executes a mortgage or deed of
trust, with the primary beneficiary agreeing to be bound by its terms. Although
a deed of trust is similar to a mortgage, a deed of trust normally has three
parties, the borrower-homeowner called the trustor (similar to a mortgagor), a
lender (similar to a mortgagee) called the beneficiary, and a third-party
grantee called the trustee. Under a deed of trust, the borrower grants the
property, irrevocably until the debt is paid, in trust and generally with a
power of sale, to the trustee to secure payment of the obligation. The trustee's
authority under a deed of trust and the mortgagee's authority under a mortgage
are governed by the law of the state in which the real property is located, as
well as by federal law, the express provisions of the deed of trust or mortgage
and, in some cases, the directions of the beneficiary.
Foreclosure
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust that
authorizes the trustee to sell the property to a third party upon any default by
the borrower under the terms of the note or deed of trust. In some states, the
trustee must record a notice of default and send a copy to the borrower-trustor
and any person who has recorded a request for a copy of a notice of default and
notice of sale. In addition, the trustee must provide notice in some states to
any other individual having an interest in the real property, including any
junior lien holders. The borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. Generally, state law controls the amount
of foreclosure expenses and costs, including attorney's fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of sale
must be posted in a public place and, in most states, published for a specific
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest in the real property.
Foreclosure of a mortgage is generally accomplished by judicial action.
The action is initiated by the service of legal pleadings upon all parties
having an interest in the real property. Delays in completion of the foreclosure
may occasionally result from difficulties in locating necessary parties
defendant. Judicial foreclosure proceedings are often not protested by any of
the parties defendant. However, when the mortgagee's right to foreclose is
contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of judicial foreclosure, the court generally
issues a judgment of foreclosure and appoints a referee or other court officer
to conduct the sale of the property.
A junior mortgagee may not foreclose on the property securing a junior
mortgage unless it forecloses subject to the senior mortgages, in which case it
must either pay the entire amount due on the senior mortgages to the senior
mortgagees prior to or at the time of the foreclosure sale or undertake the
obligation to make payments on the senior mortgages in the event the mortgagor
is in default thereunder. In either event, the amounts expended are added to the
balance due on the junior loan, and the rights of the junior mortgagee may be
subrogated to the rights of the senior mortgagees. In addition, in the event
that the foreclosure of a junior mortgage triggers the enforcement of a
"due-on-
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sale" clause, the junior mortgagee may be required to pay the full
amount of the senior mortgages to the senior mortgagees. Accordingly, with
respect to those Mortgage Loans which are junior mortgage loans, if the lender
purchases the property, the lender's title will be subject to all senior liens
and claims and certain governmental liens. The proceeds received by the referee
or trustee from the sale are applied first to the costs, fees and expenses of
sale and then in satisfaction of the indebtedness secured by the mortgage or
deed of trust under which the sale was conducted. Any remaining proceeds are
generally payable to the holders of junior mortgages or deeds of trust and other
liens and claims in order of their priority, whether or not the borrower is in
default. Any additional proceeds are generally payable to the mortgagor or
trustor. The payment of the proceeds to the holders of junior mortgages may
occur in the foreclosure action of the senior mortgagee or may require the
institution of separate legal proceeds.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at the foreclosure sale.
Rather, it is common for the lender to purchase the property from the trustee or
referee for an amount equal to the principal amount of the mortgage or deed of
trust, accrued and unpaid interest and expenses of foreclosure. Thereafter, the
lender will assume the burdens of ownership, including obtaining casualty
insurance, paying taxes and making such repairs at its own expense as are
necessary to render the property suitable for sale. The lender will commonly
obtain the services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Any loss may be reduced by the receipt of any
mortgage insurance proceeds.
In foreclosure, courts have imposed general equitable principles. The
equitable principles are generally designed to relieve the borrower from the
legal effect of its defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that the lenders reinstate loans or
recast payment schedules in order to accommodate borrowers who are suffering
from temporary financial disability. In other cases, courts have limited the
right of a lender to foreclose if the default under the mortgage instrument is
not monetary, such as the borrower's failure to adequately maintain the property
or the borrower's execution of a second mortgage or deed of trust affecting the
property.
Some courts have been faced with the issue of whether or not federal or
state constitutional provisions reflecting due process concerns for adequate
notice require that borrowers under deeds of trust or mortgages receive notices
in addition to the statutorily prescribed minimum. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust, or under a mortgage having a power
of sale, does not involve sufficient state action to afford constitutional
protections to the borrower.
Right of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure
of a mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, the right to redeem is an equitable right. The equity of redemption,
which is a non-statutory right that must be exercised prior to a foreclosure
sale, should be distinguished from statutory rights of redemption. In some
states, redemption may occur only upon payment of the entire principal balance
of the loan, accrued interest and expenses of foreclosure. In other states,
redemption may be authorized if the former borrower pays only a portion of the
sums due. The effect of a statutory right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The rights of redemption
would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect of
the redemption right is to force the lender to retain the property and pay the
expenses of ownership until the redemption period has run.
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Anti-Deficiency Legislation and Other Limitations on Lenders
Anti-Deficiency Statutes
Certain states have imposed statutory prohibitions that limit the
remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage.
In some states, statutes limit the right of the beneficiary or mortgagee to
obtain a deficiency judgment against the borrower following foreclosure or sale
under a deed of trust. A deficiency judgment would be a personal judgment
against the former borrower equal in most cases to the difference between the
net amount realized upon the public sale of the real property and the amount due
to the lender. Other statutes require the beneficiary or mortgagee to exhaust
the security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. Finally, other statutory provisions limit any deficiency judgment
against the former borrower following a judicial sale to the excess of the
outstanding debt over the fair market value of the property at the time of the
public sale. The purpose of these statutes is generally to prevent a beneficiary
or a mortgagee from obtaining a large deficiency judgment against the former
borrower as a result of low or no bids at the judicial sale.
Bankruptcy Laws
In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws and
state laws affording relief to debtors, may interfere with or affect the ability
of the secured mortgage lender to realize upon collateral and/or enforce a
deficiency judgment. For example, with respect to federal bankruptcy law, the
filing of a petition acts as a stay against the enforcement of remedies in
connection with the collection of a debt. Moreover, a court with federal
bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or
Chapter 13 plan of reorganization to cure a monetary default in respect of a
mortgage loan on a debtor's residence by paying arrearages within a reasonable
time period and reinstating the original mortgage loan payment schedule even
though the lender accelerated the mortgage loan and final judgment of
foreclosure had been entered in state court (provided no sale of the residence
had yet occurred) prior to the filing of the debtor's petition. Some courts with
federal bankruptcy jurisdiction have approved plans, based on the particular
facts of the reorganization case, that effected the curing of a mortgage loan
default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified
if the borrower has filed a petition under Chapter 11 or Chapter 13. These
courts have suggested that such modifications may include reducing the amount of
each monthly payment, changing the rate of interest, altering the repayment
schedule and reducing the lender's security interest to the value of the
residence, thus leaving the lender a general unsecured creditor for the
difference between the value of the residence and the outstanding balance of the
loan. If the borrower has filed a petition under Chapter 13, federal bankruptcy
law and limited case law indicate that the foregoing modifications could not be
applied to the terms of a loan secured solely by property that is the principal
residence of the debtor. In all cases, the secured creditor is entitled to the
value of its security plus post-petition interest, attorneys' fees, if
specifically provided for, and costs to the extent the value of the security
exceeds the debt.
Tax Liens
The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage. This may have the effect of
delaying or interfering with the enforcement of rights with respect to a
defaulted Mortgage Loan.
Consumer Protection Laws
Substantive requirements are imposed upon mortgage lenders in
connection with the origination and the servicing of mortgage loans by numerous
federal and some state consumer protection laws. These laws and their
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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.
Unless otherwise specified in the Prospectus Supplement, the Seller or
another Representing Party will represent in the Agreement that all applicable
laws, including the Truth in Lending Act, were complied with in connection with
origination of the Mortgage Loans. In the event that such representation is
breached in respect of any Mortgage Loan in a manner that materially and
adversely affects Certificateholders, the Seller or such Representing Party will
be obligated to repurchase the affected Mortgage Loan at a price equal to the
unpaid principal balance thereof plus accrued interest as provided in the
Agreement or to substitute a new mortgage loan in place of the affected Mortgage
Loan.
Enforceability of Due-on-Sale Clauses
Unless the Prospectus Supplement indicates otherwise, all of the
Mortgage Loans will contain due-on-sale clauses. These clauses permit the lender
to accelerate the maturity of a loan if the borrower sells, transfers, or
conveys the property. The enforceability of these clauses was the subject of
legislation or litigation in many states, and in some cases the enforceability
of these clauses was limited or denied. However, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act") preempts state
constitutional, statutory and case law prohibiting the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limited exceptions contained in the Garn-St
Germain Act and regulations promulgated by Office of Thrift Supervision (the
"OTS"), as successor to the Federal Home Loan Bank Board. The Garn-St Germain
Act does "encourage" lenders to permit assumption of loans at the original rate
of interest or at some other rate less than the average of the original rate and
the market rate.
Due-on-sale clauses contained in mortgage loans originated by federal
savings and loan associations or federal savings banks are fully enforceable
pursuant to regulations of the OTS which preempt state law restrictions on the
enforcement of due-on-sale clauses.
The Garn-St Germain Act also sets forth nine specific instances in
which a mortgage lender covered by the Garn-St Germain Act (including federal
savings and loan associations and federal savings banks) may not exercise a
due-on-sale clause, notwithstanding the fact that a transfer of the property may
have occurred. These include intra-family transfers, certain transfers by
operation of law, leases of three years or less and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St Germain Act by the
Federal Home Loan Bank Board as succeeded by the OTS also prohibit the
imposition of a prepayment penalty upon the acceleration of a loan pursuant
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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
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
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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 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
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Agreement to undertake any such evaluations prior to foreclosure or accepting a
deed-in-lieu of foreclosure. The Seller does not make any representations or
warranties or assume any liability with respect to the absence or effect of
contaminants on any related real property or any foreclose on related real
property or accept a deed-in-lieu of foreclosure if it knows or reasonably
believes that there are material contaminated conditions on such property. A
failure so to foreclose may reduce the amounts otherwise available to
Certificateholders of the related series.
Except as otherwise specified in the applicable Prospectus Supplement,
at the time the Mortgage Loans were originated, no environmental assessment or a
very limited environment assessment of the Mortgaged Properties will have been
conducted.
Forfeiture in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of
drug-related crimes or criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984, the
government may seize the property even before conviction. The government must
publish notice of the forfeiture proceeding and may give notice to all parties
"known to have an alleged interest in the property," including the holders of
mortgage loans.
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 ("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
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not SMMEA. Accordingly, the investors affected by such legislation will be
authorized to invest in Certificates qualifying as "mortgage related securities"
only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal in
mortgage related securities without limitation as to the percentage of their
assets represented thereby, federal credit unions may invest in such securities,
and national banks may purchase such Securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory authority may prescribe. In
this connection, 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.
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
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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 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.
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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 generally describes the anticipated 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. Investors should consult their own tax advisors regarding the
Certificates.
For purposes of this discussion, unless otherwise specified, the term
"Owner" will refer to the beneficial owner of a Certificate.
REMIC Elections
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election may be made to treat the Trust Fund related to each Series of
Certificates (or segregated pools of assets within the Trust Fund) as a "real
estate mortgage investment conduit" ("REMIC") within the meaning of Section
860D(a) of the Code. If one or more REMIC elections are made, the Certificates
of any class will be either "regular interests" in a REMIC within the meaning of
Section 860G(a)(1) of the Code ("Regular Certificates") or "residual interests"
in a REMIC within the meaning of Section 860G(a)(2) of the Code ("Residual
Certificates"). The Prospectus Supplement for each Series of Certificates will
indicate whether an election will be made to treat the Trust Fund as one or more
REMICs, and if so, which Certificates will be Regular Certificates and which
will be Residual Certificates.
If a REMIC election is made, the Trust Fund, or each portion thereof
that is treated as a separate REMIC, will be referred to as a "REMIC Pool". If
the Trust Fund is comprised of two REMIC Pools, one will be an "Upper-Tier
REMIC" and one a "Lower-Tier REMIC". The assets of the Lower-Tier REMIC will
consist of the Mortgage Loans and related Trust Fund assets. The assets of the
Upper-Tier REMIC will consist of all of the regular interests issued by the
Lower-Tier REMIC.
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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 its opinion, dated as of the date of such issuance, generally to the
effect that, with respect to each such Series of Certificates, under then
existing law and assuming compliance by the Seller, the Servicer and the Trustee
for such Series with all of the provisions of the related Agreement (and such
other agreements and representations as may be referred to in such opinion),
each REMIC Pool will be a REMIC, and the Certificates of such Series will be
treated as either Regular Certificates or Residual Certificates.
Status of Certificates.
The Certificates will be:
o assets described in Code Section 7701(a)(19)(C) (relating to the
qualification of certain corporations, trusts, or associations as real estate
investment trusts); and
o "real estate assets" under Code Section 856(c)(5)(B) (relating to
real estate interests, interests in real estate mortgages, and shares or
certificates of beneficial interests in real estate investment trusts),
to the extent the assets of the related REMIC Pool are so treated. Interest on
the Regular Certificates will be "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.
In the event the assets of the related REMIC Pool include buy-down
Mortgage Loans, it is unclear whether the related buy-down funds would qualify
under the foregoing Code sections.
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").
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Original Issue Discount. Certain Regular Certificates may have
"original issue discount." An Owner must include original issue discount in
income as it accrues, without regard to the timing of payments.
The total amount of original issue discount on a Regular Certificate is
the excess of its "stated redemption price at maturity" over its "issue price."
The issue price for any Regular Certificate is the price (including any accrued
interest) at which a substantial portion of the class of Certificates including
such Regular Certificate are first sold to the public. In general, the stated
redemption price at maturity is the sum of all payments made on the Regular
Certificate, other than payments of interest that (i) are actually payable at
least annually over the entire life of the Certificates and (ii) are based on a
single fixed rate or variable rate (or certain combinations of fixed and
variable rates). The stated redemption price at maturity of a Regular
Certificate always includes its original principal amount, but generally does
not include distributions of stated interest, except in the case of Accrual
Certificates, and, as discussed below, Interest Only Certificates. An "Interest
Only Certificate" is a Certificate entitled to receive distributions of some or
all of the interest on the Mortgage Loans or other assets in a REMIC Pool and
that has either a notional or nominal principal amount. Special rules for
Regular Certificates that provide for interest based on a variable rate are
discussed below in "Income from Regular Certificates -- Variable Rate Regular
Certificates".
With respect to an Interest Only Certificate, the stated redemption
price at maturity is likely to be the sum of all payments thereon, determined in
accordance with the Prepayment Assumption (as defined below). In that event,
Interest Only Certificates would always have original issue discount.
Alternatively, in the case of an Interest Only Certificate with some principal
amount, the stated redemption price at maturity might be determined under the
general rules described in the preceding paragraph. If, applying those rules,
the stated redemption price at maturity were considered to equal the principal
amount of such Certificate, then the rules described below under "Premium" would
apply. The Prepayment Assumption is the assumed rate of prepayment of the
Mortgage Loans used in pricing the Regular Certificates. The Prepayment
Assumption will be set forth in the related Supplement.
Under a de minimis rule, original issue discount on a Regular
Certificate will be considered zero if it is less than 0.25% of the
Certificate's stated redemption price at maturity multiplied by the
Certificate's weighted average maturity. The weighted average maturity of a
Regular Certificate is computed based on the number of full years (i.e.,
rounding down partial years) each distribution of principal (or other amount
included in the stated redemption price at maturity) is scheduled to be
outstanding. The schedule of such distributions likely should be determined in
accordance with the Prepayment Assumption.
The Owner of a Regular Certificate generally 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.
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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 generally will increase
if prepayments on the underlying Mortgage Loans exceed the Prepayment Assumption
and decrease if prepayments are slower than the Prepayment Assumption (changes
in the rate of prepayments having the opposite effect in the case of an Interest
Only Certificate). If the relative principal payment priorities of the classes
of Regular Certificates of a Series change, any increase or decrease in the
present value of the remaining payments to be made on any such class will affect
the computation of original issue discount for the period in which the change in
payment priority occurs.
If original issue discount computed as described above is negative for
any period, the Owner generally will not be allowed a current deduction for the
negative amount but instead will be entitled to offset such amount only against
future positive original issue discount from such Certificate.
Acquisition Premium. If an Owner of a Regular Certificate acquires such
Certificate at a price greater than its "adjusted issue price," but less than
its remaining stated redemption price at maturity, the daily portion for any day
(as computed above) is reduced by an amount equal to the product of (i) such
daily portion and (ii) a fraction, the numerator of which is the amount by which
the price exceeds the adjusted issue price and the denominator of which is the
sum of the daily portions for such Regular Certificate for all days on and after
the date of purchase. The adjusted issue price of a Regular Certificate on any
given day is its issue price, increased by all original issue discount that has
accrued on such Certificate and reduced by the amount of all previous
distributions on such Certificate of amounts included in its stated redemption
price at maturity.
Market Discount. A Regular Certificate may have market discount (as
defined in the Code). Market discount equals the excess of the adjusted issue
price of a Certificate over the Owner's adjusted basis in the Certificate. The
Owner of a Certificate with market discount must report ordinary interest
income, as the Owner receives distributions on the Certificate of principal or
other amounts included in its stated redemption price at maturity, equal to the
lesser of (a) the excess of the amount of those distributions over the amount,
if any, of accrued original issue discount on the Certificate or (b) the portion
of the market discount that has accrued and not previously been included in
income. Also, such Owner must treat gain from the disposition of the Certificate
as ordinary income to the extent of any accrued, but unrecognized, market
discount. Alternatively, an Owner may elect in any taxable year to include
market discount in income currently as it accrues on all market discount
instruments acquired by the Owner in that year or thereafter. An Owner may
revoke such an election only with the consent of the Internal Revenue Service.
In general terms, market discount on a Regular Certificate may be
treated, at the Owner's election, as accruing either (a) on the basis of a
constant yield (similar to the method described above for accruing original
issue discount) or (b) alternatively, either (i) in the case of a Regular
Certificate issued without original issue discount, in the ratio of stated
interest distributable in the relevant period to the total stated interest
remaining to be distributed from the beginning of such period (computed taking
into account the Prepayment Assumption) 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.
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Market discount with respect to a Regular Certificate will be
considered to be zero if such market discount is de minimis under a rule similar
to that described above in the fourth paragraph under "Original Issue Discount".
Owners should consult their own tax advisors regarding the application of the
market discount rules as well as the advisability of making any election with
respect to market discount.
Discount on a Regular Certificate that is neither original issue
discount nor market discount, as defined above, must be allocated ratably among
the principal payments on the Certificate and included in income (as gain from
the sale or exchange of the Certificate) as the related principal payments are
made (whether as scheduled payments or prepayments).
Premium. A Regular Certificate, other than an Accrual Certificate or,
as discussed above under "Original Issue Discount", an Interest Only
Certificate, purchased at a cost (net of accrued interest) greater than its
principal amount generally 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 generally 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
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addressing contingent payment debt instruments, but such regulations are not
applicable by their terms to REMIC regular interests. Until further guidance is
forthcoming, one method of calculating income on such a Regular Certificate that
appears to be reasonable would be to apply the principles governing VRDIs
outlined above.
Subordinated Certificates. Certain Series of Certificates may contain
one or more classes of subordinated Certificates. In the event there are
defaults or delinquencies on the related Mortgage Loans, amounts that otherwise
would be distributed on a class of subordinated Certificates may instead be
distributed on other more senior classes of Certificates. Since Owners of
Regular Certificates are required to report income under an accrual method,
Owners of subordinated Certificates will be required to report income without
giving effect to delays and reductions in distributions on such Certificates
attributable to defaults or delinquencies on the Mortgage Loans, except to the
extent that it can be established that amounts are uncollectible. As a result,
the amount of income reported by an Owner of a subordinated Certificate in any
period could significantly exceed the amount of cash distributed to such Owner
in that period. The Owner will eventually be allowed a loss (or be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Loans. Such a loss could in some circumstances
be a capital loss. Also, the timing and amount of such losses or reductions in
income are uncertain. Owners of subordinated Certificates should consult their
tax advisors on these points.
Income from Residual Certificates.
Taxation of REMIC Income. Generally, 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 generally 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 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).
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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 foreclosure property." A 100% tax also applies to certain
contributions to a REMIC Pool made after it is formed. It is not anticipated
that any REMIC Pool will (i) engage in prohibited transactions in which it
recognizes a significant amount of net income, (ii) receive contributions of
property that are subject to tax, or (iii) derive a significant amount of net
income from foreclosure property that is subject to tax.
Negative Value Residual Certificates. The federal income tax treatment
of any consideration paid to a transferee on a transfer of a Residual
Certificate is unclear. Such a transferee should consult its tax advisor. The
preamble to the REMIC Regulations indicates that the Internal Revenue Service
may issue future guidance on the tax treatment of such payments.
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In addition, on December 23, 1996, the Internal Revenue Service
released final regulations under Code Section 475 relating to the requirement
that a dealer mark certain securities to market. These regulations provide that
a REMIC residual interest that is acquired on or after January 4, 1995 is not a
"security" for the purposes of Section 475 of the Code, and thus is not subject
to the mark to market rules.
The method of taxation of Residual Certificates described in this
section can produce a significantly less favorable after-tax return for a
Residual Certificate than would be the case if the Certificate were taxable as a
debt instrument. Also, a Residual Owner's return may be adversely affected by
the excess inclusions rules described above. In certain periods, taxable income
and the resulting tax liability for a Residual Owner may exceed any
distributions it receives. In addition, a substantial tax may be imposed on
certain transferors of a Residual Certificate and certain Residual Owners that
are "pass-thru" entities. See "Transfers of Residual Certificates" below.
Investors should consult their tax advisors before purchasing a Residual
Certificate.
Sale or Exchange of Certificates.
An Owner generally 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 generally 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, mid-term or short-term depending on whether the Certificate has
been held for more than eighteen months, more than one year but less than
eighteen months, or one year or less. Such gain or loss will be ordinary income
or loss (i) for a bank or thrift institution, and (ii) in the case of a Regular
Certificate, (a) to the extent of any accrued, but unrecognized, market
discount, or (b) to the extent income recognized by the Owner is less than the
income that would have been recognized if the yield on such Certificate were
110% of the applicable federal rate under Code Section 1274(d).
A Residual Owner should be allowed a loss upon termination of the REMIC
Pool equal to the amount of the Owner's remaining adjusted basis in its Residual
Certificates. Whether the termination will be treated as a sale or exchange
(resulting in a capital loss) is unclear.
Except as provided in Treasury regulations, the wash sale rules of Code
Section 1091 (relating to the disallowance of losses on the sale or disposition
of certain stock or securities) will apply to dispositions of a Residual
Certificate where the seller of the interest, during the period beginning six
months before the sale or disposition of the interest and ending six months
after such sale or disposition, acquires (or enters into any other transaction
that results in the application of Code Section 1091) any REMIC residual
interest, or any interest in a "taxable mortgage pool" (such as a non-REMIC
owner trust) that is economically comparable to a residual interest.
Taxation of Certain Foreign Investors.
Regular Certificates. A Regular Certificate held by an Owner that is a
non-U.S. person (as defined below), and that has no connection with the United
States other than owning the Certificate, will not be subject to U.S.
withholding or income tax with respect to the Certificate provided such Owner
(i) is not a "10-percent shareholder", related to the issuer, within the meaning
of Code Section 871(h)(3)(B) or a controlled foreign corporation, related to the
issuer, described in Code Section 881(c)(3)(C), and (ii) provides an appropriate
statement, signed under penalties of perjury, identifying the Owner and stating,
among other things, that the Owner is a non-U.S. person. If these conditions are
not met, a 30% withholding tax will apply to interest (including original issue
discount) unless an income tax treaty reduces or eliminates such tax or unless
the interest is effectively connected with the conduct of a trade or business
within the United States by such Owner. In the latter case, such Owner will be
subject to United States federal income tax with
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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.
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
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<PAGE>
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 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:
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<PAGE>
(i) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they become due, and
(ii) the transferee represents to the transferor that it understands
that, as the holder of the noneconomic residual interest, it may incur tax
liabilities in excess of any cash flows generated by the interest and that it
intends to pay taxes associated with holding the residual interest as they
become due.
A Residual Certificate (including a Certificate with significant value
at issuance) is noneconomic unless, at the time of the transfer, (i) the present
value of the expected future distributions on the Certificate at least equals
the product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the transfer
occurs, and (ii) the transferor reasonably expects that the transferee will
receive distributions on the Certificate, at or after the time at which taxes
accrue, in an amount sufficient to pay the taxes.
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.
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<PAGE>
An Owner of a Residual Certificate is required to treat items on its
federal income tax return consistently with the treatment of the items on the
REMIC Pool's return, unless the Owner owns 100% of the Residual Certificate for
the entire calendar year or the Owner either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC Pool. The Internal Revenue Service may
assess a deficiency resulting from a failure to comply with the consistency
requirement without instituting an administrative proceeding at the REMIC level.
Any person that holds a Residual Certificate as a nominee for another person may
be required to furnish the REMIC Pool, in a manner to be provided in Treasury
regulations, the name and address of such other person and other information.
Non-REMIC Certificates
The discussion in this Section applies only to a series of Certificates
for which no REMIC election is made.
Trust Fund as Grantor Trust.
Upon issuance of each series of Certificates, Morgan, Lewis & Bockius
LLP, counsel to the Seller, will deliver its 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 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.
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<PAGE>
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 generally will be
considered to have original issue discount if the greater of the amount of
points charged to the borrower, or the amount of any interest foregone during
any initial teaser period, exceeds 0.25% of the stated redemption price at
maturity times the number of full years to maturity, or if interest is not paid
at a fixed rate or a single variable rate (disregarding any initial teaser rate)
over the life of the Mortgage Loan. It is not anticipated that the amount of
original issue discount, if any, accruing on the Mortgage Loans in each month
will be significant relative to the interest paid currently on the Mortgage
Loans, but there can be no assurance that this will be the case.
In the case of a Mortgage Loan that is considered to have been
purchased with market discount that exceeds a de minimis amount (generally,
0.25% of the stated redemption price at maturity times the number of whole years
to maturity remaining at the time of purchase), the Owner will be required to
include in income in each month the amount of such discount that has accrued
through such month and not previously been included in income, but limited to
the amount of principal on the Mortgage Loan that is received by the Trust Fund
in that month. Because the Mortgage Loans will provide for monthly principal
payments, such discount may be required to be included in income at a rate that
is not significantly slower than the rate at which such discount accrues. Any
market discount that has not previously been
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<PAGE>
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 generally 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
generally 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 should be allowed to deduct currently any negative amount of
original issue discount produced by the accrual formula.
Different approaches could be applied in calculating income under the
stripped bond rules. For example, a Certificate could be viewed as a collection
of separate debt instruments (one for each payment allocable to the Certificate)
rather than a single debt instrument. Also, in the case of an Interest-Only
Certificate, it could be argued that certain proposed regulations governing
contingent payment debt obligations apply. Owners should 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
55
<PAGE>
direct or indirect connection to the United States in addition to its ownership
of a Certificate will not be subject to United States income or withholding tax
in respect of a Certificate (assuming the underlying Mortgage Loans were
originated after July 18, 1984), if the Owner provides an appropriate statement,
signed under penalties of perjury, identifying the Owner and stating, among
other things, that the Owner is not a U.S. person. If these conditions are not
met, a 30% withholding tax will apply to interest (including original issue
discount) unless an income tax treaty reduces or eliminates such tax or unless
the interest is effectively connected with the conduct of a trade or business
within the United States by such Owner. Income effectively connected with a U.S.
trade or business will be subject to United States federal income tax at regular
rates then applicable to U.S. taxpayers (and in the case of a corporation,
possibly also the branch profits tax).
In the event the Trust Fund acquires ownership of real property located
in the United States in connection with a default on a Mortgage Loan, then any
rental income from such property allocable to an Owner that is not a U.S. person
generally will be subject to a 30% withholding tax. In addition, any gain from
the disposition of such real property allocable to an Owner that is not a U.S.
person may be treated as income that is effectively connected with a U.S. trade
or business under special rules governing United States real property interests.
The Trust Fund may be required to withhold tax on gain realized upon a
disposition of such real property by the Trust Fund at a 35% rate.
Reporting
Tax information will be reported annually to the Internal Revenue
Service and to Holders of Certificates that are not excluded from the reporting
requirements.
Backup Withholding
Distributions made on a Certificate and proceeds from the sale of a
Certificate to or through certain brokers may be subject to a "backup"
withholding tax of 31% unless, in general, the Owner of the Certificate complies
with certain procedures or is a corporation or other person exempt from such
withholding. Any amounts so withheld from distributions on the Certificates
would be refunded by the Internal Revenue Service or allowed as a credit against
the Owner's federal income tax.
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.
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In connection with the sale of the Certificates, Underwriters may
receive compensation from the Seller or from the purchasers of Certificates for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell the Certificates of a series to or through
dealers and such dealers may receive compensation in the form of discounts,
concessions or commissions from the Underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of the Certificates of a series may be
deemed to be Underwriters and any discounts or commissions received by them from
the Seller and any profit on the resale of the Certificates by them may be
deemed to be underwriting discounts and commissions, under the Securities Act of
1933, as amended (the "Act"). Any such Underwriters or agents will be
identified, and any such compensation received from the Seller will be
described, in the applicable Prospectus Supplement.
It is anticipated that the underwriting agreement pertaining to the
sale of any series or class of Certificates will provide that the obligations of
the underwriters will be subject to certain conditions precedent and that the
underwriters will be obligated to purchase all such Certificates if any are
purchased.
Under agreements which may be entered into by the Seller, Underwriters
and agents who participate in the distribution of the Certificates may be
entitled to indemnification by the Seller against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement, the Seller will authorize
Underwriters or other persons acting as the Seller's agents to solicit offers by
certain institutions to purchase the Certificates from the Seller pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational charitable
institutions and others, but in all cases such institutions must be approved by
the Seller. The obligation of any purchaser under any such contract will be
subject to the condition that the purchaser of the offered Certificates shall
not at the time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject from purchasing such Certificates. The
Underwriters and such other agents will not have responsibility in respect of
the validity or performance of such contracts.
The Underwriters may, from time to time, buy and sell Certificates, but
there can be no assurance that an active secondary market will develop and there
is no assurance that any market, if established, will continue.
USE OF PROCEEDS
Substantially all of the net proceeds from the sale of each series of
Certificates will be applied by the Seller to the purchase price of the Mortgage
Loans underlying the Certificates of such Series.
LEGAL MATTERS
Certain legal matters in connection with the Certificates offered
hereby, including certain federal income tax matters, will be passed upon for
the Seller by Morgan, Lewis & Bockius LLP, New York, New York.
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INDEX OF CERTAIN PROSPECTUS DEFINITIONS
<TABLE>
<CAPTION>
Defined Term Page
<S> <C>
Accrual Certificates.........................................................
Act..........................................................................
Advance Guarantee............................................................
Agency Certificate...........................................................
Agreement....................................................................
ARM Loans....................................................................
ARMs.........................................................................
Bankruptcy Bond..............................................................
Book-Entry Nominee...........................................................
Buy-Down Fund................................................................
Buy-Down Mortgage Loans......................................................
Buy-Down Reserve.............................................................
Cash-Out Refinance Loans.....................................................
Certificate Rate.............................................................
Chase Manhattan Mortgage.....................................................
Cleanup Costs................................................................
Code.........................................................................
Collection Account...........................................................
Commission...................................................................
Compensating Interest Payment................................................
Conservation Act.............................................................
Current Report...............................................................
Cut-Off Date.................................................................
Defective Mortgage Loan......................................................
Delivery Date................................................................
Denomination.................................................................
Deposit Guarantee............................................................
Distribution Date............................................................
DOL..........................................................................
ERISA........................................................................
Exchange Act.................................................................
FHLMC........................................................................
FNMA.........................................................................
Fund.........................................................................
Garn-St. Germain Act.........................................................
GIC..........................................................................
GNMA.........................................................................
Guarantor....................................................................
Insurance Proceeds...........................................................
Interest Accrual Period......................................................
Limited Guarantee............................................................
Liquidation Proceeds.........................................................
Mortgage.....................................................................
Mortgage Loan Schedule.......................................................
Mortgage Loans...............................................................
Mortgage Pool................................................................
Mortgage Pool Insurance Policy...............................................
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Mortgaged Properties.........................................................
NCUA.........................................................................
Nonrecoverable Advance.......................................................
Non-SMMEA Certificates.......................................................
Non-U.S. Person..............................................................
Note.........................................................................
OID Regulations..............................................................
OTS..........................................................................
Parties in Interest..........................................................
Paying Agent.................................................................
Plans........................................................................
Policy Statement.............................................................
Principal Prepayments........................................................
PTE 83-1.....................................................................
PUD..........................................................................
Record Date..................................................................
Regular Certificates.........................................................
Relief Act...................................................................
REMIC........................................................................
REMIC Regulations............................................................
Remittance Rate..............................................................
Representing Party...........................................................
Reserve Account..............................................................
Residual Certificates........................................................
Residual Owners..............................................................
Seller.......................................................................
Senior Certificates..........................................................
Servicer.....................................................................
SMMEA........................................................................
Special Hazard Insurance Policy..............................................
Stripped Bond Rules..........................................................
Stripped Certificate.........................................................
Subordinated Certificates....................................................
Superlien....................................................................
Title V......................................................................
Trustee......................................................................
Trust Fund...................................................................
Underwriters.................................................................
</TABLE>
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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.
<TABLE>
<CAPTION>
<S> <C>
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..........................................$ *
</TABLE>
- -------------
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
The Company's By-laws provide for indemnification of directors and
officers of the Company to the full extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits and proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any such action, suit or proceeding. The Delaware General Corporation Law
also provides that the Registrant may purchase insurance on behalf of any such
director, officer, employee or agent.
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
<S> <C>
1.1 Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
3.2 By-laws of the Registrant.
4.1 Form of Pooling and Servicing Agreement.
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).
</TABLE>
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the Registration
<PAGE>
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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the 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 Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<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 4th day of June, 1998.
CHASE MORTGAGE FINANCE CORPORATION
By: /s/ Paul E. Mullings
----------------------
Name: Paul E. Mullings
Title: President
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul E. Mullings and Michael D. Katz, and
both of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities as directors and officers of Chase Mortgage Finance Corporation in
the capacities and on the date indicated below.
Signature Title Date
/s/ Luke S. Hayden Principal Executive June 1, 1998
- -------------------------- Officer and Director
Luke S. Hayden
/s/ Stephen J. Fortunato Treasurer (Principal June 1, 1998
- --------------------------- Financial and Accounting
Stephen J. Fortunato Officer)
/s/ Paul E. Mullings Director June 1, 1998
- ---------------------------
Paul E. Mullings
/s/ Catherine Eckert Director June 1, 1998
- ---------------------------
Catherine Eckert
/s/ Michael D. Katz Director June 1, 1998
- -------------------------
Michael D. Katz
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
<TABLE>
<CAPTION>
<S> <C>
1.1 Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Registrant
3.2 By-laws of the Registrant
4.1 Form of Pooling and Servicing Agreement
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).
</TABLE>
<PAGE>
Exhibit 1.1
CHASE MORTGAGE FINANCE CORPORATION
Pass-Through Certificates
UNDERWRITING AGREEMENT
[DATE]
[Underwriter]
[Address]
Ladies and Gentlemen:
Chase Mortgage Finance 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 an underwriting syndicate; as the context requires, [Underwriter] is
sometimes referred to individually herein as ["Underwriter"]). The Terms
Agreement relating to each offering of
<PAGE>
Certificates shall specify, among other things, the stated balance or balances
of Certificates to be issued, the price or prices at which the Certificates are
to be purchased by the Underwriters from the Company and the initial public
offering price or prices or the method by which the price or prices at which
such Certificates are to be sold will be determined. A Terms Agreement, which
shall be substantially in the form of Exhibit A hereto, may take the form of an
exchange of any standard form of written telecommunication between you and the
Company. Each such offering of Certificates which the Company elects to make
pursuant to this Agreement will be governed by this Agreement, as supplemented
by the applicable Terms Agreement, and this Agreement and such Terms Agreement
shall inure to the benefit of and be binding upon the Underwriters participating
in the offering of such Certificates.
SECTION 1. Representations and Warranties. The Company represents and
warrants to you as of the date hereof, and to the Underwriters named in the
applicable Terms Agreement, all as of the date of such Terms Agreement (in each
case, the "Representation Date"), as follows (any representations and warranties
so made to the Underwriters named in an applicable Terms Agreement respecting
the Certificates being deemed to relate only to the Certificates described
therein):
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
33-92950), relating to the offering of Certificates from time to time
in accordance with Rule 415 under the Securities Act of 1933, as
amended (the "1933 Act"), and has filed, and proposes to file, such
amendments thereto as may have been required to the date hereof and the
same has become effective under the 1933 Act and the rules of the
Commission thereunder (the "Regulations") and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceedings for that purpose have been initiated or, to the Company's
knowledge, threatened, by the Commission. Such registration statement,
including incorporated documents, exhibits and financial statements, as
amended at the time when it became effective under the 1933 Act, and
the prospectus relating to the sale of Certificates by the Company
constituting a part thereof, as from time to time each is amended or
supplemented pursuant to the 1933 Act or otherwise, are referred to
herein as the "Registration Statement" and the "Prospectus,"
respectively; provided, however, that a supplement to the Prospectus
contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall
be deemed to have supplemented the Prospectus only with respect to the
offering or offerings of Certificates to which it relates. Any
reference herein to the Registration Statement, a preliminary
prospectus, the Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "1934 Act") on or before the date
on which the Registration Statement, as amended, became effective or
the issue date of such preliminary prospectus, Prospectus, or
Prospectus Supplement, as the case may be; and any reference herein to
the terms "amend," "amendment" or supplement with respect to the
Registration Statement, any preliminary prospectus, the Prospectus or
the Prospectus Supplement shall
2
<PAGE>
be deemed to refer to and include the filing of any document under the
1934 Act after the date on which the Registration Statement became
effective or the issue date of any preliminary prospectus, the
Prospectus or the Prospectus Supplement, as the case may be, deemed to
be incorporated therein by reference. The Registration Statement and
Prospectus, at the time the Registration Statement became effective
did, and as of the applicable Representation Date will, conform in all
material respects to the requirements of the 1933 Act and the
Regulations. The Registration Statement, at the time it became
effective did not, and as of the applicable Representation Date and the
applicable Closing Time (as defined in Section 2 hereof) will not,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or
supplemented as of the applicable Representation Date and the
applicable Closing Time (as defined in Section 2 hereof), will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in, or omissions from, (i) the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by the
Underwriters expressly for use in the Registration Statement or
Prospectus or (ii) the [Underwriter] Information (as defined in Section
10 hereof). The conditions to the use by the Company of a registration
statement on Form S-3 under the 1933 Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the
Registration Statement and the Prospectus. There are no contracts or
documents of the Company which are required to be filed as exhibits to
the Registration Statement pursuant to the 1933 Act or the Regulations
which have not been so filed.
(2) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to enter into and
perform its obligations under this Agreement, the applicable Pooling
and Servicing Agreement, and with respect to a Series of Certificates,
the Certificates and the applicable Terms Agreement; and the Company is
duly qualified or registered as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the
ownership or lease of its properties or the conduct of its business
requires such qualification.
(3) The Company is not in violation of its certificate of
incorporation or by-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, loan agreement, note,
lease or other material instrument to which it is a party or by which
it or its properties may be bound, which default might result in any
material adverse change in the financial condition, earnings, affairs
or business of the Company or which might materially and adversely
affect the properties or assets thereof or the Company's ability to
3
<PAGE>
perform its obligations under this Agreement, the applicable Terms
Agreement or the applicable Pooling and Servicing Agreement.
(4) The execution and delivery by the Company of this
Agreement, the applicable Terms Agreement and the applicable Pooling
and Servicing Agreement and the signing of the Registration Statement
by the Company are within the corporate power of the Company and have
been duly authorized by all necessary corporate action on the part of
the Company; and with respect to a Series of Certificates described in
the applicable Terms Agreement, neither the issuance and sale of the
Certificates to the Underwriters, nor the execution and delivery by the
Company of this Agreement, such Terms Agreement and the related Pooling
and Servicing Agreement, nor the consummation by the Company of the
transactions herein or therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company other than as contemplated by a Pooling and Servicing
Agreement, pursuant to any material indenture, mortgage, contract or
other material instrument to which the Company is a party or by which
it is bound or to which the property or assets of the Company are
subject, or result in the violation of the provisions of the
certificate of incorporation or by-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(5) This Agreement has been, and each applicable Terms
Agreement when executed and delivered as contemplated hereby and
thereby will have been, duly authorized, executed and delivered by the
Company, and each constitutes, or will constitute when so executed and
delivered, a legal, valid and binding instrument enforceable against
the Company in accordance with its terms (assuming due authorization,
execution and delivery by the other parties thereto), subject (a) to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting creditors' rights generally, (b) as to
enforceability to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (c) as
to enforceability with respect to rights of indemnity thereunder, to
limitations of public policy under applicable securities laws.
(6) Each applicable Pooling and Servicing Agreement when
executed and delivered as contemplated hereby and thereby will have
been duly authorized, executed and delivered by the Company, and will
constitute when so executed and delivered, a legal, valid and binding
instrument enforceable against the Company in accordance with its terms
(assuming due authorization, execution and delivery by the other
parties thereto), subject (a) to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and (b) as to enforceability to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity
4
<PAGE>
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 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,
5
<PAGE>
authority or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and
adversely affect the conduct of the business, operations, financial
condition or income of the Company.
(12) As of the Closing Time, with respect to a Series of
Certificates described in the relevant Terms Agreement evidencing
interests in a Mortgage Pool, the Trustee will have either good and
marketable title, free and clear of all prior liens, charges and
encumbrances, to or a validly perfected first priority security
interest in the Mortgage Notes and the related Mortgages included in
the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery
thereof to the Trustee and (b) the Mortgages, upon delivery to the
Trustee of instruments of assignment in recordable form assigning each
Mortgage to the Trustee and the recording of each such instrument of
assignment in the appropriate recording office in which the Mortgaged
Property is located, or if supported by an opinion of counsel, without
recording.
(13) As of the Closing Time, with respect to a Series of
Certificates as to which there is a Reserve Fund, to the extent that
the Reserve Fund does not constitute part of the Trust Fund for such
Series, the Trustee will have acquired either good and marketable title
to or a duly and validly perfected security interest in the Reserve
Fund with respect to such Series, if any, subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance.
(14) As of the Closing Time, with respect to a Series of
Certificates, the Mortgage Pool will have substantially the
characteristics described in the Prospectus Supplement and in the Form
8-K of the Company prepared with respect to such Certificates, if the
Mortgage Pool is described in such Form 8-K.
(15) Neither the Company nor the Trust Fund created by the
applicable Pooling and Servicing Agreement will be subject to
registration as an "investment company" under the Investment Company
Act of 1940, as amended (the "1940 Act").
(16) The Certificates, the applicable Pooling and Servicing
Agreement, the applicable Terms Agreement and any Primary Insurance
Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance
Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy
Insurance and Alternate Credit Enhancement related to the Certificates
described in the relevant Terms Agreement conform in all material
respects to the descriptions thereof contained in the Prospectus.
SECTION 2. Purchase and Sale. The commitment of each Underwriter to
purchase Certificates pursuant to any Terms Agreement shall be several and not
joint and shall be deemed to have been made on the basis of the representations
and warranties herein contained and shall be subject to the terms and conditions
herein set forth.
6
<PAGE>
Payment of the purchase price for, and delivery of, any Certificates to
be purchased by the Underwriters shall be made at the offices of Morgan, Lewis &
Bockius LLP, New York, New York, or at such other place as shall be agreed upon
by you and the Company, at such time or date as shall be agreed upon by you and
the Company in the Terms Agreement (each such time and date being referred to as
a "Closing Time"). Unless otherwise specified in the applicable Terms Agreement,
payment shall be made to the Company in immediately available Federal funds
wired to such bank as may be designated by the Company. Such Certificates shall
be in such denominations and registered in such names as you may request in
writing at least two business days prior to the applicable Closing Time. Such
Certificates will be made available for examination and packaging by you no
later than 12:00 noon on the first business day prior to the applicable Closing
Time.
It is understood that the Underwriters intend to offer the Certificates
for sale to the public as set forth in the Prospectus Supplement.
SECTION 3. Covenants of the Company. The Company covenants with each of
you and each Underwriter participating in an offering of Certificates pursuant
to a Terms Agreement, with respect to such Certificates and such offering, as
follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Certificates covered thereby, the price
or prices at which the Certificates are to be purchased by the
Underwriters, either the initial public offering price or prices or the
method by which the price or prices by which the Certificates are to be
sold will be determined, the selling concession(s) and reallowance(s),
if any, any delayed delivery arrangements, and such other information
as you and the Company deem appropriate in connection with the offering
of the Certificates. The Company will promptly transmit copies of the
Prospectus Supplement to the Commission for filing pursuant to Rule 424
under the 1933 Act and will furnish to the Underwriters as many copies
of the Prospectus and such Prospectus Supplement as you shall
reasonably request.
(b) If the delivery of a prospectus is required at any time in
connection with the offering or sale of the Certificates described in
the relevant Terms Agreement and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period of time to
amend or supplement the Prospectus in order to comply with the 1933
Act, the Company agrees to notify you promptly and upon your request so
to amend or supplement the Prospectus and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an
7
<PAGE>
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance.
(c) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
give you reasonable notice of its intention to file any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus, whether pursuant to the 1933 Act or otherwise, and will
furnish you with copies of any such amendment or supplement or other
documents proposed to be filed a reasonable time in advance of filing.
(d) During any period in which the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Certificates described in the relevant Terms Agreement the Company will
notify you promptly (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the
Commission for filing of any supplement to the Prospectus or any
document other than quarterly and annual reports to be filed pursuant
to the 1934 Act, (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement, the Prospectus
or any Prospectus Supplement, (iv) of any request by the Commission for
any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Certificates for sale in any
jurisdiction or the threat of any proceeding for that purpose and (vi)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order and, if any stop order is
issued, to obtain the lifting thereof as soon as possible.
(e) The Company will deliver to you as many conformed copies
of the Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith or incorporated
by reference therein and documents incorporated by reference in the
Prospectus) as you may reasonably request.
(f) The Company will endeavor, in cooperation with you, to
qualify the Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United
States as you may designate, and will maintain or cause to be
maintained such qualifications in effect for as long as may be required
for the distribution of the Certificates, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction. The Company will file or cause the filing of such
statements and reports as may be required by the laws of each
jurisdiction in which the Certificates have been qualified as above
provided.
8
<PAGE>
(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.
SECTION 4. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase Certificates pursuant to any Terms Agreement shall
be subject to the accuracy of the representations and warranties on the part of
the Company herein contained, to the accuracy of the statements of the Company's
officers made pursuant hereto, to the performance by the Company of all of its
obligations hereunder and to the following additional conditions precedent:
(a) At the applicable Closing Time (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission, (ii) the Certificates shall
have received the rating or ratings specified in the applicable Terms
Agreement, and (iii) there shall not have come to your attention any
facts that would cause you to believe that the Prospectus, together
with the applicable Prospectus Supplement at the time it was required
to be delivered to a purchaser of the Certificates, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances existing at such time, not misleading. No challenge by
the Commission shall have been made to the accuracy or adequacy of the
Registration Statement and any request of the Commission for inclusion
of additional information in the Registration Statement or the
Prospectus or the Prospectus Supplement shall have been complied with
and the Company shall not have filed with the Commission any amendment
or supplement to the Registration Statement, the Prospectus or the
Prospectus Supplement without the consent of the Underwriters.
(b) At the applicable Closing Time you shall have received:
(1) The opinion, dated as of the applicable Closing
Time, of Morgan, Lewis & Bockius LLP, counsel for the Company, in form
and substance satisfactory to such of you as may be named in the
applicable Terms Agreement, to the effect that:
(i) The Company is validly existing as a
corporation in good standing under the laws of the State of
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
9
<PAGE>
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, (B) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought, and (C)
the enforceability as to rights to indemnity thereunder may be
subject to limitations of public policy under applicable
securities laws.
(iii) The applicable Pooling and Servicing
Agreement has been duly authorized, executed and delivered by
the Company, and is a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except that (A) such enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms' of equitable
relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor
may be brought.
(iv) The execution and delivery by the
Company of this Agreement, the applicable Terms Agreement and
applicable Pooling and Servicing Agreement and the signing of
the Registration Statement by the Company are within the
corporate power of the Company and have been duly authorized
by all necessary corporate action on the part of the Company;
and neither the issue and sale of the Certificates nor the
consummation of the transactions contemplated herein or
therein nor the fulfillment of the terms hereof or thereof
will, conflict with or constitute a breach or violation of any
of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, or other
instrument to which the Company is a party or by which it may
be bound of which such counsel is aware, other than the lien
or liens created by the applicable Pooling and Servicing
Agreement, nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws of
the Company or, any statute, rule or regulation to which the
Company is subject or by which it is bound or any writ,
injunction or decree of any court, governmental authority or
regulatory body to which it is subject or by which it is bound
of which such counsel is aware.
(v) The Certificates have been duly
authorized and, when executed and authenticated as specified
in the related Pooling and Servicing Agreement and delivered
and paid for, will be validly issued and entitled to the
benefits of the related Pooling and Servicing Agreement.
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(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 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
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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 addressing
the transfer by the Company to the Trustee of its right, title and interest in
and to the Mortgage Loans and other property included in the Trust Fund at the
Closing Time as may be required by each Rating Agency rating the Certificates.
Such counsel shall state that it has participated in conferences with
officers and other representatives of the Company, your counsel, representatives
of the independent accountants for the Company and you at which the contents of
the Registration Statement and the Prospectus and related matters were discussed
and, although such counsel is not passing upon and does not assume
responsibility for, the factual accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus (except as
stated in paragraphs (xi) and (xii) above) and has made no independent check or
verification thereof for the purpose of rendering its opinion, on the basis of
the foregoing, nothing has come to their attention that leads
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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 ____________, duly
authorized and validly existing in good standing under the
laws of the ___________, and has all requisite power and
authority to enter into the Pooling and Servicing Agreement
and to perform its obligations thereunder.
(ii) To the knowledge of such counsel, there
is no action, suit, proceeding or investigation pending or
threatened against the Trustee that could materially adversely
affect the ability of the Trustee to perform its obligations
under the Pooling and Servicing Agreement.
(iii) The Trustee has duly authorized,
executed and delivered the applicable Pooling and Servicing
Agreement and such Pooling and Servicing Agreement will
constitute the legal, valid and binding obligation of the
Trustee.
(iv) The Trustee has full power and
authority to execute and deliver the applicable Pooling and
Servicing Agreement and to perform its obligations thereunder.
(v) No consent, approval or authorization
of, or registration, declaration or filing with, any court or
governmental agency or body of the
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jurisdiction of its organization is required for the
execution, delivery or performance by the Trustee of the
Pooling and Servicing Agreement.
(vi) The Certificates have been duly and
validly executed, authenticated and delivered by the Trustee
in accordance with the Pooling and Servicing Agreement.
(vii) The performance by the Trustee of its
duties pursuant to the Pooling and Servicing Agreement does
not conflict with or result in a breach or violation of any
term or provision of, or constitute a default under, any
statute or regulation currently governing the Trustee.
In rendering such opinion, such counsel may rely, as to
matters of fact, to the extent deemed proper and stated therein, on certificates
of responsible officers of the Trustee or public officials.
(3) The favorable opinion of counsel to the Servicer,
dated as of the applicable Closing Time, addressed to you and
in form and scope satisfactory to your counsel, to the effect
that:
(i) The Servicer is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation.
(ii) The execution and delivery by the
Servicer of the applicable Pooling and Servicing Agreement is
within the corporate power of the Servicer and has been duly
authorized by all necessary corporate action on the part of
the Servicer; and to the knowledge of such counsel, neither
the execution and delivery of such instrument, nor the
consummation of the transactions provided for therein, nor
compliance with the provisions thereof, will conflict with or
constitute a breach of, or default under, any contract,
indenture, mortgage, loan agreement, note, lease, deed of
trust, or other instrument to which the Servicer is a party or
by which it may be bound, nor will such action result in any
violation of the provisions of the charter or by-laws of the
Servicer or to the knowledge of such counsel, any law,
administrative regulation or administrative or court decree.
(iii) The applicable Pooling and Servicing
Agreement has been duly executed and delivered by the Servicer
and constitutes a valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms,
except that such enforceability thereof may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of
equity (regardless whether enforcement is sought in a
proceeding in equity or at law).
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(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.
(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.
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(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.
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.
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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, in light of the circumstances under which they were made, not
misleading in each case in respect of the relevant Certificates, and
will reimburse each Underwriter and each such controlling person for
any legal or other expenses reasonably incurred by such Underwriter or
controlling person in connection with investigating or defending any
such action or claim; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
such document in reliance upon and in conformity with written
information furnished to the Company by any Underwriter expressly for
use therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) [Underwriter] will indemnify and hold harmless the
Company, each of its officers who signed the Registration Statement in
the case of the Company, their respective directors, and any person
controlling the Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which the Company or any such
officer, director or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto) or
the Prospectus (or any amendment or supplement thereto), or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of [Underwriter] expressly for use therein and will reimburse
the Company or any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company, any such
officer, director or controlling person in connection with
investigating or defending any such action or claim. This indemnity
agreement is in addition to any liability which [Underwriter] may
otherwise have. The Company acknowledges that, unless otherwise set
forth in the applicable Terms
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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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(e) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Certificates to which such loss, claim, damage or
liability (or actions in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions (or in the case of a public
offering in negotiated transactions, the difference between the
proceeds to the Company and the aggregate price received from the
public) received by such Underwriters. The relative fault of the
Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or such Underwriters on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding anything to the contrary in this Section 6(d), if the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in this Section 6(d) arise out of an untrue statement or
alleged untrue statement of a material fact contained in any
[Underwriter] 8-K (as such term is defined in Section 10 hereof) then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Underwriters on the other (determined in accordance with
the preceding sentence) in connection with the statements or omissions
in such [Underwriter] 8-K which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other equitable considerations. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation even if the
Underwriters were treated as one entity for such purpose or by any
other method of allocation which does not take account of the equitable
considerations referred to in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d)
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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 pursuant to the applicable
Terms Agreement
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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 10% of the aggregate
principal amount of the Certificates to be purchased pursuant to the
applicable Terms Agreement, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the principal
amount of Certificates which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of
Certificates which such Underwriter agreed to purchase pursuant to the
applicable Terms Agreement) of the Defaulted Certificates of the
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Defaulted Certificates of the defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Defaulted
21
<PAGE>
Certificates which remains unpurchased exceeds 10% of the aggregate
principal amount of the Certificates to be purchased pursuant to the
applicable Terms Agreement, or if the Company shall not exercise the
right described in subsection (b) above to require non-defaulting
Underwriters to purchase Defaulted Certificates of a defaulting
Underwriter or Underwriters, then this Agreement shall thereupon
terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the
Company and the Underwriters as provided in Section 5 hereof and the
indemnity agreement and contribution provisions in Section 6 hereof;
but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
SECTION 10. Computational Materials and ABS Term Sheets.
(a) The parties acknowledge that, subsequent to the date on
which the Registration Statement became effective and up to and
including the date on which the Prospectus Supplement and Prospectus
with respect to a Series of Certificates is first made available to the
Underwriters, the Underwriters may furnish to various potential
investors in such Series of Certificates, in writing: (i)
"Computational Materials", as defined in a no-action letter (the
"Kidder No-Action Letter") issued by the staff of the Commission on May
20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as
modified by a no-action letter (the "First PSA No-Action Letter")
issued by the staff of the Commission on May 27, 1994 to the Public
Securities Association (the "PSA") and as further modified by a
no-action letter (the "Second PSA No-Action Letter", and together with
the Kidder No-Action Letter and the First PSA No-Action Letter, the
"No-Action Letters") issued by the staff of the Commission on February
17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the
Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as
defined in the Second PSA No-Action Letter.
(b) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the 1933 Act, all Computational Materials used by [Underwriter]
and required to be filed with the Commission in order for [Underwriter]
to avail itself of the relief granted in the No-Action Letters (such
Computational Materials, the "[Underwriter] Furnished Computational
Materials").
(c) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, at least one (1) business
day prior to the time of filing of the Prospectus pursuant to Rule 424
under the Act, all Structural Term Sheets used by [Underwriter] and
required to be filed with the Commission in order for [Underwriter] to
avail itself of the relief granted in the No-Action Letters (such
Structural Term Sheets, the "[Underwriter] Furnished Structural Term
Sheets").
(d) In connection with each Series of Certificates,
[Underwriter] shall furnish to the Company, within one (1) business day
after the first use thereof, all Collateral Term
22
<PAGE>
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
Company and filing and (following signature by the Company) cause to be
delivered for filing to the Commission
23
<PAGE>
in accordance herewith, revised and/or corrected Computational
Materials or ABS Term Sheets, as the case may be.
(h) [Underwriter] covenants that all Computational Materials
and ABS Term Sheets used by it shall contain the following legend:
"THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE
UNDERWRITER] AND NOT BY CHASE MORTGAGE FINANCE
CORPORATION ("CMFC") OR ANY OF ITS AFFILIATES. [THE
UNDERWRITER] IS NOT ACTING AS CMFC'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
24
<PAGE>
Chase Mortgage Finance 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]
25
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
CHASE MORTGAGE FINANCE
CORPORATION
By:
-----------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
[UNDERWRITER]
By:------------------------------
Name:
Title:
26
<PAGE>
EXHIBIT A
PASS-THROUGH CERTIFICATES
CHASE MORTGAGE FINANCE CORPORATION, SELLER
TERMS AGREEMENT
Dated: _________, 19__
To: Chase Mortgage Finance Corporation
Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting Agreement")
Ladies and Gentlemen:
The undersigned (being herein called the "Underwriters"), understand
that Chase Mortgage Finance 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: ____________
1
<PAGE>
Terms of the Certificates and Underwriting Compensation:
<TABLE>
<CAPTION>
Original
Principal Remittance Price to
Classes Amount* Rate Public
- ------- --------- ---------- --------
<S> <C> <C> <C>
**
</TABLE>
* Approximate. Subject to permitted variance in each case of
plus or minus 5%.
** The [Class A] Certificates are being offered by the
Underwriter from time to time in negotiated transactions or
otherwise at varying prices to be determined, in each case, at
the time of sale.
Certificate Rating:
_____ by [Rating Agency]
_____ by [Rating Agency]
REMIC Election:
The Company [does not] intend[s] to cause the Mortgage Pool to
be treated as a REMIC.
Credit Enhancement:
Cut-off Date:
The Cut-off Date is ___________, 19__.
2
<PAGE>
Remittance Date:
The ____ day of each month (or, if such ____ day is not a
business day, the business day immediately following) commencing __________,
19__.
Purchase Price:
The purchase price payable by the Underwriter for the [Class
A] Certificates is ___% of the aggregate principal balance of the [Class A]
Certificates as of the Closing Date plus accrued interest at the per annum rate
of ___% from __________, 19__ up to but not including the Closing Date.
Underwriting Commission:
Notwithstanding anything to the contrary in the Underwriting
Agreement, no additional underwriting commission shall be payable by the Company
to the Underwriter in connection with the purchase of the Certificates.
Information Provided by Underwriter:
Closing Date and Location:
__________ 19__ at the offices of Morgan, Lewis & Bockius LLP.
3
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
CHASE MORTGAGE FINANCE CORPORATION
(Pursuant to Section 242 of the Delaware General Corporation Law)
Chase Mortgage Finance Corporation, a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly
adopted a resolution proposing and declaring advisable that Corporation's
Restated Certificate of Incorporation shall be amended as follows:
ARTICLE THIRD shall be amended to read in its entirety as
follows:
"THIRD: The purpose of the corporation is to engage in the
following activities:
(a) to acquire, own, hold, pledge, sell, dispose of,
finance and refinance and otherwise deal with mortgage loans
(and interests therein) secured by first liens on one- to
four-family residential properties, regardless of whether
insured or guaranteed, in whole or in part, by any
governmental agency ("Mortgage Loans") and mortgage loan
pass-through certificates and similar instruments ("Mortgage
Certificates") evidencing a fractional undivided interest in
one or more pools of Mortgage Loans;
(b) to authorize, issue, sell and deliver either or
both debt obligations (including collateralized mortgage
obligations) secured by Mortgage Loans or Mortgage
Certificates and rated in one of its two highest rating
categories by a nationally recognized statistical rating
agency, and Mortgage Certificates (including those
representing interests subordinate to such debt obligations)
with respect to pools of Mortgage Loans;
(c) to organize and create one or more trusts or
corporations to engage in the activities described in clauses
(a) and (b) above; and
<PAGE>
(d) to engage in any activity and to exercise any
powers permitted to corporations under the laws of the State
of Delaware which are incidental to and necessary or
convenient to enable the corporation or nay of its affiliates
to accomplish the foregoing."
RECORD: The foregoing amendment has been duly adopted by
written consent in accordance with the provisions of Section 142 and Section 238
of the General Corporation Law of the State of Delaware and written notice has
been given to stockholders in accordance with and as provided by Section 226(d)
of the General Corporation Law of the State of Delaware.
IN WITNESS THEREOF, Chase Mortgage Finance Corporation has
caused this certificate to be executed as of the eighteenth day of October,
1994.
CHASE MORTGAGE FINANCE
CORPORATION
By: /s/ Samuel H. Cooper
-----------------------------
Name: Samuel H. Cooper
Title: President
ATTEST:
By: /s/ Robert J. Jacobs
-----------------------------
Name: Robert J. Jacobs
Title: Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
CMB Mortgage Finance Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation by unanimous
written consent in lieu of a meeting, adopted by a resolution proposing and
declaring advisable the following amendment to the Restated Certificate of
Incorporation of said corporation:
RESOLVED, that the Restated Certificate of Incorporation of
CMB Mortgage Finance Corporation be amended by changing the
First Article thereof so that, as amended, said Article
shall be and read as follows:
"The name of the corporation is Chase
Mortgage Finance Corporation"
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said CMB Mortgage Finance Corporation has caused
this certificate to be signed by A. Hardy Eubanks, III, its President, and
attested by Keith C. Leavy, ts Assistant Secretary, this 22nd day of November,
1988.
<PAGE>
CMB Mortgage Finance Corporation
By: /s/ A. Hardy Eubanks III
------------------------------
President
ATTEST:
By: /s/ Keith C. Leavy
---------------------------
Assistant Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
The Mortgage Finance Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by unanimous
written consent in lieu of a meeting, adopted by a resolution proposing and
declaring advisable the following amendment to the Restated Certificate of
Incorporation of said corporation:
RESOLVED, that the Restated Certificate of Incorporation of
The Mortgage Finance Corporation be amended by changing the
First Article thereof so that, as amended, said Article
shall be and read as follows:
"The name of the corporation is CMB
Mortgage Finance Corporation"
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said The Mortgage Finance Corporation has caused
this certificate to be signed by A. Hardy Eubanks, III, its President, and
attested by Keith C. Leavy, its Assistant Secretary, this 22nd day of March,
1988.
<PAGE>
The Mortgage Finance Corporation
By /s/ A. Hardy Eubanks, III
--------------------------
President
ATTEST:
By /s/ Keith C. Leavy
------------------------
Assistant Secretary
2
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE MORTGAGE FINANCE CORPORATION
The undersigned, being the sole incorporator of The Mortgage
Finance Corporation, a Delaware corporation (the "Corporation"), pursuant to
Sections 241 and 245 of the General Corporation Law of the State of Delaware, do
hereby certify and set forth as follows:
1. The name of the Corporation is The Mortgage Finance
Corporation.
2. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
December 4, 1986.
3. The Corporation has not as of the date hereof received any
payment for any of its shares of common stock.
4. The sole incorporator has adopted the following Restated
Certificate of Incorporation of the Corporation (attached hereto) declaring such
Restated to be advisable and said Restated was adopted by the sole Incorporator
in accordance with Sections 241 and 245 of the General Corporation Law of the
State of Delaware.
WITNESS the signature of the undersigned to this certificate
this 3rd day of March, 1988.
/s/ Frank C. Puleo
------------------------
Frank C. Puleo
Sole Incorporator
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE MORTGAGE FINANCE CORPORATION
FIRST: The name of the corporation is The Mortgage Finance
Corporation.
SECOND: The address of the corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage solely in
the following activities:
(a) to acquire, own, hold, pledge, sell, dispose of, finance
and refinance and otherwise deal with mortgage loans and interests therein
("Mortgage Loans") and mortgage loan pass-through certificates, participation
certificates, and similar instruments, including those issued or guaranteed by
U.S. government agencies or instrumentalities ("Mortgage Certificates") secured
by or evidencing a fractional undivided interest in one or more pools-of
Mortgage Loans or Mortgage Certificates;
(b) to authorize, issue, sell, retain and deal in one or more
series (which may consist of multiple classes) of either or both of (i) debt
obligations (including collateralized mortgage obligations) secured primarily by
Mortgage Loans or Mortgage Certificates or other mortgage collateral and rated
in one of its two highest rating categories by a nationally recognized
statistical
<PAGE>
rating agency and (ii) Mortgage Certificates (including those representing
interests subordinate to such debt obligations or to series, or classes of a
series, of Mortgage Certificates);
(c) to organize and create one or more trusts or corporations
to engage in the activities described in clauses (a) and (b) above and to invest
in or to sell beneficial interests in the same; and
(d) to engage in any activity and to exercise any powers
permitted to corporations under the laws of the State of Delaware which are
incidental to and necessary or convenient to accomplish the foregoing.
FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is one thousand (1,000) shares of
common stock with a par value of One Dollar ($1.00) per share.
FIFTH: The name and mailing address of the incorporator is
Frank C. Puleo, 1 Chase Manhattan Plaza, New York, New York 10005.
SIXTH: The directors shall have power to make, alter or repeal
by-laws, except as may otherwise be provided in the by-laws.
SEVENTH: Elections of directors need not be by written ballot,
except as may otherwise be provided in the by-laws. Meetings of stockholders may
be held within or without the State of Delaware, as the by-laws may provide. The
books of the corporation may (except as otherwise required by law) be kept
within or without the State of Delaware at such place or places as may be
designated from time to time by the board of directors.
2
<PAGE>
EIGHTH: To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or may hereafter be amended, a
director of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The corporation reserves the right to amend, alter, modify or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by law.
3
<PAGE>
Exhibit 3.2
BY-LAWS
of
THE MORTGAGE FINANCE CORPORATION
ARTICLE I
Stockholders
Section 1.1. Annual Meeting. Except as otherwise provided in
the Certificate of Incorporation and these By-Laws, an annual meeting of
stockholders of the Corporation for the election of Directors and for the
transaction of any other proper business shall be held at the principal office
of the Corporation in the City of New York, State of New York or such other
place within or without the State of Delaware as the Board may designate, on the
first Tuesday in March in each year or on such earlier or later date as the
Board may designate, at such time of the day as the Board shall appoint. if such
day shall fall an a legal holiday in the State of Delaware, such meeting shall
be held and the Directors elected on the next day thereafter not such a legal
holiday. If the annual meeting for the election of Directors is not held on the
date designated therefor, the Directors shall cause the meeting to be held as
soon thereafter as convenient.
Section 1.2. Special Meetings. A special meeting of
stockholders of the Corporation may be called by the Board or the President, and
shall be called by the Secretary or an Assistant Secretary upon the written
request, stating the purpose or purposes of the proposed meeting, of the holders
of an aggregate of not less than 25% of the outstanding stock entitled to vote
at such meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
Unless otherwise provided by law, the written notice of any
meeting shall be given, personally or by mail, not less than ten nor more than
fifty days before the date of the meeting, to each stockholder entitled to vote
at such meeting. If mailed, notice shall be deemed given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears an the records of the Corporation.
When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business
<PAGE>
which might have been transacted at the original meeting. If, however, the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 1.4. Quorum. Except as otherwise provided by law in
respect of the vote of holders of stock that shall be required for a specified
action, at any meeting of stockholders the holders of a majority of the
outstanding stock entitled to vote thereat, either present or represented by
proxy, shall constitute a quorum for the transaction of any business, but the
stockholders present, although less than a quorum, may adjourn the meeting to
another time or place and, except as provided in the last paragraph of Section
1.3 of these By-Laws, notice need not be given of the adjourned meeting.
Section 1.5. Presiding Officer and Secretary. At every meeting
of stockholders the President, or in his absence the Treasurer, shall preside.
In the absence of both said officers, any other officer of the Corporation
present shall call such meeting to order and preside. The Secretary, or in his
absence the appointee of the presiding officer of the meeting, shall act as
secretary of the meeting.
Section 1.6. Vote of Stockholders. Except as otherwise
required by law or the Certificate of Incorporation, all action by stockholders
shall be taken at stockholders' meetings unless the Board shall determine that
such action shall be taken by written consent of stockholders.
Except as otherwise provided by law, each holder of record of
stock of the Corporation entitled to vote on any matter at any meeting of
stockholders shall be entitled to one vote for each share of such stock standing
in the name of such holder on the stock ledger of the Corporation on the record
date for the determination of the stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for Directors
shall be by written ballot, but otherwise the method of voting and the manner in
which votes are counted shall be discretionary with the presiding officer at the
meeting.
Whenever Directors are to be elected at a meeting, they shall
be elected by a plurality of the votes cast at the meeting by the holders of
stock entitled to vote thereat. Whenever any corporate action, other than the
election of Directors, is to be taken by vote of stockholders at a meeting, it
shall, except as otherwise required by law or by the Certificate of
Incorporation or by these By-Laws, be authorized by a majority of the votes cast
at the meeting by the holders of stock entitled to vote thereat.
Section 1.7. Judges of Election. The Board may at any time
appoint two or more persons to serve as Judges of Election at any meeting of
stockholders to act as judges and tellers with respect to all votes by ballot at
such meeting. If any Judge appointed be absent or refuse to act, or if his
office become vacant and not be filled by the Board, if a majority of the
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Judges be present, they may act, otherwise, or if there be a failure to elect or
appoint Judges, the presiding officer of the meeting may appoint one or more
Judges for such meeting. No Director or officer of the Corporation shall be
eligible for election or appointment as Judge. The Judges appointed to act at
any meeting of the stockholders, before entering upon the discharge of their
duties, shall be sworn faithfully to execute the duties of Judges at such
meeting with strict impartiality, and according to the best of their ability,
and the oath so taken shall be subscribed by them.
ARTICLE II
Directors
Section 2.1. Number, Election and Term of Directors. The
number of Directors constituting the Board of Directors (herein called the
"Board") shall be such number as is fixed from time to time by resolution
adopted by a majority of the Directors then in office or by the stockholders,
but in no event shall be less than three. Directors shall be elected annually by
stockholders. The term of office of each Director shall be from the time of his
election and qualification until the annual election of Directors next
succeeding his election and until his successor shall have been elected and
shall have qualified.
Section 2.2. Vacancies and Newly Created Directorships.
Vacancies and newly created Directorships resulting from any increase in the
authorized number of Directors may be filled by a majority of the Directors then
in office, although less than a quorum, or by a sole remaining Director.
Section 2.3. Place of Meeting. Meetings of the Board, regular
or special, shall be held at the principal office of the Corporation in the City
of New York, State of New York, or at such other place within or without the
State of Delaware as may fixed by resolution of the Board.
Section 2.4. Annual Organization Meeting. An annual
organization meeting of the Board shall be held at the time of the next regular
meeting of the Board after each annual election of Directors unless another time
be fixed by resolution of the Board. No notice of such meeting need be given.
Any business may be transacted at such annual organization meeting.
Section 2.5. Regular Meetings. The Board may fix times for
regular meetings of the Board and no notice of such meetings need be given. Any
business may be transacted at any regular meeting.
Section 2.6. Special Meetings, Notice and Waiver of Notice.
Special meetings of the Board shall be held whenever called by the President or
any three Directors. Notice of
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each such special meeting shall be mailed postage prepaid to each Director,
addressed to him at his residence or usual place of business or other address
filed by him with the Secretary for such purpose, or shall be sent to him by
telegraph, cable or wireless, or shall be delivered or given to him personally
or by telephone, not later than the second day preceding the day on which the
meeting is to be held. Such notice need not state the purposes of the meeting.
Any business may be transacted at any special meeting. Waiver of notice in
writing by any Director of any special meeting of the Board, whether prior or
subsequent to such meeting, or attendance at such meeting by any Director, shall
be equivalent to notice to such Director of such meeting.
Section 2.7. Quorum and Manner of Acting. Except as otherwise
required by law, the Certificate of Incorporation or these By-Laws, one-third of
the whole Board shall constitute a quorum for the transaction of any business at
any meeting of the Board and the act of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum a majority of the Directors present may adjourn any meeting
from time to time until a quorum is present and no notice of any adjourned
meeting need be given other than by announcement at the meeting which is being
adjourned. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 2.8. Written Consent of Directors in Lieu of a
Meeting. Any action required or permitted to be taken at any meeting of the
Board or of any Committee thereof may be taken without a meeting, if all members
of the Board or of such Committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes proceedings of
the Board or Committee.
Section 2.9. Compensation of Directors. Directors who are not
officers of the Corporation shall receive such compensation as may be fixed by
the Board for service on the Board or any Committee of the Board.
ARTICLE III
Committees of the Board
Section 3.1. Committees. The Board may from time to time, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, each Committee to consist of two or more Directors of the
Corporation. The Board may designate one or more Directors as alternate members
of any such Committee, who may replace any absent or disqualified member at any
meeting of such Committee. Any such Committee shall exercise powers as may be
assigned to it by the Board.
4
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Section 3.2. Committee Rules; Quorum. Each Committee may adopt
rules governing the method of calling and time and place of holding its
meetings. Unless otherwise provided by the Board one-third of any Committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the members of such Committee present at a meeting at which a quorum
is present shall be the act of such Committee.
ARTICLE IV
Officers
Section 4.1. Titles. The officers of the Corporation shall be
a President, one or more Vice Presidents, a Secretary, a Treasurer and such
other officers as may be appointed at any time or from time to time by the
Board. The Board may by resolution delegate to any Committee of the Board or any
officer authority to appoint such other officers, to assign powers and duties to
any such officer, to rescind or terminate the appointment of any such officer
and to accept the resignation of any such officer. Any one or more Vice
Presidents may be designated Executive Vice President or Senior Vice President.
One person may hold any two or more offices and perform the duties thereof.
Section 4.2. Appointment, Term and Compensation of Officers.
The President shall be appointed by the Board to hold office until the next
annual organization meeting of the Board and until their successors are
appointed and qualified. The term of office of all other officers shall be at
the pleasure of the Board. The compensation of all officers of the Corporation
shall be fixed by resolution of the Board, except that the Board may authorize
the President to fix and to delegate to such other officers as the Board may
designate authority to fix any compensation of any officer not exceeding a total
amount or amounts specified by the Board.
Section 4.3. President. The President shall be the principal
executive officer and the principal administrative officer of the Corporation
and shall have the responsibility for carrying out the policies of the Board
and, subject to the direction of the Board, shall have general supervision over
the business and affairs of the Corporation.
Section 4.4. Vice Presidents. Each Vice President shall, upon
request, advise and assist the President in managing the Corporation and shall
have such other powers and perform such other duties as usually pertain to his
office and as may be assigned to him at any time or from time to time by the
Board or the President.
Section 4.5. Secretary. The Secretary shall act as Secretary
of the Board and as Secretary at meetings of the stockholders and, in general,
shall have charge of all records of the Corporation relating to its organization
and corporate action and shall have power to certify the contents thereof, and
shall have such other powers and perform such duties as usually pertain to
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his office and as may be assigned to him at any time or from time to time by the
Board, or the President.
Section 4.6. Treasurer. The Treasurer shall act as the
principal financial officer and the principal accounting officer and shall have
charge of all funds and securities of the Corporation, shall endorse the same
for deposit or collection when necessary and deposit the same to the credit of
the Corporation in such banks or depositories as the Board of Directors may
authorize. He or she may endorse all commercial documents requiring endorsements
for or on behalf of the Corporation and may sign all receipts and vouchers for
payments made to the Corporation. He or she shall have all such further powers
and duties as generally are incident to the position of Treasurer or as may be
assigned to him or her by the Board or the President.
Section 4.7. Other Officers. Other officers and assistant
officers appointed by the Board shall have such powers and perform such duties
as usually pertain to their respective offices and as may be assigned to them at
any time or from time to time by the Board or the President.
ARTICLE V
Capital Stock
Section 5.1. Certificates; Transfer Agents and Registrars.
Certificates for stock of the Corporation shall be in such form as shall be
approved by the Board and shall be signed in the name of the Corporation by the
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer. Such certificates may be sealed with the seal of the
Corporation or a facsimile thereof, engraved, stamped or printed, and shall
contain such information as is required by law to be stated thereon. If any
stock certificate is countersigned by a transfer agent or registrar other than
the Corporation or its employee, any other signature on the certificate may be a
facsimile, engraved, stamped or printed. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 5.2. Transfers of Stock. Transfers of stock of the
Corporation shall be made on the books of the Corporation by the registered
holder thereof or by his attorney thereunto authorized by power of attorney duly
executed, and on surrender of the certificate or certificates for such stock
properly endorsed or accompanied by a proper instrument of transfer. The Board
may make such additional rules and regulations as it may deem expedient
concerning the issue, registration and transfer of certificates for stock of the
Corporation and may appoint one or more banks or trust companies, including any
affiliate of the Corporation, as transfer
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agents and registrars of the stock of the Corporation and require all
certificates to bear the signature thereof. The Corporation shall be entitled to
treat the holder of record of any stock as the owner thereof in fact.
Section 5.3. Stockholder Record Date. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty not, less than ten days before
the date of such meeting, nor more than sixty days prior to any other action.
Only such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to notice of, and to vote at, such meeting and any adjournment
thereof or to give such consent, or to receive payment of such dividend or other
distribution, or to exercise such rights in respect of any such change,
conversion or exchange of stock, or to participate in such action, as the case
may be, notwithstanding any transfer of any stock on the books of the
Corporation after any record date so fixed.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
ARTICLE VI
Seal
Section 6.1. Seal. The seal of the Corporation shall be in
such form as may be approved from time to time by the Board and said seal, or a
facsimile thereof, may be imprinted or affixed by any process or in any manner
reproduced. The Secretary and any other officers authorized by resolution of the
Board shall be empowered to use and attest the corporate seal on all documents.
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ARTICLE VII
Miscellaneous
Section 7.1. Checks, Notes, Drafts, Etc. Checks, notes,
drafts, acceptances, bills of exchange and other orders or obligations for the
payment of money shall be signed by such officer or officers or person or
persons as the Board by resolution shall from time to time designate.
Section 7.2. Shares of Other Corporations. The President, or
in his absence the Treasurer, is authorized to vote, represent and exercise on
behalf of the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted to said officer to vote or represent on behalf of the
Corporation any and all shares held by the Corporation in any other corporation
or corporations may be exercised either by said officer in person or by any
person authorized so to do by proxy or power of attorney duly executed by said
officer. Notwithstanding the above, however, the Board, in its discretion, may
designate by resolution any additional person to vote or represent said shares
of other corporations.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification of Directors, Officers, Employees
and Agents. Any person (including the heirs, executors and administrators of
such person) who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any action or suit by or in
the right of the Corporation to procure a judgment in its favor) by reason of
the fact that (a) he is or was a director or officer of the Corporation, or (b)
he is or was a director or officer of the Corporation and is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Corporation, if,, as and to the extent authorized by
the applicable law, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of such action, suit or proceedings.
The Corporation may indemnify any person (including the heirs, executors and
administrators of such person) who is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the extent and under the circumstances
provided by the foregoing sentence. The indemnification provided by this Section
8.1 and by statute in a specific case shall not be deemed exclusive of any other
8
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rights to which any person indemnified may be entitled under any By-Law, lawful
agreement, vote of stockholders or disinterested directors or otherwise.
ARTICLE IX
Amendments
Section 9.1. Amendments. These By-Laws or any of them may be
altered, amended or repealed, or new By-Laws may be adopted, from time to time,
by the Board at any regular or special meeting thereof by vote of a majority of
the Directors then in office.
9
<PAGE>
THE MORTGAGE FINANCE CORPORATION
Written Consent in Lieu of First Meeting
of the Board of Directors
The undersigned, being all of the directors of The Mortgage
Finance Corporation, a Delaware corporation (the "Corporation"), hereby consent,
pursuant to Section 141(f) of the General Corporation Law of the State of
Delaware, to the adoption of the resolutions below taking or authorizing the
actions specified therein.
On December 4, 1986, the Certificate of Incorporation of the
Corporation was filed with the Secretary of State of Delaware. The Restated
Certificate of Incorporation was filed with the Secretary of State of Delaware
on March 4, 1988. The incorporator (the "Incorporator") of the Corporation
adopted By-Laws pursuant to an Instrument of Organization dated March 4, 1988.
It is therefore appropriate for the Board of Directors of the Corporation to
take certain actions relating to the organization of the Corporation.
Accordingly, the following resolutions were unanimously adopted:
Resolution No. 1 - Acts of Incorporator
RESOLVED, that all of the acts of the Incorporator
be, and hereby are, ratified and approved.
Resolution No. 2 - Number of Directors
RESOLVED, that pursuant to Section 2.1 of the
By-laws, the number of Directors constituting the Board of
Directors shall be five.
<PAGE>
Resolution No. 3 - Appointment of Officers
RESOLVED, that the following persons are appointed to
the offices below set opposite their names, to hold office at
the pleasure of the Board of Directors until the meeting of
the Board of Directors following the next annual meeting of
the stockholders of this Corporation and until their
successors shall have been appointed and shall have qualified:
President A. Hardy Eubanks III
Treasurer Jeffrey L. Satenstein
; and it is further
RESOLVED, that the President shall be designated as
the principal executive officer of the Corporation; and it is
further
RESOLVED, that the Treasurer shall be designated as
the principal financial officer and shall be designated as the
principal accounting officer.
Resolution No. 4 - Filing of By-Laws
RESOLVED, that the form of By-Laws adopted by the
Incorporator, a copy of which is annexed hereto, be filed with
the records of this Corporation.
Resolution No. 5 - Corporate Borrowing
RESOLVED, that the President is hereby authorized on
behalf of this Corporation to borrow for this Corporation
$100,000 from Chase Manhattan Corporation.
Resolution No. 6 - Issuance of Certificates
RESOLVED, that the execution in the name of the
Corporation and the filing with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Securities Act"), of a Registration Statement or
Statements on Form S-11, together with any pre-effective and
post-effective amendments thereto (collectively, the
"Registration Statement"), including a prospectus, one or more
forms of
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prospectus supplements and any and all exhibits and other
documents relating thereto, for the purpose of the
registration of the offering and sale by the Corporation
directly or through one or more trusts of up to $500,000,000
of pass-through certificates to be issued in series
(hereinafter, collectively, the "Certificates"), presented to
the Board of Directors, be, and hereby is, approved and each
of the President, any Vice President or Treasurer of the
Corporation is singly authorized and empowered to file such
Registration Statement on behalf of the Corporation and any
prospectus and forms of prospectus supplement included therein
as they in their discretion deem necessary or desirable in
order to effect the registration of the Certificates and
further to cause to be filed with the SEC such other documents
as they in their discretion deem necessary or desirable in
order to comply with the Securities Act or the Securities
Exchange Act of 1934, as amended; and it is further
RESOLVED, that the Board of Directors hereby approves
the execution by each officer and director who may be required
to sign the Registration Statement (whether on behalf of the
Corporation or as an officer or director thereof or by
attesting the seal of the Corporation or otherwise) of a power
of attorney appointing such officers and directors, and each
of them, severally, his true and lawful attorney and agent to
execute in his name, place and stead (in any capacity) any and
all amendments to the Registration Statement and all
instruments necessary or desirable in connection therewith,
and file the same with the SEC, granting to each of said
attorneys and agents the power to act with or without the
other, and the full power and authority to do and perform in
the name and on behalf of each of said officers and directors,
or both, as the case may be, every act whatsoever which may be
necessary or desirable as set forth in such Registration
Statement, and to do or cause to be done all such acts and
things in connection therewith on behalf of the Corporation as
they, in their sole discretion, deem necessary or desirable,
and each officer an director is authorized and empowered to so
executed such power of attorney; and it is further
RESOLVED, that any and all actions of the executive
officers of this Corporation in connection with the matters
contemplated by the foregoing resolutions taken prior to the
date of this resolution be, and they hereby are, approved,
ratified and adopted in all respects as fully as if such
actions had been
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presented to this Board of Directors for its approval prior to
such actions being taken; and it is further
RESOLVED, that the proper officers of the Corporation
be, and they hereby are, authorized and directed in its name
and on its behalf, to take all such further action, to cause
to be prepared and filed all such documents, to make all
expenditures and incur all expenses, and to execute and
deliver all instruments deemed by any of them to be necessary
or appropriate for carrying out the purposes of the foregoing
resolutions; and the execution by such officers of any such
document or instrument or the payment of any such expenditures
or expenses or the doing by them of any act in connection with
the foregoing matters shall conclusively establish their
authority therefor from this Corporation of the documents or
instruments so executed, the expenses or expenditures so paid
and the action so taken; and it is further
RESOLVED, that A. Hardy Eubanks III, President, The
Mortgage Finance Corporation, 1 Chase Manhattan Plaza, 35th
Floor, New York, New York 10005, be, and he hereby is,
appointed as agent for service for the Company, pursuant to
the rules and regulations of the Securities Act of 1933, as
amended, in respect to the aforesaid Registration Statement,
and any all amendments thereto.
Resolution No. 7 - Authorization of Officers and Counsel to
take Necessary Action
RESOLVED, that the proper officers of the
Corporation, and the Corporation's counsel, be, and each of
them hereby is, authorized and directed to prepare and execute
such documents, make such filings, seek such approvals and to
take such actions as may be necessary or advisable in order to
carry out the purposes of the foregoing resolutions and the
intent of each thereof.
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IN WITNESS WHEREOF, this consent has been executed by each
director on the date indicated opposite such directors name and each director
does hereby direct that this Consent be filed with the minutes of this
Corporation.
Date of Execution
-------------------
/s/ Richard L. Huber March 4, 1988
-------------------------------
Richard L. Huber
/s/ Gordon I. Miller, Jr. March 4, 1988
-------------------------------
Gordon I. Miller, Jr.
/s/ Michael G. J. Davis March 4, 1988
-------------------------------
Michael G. J. Davis
/s/ A. Hardy Eubanks III March 4, 1988
-------------------------------
A. Hardy Eubanks III
/s/ Jeffrey L. Satenstein March 4, 1988
-------------------------------
Jeffrey L. Satenstein
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Exhibit 4.1
CHASE MORTGAGE FINANCE CORPORATION,
DEPOSITOR,
CHASE MANHATTAN MORTGAGE CORPORATION,
SERVICER
and
[TRUSTEE]
TRUSTEE
POOLING AND SERVICING AGREEMENT
Dated as of [DATE]
$----------------
Multi-Class Mortgage Pass-Through Certificates
Series [ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS........................................................................................
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND...........................................................
Section 2.01. Conveyance of Mortgage Loans...................................................
Section 2.02. Acceptance by Trustee..........................................................
Section 2.03. Trust Fund; Authentication of Certificates.....................................
Section 2.04. REMIC Election.................................................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS.........................................................
Section 3.01. Representations and Warranties of the Depositor with respect to the
Mortgage Loans.................................................................
Section 3.02. Representations and Warranties of the Servicer.................................
Section 3.03. Option to Substitute...........................................................
ARTICLE IV
THE CERTIFICATES...................................................................................
Section 4.01. The Certificates...............................................................
Section 4.02. Registration of Transfer and Exchange of Certificates..........................
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates..............................
Section 4.04. Persons Deemed Owners..........................................................
Section 4.05. Appointment of Paying Agent; Certificate Account...............................
Section 4.06. Authenticating Agents..........................................................
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.....................................................
Section 5.01. Servicer to Service Mortgage Loans.............................................
Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers;
Enforcement of Sub-Servicer's Obligations......................................
Section 5.03. Successor Sub-Servicers........................................................
Section 5.04. Liability of the Servicer......................................................
Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee or
Certificateholders.............................................................
Section 5.06. Termination of Sub-Servicing Agreement.........................................
Section 5.07. Collection of Mortgage Loan Payments...........................................
Section 5.08. Establishment of Collection Account; Deposit in Collection Account.............
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
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
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<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
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EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B CONTENTS OF MORTGAGE FILE
EXHIBIT C FORMS OF CLASS A CERTIFICATES
EXHIBIT D FORM OF CLASS M CERTIFICATE
EXHIBIT E FORMS OF CLASS B CERTIFICATES
EXHIBIT F FORM OF CLASS A-R CERTIFICATE
EXHIBIT G FORM OF TRUSTEE CERTIFICATION
EXHIBIT H FORM OF INVESTMENT LETTER
EXHIBIT I FORM OF RULE 144A INVESTMENT LETTER
EXHIBIT J FORM OF SPECIAL SERVICING AGREEMENT
EXHIBIT K FORM OF CLASS A-R TRANSFER LETTER
EXHIBIT L REQUEST FOR RELEASE
iv
<PAGE>
This Pooling and Servicing Agreement, dated as of [DATE], is
executed among Chase Mortgage Finance 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.
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AGREEMENT: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
APPRAISED VALUE: The value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.
ASSIGNMENT OF MORTGAGE: An assignment of the Mortgage, notice
of transfer or equivalent instrument, in recordable form, sufficient under the
laws of the jurisdiction where the related Mortgaged Property is located to
reflect of record the sale and assignment of the Mortgage Loan to the Trustee,
which assignment, notice of transfer or equivalent instrument may, if permitted
by law, be in the form of one or more blanket assignments covering Mortgages
secured by Mortgaged Properties located in the same county.
AUTHENTICATING AGENT: The meaning specified in Section 4.06.
AVAILABLE DISTRIBUTION AMOUNT: On any Distribution Date, an
amount equal to the amount on deposit in the Certificate Account as of the close
of business on the related Determination Date except:
(a) amounts received on particular Mortgage Loans as late
payments or other recoveries of principal or interest (including
Liquidation Proceeds, Insurance Proceeds and condemnation awards) and
respecting which the Servicer previously made an unreimbursed Advance
of such amounts;
(b) reimbursement for Nonrecoverable Advances and other
amounts permitted to be withdrawn by the Servicer pursuant to Section
5.09 from, or not required to be deposited in, the Collection Account;
(c) amounts representing the Servicing Fee with respect to
such Distribution Date;
(d) amounts representing all or part of a Monthly Payment due
(i) after the related Due Period or (ii) on or prior to the Cut-off
Date;
(e) all Repurchase Proceeds, Principal Prepayments,
Liquidation Proceeds, Insurance Proceeds and condemnation awards with
respect to Mortgage Loans received after the related Principal
Prepayment Period, and all related payments of interest representing
interest for any period of time after the last day of the related Due
Period for such Mortgage Loans; and
(f) all income from Eligible Investments held in the
Collection Account for the account of the Servicer.
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BANKRUPTCY AMOUNT: As of any date of determination, $_________
minus all Bankruptcy Losses on the Mortgage Loans, if any, previously allocated
to the Certificates in accordance with Section 6.04.
BANKRUPTCY LOSS: With respect to any Mortgage Loan, a Realized
Loss resulting from a Deficient Valuation or Debt Service Reduction.
BOOK-ENTRY CERTIFICATES: The Class A Certificates (other than
the Class A-R and Class A-X Certificates), referred to collectively.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, (b)
a legal holiday in the State of New York or (c) a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to be closed.
CARRY-OVER SUBORDINATED PRINCIPAL AMOUNT: As of any
Distribution Date, with respect to any Class of Subordinated Certificates, an
amount, if any, equal to the amount of principal distributable to such Class on
any prior Distribution Date that has not been so distributed.
CASH LIQUIDATION: Recovery of all cash proceeds by the
Servicer with respect to the liquidation of any Mortgage Loan, including
Insurance Proceeds and other payments or recoveries (whether made at one time or
over a period of time) which the Servicer deems to be finally recoverable, in
connection with the sale, assignment or satisfaction of such Mortgage Loan,
trustee's sale, foreclosure sale or otherwise, but only if title to the related
Mortgaged Property was not acquired by foreclosure or deed in lieu of
foreclosure by the Servicer pursuant to Section 5.21.
CERTIFICATE: Any Class A, Class M or Class B Certificate.
CERTIFICATE ACCOUNT: The account created and maintained
pursuant to Section 4.05.
CERTIFICATEHOLDER or HOLDER: The person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Depositor, the
Servicer, any Sub-Servicer, or any of their respective affiliates shall be
disregarded and the undivided Percentage Interest evidenced thereby shall not be
taken into account in determining whether the requisite amount of Percentage
Interests necessary to effect any such consent, waiver, request or demand has
been obtained. The Trustee shall be entitled to conclusively rely upon the
certificate of the Depositor or the Servicer as to the determination of which
Certificates are registered in the name of such affiliates.
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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 Mortgage Finance 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).
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.
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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 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;
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<PAGE>
(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 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.
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<PAGE>
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.
FNMA: The Federal National Mortgage Association, or any
successor organization.
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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 foreclosure or otherwise, which represent late
payments or collections of Monthly Payments due but delinquent for a previous
Due Period and not previously recovered.
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<PAGE>
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 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
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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.
MORTGAGE FILE: As to each Mortgage Loan, the items referred to
in Exhibit B annexed hereto.
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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.
NON-DISCOUNT MORTGAGE LOANS: The Mortgage Loans having Net
Mortgage Rates in excess of the Remittance Rate.
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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);
(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
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<PAGE>
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]
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.
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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).
<TABLE>
<CAPTION>
<S> <C>
ORIGINAL CLASS A PRINCIPAL BALANCE: $_____________
ORIGINAL CLASS M PRINCIPAL BALANCE: $_____________
ORIGINAL CLASS B PRINCIPAL BALANCE: $_____________
ORIGINAL NON-PO CLASS A PRINCIPAL
BALANCE $_____________
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
Class M: %
Class B-1: %
Class B-2: %
Class B-3: %
Class B-4: %
</TABLE>
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE: With respect to any
Class (other than the Class A-X Certificates) of Certificates and any
Distribution Date, the 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
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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 Remittance Rate over the applicable Net Mortgage
Rate and the denominator of which equals the Remittance Rate.
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<PAGE>
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.
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
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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.
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.
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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 the principal balance of such Mortgage Loan by
a bankruptcy court, irrespective of any delinquency in payment by the related
Mortgagor.
SELLER: [CMMC].
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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 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
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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;
(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;
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(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:
<TABLE>
<CAPTION>
Distribution Date Occurring in Step Down Percentage
------------------------------ --------------------
<S> <C>
MONTH/DATE through MONTH DATE................ %
</TABLE>
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 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,
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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 party, and any successor trustee at the time serving
as successor trustee hereunder, appointed as herein provided.
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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 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.
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(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 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
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<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
(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 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.
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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 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,
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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;
(l) 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 Section 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).
<TABLE>
<CAPTION>
Aggregate Original Certificate
Minimum Principal Balance of all
Original Certificates of the CUSIP
Class Denomination Indicated Class Number
----- ------------ ------------------------------ ------
<S> <C> <C> <C>
A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-P
A-R(1)
A-X(2) (2) (2)
M
B-1
B-2
B-3
B-4
B-5
</TABLE>
- ---------------
(1) The Class A-R Certificate represents the Residual Interest.
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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. Section 2510.3-101 and subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions
of the Code, will not constitute or result in a prohibited transaction within
the meaning of Section 406 or Section 407 of ERISA or Section 4975 of the
Code, and will not subject the Trustee, the Depositor or the Servicer to any
obligation in addition to those undertaken in this Agreement, which opinion
of counsel shall not be an expense of the Trustee, the Depositor or the
Servicer.
(e) At the option of a Certificateholder, a Certificate may be
exchanged for another Certificate or Certificates of authorized denominations of
a like Class, upon surrender of the Certificate to be exchanged at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose. Whenever the Certificate is
so surrendered for exchange, the Depositor shall execute and the Authenticating
Agent shall authenticate and deliver, the Certificate which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall (if so required by the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument of transfer in the form satisfactory to the Authenticating Agent duly
executed by, the Holder thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to the Holder for any
transfer or exchange of a Certificate, but the Servicer may require payment by
the Certificateholders of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of such
Certificate.
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<PAGE>
(g) All Certificates surrendered for transfer or exchange
shall be destroyed by the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, in accordance with the Trustee's or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent's, standard
procedures.
(h) [Reserved].
(i) A Disqualified Organization is prohibited from acquiring
beneficial ownership of a Class A-R Certificate. Notwithstanding anything to the
contrary contained herein, unless and until the Servicer shall have received an
Opinion of Counsel, satisfactory to it in form and substance, to the effect that
the absence of the conditions contained in this Section 4.02(i) would not result
in the imposition of federal tax upon the Trust Fund or cause the Trust Fund to
fail to qualify as a REMIC, no transfer, sale or other disposition of the Class
A-R Certificate (including for purposes of this section any beneficial interest
therein) may be made without the express written consent of the Servicer, which
consent is to be granted by the Servicer only upon compliance with the
requirements of this Section and a copy of which written consent shall be
supplied to the Servicer. As a condition to granting its consent to a transfer
of a Class A-R Certificate, the Servicer shall require the proposed transferee
of such Certificate (including, in the case of the initial issuance of the Class
A-R Certificate, the initial Holder thereof) to execute a letter and affidavit
substantially in the form attached hereto as Exhibit K.
As a condition to the granting of the consent referred to in
this Section 4.02(i), prior to the transfer, sale, pledge, hypothecation or
other disposition of the Class A-R Certificate or any interest therein, the
Servicer shall require that the proposed transferee deliver to it (1) its
taxpayer identification number and state, under penalties of perjury that such
number is the social security or employee identification number, as the case may
be, of the transferee or provide an affidavit under penalties of perjury stating
that as of the date of such transfer such transferee is not and has no intention
of becoming a Disqualified Organization, (2) an affidavit stating (i) that such
transferee is not acquiring such Class A-R Certificate as an agent, broker,
nominee, or middleman for a Disqualified Organization, (ii) if the Residual
Interest is a "non-economic residual interest" within the meaning of Treas. Reg.
Section 1.860E-1(c)(2), (X) that no purpose of the acquisition of the Class A-R
Certificate is to avoid or impede the assessment or collection of tax, (Y) that
such transferee has historically paid its debts as they came due and will
continue to pay its debts as they come due, and (Z) that such transferee
represents that it understands that, as the holder of the non-economic residual
interest, the transferee may incur tax liabilities in excess of any cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest, and (iii) unless the Servicer
consents to the transfer of the Class A-R Certificate to a Person who is not a
U.S. Person and who has furnished a duly completed and effective Form 4224, that
it is a U.S. Person, and (3) the transferor deliver to the Servicer a written
certification that as of the date of such transfer it has no knowledge and no
reason to know that the affirmations described in clauses (1) and (2) were
false. The Servicer shall not grant the consent referred to in this Section
4.02(i) if it has actual knowledge that any statement made in the affidavit
issued pursuant to the preceding sentence is not true.
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<PAGE>
Notwithstanding any purported transfer, sale or other disposition of the Class
A-R Certificate to a Disqualified Organization, such transfer, sale or other
disposition shall be deemed to be of no legal force or effect whatsoever and
such Disqualified Organization shall not be deemed to be a Class A-R
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class A-R Certificate. If any purported
transfer shall be in violation of the provisions of this Section 4.02(i) then
the prior holder of the Class A-R Certificate shall, upon discovery that the
transfer of such Class A-R Certificate was not in fact permitted by this Section
4.02(i), be restored to all rights as a Holder thereof retroactive to the date
of the purported transfer of such Class A-R Certificate. The Trustee and the
Servicer shall be under no liability to any Person for any registration or
transfer of a Class A-R Certificate that is not permitted by this Section
4.02(i) or for making payments due on such Class A-R Certificate to the
purported Holder thereof or taking any other action with respect to such
purported Holder under the provisions of this Agreement so long as the transfer
was not registered under the written certification of the Servicer as described
in this Section 4.02(i). The prior Holder shall be entitled to recover from any
purported Holder of a Class A-R Certificate that was in fact not a permitted
purported transferee under this Section 4.02(i) at the time it became a
purported Holder all payments made to such purported Holder on such Class A-R
Certificate; provided that the Servicer shall not be responsible for such
recovery. Each Class A-R Certificateholder, by the acceptance of the Class A-R
Certificate, shall be deemed for all purposes to have consented to the
provisions of this Section 4.02(i) and to any amendment to this Agreement deemed
necessary by counsel of the Trustee or the Servicer to ensure that the Class A-R
Certificate is not transferred to a Disqualified Organization and that any
transfer of such Class A-R Certificate will not cause the imposition of a tax
upon the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC. The
restrictions on transfer of the Class A-R Certificate will cease to apply and be
void upon receipt by the Servicer of an Opinion of Counsel to the effect that
such restrictions on transfer are no longer necessary to avoid the risk of
material federal taxation to the Trust Fund or prevent the Trust Fund from
qualifying as a REMIC.
(j) The Servicer shall make available upon written request to
each Holder and each proposed transferee of a Class A-X, Class B-3, Class B-4 or
Class B-5 Certificate such information as may be required to permit the proposed
transfer to be effected pursuant to Rule 144A under the Securities Act of 1933.
Section 4.03. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Trustee or,
if a Paying Agent has been appointed under Section 4.05, the Paying Agent, or
the Trustee or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, such
security or indemnity as may be required by it to save it harmless, then, in the
absence of notice to the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, that such Certificate has been acquired by a
bona fide purchaser, the Trustee or, if a Paying Agent has been appointed under
Section 4.05, the Paying Agent, shall authenticate and deliver, in exchange for
or in lieu of any such mutilated,
54
<PAGE>
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
Class. Upon the issuance of any new Certificate under this Section, the Trustee
or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent,
may require of the Certificateholder the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses connected therewith. Any replacement Certificate of any Class
issued pursuant to this Section shall constitute complete and indefeasible
evidence of ownership of the Percentage Interest in the distributions to which
the Certificateholders of such Class are entitled, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time, and such mutilated, destroyed, lost or stolen Certificate
shall be of no force or effect under this Agreement, to the extent permitted by
law.
Section 4.04. Persons Deemed Owners. Prior to due presentation
of a Certificate of any Class for registration of transfer, the Depositor, the
Servicer, the Paying Agent and the Trustee may treat the person in whose name
any Certificate is registered on the Record Date as the owner of such
Certificate and the Percentage Interest in the distributions to which the
Certificateholders of such Class are entitled on the relevant date as the Holder
of such Certificate and the Percentage Interest represented by such Certificate
for the purpose of receiving remittances pursuant to Section 6.01 and for all
other purposes whatsoever, and neither the Depositor, the Servicer nor the
Trustee shall be affected by notice to the contrary.
Section 4.05. Appointment of Paying Agent; Certificate
Account. The Trustee may appoint a Paying Agent hereunder, which Paying Agent
shall not be Depositor, the Seller, or an affiliate of the Depositor or the
Seller unless such Paying Agent is the Corporate Trust Department of Chase. In
the event of any such appointment, on the Business Day prior to each
Distribution Date, the Servicer shall deposit or cause to be deposited with the
Paying Agent from funds on deposit in the Collection Account a sum up to the
Available Distribution Amount, such sum to be held in trust for the benefit of
Certificateholders in a segregated account (the "Certificate Account") which
shall be an Eligible Account in the name of "[TRUSTEE], as Trustee, in trust for
and for the benefit of the Certificateholders of Multi-Class Mortgage Pass-
Through Certificates, Chase Mortgage Finance 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 this paragraph to distribute to Certificateholders any
amounts other than those on deposit in the
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<PAGE>
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 mail notice of such appointment to all Holders of
Certificates. Any successor Authenticating
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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 Mortgage Finance 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 Mortgage
Finance 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 MORTGAGE FINANCE
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
MORTGAGE FINANCE 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 MORTGAGE FINANCE 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 MORTGAGE FINANCE 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 Mortgage Finance
Corporation (the "Company"), which Mortgage Loans are secured by Mortgaged
Properties, and in certain other property held in trust for the benefit of the
Certificate holders (collectively, the "Trust Fund"). The Mortgage Loans are
serviced by Chase Manhattan Mortgage Corporation (in such capacity, the
"Servicer"). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as of [DATE] (the "Agreement") among the Company, the Servicer
and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not defined herein, the
capitalized terms used herein shall have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class A (the "Class A Certificates") and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound. Also issued under the Agreement are
Certificates designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class M (the "Class M Certificates") and Class B (the "Class B
Certificates"). The Class A Certificates, the Class M Certificates and the Class
B Certificates are collectively referred to as the "Certificates".
Pursuant to the terms of the Agreement, the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, will
distribute from funds in the Certificate Account the amount as described on the
reverse hereof on the 25th day of each month or, if such 25th day is not a
Business Day, the Business Day immediately following (the "Distribution Date"),
commencing on [DATE]. Such distributions will be made to the Person in whose
name this Certificate is registered at the close of business on the last
Business Day of the month preceding the month in which such payment is made, or
if such last day is not a Business Day, the Business Day immediately preceding
such last day (the "Record Date").
Distributions on this Certificate will be made either by check
mailed to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate
<PAGE>
Register, or by wire transfer in immediately available funds to the account of
such Holder at a bank or other financial or depository institution having
appropriate facilities therefor, if such Holder has so notified the Paying Agent
in writing at least 10 Business Days prior to the first Distribution Date for
which distribution by wire transfer is to be made, and such Holder's
Certificates evidence an aggregate original principal balance of not less than
$5,000,000 or such Holder holds a 100% Percentage Interest of such Class.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee or, if a Paying Agent has been appointed
under Section 4.05, the Paying Agent, of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office of the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, or agency appointed by the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, for the purpose and specified in
such notice of final distribution.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Authenticating Agent, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to
be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By:
------------------------------
Certificate of Authentication
This is one of the Class A-1 Certificates
referred to in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By:
---------------------------
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], issued in ten Classes of Class A Certificates, one Class of Class M
Certificates and five Classes of Class B Certificates, each evidencing an
interest in certain distributions with respect to a pool of adjustable rate one-
to four-family first Mortgage Loans formed and sold by the Company and certain
other property conveyed by the Company to the Trustee. The Class A Certificates
evidence in the aggregate the Class A Percentage of distributions relating to
repayments of principal and interest on such Mortgage Loans. The Class M
Certificates evidence in the aggregate the Class M Percentage of distributions
relating to repayments of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the
Principal Balance of this Certificate will be different from the Original
Denomination shown above. Anyone acquiring this Certificate may ascertain its
current Principal Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee (or any Paying Agent, as the case
may be) will provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like Class and dated the date of authentication
by the Authenticating Agent.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, may require payment of a sum
sufficient to cover any tax or governmental charge
<PAGE>
that may be imposed in connection with any transfer or exchange of the
Certificate. Prior to due presentation of a Certificate for registration of
transfer, the Company, the Servicer, the Paying Agent and the Trustee may treat
the person in whose name any Certificate is registered as the owner of such
Certificate and the Percentage Interest in the Trust Fund evidenced thereby for
the purpose of receiving distributions pursuant to the Agreement and for all
other purposes whatsoever, and neither the Company, the Servicer, the Paying
Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company,
the Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with the other provisions therein,
to ensure continuing treatment of the Trust Fund as a REMIC, or to make any
other provisions with respect to matters or questions arising under the
Agreement which are not materially inconsistent with the provisions of the
Agreement, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Company, the Servicer and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage
Interests of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Holders of Certificates of such Class; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
The respective obligations and responsibilities of the
Company, the Servicer and the Trustee under the Agreement will terminate upon
(i) the later of the final payment or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan or the disposition of all property
acquired upon the foreclosure or deed in lieu of foreclosure of any Mortgage
Loan and the remittance of all funds due thereunder; or (ii) at the option of
the Servicer, on any Distribution Date which occurs in the month following a Due
Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage
Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date, so long as the Servicer deposits or causes to be
deposited in the Collection Account during the Principal Prepayment Period
related to such Distribution Date an amount equal to the Purchase Price for each
Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage
Loan, and with respect to all property acquired in respect of any Mortgage Loan
remaining in the Trust Fund, an amount equal to the fair market value of such
property, as determined by an appraisal to be conducted by an appraiser selected
by the Trustee, less unreimbursed Advances made with respect to the Mortgage
Loan with respect to which property has been acquired; provided, however, that
in no event shall the trust created hereby continue beyond the earlier of (i) 32
years
<PAGE>
after the Closing Date and (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James's, living on the date hereof.
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
<PAGE>
(*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. Section 2510.3-101 AND TO BE SUBJECT TO
THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED
TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A
PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
<PAGE>
SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY
(INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE)
RELATING TO THE CERTIFICATES.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE
MORTGAGE FINANCE 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 MORTGAGE FINANCE 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 MORTGAGE FINANCE 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 Mortgage Finance Corporation (the "Company"), which Mortgage Loans
are secured by Mortgaged Properties, and in certain other property held in trust
for the benefit of the Certificate holders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (in such
capacity, the "Servicer"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of [DATE] (the "Agreement") among the Company, the
Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not defined
herein, the capitalized terms used herein shall have the meanings assigned in
the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class M (the "Class M Certificates") and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound. Also issued under the Agreement are
Certificates designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class A (the "Class A Certificates") and Class B (the "Class B
Certificates"). The Class A Certificates are senior to, and the Class B
Certificates are subordinate to, the Class M Certificates in right of payment to
the extent described herein and in the Agreement. The Class A Certificates,
Class M Certificates and Class B Certificates are collectively referred to as
the "Certificates".
<PAGE>
Pursuant to the terms of the Agreement, the Trustee or, if a
Paying Agent has been appointed under Section 4.05, the Paying Agent, will
distribute from funds in the Certificate Account the amount as described on the
reverse hereof on the 25th day of each month or, if such 25th day is not a
Business Day, the Business Day immediately following (the "Distribution Date"),
commencing on [DATE]. Such distributions will be made to the Person in whose
name this Certificate is registered at the close of business on the last
Business Day of the month preceding the month in which such payment is made, or
if such last day is not a Business Day, the Business Day immediately preceding
such last day (the "Record Date").
Distributions on this Certificate will be made either by check
mailed to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate Register, or by wire transfer in immediately
available funds to the account of such Holder at a bank or other financial or
depository institution having appropriate facilities therefor, if such Holder
has so notified the Paying Agent in writing at least 10 Business Days prior to
the first Distribution Date for which distribution by wire transfer is to be
made, and such Holder's Certificates evidence an aggregate original principal
balance of not less than $5,000,000 or such Holder holds a 100% Percentage
Interest of such Class. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office of the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, or agency appointed by the
Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying
Agent, for the purpose and specified in such notice of final distribution.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to
be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By:
------------------------------
Certificate of Authentication
This is one of the Class M Certificates
referred to in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By:
------------------------------
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], issued in ten Classes of Class A Certificates, one Class of Class M
Certificates and five Classes of Class B Certificates, each evidencing an
interest in certain distributions with respect to a pool of adjustable rate one-
to four-family first Mortgage Loans formed and sold by the Company and certain
other property conveyed by the Company to the Trustee. The Class A Certificates
evidence in the aggregate the Class A Percentage of distributions relating to
repayments of principal and interest on such Mortgage Loans. The Class M
Certificates evidence in the aggregate the Class M Percentage of distributions
relating to repayments of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the
Principal Balance of this Certificate will be different from the Original
Denomination shown above. Anyone acquiring this Certificate may ascertain its
current Principal Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund and certain amounts resulting from credit
enhancements for payment hereunder and that the Trustee is not liable to the
Holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee (or any Paying Agent, as the case
may be) will provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee or, if a Paying Agent has
been appointed under Section 4.05, the Paying Agent, maintained for such
purpose, the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like Class and dated the date of authentication
by the Authenticating Agent.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Company, the
Servicer and the Trustee may treat the person in whose name any Certificate is
registered as the owner of such
<PAGE>
Certificate and the Percentage Interest in the Trust Fund evidenced thereby for
the purpose of receiving distributions pursuant to the Agreement and for all
other purposes whatsoever, and neither the Company, the Servicer, the Paying
Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company,
the Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with the other provisions therein,
to ensure continuing treatment of the Trust Fund as a REMIC, or to make any
other provisions with respect to matters or questions arising under the
Agreement which are not materially inconsistent with the provisions of the
Agreement, provided that such action does not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
The Agreement may also be amended from time to time by the
Company, the Servicer and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage
Interests of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Holders of Certificates of such Class; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
The respective obligations and responsibilities of the
Company, the Servicer and the Trustee under the Agreement will terminate upon
(i) the later of the final payment or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan or the disposition of all property
acquired upon the foreclosure or deed in lieu of foreclosure of any Mortgage
Loan and the remittance of all funds due thereunder; or (ii) at the option of
the Servicer, on any Distribution Date which occurs in the month following a Due
Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage
Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage
Loans on the Cut-off Date, so long as the Servicer deposits or causes to be
deposited in the Collection Account during the Principal Prepayment Period
related to such Distribution Date an amount equal to the Purchase Price for each
Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage
Loan, and with respect to all property acquired in respect of any Mortgage Loan
remaining in the Trust Fund, an amount equal to the fair market value of such
property, as determined by an appraisal to be conducted by an appraiser selected
by the Trustee, less unreimbursed Advances made with respect to the Mortgage
Loan with respect to which property has been acquired; provided, however, that
in no event shall the trust created hereby continue beyond the earlier of (i) 32
years
<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.
<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 MORTGAGE FINANCE CORPORATION
This Certificate does not represent an obligation of or
interest in Chase Mortgage Finance Corporation ("CMFC" 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 CMFC, 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 Mortgage Finance Corporation (hereinafter called the "Depositor"), and
certain other property held in trust for the benefit of Certificate holders
(collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase
Manhattan Mortgage Corporation (the "Servicer") and are secured by first
mortgages on Mortgaged Properties. The Trust Fund was created pursuant to a
Pooling and Servicing Agreement (the "Agreement"), dated as of [DATE] among the
Depositor, the Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class B-1 (the "Class B-1 Certificate") and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which Agreement such Holder is bound.
Distributions on this Certificate will be made either by check mailed
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, or by wire transfer in immediately available
funds to the account of such Holder at a bank or other financial or depository
institution having appropriate facilities therefor, if such Holder has so
notified the Paying Agent in writing at least 10 Business Days prior to the
first Distribution Date for which distribution by wire transfer is to be made,
and such Holder's Certificates evidence an aggregate original principal balance
of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of
such Class.
The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates on any Distribution Date
are subordinated to the rights of the Class A and Class M Certificateholders and
the holders of any Class or Classes of Class B Certificates having a lower
numerical class designation to receive distributions in respect of the Class A
and Class M Certificates and such Class B Certificates to the extent, and only
to the extent, set forth in the Agreement. Amounts properly distributed to the
Class B Certificateholders pursuant to the
<PAGE>
Agreement will be deemed released from the Trust Fund, and the Class B
Certificateholders will not in any event be required to refund any such
distributed amounts. The final distribution on this Certificate will be made
after due notice by the Trustee of the pendency of such distribution and only
upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and specified in such notice of final
distribution.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, will provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Upon surrender for registration of transfer of any Certificate at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose, the Trustee or, if a Paying
Agent has been appointed under Section 4.05, the Paying Agent, will, subject to
the limitations set forth in the Agreement, authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate of a like class
and dated the date of authentication by the Authenticating Agent.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. Prior to due
presentation of a Certificate for registration of transfer, the Depositor, the
Servicer, the Paying Agent and the Trustee may treat the person in whose name
any Certificate is registered as the owner of such Certificate and the Ownership
Interest in the Trust Fund evidenced thereby for the purpose of receiving
distributions pursuant to the Agreement and for all other purposes whatsoever,
and neither the Depositor, the Servicer nor the Trustee will be affected by
notice to the contrary.
The Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein, which may be inconsistent with any other provisions therein,
to ensure continuing treatment of the Trust Fund or its assets as a REMIC and to
avoid the imposition of certain tax liabilities, or to make any other provisions
with respect to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 66% of the Percentage
Interest of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Holders of Certificates of such Class; provided, however, that no such amendment
may (i) reduce in any
<PAGE>
manner the amount of, or delay the timing of, payments received on the Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage
of Certificates of any Class the Holders of which are required to consent to any
such amendment or (iii) change the percentage specified in clause (ii) of the
first paragraph of Section 11.01 of the Agreement, without the consent of the
Holders of all Certificates of such Class then outstanding.
The respective obligations and responsibilities of the
Depositor, the Servicer and the Trustee under the Agreement will terminate upon:
(i) the later of the final payment or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan
and the remittance of all funds due thereunder; or (ii) at the option of the
Servicer, on any Distribution Date which occurs in the month next following a
Due Date on which the aggregate unpaid Principal Balance of the Outstanding
Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the
Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes
to be deposited in the Collection Account during the Principal Prepayment Period
related to such Distribution Date an amount equal to the Purchase Price for each
Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage
Loan and, with respect to all property acquired in respect of any Mortgage Loan
remaining in the Trust Fund, an amount equal to the fair market value of such
property, as determined by an appraisal to be conducted by an appraiser selected
by the Trustee, less unreimbursed Advances made with respect to the Mortgage
Loan with respect to which property has been acquired; provided, however, that
in no event shall the trust created hereby continue beyond the earlier of (i) 32
years after the Closing Date and (ii) the expiration of 21 years from the death
of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate
to be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By:
------------------------------
Authorized Officer
This is one of the Class B-1
Certificates referred to
in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By:
---------------------------
Authorized Signatory
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT F
FORM OF CLASS A-R CERTIFICATE
AS MORE FULLY PROVIDED BY SECTION 4.02(i) OF THE AGREEMENT, CERTAIN
SPECIFIED ENTITIES INCLUDING (A) THE UNITED STATES, ANY STATE OR
POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF
THE FOREGOING (OTHER THAN AN INSTRUMENTALITY THAT IS A CORPORATION ALL
OF WHOSE ACTIVITIES ARE SUBJECT TO TAX UNDER CHAPTER 1 OF SUBTITLE A OF
THE CODE AND (EXCEPT IN THE CASE OF FHLMC) A MAJORITY OF WHOSE BOARD OF
DIRECTORS IS NOT SELECTED BY THE UNITED STATES, OR ANY STATE OR
POLITICAL SUBDIVISION THEREOF), (B) ANY ORGANIZATION THAT IS EXEMPT
FROM TAX IMPOSED BY CHAPTER 1 OF SUBTITLE A OF THE CODE, OTHER THAN (X)
A TAX-EXEMPT FARMERS' COOPERATIVE WITHIN THE MEANING OF SECTION 521 OF
THE CODE OR (Y) AN ORGANIZATION THAT IS SUBJECT TO THE TAX IMPOSED BY
SECTION 511 OF THE CODE ON "UNRELATED BUSINESS INCOME", (C) A
CORPORATION OPERATING ON A COOPERATIVE BASIS THAT IS ENGAGED IN
FURNISHING ELECTRIC ENERGY OR PROVIDING TELEPHONE SERVICE TO PERSONS IN
RURAL AREAS (WITHIN THE MEANING OF SECTION 1381(a)(2)(C) OF THE CODE)
AND (D) CERTAIN FOREIGN PERSONS ARE PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF A CLASS A-R CERTIFICATE.
CLASS A-R CERTIFICATE
Cut-off Date: [DATE] Original Denomination
$_______________
First Distribution Date: Aggregate Original Principal
[DATE] Balance of all Class A-R
Certificates: $________
Cut-off Date: [DATE] Number 98-[ ]-A-R-1
Certificate Rate: ___%
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series [ ]
evidencing an ownership interest in distributions allocable to
the Residual Interest Certificates with respect to a pool of
conventional one- to four-family first mortgage loans formed
and sold by
CHASE MORTGAGE FINANCE CORPORATION
<PAGE>
This Certificate does not represent an obligation of or
interest in Chase Mortgage Finance 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 Mortgage Finance
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 Mortgage Finance
Corporation (hereinafter called the "Depositor", which term includes any
successor entity under the Agreement referred to below) and certain other
property held in trust for the benefit of Certificateholders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage
Corporation (the "Servicer") and are secured by first mortgages on Mortgaged
Properties. The Trust Fund was created pursuant to a Pooling and Servicing
Agreement (the "Agreement") dated as of [DATE] among the Depositor, the Servicer
and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined herein,
the capitalized terms used herein have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Multi-Class Mortgage Pass-Through Certificates,
Series [ ], Class A-R (the "Class A-R Certificate") and is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which Agreement such Holder is bound. All payments made under
this Certificate will be made in accordance with the terms of the Agreement.
Also issued under the Agreement are Certificates designated as Multi-Class
Mortgage Pass-Through Certificates Series [ ], Class A, Class M, Class B-1,
Class B-2, Class B-3, Class B-4 and Class B-5 Certificates. The Class A
Certificates, the Class M Certificates, the Class B Certificates and the Class
A-R Certificates are collectively referred to as the "Certificates".
The final distribution on this Certificate will be made after
due notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the
Paying Agent, for that purpose and specified in such notice of final
distribution.
The Trustee will cause to be kept at its Corporate Trust
Office in New York, New York, or at the office of any Paying Agent appointed
under the Agreement, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee or, if a Paying Agent has been
appointed under Section 4.05, the Paying Agent, will provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Upon surrender for registration of transfer of any Certificate at any office or
agency of the Trustee or, if a Paying Agent has been appointed under Section
4.05, the Paying Agent, maintained for such purpose, the Trustee will, subject
to the limitations set forth in the Agreement, authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate of a like class
and dated the date of authentication by the Trustee.
No service charge will be made to the Holder for any transfer
or exchange of the Certificate, but the Trustee may require payment of a sum
sufficient to cover any tax or
<PAGE>
governmental charge that may be imposed in connection with any transfer or
exchange of the Certificate. Prior to due presentation of a Certificate for
registration of transfer, the Depositor, the Servicer, the Paying Agent and the
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the Ownership Interest in the Trust Fund evidenced
thereby for the purpose of receiving distributions pursuant to the Agreement and
for all other purposes whatsoever, and neither the Depositor, the Servicer, the
Paying Agent nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein, which may be inconsistent with any other provisions therein,
to ensure continuing treatment of the Trust Fund or its assets as a REMIC and to
avoid the imposition of certain tax liabilities, or to make any other provisions
with respect to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Holders of
Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage
Interest of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Holders of Certificates of such Class; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
received on the Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii) reduce
the aforesaid percentage of Certificates of any Class the Holders of which are
required to consent to any such amendment or (iii) change the percentage
specified in clause (ii) of the first paragraph of Section 11.01 of the
Agreement, without the consent of the Holders of all Certificates of such Class
then outstanding.
An election will be made to treat the Trust Fund as a REMIC
for federal income tax purposes. The Class A Certificates, the Class M
Certificates, the Class B Certificates will represent regular interests in the
REMIC. The Class A-R Certificate constitutes the Residual Interest in the REMIC.
The respective obligations and responsibilities of the
Depositor, the Servicer and the Trustee under the Agreement will terminate upon:
(i) the later of the final payment or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan
and the remittance of all funds due thereunder; or (ii) at the option of the
Servicer, on any Distribution Date which occurs in the month next following a
Due Date on which the aggregate unpaid Principal Balance of all Outstanding
Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the
Mortgage Loans on the Cut-off Date, so long as the Servicer
<PAGE>
deposits or causes to be deposited in the Collection Account during the
Principal Prepayment Period related to such Distribution Date an amount equal to
the Purchase Price for each Mortgage Loan, less unreimbursed Advances made with
respect to any Mortgage Loan and, with respect to all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the
fair market value of such property, as determined by an appraisal to be
conducted by an appraiser selected by the Trustee, less any Advances made with
respect to the Mortgage Loan with respect to which property has been acquired;
provided, however, that in no event shall the trust created hereby continue
beyond the earlier of (i) 32 years after the Closing Date and (ii) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St.
James's, living on the date hereof.
IN WITNESS WHEREOF, the Depositor has caused this Certificate
to be duly executed.
Dated: [DATE] CHASE MORTGAGE FINANCE
CORPORATION
By:
----------------------------
Authorized Officer
This is the Class A-R
Certificate referred to
in the within-mentioned
Agreement.
[TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK
as Authenticating Agent
By:
-----------------------------
Authorized Signatory
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) _______________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT G
FORM OF TRUSTEE CERTIFICATION
[DATE]
Chase Mortgage Finance Corporation
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Re: Pooling and Servicing Agreement dated as of [DATE] among
Chase Mortgage Finance 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 Mortgage Finance 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 Mortgage Finance Corporation (the "Depositor"), Chase
Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and [TRUSTEE], as
trustee (the "Trustee"). [The Purchaser intends to register the Transferred
Certificate in the name of ____________________, as nominee for
__________________.] All terms used and not otherwise defined herein shall have
the meanings set forth in the Pooling and Servicing Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser certifies, represents
and warrants to, and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have
not been registered or qualified under the Securities Act of 1933, as amended
(the "Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.
<PAGE>
2. The Certificates will bear a legend to the following
effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE "1940 ACT") OR ANY STATE
SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT, DIRECTLY OR
INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR
SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION
UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER
PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING
AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE
UNLESS THE TRUSTEE SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE
SATISFACTORY TO THE SERVICER AND THE TRUSTEE (A) AN INVESTMENT
LETTER FROM THE PROSPECTIVE INVESTOR; AND (B) REPRESENTATIONS
FROM THE TRANSFEROR REGARDING THE OFFERING AND SALE OF THE
CERTIFICATES.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE
DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION
LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT
THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT
PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY
CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED
FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE
ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS
FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY
GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY
12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND
SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE
PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS
CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A
PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR
COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A
TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN
<PAGE>
OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING
OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST
FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29
C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED
TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE
CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE
COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR
LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR
SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
3. The Purchaser is acquiring the Transferred Certificates for
its own account [for investment only]*/ and not with a view to or for sale or
other transfer in connection with any distribution of the Transferred
Certificates in any manner that would violate the Securities Act or any
applicable state securities laws, subject, nevertheless, to the understanding
that disposition of the Purchaser's property shall at all times be and remain
within its control.
4. The Purchaser (a) is a substantial, sophisticated
institutional investor having such knowledge and experience in financial and
business matters, and in particular in such matters related to securities
similar to the Certificates, such that it is capable of evaluating the merits
and risks of investment in the Certificates, (b) is able to bear the economic
risks of such an investment and (c) is an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Securities Act.
5. The Purchaser will not nor has it authorized nor will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
advertising or in
- --------
*/ Not required of a broker/dealer purchaser.
<PAGE>
any other manner with respect to the Certificates. The Purchaser will not sell
or otherwise transfer any of the Certificates, except in compliance with the
provisions of the Pooling and Servicing Agreement.
6. [This paragraph may be deleted if the Purchaser provides
the Opinion of Counsel referred to in clause (ii) of Section 4.02(d) of the
Pooling and Servicing Agreement.] The Purchaser either (A) is not an employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or a plan within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")
(each, a "Plan"), and is not directly or indirectly purchasing any Certificate
on behalf of, as investment manager of, as named fiduciary of, as trustee of or
with assets of a Plan or directly or indirectly purchasing any certificates with
the assets of any insurance company separate account or of any Plan or (B) is an
insurance company and the source of funds for the purchase of the certificates
is an "insurance company general account" within the meaning of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995), and the conditions set forth in Section I and III of PTCE 95-60 are
satisfied with respect to the purchase and holding of the Certificates.
7. Prior to the sale or transfer by the Purchaser of any of
the Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit I to the Pooling and Servicing Agreement.
8. The Purchaser agrees to indemnify the Trustee, the Servicer
and the Depositor against any liability that may result from any
misrepresentation made herein.
Very truly yours,
[PURCHASER]
By:
----------------------------
Name:
Title:
<PAGE>
EXHIBIT I
FORM OF RULE 144A INVESTMENT LETTER
(Qualified Institutional Buyer)
[DATE]
Chase Manhattan Mortgage Corporation
343 Thornall Street
Edison, NJ 08834
The Chase Manhattan Bank
Global Trust Services
15th Floor
450 West 33rd Street
New York, NY 10001
Re: Chase Mortgage Finance 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 Mortgage Finance 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 Mortgage Finance 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 Mortgage Finance 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 Mortgage Finance 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 MORTGAGE FINANCE CORPORATION Series [ ]
[DATE]
Chase Mortgage Finance Corporation
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Ladies and Gentlemen:
We propose to purchase Chase Mortgage Finance 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 Mortgage Finance Corporation ("CMFC") 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 CMFC a letter in the form of this letter (including the
affidavit appended hereto) and, if requested by CMFC, an opinion of counsel (in
a form acceptable to CMFC) 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 CMFC.
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 MORTGAGE FINANCE CORPORATION
By: _________________________________
<PAGE>
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 Mortgage Finance Corporation, Multiclass
Mortgage Pass-Through Certificates, Series [ ], Class A-R on
behalf of a disqualified organization or any other entity,
(4) unless Chase Mortgage Finance Corporation ("CMFC") 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 CMFC
(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 Mortgage Finance Corporation ("CMFC") 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
CMFC's knowledge that the Transferee is not a U.S. person (as defined in such
Transferee's Letter).
CHASE MORTGAGE FINANCE
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>
Morgan, Lewis
& Bockius LLP
Counselors at Law
101 Park Avenue
New York, NY 10178-0060
212-309-6000
Fax: 212-309-6273
June 4, 1998
Chase Mortgage Finance Corporation
343 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
We have acted as your counsel in connection with the Registration Statement on
Form S-3 (the "Registration Statement") filed on June 4, 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 you plan to offer in series, each series to be issued
under a separate pooling and servicing agreement (a "Pooling and Servicing
Agreement"), in all material respects relevant hereto substantially in the form
of Exhibit 4.1 to the Registration Statement, among Chase Mortgage Finance
Corporation (the "Company"), 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 the Company, 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 the Company, the Servicer and the Trustee for such series, such
Pooling and Servicing Agreement will be a legal and valid obligation of the
Company; and
<PAGE>
Chase Mortgage Finance Corporation
June 4, 1998
Page 2
2. When a Pooling and Servicing Agreement for a series of Certificates has been
duly authorized by all necessary action and duly executed and delivered by the
Company, 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 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>
[LOGO]
101 Park Avenue
New York, NY 10178-0060
212-309-6000
Fax: 212-309-6273
June 4, 1998
Chase Mortgage Finance Corporation
343 Thornall Street
Edison, NJ 08837
Ladies and Gentlemen:
We have acted as your counsel in connection with the Registration Statement on
Form S-3 (the "Registration Statement") filed with the Securities and Exchange
Commission on June 4, 1998, pursuant to the Securities Act of 1933, as amended
(the "Act") in respect of Pass-Through Certificates ("Certificates") that you
plan to offer in series. Our advice formed the basis for the discussion of
federal income tax consequences appearing in the Registration Statement under
the heading "Federal Income Tax Consequences." Such discussion does not purport
to deal with all possible federal income tax consequences of an investment in
Certificates, but with respect to those tax consequences which are discussed, in
our opinion, the discussion is a fair and accurate summary of the matters
addressed therein under existing law and the assumptions stated therein.
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.
The opinion set forth herein has no binding effect. 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.
<PAGE>
Chase Mortgage Finance Corporation
June 4, 1998
Page 2
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
