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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 29, 1996
First Alliance Morgage Loan Trust 1996-1
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(Exact name of registrant as specified in its charter)
Delaware 33-91148 Application Pending
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation File Number) Identification No.)
c/o Prudential Securities 10292
Secured Financing -----------------------
Corporation (Zip Code)
Attention: Norman Chaleff
One New York Plaza
New York, New York
(Address of Principal)
Executive Offices
Registrant's telephone number, including area code (212) 778-1000
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No Change
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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In connection with the offering of Mortgage Pass-Through Certificates,
Series 1996-1, described in a Prospectus Supplement dated as of March 28, 1996,
certain "Computational Materials" within the meanings of the May 20, 1994
Kidder, Peabody No-Action Letter and the February 17, 1995 Public Securities
Association No-Action Letter were furnished to certain propsective investors
(the "Related Computational Materials").
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Not applicable
(b) Not applicable
(c) Exhibit 99.1 Related Computational Materials (as defined in Item 5
above.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-1
By: Prudential Securities Secured Financing
Corporation, as Depositor
By: /s/Norman Chaleff
---------------------------
Name: NORMAN CHALEFF
Title: Vice President
Dated: April 2, 1996
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FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-1
MORTGAGE LOAN ASSET BACKED CERTIFICATES
SERIES 1996-1
UNDERWRITING AGREEMENT
March 28, 1996
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One Seaport Plaza
New York, New York 10292
March 28, 1996
Dear Sirs:
Prudential Securities Secured Financing Corporation (the
"Depositor") proposes, subject to the terms and conditions stated herein and in
the attached Underwriting Agreement Standard Provisions, dated March 28, 1996
(the "Standard Provisions"), between the Depositor and Prudential Securities
Incorporated, to issue and sell to you (the "Underwriter") the Securities
specified in Schedule I hereto (the "Offered Securities"). The Depositor agrees
that each of the provisions of the Standard Provisions is incorporated herein by
reference in its entirety, and shall be deemed to be a part of this Agreement to
the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Underwriting Agreement. Each
reference to the Representative herein and in the provisions of the Standard
Provisions so incorporated by reference shall be deemed to refer to you. Unless
otherwise defined herein, terms defined in the Standard Provisions are used
herein as therein defined. The Prospectus Supplement and the accompanying
Prospectus relating to the Offered Securities (together, the "Prospectus") are
incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to issue and sell to the Underwriter, and the Underwriter agrees to purchase
from the Depositor, at the time and place and at the purchase price to the
Underwriter and in the manner set forth in Schedule I hereto, the entire
original principal balance of the Offered Securities.
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If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon acceptance hereof
by you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: s/ Norm Chaleff
------------------------
Name: Norm Chaleff
Title: Vice-President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: s/ Norm Chaleff
---------------------------
Name: Norm Chaleff
Title: Managing Director
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SCHEDULE I
Title of Offered
Securities: First Alliance Mortgage Loan Trust,
Mortgage Loan Asset-Backed
Certificates, Series 1996-1, Class
A-1 and Class A-2 (together, the
"Class A Certificates.")
Terms of Offered
Securities: The Offered Securities shall have
the terms set forth in the
Prospectus and shall conform in all
material respects to the descrip-
tions thereof contained therein, and
shall be issued pursuant to a
Pooling and Servicing Agreement to
be dated as of the Closing Date
among the Depositor, First Alliance
Mortgage Company, as servicer, and
Bankers Trust Company of California,
N.A., as trustee.
Purchase Price: The purchase price for the Class A-1
Certificates shall be 99.60000% of
the aggregate principal balance of
the Class A-1 Certificates as of the
Closing Date, plus accrued interest
at the rate of 7.34% per annum from
March 1, 1996 to the date of payment
thereof. The purchase price for the
Class A-2 Certificates shall be
99.60000% of the aggregate principal
balance of the Class A-2
Certificates as of the Closing Date,
plus accrued interest at the initial
rate of 5.82% per annum from March
1, 1996 to the date of payment
thereof.
Specified funds for
payment of
Purchase Price: Federal Funds (immediately available
funds).
Required Rating: Aaa by Moody's Investors Service,
Inc.
AAA by Standard & Poor's Corporation
Closing Date: On or about March 29, 1996 at 11:00
A.M. eastern standard time or at
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such other time as the Depositor and
the Underwriter shall agree.
Closing Location: Offices of Dewey Ballantine, 1301
Avenue of the Americas, New York,
New York.
Name of Representative: Prudential Securities Incorporated
Address for Notices,
etc.: One Seaport Plaza
New York, New York 10292
Attn: Norman Chaleff.
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
March 29, 1996
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the Underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell
pursuant to the applicable Underwriting Agreement to the several Underwriters
named therein mortgage pass-through certificates (the "Securities") representing
beneficial ownership interests in a trust, the trust property of which consists
of a pool of Mortgage Loans and certain related property. The Securities will be
issued pursuant to a pooling and servicing agreement (the "Pooling and Servicing
Agreement") by and among the Depositor, First Alliance Mortgage Company (the
"Servicer") and Bankers Trust Company of California, N.A., as trustee (the
"Trustee").
The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Pooling and
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Servicing Agreement identified in such Underwriting Agreement. The Securities
which are the subject of any particular Underwriting Agreement into which this
Agreement is incorporated are herein referred to as the "Offered Securities."
The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
33-91148), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Basic Prospectus" means the prospectus
included in the Registration Statement. The term "Prospectus" means the Basic
Prospectus together with the prospectus supplement specifically relating to the
Offered Securities, as first filed with the Commission pursuant to Rule 424. The
term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Offered Securities together with the Basic
Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities.
Unless otherwise specified in the Underwriting Agreement, payment for the
Offered Securities shall be made by certified or official bank check or checks
payable to the order of the Depositor in immediately available or next day
funds, at the time and place set forth in the Underwriting Agreement, upon
delivery to the Representative for the respective accounts of the several
Underwriters of the Offered Securities registered in definitive form and in such
names and in such denominations as the Representative shall request in writing
not less than five full business days prior to the date of delivery. The time
and date of such payment and delivery with respect to the Offered Securities are
herein referred to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
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Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required
to be made by or on behalf of the Depositor under the 1933 Act
and the Securities Exchange Act of 1934, as amended (the "1934
Act") prior to the sale of the Offered Securities shall have
been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings
for such purpose shall be pending before or threatened by the
Commission, or by any authority administering any state
securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall
have been complied with to the Representative's reasonable
satisfaction, (iv) since the respective dates as of which
information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall
have been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Depositor; (v) there
are no material actions, suits or proceedings pending before
any court or governmental agency, authority or body or
threatened, affecting the Depositor or the transactions
contemplated by the Underwriting Agreement; (vi) the Depositor
is not in violation of its charter or its by-laws or in
default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its
properties may be bound, which violations or defaults
separately or in the aggregate would have a material adverse
effect on the Depositor; and (vii) the Representative shall
have received, on the Closing Date a certificate, dated the
Closing Date and signed by an executive officer of the
Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at
or prior to the Closing Date, trading in securities on the New
York Stock Exchange shall have been suspended or any material
limitation in trading in securities
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generally shall have been established on such exchange, or a
banking moratorium shall have been declared by New York or
United States authorities; (ii) if at or prior to the Closing
Date, there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power,
or of any other insurrection or armed conflict involving the
United States which results in the declaration of a national
emergency or war, and, in the reasonable opinion of the
Representative, makes it impracticable or inadvisable to offer
or sell the Offered Securities or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking
activities in New York shall have been declared by either
Federal or New York State authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an
executive officer of the Depositor to the effect that attached
thereto is a true and correct copy of the letter from each
nationally recognized statistical rating organization (as that
term is defined by the Commission for purposes of Rule
436(g)(2) under the 1933 Act) that rated the Offered
Securities and confirming that, unless otherwise specified in
the Underwriting Agreement, the Offered Securities have been
rated in the highest rating categories by each such
organization and that each such rating has not been rescinded
since the date of the applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, special counsel for the
Depositor, dated the Closing Date, in form and substance
satisfactory to the Representative and containing opinions
substantially to the effect set forth in Exhibit A hereto.
(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Servicer, dated the
Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters and containing
opinions substantially to the effect set forth in Exhibit B
hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Trustee, dated the Closing
Date, in form and substance satisfactory to the Representative
and counsel for the Underwriters and containing
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opinions substantially to the effect set forth in Exhibit C
hereto.
(h) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, counsel for the
Underwriters, dated the Closing Date, with respect to the
incorporation of the Depositor, the validity of the Offered
Securities, the Registration Statement, the Prospectus and
other related matters as the Underwriters may reasonably
require, and the Depositor shall have furnished to such
counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(i) The Representative shall have received, on or prior to the
date of first use of the prospectus supplement relating to the
Offered Securities, and on the Closing Date if requested by
the Representative, letters of independent accountants of the
Depositor in the form and reflecting the performance of the
procedures previously requested by the Representative.
(j) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a
certificate of an executive officer of the Depositor
satisfactory to the Representative as to the accuracy of the
representations and warranties of the Depositor herein at and
as of such Closing Date as if made as of such date, as to the
performance by the Depositor of all of its obligations
hereunder to be performed at or prior to such Closing Date,
and as to such other matters as the Representative may
reasonably request;
(k) The Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a
certificate of officers of such Servicer in form and substance
reasonably satisfactory to the Representative;
(l) The Certificate Insurance Policies shall have been duly
executed and issued at or prior to the Closing Date and shall
conform in all material respects to the description thereof in
the Prospectus Supplement.
(m) The Representative shall have received, on the Closing
Date, an opinion of counsel to MBIA Insurance Corporation
("the Certificate Insurer"), dated the Closing Date, in form
and substance satisfactory to the Representative and counsel
for
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the Underwriters and containing opinions substantially to the
effect set forth in Exhibit D hereto.
(n) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given
of (i) any intended or potential downgrading or (ii) any
review or possible change in rating the direction of which has
not been indicated, in the rating accorded the Certificate
Insurer's claims paying ability by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act.
(o) There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since
December 31, 1993, of the Certificate Insurer, that is in the
Representative's judgment material and adverse and that makes
it in the Representative's judgment impracticable to market
the Offered Securities on the terms and in the manner
contemplated in the Prospectus.
(p) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by the
President, a senior vice president or a vice president of the
Certificate Insurer to the effect that the signer of such
certificate has carefully examined the Certificate Insurance
Policies, the Indemnification Agreement dated the Closing Date
(the "Indemnification Agreement") among the Servicer, the
Underwriter, the Depositor and the Certificate Insurer and the
related documents and that, to the best of his or her
knowledge based on reasonable investigation:
(i) there are no actions, suits or proceedings pending or
threatened against or affecting the Certificate Insurer which,
if adversely determined, individually or in the aggregate,
would adversely affect the Certificate Insurer's performance
under the Certificate Insurance Policies or the
Indemnification Agreement;
(ii) each person who as an officer or representative of the
Certificate Insurer, signed or signs the Certificate Insurance
Policies, the Indemnification Agreement or any other document
delivered pursuant hereto, on the date thereof, or on the
Closing Date, in connection with the
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transactions described in this Agreement was, at the
respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such
officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures;
(iii) the information contained in the Prospectus under the
caption "THE CERTIFICATE INSURANCE POLICIES AND THE
CERTIFICATE INSURER" is true and correct in all material
respects and does not omit to state a material fact with
respect to the description of the Certificate Insurance
Policies or the ability of the Certificate Insurer to meet its
payment obligations under the Certificate Insurance Policies;
(iv) the tables regarding the Certificate Insurer's
capitalization set forth under the heading "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER" present fairly
the capitalization of the Certificate Insurer as of September
30, 1995;
(v) on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (i) any intended
or potential downgrading or (ii) any review or possible
changes in rating the direction of which has not been
indicated, in the rating accorded the claims paying ability of
the Certificate Insurer by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act;
(vi) the audited balance sheet of the Certificate Insurer as
of December 31, 1994 and the related statement of income and
retained earnings for the fiscal year then ended, and the
accompanying footnotes, together with an opinion thereon dated
Deloitte & Touche, independent certificated public
accountants, copies of which are included in the Prospectus,
fairly present in all material respects the financial
condition of the Certificate Insurer as of such date and for
the period covered by such statements in accordance with
generally accepted accounting principles consistently applied.
(vii) to the best knowledge of such officer, since December
31, 1994, no material adverse change has occurred in the
financial position of the Certificate Insurer other than as
set forth in the Prospectus.
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The officer of the Certificate Insurer certifying to items
(v)-(vii) shall be an officer in charge of a principal
financial function. The Certificate Insurer shall attach to
such certificate a true and correct copy of its certificate or
articles of incorporation, as appropriate, and its bylaws, all
of which are in full force and effect on the date of such
certificate.
(q) The Representative shall have been furnished such further
information, certificates, documents and opinions as the
Representative may reasonably request.
5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto
including exhibits and as many copies of the Prospectus and
any supplements and amendments thereto as the Representative
may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement
setting forth the principal amount, notional amount or stated
amount, as applicable, of Offered Securities covered thereby,
the price at which the Offered Securities are to be purchased
by the Underwriters from the Depositor, either the initial
public offering price or prices or the method by which the
price or prices at which the Offered Securities are to be sold
will be determined, the selling concessions and reallowances,
if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem
appropriate in connection with the offering of the Offered
Securities, but the Depositor will not file any amendment to
the Registration Statement or any supplement to the Prospectus
of which the Representative shall not previously have been
advised and furnished with a copy a reasonable time prior to
the proposed filing or to which the Representative shall have
reasonably objected. The Depositor will use its best efforts
to cause any amendment to the Registration Statement to become
effective as promptly as possible. During the time when a
Prospectus is required to be delivered under the 1933 Act, the
Depositor will comply so far as
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it is able with all requirements imposed upon it by the 1933
Act and the rules and regulations thereunder to the extent
necessary to permit the continuance of sales or of dealings in
the Offered Securities in accordance with the provisions
hereof and of the Prospectus, and the Depositor will prepare
and file with the Commission, promptly upon request by the
Representative, any amendments to the Registration Statement
or supplements to the Prospectus which may be necessary or
advisable in connection with the distribution of the Offered
Securities by the Underwriters, and will use its best efforts
to cause the same to become effective as promptly as possible.
The Depositor will advise the Representative, promptly after
it receives notice thereof, of the time when any amendment to
the Registration Statement or any amended Registration
Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed. The
Depositor will advise the Representative, promptly after it
receives notice or obtains knowledge thereof, of the issuance
by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus
or the Prospectus, or the suspension of the qualification of
the Offered Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose, or of any request made by the
Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional
information, and the Depositor will use its best efforts to
prevent the issuance of any such stop order or any order
suspending any such qualification, and if any such order is
issued, to obtain the lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any
event occurs as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of
a material fact, or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary for any other
reason to amend or supplement the Prospectus to comply with
the 1933 Act, to promptly notify the Representative thereof
and upon their request to prepare and file with the
Commission, at the
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Depositor's own expense, an amendment or supplement which will
correct such statement or omission or any amendment which will
effect such compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered
Securities pursuant to the Underwriting Agreement, the
Depositor will file, on a timely and complete basis, all
documents that are required to be filed by the Depositor with
the Commission pursuant to Sections 13, 14, or 15(d) of the
1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all
expenses (including fees and disbursements of counsel) in
connection with such qualification of the eligibility of the
Offered Securities for investment under the laws of such
jurisdictions as the Representative may designate provided
that in connection therewith the Depositor shall not be
required to qualify to do business or to file a general
consent to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later
than eighteen months after the date on which the filing of the
Prospectus, as amended or supplemented, pursuant to Rule 424
under the 1933 Act first occurs, an earnings statement of the
Depositor covering a twelve-month period beginning after the
date of the Underwriting Agreement, which shall satisfy the
provisions of Section 11(a) of the 1933 Act and the applicable
rules and regulations of the Commission thereunder (including
at the option of the Depositor Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in
writing copies of such financial statements and other periodic
and special reports as the Depositor may from time to time
distribute generally to its creditors or the holders of the
Offered Securities and to furnish to the Representative copies
of each annual or other report the Depositor shall be required
to file with the Commission.
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(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer
to, furnish to the Representative, as soon as available, a
copy of (i) the annual statement of compliance delivered by
the Servicer to the Trustee under the applicable Pooling and
Servicing Agreement, (ii) the annual independent public
accountants' servicing report furnished to the Trustee
pursuant to the applicable Pooling and Servicing Agreement,
(iii) each report regarding the Offered Securities mailed to
the holders of such Securities, and (iv) from time to time,
such other information concerning such Securities as the
Representative may reasonably request.
6. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and agrees with, each Underwriter, as of
the date of the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time
in accordance with Rule 415 under the 1933 Act has been filed
with the Commission and such Registration Statement, as
amended to the date of the Underwriting Agreement, has become
effective. No stop order suspending the effectiveness of such
Registration Statement has been issued and no proceeding for
that purpose has been initiated or threatened by the
Commission. A prospectus supplement specifically relating to
the Offered Securities will be filed with the Commission
pursuant to Rule 424 under the 1933 Act; provided, however,
that a supplement to the Prospectus prepared pursuant to
Section 5(b) hereof shall be deemed to have supplemented the
Basic Prospectus only with respect to the Offered Securities
to which it relates. The conditions to the use of a
registration statement on Form S-3 under the 1933 Act, as set
forth in the General Instructions on Form S-3, and the
conditions of Rule 415 under the 1933 Act, have been satisfied
with respect to the Depositor and the Registration Statement.
There are no contracts or documents of the Depositor that are
required to be filed as exhibits to the Registration Statement
pursuant to the 1933 Act or the rules and regulations
thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic
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Prospectus conformed in all material respects to the
requirements of the 1933 Act and the rules and regulations
thereunder, and did not include 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; on the date of the Underwriting Agreement and
as of the Closing Date, the Registration Statement and the
Prospectus conform, and as amended or supplemented, if
applicable, will conform in all material respects to the
requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of the Underwriting Agreement and
as of the Closing Date, neither of such documents includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and neither of
such documents as amended or supplemented, if applicable, will
include 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;
provided, however, that the foregoing does not apply to
statements or omissions in any of such documents based upon
written information furnished to the Depositor by any
Underwriter specifically for use therein.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except
as otherwise stated therein, there has been no material
adverse change in the condition, financial or otherwise,
earnings, affairs, regulatory situation or business prospects
of the Depositor, whether or not arising in the ordinary
course of the business of the Depositor.
(d) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Delaware.
(e) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations,
approvals, order, licenses, certificates and permits of and
from all government or regulatory officials and bodies to own
its properties, to conduct its business as described in the
Registration Statement and the Prospectus and to execute,
deliver and perform this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and, if
applicable, the Custodial Agreement, except such as may be
required under
17
<PAGE>
state securities or Blue Sky laws in connection with the
purchase and distribution by the Underwriter of the Offered
Securities; all such authorizations, approvals, orders,
licenses, certificates are in full force and effect and
contain no unduly burdensome provisions; and, except as set
forth or contemplated in the Registration Statement or the
Prospectus, there are no legal or governmental proceedings
pending or, to the best knowledge of the Depositor, threatened
that would result in a material modification, suspension or
revocation thereof.
(f) The Offered Securities have been duly authorized, and when
the Offered Securities are issued and delivered pursuant to
the Underwriting Agreement, the Offered Securities will have
been duly executed, issued and delivered and will be entitled
to the benefits provided by the applicable Pooling and
Servicing Agreement, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity
(regardless of whether the entitlement to such benefits is
considered in a proceeding in equity or at law), and will
conform in substance to the description thereof contained in
the Registration Statement and the Prospectus, and will in all
material respects be in the form contemplated by the Pooling
and Servicing Agreement.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement and the Pooling and
Servicing Agreement are within the corporate power of the
Depositor and neither the execution and delivery by the
Depositor of this Agreement, the Underwriting Agreement and
the Pooling and Servicing Agreement nor the consummation by
the Depositor of the transactions therein contemplated, nor
the compliance by the Depositor with the provisions thereof,
will conflict with or result in a breach of, or constitute a
default under, the charter or the by-laws of the Depositor or
any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Depositor
or its properties, or any of the provisions of any indenture,
mortgage, contract or other instrument to which the Depositor
is a party or by which it is bound, or will result in the
creation or imposition of a lien, charge or encumbrance upon
any of its property pursuant to the terms of any such
18
<PAGE>
indenture, mortgage, contract or other instrument, except such
as have been obtained under the 1933 Act 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 Offered
Securities by the Underwriters.
(h) The Underwriting Agreement has been, and at the Closing
Date the Pooling and Servicing Agreement will have been, duly
authorized, executed and delivered by the Depositor.
(i) At the Closing Date, each of the Underwriting Agreement
and the Pooling and Servicing Agreement will constitute a
legal, valid and binding obligation of the Depositor,
enforceable against the Depositor, in accordance with its
terms, subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting the rights of creditors generally,
and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other
action of, any court or governmental authority or agency is
required for the consummation by the Depositor of the
transactions contemplated by the Underwriting Agreement or the
Pooling and Servicing Agreement, except such as have been
obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities
or "Blue Sky" laws, in connection with the purchase and
distribution of the Offered Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease, own or
license, as the case may be, and to operate, its properties
and to carry on its business as presently conducted and has
received no notice of proceedings relating to the revocation
of any such license, permit, consent, order or approval, which
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially adversely affect
the conduct of the business,
19
<PAGE>
results of operations, net worth or condition (financial or
otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to
which the Depositor is a party or of which any property of the
Depositor is the subject which, if determined adversely to the
Depositor would individually or in the aggregate have a
material adverse effect on the condition (financial or
otherwise), earnings, affairs, or business or business
prospects of the Depositor and, to the best of the Depositor's
knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section
3(a)(41) of the 1934 Act.
(n) At the Closing Date, each of the Mortgage Loans which is a
subject of the Pooling and Servicing Agreement and all such
Mortgage Loans in the aggregate will meet the criteria for
selection described in the Prospectus, and at the Closing
Date, the representations and warranties made by the Depositor
in such Pooling and Servicing Agreement will be true and
correct as of such date.
(o) At the time of execution and delivery of the Pooling and
Servicing Agreement, the Depositor will have good and
marketable title to the Mortgage Loans being transferred to
the Trustee pursuant to the Pooling and Servicing Agreement,
free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest
(collectively "Liens"), and will not have assigned to any
person any of its right, title or interest in such Mortgage
Loans or in such Pooling and Servicing Agreement or the
Offered Securities being issued pursuant thereto, the
Depositor will have the power and authority to transfer such
Mortgage Loans to the Trustee and to transfer the Offered
Securities to each of the Underwriters, and, upon execution
and delivery to the Trustee of the Pooling and Servicing
Agreement and delivery to each of the Underwriters of the
Offered Securities, the Trustee will have good and marketable
title to the Mortgage Loans and each of the Underwriters will
have good and marketable title to the Offered Securities, in
each case free and clear of any Liens.
20
<PAGE>
(p) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended,
and the Trust Fund (as defined in the Pooling and Servicing
Agreement) is not required to be registered under the
Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, this Agreement, the Pooling and
Servicing Agreement and the Offered Securities have been or
will be paid at
or prior to the Closing Date.
7. Indemnification and Contribution.
(a) The Depositor agrees to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated
acting in its capacity as Representative and as one of the
Underwriters), 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 any untrue statement
or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
will reimburse each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Depositor
will 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 any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in
conformity with (1) written information furnished to the
Depositor by any Underwriter through the Representative
specifically for use therein or (2) information regarding the
21
<PAGE>
Mortgage Loans except to the extent that the Depositor has
been indemnified by the Servicer. This indemnity agreement
will be in addition to any liability which the Depositor may
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the
Depositor's officers who signed the Registration Statement and
each person, if any, who controls the Depositor, within the
meaning of the 1933 Act, against any losses, claims, damages
or liabilities to which the Depositor, or any such director,
officer 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 any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any other prospectus
relating to the Offered Securities, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue
statements or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with
written information furnished to the Depositor by any
Underwriter through the Representative specifically for use
therein; and each Underwriter will reimburse any legal or
other expenses reasonably incurred by the Depositor or any
such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise
have. The Depositor acknowledges that the statements set forth
under the caption "Plan of Distribution" in the Prospectus
Supplement constitute the only information furnished to the
Depositor by or on behalf of any Underwriter for use in the
Registration Statement, any Preliminary Prospectus or the
Prospectus, and each of the several Underwriters represents
and warrants that such statements are correct as to it.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such
indemnified party will, if a
22
<PAGE>
claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the
indemnifying party of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the
indemnifying party may have to any indemnified party hereunder
except to the extent such indemnifying party has been
prejudiced thereby. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel
satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 7
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however,
that the Representative shall have the right to employ
separate counsel to represent the Representative, those other
Underwriters and their respective controlling persons who may
be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the
Depositor under this Section 7 if, in the reasonable judgment
of the Representative, it is advisable for the Representative
and those Underwriters and controlling persons to be
represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the
Depositor (it being understood, however, that the Depositor
shall not, in connection with any one such claim or separate
but substantially similar or related claim in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys at any time for
the Representative and those Underwriters and controlling
persons).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in
the preceding parts of this Section 7 is for any reason held
to be unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b)
23
<PAGE>
above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then the
indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect
thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation. In determining the amount of contribution
to which the respective parties are entitled, there shall be
considered the relative benefits received by the Depositor on
the one hand, and the Underwriters on the other, from the
offering of the Offered Securities (taking into account the
portion of the proceeds of the offering realized by each), the
Depositor's and the Underwriters' relative knowledge and
access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and
prevent any statement or omission, and any other equitable
considerations appropriate in the circumstances. The Depositor
and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or
per capita allocation (even if the Underwriters were treated
as one entity for such purpose). No Underwriter or person
controlling such Underwriter shall be obligated to make
contribution hereunder which in the aggregate exceeds the
total public offering price of the Offered Securities
purchased by such Underwriter under the Underwriting
Agreement, less the aggregate amount of any damages which such
Underwriter and its controlling persons have otherwise been
required to pay in respect of the same or any substantially
similar claim. The Underwriters' obligation to contribute
hereunder are several in proportion to their respective
underwriting obligations and not joint. For purposes of this
Section 7, each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act shall have
the same rights to contribution as such Underwriter, and each
director of the Depositor, each officer of the Depositor who
signed the Registration Statement, and each person, if any,
who controls the Depositor within the meaning of Section 15 of
the 1933 Act, shall have the same rights to contribution as
the Depositor.
24
<PAGE>
(e) The parties hereto agree that the first sentence of
Section 5 of the Indemnification Agreement (the
"Indemnification Agreement") dated as of the Closing Date
among the Certificate Insurer, the Servicer, the Depositor and
the Underwriter shall not be construed as limiting the
Depositor's right to enforce its rights under Section 7 of
this Agreement. The parties further agree that, as between the
parties hereto, to the extent that the provisions of Section
4, 5 and 6 of the Indemnification Agreement conflict with
Section 7 hereof, the provisions of Section 7 hereof shall
govern.
(f) Each Underwriter agrees to provide the Depositor no later
the date on which the Prospectus Supplement is required to be
filed pursuant to Rule 424 with a copy of its Derived
Information (defined below) for filing with the Commission on
Form 8-K.
(g) Each Underwriter severally agrees, assuming all
Depositor-Provided Information (defined below) is accurate and
complete in all material respects, to indemnify and hold
harmless the Depositor, its respective officers and directors
and each person who controls the Depositor within the meaning
of the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement of a material
fact contained in the Derived Information provided by such
Underwriter, 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 the light of the circumstances under which they were made,
not misleading, and agrees to reimburse each such indemnified
party for any legal or other expenses reasonably incurred by
him, her or it in connection with investigating or defending
or preparing to defend any such loss, claim, damage, liability
or action as such expenses are incurred. The obligations of an
Underwriter under this Section 8(E) shall be in addition to
any liability which such Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally
applicable to this Section 8(E).
25
<PAGE>
For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section 8(D) for filing with the Commission on Form 8-K as: (i) is
not contained in the Prospectus without taking into account information
incorporated therein by reference; and (ii) does not constitute
Depositor-Provided Information. "Depositor- Provided Information" means any
computer tape furnished to the Underwriter by the Depositor concerning the
assets comprising the Trust.
8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor, its officers and the several Underwriters set
forth in, or made pursuant to, the Underwriting Agreement shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
9. Termination.
(a) The Underwriting Agreement may be terminated by the
Depositor by notice to the Representative in the event that a
stop order suspending the effectiveness of the Registration
Statement shall have been issued or proceedings for that
purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that
the Depositor shall have failed, refused or been unable to
perform all obligations and satisfy all conditions to be
performed or satisfied hereunder by the Depositor at or prior
to the Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other
party other than as provided in Sections 7 and 11 hereof.
10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it agreed to purchase under the Underwriting Agreement and the
aggregate principal amount of the Offered Securities which such defaulting
Underwriter agreed but failed to purchase is ten percent or less of the
aggregate principal amount, notional amount or stated amount, as applicable, of
the Offered Securities to be sold under the
26
<PAGE>
Underwriting Agreement, as the case may be, the other Underwriters shall be
obligated severally in proportion to their respective commitments under the
Underwriting Agreement to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
11. Expenses. The Depositor agrees with the
several Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting
Agreement is terminated, the Depositor will pay all fees and
expenses incident to the performance of its obligations under
the Underwriting Agreement, including, but not limited to, (i)
the Commission's registration fee, (ii) the expenses of
printing and distributing the Underwriting Agreement and any
related underwriting documents, the Registration Statement,
any Preliminary Prospectus, the Prospectus, any amendments or
supplements to the Registration Statement or the Prospectus,
and any Blue Sky memorandum or legal investment survey and any
supplements thereto, (iii) fees and expenses of rating
agencies, accountants and counsel for the Depositor, (iv) the
expenses referred to in Section 5(e) hereof, and (v) all
miscellaneous expenses referred to in Item 30 of the
Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the
Underwriters in connection with investigating, preparing to
market and marketing
27
<PAGE>
the Offered Securities and proposing to purchase and
purchasing the Offered Securities under the Underwriting
Agreement will be borne and paid by the Depositor if the
Underwriting Agreement is terminated by the Depositor pursuant
to Section 9(a) hereof or by the Representative on account of
the failure, refusal or inability on the part of the Depositor
to perform all obligations and satisfy all conditions on the
part of the Depositor to be performed or satisfied hereunder;
and
(c) the Depositor will pay the cost of preparing the
certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
12. Notices. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Representative at the address and
to the attention of the person specified in the Underwriting Agreement, and, if
sent to the Depositor, shall be mailed, delivered or telegraphed and confirmed
to Prudential Securities Secured Financing Corporation, 199 Water Street, 26th
Floor, New York, New York 10292, Attention: Director- Mortgage Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
13. Representative of Underwriters. Any Represen- tative
identified in the Underwriting Agreement will act for the Underwriters of the
Offered Securities and any action taken by the Representative under the
Underwriting Agreement will be binding upon all of such Underwriters.
14. Successors. The Underwriting Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters and the Depositor
and their respective successors and legal representatives, and nothing expressed
or mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and
28
<PAGE>
exclusive benefit of such persons and for the benefit of no other person except
that (i) the representations and warranties of the Depositor contained herein or
in the Underwriting Agreement shall also be for the benefit of any person or
persons who controls or control any Underwriter within the meaning of Section 15
of the 1933 Act, and (ii) the indemnities by the several Underwriters shall also
be for the benefit of the directors of the Depositor, the officers of the
Depositor who have signed the Registration Statement and any person or persons
who control the Depositor within the meaning of Section 15 of the 1933 Act. No
purchaser of the Offered Securities from any Underwriter shall be deemed a
successor because of such purchase. This Agreement and each Underwriting
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. This Agreement and each Underwriting
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
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<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return two counterparts hereof.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: s/ Norm Chaleff
---------------------------
Name: Norm Chaleff
Title: Vice-President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: s/ Norm Chaleff
---------------------------
Name: Norm Chaleff
Title: Managing Director
[Underwriting Agreement Signature Page]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine,
special counsel for the Depositor
---------------------------------
(i) Each of the Documents constitutes the valid, legal
and binding agreement of the Depositor, and is enforceable against the Depositor
in accordance with its terms.
(ii) The Certificates, assuming the due execution by
the Trustee and due authentication by the Trustee and payment therefor pursuant
to the Underwriting Agreement, are validly issued and outstanding and are
entitled to the benefits of the Pooling and Servicing Agreement.
(iii) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Certificates or the consummation of any other
transaction contemplated thereby by the Depositor, except such which have been
obtained.
(iv) The Registration Statement and the Prospectus
(other than the financial and statistical data included therein, as to which we
are not called upon to express any opinion), at the time the Registration
Statement became effective, as of the date of execution of the Underwriting
Agreement and as of the date hereof comply as to form in all material respects
with the requirements of the Securities Act of 1933, as amended, and the rules
and regulations thereunder, and the Exchange Act and the rules and regulations
thereunder, and we do not know of any amendment to the Registration Statement
required to be filed, or of any contracts, indentures or other documents of a
character required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus, which
has not been filed or described as required.
(v) Neither the qualification of the Pooling and
Servicing Agreement under the Trust Indenture Act of 1939, as amended, nor the
registration of the Trust Fund created by the Pooling and Servicing Agreement
under the Investment Company Act of 1940 is required.
(vi) The statements in the Prospectus Supplement set
forth under the caption "DESCRIPTION OF THE OFFERED CERTIFICATES," to the extent
such statements purport
<PAGE>
to summarize certain provisions of the Certificates or of the Pooling and
Servicing Agreement or of the Unaffiliated Seller's Agreement, are fair and
accurate in all material respects.
A-2
<PAGE>
Exhibit B
Opinions of Counsel to
the Servicer
------------
(i) The Servicer has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
California and is qualified to transact business in the State of California.
(ii) The Servicer has the requisite power and authority
to execute and deliver, engage in the transactions contemplated by, and perform
and observe the conditions of, the Pooling and Servicing Agreement, the
Unaffiliated Seller's Agreement dated as of the Closing Date (the "Unaffiliated
Seller's Agreement") between the Servicer and the Depositor, collectively
referred to hereinafter as the "Servicer Agreements".
(iii) The Servicer Agreements have been duly and
validly authorized, executed and delivered by the Servicer, all requisite
corporate action having been taken with respect thereto, and each constitutes
the valid, legal and binding agreement of the Servicer, and are enforceable
against the Servicer in accordance with their respective terms.
(iv) Neither the transfer of the Mortgage Loans to the
Depositor, nor the execution, delivery or performance by the Servicer of the
Servicer Agreements (A) conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default under or
violates or will violate, (i) any term or provision of the Articles of
Incorporation or By-laws of the Servicer; (ii) any term or provision of any
material agreement, contract, instrument or indenture, to which the Servicer or
any of its subsidiaries is a party or is bound; or (iii) any order, judgment,
writ, injunction or decree of any court or governmental agency or body or other
tribunal having jurisdiction over the Servicer or any of its properties; or (B)
results in, or will result in the creation or imposition of any lien, charge or
encumbrance upon the Trust Fund or upon the Certificates, except as otherwise
contemplated by the Pooling and Servicing Agreement.
(v) The endorsement and delivery of each Mortgage Note,
and the preparation, delivery and recording of an Assignment of Mortgage with
respect to each Mortgage is sufficient fully to transfer to the Depositor and
its assignees all right, title and interest of the Servicer in the
<PAGE>
Mortgage Note and Mortgage, as noteholder and mortgagee or assignee thereof.
(vi) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any courts, governmental
agency or body or other tribunal is required under the laws of New York or
California, for the execution, delivery and performance of the Servicer
Agreements or the consummation of any other transaction contemplated thereby by
the Servicer, except such which have been obtained.
(vii) There are no legal or governmental suits,
proceedings or investigations pending or, to such counsel's knowledge,
threatened against the Servicer before any court, governmental agency or body or
other tribunal (A) which, if determined adversely to the Servicer, would
individually or in the aggregate have a material adverse effect on (i) the
consolidated financial position, business prospects, stockholders's equity or
results of operations of the Servicer; (ii) the Servicer's ability to perform
its obligations under, or the validity or enforceability of the Servicer
Agreements; (iii) any Mortgage Note or Mortgaged Property, or the title of any
Mortgagor to any Mortgaged Property; or (B) which have not otherwise been
disclosed in the Registration Statement and to the best of such counsel's
knowledge, no such proceedings or investigations are threatened or contemplated
by governmental authorities or threatened by others.
B-2
<PAGE>
Exhibit C
Opinions of Counsel to
the Trustee
-----------
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States and has the power and authority to enter into and to take all actions
required of it under the Pooling and Servicing Agreement;
(ii) The Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the Pooling and Servicing
Agreement constitutes the legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, except as
enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the Trustee, and
(B) general principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity;
(iii) No consent, approval, authorization or other
action by any governmental agency or body or other tribunal is required on the
part of the Trustee in connection with its execution and delivery of the Pooling
and Servicing Agreement or the performance of its obligations thereunder;
(iv) The Certificates have been duly executed,
authenticated and delivered by the Trustee; and
(v) The execution and delivery of, and performance by
the Trustee of its obligations under, the Pooling and Servicing Agreement do not
conflict with or result in a violation of any statute or regulation applicable
to the Trustee, or the charter or bylaws of the Trustee, or to the best
knowledge of such counsel, any governmental authority having jurisdiction over
the Trustee or the terms of any indenture or other agreement or instrument to
which the Trustee is a party or by which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel
to the Certificate Insurer
--------------------------
(i) The Certificate Insurer is a stock insurance
corporation, duly incorporated and validly existing under the laws of the State
of New York. The Certificate Insurer is validly licensed and authorized to issue
the Certificate Insurance Policies and perform its obligations under the
Certificate Insurance Policies in accordance with the terms thereof, under the
laws of the State of New York.
(ii) The execution and delivery by the Certificate
Insurer of the Certificate Insurance Policies, and the Indemnification Agreement
are within the corporate power of the Certificate Insurer and has been
authorized by all necessary corporate action on the part of the Certificate
Insurer; the Certificate Insurance Policies has been duly executed and is the
valid and binding obligation of the Certificate Insurer enforceable in
accordance with its terms except that the enforcement of the Certificate
Insurance Policies may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity.
(iii) The Certificate Insurer is authorized to deliver
the Indemnification Agreement, and the Indemnification Agreement has been duly
executed and is the valid and binding obligation of the Certificate Insurer
enforceable in accordance with its terms except that the enforcement thereof may
be limited by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and by public policy
considerations relating to indemnification for securities law violations.
(iv) No consent, approval, authorization or order of
any state or federal court or governmental agency or body is required on the
part of the Certificate Insurer, the lack of which would adversely affect the
validity or enforceability of the Certificate Insurance Policies; to the extent
required by applicable legal requirements that would adversely affect validity
or enforceability of the Certificate Insurance Policies, the form of the
Certificate Insurance Policies has been filed with, and approved by, all
governmental authorities having jurisdiction over the Certificate Insurer in
connection with such Certificate Insurance Policies.
C-2
<PAGE>
(v) To the extent the Certificate Insurance Policies
constitutes a security within the meaning of Section 2(1) of the 1933 Act, it is
a security that is exempt from the registration requirements of the Act.
(vi) The information set forth under the caption "THE
CERTIFICATE INSURANCE POLICIES AND THE CERTIFICATE INSURER" in the Prospectus
insofar as such statements constitute a description of the Certificate Insurance
Policies, accurately summarizes the Certificate Insurance Policies.
C-3
<PAGE>
POOLING AND SERVICING AGREEMENT
Relating to
FIRST ALLIANCE MORTGAGE LOAN TRUST
1996-1
Among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor
FIRST ALLIANCE MORTGAGE COMPANY,
as Company
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
Dated as of March 1, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(Not a Part of this Agreement)
Page
<S> <C> <C>
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION 1
1.1. Definitions 1
1.2. Use of Words and Phrases 24
1.3. Captions; Table of Contents 24
1.4. Opinions 24
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST 25
2.1. Establishment of the Trust 25
2.2. Office 25
2.3. Purposes and Powers 25
2.4. Appointment of the Trustee; Declaration of Trust 25
2.5. Expenses of Trustee 25
2.6. Ownership of the Trust 25
2.7. Situs of the Trust 25
2.8. Miscellaneous REMIC Provisions 26
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
DEPOSITOR, THE COMPANY AND THE SERVICER; COVENANT OF
COMPANY TO CONVEY MORTGAGE LOANS 26
3.1A. Representations and Warranties of the Depositor 26
3.1B. Representations and Warranties of the Company 28
3.2. Representations and Warranties of the Servicer 31
3.3. Representations and Warranties of the Company with Respect to
the Mortgage Loans 33
3.4. Covenants of the Company to Take Certain Actions with Respect
to the Mortgage
Loans In Certain Situations 34
3.5. Conveyance of the Mortgage Loans 35
3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification
by Trustee 39
3.7. Cooperation Procedures 40
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES 40
4.1. Issuance of Certificates 40
4.2. Sale of Certificates 40
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS 41
5.1. Terms 41
5.2. Forms 41
5.3. Execution, Authentication and Delivery 41
5.4. Registration and Transfer of Certificates 42
5.5. Mutilated, Destroyed, Lost or Stolen Certificates 43
5.6. Persons Deemed Owners 44
5.7. Cancellation 44
5.8. Limitation on Transfer of Ownership Rights 44
5.9. Assignment of Rights 45
i
<PAGE>
Page
ARTICLE VI COVENANTS 45
6.1. Distributions 45
6.2. Money for Distributions to be Held in Trust; Withholding 45
6.3. Protection of Trust Estate 46
6.4. Performance of Obligations 46
6.5. Negative Covenants 47
6.6. No Other Powers 47
6.7. Limitation of Suits 47
6.8. Unconditional Rights of Owners to Receive Distributions 48
6.9. Rights and Remedies Cumulative 48
6.10. Delay or Omission Not Waiver 48
6.11. Control by Owners 48
6.12. Access to Owners of Certificates' Names and Addresses 49
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES 49
7.1. Collection of Money 49
7.2. Establishment of Accounts 49
7.3. The Certificate Insurance Policies 49
7.4 51
7.5. Flow of Funds 51
7.6. Investment of Accounts 53
7.7. Eligible Investments 54
7.8. Reports by Trustee 55
7.9. Additional Reports by Trustee 57
ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS 57
8.1. Servicer and Sub-Servicers 57
8.2. Collection of Certain Mortgage Loan Payments 58
8.3. Sub-Servicing Agreements Between Servicer and Sub-Servicers 59
8.4. Successor Sub-Servicers 59
8.5. Liability of Servicer 59
8.6. No Contractual Relationship Between Sub-Servicer and Trustee
or the Owner
8.7. Assumption or Termination of Sub-Servicing Agreement by Trustee 59
8.8. Principal and Interest Account 60
8.9. Delinquency Advances, Compensating Interest and Servicing Advances 61
8.10. Purchase of Mortgage Loans 62
8.11. Maintenance of Insurance 62
8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements 63
8.13. Realization Upon Defaulted Mortgage Loans 63
8.14. Trustee to Cooperate; Release of Files 64
8.15. Servicing Compensation 65
8.16. Annual Statement as to Compliance 66
8.17. Annual Independent Certified Public Accountants' Reports 66
8.18. Access to Certain Documentation and Information Regarding the
Mortgage Loans 66
8.19. Assignment of Agreement 66
8.20. Events of Servicing Termination 66
ii
<PAGE>
Page
8.21. Resignation of Servicer and Appointment of Successor 69
8.22. Waiver of Past Events of Servicing Termination 71
8.23. Inspections by Certificate Insurer; Errors and Omissions Insurance 72
8.24. Merger, Conversion, Consolidation or Succession to Business of Servicer 72
8.25. Notices of Material Events 72
8.26. Monthly Servicing Report and Servicing Certificate 73
8.27. Indemnification by the Company. 75
8.28. Indemnification by the Servicer 75
ARTICLE IX TERMINATION OF TRUST 75
9.1. Termination of Trust 75
9.2. Termination Upon Option of Servicer 76
9.3. Termination Upon Loss of REMIC Status 76
9.4. Disposition of Proceeds 78
9.5. Netting of Amounts 78
ARTICLE X THE TRUSTEE 78
10.1. Certain Duties and Responsibilities 78
10.2. Removal of Trustee for Cause 80
10.3. Certain Rights of the Trustee 81
10.4. Not Responsible for Recitals or Issuance of Certificates 82
10.5. May Hold Certificates 82
10.6. Money Held in Trust 82
10.7. No Lien for Fees 83
10.8. Corporate Trustee Required; Eligibility 83
10.9. Resignation and Removal; Appointment of Successor 83
10.10. Acceptance of Appointment by Successor Trustee 84
10.11. Merger, Conversion, Consolidation or Succession to Business of the Trustee 85
10.12. Reporting; Withholding 85
10.13. Liability of the Trustee 85
10.14. Appointment of Co-Trustee or Separate Trustee 85
ARTICLE XI MISCELLANEOUS 87
11.1. Compliance Certificates and Opinions 87
11.2. Form of Documents Delivered to the Trustee 87
11.3. Acts of Owners 88
11.4. Notices, etc. to Trustee 88
11.5. Notices and Reports to Owners; Waiver of Notices 88
11.6. Rules by Trustee and the Company 89
11.7. Successors and Assigns 89
11.8. Severability 89
11.9. Benefits of Agreement 89
11.10. Legal Holidays 89
11.11. Governing Law 89
11.12. Counterparts 89
11.13. Usury 90
11.14. Amendment 90
11.15. REMIC Status; Taxes 90
iii
<PAGE>
11.16. Additional Limitation on Action and Imposition of Tax 92
11.17. Appointment of Tax Matters Person 92
11.18. The Certificate Insurer 92
11.19. Maintenance of Records 93
11.20. Notices 93
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT B -- Mortgage Loan Schedule
EXHIBIT C -- Form of Class R Certificate
EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in full After the Cut-Off Date
EXHIBIT E -- Form of Initial Certification
EXHIBIT F -- Form of Final Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT I -- Form of Notice for Certificate Insurance Policy
EXHIBIT J -- Form of Monthly Report
EXHIBIT K -- Form of Request for Release
iv
<PAGE>
WHEREAS, the Depositor wishes to establish a trust and two
subtrusts, which provide for the allocation and sale of the beneficial interests
therein and the maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee, valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Bankers Trust Company of California, N.A. is willing
to serve in the capacity of Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Company, the Servicer and the Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": Any account established in accordance with Section
7.2 or 8.8 hereof.
"Agreement": This Pooling and Servicing Agreement, as it may
be amended from time to time, and including the Exhibits hereto.
"Appraised Value": The appraised value of any Property based
upon the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Agreement,
and whose action is binding upon such Person and, with respect to the Depositor,
the Company and the Servicer, initially including those individuals whose
<PAGE>
names appear on the lists of Authorized Officers delivered on the Startup Day,
and with respect to the Trustee, any Vice President, Assistant Vice President or
Assistant Secretary of the Trustee.
"Available Funds": With respect to Group I, the Group I
Available Funds and with respect to Group II, the Group II Available Funds.
"Available Funds Cap Carry-Forward Amortization Amount": As of
any Payment Date, any amount distributed from the Available Funds Cap
Carry-Forward Amount Account on such Payment Date pursuant to Section 7.5(e)
hereof.
"Available Funds Cap Carry-Forward Amount": As of any Payment
Date, the excess, if any, of (x) the sum of (i) the excess, if any, equal to (a)
the aggregate amount of interest due on the Class A-2 Certificates on all prior
Payment Dates, calculated at the Class A-2 Formula Pass-Through Rate applicable
to each such Payment Date over (b) the aggregate amount of interest due on the
Class A-2 Certificates on all prior Payment Dates, calculated at the Class A-2
Pass-Through Rate applicable to each such Payment Date, (ii) the amount, if any,
described in clause (iii) hereof as of the immediately preceding Payment Date
and (iii) the product of (a) one-twelfth of the Class A-2 Formula Pass-Through
Rate on such Payment Date and (b) the sum of the amounts described in clauses
(i) and (ii) preceding over (y) all Available Funds Cap Carry-Forward
Amortization Amounts actually funded on all prior Payment Dates.
"Available Funds Cap Carry-Forward Amount Account": The
Available Funds Cap Carry-Forward Amount Account established in accordance with
Section 7.2 hereof and maintained by the Trustee.
"Available Funds Shortfall": Any of the Group I Available
Funds Shortfall or the Group II Available Funds Shortfall.
"Balloon Loan": Any Mortgage Loan which has an amortization
schedule which extends beyond its maturity date, resulting in an unamortized
principal balance due in a single payment at maturity.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the States of New York and
California or in the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to be closed.
"Certificate": Any one of the Class A Certificates or the
Class R Certificates, each representing the interests and the rights described
in this Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee; provided that
the funds in such account shall not be commingled with any other funds held by
the Trustee.
"Certificate Insurance Policies": The Class A-1 Certificate
Insurance Policy and the Class A-2 Certificate Insurance Policy.
"Certificate Insurer": MBIA Insurance Corporation or any
successor thereto, as issuer of the Certificate Insurance Policies.
2
<PAGE>
"Certificate Principal Balance": As to the Class A-1
Certificates, the Class A-1 Certificate Principal Balance and as to the Class
A-2 Certificates, the Class A-2 Certificate Principal Balance. The Class R
Certificates do not have a "Certificate Principal Balance".
"Class": All of the Class A-1 Certificates, all of the Class
A-2 Certificates or all of the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates
or the Class A-2 Certificates.
"Class A Distribution Amount": Any of the Class A-1
Distribution Amount or the Class A-2 Distribution Amount.
"Class A-1 Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-1 Distribution
Amount as of the immediately preceding Payment Date exceeded (y) the amount of
the actual distribution made to the Owners of the Class A-1 Certificates on such
immediately preceding Payment Date and (ii) 30 days' interest on the interest
portion of such amount at the Class A-1 Pass-Through Rate.
"Class A-1 Certificate": Any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to distributions as set forth herein. The Class A-1
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-1 Certificate Insurance Policy": The certificate
guaranty insurance policy (number 20773) dated March 29, 1996 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-1 Certificates.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed on account of the Class A-1
Distribution Amount pursuant to Section 7.5(d)(iv)(B) hereof with respect to
principal thereon on all prior Payment Dates.
"Class A-1 Certificate Termination Date": The Payment Date on
which the Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to interest
accruing on or after the Cut-Off Date and as of any Payment Date, the aggregate
amount of interest accrued on the Class A-1 Certificate Principal Balance
immediately prior to such Payment Date during the related Interest Accrual
Period at the Class A-1 Pass-Through Rate.
"Class A-1 Distribution Amount": The sum of (x) the Group I
Principal Distribution Amount payable to the Owners of the Class A-1
Certificates pursuant to Section 7.5(d)(iv)(B) and (y) the Class A-1 Current
Interest.
"Class A-1 Pass-Through Rate": 7.34% per annum.
"Class A-2 Carry-Forward Amount": With respect to any Payment
Date, the sum of (i) the amount, if any, by which (x) the Class A-2 Distribution
Amount as of the immediately preceding Payment Date exceeded (y) the amount of
the actual distribution made to the Owners of the Class A-2
3
<PAGE>
Certificates on such immediately preceding Payment Date and (ii) 30 days'
interest on the interest portion of such amount at the Class A-2 Pass-Through
Rate.
"Class A-2 Certificate": Any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit A-2 hereto
representing the right to distributions as set forth herein. The Class A-2
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-2 Certificate Insurance Policy": The certificate
guaranty insurance policy (number 20774) dated March 29, 1996 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-2 Certificates.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less amounts actually distributed on account of the Class A-2
Distribution Amount pursuant to Section 7.5(d)(iv)(D) hereof made with respect
to principal thereon on all prior Payment Dates.
"Class A-2 Certificate Termination Date": The Payment Date on
which the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to interest
accruing on or after the Cut-Off Date and as of any Payment Date, the aggregate
amount of interest accrued on the Class A-2 Certificate Principal Balance
immediately prior to such Payment Date during the related Interest Accrual
Period at the Class A-2 Pass-Through Rate for such Payment Date.
"Class A-2 Distribution Amount": The sum of (x) the Group II
Principal Distribution Amount payable to the Owners of the Class A-2
Certificates pursuant to Section 7.5(d)(iv)(D) hereof and (y) the Class A-2
Current Interest.
"Class A-2 Formula Pass-Through Rate": As of any Payment Date,
the rate determined by clause (x) of the definition of Class A-2 Pass-Through
Rate.
"Class A-2 Pass-Through Rate": As of any Payment Date, the
lesser of (x) LIBOR plus, in the case of any Payment Date prior to the date on
which the outstanding aggregate Loan Balance of the Mortgage Loans in the Trust
has declined to 10% or less of the Original Aggregate Loan Balance, 0.38% per
annum, or in the case of any Payment Date thereafter, 0.76% per annum and (y)
the Group II Available Funds Cap for such Payment Date.
"Class R Certificate": Any of those Certificates representing
certain residual rights to distributions from the REMIC, designated as a "Class
R Certificate" on the face thereof, in the form of Exhibit C hereto and
evidencing an interest designated as the "residual interest" in the Trust for
purposes of the REMIC Provisions.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Combined Loan-to-Value Ratio": With respect to any First
Mortgage Loan, the percentage equal to the Original Principal Amount of the
related Note divided by the Appraised Value of the related Property and with
respect to any Second Mortgage Loan the percentage equal to (a) the sum of (i)
the remaining principal balance, as of origination of the Second Mortgage Loan
of the Senior Lien
4
<PAGE>
note(s) relating to such Second Mortgage Loan and (ii) the Original Principal
Amount of the Note relating to such Second Mortgage Loan divided by (b) the
Appraised Value.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Corporate Trust Office": The principal office of the Trustee
at 3 Park Plaza, 16th Floor, Irvine, California 92714, attention: First Alliance
Mortgage Loan Trust 1996-1 or any other office of the Trustee designated as such
hereunder.
"Coupon Rate": The rate of interest borne by each Note.
"Current Interest": As of any Payment Date, the sum of the
Class A-1 Current Interest and the Class A-2 Current Interest due on the related
Payment Date.
"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Remittance Period as part of a payment that is in
excess of the amount of the monthly payment due for such Remittance Period and
which is not a Paid-in-Full Mortgage Loan, nor is intended to cure a
delinquency.
"Cut-Off Date": March 1, 1996.
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "Delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "31 days Delinquent" if such payment has
not been received by the close of business on the second day of the month
immediately succeeding the month in which such payment was due. Similarly for
"61 days Delinquent," "91 days Delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as
Exhibit G hereto and delivered by the Company to the Trustee on the Startup Day
pursuant to Section 4.1 hereof.
"Depositor": Prudential Securities Secured Financing
Corporation, a Delaware corporation, and any successor thereto.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the
Principal and Interest Account or the Certificate Account, an institution whose
deposits are insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, the long-term deposits of which shall be rated (x) A
or better by Standard & Poor's and (y) A2 or better by Moody's and in one of the
highest short-term rating categories, unless otherwise approved in writing by
the Certificate Insurer and each of Moody's and Standard & Poor's, and which is
any of the following: (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Certificate Insurer, Moody's and Standard & Poor's and, in each
case acting or designated by the Servicer as the depository institution for the
Principal and Interest Account; provided, however, that any
5
<PAGE>
such institution or association shall have combined capital, surplus and
undivided profits of at least $100,000,000. Notwithstanding the foregoing, the
Principal and Interest Account or the Certificate Account may be held by (a) the
Trustee or (b) an institution otherwise meeting the preceding requirements
except that the only applicable rating requirement shall be that the unsecured
and uncollateralized debt obligations thereof shall be rated Baa3 or better by
Moody's if such institution has trust powers and the Principal and Interest
Account is held by such institution in its trust capacity and not in its
commercial capacity.
"Determination Date": As to each Remittance Date, the 12th day
of each month, or if such day is not a Business Day, the next succeeding
Business Day.
"Direct Participant" or "DTC Participant": Any broker-dealer,
bank or other financial institution for which the Depository holds Offered
Certificates from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall
have the meaning set forth from time to time in the definition thereof at
Section 860E(e)(5) of the Code (or any successor statute thereto) and applicable
to the Trust.
"Due Date": The first day of the month of the related Payment
Date.
"Due Period": With respect to any Payment Date, the period
commencing on the second day of the month preceding the month of such Payment
Date (or, with respect to the first Due Period, the day following the Cut-Off
Date) and ending on the related Due Date.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or (b)
of Section 8.20 hereof.
"Event of Servicing Termination": Any event as described in
Section 8.20 hereof.
"Excess Subordinated Amount": With respect to any Mortgage
Loan Group and Payment Date, the difference, if any, between (x) the
Subordinated Amount that would apply to the related Mortgage Loan Group on such
Payment Date after taking into account the payment of the related Class A
Distribution Amounts on such Payment Date (except for any distributions of
related Subordination Reduction Amounts on such Payment Date) and (y) the
related Specified Subordinated Amount for such Payment Date.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to
Section 3.5 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the mortgage file pursuant to this Agreement.
6
<PAGE>
"Final Certification": The final certification in the form set
forth as Exhibit F hereto and delivered by the Trustee to the Company within 90
days after the Startup Day pursuant to Section 3.6 hereof.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property.
"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Group I": The pool of Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group I, including
any Qualified Replacement Mortgages delivered in replacement thereof.
"Group I Amortized Subordinated Amount Requirement": As of any
date of determination, the product of (x) 2.25% and (y) the Group I Original
Aggregate Loan Balance.
"Group I Available Funds": As defined in Section 7.3(a)(i)
hereof.
"Group I Available Funds Shortfall": As defined in Section
7.5(d)(ii)(A).
"Group I Initial Specified Subordinated Amount": $105,000.00.
"Group I Insured Payment": As defined in the Class A-1
Certificate Insurance Policy.
"Group I Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all scheduled interest collected by
the Servicer during the related Due Period, with respect to the Mortgage Loans
in Group I, (ii) all Delinquency Advances relating to interest made by the
Servicer on such Remittance Date with respect to Group I and (iii) all
Compensating Interest paid by the Servicer on such Remittance Date with respect
to Group I.
"Group I Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group I Interest Remittance Amount for such Remittance
Date and (ii) the Group I Principal Remittance Amount for such Remittance Date.
"Group I Original Aggregate Loan Balance": The aggregate Loan
Balances of all Mortgage Loans in Group I as of the Cut-Off Date, i.e.,
$20,541,764.16.
"Group I Preference Amount": As defined in the Class A-1
Certificate Insurance Policy.
"Group I Premium Amount": As to any Payment Date beginning
with the third Payment Date, the product of (x) .0125% and (y) the Class A-1
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to be made to the Owners of the Class A-1
Certificates on such Payment Date).
"Group I Principal Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date, the lesser of:
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(x) the Group I Total Available Funds plus any Group I Insured
Payment minus the Class A-1 Current Interest for such Payment
Date; and
(y) the excess, if any, of (i) the sum, without duplication of:
(a) the Class A-1 Carry-Forward Amount,
(b) the principal portion of all scheduled monthly
payments on the Mortgage Loans in Group I due on
or prior to the related Due Date during the
related Due Period, to the extent actually
received by the Trustee on or prior to the
related Remittance Date or to the extent
advanced by the Servicer on or prior to the
related Remittance Date and any Prepayments made
by the respective Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage Loan in Group
I that either was repurchased by the Company or
an Originator or purchased by the Servicer on
the related Remittance Date, to the extent such
Loan Balance is actually received by the Trustee
on or prior to the related Remittance Date,
(d) any Substitution Amounts delivered by the
Company or an Originator on the related
Remittance Date in connection with a
substitution of a Mortgage Loan in Group I (to
the extent such Substitution Amounts relate to
principal), to the extent such Substitution
Amounts are actually received by the Trustee on
or prior to the related Remittance Date,
(e) all Net Liquidation Proceeds actually collected
by the Servicer with respect to the Mortgage
Loans in Group I during the related Remittance
Period (to the extent such Net Liquidation
Proceeds relate to principal) to the extent
actually received by the Trustee on or prior to
the related Remittance Date,
(f) the amount of any Group I Subordination Deficit
for such Payment Date,
(g) the proceeds received by the Trustee of any
termination as set forth in Article IX hereof of
Group I (to the extent such proceeds related to
principal), and
(h) the amount of any Subordination Increase Amount
with respect to Group I for such Payment Date,
to the extent of any Net Monthly Excess Cashflow
available for such purpose;
over
(ii) the amount of any Subordination Reduction Amount
with respect to Group I for such Payment Date.
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"Group I Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the scheduled principal actually
collected by the Servicer with respect to Mortgage Loans in Group I during the
related Due Period, (ii) Prepayments collected in the related Remittance Period,
(iii) the Loan Balance of each such Mortgage Loan in Group I that either was
repurchased by an Originator or by the Company or purchased by the Servicer on
such Remittance Date, to the extent such Loan Balance was actually deposited in
the Principal and Interest Account, (iv) any Substitution Amounts delivered by
the Company in connection with a substitution of a Mortgage Loan in Group I, to
the extent such Substitution Amounts were actually deposited in the Principal
and Interest Account on such Remittance Date, (v) all Net Liquidation Proceeds
actually collected by the Servicer with respect to such Mortgage Loans in Group
I during the related Due Period (to the extent such Liquidation Proceeds related
to principal) and (vi) all Delinquency Advances relating to principal made by
the Servicer on such Remittance Date with respect to Group I.
"Group I Projected Net Monthly Excess Cashflow": As of any
date of calculation, Net Monthly Excess Cashflow relating to Group I, as
calculated pursuant to Section 7.5(d)(iii) hereof on the Payment Date
immediately preceding such date of calculation.
"Group I Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group I Insured Payments previously received by the Trustee
and all Group I Preference Amounts previously paid to the Trustee by the
Certificate Insurer and in each case not previously repaid to the Certificate
Insurer pursuant to Section 7.5(d)(ii)(C) or Section 7.5(d)(ii)(D) hereof plus
(ii) interest accrued on each such Group I Insured Payment not previously repaid
calculated at the Late Payment Rate from the date the Trustee received the
related Group I Insured Payment to, but not including, such Payment Date and
(y)(i) any amounts then due and owing to the Certificate Insurer relating to
Group I under the Insurance Agreement plus (ii) interest on such amounts at the
Late Payment Rate. The Certificate Insurer shall notify the Trustee and the
Company of the amount of any Group I Reimbursement Amount.
"Group I Servicing Fee": With respect to Group I, as to any
Payment Date beginning with the second Payment Date, the product of (x)
one-twelfth of 1.00% and (y) the aggregate Loan Balances of the Mortgage Loans
in Group I as of the opening of business on the first day of the related
Remittance Period less any Curtailments collected during such Remittance Period.
Such Servicing Fee is retained by the Servicer pursuant to Sections 8.8(c)(i)
and 8.15 hereof.
"Group I Specified Subordinated Amount": Means the sum of:
(a) for any Payment Date occurring during the period
commencing on the Startup Day and ending on the later of (i) the date
upon which principal equal to one-half of the Group I Original
Aggregate Loan Balance has been received and (ii) the 30th Payment Date
following the Startup Day, the greater of (A) the Group I Amortized
Subordinated Amount Requirement and (B) two (2) times the excess of (x)
one-half of the aggregate Loan Balances of all Mortgage Loans in Group
I which are 91 or more days Delinquent (including REO Properties) over
(y) five times the Group I Projected Net Monthly Excess Cashflow as of
such Payment Date; and
(b) for any Payment Date occurring after the end of the period
in clause (a) above, the greatest of (i) the lesser of (A) the Group I
Amortized Subordinated Amount Requirement and (B) two (2) times the
Group I Amortized Subordinated Amount Requirement stated as a
percentage of the aggregate Original Certificate Principal Balance of
the Class A-1 Certificates times the current Class A-1 Certificate
Principal Balance, (ii) two (2) times the excess of (A) one-half of the
aggregate Loan Balances of all Mortgage Loans in Group I which are 91
or more days
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Delinquent (including REO Properties) over (B) three times the Group I
Projected Net Monthly Excess Cashflow as of such Payment Date and (iii)
an amount equal to 0.50% of the Group I Original Aggregate Loan
Balance; provided, however, notwithstanding the above, in the event
that any Group I Insured Payment or Group II Insured Payment is made by
the Certificate Insurer, the amount described in this clause (b) shall
remain equal to the Group I Amortized Subordinated Amount Requirement.
"Group I Subordinated Amount": As of any Payment Date, the
difference, if any, between (x) the aggregate Loan Balances (minus the aggregate
principal components of unreimbursed Delinquency Advances) of the Mortgage Loans
in Group I as of the close of business on the last day of the related Remittance
Period and (y) the Class A-1 Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Class A-1 Distribution Amount
(except for any portion thereof related to an Insured Payment) on such Payment
Date).
"Group I Subordination Deficit": With respect to Group I and
any Payment Date, the amount, if any, by which (x) the aggregate Class A-1
Certificate Principal Balance, after taking into account the payment of the
Group I Principal Remittance Amount on such Payment Date (except any payment to
be made as to principal from the proceeds of the Class A-1 Certificate Insurance
Policy), exceeds (y) the aggregate Loan Balances of the Mortgage Loans in Group
I as of the close of business on the last day of the related Due Period;
provided that for the purpose of calculating Loan Balances to determine if a
Subordination Deficit exists, the aggregate amount of the principal component of
all unreimbursed Delinquency Advances shall be deducted from the related actual
Loan Balances.
"Group I Total Available Funds": As defined in Section 7.3(a)
hereof.
"Group I Total Available Funds Shortfall": As defined in
Section 7.3(b) hereof.
"Group I Total Monthly Excess Spread": With respect to Group I
and any Payment Date, the difference between (i) the interest which is collected
on the Mortgage Loans in Group I during the related Remittance Period, less the
Group I Servicing Fee plus any Delinquency Advances and Compensating Interest
paid by the Servicer with respect to Group I for such Remittance Period and (ii)
the sum of (x) the interest due on the Class A-1 Certificates on such Payment
Date and (y) the Group I Premium Amount and the Group I Trustee Fee, if any, for
such Payment Date.
"Group I Trustee Fee": The amount payable monthly to the
Trustee on each Payment Date, in an amount equal to the product of (x)
one-twelfth of 0.025% and (y) the aggregate Loan Balance of the Mortgage Loans
in Group I as of the opening of business on the first day of the preceding
Remittance Period.
"Group II": The pool of Mortgage Loans identified in the
related Schedules of Mortgage Loans as having been assigned to Group II,
including any Qualified Replacement Mortgages delivered in replacement thereof.
"Group II Amortized Subordinated Amount Requirement": As of
any date of determination, the product of (x) 2.2% and (y) the Group II Original
Aggregate Loan Balance.
"Group II Available Funds": As defined in Section 7.3(a)(ii)
hereof.
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"Group II Available Funds Cap": As of any Payment Date, the
weighted average of the Coupon Rates on the Mortgage Loans in Group II less the
sum of (a) the rates of which (i) the Group II Servicing Fee, (ii) the Group II
Trustee Fee, (iii) beginning on the seventh Payment Date, the Group II Premium
Amount are determined and (b) beginning on the seventh Payment Date, 0.50% per
annum expressed as a percentage of the Mortgage Loans in Group II.
"Group II Available Funds Shortfall": As defined in Section
7.5(d)(ii)(A).
"Group II Initial Specified Subordinated Amount": $0.00.
"Group II Insured Payment": The Group II Insured Payment shall
have the meaning set forth in the Class A-2 Certificate Insurance Policy.
"Group II Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all scheduled interest collected by
the Servicer during the related Due Period with respect to the Mortgage Loans in
Group II, (ii) all Delinquency Advances relating to interest made by the
Servicer on such Remittance Date with respect to Group II, and (iii) all
Compensating Interest paid by the Servicer on such Remittance Date with respect
to Group II.
"Group II Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group II Interest Remittance Amount for such Remittance
Date and (ii) the Group II Principal Remittance Amount for such Remittance Date.
"Group II Original Aggregate Loan Balance": The aggregate Loan
Balances of all Mortgage Loans in Group II as of the Cut-Off Date, i.e.,
$31,878,145.23.
"Group II Preference Amount": As defined in the Class A-2
Certificate Insurance Policy.
"Group II Premium Amount": As to any Payment Date on or after
the seventh Payment Date, the product of (x) .0125% and (y) the Class A-2
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to be made to the Owners of Class A-2
Certificates on such Payment Date).
"Group II Principal Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, the lesser of:
(x) the Group II Total Available Funds plus any Group II Insured
Payment minus the Class A-2 Current Interest for such Payment
Date; and
(y) the excess, if any, of (i) the sum, without any duplication of:
(a) the Class A-2 Carry-Forward Amount,
(b) the principal portion of all scheduled
monthly payments on the Mortgage Loans
in Group II due on or prior to the
related Due Date during the related Due
Period, to the extent actually received
by the Trustee on or prior to the
related Remittance Date or to the
extent advanced by the Servicer on or
prior to the related Remittance Date
and any Prepayments made by the
respective Mortgagors during the
related Remittance Period,
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(c) the Loan Balance of each Mortgage Loan
in Group II that either was repurchased
by the Company or an Originator or
purchased by the Servicer on the
related Remittance Date, to the extent
such Loan Balance is actually received
by the Trustee, on or prior to the
related Remittance date,
(d) any Substitution Amounts delivered by
the Company or an Originator on the
related Remittance Date in connection
with a substitution of a Mortgage Loan
in Group II (to the extent such
Substitution Amounts relate to
principal), to the extent such
Substitution Amounts are actually
received by the Trustee, on or prior to
the related Remittance date,
(e) all Net Liquidation Proceeds actually
collected by the Servicer with respect
to the Mortgage Loans in Group II
during the related Remittance Period
(to the extent such Net Liquidation
Proceeds relate to principal) to the
extent actually received by the
Trustee, on or prior to the related
Remittance date,
(f) the amount of any Group II
Subordination Deficit for such Payment
Date,
(g) the proceeds received by the Trustee of
any termination as set forth in Article
IX hereto of Group II (to the extent
such proceeds related to principal),
and
(h) the amount of any Subordination
Increase Amount with respect to Group
II for such Payment Date, to the extent
of any Net Monthly Excess Cashflow
available for such purpose;
over
(ii) the amount of any Subordination
Reduction Amount with respect to Group
II for such Payment Date.
"Group II Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the scheduled principal actually
collected by the Servicer with respect to Mortgage Loans in Group II during the
related Due Period, (ii) the Prepayments collected in the related Remittance
Period, (iii) the Loan Balance of each such Mortgage Loan in Group II that
either was repurchased by an Originator or by the Company or purchased by the
Servicer on such Date, to the extent such Loan Balance was actually deposited in
the Principal and Interest Account, (iv) any Substitution Amounts delivered by
the Company in connection with a substitution of a Mortgage Loan in Group II, to
the extent such Substitution Amounts were actually deposited in the Principal
and Interest Account on such Remittance Date, (v) all Net Liquidation Proceeds
actually collected by the Servicer with respect to such Mortgage Loans in Group
II during the related Due Period (to the extent such Liquidation Proceeds
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related to principal) and (vi) all Delinquency Advances relating to principal
made by the Servicer on such Remittance Date with respect to Group II.
"Group II Projected Net Monthly Excess Cashflow": As of any
date of calculation, Net Monthly Excess Cashflow relating to Group II, as
calculated pursuant to Section 7.5(d)(iii) hereof on the Payment Date
immediately preceding such date of calculation.
"Group II Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group II Insured Payments previously received by the Trustee
and all Group II Preference Amounts previously paid to the Trustee by the
Certificate Insurer and in each case not previously repaid to the Certificate
Insurer pursuant to Sections 7.5(d)(ii)(C) and 7.5(d)(ii)(D) hereof plus (ii)
interest accrued on each such Group II Insured Payment not previously repaid
calculated at the Late Payment Rate from the date the Trustee received the
related Group II Insured Payment to, but not including, such Payment Date and
(y)(i) any amounts then due and owing to the Certificate Insurer relating to
Group II under the Insurance Agreement plus (ii) interest on such amounts at the
Late Payment Rate. The Certificate Insurer shall notify the Trustee and the
Company of the amount of any Group II Reimbursement Amount.
"Group II Servicing Fee": With respect to Group II, as to any
Payment Date, the product of (x) one-twelfth of 0.50% and (y) the aggregate Loan
Balances of the Mortgage Loans in Group II as of the opening of business on the
first day of the related Remittance Period less any Curtailments collected
during such Remittance Period; provided, however, that in the event that, as of
any of the first twelve Payment Dates, (i) the sum of (x) Class A-2 Pass-Through
Rate applicable to such Payment Date and (y) the annualized rate at which the
Group II Servicing Fee would otherwise be calculated exceeds (ii) the weighted
average Coupon Rate of the Mortgage Loans in Group II for the related Remittance
Period, then the Group II Servicing Fee for such Payment Date shall be reduced
by an amount equal to the product of (a) one-twelfth of such excess (not to
exceed 10 basis points on a per annum basis) and (b) the aggregate Loan Balance
of the Mortgage Loans in Group II as of the opening of business of the first day
of such Remittance Period. Such Servicing Fee is retained by the Servicer
pursuant to Sections 8.8(c)(i) and 8.15 hereof.
"Group II Specified Subordinated Amount": means:
(a) for any Payment Date occurring during the period
commencing on the Startup Day and ending on the later of (i) the date
upon which principal equal to one-half of the Group II Original
Aggregate Loan Balance has been received and (ii) the 30th Payment Date
following the Startup Day, the greater of (A) the Group II Amortized
Subordinated Amount Requirement and (B) two times the excess of (x)
one-half of the aggregate Loan Balances of all Mortgage Loans in Group
II which are 91 or more days Delinquent (including REO Properties) over
(y) five times the Group II Projected Net Monthly Excess Cashflow as of
such Payment Date; and
(b) for any Payment Date occurring after the end of the period
in clause (a) above, the greatest of (i) the lesser of (A) the Group II
Amortized Subordinated Amount Requirement and (B) two (2) times the
Group II Amortized Subordinated Amount Requirement stated as a
percentage of the Original Certificate Principal Balance of the Class
A-2 Certificates times the current Class A-2 Certificate Principal
Balance, (ii) two (2) time the excess of (A) one-half of the aggregate
Loan Balances of all Mortgage Loans in Group II which are 91 or more
days Delinquent (including REO Properties) over (B) three times the
Group II Projected Net Monthly Excess Cashflow as of such Payment Date
and (iii) an amount equal to 0.50% of the Group II Original Aggregate
Loan Balance; provided, however, notwithstanding the above, in the
event
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that any Group I Insured Payment or Group II Insured Payment is made by
the Certificate Insurer, the Group II Specified Subordinated Amount
shall remain equal to the Group II Amortized Subordinated Amount
Requirement.
"Group II Subordinated Amount": As of any Payment Date, the
difference, if any, between (x) the aggregate Loan Balances (minus the aggregate
principal components of unreimbursed Delinquency Advances) of the Mortgage Loans
in Group II as of the close of business on the last day of the related
Remittance Period and (y) the Class A-2 Certificate Principal Balance as of such
Payment Date (after taking into account the payment of the Class A-2
Distribution Amount (except for any portion thereof related to an Insured
Payment) on such Payment Date).
"Group II Subordination Deficit": With respect to Group II and
any Payment Date, the amount, if any, by which (x) the aggregate Class A-2
Certificate Principal Balance, after taking into account the payment of the
Group II Principal Remittance Amount on such Payment Date (except any payment to
be made as to principal from the proceeds of the Class A-2 Certificate Insurance
Policy), exceeds (y) the aggregate Loan Balances of the Mortgage Loans in Group
II as of the close of business on the last day of the related Due Period;
provided that for the purpose of calculating Loan Balances to determine if a
Subordination Deficit exists, the aggregate amount of the principal component of
all unreimbursed Delinquency Advances shall be deducted from the related actual
Loan Balances.
"Group II Total Available Funds": As defined in Section
7.3(a)(ii) hereof.
"Group II Total Available Funds Shortfall": As defined in
Section 7.3(b) hereof.
"Group II Total Monthly Excess Spread": With respect to Group
II and any Payment Date, the difference between (i) the interest which is
collected on the Mortgage Loans in Group II during the related Remittance
Period, less the Group II Servicing Fee for such Remittance Period plus any
Delinquency Advances and Compensating Interest paid by the Servicer with respect
to Group II for such Remittance Period and (ii) the sum of (x) the interest due
on the Class A-2 Certificates on such Payment Date, (y) the Group II Premium
Amount, and the Group II Trustee Fee, if any, for such Payment Date and (z) the
difference between (A) one month's interest on the Class A-2 Certificates,
calculated at the Group II Available Funds Cap and (B) the amount of any
Available Funds Cap Carry-Forward Amount for such Payment Date.
"Group II Trustee Fee": The amount payable monthly to the
Trustee on each Payment Date, in an amount equal to the product of (x)
one-twelfth of 0.025% and (y) the aggregate Loan Balance of the Mortgage Loan in
Group II as of the opening of business on the first day of the related
Remittance Period.
"Highest Lawful Rate": As defined in Section 11.13.
"Indemnification Agreement": The Indemnification Agreement
dated as of March 1, 1996, among the Certificate Insurer, the Depositor and the
Underwriter.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
"Initial Certification": The initial certification in the form
set forth as Exhibit E hereto and delivered by the Trustee to the Company on the
Startup Day pursuant to Section 3.6 hereof.
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"Initial Premiums": The initial premium (covering three
months) for Group I and the initial premium (covering seven months) for Group II
payable by the Company on behalf of the Trust to the Certificate Insurer in
consideration of the delivery to the Trustee of each of the Certificate
Insurance Policies.
"Insurance Agreement": The Insurance Agreement dated as of
March 1, 1996, among the Company, the Servicer, the Depositor, the Trustee and
the Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary
mortgage insurance policy relating to a Mortgage Loan.
"Insured Payment": With respect to either Group I or Group II
and as to any Payment Date, the sum of (i) the excess, if any, of (a) the sum of
the related Current Interest and the then existing Subordination Deficit, if
any, over (b) the related Total Available Funds (after applying the cross
collateralization provisions of Section 7.5(d)(ii)(A) and (B) hereof, after
deduction for the related Premium Amount and the related Trustee Fee and after
taking into account the portion of the related Principal Distribution Amount to
be actually distributed on such Payment Date without regard to any related
Insured Payment to be made with respect to such Payment Date), plus (ii) the
related Preference Amount.
"Interest Accrual Period": With respect to the Class A-1
Certificates and any Payment Date, the calendar month immediately preceding such
Payment Date. A "Calendar Month" shall be deemed to be 30 days. With respect to
the Class A-2 Certificates and any Payment Date, the period commencing on the
immediately preceding Payment Date (or in the case of the first Payment Date,
the Startup Day) and ending on the day immediately preceding the current Payment
Date. All calculations of interest on the Class A-1 Certificates will be made on
the basis of a 360-day year assumed to consist of twelve 30-day months and all
calculations of interest on the Class A-2 Certificates will be made on the basis
of the actual number of days elapsed in the related Interest Accrual Period and
in a year of 360 days.
"Interest Determination Date": With respect to any Interest
Accrual Period for the Class A-2 Certificates, the second London Business Day
preceding such Interest Accrual Period.
"Late Payment Rate": For any Payment Date, the rate of
interest, as it is publicly announced by State Street Bank and Trust Company,
N.A. at its principal office in New York, New York as its prime rate (any change
in such prime rate of interest to be effective on the date such change is
announced by State Street Bank and Trust Company, N.A.) plus 3%. The Late
Payment Rate shall be computed on the basis of a year of 365 days calculating
the actual number of days elapsed. In no event shall the Late Payment Rate
exceed the maximum rate permissible under any applicable law limiting interest
rates.
"Latest Termination Date": The later to occur of (i) the Class
A-1 Certificate Termination Date and (ii) the Class A-2 Certificate Termination
Date.
"LIBOR": With respect to any Interest Accrual Period for the
Class A-2 Certificates, the rate determined by the Trustee on the related
Interest Determination Date on the basis of the offered rates of the Reference
Banks for one-month U.S. dollar deposits, as such rates appear on the Reuters
Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest Determination
Date. On each
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Interest Determination Date, LIBOR for the related Interest Accrual Period will
be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such
offered quotations (rounded upwards if necessary to the
nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the
related Interest Accrual Period shall be the higher of (i)
LIBOR as determined on the previous Interest Determination
Date and (ii) the Reserve Interest Rate.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A
Mortgage Loan which is purchased from the Trust pursuant to Section 3.4, 3.6 or
8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the
Servicer in connection with the liquidation of any defaulted Mortgage Loan, such
expenses, including, without limitation, legal fees and expenses, and any
unreimbursed Servicing Advances expended by the Servicer pursuant to Sections
8.9(c) and 8.13 with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan,
any amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the
outstanding principal balance thereof on the Cut-Off Date less any related
Principal Remittance Amounts relating to such Mortgage Loan included in previous
related Monthly Remittance Amounts that were transferred by the Servicer or any
Sub-Servicer to the Trustee for deposit in the related Certificate Account;
provided, however, that the Loan Balance for any Mortgage Loan which has become
a Liquidated Loan shall be zero as of the first day of the Remittance Period
following the Remittance Period in which such Mortgage Loan becomes a Liquidated
Loan, and at all times thereafter; and further provided that for purposes of
calculating the Specified Subordinated Amount, Loan Balance shall not include
any principal relating to a Delinquency Advance.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section 3.4, 3.6 or
8.10 hereof, an amount equal to the Loan Balance of such Mortgage Loan as of the
date of purchase, plus one month's interest on the outstanding Loan Balance
thereof as of the beginning of the preceding Remittance Period computed at the
Coupon Rate less the Servicing Fee (expressed as an annual percentage rate), if
any, together with, without duplication, the aggregate amount of (i) all
delinquent interest, all Delinquency Advances and Servicing Advances theretofore
made with respect to such Mortgage Loan and not subsequently recovered from the
related Mortgage Loan and (ii) all Delinquency Advances which the Servicer or
any Sub-Servicer has theretofore failed to remit with respect to such Mortgage
Loan.
"London Business Day": A day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
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"Master Transfer Agreement": Any one of the Mortgage Loan
Master Transfer Agreements and related Conveyance Agreements among the Company
and one or more Originators.
"Monthly Exception Report": The monthly report delivered by
the Servicer to the Trustee on each Determination Date, commencing with the
Determination Date in April, 1996, pursuant to Section 8.8(d)(ii), which shall
be on computer tape and printout. Each Monthly Exception Report shall cover the
immediately preceding Remittance Period and shall consist of (i) a computer
generated activity report of the Mortgage Loans setting forth the Scheduled
Balance of Mortgage Loans as of the first day of the related Remittance Period.
Scheduled Payments due, Prepayments, Liquidated Loan balances, and the resulting
Scheduled Balance of the Mortgage Loans as of the last day of the related
Remittance period and (ii) separate computer generated reports in computer
format of (a) payoffs and curtailments, such reports to provide the payment
details for each Mortgage Loan covering the immediately preceding Remittance
Period and any Prepayments not previously reported from a prior Remittance
Period, and (b) prepayments and delinquencies, such reports to reflect the
current status of each Mortgage Loan with payment details as of the last day of
the related Remittance Period.
"Monthly Remittance Amount": With respect to Group I, the
Group I Monthly Remittance Amount and with respect to Group II, the Group II
Monthly Remittance Amount. The sum of the Group I Monthly Remittance Amount and
the Group II Monthly Remittance Amount shall equal the "Total Available Funds".
"Monthly Servicing Report": As defined in Section 8.26.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on an estate in fee simple interest in real
property securing a Note.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 3.5(a) and Section 3.8 hereof,
together with any Qualified Replacement Mortgages substituted therefor in
accordance with this Agreement, as from time to time are held as a part of the
Trust Estate, the Mortgage Loans originally so held being identified in the
Schedules of Mortgage Loans. The term "Mortgage Loan" includes the terms "First
Mortgage Loan" and "Second Mortgage Loan." The term "Mortgage Loan" includes any
Mortgage Loan which is Delinquent, which relates to a foreclosure or which
relates to a Property which is REO Property prior to such Property's disposition
by the Trust. Any mortgage loan which, although intended by the parties hereto
to have been, and which purportedly was, transferred and assigned to the Trust
by the Company, in fact was not transferred and assigned to the Trust for any
reason whatsoever shall nevertheless be considered a "Mortgage Loan" for all
purposes of this Agreement.
"Mortgage Loan Group": Either Group I or Group II. References
herein to the related Class of Class A Certificates, when used with respect to a
Mortgage Loan Group, shall mean (A) in the case of Group I, the Class A-1
Certificates and (B) in the case of Group II, the Class A-2 Certificates.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances, unreimbursed Delinquency Advances and accrued
and unpaid Servicing Fees through the date of liquidation relating to
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such Liquidated Loan. In no event shall Net Liquidation Proceeds with respect to
any Liquidated Loan be less than zero.
"Net Monthly Excess Cashflow": As defined in Section
7.5(d)(iii) hereof.
"Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Trustee.
"Operative Documents": Collectively, this Agreement, the
Master Transfer Agreements, the Certificate Insurance Policies, the Purchase
Agreement, the Certificates, the Insurance Agreement, the Underwriting Agreement
and the Indemnification Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances
of the Mortgage Loans as of the Cut-Off Date, i.e., $52,419,909.39.
"Original Certificate Principal Balance": As of the Startup
Day and as to each Class of Class A Certificates, the original Certificate
Principal Balances thereof, as follows:
Class A-1 Certificates $20,541,000.
Class A-2 Certificates $31,878,000.
The Class R Certificates do not have an Original Certificate
Principal Balance.
"Original Principal Amount": With respect to each Note, the
principal amount of such Note or the mortgage note relating to a Senior Lien, as
the case may be, on the date of origination thereof.
"Originator": The Company and any entity from which the
Company acquires Mortgage Loans.
"Outstanding": With respect to all Certificates of a Class, as
of any date of determination, all such Certificates theretofore executed and
delivered hereunder except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and
final payment money in the necessary amount has been theretofore
deposited with the Trustee in trust for the Owners of such
Certificates;
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that
any such Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 5.5 hereof.
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(v) Certificates as to which the Trustee has made the
final distribution thereon, whether or not such Certificates have been
returned to the Trustee.
"Owner": The Person in whose name a Certificate is registered
in the Register, to the extent described in Section 5.6.
"Paid-in-Full Mortgage Loan": With respect to any Payment
Date, a Mortgage Loan which has been paid in full during the related Remittance
Period.
"Pass-Through Rate": As to the Class A-1 Certificates, the
Class A-1 Pass-Through Rate and as to the Class A-2 Certificates, the Class A-2
Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to
make distributions to the Owners, which shall be the 20th day of each month, or
if such day is not a Business Day, the next succeeding Business Day, commencing
in the month following the Startup Day.
"Percentage Interest": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance set forth on such Certificate as of the Cut-Off Date and the
denominator of which is the Original Certificate Principal Balance of all Class
A Certificates of the same Class as of the Cut-Off Date; and as to any Class R
Certificate, that Percentage Interest set forth on such Class R Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Expected Losses": With respect to any period,
the sum of (i) all Realized Losses with respect to the Mortgage Loans
experienced during such period and (ii) the product of (A) 0.43 and (B) with
respect to any date of determination, the sum of (x) 25% of the Loan Balances of
all Mortgage Loans which are greater than 31 days Delinquent and less than 61
days Delinquent, (y) 50% of the Loan Balances of all Mortgage Loans which are
greater than 61 days Delinquent and less than 91 days Delinquent, and (z) 100%
of the Loan Balances of all Mortgage Loans which are greater than 91 days
Delinquent (including REO Properties).
"Pool Cumulative Realized Losses": With respect to any period,
the sum of all Realized Losses with respect to the Mortgage Loans experienced
during such period.
"Pool Delinquency Rate": With respect to any Remittance
Period, the fraction, expressed as a percentage, equal to (x) the aggregate
principal balances of all Mortgage Loans 91 or more days Delinquent (including
foreclosures and REO Properties) as of the close of business on the last day of
such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"Pool Principal Balance": The aggregate principal balances of
the Group I Mortgage Loans and the Group II Mortgage Loans.
"Pool Rolling Three Month Delinquency Rate": As of any Payment
Date, the fraction, expressed as a percentage, equal to the average of the Pool
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Payment Dates) immediately preceding Remittance Periods.
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"Preference Amount": Any of the Group I Preference Amount or
the Group II Preference Amount.
"Premium Amount": As to any Payment Date beginning on the
third Payment Date, the Group I Premium Amount and the Group II Premium Amount.
"Premium Percentage": As defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received by the Servicer
prior to the scheduled due date for such installment, intended by the Mortgagor
as an early payment thereof and not as a Prepayment with respect to such
Mortgage Loan.
"Prepayment": A Curtailment or a Paid-in-Full Mortgage Loan.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Mortgage Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": Collectively, each principal
and interest account created by the Servicer pursuant to Section 8.8(a) hereof,
or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I
Principal Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": The meaning set forth from time to
time in the definition thereof at Section 860F(a)(2) of the Code (or any
successor statute thereto) and applicable to the Trust.
"Property": The underlying property securing a Mortgage Loan.
"Prospectus": The Prudential Securities Secured Financing
Corporation Prospectus dated August 4, 1995.
"Prospectus Supplement": The First Alliance Mortgage Loan
Trust 1996-1 Prospectus Supplement dated March 28, 1996 to the Prospectus.
"Purchase Agreement": The Unaffiliated Seller's Agreement,
dated as of the date hereof, between the Company and the Depositor relating to
the sale of the Mortgage Loans from the Company to the Depositor.
"Qualified Liquidation": The meaning set forth from time to
time in the definition thereof at Section 860F(a)(4) of the Code (or any
successor statute thereto) and applicable to the Trust and the Trust Estate.
"Qualified Mortgage": The meaning set forth from time to time
in the definition thereof at Section 860G(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust and the Mortgage Loan Groups.
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"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 3.4 or 3.6 hereof, which (i) bears a fixed rate
of interest if the Mortgage Loan to be substituted for is in Group I or bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II, (ii) has a Coupon Rate at least equal to the Coupon Rate of the Mortgage
Loan being replaced (which, in the case of a Mortgage Loan in Group II, shall
mean a Mortgage Loan having the same interest rate index, a margin over such
index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be
of the same or better credit quality classification (determined in accordance
with the Originators' credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than June 1, 2026 for Group I and June 1,
2026 for Group II, (vi) has a Combined Loan-to-Value Ratio as of the Cut-Off
Date, no higher than the Combined Loan-to-Value Ratio of the replaced Mortgage
Loan at such time, (vii) has a Loan Balance as of the related Replacement
Cut-Off Date equal to or less than the Loan Balance of the replaced Mortgage
Loan as of such Replacement Cut-Off Date, (viii) satisfies the criteria set
forth from time to time in the definition thereof at Section 860G(a)(4) of the
Code (or any successor statute thereto) and applicable to the Trust, all as
evidenced by an Officer's Certificate of the Company delivered to the Trustee
and the Certificate Insurer prior to any such substitution, (ix) is of the same
lien status or better lien status and (x) a valid fixed rate Mortgage Loan, if
the Mortgage Loan to be substituted for is in Group I, and is a valid variable
rate Loan, if the Mortgage Loan to be substituted for is in Group II. In the
event that one or more mortgage loans are proposed to be substituted for one or
more mortgage loans, the Certificate Insurer may allow the foregoing tests to be
met on a weighted average basis or other aggregate basis acceptable to the
Certificate Insurer, as evidenced by a written approval delivered to the Trustee
by the Certificate Insurer, except that the requirement of clauses (vi) and
(viii) hereof must be satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan, the amount, if
any, by which the Loan Balance thereof as of the date of liquidation is in
excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last
Business Day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Company or any affiliate thereof, (iii) whose quotations
appear on the Reuters Screen LIBO Page on the relevant Interest Determination
Date and (iv) which have been designated as such by the Trustee.
"Register": The register maintained by the Trustee in
accordance with Section 5.4 hereof, in which the names of the Owners are set
forth.
"Registrar": The Trustee, acting in its capacity as Trustee
appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible
successor thereto.
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"Registration Statement": The Registration Statement filed by
the Depositor with the Securities and Exchange Commission, including all
amendments thereto and including the Prospectus constituting a part thereof.
"Reimbursement Amount": A Group I Reimbursement Amount or a
Group II Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"Remittance Date": Any date on which the Servicer is required
to remit moneys on deposit in the Principal and Interest Account to the Trustee,
which shall be the day prior to the related Payment Date , or if such day is not
a Business Day, the next preceding Business Day, commencing one day prior to the
first Payment Date.
"Remittance Period": The period (inclusive) beginning on the
first day of the calendar month immediately preceding the month in which a
Remittance Date occurs and ending on the last day of such immediately preceding
calendar month.
"REO Property": A Property acquired by the Servicer or any
Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Request for Release": The request for release in the form set
forth as Exhibit K hereto.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residual Net Monthly Excess Cashflow": With respect to any
Payment Date, the aggregate Net Monthly Excess Cashflow, if any, remaining with
respect to each of the Mortgage Loan Groups after the making of all applications
described in Section 7.5(d)(iii) hereof.
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"Responsible Officer": When used with respect to the Trustee,
any officer assigned to the corporate trust group (or any successor thereto),
including any vice president, assistant vice president, trust officer, any
assistant secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Agreement.
"Schedules of Mortgage Loans": The Schedules of Mortgage
Loans, separated by Mortgage Loan Group, with respect to the Mortgage Loans
listing each Mortgage Loan in the related Group to be conveyed on the Startup
Day. Such Schedules of Mortgage Loans shall identify each Mortgage Loan by the
Servicer's loan number and address (including the state) of the Property and
shall set forth as to each Mortgage Loan the lien status, the Combined
Loan-to-Value Ratio, the Loan Balance as of the Cut-Off Date, the Coupon Rate
thereof (or, with respect to Mortgage Loans in Group II, the index, the margin)
the current scheduled monthly payment of principal and interest and the maturity
of the related Note, the property type, occupancy status, Appraised Value and
the Originator of the Mortgage Loan, all as delivered to the Trustee in physical
and computer readable form and delivered to the Certificate Insurer in physical
form.
"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Property having a first priority
lien.
"Servicer": First Alliance Mortgage Company, a California
corporation, and its permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section
8.13 hereof.
"Servicing Certificate": A certificate completed by and
executed by an Authorized Officer of the Trustee as attached hereto in the form
of Exhibit J.
"Six Month LIBOR Loans": Mortgage Loans whose interest rates
adjust semi-annually based on the London interbank offered rate for six-month
United States Dollar deposits in the London Market and as published in The Wall
Street Journal.
"Specified Subordinated Amount": As applicable, the Group I
Specified Subordinated Amount or the Group II Specified Subordinated Amount.
"Standard & Poor's": Standard & Poor's, a Division of The
McGraw-Hill Companies.
"Startup Day": March 29, 1996.
"Subordinated Amount": As applicable, the Group I Subordinated
Amount or the Group II Subordinated Amount.
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"Subordination Deficiency Amount": With respect to any
Mortgage Loan Group and Payment Date, the difference, if any, between (i) the
Specified Subordinated Amount applicable to such Mortgage Loan Group and Payment
Date and (ii) the Subordinated Amount applicable to such Mortgage Loan Group and
Payment Date prior to taking into account the payment of any related
Subordination Increase Amounts on such Payment Date.
"Subordination Deficit": As applicable, the Group I
Subordination Deficit or the Group II Subordination Deficit.
"Subordination Increase Amount": With respect to any Mortgage
Loan Group and Payment Date, the lesser of (i) the Subordination Deficiency
Amount as of such Payment Date (after taking into account the payment of the
related Class A Distribution Amount on such Payment Date (except for any
Subordination Increase Amount)) and (ii) the aggregate amount of Net Monthly
Excess Cashflow to be allocated to such Mortgage Loan Group pursuant to Sections
7.5(d)(iii)(A) and 7.5(d)(iii)(B) on such Payment Date.
"Subordination Reduction Amount": With respect to any Mortgage
Loan Group and Payment Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Payment Date and (y) the
Principal Remittance Amount with respect to such Mortgage Loan Group for the
related Remittance Period.
"Sub-Servicer": Any Person with whom the Servicer has entered
into a Sub-Servicing Agreement and who satisfies any requirements set forth in
Section 8.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and any Sub-Servicer relating to servicing and/or administration of
certain Mortgage Loans as permitted by Section 8.3.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Coupon Rate net of
the Servicing Fee of the Mortgage Loan being replaced.
"Tax Matters Person": The Tax Matters Person appointed
pursuant to Section 11.17 ------------------ hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Total Available Funds": The sum of the Group I Monthly
Remittance Amount and the Group II Monthly Remittance Amount.
"Total Monthly Excess Cashflow": As defined in Section
7.5(d)(ii) hereof.
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"Total Monthly Excess Spread": As applicable, the Group I
Total Monthly Excess Spread or the Group II Total Monthly Excess Spread.
"Transaction Documents": Collectively this Agreement, the
Insurance Agreement, the Underwriting Agreement, the Master Transfer Agreements,
any Sub-Servicing Agreement, the Indemnification Agreement, the Purchase
Agreement, the Registration Statement and the Certificates.
"Trust": First Alliance Mortgage Loan Trust 1996-1, the trust
created under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except as otherwise provided herein), (iii)
any Property, the ownership of which has been effected on behalf of the Trust as
a result of foreclosure or acceptance by the Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) any Insurance
Policies relating to the Mortgage Loans and any rights of the Company under such
Insurance Policies, (v) Net Liquidation Proceeds with respect to any Liquidated
Loan, (vi) the Certificate Insurance Policies, (vii) the rights of the Depositor
against the Company under the Purchase Agreement and (viii) the rights of the
Company against any Originator pursuant to the related Master Transfer Agreement
and the proceeds of any of the above.
"Trustee": Bankers Trust Company of California, N.A. located
on the date of execution of this Agreement at 3 Park Plaza, 16th Floor, Irvine,
California 92714, not in its individual capacity but solely as Trustee under
this Agreement, and any successor hereunder.
"Trustee Fee": The fee payable monthly to the Trustee equal to
the sum of the Group I Trustee Fee and the Group II Trustee Fee.
"Underwriter": Prudential Securities Incorporated.
"Underwriting Agreement": The Underwriting Agreement dated as
of March 28, 1996 between the Underwriter and the Depositor.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or
headings in this Agreement and the Table of Contents are for convenience only
and in no way define, limit or describe the scope and intent of any provisions
of this Agreement.
Section 1.4. Opinions. Each opinion with respect to the
validity, binding nature and enforceability of documents or Certificates may be
qualified to the extent that the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a
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proceeding or action in equity or at law) and may state that no opinion is
expressed on the availability of the remedy of specific enforcement, injunctive
relief or any other equitable remedy. Any opinion required to be furnished by
any Person hereunder must be delivered by counsel upon whose opinion the
addressee of such opinion may reasonably rely, and such opinion may state that
it is given in reasonable reliance upon an opinion of another, a copy of which
must be attached, concerning the laws of a foreign jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "First
Alliance Mortgage Loan Trust 1996-1".
Section 2.2. Office. The office of the Trust shall be in care
of the Trustee, at 3 Park Plaza, 16th Floor, Irvine, California 92714 or at such
other address as the Trustee may designate by notice to the Company, the
Depositor, the Servicer, the Owners and the Certificate Insurer.
Section 2.3. Purposes and Powers. The purpose of the Trust is
to engage in the following activities and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the Trust.
Section 2.4. Appointment of the Trustee; Declaration of Trust.
The Company hereby appoints the Trustee as trustee of the Trust effective as of
the Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners.
Section 2.5. Expenses of Trustee. The expenses of the Trust,
including (i) any portion of the Trustee Fee not paid pursuant to Section
7.5(d)(i) hereof, (ii) any reasonable expenses of the Trustee, and (iii) any
other expenses of the Trust that have been reviewed by the Servicer, which
review shall not be required in connection with the enforcement of a remedy by
the Trustee resulting from a default under this Agreement, shall be paid
directly by the Servicer. The Servicer shall pay directly the reasonable fees
and expenses of counsel to the Trustee. The reasonable fees and expenses of the
Trustee's counsel in connection with the review and delivery of this Agreement
and related documentation shall be paid by the Servicer on the Startup Day.
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Section 2.6. Ownership of the Trust. On the Startup Day the
ownership interests in the Trust and the subtrusts shall be transferred as set
forth in Section 4.2 hereof, such transfer to be evidenced by sale of the
Certificates as described therein. Thereafter, transfer of any ownership
interest shall be governed by Sections 5.4 and 5.8 hereof.
Section 2.7. Situs of the Trust. It is the intention of the
parties hereto that the Trust constitute a trust under the laws of the State of
New York. The Trust will be created and administered in, the State of New York.
The Trust's only office will be at the office of the Trustee as set forth in
Section 2.2 hereof.
Section 2.8. Miscellaneous REMIC Provisions. (a) The Trust
shall elect to be treated as a REMIC under Section 860D of the Code, as
described in Section 11.15. Any inconsistencies or ambiguities in this Agreement
or in the administration of the Trust shall be resolved in a manner that
preserves the validity of the election of the Trust to be treated as a REMIC.
(b) The Class A Certificates are hereby designated as "regular
interests" in the REMIC and the Class R Certificates are hereby designated as
the "residual interest" in the REMIC, as defined in Section 860G(a) of the Code.
(c) The Startup Day is hereby designated as the "startup day"
of the REMIC within the meaning of Section 860G(a)(9) of the Code.
(d) The final scheduled Payment Date for any Class of
Certificates is hereby set to be the Payment Date succeeding by one year the
latest maturity date of any Mortgage Loan in the related Mortgage Loan Group, as
follows:
Class Final Scheduled Payment Date
Class A-1 Certificates ____________, ______________
Class A-2 Certificates ____________, ______________
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE COMPANY AND THE SERVICER;
COVENANT OF COMPANY TO CONVEY MORTGAGE LOANS
Section 3.1A. Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the Company, the
Trustee, the Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased
by it, make such qualification necessary. The Depositor has all
requisite corporate power and authority to own and operate its
properties, to carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its
obligations under this Agreement and the other Operative Documents to
which it is a party.
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(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Depositor is a party by the Depositor
and its performance and compliance with the terms of this Agreement and
of the other Operative Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of the
Depositor and will not violate the Depositor's Articles of
Incorporation or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Depositor is a party or by which the
Depositor is bound, or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Depositor or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Depositor is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Depositor, enforceable
against it in accordance with the terms hereof and thereof, except as
the enforcement hereof and thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at
law).
(d) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Depositor or its properties
or might have consequences that would materially and adversely affect
its performance hereunder or under the other Operative Documents to
which it is a party.
(e) No action, suit, proceeding or investigation is pending
or, to the best of the Depositor's knowledge, threatened against the
Depositor which, individually or in the aggregate, might have
consequences that would prohibit the Depositor from entering into this
Agreement or any other Operative Document to which it is a party or
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Depositor or its properties or might
have consequences that would materially and adversely affect the
validity or enforceability of Mortgage Loans or the Depositor's
performance hereunder or under the other Operative Documents to which
it is a party.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1A shall survive delivery of the Mortgage
Loans to the Trustee.
Section 3.1B. Representations and Warranties of the Company.
The Company hereby represents, warrants and covenants to the Trustee, the
Depositor the Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased
by it, make such qualification necessary. The Company has all requisite
corporate power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be
conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party.
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(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Company is a party by the Company and
its performance and compliance with the terms of this Agreement and of
the other Operative Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of the Company
and will not violate the Company's Articles of Incorporation or Bylaws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other instrument to
which the Company is a party or by which the Company is bound, or
violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over
the Company or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Company is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Company, enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Company 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 (other than any such order,
regulation or demand relating to filings required to be made pursuant
to the Securities Act and the Securities Exchange Act of 1934, as
amended), which might have consequences that would materially and
adversely affect the condition (financial or other) or operations of
the Company or its properties or might have consequences that would
materially and adversely affect its performance hereunder or under the
other Operative Documents to which it is a party.
(e) No action, suit, proceeding or investigation is pending
or, to the best of the Company's knowledge, threatened against the
Company which, individually or in the aggregate, might have
consequences that would prohibit the Company from entering into this
Agreement or any other Operative Document to which it is a party or
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Company or its properties or might have
consequences that would materially and adversely affect the validity or
enforceability of Mortgage Loans or the Company's performance hereunder
or under the other Operative Documents to which it is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Company
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report
not misleading.
(g) The statements contained in the Registration Statement
which describe the Company or matters or activities for which the
Company is responsible in accordance with the Operative Documents or
which are attributed to the Company therein are true and correct in all
material respects, and the Registration Statement does not contain any
untrue statement of a material fact with respect to the Company or omit
to state a material fact required to be stated therein or necessary in
order to make the statements contained therein with respect to the
Company not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the
Company's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact required to be stated
therein or omit to state any
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material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or agency
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Company makes no such representation or warranty), that are
necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Company of the
Operative Documents to which it is a party, have been duly taken, given
or obtained, as the case may be, are in full force and effect on the
date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative
Documents on the part of the Company and the performance by the Company
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Company.
(j) The Company received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the
Mortgage Loans evidenced by the Certificates.
(k) The Company did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any intent to hinder, delay or
defraud any of its respective creditors.
(l) The Company is solvent and the Company will not be
rendered insolvent as a result of the sale of the Mortgage Loans to the
Trust or the sale of the Certificates.
(m) On the Startup Day, the Trustee will have good title on
behalf of the Trust to each Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien.
(n) There has been no material adverse change in any
information submitted by the Company in writing to the Certificate
Insurer.
(o) To the best knowledge of the Company, no event has
occurred which would allow any purchaser of the Class A Certificates
not to be required to purchase the Class A Certificates on the Startup
Day.
(p) To the best knowledge of the Company, no document
submitted by or on behalf of the Company to the Certificate Insurer
contains any untrue or misleading statement of a material fact or fails
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
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(q) To the best knowledge of the Company, no material adverse
change affecting any security for the Class A Certificates has occurred
prior to delivery of and payment for the Class A Certificates.
(r) The Company is not in default under any agreement
involving financial obligations or on any outstanding obligation which
would materially adversely impact the financial condition or operations
of the Company or legal documents associated with the transaction
contemplated in this Agreement.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1B shall survive delivery of the Mortgage
Loans to the Trustee.
Section 3.2. Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the Trustee, the
Depositor, the Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. The Servicer is in compliance with the laws of each state
in which any Property is located to the extent necessary to enable it
to perform its obligations hereunder and is in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it, make such
qualification necessary. The Servicer has all requisite corporate power
and authority to own and operate its properties, to carry out its
business as presently conducted and as proposed to be conducted and to
enter into and discharge its obligations under this Agreement and the
other Operative Documents to which it is a party. The Servicer has
equity of at least $20,000,000, as determined in accordance with
generally accepted accounting principles.
(b) The execution and delivery of this Agreement by the
Servicer and its performance and compliance with the terms of this
Agreement and the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of
the Servicer and will not violate the Servicer's Articles of
Incorporation or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Servicer is a party or by which the
Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to
which the Servicer is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, each constitutes
a valid, legal and binding obligation of the Servicer, enforceable
against it in accordance with the terms hereof, except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law).
(d) The Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency (other than any such
order, regulation or demand relating to filings required to be made
pursuant to the Securities Act and the Securities Exchange Act of 1934,
as amended), which might have
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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 materially and adversely affect its
performance hereunder or under the other Operative Documents to which
the Servicer is a party.
(e) No action, suit, proceeding or investigation is
pending or, to the best of the Servicer's knowledge, threatened against
the Servicer which, individually or in the aggregate, might have
consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or otherwise)
or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect the validity or
the enforceability of the Mortgage Loans or the Servicer's performance
hereunder or under the other Operative Documents to which the Servicer
is a party.
(f) No certificate of an officer, statement furnished
in writing or report delivered pursuant to the terms hereof by the
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement or
report not misleading.
(g) The statements contained in the Prospectus
Supplement which describe the Servicer or matters or activities for
which the Servicer is responsible in accordance with the Operative
Documents or which are attributed to the Servicer therein are true and
correct in all material respects, and the Prospectus Supplement does
not contain any untrue statement of a material fact with respect to the
Servicer or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein with respect to
the Servicer not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the
Servicer's knowledge and belief, the Prospectus Supplement does 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 contained therein not misleading.
(h) All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the
case may be, by or from any federal, state or other governmental
authority or agency (other than any such actions, approvals, etc. under
any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Servicer makes no such representation or
warranty), that are necessary or advisable in connection with the
execution and delivery by the Servicer of the Operative Documents to
which it is a party, have been duly taken, given or obtained, as the
case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this
Agreement and the other Operative Documents on the part of the Servicer
and the performance by the Servicer of its obligations under this
Agreement and such of the other Operative Documents to which it is a
party.
(i) The collection practices used by the Servicer with
respect to the Mortgage Loans directly serviced by it have been, and
are in all material respects, legal, proper, prudent and customary in
the mortgage loan servicing business.
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(j) The transactions contemplated by this Agreement are
in the ordinary course of business of the Servicer.
(k) There are no Sub-Servicers as of the date hereof.
(l) The Servicer covenants that it will terminate any
Sub-Servicer within ninety (90) days after being directed by the
Certificate Insurer to do so.
(m) There has been no material adverse change in any
information submitted by the Servicer in writing to the Certificate
Insurer.
(n) To the best knowledge of the Servicer, no event has
occurred which would allow any purchaser of the Class A Certificates
not to be required to purchase the Class A Certificates on the Startup
Day.
(o) To the best knowledge of the Servicer, no document
submitted by or on behalf of the Servicer to the Certificate Insurer
contains any untrue or misleading statement of a material fact or fails
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
(p) To the best knowledge of the Servicer, no material
adverse change affecting any security for the Class A Certificates has
occurred prior to delivery of and payment for the Class A Certificates.
(q) The Servicer is not in default under any agreement
involving financial obligations or on any outstanding obligation which
would materially and adversely impact the financial condition or
operations of the Servicer or legal documents associated with the
transaction contemplated in this Agreement.
It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of the Mortgage
Loans to the Trustee.
Upon discovery by any of the Originators, the Servicer, the
Company, the Depositor, any Sub-Servicer, the Certificate Insurer or the Trustee
of a breach of any of the representations and warranties set forth in this
Section 3.2 or in Section 3.1 hereof which materially and adversely affects the
interests of the Owners or of the Certificate Insurer, without regard to any
limitation set forth in such representation or warranty concerning the knowledge
of the party making such representation or warranty as to the facts stated
therein, the party discovering such breach shall give prompt written notice to
the other parties. Within 30 days of its discovery or its receipt of notice of
breach, the breaching party shall cure such breach in all material respects and,
if such breaching party is the Servicer and upon the Servicer's continued
failure to cure such breach, the Servicer thereafter be removed by the Trustee
or the Certificate Insurer pursuant to Section 8.20 hereof; provided, however,
that if the Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that it is diligently pursuing remedial action, then the
cure period may be extended with the written approval of the Certificate
Insurer.
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Section 3.3. Representations and Warranties with Respect to
the Mortgage Loans. (a) Pursuant to the Purchase Agreement, the Company has made
various representations and warranties to the Depositor as to the Mortgage Loans
on which the Certificate Insurer relies in issuing the Certificate Insurance
Policies. The Depositor does hereby irrevocably transfer, assign, set over and
otherwise convey to the Trustee its right to exercise the remedies created by
Sections 2.05 and 3.05 of the Purchase Agreement for breaches of the
representations, warranties, covenants and agreements of the Company contained
in Sections 2.04, 2.05, 3.01 and 3.02 of the Purchase Agreement. Further, the
Depositor represents and warrants that it has taken no action to impair the
title of the Mortgage Loans.
(b) The Company hereby assigns to the Depositor and the
Depositor immediately assigns to the Trustee for the benefit of the Owners of
the Certificates and the Certificate Insurer all of its right, title and
interest in respect of each Master Transfer Agreement applicable to the related
Mortgage Loan. Insofar as such Master Transfer Agreement provides for
representations and warranties made by the related Originator or by the Company
in respect of a Mortgage Loan and any remedies provided thereunder for any
breach of such representations and warranties, such right, title and interest
may be enforced by the Servicer or by the Trustee on behalf of the Owners or by
the Certificate Insurer. Upon the discovery by the Company, the Servicer, the
Certificate Insurer or the Trustee of a breach of any of the representations and
warranties made in a Master Transfer Agreement in respect of any Mortgage Loan,
without regard to any limitation set forth in such representation or warranty
concerning the knowledge of the Company or any related Originator as to the
facts stated therein, which materially and adversely affects the interests of
the Owners or of the Certificate Insurer in such Mortgage Loan the party
discovering such breach shall give prompt written notice to the other parties.
The Servicer shall promptly notify the related Originator of such breach and
request that such Originator cure such breach or take the actions described in
Section 3.4(b) hereof within the time periods required thereby, and if such
Originator does not cure such breach in all material respects, the Company shall
cure such breach or take such actions. Except as set forth in Section 3.4, the
obligations of the Company or Servicer, as the case may be, shall be limited to
the remedies for cure set forth in Section 3.4 with respect to any Mortgage Loan
as to which such a breach has occurred and is continuing; the remedies set forth
in Section 3.4 shall constitute the sole remedy with respect to such breach
available to the Owners, the Trustee and the Certificate Insurer.
The Company acknowledges that a breach of any representation
or warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan and (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property is a priori the breach
of a representation or warranty which "materially and adversely affects the
interests of the Owners or of the Certificate Insurer" in such Mortgage Loan.
Section 3.4. Covenants of the Company to Take Certain Actions
with Respect to the Mortgage Loans In Certain Situations. (a) With the provisos
and limitations as to remedies set forth in this Section 3.4, upon the discovery
by any Originator, the Depositor, the Company, the Servicer, the Certificate
Insurer, any Sub-Servicer or the Trustee that the representations and warranties
set forth in the Purchase Agreement and assigned by the Depositor to the Trust
in Section 3.3(a) of this Agreement or in the Master Transfer Agreement and
assigned to the Trust in Section 3.3(b) of this Agreement were untrue in any
material respect as of the Startup Day and that such breach of the
representations and warranties materially and adversely affects the interests of
the Owners or of the Certificate Insurer, the party discovering such breach
shall give prompt written notice to the other parties.
(b) Upon the earliest to occur of the Company's discovery, its
receipt of notice of breach
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from any one of the other parties hereto or from the Certificate Insurer or such
time as a breach of any representation and warranty materially and adversely
affects the interests of the Owners or of the Certificate Insurer as set forth
above, the Company hereby covenants and warrants that it shall promptly cure
such breach in all material respects or it shall (or shall cause an affiliate of
the Company to or an Originator to), subject to the further requirements of this
paragraph, on the second Remittance Date next succeeding such discovery, receipt
of notice or such other time (i) substitute in lieu of each Mortgage Loan in the
related Mortgage Loan Group which has given rise to the requirement for action
by the Company a Qualified Replacement Mortgage and deliver the Substitution
Amount applicable thereto, together with the aggregate amount of all Delinquency
Advances and Servicing Advances theretofore made with respect to such Mortgage
Loan, to the Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Mortgage Loan from the Trust at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be delivered to the Servicer
for deposit in the Principal and Interest Account. In connection with any such
proposed purchase or substitution, the Company, at its expense, shall cause to
be delivered to the Trustee and to the Certificate Insurer an opinion of counsel
experienced in federal income tax matters stating whether or not such a proposed
purchase or substitution would constitute a Prohibited Transaction for the Trust
or would jeopardize the status of the Trust as a REMIC, and the Company shall
only be required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the Trust or would not jeopardize the
status of the Trust as a REMIC. Any required purchase or substitution, if
delayed by the absence of such opinion shall nonetheless occur upon the earlier
of (i) the occurrence of a default or imminent default with respect to the
Mortgage Loan or (ii) the delivery of such opinion. It is understood and agreed
that the obligation of the Company to cure the defect, or substitute for or
purchase any Mortgage Loan as to which a representation or warranty is untrue in
any material respect and has not been remedied shall constitute the sole remedy
available to the Owners, the Trustee and the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by the Company to the Trust pursuant to this
Section 3.4 or Section 3.6 hereof, the related Originator and the Company shall
be obligated to take the actions described in Section 3.4(b) with respect to
such Qualified Replacement Mortgage upon the discovery by any of the Owners, the
Company, the Servicer, the Certificate Insurer, any Sub-Servicer or the Trustee
that any of the representations and warranties set forth in the related Master
Transfer Agreement or in Section 3.3 above are untrue in any material respect on
the date such Qualified Replacement Mortgage is conveyed to the Trust such that
the interests of the Owners or the Certificate Insurer in the related Qualified
Replacement Mortgage are materially and adversely affected; provided, however,
that for the purposes of this subsection (c) the representations and warranties
in the related Master Transfer Agreement or as set forth in Section 3.3 above
referring to items "as of the Cut-Off Date" or "as of the Startup Day" shall be
deemed to refer to such items as of the date such Qualified Replacement Mortgage
is conveyed to the Trust.
(d) It is understood and agreed that the covenants set forth
in this Section 3.4 shall survive delivery of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Trustee.
(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any
Mortgage Loan pursuant to this section or the eligibility of any Mortgage Loan
for purposes of this Agreement.
Section 3.5. Conveyance of the Mortgage Loans. (a) The
Company, concurrently with the execution and delivery hereof, hereby transfers,
assigns,
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sets over and otherwise conveys without recourse, to the Depositor, and the
Depositor, concurrently with such transfer, hereby transfers, assigns, sets over
and otherwise conveys without recourse, to the Trustee for the benefit of the
Owners of the Certificates, all right, title and interest of the Company and the
Depositor, as the case may be, in and to each Mortgage Loan listed on the
Schedules of Mortgage Loans delivered by the Company and the Depositor, as the
case may be, on the Startup Day, all right, title and interest in and to
principal and interest due on each such Initial Mortgage Loan after the Cut-Off
Date (other than payments of principal and interest due on or before the Cut-Off
Date) and all its right, title and interest in and to all Insurance Policies;
provided, however, that the Company reserves and retains all its right, title
and interest in and to principal (including Prepayments) collected and principal
and interest due on each Mortgage Loan on or prior to the Cut-Off Date. The
transfer by the Company of the Mortgage Loans set forth on the Schedules of
Mortgage Loans to the Depositor and by the Depositor to the Trustee is absolute
and is intended by the Owners and all parties hereto to be treated as a sale by
the Company and the Depositor, as the case may be.
It is intended that the sale, transfer, assignment and
conveyance herein contemplated constitute a sale of the Mortgage Loans conveying
good title thereto free and clear of any liens and encumbrances from the Company
to the Depositor and by the Depositor to the Trust and that the Mortgage Loans
not be part of either the Company's or the Depositor's estate in the event of an
insolvency. In the event that any such conveyance is deemed to be a loan, the
parties intend that the Company shall be deemed to have granted to the Depositor
and the Depositor shall be deemed to have granted to the Trustee a security
interest of first priority in all of the Company's and the Depositor's right,
title and interest in the Mortgage, Note and the File, and that this Agreement
shall constitute a security agreement under applicable law.
In connection with the sale, transfer, assignment, and
conveyance from the Company to the Depositor, the Company has filed, in the
appropriate office or offices in the States of California and New York, a UCC-1
financing statement executed by the Company as debtor, naming the Depositor as
secured party and listing the Mortgage Loans and the other property described
above as collateral. The characterization of the Company as a debtor and the
Depositor as the secured party in such financing statements is solely for
protective purposes and shall in no way be construed as being contrary to the
intent of the parties that this transaction be treated as a sale of the
Depositor's entire right, title and interest in the Mortgage Loans and the File
to the Trust. In connection with such filing, the Depositor agrees that it shall
cause to be filed all necessary continuation statements thereof and to take or
cause to be taken such actions and execute such documents as are necessary to
perfect and protect the Trustee's and the Owner's interests in the Mortgage
Loans and the File.
In connection with the sale, transfer, assignment, and conveyance, from
the Depositor to the Trustee, the Depositor has filed, in the appropriate office
or offices in the States of Delaware and New York, a UCC-1 financing statement
executed by the Depositor as debtor, naming the Trustee as secured party and
listing the Mortgage Loans and the other property described above as collateral.
The characterization of the Depositor as a debtor and the Trustee as the secured
party in such financing statements is solely for protective purposes and shall
in no way be construed as being contrary to the intent of the parties that this
transaction be treated as a sale of the Depositor's entire right, title and
interest in the Mortgage Loans and the File to the Trust. In connection with
such filing, the Depositor agrees that it shall cause to be filed all necessary
continuation statements thereof and to take or cause to be taken such actions
and execute such documents as are necessary to perfect and protect the Trustee's
and the Owner's interests in the Mortgage Loans and the File.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Company agrees to:
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(i) cause to be delivered, on or prior to the Startup
Day (except as otherwise stated below) without recourse to the Trustee
on the Startup Day with respect to each Mortgage Loan listed on the
Schedule of Mortgage Loans:
(a) the original Notes or certified copies
thereof, endorsed without recourse by the related Originator,
"Pay to the order of ______________________________, without
recourse" or "Pay to the order of holder, without recourse."
In the event that the Mortgage Loan was acquired by the
related Originator in a merger, the endorsement must be by the
"(related Originator), successor by merger to (name of
predecessor)"; and in the event that the Mortgage Loan was
acquired or originated by the related Originator while doing
business under another name, the endorsement must be by the
"(related Originator), formerly known as (previous name)";
(b) originals of all intervening assignments,
showing a complete chain of assignment from origination to the
related Originator, if any, including warehousing assignments,
with evidence of recording thereon (or, if an original
intervening assignment has not been returned from the
recording office, a certified copy thereof, the original to be
delivered to the Trustee forthwith after return);
(c) originals of all assumption and
modification agreements, if any (or, if an original assumption
and/or modification agreement has not been returned from the
recording office, a certified copy thereof, the original to be
delivered to the Trustee forthwith after return);
(d) either (A) the original Mortgage with
evidence of recording thereon or a certified copy of the
Mortgage as recorded, or (B) if the original Mortgage has not
yet been returned from the recording office, a certified copy
of the Mortgage, together with a receipt from the recording
office or from a title insurance company or a certificate of
an Authorized Person of the related Originator indicating that
such Mortgage has been delivered for recording;
(e) the original assignment of Mortgage for
each Mortgage Loan conveying the Mortgage to the Trust which
assignment shall be in form and substance acceptable for
recording in the state or other jurisdiction where the
mortgaged property is located and, within 75 Business Days
following the Startup Day with respect to the Mortgage Loans,
a recorded assignment of each such Mortgage; provided that in
the event that the Mortgage Loan was acquired by the related
Originator in a merger, the assignment of Mortgage must be by
the "(related Originator), successor by merger to (name of
predecessor)"; and in the event that the Mortgage Loan was
acquired or originated by the related Originator while doing
business under another name, the assignment of Mortgage must
be by the "(related Originator), formerly known as (previous
name)" (subject to the foregoing, and where permitted under
the applicable laws of the jurisdiction where the mortgaged
property is located, the assignments of Mortgage may be made
by blanket assignments for Mortgage Loans covering mortgaged
properties situated within the same county or other permitted
governmental subdivision); and
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(f) evidence of title insurance with respect
to the mortgaged property in the form of a binder or
commitment.
(ii) except with respect to Mortgage Loans covered by
opinions of counsel delivered in the manner set forth below
("Assignment Opinions"), cause, as soon as possible but no more than 75
Business Days following the Startup Day with respect to the Mortgage
Loans, the Originators to deliver to the Trustee copies of all Mortgage
assignments submitted for recording, together with a list of (x) all
Mortgages for which no Mortgage assignment has yet been submitted for
recording by the related Originator (y) reasons why the related
Originator has not yet submitted such Mortgage assignments for
recording; provided, however, that with respect to Mortgage Loans
subject to jurisdiction in the states of California, Colorado,
Illinois, Oregon, Washington, Georgia and Arizona an Originator shall
not be required to record an assignment of a Mortgage if the Company
furnishes to the Trustee and the Certificate Insurer, on or before the
Startup Day with respect to the Mortgage Loans, at the Company's
expense, the Assignment Opinions which opine that recording is not
necessary to perfect the rights of the Trustee in the related Mortgage
(in form satisfactory to the Certificate Insurer, Moody's and Standard
& Poor's). With respect to any Mortgage assignment set forth on the
aforementioned list which has not been submitted for recording for a
reason other than a lack of original recording information or with
respect to Mortgages not covered by the Assignment Opinions, the
Trustee shall make an immediate demand on the Company to cause such
Mortgage assignments to be prepared and shall inform the Certificate
Insurer of the Company's failure to cause such Mortgage assignments to
be prepared. Thereafter, the Trustee shall cooperate in executing any
documents prepared by the Certificate Insurer and submitted to the
Trustee in connection with this provision. Following the expiration of
the 75-Business Day period following the Startup Day and except with
respect to Mortgages covered by the Assignment Opinions, the Company
shall cause to be prepared a Mortgage assignment for any Mortgage for
which original recording information is subsequently received by the
related Originator and shall promptly deliver a copy of such Mortgage
assignment to the Trustee.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Company.
Notwithstanding anything to the contrary contained in this Section 3.5, in those
instances where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Company shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee
shall be kept in the related File.
(c) In the case of Mortgage Loans which have been prepaid in
full on or after the Cut-Off Date and prior to the Startup Day, the Company, in
lieu of the foregoing, will deliver within 15 Business Days after the Startup
Day to the Trustee a certification of an Authorized Officer in the form set
forth in Exhibit D.
(d) The Company shall transfer, assign, set over and otherwise
convey without recourse, to the Trustee all right, title and interest of the
Company in and to any Qualified Replacement Mortgage delivered to the Trustee on
behalf of the Trust by the Company pursuant to Section 3.4 or Section 3.6 hereof
and all its right, title and interest to principal collected and interest
accruing on such Qualified
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Replacement Mortgage on and after the applicable Replacement Cut-Off Date;
provided, however, that the Company shall reserve and retain all right, title
and interest in and to payments of principal and interest due on such Qualified
Replacement Mortgage prior to the applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage therefor, the
Trustee will transfer, assign, set over and otherwise convey without recourse,
on the Company's order, all of its right, title and interest in and to such
released Mortgage Loan and all the Trust's right, title and interest to
principal and interest due on such released Mortgage Loan after the applicable
Replacement Cut-Off Date; provided, however, that the Trust shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such released Mortgage Loan prior to the applicable Replacement
Cut-Off Date.
(f) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Trustee on behalf of the Trust, the
Company agrees to cause to be delivered to the Trustee the items described in
Section 3.5(b) on the date of such transfer and assignment or if a later
delivery time is permitted by Section 3.5(b) then no later than such later
delivery time.
(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the Trustee
shall deliver on the date of conveyance of such Qualified Replacement Mortgage,
and on the order of the Company (i) the original Note, or the certified copy,
relating thereto, endorsed without recourse, to the Company and (ii) such other
documents as constituted the File with respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Company shall prepare a substitute assignment or cure such defect,
as the case may be, and thereafter cause each such assignment to be duly
recorded.
(i) The Company shall reflect on its records that the Mortgage
Loans have been sold to the Depositor and the Depositor shall reflect on its
records that the Mortgage Loans have been sold to the Trust.
Section 3.6. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee.
(a) The Trustee agrees to execute and deliver to the
Depositor, the Company, the Servicer and the Certificate Insurer on the Startup
Day an Initial Certification in the form annexed hereto as Exhibit E to the
effect that, as to each Mortgage Loan listed in the Schedules of Mortgage Loans
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in such certification as not covered by such certification), (i) all
documents required to be delivered to it pursuant to this Agreement with respect
to such Mortgage Loan are in its possession, (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage Loan
and (iii) based on its examination and only as to the foregoing documents, the
information set forth on the Schedules of Mortgage Loans as to loan number and
address accurately reflects information set forth in the File. The Trustee shall
not be under any duty or obligation to inspect, review or examine said
documents, instruments, certificates or other papers to determine that the same
are genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face. Within 90 days of the Startup Date (or, with respect to any
document delivered after the Startup Day, within 45 days of receipt and with
respect to any or Qualified
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Replacement Mortgage, within 45 days after the assignment thereof) the Trustee
shall deliver to the Depositor, the Company, Certificate Insurer and the
Servicer a Final Certification in the form annexed hereto as Exhibit F
evidencing the completeness of the Files, with any applicable exceptions noted
thereon.
(b) If in the process of reviewing the Files and preparing the
certifications referred to above the Trustee finds any document or documents
constituting a part of a File which is not properly executed, has not been
received within the specified period or is unrelated to the Mortgage Loans
identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does
not conform as to loan number and address as set forth in the Schedules of
Mortgage Loans, the Trustee shall promptly notify the Company and the
Certificate Insurer. The Company shall use reasonable efforts to cure any such
defect within 60 days from the date on which the Company was notified of such
defect, and if the Company does not cure such defect in all material respects
during such period, the Company will (or will cause the related Originator or an
affiliate of the Company to) on the next succeeding Remittance Date (i)
substitute in lieu of such Mortgage Loan a Qualified Replacement Mortgage and
deliver the Substitution Amount applicable thereto to the Servicer for deposit
in the Principal and Interest Account or (ii) purchase such Mortgage Loan at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Servicer for deposit in the Principal and Interest
Account. In connection with any such proposed purchase or substitution the
Company shall cause at the Company's expense to be delivered to the Trustee and
to the Certificate Insurer an opinion of counsel experienced in federal income
tax matters stating whether or not such a proposed purchase or substitution
would constitute a Prohibited Transaction for the Trust or would jeopardize the
status of the Trust as a REMIC, and the Company shall only be required to take
either such action to the extent such action would not constitute a Prohibited
Transaction for the Trust or would not jeopardize the status of the Trust as a
REMIC. Any required purchase or substitution, if delayed by the absence of such
opinion shall nonetheless occur upon the earlier of (i) the occurrence of a
default or imminent default with respect to the Mortgage Loan or (ii) the
delivery of such opinion.
Section 3.7. Cooperation Procedures. (a) The Company shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Trustee, provide the Trustee with the information set forth in the Schedules of
Mortgage Loans with respect to such Qualified Replacement Mortgage.
(b) The Company, the Servicer, the Depositor and the Trustee
covenant to provide each other with all data and information required to be
provided by them hereunder at the times required hereunder, and additionally
covenant reasonably to cooperate with each other in providing any additional
information required to be obtained by any of them in connection with their
respective duties hereunder.
(c) The Servicer shall maintain such accurate and complete
accounts, records and computer systems pertaining to each File as shall enable
it and the Trustee to comply with this Agreement. In performing its
recordkeeping duties the Servicer shall act in accordance with the servicing
standards set forth in this Agreement. The Servicer shall conduct, or cause to
be conducted, periodic audits of its accounts, records and computer systems as
set forth in Sections 8.16 and 8.17 hereof. The Servicer shall promptly report
to the Trustee any failure on its part to maintain its accounts, records and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure.
(d) The Company further confirms to the Trustee that it has
caused the portions of the electronic ledger relating to the Mortgage Loans to
be clearly and unambiguously marked to indicate that such Mortgage Loans have
been sold, transferred, assigned and conveyed to the Trustee and constitute part
of the Trust Estate in accordance with the terms of the trust created hereunder
and that the
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Company will treat the transaction contemplated by such sale, transfer,
assignment and conveyance as a sale for accounting purposes.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Startup Day,
upon the Trustee's receipt from the Company of an executed Delivery Order in the
form set forth as Exhibit G hereto, the Trustee shall execute, authenticate and
deliver the Certificates on behalf of the Trust in accordance with the
directions set forth in such Delivery Order.
Section 4.2. Sale of Certificates. At 10 a.m. New York City
time on the Startup Date, at the offices of Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York, the Company will sell and convey the Mortgage
Loans and the money, instruments and other property related thereto to the
Depositor, the Depositor will sell and convey the Mortgage Loans and the money,
instruments and other property related thereto to the Trustee, and the Trustee
will (i) deliver to the Underwriter the Class A Certificates with an aggregate
Percentage Interest in each Class equal to 100%, registered in the name of Cede
& Co. or in such other names as the Underwriter shall direct, against payment of
the purchase price thereof by wire transfer of immediately available funds to
the Trustee and (ii) deliver to the Company the Class R Certificates, with an
aggregate Percentage Interest in each Class equal to 100%, registered as the
Company shall request. Upon the Trustee's receipt of the entire net proceeds of
the sale of the Class A Certificates the Company shall instruct the Trustee to:
(a) pay any fees and expenses identified by the Company and (b) pay to the
Company the balance after deducting such amounts. The Company shall pay directly
to the Certificate Insurer the Initial Premiums.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through
securities having the rights described therein and herein. Notwithstanding
references herein or therein with respect to the Certificates as to "principal"
and "interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policies). Distributions on the Certificates are payable solely from
payments received on or with respect to the Mortgage Loans (other than the
Servicing Fees), moneys in the Principal and Interest Account, except as
otherwise provided herein, from earnings on moneys and the proceeds of property
held as a part of the Trust Estate and, upon the occurrence of certain events,
from Insured Payments. Each Certificate entitles the Owner thereof to receive
monthly on each Payment Date, in order of priority of distributions with respect
to such Class of Certificates a specified portion of such payments with respect
to the Mortgage Loans in the related Mortgage Loan Group and certain related
Insured Payments, pro rata in accordance with such Owner's Percentage Interest.
(b) Each Owner is required, and hereby agrees, to return to
the Trustee at the Corporate Trust Office any Certificate prior to the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement.
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Section 5.2. Forms. The Class A-1 Certificates, the Class A-2
Certificates and the Class R Certificates shall be in substantially the forms
set forth in Exhibits A-1, A-2 and C hereof, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or as may in the Company's judgment be necessary,
appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any applicable securities laws or as may, consistently herewith, be
determined by the Authorized Officer of the Trustee executing such Certificates,
as evidenced by his execution thereof.
Section 5.3. Execution, Authentication and Delivery. Each
Certificate shall be executed on behalf of the Trust, by the manual or facsimile
signature of one of the Trustee's Authorized Officers and shall be authenticated
by the manual or facsimile signature of one of the Trustee's Authorized
Officers.
Certificates bearing the manual signature of individuals who
were at any time the proper officers of the Trustee shall, upon proper
authentication by the Trustee, bind the Trust, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
execution and delivery of such Certificates or did not hold such offices at the
date of authentication of such Certificates.
The initial Certificates shall be dated as of the Startup Day
and delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated
as set forth above.
Section 5.4. Registration and Transfer of Certificates. (a)
The Trustee, as registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed registrar for the
purpose of registering Certificates and transfers of Certificates as herein
provided. The Owners shall have the right to inspect the Register during
business hours upon reasonable notice (but no less than 2 Business Days) and to
obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon
surrender for registration of transfer of any Certificate at the office
designated as the location of the Register, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class
owned by such Owner may be exchanged for other Certificates authorized of like
Class, tenor, aggregate original principal amount and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
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(e) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Class A Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Class A Certificate with a denomination equal to the Original
Aggregate Principal Balance. Upon initial issuance, the ownership of each such
Class A Certificate shall be registered in the Register in the name of Cede &
Co., or any successor thereto, as nominee for the Depository.
On the Startup Day, no Class A Certificates shall be issued in
denominations of less than $1,000 except for one Certificate of each Class which
may be in a denomination of less than $1,000; accordingly the Trust shall not
issue tail certificates on the Startup Day.
The Company and the Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Register in the name of Cede & Co., as nominee of the Depository, the Depositor,
the Company, the Servicer and the Trustee shall have no responsibility or
obligation to Direct or Indirect Participants or beneficial owners for which the
Depository holds Class A Certificates from time to time as a Depository. Without
limiting the immediately preceding sentence, the Company, the Servicer and the
Trustee shall have no responsibility or obligation with respect to (i) the
accuracy of the records of the Depository, Cede & Co., or any Direct or Indirect
Participant with respect to the ownership interest in the Class A Certificates,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a registered Owner of a Class A Certificate as shown in the Register,
of any notice with respect to the Class A Certificates or (iii) the payment to
any Direct or Indirect Participant or any other Person, other than a registered
Owner of a Class A Certificate as shown in the Register, of any amount with
respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a registered Owner of a Class A Certificate
as shown in the Register shall receive a certificate evidencing such Class A
Certificate.
Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of interest by the mailing of checks or drafts to the
registered Owners of Class A Certificates appearing as registered Owners in the
registration books maintained by the Trustee at the close of business on a
Record Date, the name "Cede & Co." in this Agreement shall refer to such new
nominee of the Depository.
(h) In the event that (i) the Depository or the Company
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Company or the Trustee is unable to
locate a qualified successor or (ii) the Company at its sole option elects to
terminate the book-entry system
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through the Depository, the Class A Certificates shall no longer be restricted
to being registered in the Register in the name of Cede & Co. (or a successor
nominee) as nominee of the Depository. At that time, the Company may determine
that the Class A Certificates shall be registered in the name of and deposited
with a successor depository operating a global book-entry system, as may be
acceptable to the Company and at the Company's expense, or such depository's
agent or designee but, if the Company does not select such alternative global
book-entry system, then the Class A Certificates may be registered in whatever
name or names registered Owners of Class A Certificates transferring Class A
Certificates shall designate, in accordance with the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates and all notices with respect to such Class
A Certificates shall be made and given, respectively, in the manner provided in
the Representation Letter.
Section 5.5. Mutilated, Destroyed, Lost or Stolen
Certificates. If (i) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) in the case of any mutilated Certificate,
such mutilated Certificate shall first be surrendered to the Trustee, and in the
case of any destroyed, lost or stolen Certificate, there shall be first
delivered to the Trustee such security or indemnity as may be reasonably
required by it to hold the Trustee harmless, then, in the absence of notice to
the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Trustee shall execute, authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like Class, tenor and aggregate principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto; any other
expenses in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in
exchange for or in lieu of any mutilated, destroyed, lost or stolen Certificate
shall constitute evidence of a substitute interest in the Trust and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.6. Persons Deemed Owners. The Trustee and any agent
of the Trustee may treat the Person in whose name any Certificate is registered
as the Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7. Cancellation. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate canceled as provided in this Section, except as expressly permitted
by this Agreement. All canceled Certificates may be held by the Trustee in
accordance with its standard retention policy.
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Section 5.8. Limitation on Transfer of Ownership Rights. (a)
No sale or other transfer of any Class A Certificate shall be made to the
Company, any Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial
ownership of a Class R Certificate (whether pursuant to a purchase, a transfer
resulting from a default under a secured lending agreement or otherwise) shall
be made to a Disqualified Organization or agent of a Disqualified Organization.
The transfer, sale or other disposition of a Class R Certificate (whether
pursuant to a purchase, a transfer resulting from a default under a secured
lending agreement or otherwise) to a Disqualified Organization shall be deemed
to be of no legal force or effect whatsoever and such transferee shall not be
deemed to be an Owner for any purpose hereunder, including, but not limited to,
the receipt of distributions on such Class R Certificate. Furthermore, in no
event shall the Trustee accept surrender for transfer, registration of transfer,
or register the transfer, of any Class R Certificate nor authenticate and make
available any new Class R Certificate unless the Trustee has received an
affidavit from the proposed transferee in the form attached hereto as Exhibit H.
Each holder of a Class R Certificate, by his acceptance thereof, shall be deemed
for all purposes to have consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial
ownership of a Class R Certificate shall be made unless such transfer is exempt
from the registration requirements of the Securities Act, as amended, and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event such a transfer is to be made within three years from the
Startup Day, (i) the Trustee and the Company shall require a written opinion of
counsel acceptable to and in form and substance satisfactory to the Company and
the Certificate Insurer in the event that such transfer may be made pursuant to
an exemption, describing the applicable exemption and the basis therefor, from
said Act and laws or is being made pursuant to said Act and laws, which opinion
of counsel shall not be an expense of the Trustee, the Trust Estate or the
Certificate Insurer, and (ii) the Trustee shall require the Transferee to
execute an investment letter acceptable to and in form and substance
satisfactory to the Company and the Certificate Insurer certifying to the
Trustee, the Certificate Insurer and the Company the facts surrounding such
transfer, which investment letter shall not be an expense of the Trustee, the
Trust Estate, the Certificate Insurer or the Company. The Owner of a Class R
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee, the Certificate Insurer and the Company against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
Section 5.9. Assignment of Rights. An Owner may pledge,
encumber, hypothecate or assign all or any part of its right to receive
distributions hereunder, but such pledge, encumbrance, hypothecation or
assignment shall not constitute a transfer of an ownership interest sufficient
to render the transferee an Owner of the Trust without compliance with the
provisions of Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. On each Payment Date, the Trustee
will withdraw amounts from the Certificate Account and make the distributions
with respect to the Certificates in accordance with the terms of the
Certificates and this Agreement. Such distributions shall be made (i) by check
mailed on each Payment Date or (ii) if requested by any Owner, to such Owner by
wire transfer to an account within the United States designated no later than
five Business Days prior to the related Record Date,
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made on each Payment Date, in each case to each Owner of record on the
immediately preceding Record Date; provided, however, that an Owner of a Class A
Certificate shall only be entitled to payment by wire transfer if such Owner
owns Class A Certificates in the aggregate denomination of at least $5,000,000.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Certificate
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of
any amount due with respect to any Class A Certificate and remaining unclaimed
by the Owner of such Class A Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first to the Certificate
Insurer on account of any Reimbursement Amounts and second to the Owners of the
Class R Certificates; and the Owner of such Class A Certificate shall
thereafter, as an unsecured general creditor, look only to the Certificate
Insurer or the Owners of the Class R Certificates for payment thereof (but only
to the extent of the amounts so paid to the Certificate Insurer or the Owners of
the Class R Certificates), and all liability of the Trustee with respect to such
trust money shall thereupon cease; provided, however, that the Trustee, before
being required to make any such payment, shall at the expense of the Trust cause
to be published once, in the eastern edition of The Wall Street Journal, notice
that such money remains unclaimed and that, after a date specified therein,
which shall be not fewer than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be paid to the Certificate
Insurer or the Owners of the Class R Certificates. The Trustee shall, at the
direction of the Company, also adopt and employ, at the expense of the Trust,
any other reasonable means of notification of such payment (including but not
limited to mailing notice of such payment to Owners whose right to or interest
in moneys due and payable but not claimed is determinable from the Register at
the last address of record for each such Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee will
hold the Trust Estate in trust for the benefit of the Owners and, upon request
of the Certificate Insurer, or, with the consent of the Certificate Insurer, at
the request and expense of the Company, will from time to time execute and
deliver all such supplements and amendments hereto pursuant to Section 11.14
hereof and all instruments of further assurance and other instruments, and will
take such other action upon such request from the Company or the Certificate
Insurer, to:
(i) more effectively hold in trust all or any portion of the
Trust Estate;
(ii) perfect, publish notice of or protect the validity of
any grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
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(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee, and the ownership interests of the Owners
represented thereby, in such Trust Estate against the claims of all
Persons and parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Company to take any action pursuant to this Section
6.3 to the other party.
(b) The Trustee shall have the power to enforce, shall enforce
the obligations of the other parties to this Agreement and of the Certificate
Insurer, by action, suit or proceeding at law or equity and shall also have the
power to enjoin, by action or suit in equity, any acts or occurrences which may
be unlawful or in violation of the rights of the Owners; provided, however, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Class A Certificates then Outstanding or, if there are no longer any
affected Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates.
(c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties.
Section 6.4. Performance of Obligations. The Trustee will not
take any action that would release the Depositor, the Company or the Certificate
Insurer from any of their respective covenants or obligations under any
instrument or document relating to the Trust Estate or the Certificates or which
would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any such instrument or
document, except as expressly provided in this Agreement or such other
instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
Section 6.5. Negative Covenants. The Trustee will not, to the
extent within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of
the Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Owner by reason of the payment
of any taxes levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in
part, except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations with
respect to the Trust or to the Certificates under this
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Agreement, except as may be expressly permitted hereby or (B) create or extend
any lien, charge, adverse claim, security interest, mortgage or other
encumbrance to or upon the Trust Estate or any part thereof or any interest
therein or the proceeds thereof.
Section 6.6. No Other Powers. The Trustee will not, to the
extent within the control of the Trustee, permit the Trust to engage in any
business activity or transaction other than those activities permitted by
Section 2.3 hereof.
Section 6.7. Limitation of Suits. No Owner shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Agreement or the Certificate Insurance Policies or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the Company
and the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the affected Class or Classes of Certificates
then Outstanding or, if there are no affected Classes of Class
A Certificates then Outstanding, by such percentage of the
Percentage Interests represented by the Class R Certificates
shall have made written request to the Trustee to institute
such proceeding in respect of such Event of Default;
(3) such Owner or Owners have offered to the Trustee indemnity
against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer consented in writing thereto; and
(6) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the
Certificate Insurer or by the Owners of a majority of the
Percentage Interests represented by the Class A Certificates
or, if there are no Class A Certificates then Outstanding, by
such majority of the Percentage Interests represented by the
Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Owners, each
representing less than a majority of the applicable Class of Certificates, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provision of this Agreement.
Section 6.8. Unconditional Rights of Owners to Receive
Distributions. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right,
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which is absolute and unconditional, to receive distributions to the extent
provided herein and therein with respect to such Certificate or to institute
suit for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
Section 6.9. Rights and Remedies Cumulative. Except as
otherwise provided herein, no right or remedy herein conferred upon or reserved
to the Trustee, the Certificate Insurer or to the Owners is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. Except as otherwise provided herein, the assertion or employment of
any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver. No delay of the
Trustee, the Certificate Insurer or any Owner of any Certificate to exercise any
right or remedy under this Agreement to any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article VI or by law
to the Trustee, the Certificate Insurer or the Owners may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee, the
Certificate Insurer or the Owners, as the case may be.
Section 6.11. Control by Owners. The Certificate Insurer or
the Owners of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding, with the consent of the Certificate Insurer
(which may not be unreasonably withheld), or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding, with the consent of
the Certificate Insurer (which may not be unreasonably withheld), may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.3, Section
8.20 and Section 10.1 hereof, provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Agreement;
(2) the Trustee shall have been provided with indemnity
satisfactory to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, which is not inconsistent with such direction;
provided, however, that the Trustee need not take any action
which it determines might involve it in liability or may be
unjustly prejudicial to the Owners not so directing.
Section 6.12. Access to Owners of Certificates' Names and
Addresses. (a) If any owner (for purposes of this Section 6.12, an "Applicant")
applies in writing to the Trustee, and such application states that the
Applicant desires to communicate with other Owners with respect to their rights
under this Agreement or under the Certificates and is accompanied by a copy of
the communication which such Applicant proposes to transmit, then the Trustee
shall, at the expense of such Applicant, within ten (10) Business Days after the
receipt of such application, furnish or cause to be furnished to such Applicant
a list of the names and addresses of the Owners of record as of the most recent
Payment Date.
(b) Every Owner, by receiving and holding such list, agrees
with the Trustee that the Trustee shall not be held accountable in any way by
reason of the disclosure of any information as to the
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names and addresses of the owners hereunder, regardless of the source from which
such information was derived.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Sub-Servicer
and (b) Insured Payments. The Trustee shall hold all such money and property
received by it, other than pursuant to or as contemplated by Section 6.2(b)
hereof, as part of the Trust Estate and shall apply it as provided in this
Agreement.
Section 7.2. Establishment of Accounts. The Company shall
cause to be established, and the Trustee shall maintain, at the Corporate Trust
Office, a Certificate Account and an Available Funds Cap Carry-Forward Amount
Account, each to be held by the Trustee so long as the Trustee qualifies as a
Designated Depository Institution and if the Trustee does not so qualify, then
by any Designated Depository Institution in the name of the Trust for the
benefit of the Owners of the Certificates and the Certificate Insurer, as their
interests may appear.
Section 7.3. The Certificate Insurance Policies. (a) (i) Three
Business Days prior to each Payment Date the Trustee shall determine (based
solely upon the information contained in the Monthly Servicing Report) with
respect to the immediately following Payment Date, the amount required to be on
deposit in the Certificate Account on such Payment Date with respect to Group I
(disregarding the sum of (x) the amount of any Insured Payments and (y) the
amount of any expected investment earnings) and equal to the sum of (A) such
amount excluding the amount of any Total Monthly Excess Cashflow from Group I
included in such amount plus (B) any amount of Total Monthly Excess Cashflow
from either Group to be applied on account of Group I on such Payment Date to
the Class A-1 Certificates. The amount described in clause (A) of the preceding
sentence with respect to each Payment Date is the "Group I Available Funds"; the
sum of the amounts described in clauses (A) and (B) of the preceding sentence
with respect to each Payment Date is the "Group I Total Available Funds."
(ii) Three Business Days prior to each Payment Date, the
Trustee shall determine (based solely upon the information contained in the
Monthly Servicing Report) with respect to the immediately following Payment
Date, the amount required to be on deposit in the Certificate Account on such
Payment Date with respect to Group II (disregarding the sum of (x) the amount of
any Insured Payments and (y) the amount of any expected investment earnings),
and equal to the sum of (A) such amount excluding the amount of any Total
Monthly Excess Cashflow from Group II included in such amount plus (B) any
amounts of Total Monthly Excess Cashflow from either Group to be applied on
account of Group II on such Payment Date to the Class A-2 Certificates. The
amount described in clause (A) of the preceding sentence with respect to each
Payment Date is the "Group II Available Funds"; the sum of the amounts described
in clauses (A) and (B) of the preceding sentence with respect to each Payment
Date is the "Group II Total Available Funds".
(b) If the sum of the Class A-1 Current Interest and Group I
Subordination Deficit for any Payment Date exceeds the Group I Total Available
Funds for such Payment Date after deducting amounts payable therefrom, if any,
for the Group I Premium Amount and the Group I Trustee Fee due
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on such Payment Date and after taking into account the portion of the Group I
Principal Distribution Amount to be actually distributed on such Payment Date
without regard to any Group I Insured Payment to be made with respect to such
Payment Date, (such event being a "Group I Total Available Funds Shortfall"),
the Trustee shall complete a Notice in the form of Exhibit A to the Class A-1
Certificate Insurance Policy and submit such notice to the Certificate Insurer
no later than 12:00 noon New York City time on the third Business Day preceding
such Payment Date as a claim for an Insured Payment in an amount equal to such
Group I Total Available Funds Shortfall. Similarly, if on any Payment Date the
sum of the Class A-2 Current Interest and Group II Subordination Deficit exceeds
the Group II Total Available Funds for such Payment Date after deducting amounts
payable therefrom, if any, for the Group II Premium Amount and the Group II
Trustee Fee due on such Payment Date and after taking into account the portion
of the Class A-2 Principal Distribution Amount to be actually distributed on
such Payment Date without regard to any Group II Insured Payment to be made with
respect to such Payment Date, (such event being a "Group II Total Available
Funds Shortfall"), the Trustee shall complete a Notice in the form of Exhibit A
to the Class A-2 Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 noon New York City time on the second
Business Day preceding such Payment Date as a claim for an Insured Payment in an
amount equal to such Group II Total Available Funds Shortfall.
(c) The Certificate Insurer shall forward to the Trustee
Insured Payments no later than 12:00 noon New York City time on the Business Day
preceding the Payment Date or on such later date specified in the related
Certificate Insurance Policy. Upon receipt of Insured Payments from the
Certificate Insurer on behalf of Owners, the Trustee shall deposit such Insured
Payments in the Certificate Account and shall distribute such Insured Payments,
or the proceeds thereof, in accordance with Section 7.5(d)(iv) to the Owners of
the Class A Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of Offered Certificates as set forth in
Section 7.5(d)(iv). Insured Payments disbursed by the Trustee from proceeds of a
Certificate Insurance Policy shall not be considered payment by the Trust nor
shall such payments discharge the obligation of the Trust with respect to the
related Class A Certificates, and the Certificate Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to Sections 7.5(d)(ii)(C) and
7.5(d)(ii)(D) hereof. Each Owner of Class A Certificates by its acceptance
thereof recognizes that to the extent the Certificate Insurer makes Insured
Payments, either directly or indirectly (as by paying through the Trustee), to
the Owners of such Class A Certificates the Certificate Insurer will be entitled
to receive the related Reimbursement Amount pursuant to Sections 7.5(d)(ii)(C)
and 7.5(d)(ii)(D) hereof.
Section 7.4 [Reserved]
Section 7.5. Flow of Funds. (a) The Trustee shall deposit to
the Certificate Account with respect to Group I, without duplication, upon
receipt, any Insured Payments relating to Group I, the proceeds of any
liquidation of the assets of the Trust, insofar as such assets relate to Group
I, the Group I Monthly Remittance Amount remitted by the Servicer or any
Sub-Servicer, together with any Substitution Amounts and any Loan Purchase Price
amounts received by the Trustee (each with respect to Group I).
(b) The Trustee shall deposit to the Certificate Account with
respect to Group II, without duplication, (i) upon receipt, any Insured Payments
relating to Group II, the proceeds of any liquidation of the assets of the
Trust, insofar as such assets relate to Group II, the Group II Monthly
Remittance
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Amount remitted by the Servicer or any Sub-Servicer, together with any
Substitution Amounts and any Loan Purchase Price amounts received by the Trustee
(each with respect to Group II).
(c) [Reserved].
(d) With respect to the Certificate Account, on each Payment
Date, the Trustee shall make the following allocations, disbursements and
transfers for each Mortgage Loan Group from amounts deposited therein pursuant
to subsections (a) and (b), respectively in the following order of priority, and
each such allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and disbursements have
occurred:
(i) first, on each Payment Date from amounts then on deposit in the
Certificate Account (A) to the Trustee, the Trustee Fee and (B)
commencing on the third Payment Date following the Startup Day and each
Payment Date thereafter, to the Certificate Insurer, from amounts then
on deposit in the Certificate Account, (x) from amounts then on deposit
therein with respect to Group I, the Group I Premium Amount for such
Payment Date and (y) commencing on the seventh Payment Date from
amounts then on deposit therein with respect to Group II, the Group II
Premium Amount for such Payment Date;
(ii) second, on each Payment Date, the Trustee shall allocate an amount
equal to the sum of (x) the Total Monthly Excess Spread with respect to
such Mortgage Loan Group and Payment Date (net of the related Premium
Amount and Trustee Fee paid as described above) plus (y) any
Subordination Reduction Amount with respect to such Mortgage Loan Group
and Payment Date (such sum being the "Total Monthly Excess Cashflow"
with respect to such Mortgage Loan Group and Payment Date) with respect
to each Mortgage Loan Group in the following order of priority:
(A) first, such Total Monthly Excess Cashflow with
respect to each Group shall be allocated to the
payment of the related Class A Distribution Amount
pursuant to clause (iv) below on such Payment Date
with respect to the related Mortgage Loan Group in an
amount equal to the difference, if any, between (x)
the related Class A Distribution Amount (calculated
only with respect to clause (y) of the definition of
the related Group I or Group II Principal
Distribution Amount and without any Subordination
Increase Amount) for such Payment Date and (y) the
Available Funds with respect to such Mortgage Loan
Group for such Payment Date (the amount of such
difference being the "Group I or the Group II
Available Funds Shortfall" with respect to the
related Mortgage Loan Group);
(B) second, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the application described in clause
(A) above shall be allocated against any Available
Funds Shortfall with respect to the other Mortgage
Loan Group and to the payment of the Class A
Distribution Amount with respect to the other
Mortgage Loan Group pursuant to clause (iv) below;
(C) third, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocations described in clauses
(A) and (B) above shall be disbursed to the
Certificate Insurer in respect of amounts
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owen on account of any Reimbursement Amount with
respect to the related Mortgage Loan Group; and
(D) fourth, any portion of the Total Monthly Excess
Cashflow with respect to such Mortgage Loan Group
remaining after the allocations described in clauses
(A), (B) and (C) above shall be paid to the
Certificate Insurer in respect of any Reimbursement
Amount with respect to the other Mortgage Loan Group.
(iii) third, the amount, if any, of the Total Monthly Excess Cashflow with
respect to a Mortgage Loan Group on a Payment Date remaining after the
allocations described in clause (ii) above is the "Net Monthly Excess
Cashflow" with respect to such Mortgage Loan Group for such Payment
Date; such Net Monthly Excess Cashflow is required to be allocated in
the following order of priority:
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the allocation of a
Subordination Increase Amount to the payment of the
related Class A Distribution Amount pursuant to
clause (iv) below, any Subordination Deficiency
Amount with respect to the related Mortgage Loan
Group as of such Payment Date;
(B) second, the Net Monthly Excess Cashflow remaining
after the application described in clause (A) above
shall be used to reduce to zero, through the
allocation of a Subordination Increase Amount to the
payment of the related Class A Distribution Amount
pursuant to clause (iv) below, any Subordination
Deficiency Amounts with respect to the other Mortgage
Loan Group; and
(C) third, an amount equal to the lesser of (i) any
portion of the Net Monthly Excess Cashflow remaining
after the applications described in clauses (A) and
(B) above and (ii) the excess of (a) the Available
Funds Cap Carry-Forward Amount for such Payment Date
over (b) the amount then on deposit in the Available
Funds Cap Carry-Forward Amount Account shall be
allocated to the Available Funds Cap Carry-Forward
Amount Account.
(D) third, any Net Monthly Excess Cashflow remaining
after the applications described in clauses (A), (B)
and (C) above shall be paid to the Servicer to the
extent of any unreimbursed Delinquency Advances,
unreimbursed Servicing Advances and accrued and
unpaid Servicing Fees, in each case as certified to
the Trustee by the Servicer to be owing to it as of
such Payment Date.
(iv) fourth, following the making by the Trustee of all allocations,
transfers and disbursements described above under Section 7.3 hereof
and the prior clauses of this Section 7.5, from amounts (including any
related Insured Payment which shall be paid only to the Owners of the
Class A Certificates) then on deposit in the Certificate Account with
respect to the related Mortgage Loan Group, the Trustee shall
distribute in the following order of priority:
(A) from the amounts then on deposit in the Certificate
Account with respect to Group I, to the Owners of the
Class A-1 Certificates, the Class A-1 Current
Interest thereon until the Class A-1 Certificate
Termination Date;
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(B) from the amounts then on deposit in the Certificate
Account with respect to Group I, to the Owners of the
Class A-1 Certificates, the Group I Principal
Distribution Amount until the Class A-1 Certificate
Termination Date;
(C) from the amounts then on deposit in the Certificate
Account with respect to Group II, to the Owners of
the Class A-2 Certificates, the Class A-2 Current
Interest until the Class A-2 Certificate Termination
Date; and
(D) from the amounts then on deposit in the Certificate
Account with respect to Group II, to the Owners of
the Class A-2 Certificates, the Group II Principal
Distribution Amount until the Class A-2 Certificate
Termination Date;
(E) to the Owners of the Class R Certificates, the
Residual Net Monthly Excess Cashflow, if any, for
such Payment Date.
(e) On each Payment Date the Trustee shall distribute to the Owners of
the Class A-2 Certificates the amount, if any, then on deposit in the Available
Funds Cap Carry-Forward Amount Account.
(f) Notwithstanding clause (d)(iv) above, the aggregate amounts
distributed on all Payment Dates to the Owners of the related Class A
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the related Class A Certificates.
Section 7.6. Investment of Accounts. (a) So long as no event
described in Sections 8.20(a) or (b) hereof shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Trustee shall be invested and reinvested by the
Trustee in the name of the Trustee for the benefit of the Owners, as directed in
writing by the Servicer on the Closing Date and from time to time thereafter, in
one or more Eligible Investments bearing interest or sold at a discount. During
the continuance of an event described in Sections 8.20(a) or (b) hereof and
following any removal of the Servicer, the Certificate Insurer shall direct such
investments. No investment in any Account shall mature later than the second
Business Day preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not available to
make such disbursement, the Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. No
investments will be liquidated prior to maturity unless the proceeds thereof are
needed for disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any loss on any Eligible Investment included therein.
(d) The Trustee shall hold funds in the Accounts held by the
Trustee uninvested upon the occurrence of either of the following events:
(i) the Servicer or the Certificate Insurer, as the
case may be, shall have failed to give investment directions to the
Trustee within ten days after receipt of a written request for such
directions from the Trustee; or
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(ii) the Servicer or the Certificate Insurer, as the
case may be, shall have failed to give investment directions to the
Trustee with respect to any investment by the Trustee that shall mature
during the ten-day period described in clause (i).
(e) For purposes of investment, the Trustee shall aggregate
all amounts on deposit in each Account. All income or other gain from
investments in any Account shall be deposited in such Account immediately on
receipt, and any loss resulting from such investments shall be charged to the
Company, and upon request by the Trustee, the Company shall reimburse the Trust
Estate for such losses.
Section 7.7. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by Standard & Poor's and P-1 by Moody's.
(c) Investment agreements approved by the Certificate Insurer
provided:
1. The agreement is with a bank or insurance company which has
an unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by Standard &
Poor's or is the lead bank of a parent bank holding company with an
uninsured, unsecured and unguaranteed obligation meeting such rating
requirements,
2. Moneys invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time prior to
the withdrawal date),
3. The agreement is not subordinated to any other obligations
of such insurance company or bank,
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
5. The Trustee and the Certificate Insurer receive an opinion
of counsel that such agreement is an enforceable obligation of such
insurance company or bank.
(d) Commercial paper (having original maturities of not more
than 365 days) rated A-1 or better by Standard & Poor's and P-1 or better by
Moody's.
(e) Investments in no load money market funds rated AAAm or
AAAm-G by Standard & Poor's and P-1 by Moody's.
(f) Investments approved in writing by the Certificate Insurer
and acceptable to Moody's and Standard & Poor's.
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provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Section 7.8. Reports by Trustee. (a) On each Payment Date the
Trustee shall provide to each Owner, the Servicer, the Depositor, the
Certificate Insurer, the Underwriter, the Company, Standard & Poor's and Moody's
a written report (based solely upon the information contained in the Monthly
Servicing Report) in substantially the form set forth as Exhibit J hereto with
respect to each Mortgage Loan Group, as such form may be revised by the Trustee,
the Servicer, Moody's and Standard & Poor's from time to time, but in every case
setting forth the information requested on Exhibit J hereto and the following
information:
(i) the amount of the distribution with respect to the
related Class of the Class A Certificates and the Class R Certificates;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments or Prepaid Installments of principal included therein
(based on a Certificate in the original principal amount of $1,000) and
separately identifying any Subordination Increase Amounts with respect
to the related Mortgage Loan Group;
(iii) the amount of such distributions allocable to
interest;
(iv) the Certificate Principal Balance for each Class of
Class A Certificates as of such Payment Date together with the
principal amount of such Class of Class A Certificates (based on a
Certificate in an original principal amount of $1,000) then
outstanding, in each case after giving effect to any payment of
principal on such Payment Date;
(v) the amount of any Insured Payment included in the
amounts distributed with respect to the Class A Certificates on such
Payment Date;
(vi) information to the extent and in the form furnished
by the Company pursuant to Section 6049(d)(7)(C) of the Code and the
regulations promulgated thereunder to assist the Owners in computing
their market discount;
(vii) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(viii) the amount of any Subordination Reduction Amount
with respect to each Mortgage Loan Group;
(ix) the amounts, if any, of any Realized Losses in each
Mortgage Loan Group for the related Remittance Period;
(x) the amount of any Available Funds Cap Carry-Forward
Amount; and
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(xi) a number with respect to each Class (the "Pool
Factor" for such Class) computed by dividing the Certificate Principal
Balance for such Class (after giving effect to any distribution of
principal to be made on such Payment Date) by the Original Certificate
Principal Balance for such Class on the Startup Day.
Items (i) through (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a Certificate having
a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Certificates are outstanding, the Trustee
shall furnish a report to each Owner of record at any time during each calendar
year as to the aggregate of amounts reported pursuant to (i), (ii) and (iii)
with respect to the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will
distribute to each Owner, the Certificate Insurer, the Underwriter, the
Depositor, the Servicer, the Company, Standard & Poor's and Moody's, together
with the information described in Subsection (a) preceding, the following
information with respect to each Mortgage Loan Group as of the last day of the
related Remittance Period, which is hereby required to be prepared by the
Servicer and furnished to the Trustee for such purpose on or prior to the
related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage
Loan Group and the aggregate Loan Balances thereof, together with the
number, aggregate principal balances of such Mortgage Loans in such
Mortgage Loan Group and the percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) (a) 31-60
days Delinquent, (b) 61-90 days Delinquent and (c) 91 or more days
Delinquent;
(ii) the number and aggregate Loan Balances of all
Mortgage Loans in each Mortgage Loan Group and percentage (based on the
aggregate Loan Balances of the Mortgage Loans in such Mortgage Loan
Group) in foreclosure proceedings (and whether any such Mortgage Loans
are also included in any of the statistics described in the foregoing
clause (i));
(iii) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the
aggregate Loan Balances of the Mortgage Loans in such Mortgage Loan
Group) relating to Mortgagors in bankruptcy proceedings (and whether
any such Mortgage Loans are also included in any of the statistics
described in the foregoing clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the
aggregate Loan Balances of the Mortgage Loans in such Mortgage Loan
Group) relating to REO Properties (and whether any such Mortgage Loans
are also included in any of the statistics described in the foregoing
clause (i));
(v) the aggregate Loan Balance of all Mortgage Loans, the
aggregate Loan Balance of the Mortgage Loans in each Group in each case
after giving effect to any payment of principal on such Payment Date;
and
(vi) the book value of any REO Property in each Mortgage Loan
Group.
(c) The foregoing reports shall be sent to an Owner only
insofar as such Owner owns a Certificate with respect to the related Mortgage
Loan Group.
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Section 7.9. Additional Reports by Trustee. (a) The Trustee
shall report to the Company, the Depositor, the Servicer, Standard & Poor's,
Moody's and the Certificate Insurer with respect to the amount then held in each
Account (including investment earnings accrued or scheduled to accrue) held by
the Trustee and the identity of the investments included therein, as the
Company, the Servicer or the Certificate Insurer may from time to time request.
(b) Not later than 20 days after each Payment Date, the
Trustee shall forward to the Company, the Depositor, the Servicer and the
Certificate Insurer a statement, setting forth the status of the Certificate
Account as of the close of business on the last Business Day of the related
Remittance Period showing, for the period covered by such statement, the
aggregate of deposits into and withdrawals from the Certificate Account.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.1. Servicer and Sub-Servicers. (a) Acting directly
or through one or more Sub-Servicers as provided in Section 8.3, the Servicer,
as servicer, shall service and administer the Mortgage Loans in accordance with
this Agreement and with reasonable care, and using that degree of skill and
attention that the Servicer exercises with respect to comparable mortgage loans
that it services for itself or others, and shall have full power and authority,
acting alone, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
(b) The duties of the Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections,
furnishing monthly and annual statements to the Trustee with respect to
distributions, paying Compensating Interest and making Delinquency Advances and
Servicing Advances pursuant hereto. The Servicer shall follow its customary
standards, policies and procedures in performing its duties as Servicer. The
Servicer shall cooperate with the Trustee and furnish to the Trustee with
reasonable promptness information in its possession as may be necessary or
appropriate to enable the Trustee to perform its tax reporting duties hereunder.
The Trustee shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the
Servicer (i) shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Owners 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 related Properties; (ii)
may consent to any modification of the terms of any Note not expressly
prohibited hereby if the effect of any such modification (x) will not be to
affect materially and adversely the security afforded by the related Property,
the timing of receipt of any payments required hereby or the interests of the
Certificate Insurer and (y) will not cause the Trust to fail to qualify as a
REMIC.
(d) The parties intend that the Trust shall constitute and
that the affairs of Trust shall be conducted so as to qualify it as a REMIC. In
furtherance of such intention, the Servicer covenants
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and agrees that it shall act as agent (and the Servicer is hereby appointed to
act as agent) on behalf of the Trust and that in such capacity it shall: (i) use
its best efforts to conduct the affairs of the Trust at all times that any Class
of Certificates are outstanding so as to maintain the status of the Trust as a
REMIC under the REMIC Provisions; (ii) not knowingly or intentionally take any
action or omit to take any action that would cause the termination of the REMIC
status of the Trust or that would subject the Trust to tax and (iii) exercise
reasonable care not to allow the Trust to receive income from the performance of
services or from assets not permitted under the REMIC Provisions to be held by a
REMIC.
(e) The Servicer may, and is hereby authorized to, perform any
of its servicing responsibilities with respect to all or certain of the Mortgage
Loans through a Sub-Servicer as it may from time to time designate but no such
designation of a Sub-Servicer shall serve to release the Servicer from any of
its obligations under this Agreement. Such Sub-Servicer shall have all the
rights and powers of the Servicer with respect to such Mortgage Loans under this
Agreement.
(f) Without limiting the generality of the foregoing, but
subject to Sections 8.13 and 8.14, the Servicer in its own name or in the name
of a Sub-Servicer may be authorized and empowered pursuant to a power of
attorney executed and delivered by the Trustee to execute and deliver, on behalf
of itself, the Owners and the Trustee or any of them, (i) any and all
instruments of satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the Mortgage
Loans and with respect to the Properties, (ii) to institute foreclosure
proceedings or obtain a deed in lieu of foreclosure so as to effect ownership of
any Property on behalf of the Trustee and (iii) to hold title to any Property
upon such foreclosure or deed in lieu of foreclosure on behalf of the Trustee;
provided, however, that Section 8.14(a) shall constitute a power of attorney
from the Trustee to the Servicer to execute an instrument of satisfaction (or
assignment of mortgage without recourse) with respect to any Mortgage Loan paid
in full (or with respect to which payment in full has been escrowed). Subject to
Sections 8.13 and 8.14, the Trustee shall execute a power of attorney to the
Servicer and any Sub-Servicer and furnish them with any other documents as the
Servicer or such Sub-Servicer shall reasonably request to enable the Servicer
and such Sub-Servicer to carry out their respective servicing and administrative
duties hereunder.
(g) The Servicer shall give prompt notice to the Trustee and
the Certificate Insurer of any action, of which the Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
(h) Servicing Advances incurred by the Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with the payment of any taxes and assessments or
other charges) on any Property shall be recoverable by the Servicer or such
Sub-Servicer to the extent described in Section 8.9(c) and in Section
7.5(d)(iii)(C) hereof.
Section 8.2. Collection of Certain Mortgage Loan Payments. (a)
The Servicer shall, to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any applicable Insurance Policies
follow such collection procedures as it follows from time to time with respect
to mortgage loans in its servicing portfolio that are comparable to the Mortgage
Loans; provided that the Servicer shall always at least follow collection
procedures that are consistent with or better than standard industry practices.
Consistent with the foregoing, the Servicer may in its discretion (i) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the
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related Mortgage Loan; provided, however, the Servicer shall not reschedule the
payment of delinquent payments more than one time in any twelve (12) consecutive
months with respect to any Mortgagor or (iii) modify payments of monthly
principal and interest on any Mortgage Loan becoming subject to the terms of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended, in accordance with
the Servicer's general policies of the comparable mortgage loans subject to such
Act.
(b) The Servicer shall hold in escrow on behalf of the related
Mortgagor all Prepaid Installments received by it, and shall apply such Prepaid
Installments as directed by such Mortgagor and as set forth in the related Note.
Section 8.3. Sub-Servicing Agreements Between Servicer and
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is
acceptable to the Certificate Insurer and which is in compliance with the laws
of each state necessary to enable it to perform its obligations under such
Sub-Servicing Agreement and (x) has (i) been designated an approved
seller-servicer by FHLMC or FNMA for Mortgage Loans and (ii) has equity of at
least $5,000,000, as determined in accordance with generally accepted accounting
principles or (y) is a Servicer Affiliate. The Servicer shall give notice to the
Certificate Insurer and the Trustee of the appointment of any Sub-Servicer and
shall furnish to the Certificate Insurer and the Trustee a copy of such
Sub-Servicing Agreement. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. Any such Sub-Servicing Agreement shall be consistent
with and not violate the provisions of this Agreement.
Section 8.4. Successor Sub-Servicers. The Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement and either itself directly service
the related Mortgage Loans or enter into a Sub-Servicing Agreement with a
successor Sub-Servicer that qualifies under Section 8.3.
Section 8.5. Liability of Servicer. The Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or otherwise,
and the Servicer shall be obligated to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Mortgage
Loans. The Servicer shall be entitled to enter into any agreement with a
Sub-Servicer for indemnification of the Servicer by such Sub-Servicer and
nothing contained in such Sub-Servicing Agreement shall be deemed to limit or
modify this Agreement. The Trust shall not indemnify the Servicer for any losses
due to the Servicer's negligence.
Section 8.6. No Contractual Relationship Between Sub-Servicer
and Trustee or the Owners. Any Sub-Servicing Agreement and any other
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
shall be deemed to be between the Sub-Servicer and the Servicer alone and the
Certificate Insurer, the Trustee and the Owners shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to any Sub-Servicer except as set forth in Section 8.7.
Section 8.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Servicer's rights and obligations under any Sub-Servicing Agreement
then in force between the
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Servicer and a Sub-Servicer may be assumed or terminated by the Trustee at its
option without the payment of a fee notwithstanding any contrary provision in
any Sub-Servicing Agreement.
The Servicer shall, upon reasonable request of the Trustee,
but at the expense of the Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party.
Section 8.8. Principal and Interest Account.
(a) The Servicer shall establish in the name of the Trust for
the benefit of the Owners of the Certificates and maintain at one or more
Designated Depository Institutions one or more Principal and Interest Accounts.
Subject to Subsection (c) below, the Servicer and any
Sub-Servicer shall deposit all receipts related to the Mortgage Loans into the
Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
Subject to Subsection (c) below, within one Business Day
following the Startup Day, the Company and/or the Servicer shall deposit into
the Principal and Interest Account all receipts related to the related Mortgage
Loans received after the Cut-Off Date.
(b) Any investment of funds in the Principal and Interest
Account shall mature or be withdrawable at par on or prior to the immediately
succeeding Remittance Date. All funds in the Principal and Interest Account may
only be held (i) uninvested, up to the limits insured by the FDIC or (ii)
invested in Eligible Investments. The Principal and Interest Account shall be
held in trust in the name of the Trust and for the benefit of the Owners of the
Certificates. Any investment earnings on funds held in the Principal and
Interest Account shall be for the account of the Servicer and may only be
withdrawn from the Principal and Interest Account by the Servicer on the second
Business Day of the month for the investment earnings for the previous calendar
month. The Servicer shall withdraw from the Principal and Interest Account held
by the Trustee, on the second Business Day of the month, investment earnings for
the previous calendar month. The Servicer shall deposit into the Principal and
Interest Account the amount of all losses on investment of funds in the
Principal and Interest Account upon request from the Trustee. Any references
herein to amounts on deposit in the Principal and Interest Account shall refer
to amounts net of investment earnings.
(c) The Servicer shall deposit to the Principal and Interest
Account all principal and interest collections on the Mortgage Loans received
after the Cut-Off Date, including any Prepayments and Net Liquidation Proceeds,
all Loan Purchase Prices and Substitution Amounts received or paid by the
Servicer with respect to the Mortgage Loans, other recoveries or amounts related
to the Mortgage Loans received by the Servicer, Compensating Interest and
Delinquency Advances together with any amounts which are reimbursable from the
Principal and Interest Account but net of (i) the Servicing Fee with respect to
each Mortgage Loan and other servicing compensation to the Servicer as permitted
by Section 8.15 hereof, (ii) principal (including Prepayments) collected on the
related Mortgage Loans on or prior to the Cut-Off Date, (iii) interest accruing
on the related Mortgage Loans on or prior to the Cut-Off Date and (iv) Net
Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the Loan
Balance of the related Mortgage Loan.
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(d) (i) The Servicer may make withdrawals from the Principal
and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of the
Monthly Remittance Amounts due on the Remittance
Date;
(B) to reimburse itself pursuant to Section 8.9(a) hereof
for unrecovered Delinquency Advances and Servicing
Advances;
(C) to withdraw investment earnings on amounts on deposit
in the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest
Account following the termination of the Trust Estate
pursuant to Article IX hereof.
(ii) On the Determination Date of each month, commencing in
April 1996 the Servicer shall send to the Trustee the Monthly Exception Report,
in the form of a computer tape, detailing the payments on the Mortgage Loans
during the prior Remittance Period and certifying the amounts and purpose of
withdrawals permitted pursuant to (d) above from the Principal and Interest
Account. Such tape shall contain the specified data, as described in Section
8.26 hereof, and shall be in the form and have the specifications as may be
agreed to between the Servicer, the Certificate Insurer and the Trustee from
time to time.
(iii) On each Remittance Date, commencing in April 1996 the
Servicer shall remit to the Trustee by wire transfer, or otherwise make funds
available in immediately available funds for deposit to the Certificate Account,
(x) for Group I, the Group I Interest Remittance Amount and the Group I
Principal Remittance Amount and (y) for Group II, the Group II Interest
Remittance Amount and the Group II Principal Remittance Amount.
Section 8.9. Delinquency Advances, Compensating Interest and
Servicing Advances. (a) The Servicer is required, not later than each Remittance
Date, to deposit into the Principal and Interest Account an amount equal to the
sum of (i) the interest due (net of the Servicing Fees due but not collected)
and (ii) scheduled principal due, but not collected, with respect to Delinquent
Mortgage Loans during the related Due Period but only if, in its good faith
business judgment, the Servicer reasonably believes that such amount will
ultimately be recovered from the related Mortgage Loan. Such amounts are
"Delinquency Advances".
The Servicer shall be permitted to fund its payment of
Delinquency Advances on any Remittance Date and to reimburse itself for any
Delinquency Advances paid from the Servicer's own funds, from collections on any
Mortgage Loan deposited to the Principal and Interest Account subsequent to the
related Due Period and shall deposit into the Principal and Interest Account
with respect thereto (i) collections from the Mortgagor whose Delinquency gave
rise to the shortfall which resulted in such Delinquency Advance and (ii) Net
Liquidation Proceeds recovered on account of the related Mortgage Loan to the
extent of the amount of aggregate Delinquency Advances related thereto. If not
thereto recovered from the related Mortgagor or the related Net Liquidation
Proceeds, Delinquency Advances shall be recoverable pursuant to Section
7.5(d)(iii)(C).
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(b) On or prior to each Remittance Date, the Servicer shall
deposit in the Principal and Interest Account with respect to any Paid-in-Full
Mortgage Loan during the related Remittance Period out of its own funds without
any right of reimbursement therefor an amount equal to the difference between
(x) 30 days' interest at such Mortgage Loan's Coupon Rate (less the Servicing
Fee) on the Loan Balance of such Mortgage Loan as of the first day of the
related Remittance Period and (y) to the extent not previously advanced, the
interest (less the Servicing Fee) paid by the Mortgagor with respect to the
Mortgage Loan during such Remittance Period (any such amount paid by the
Servicer, "Compensating Interest"). The Servicer shall in no event be required
to pay Compensating Interest with respect to any Remittance Period in an amount
in excess of the aggregate Servicing Fee received by the Servicer with respect
to all Mortgage Loans for such Remittance Period. Further, the Servicer is not
obligated to cover shortfalls in collections in interest due to Curtailments.
(c) The Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) Preservation Expenses, (ii) any enforcement
or judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Servicer reasonably believes such costs and expenses will
increase Net Liquidation Proceeds on the related Mortgage Loan. Each such amount
so paid will constitute a "Servicing Advance". The Servicer may recover
Servicing Advances (x) from the Mortgagors to the extent permitted by the
Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of the
related Mortgage Loan, and (y) as provided in Section 7.5(d)(iii)(C) hereof. In
no case may the Servicer recover Servicing Advances from principal and interest
payments on any Mortgage Loan or from any amounts relating to any other Mortgage
Loan except as provided pursuant to Section 7.5(d)(iii)(C) hereof.
Section 8.10. Purchase of Mortgage Loans. The Servicer may,
but is not obligated to, purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to four consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Servicer or by any Sub-Servicer pursuant to Section 8.13. Any
such Loan so purchased shall be purchased by the Servicer not later than the
related Remittance Date at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be deposited in the Principal and Interest
Account.
Section 8.11. Maintenance of Insurance. (a) The Servicer shall
cause to be maintained with respect to each Mortgage Loan a hazard insurance
policy with a generally acceptable carrier that provides for fire and extended
coverage, and which provides for a recovery by the Servicer on behalf of the
Trust of insurance proceeds relating to such Mortgage Loan in an amount not less
than the least of (i) the outstanding principal balance of the Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to
a Property in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, the Servicer will
cause to be maintained with respect thereto a flood insurance policy in a form
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Servicer on behalf of the
Trust of insurance proceeds relating to such Mortgage Loan of not less than the
least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the
minimum amount required to compensate for damage or loss on a replacement cost
basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973. The Servicer shall indemnify the Trust
and the Certificate Insurer out of the Servicer's own funds for any loss to the
Trust
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and the Certificate Insurer resulting from the Servicer's failure to maintain
the insurance required by this Section.
(c) In the event that the Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Servicer as
loss payee and provides coverage in an amount equal to the aggregate unpaid
principal balance on the Mortgage Loans without co-insurance and otherwise
complies with the requirements of this Section 8.11, the Servicer shall be
deemed conclusively to have satisfied its obligations with respect to fire and
hazard insurance coverage under this Section 8.11, it being understood and
agreed that such blanket policy may contain a deductible clause, in which case
the Servicer shall, in the event that there shall not have been maintained on
the related Property a policy complying with the preceding paragraphs of this
Section 8.11, and there shall have been a loss which would have been covered by
such policy, deposit in the Principal and Interest Account from the Servicer's
own funds the difference, if any, between the amount that would have been
payable under a policy complying with the preceding paragraphs of this Section
8.11 and the amount paid under such blanket policy. Upon the request of the
Trustee or the Certificate Insurer, the Servicer shall cause to be delivered to
the Trustee or the Certificate Insurer a certified true copy of such policy.
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Servicer shall not exercise any
such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law or (ii) the Servicer
reasonably believes that to permit an assumption of the Mortgage Loan would not
materially and adversely affect the interest of the Owners or of the Certificate
Insurer. In such event, the Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Note and, unless prohibited by applicable law or the Mortgage Documents, the
Mortgagor remains liable thereon. If the foregoing is not permitted under
applicable law, the Servicer is authorized to enter into a substitution of
liability agreement with such person, pursuant to which the original Mortgagor
is released from liability and such person is substituted as Mortgagor and
becomes liable under the Note; provided, however, that to the extent any such
substitution of liability agreement would be delivered by the Servicer outside
of its usual procedures for mortgage loans held in its own portfolio the
Servicer shall, prior to executing and delivering such agreement, obtain the
prior written consent of the Certificate Insurer. The Mortgage Loan, as assumed,
shall conform in all respects to the requirements, representations and
warranties of this Agreement. The Servicer shall notify the Trustee that any
such assumption or substitution agreement has been completed by forwarding to
the Trustee the original copy of such assumption or substitution agreement,
which copy shall be added by the Trustee to the related File and which shall,
for all purposes, be considered a part of such File to the same extent as all
other documents and instruments constituting a part thereof. The Servicer shall
be responsible for recording any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, the required
monthly payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional servicing
compensation.
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Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 8.13. Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably effect the ownership
on behalf of the Trust of Properties relating to defaulted Mortgage Loans as to
which no satisfactory arrangements can be made for collection of Delinquent
payments and which the Servicer has not purchased pursuant to Section 8.10. In
connection with such foreclosure or other conversion, the Servicer shall
exercise such of the rights and powers vested in it hereunder, and use the same
degree of care and skill in its exercise or use as prudent mortgage lenders
would exercise or use under the circumstances in the conduct of their own
affairs, including, but not limited to, advancing funds for the payment of
taxes, amounts due with respect to Senior Liens and insurance premiums. Any
amounts so advanced shall constitute "Servicing Advances" within the meaning of
Section 8.9(c) hereof. The Servicer shall sell any REO Property within 23 months
of its acquisition by the Trust, unless the Servicer obtains for the Trustee and
the Certificate Insurer an opinion of counsel experienced in federal income tax
matters and reasonably acceptable to the Certificate Insurer, addressed to the
Trustee, the Certificate Insurer and the Servicer, to the effect that the
holding by the Trust of such REO Property for any greater period will not result
in the imposition of taxes on "Prohibited Transactions" of the Trust as defined
in Section 860F of the Code or cause the Trust to fail to qualify as a REMIC
under the REMIC Provisions at any time that any Certificates are outstanding, in
which case the Servicer shall sell any REO Property by the end of any extended
period specified in any such opinion.
Notwithstanding the generality of the foregoing provisions,
the Servicer shall manage, conserve, protect and operate each REO Property for
the Owners solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions. Pursuant to
its efforts to sell such REO Property, the Servicer shall either itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Owners, rent the same, or any part thereof, as the Servicer
deems to be in the best interest of the Owners for the period prior to the sale
of such REO Property. The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on a Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such Property.
(b) The Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
Section 8.14. Trustee to Cooperate; Release of Files. (a) Upon
the payment in full of any Mortgage Loan (including the repurchase of any
Mortgage Loan or any liquidation of such Mortgage Loan through foreclosure or
otherwise) or the receipt by the Servicer of a notification that payment in full
will be escrowed in a manner customary for such purposes, the Servicer shall
deliver to the Trustee
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a Request for Release. Upon receipt of such Request for Release, the Trustee
shall promptly release the related File, in trust to (i) the Servicer, (ii) an
escrow agent or (iii) any employee, agent or attorney of the Trustee, in each
case pending its release by the Servicer, such escrow agent or such employee,
agent or attorney of the Trustee, as the case may be. Upon any such payment in
full or the receipt of such notification that such funds have been placed in
escrow, the Servicer is authorized to give, as attorney-in-fact for the Trustee
and the mortgagee under the Mortgage which secured the Note, an instrument of
satisfaction (or assignment of Mortgage without recourse) regarding the Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Principal and
Interest Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Servicer may prepare and submit to the Trustee a
satisfaction (or assignment without recourse, if requested by the Person or
Persons entitled thereto) in form for execution by the Trustee with all
requisite information completed by the Servicer; in such event, the Trustee
shall execute and acknowledge such satisfaction or assignment, as the case may
be, and deliver the same with the related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related File is released to an escrow agent or
an employee, agent or attorney of the Trustee), upon request of the Servicer and
delivery to the Trustee of a Request for Release, release the related File to
the Servicer and shall execute such documents as shall be necessary to the
prosecution of any such proceedings, including, without limitation, an
assignment without recourse of the related Mortgage to the Servicer; provided
that there shall not be released and unreturned at any one time more than 10% of
the entire number of Files. The Trustee shall complete in the name of the
Trustee any endorsement in blank on any Note prior to releasing such Note to the
Servicer. Such receipt shall obligate the Servicer to return the File to the
Trustee when the need therefor by the Servicer no longer exists unless the
Mortgage Loan shall be liquidated in which case, upon receipt of the liquidation
information, in physical or electronic form, the Request for Release shall be
released by the Trustee to the Servicer.
(c) The Servicer shall have the right to approve applications
of Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages. No
application for approval shall be considered by the Servicer unless: (x) the
provisions of the related Note and Mortgage have been complied with; (y) the
Combined Loan-to-Value Ratio (which may, for this purpose, be determined at the
time of any such action in a manner reasonably acceptable to the Certificate
Insurer) after any release does not exceed the Combined Loan-to-Value Ratio as
of the Cut-Off Date and the Mortgagor's debt-to-income ratio after any release
does not exceed the debt-to-income ratio as of the Cut-Off Date and in no event
exceeds the maximum debt-to-income levels under the related Originator's
underwriting guidelines for a similar credit grade borrower and (z) the lien
priority of the related Mortgage is not adversely affected. Upon receipt by the
Trustee of an Officer's Certificate executed on behalf of the Servicer setting
forth the action proposed to be taken in respect of a particular Mortgage Loan
and certifying that the criteria set forth in the immediately preceding sentence
have been satisfied, the Trustee shall execute and deliver to the Servicer the
consent or partial release so requested by the Servicer. A proposed form of
consent or partial release, as the case may be, shall accompany any Officer's
Certificate delivered by the Servicer pursuant to this paragraph.
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(d) No costs associated with the procedures described in this
Section 8.14 shall be an expense of the Trust.
Section 8.15. Servicing Compensation. As compensation for its
activities hereunder, the Servicer shall be entitled to retain the amount of the
Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, prepayment penalties, any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Principal and Interest Account pursuant to Section 8.8(c)(iv) and similar
items shall, to the extent collected from Mortgagors, be retained by the
Servicer.
Section 8.16. Annual Statement as to Compliance. (a) The
Servicer, at its own expense, will deliver to the Trustee, the Certificate
Insurer, Standard & Poor's and Moody's, on or before the last day of December of
each year, commencing in 1996, an Officer's Certificate stating, as to each
signer thereof, that (i) a review of the activities of the Servicer during such
preceding calendar year and of performance under this Agreement has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement for such year, or, if there has been a default in the
fulfillment of all such obligations, specifying each such default known to such
officers and the nature and status thereof including the steps being taken by
the Servicer to remedy such defaults.
(b) The Servicer shall deliver to the Trustee, the Certificate
Insurer, the Owners and the Rating Agencies, promptly after having obtained
knowledge thereof but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with the
giving of notice or lapse of time, or both, would become an Event of Servicing
Termination.
Section 8.17. Annual Independent Certified Public Accountants'
Reports. On or before the last day of March of each year, commencing in 1997,
the Servicer, at its own expense, shall cause to be delivered to the Trustee,
the Certificate Insurer, Standard & Poor's and Moody's a letter or letters of a
firm of independent, nationally- recognized certified public accountants
reasonably acceptable to the Certificate Insurer stating that such firm has,
with respect to the Servicer's overall servicing operations during the preceding
calendar year, examined such operations in accordance with the requirements of
the Uniform Single Audit Program for Mortgage Bankers, and in either case
stating such firm's conclusions relating thereto.
Section 8.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Servicer shall provide to the Trustee, the
Certificate Insurer, the FDIC and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Servicer designated by it.
Upon any change in the format of the computer tape maintained
by the Servicer in respect of the Mortgage Loans, the Servicer shall deliver a
copy of such computer tape to the Trustee and in addition shall provide a copy
of such computer tape to the Trustee, and the Certificate Insurer at such other
times as the Trustee or the Certificate Insurer may reasonably request.
Section 8.19. Assignment of Agreement. The Servicer may not
assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the
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Trustee and the Certificate Insurer, which such consent shall not be
unreasonably withheld; provided, however, that any assignee must meet the
eligibility requirements set forth in Section 8.21(f) hereof for a successor
servicer. Notice of any such assignment shall be given by the Servicer to the
Trustee, the Certificate Insurer and the Rating Agencies.
Section 8.20. Events of Servicing Termination. (a) The Trustee
or the Certificate Insurer (or the Owners pursuant to Section 6.11 hereof) may
remove the Servicer (including any successor entity serving as the Servicer)
upon the occurrence of any of the following events:
(i) The Servicer shall fail to deliver to the Trustee
any proceeds or required payment, which failure continues unremedied
for five Business Days following written notice to an Authorized
Officer of the Servicer from the Trustee or from any Owner;
(ii) The Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing
its inability to pay its debts generally as they become due, (III) make
a general assignment for the benefit of creditors, (IV) be adjudicated
a bankrupt or insolvent, (V) commence a voluntary case under the
federal bankruptcy laws of the United States of America or file a
voluntary petition or answer seeking reorganization, an arrangement
with creditors or an order for relief or seeking to take advantage of
any insolvency law or file an answer admitting the material allegations
of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding or (VI) take corporate action for the purpose of
effecting any of the foregoing;
(iii) If without the application, approval or consent of
the Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of
a trustee, receiver, liquidator, custodian or similar entity with
respect to the Servicer or of all or any substantial part of its
assets, or other like relief in respect thereof under any bankruptcy or
insolvency law, and, if such proceeding is being contested by the
Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B)
continue undismissed or pending and unstayed for any period of
seventy-five (75) consecutive days;
(iv) The Servicer shall fail to perform any one or more
of its obligations hereunder (other than the obligations set out in (i)
above) and shall continue in default thereof for a period of sixty (60)
days after the earlier of (x) notice by the Trustee or the Certificate
Insurer of said failure or (y) actual knowledge of an officer of the
Servicer; provided, however, that if the Servicer can demonstrate to
the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Certificate Insurer; or
(v) The Servicer shall fail to cure any breach of any
of its representations and warranties set forth in Section 3.2 which
materially and adversely affects the interests of the Owners or
Certificate Insurer for a period of sixty (60) days after the
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Servicer can demonstrate to the
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reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Certificate Insurer.
(b) The Certificate Insurer may remove the Servicer upon the
occurrence of any of the following events:
(i) a Group I Total Available Funds Shortfall or a Group
II Total Available Funds Shortfall; provided, however, that the
Certificate Insurer shall have no right to remove the Servicer under
this clause (i) if the Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that such event was due to
circumstances beyond the control of the Servicer;
(ii) the failure by the Servicer to make any required
Servicing Advance;
(iii) the failure by the Servicer to perform any one or
more of its obligations hereunder, which failure materially and
adversely affects the interests of the Certificate Insurer, and the
continuance of such failure for a period of 30 days or such longer
period as agreed to in writing by the Certificate Insurer.
(iv) the failure by the Servicer to make any required
Delinquency Advance or to pay any Compensating Interest;
(v) if on any Payment Date the Pool Rolling Three Month
Delinquency Rate exceeds 7.0%;
(vi) if on any Payment Date occurring in March of any
year, commencing in March 1997, the aggregate Pool Cumulative Realized
Losses over the prior twelve month period exceed 2.0% of the average
Pool Principal Balance as of the close of business on the last day of
each of the twelve preceding Remittance Periods; or
(vii) (a) if on any of the first 60 Payment Dates from
the Startup Day the aggregate Pool Cumulative Expected Losses for all
prior Remittance Periods since the Startup Day exceed 6.625% of the
Pool Principal Balance as of the Cut-Off Date and (b) if on any Payment
Date thereafter the aggregate Pool Cumulative Expected Losses for all
prior Remittance Periods from the Startup Day exceed 9.9375% of the
Pool Principal Balance as of the Cut-Off Date, provided, however, with
respect to clauses (v), (vi) and (vii), if the Servicer can demonstrate
to the reasonable satisfaction of the Certificate Insurer that any such
event was due to circumstances beyond the control of the Servicer, such
event shall not be considered an event of termination of the Servicer.
Upon the Trustee's determination that a required Delinquency Advance or payment
of Compensating Interest has not been made by the Servicer, the Trustee shall so
notify in writing an Authorized Officer of the Servicer and the Certificate
Insurer as soon as is reasonably practical.
(c) In the case of clauses (i), (ii), (iii), (iv) or (v) of
Subsection (b) the Owners of Certificates evidencing not less than 33 1/3% of
the aggregate Class A Certificate Principal Balance (with the consent of the
Certificate Insurer) by notice then given in writing to the Servicer (and a copy
to the Trustee) may terminate all of the rights and obligations of the Servicer
under this Agreement; provided, however, that the responsibilities and duties of
the initial Servicer with respect to the repurchase of Mortgage Loans pursuant
to Section 3.4 shall not terminate. The Trustee shall mail a copy of any notice
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given by it hereunder to the Rating Agencies. 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 Certificates or the Mortgage Loans
or otherwise, shall without further action pass to and be vested in the Trustee
(for this purpose, the term includes an affiliate thereof) or such successor
Servicer as may be appointed hereunder, and, without limitation, the Trustee is
hereby authorized and empowered (which authority and power are coupled with an
interest and are irrevocable) to execute and deliver, on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments and to do or accomplish all other acts or things necessary
or appropriate to effect the purposes of such notice or termination, whether to
complete the transfer and endorsement of the Mortgage Loans and related
documents or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer or the Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement
including the transfer to the successor Servicer or to the Trustee for
administration by it of all cash accounts that shall at the time be held by the
predecessor Servicer for deposit or shall thereafter be received with respect to
a Mortgage Loan. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 8.20 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses.
(d) If any event described in subsections (a) or (b) above
occurs and is continuing, during the 30 day period following receipt of notice,
the Trustee and the Certificate Insurer shall cooperate with each other to
determine if the occurrence of such event is more likely than not the result of
the acts or omissions of the Servicer or more likely than not the result of
events beyond the control of the Servicer. If the Trustee and the Certificate
Insurer conclude that the event is the result of the latter, the Servicer may
not be terminated, unless and until some other event set forth in subsection (a)
or (b) has occurred and is continuing. If the Trustee and the Certificate
Insurer conclude that the event is the result of the former, the Certificate
Insurer may terminate the Servicer in accordance with this Section, and the
Trustee shall act as successor Servicer, provided that the Trustee shall have
until the 30th day following the date of receipt of notice of the event to
appoint a successor Servicer pursuant to this Section.
If the Trustee and the Certificate Insurer cannot agree, and
the basis for such disagreement is not arbitrary or unreasonable, as to the
cause of the event, the decision of the Certificate Insurer shall control;
provided, however, that if the Certificate Insurer decides to terminate the
Servicer, the Trustee shall be relieved of its obligation to assume the
servicing or to appoint a successor, which shall be the exclusive obligation of
the Certificate Insurer.
The Certificate Insurer agrees to use its best efforts to
inform the Trustee of any materially adverse information regarding the
Servicer's servicing activities that comes to the attention of the Certificate
Insurer from time to time.
Section 8.21. Resignation of Servicer and Appointment of
Successor. (a) Upon the Servicer's receipt of notice of termination pursuant to
Section 8.20 or the Servicer's resignation in accordance with the terms of this
Section 8.21, the predecessor Servicer shall continue to perform its functions
as Servicer under this Agreement, in the case of termination, only until the
date specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
resignation, until the earlier of (x) the date 45 days from the delivery to the
Certificate Insurer and the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
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accompanying Opinion of Counsel. All collections then being held by the
predecessor Servicer prior to its removal and any collections received by the
Servicer after removal or resignation shall be endorsed by it to the Trustee and
remitted directly and immediately to the Trustee or the successor Servicer. In
the event of the Servicer's resignation or termination hereunder, the Trustee
shall appoint a successor Servicer and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Trustee and the
Certificate Insurer, with copies to the Certificate Insurer and the Rating
Agencies.
(b) The Servicer shall not resign from the obligations and
duties hereby imposed on it, except (i) upon determination that its duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it,
the other activities of the Servicer so causing such a conflict being of a type
and nature carried on by the Servicer at the date of this Agreement or (ii) upon
written consent of the Certificate Insurer and the Trustee. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an opinion of counsel to such effect which shall be delivered to the Trustee and
the Certificate Insurer.
(c) No removal or resignation of the Servicer shall become
effective until the Trustee or a successor Servicer shall have assumed the
Servicer's responsibilities and obligations in accordance with this Section.
(d) Upon removal or resignation of the Servicer, the Servicer
also shall promptly deliver or cause to be delivered to a successor Servicer or
the Trustee all the books and records (including, without limitation, records
kept in electronic form) that the Servicer has maintained for the Mortgage
Loans, including all tax bills, assessment notices, insurance premium notices
and all other documents as well as all original documents then in the Servicer's
possession.
(e) Any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee, or the successor Servicer.
(f) Upon removal or resignation of the Servicer, the Trustee
(x) shall solicit bids for a successor Servicer as described below and (y)
pending the appointment of a successor Servicer as a result of soliciting such
bids, shall serve as Servicer. The Trustee shall, if it is unable to obtain a
qualifying bid and is prevented by law from acting as Servicer, (I) appoint, or
petition a court of competent jurisdiction to appoint, any housing and home
finance institution, bank or mortgage servicing institution which has been
designated as an approved seller-servicer by FNMA or FHLMC for second mortgage
loans and having equity of not less than $15,000,000 or such lower level as may
be acceptable to the Certificate Insurer as determined in accordance with
generally accepted accounting principles as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder and (II) give notice thereof to the
Certificate Insurer and Rating Agencies. The compensation of any successor
Servicer (including, without limitation, the Trustee) so appointed shall be the
Servicing Fee, together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 8.8
and 8.15; provided, however, that if the Trustee acts as successor Servicer,
then the former Servicer agrees to pay to the Trustee at such time that the
Trustee becomes such successor Servicer a set-up fee of twenty-five dollars
($25.00) for each Mortgage Loan then included in the Trust Estate. The Trustee
shall be obligated to serve as successor Servicer whether or not the fee
described in the preceding sentence is paid by the Company, but shall in any
event be entitled to receive, and to enforce payment of, such fee from the
former Servicer.
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(g) In the event the Trustee solicits bids as provided above,
the Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Trustee shall deduct from any sum
received by the Trustee from the successor to the Servicer in respect of such
sale, transfer and assignment all costs and expenses of any public announcement
and of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder. After such deductions, the remainder of such sum
shall be paid by the Trustee to the Servicer at the time of such sale.
(h) The Trustee and such successor shall take such action
consistent with this Agreement as shall be necessary to effectuate any such
succession, including the notification to all Mortgagors of the transfer of
servicing if such notification is not done by the Servicer as required by
subsection (j) below. The Servicer agrees to cooperate with the Trustee and any
successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor Servicer, as applicable, all documents and records reasonably
requested by it to enable it to assume the Servicer's functions hereunder and
shall promptly also transfer to the Trustee or such successor Servicer, as
applicable, all amounts which then have been or should have been deposited in
the Principal and Interest Account by the Servicer or which are thereafter
received with respect to the Mortgage Loans. Neither the Trustee nor any other
successor Servicer shall be held liable by reason of any failure to make, or any
delay in making, any distribution hereunder or any portion thereof caused by (i)
the failure of the Servicer to deliver, or any delay in delivery, cash,
documents or records to it or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Servicer.
(i) The Trustee or any other successor Servicer, upon assuming
the duties of Servicer hereunder, shall immediately make all Delinquency
Advances and pay all Compensating Interest which the Servicer has theretofore
failed to remit with respect to the Mortgage Loans; provided, however, that if
the Trustee is acting as successor Servicer, the Trustee shall only be required
to make Delinquency Advances (including the Delinquency Advances described in
this clause (e)) if, in the Trustee's reasonable good faith judgment, such
Delinquency Advances will ultimately be recoverable from the Mortgage Loans.
(j) The Servicer which is being removed or is resigning shall
give notice to the Mortgagors and to the Rating Agencies of the transfer of the
servicing to the successor Servicer.
(k) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject to
all the responsibilities, duties and liabilities of the predecessor Servicer
including, but not limited to, the maintenance of the hazard insurance
policy(ies), the fidelity bond and an errors and omissions policy pursuant to
Section 8.27 and shall be entitled to the Monthly Servicing Fee and all of the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement. The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer (including, without limitation, any
deductible under an insurance policy) nor shall any successor Servicer
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be liable for any acts or omissions of the predecessor Servicer or for any
breach by such Servicer of any of its representations or warranties contained
herein or in any related document or agreement.
(l) The Trustee shall give notice to the Certificate Insurer,
Moody's and Standard & Poor's and the Owners of the occurrence of any event
specified in Section 8.20 of which a Responsible Officer of the Trustee has
actual knowledge.
Section 8.22. Waiver of Past Events of Servicing Termination.
Subject to the rights of the Certificate Insurer pursuant to Section 8.20 to
terminate all of the rights and obligations of the Servicer under this
Agreement, the Owners of at least 51% of the Class A Certificate Principal
Balance may, on behalf of all Owners of Certificates, waive any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to or payments from the
Principal and Interest Account in accordance with this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any Event of
Servicing Termination 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.
Section 8.23. Inspections by Certificate Insurer; Errors and
Omissions Insurance. (a) At any reasonable time and from time to time upon
reasonable notice, the Certificate Insurer, the Trustee, or any agents or
representatives thereof may inspect the Servicer's servicing operations and
discuss the servicing operations of the Servicer with any of its officers or
directors. The costs and expenses incurred by the Servicer or its agents or
representatives in connection with any such examinations or discussions shall be
paid by the Servicer.
(b) The Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally maintained
by prudent mortgage loan servicers having servicing portfolios of a similar
size.
Section 8.24. Merger, Conversion, Consolidation or Succession
to Business of Servicer. Any corporation into which the Servicer may be merged
or converted or with which it may be consolidated, or corporation resulting from
any merger, conversion or consolidation to which the Servicer
shall be a party or any corporation succeeding to all or substantially all of
the business of the Servicer shall be the successor of the Servicer hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto provided that such corporation meets the
qualifications set forth in Section 8.21(f).
Section 8.25. Notices of Material Events. The Servicer shall
give prompt notice to the Certificate Insurer, the Trustee, Moody's and Standard
& Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which
with notice or the passage of time, or both, would result in the occurrence of a
default by the Company, any Originator or the Servicer under any Transaction
Document or would constitute a material breach of a representation, warranty or
covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Company or the Servicer in any federal, state or local court or before any
governmental body or agency or before any arbitration board or any such
proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse
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effect upon any the Company's or the Servicer's ability to perform its
obligations under any Transaction Document;
(c) The commencement of any proceedings by or against the
Company or the Servicer under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official shall have been, or may be, appointed or requested for the Company or
the Servicer; and
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Company's or the Servicer's
business that the Company or the Servicer is to cease and desist, or to
undertake any practice, program, procedure or policy employed by the Company or
the Servicer in the conduct of the business of any of them, and such cessation
or undertaking will materially and adversely affect the conduct of the Company's
or the Servicer's business or its ability to perform under the Transaction
Documents or materially and adversely affect the financial affairs of the
Company or the Servicer.
Section 8.26. Monthly Servicing Report and Servicing
Certificate. (a) The Servicer shall, not later than the related Determination
Date, deliver to the Depositor, the Trustee and the Certificate Insurer a
Monthly Servicing Report relating to the Group I Mortgage Loans and a Monthly
Servicing Report relating to the Group II Mortgage Loans in computer readable
format stating the following:
(i) As to the related Due Period, the Interest
Remittance Amount (in both cases specifying the (a) scheduled interest
collected; (b) Delinquency Advances relating to interest; (c)
Compensating Interest paid; and (d) the Principal Remittance Amount (in
both cases specifying the (a) scheduled principal collected; (b)
Delinquency Advance relating to Mortgage principal; (c) Prepayments;
(d) Loan Balance of Loans repurchased; (e) Substitution Amounts; and
(f) Net Liquidation Proceeds (related to principal);
(ii) With respect to the related Remittance period,
the Servicing Fee payable to the Servicer;
(iii) With respect to the related Remittance period,
the net scheduled principal and interest payments remitted by the
Servicer to the Principal and Interest Account;
(iv) The scheduled principal and interest payments on
the Mortgage Loans that were not made by the related Mortgagors as of
the last day of the related Remittance Period;
(v) The number and aggregate Loan Balances (computed
in accordance with the terms of the Mortgage Loans) and the percentage
of the total number of Mortgage Loans and of the Loan Balance which
they represent of Mortgage Loans delinquent, if any, (i) 31-60 days,
(ii) 61-90 days and (iii) 91 days or more, respectively, as of the last
day of the related Remittance Period;
(vi) The number and aggregate Loan Balances of
Mortgage Loans, if any, in foreclosure and the book value (within the
meaning of 12 Code of Federal Regulations Section 571.13 or any
comparable provision) of any real estate acquired through foreclosure
or deed in lieu of foreclosure, including REO Properties as of the last
day of the related Remittance Period;
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(vii) The Loan Balances (immediately prior to being
classified as Liquidated Mortgage Loans) of Liquidated Mortgage Loans
as of the last day of the related Remittance Period;
(viii) Liquidation Proceeds received during the
related Remittance Period;
(ix) The amount of any Liquidation Expenses being
deducted from Liquidation Proceeds or otherwise being charged to the
Principal and Interest Account with respect to such Determination Date;
(x) Liquidation Expenses incurred during the related
Remittance Period which are not being deducted from Liquidation
Proceeds or otherwise being charged to the Principal and Interest
Account with respect to such Determination Date;
(xi) Net Liquidation Proceeds as of the last day of
the related Remittance Period;
(xii) Insurance payments received from Insurance
Policies during the related Remittance Period;
(xiii) The number of Mortgage Loans and the aggregate
scheduled Loan Balances as of the last day of the Due Period relating
to the Payment Date;
(xiv) The Group I Total Available Funds and the Group
II Total Available Funds for each Remittance Date;
(xv) The number and aggregate Loan Balances and Loan
Purchase Prices of Mortgage Loans required to be repurchased by the
Company or purchased by the Servicer as of the Replacement Cut-Off Date
occurring during the Remittance Period preceding such Date;
(xvi) The number and aggregate Loan Balances of
Mortgage Loans (at the time they became Defaulted Mortgage Loans) which
are being carried as REO Properties;
(xvii) The amount of any Delinquency Advances made by
the Servicer during the related Remittance Period and any unreimbursed
Delinquency Advances as of such Payment Date;
(xviii) The weighted average Coupon Rates of the
Group I and Group II Mortgage Loans, respectively;
(xix) The Monthly Exception Report;
(xx) The amount of any Substitution Amounts delivered
by the Company;
(xxi) The number and aggregate Loan Balances of
Mortgage Loans, if any, in bankruptcy proceedings as of the last day of
related Remittance Period;
(xxii) The amount of unreimbursed Delinquency
Advances made by the Servicer;
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(xxiii) The amount of unreimbursed Servicing Advances
made by the Servicer;
(xxiv) Unpaid Servicing Fees;
(xxv) The amount of Compensating Interest to be paid
by the Servicer during the related Remittance Period;
(xxvi) The weighted average net Coupon Rate of the
Mortgage Loans; and
(xxvii) Any other information reasonably requested by
the Certificate Insurer.
(b) On each Payment Date, the Trustee shall provide to the
Depositor, the Certificate Insurer, the Underwriter, the Company, Standard &
Poor's and Moody's a written report in substantially the form set forth as
Exhibit J hereto (the "Servicing Certificate") with respect to each Mortgage
Loan Group, as such form may be revised by the Trustee, the Servicer, Moody's
and Standard & Poor's from time to time, but in every case setting forth the
information required under Section 7.8 hereof, based solely on information
contained in the Monthly Servicing Report.
Section 8.27. Indemnification by the Company. The Company
agrees to indemnify and hold the Trustee, the Certificate Insurer, the Depositor
and each Owner harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trustee, the Certificate Insurer and any Owner may sustain
in any way related to the failure of the Company to perform its duties under
this Agreement. A party against whom a claim is brought shall immediately notify
the other parties and the Rating Agencies if a claim is made by a third party
with respect to this Agreement, and the Company shall assume (with the consent
of the Certificate Insurer and the Trustee) the defense of any such claim and
pay all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Certificate Insurer, the Servicer, the Company, the Trustee and/or
Owner in respect of such claim.
Section 8.28. Indemnification by the Servicer. The Servicer
agrees to indemnify and hold the Trustee, the Certificate Insurer, the Depositor
and each Owner harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trustee, the Certificate Insurer and any Owner may sustain
in any way related to the failure of the Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement. A
party against whom a claim is brought shall immediately notify the other parties
and the Rating Agencies if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Certificate Insurer, the
Servicer, the Trustee and/or Owner in respect of such claim.
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ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder
and all obligations created by this Agreement will terminate upon the earlier of
(i) the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policies of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
both Mortgage Loan Groups included within the Trust is effected as described
below or (iii) as described in Section 9.2, 9.3 and 9.4 hereof. To effect a
termination of this Agreement pursuant to clause (ii) above, the Owners of all
Certificates then Outstanding shall (x) unanimously direct the Trustee on behalf
of the Trust to adopt a plan of complete liquidation for both Mortgage Loan
Groups, as contemplated by Section 860F(a)(4) of the Code and (y) provide to the
Trustee an opinion of counsel experienced in federal income tax matters to the
effect that such liquidation constitutes a Qualified Liquidation, and the
Trustee either shall sell the Mortgage Loans and distribute the proceeds of the
liquidation of the Trust Estate, or shall distribute equitably in kind all of
the assets of the Trust Estate to the remaining Owners of the Certificates based
on their interests in the Trust, each in accordance with such plan, so that the
liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the United Kingdom, living on the date hereof. The Trustee shall give written
notice of termination of the Agreement to each Owner in the manner set forth in
Section 11.5 hereof.
Section 9.2. Termination Upon Option of Servicer. (a) On any
Remittance Date on or after the Remittance Date on which the then-outstanding
aggregate Loan Balances of the Mortgage Loans in the Trust Estate is less than
or equal to ten percent of the Original Aggregate Loan Balance, the Servicer
acting directly or through one or more affiliates may determine to purchase and
may cause the purchase from the Trust of all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired in respect of
any such Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise
then remaining in the Trust Estate at a price equal to the sum of (w) the
greater of (i) 100% of the aggregate Loan Balances of the related Mortgage Loans
as of the Due Date which immediately follows the last day of the related
Remittance Period immediately preceding the day of purchase minus the amount
actually remitted by the Servicer representing collections of principal on the
Mortgage Loans during the related Remittance Period and Due Period and (ii) the
greater of (A) the fair market value of such Mortgage Loans (disregarding
accrued interest) and (B) the aggregate outstanding Certificate Principal
Balance, (x) one month's interest on the purchase price computed at the weighted
average Pass-Through Rate for the Class A Certificates, (y) the related
Reimbursement Amount, if any, as of such Remittance Date and (z) the aggregate
amount of any Delinquency Advances and Servicing Advances remaining
unreimbursed, together with any accrued and unpaid Servicing Fees, as of such
Remittance Date (such amount, the "Termination Price"). In connection with such
purchase, the Servicer shall remit to the Trustee all amounts then on deposit in
the Principal and Interest Account for deposit to the Certificate Account, which
deposit shall be deemed to have occurred immediately preceding such purchase.
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(b) In connection with any such purchase, the Servicer shall
provide to the Trustee an opinion of counsel experienced in federal income tax
matters and reasonably acceptable to the Certificate Insurer to the effect that
such purchase constitutes a Qualified Liquidation of the Trust Estate.
(c) Promptly following any such purchase, the Trustee will
release the Files to the Servicer, or otherwise upon their order, in a manner
similar to that described in Section 8.14 hereof.
(d) If the Servicer does not exercise its option pursuant to
this Section 9.2 with respect to the Trust Estate, then the Certificate Insurer
may do so on the same terms.
Section 9.3. Termination Upon Loss of REMIC Status. (a)
Following a final determination by the Internal Revenue Service, or by a court
of competent jurisdiction, in either case from which no appeal is taken within
the permitted time for such appeal, or if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the Trust does not and will no longer qualify as a "REMIC" pursuant
to Section 860D of the Code (the "Final Determination"), at any time on or after
the date which is 30 calendar days following such Final Determination, (i) the
Certificate Insurer or the Owners of a majority in Percentage Interest
represented by the Class A Certificates then Outstanding with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) may
direct the Trustee on behalf of the Trust to adopt a plan of complete
liquidation, as contemplated by Section 860F(a)(4) of the Code and (ii) the
Certificate Insurer may notify the Trustee of the Certificate Insurer's
determination to purchase from the Trust all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Estate at a price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit in the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(b) Upon receipt of such direction from the Certificate
Insurer, the Trustee shall notify the holders of the Class R Certificates of
such election to liquidate or such determination to purchase, as the case may be
(the "Termination Notice"). The Owner of a majority of the Percentage Interest
of the Class R Certificates then Outstanding may, on any Remittance Date, within
60 days from the date of receipt of the Termination Notice (the "Purchase Option
Period"), at their option, purchase from the Trust all (but not fewer than all)
Mortgage Loans in the Trust Estate, and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise in respect of any
Mortgage Loan then remaining in the Trust Estate at a purchase price equal to
the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the
Class R Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Certificate Insurer or the Owners of the Class A
Certificates, with the consent of the Certificate Insurer have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, each in accordance with the plan of complete liquidation, such that, if
so directed, the liquidation of the Trust Estate, the distribution of the
proceeds of such liquidation and the termination of this Agreement occur no
later than the close of the 60th day, or such later day as the Certificate
Insurer or the Owners of the Class A Certificates, with the consent of the
Certificate Insurer shall permit or direct in writing, after the expiration of
the Purchase Option Period and (ii) in the event that the Certificate Insurer
has given the Trustee notice of the Certificate Insurer's determination to
purchase the Mortgage Loans in the Trust Estate described in clause (a)(ii)
preceding, the Certificate
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Insurer shall, on any Remittance Date within 60 days,
purchase all (but not fewer than all) Mortgage Loans in the Trust Estate, and
all property theretofore acquired by foreclosure, deed in lieu of foreclosure or
otherwise in respect of any Mortgage Loan then remaining in the Trust Estate. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(d) Following a Final Determination, the Owners of a majority
of the Percentage Interest of the Class R Certificates then Outstanding may, at
their option on any Remittance Date and upon delivery to the Owners of the Class
A Certificates and the Certificate Insurer of an opinion of counsel experienced
in federal income tax matters acceptable to the Certificate Insurer selected by
the Owners of such Class R Certificates which opinion shall be reasonably
satisfactory in form and substance to the Certificate Insurer, to the effect
that the effect of the Final Determination is to increase substantially the
probability that the gross income of the Trust will be subject to federal
taxation, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. The foregoing opinion shall be deemed satisfactory
unless the Certificate Insurer gives the Owners of a majority of the Percentage
Interest of the Class R Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
In connection with any such purchase, such Owners shall direct
the Trustee to adopt a plan of complete liquidation as contemplated by Section
860F(a)(4) of the Code and shall provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such purchase
constitutes a Qualified Liquidation.
Section 9.4. Disposition of Proceeds. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Servicer from the
Servicer's own funds shall be paid by the Trustee to the Servicer from the
proceeds of the Trust Estate.
Section 9.5. Netting of Amounts. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities. (a) The
Trustee (i) undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any
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provision hereof are specifically required to be furnished to the Trustee, shall
be under a duty to examine the same to determine whether or not they conform to
the requirements of this Agreement.
(b) Following the termination of the Servicer hereunder and
pending the appointment of any other Person as successor Servicer, the Trustee
(for this purpose, the term includes an affiliate thereof) is hereby empowered
to perform the duties of the Servicer hereunder and shall, for such period, have
all of the rights of the Servicer; it being expressly understood, however, by
all parties hereto, and the Owners, agree, prior to any termination of the
Servicer pursuant to Section 8.21, the Servicer shall perform such duties.
Specifically, and not in limitation of the foregoing, the Trustee shall upon
termination or resignation of the Servicer, and pending the appointment of any
other Person as successor Servicer, have the power and duty during its
performance as successor Servicer:
(i) to collect Mortgage payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted
by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to
Section 8.14 hereof;
(v) to make Delinquency Advances and Servicing Advances
and to pay Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer,
unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith in accordance with the direction of the
Certificate Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of the
affected Class or Classes and the Certificate Insurer
relating to the time, method and place of conducting
any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement relating to
such Certificates;
(iv) The Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability
for the performance of any of its duties hereunder or
the exercise of any of its rights or powers if there
is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it, and
none of the provisions contained
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in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner
of performance of, any of the obligations of the
Servicer under this Agreement except during such
time, if any, as the Trustee shall be the successor
to, and be vested with the rights, duties, powers and
privileges of, the Servicer in accordance with the
terms of this Agreement;
(v) Subject to the other provisions of this Agreement and
without limiting the generality of this Section 10.1,
the Trustee shall have no duty (A) to see any
recording, filing, or depositing of this Agreement or
any agreement referred to herein or any financing
statement or continuation statement evidencing a
security interest, or to see to the maintenance of
any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance (C) to see to the payment
or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any
kind owing with respect to, assessed or levied
against, any part of the Trust Estate from funds
available in the Certificate Account, (D) to confirm
or verify the contents of any reports or certificates
of the Servicer delivered to the Trustee pursuant to
this Agreement believed by the Trustee to be genuine
and to have been signed or presented by the proper
party or parties;
(vi) The Trustee shall not be accountable for the use or
application of any funds paid to the Company or the
Servicer in respect of the Mortgage Loans or
withdrawn from the Principal and Interest Account or
the Certificate Account by the Company or the
Servicer; and
(vii) The Trustee shall not be required to take notice or
be deemed to have notice or knowledge of any default
or any of the events described in Section 8.20 unless
a Responsible Officer of the Trustee shall have
received written notice thereof or a Responsible
Officer has actual knowledge thereof. In the absence
of receipt of such notice, the Trustee may
conclusively assume that no default or event
described in Section 8.20 has occurred.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
(e) No provision of this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions
enumerated in this Agreement shall not be construed as a duty and the Trustee
shall not be answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Agreement, or to take any
steps in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder until it shall be indemnified to its satisfaction
against
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any and all costs and expenses, outlays, counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken.
Section 10.2. Removal of Trustee for Cause. (a) The Trustee
may be removed pursuant to paragraph (b) hereof upon the occurrence of any of
the following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners entitled
thereto on any Payment Date amounts available for distribution
in accordance with the terms hereof; or
(2) the Trustee shall fail in the performance of, or breach, any
covenant or agreement of the Trustee in this Agreement, or if
any representation or warranty of the Trustee made in this
Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when the same
shall have been made, and such failure or breach shall
continue or not be cured for a period of 30 days after there
shall have been given, by registered or certified mail, to the
Trustee by the Company, the Certificate Insurer or by the
Owners of at least 25% of the aggregate Percentage Interests
represented by the Class A Certificates then Outstanding, or,
if there are no Class A Certificates then Outstanding, by such
Percentage Interests represented by the Class R Certificates,
a written notice specifying such failure or breach and
requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Trustee, and
such decree or order shall have remained in force undischarged
or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the
Trustee or relating to all or substantially all of its
property; or
(5) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due,
file or consent to the filing of a petition to take advantage
of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, voluntarily
suspend payment of its obligations or take corporate action
for the purpose of any of the foregoing.
The Company shall give to Moody's and Standard & Poor's notice
of the occurrence of any such event of which the Company is aware.
(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or (ii) with
the prior written consent (which shall not be unreasonably withheld) of the
Certificate Insurer (x) the Company or (y) the Owners of a majority of the
Percentage
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Interests represented by the Class A Certificates may, whether or not the
Trustee resigns pursuant to Section 10.9 hereof, immediately, concurrently with
the giving of notice to the Trustee, and without delaying the 30 days required
for notice therein, appoint a successor Trustee pursuant to the terms of Section
10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as
otherwise provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Depositor, the Company,
the Certificate Insurer or the Owners of any Class of Certificates
mentioned herein shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel, and the written
advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request
or direction of any of the Owners pursuant to this Agreement, unless
such Owners shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document, but the Trustee
in its discretion may make such further inquiry or investigation into
such facts or matters as it may see fit; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
cost, expense or liability as a condition to taking any such action.
The reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be repaid by the Servicer
upon demand by the Trustee from the Servicer's own funds;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed and supervised with due care by it hereunder;
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(h) the Trustee shall not be personally liable for any action
it takes or omits to take in good faith which it reasonably believes to
be authorized by the Authorized Officer of any Person or within its
rights or powers under this Agreement;
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act;
(j) the Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust Estate created hereby
or the powers granted hereunder; and
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates. The recitals and representations contained herein and in the
Certificates, except any such recitals relating to the Trustee, shall be taken
as the statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement, of the Certificates, of the Mortgage Loans or any
document relating thereto other than as to validity and sufficiency of its
authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee or any agent
of the Trust, in its individual or any other capacity, may become an Owner or
pledgee of Certificates and may otherwise deal with the Trust with the same
rights it would have if it were not Trustee or such agent.
Section 10.6. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other trust funds except to the
extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. No Lien for Fees. The Trustee shall have no lien
on the Trust Estate for the payment of any fees and expenses.
Section 10.8. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a corporation or
association organized and doing business under the laws of the United States of
America or of any State authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000, subject
to supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer and having a
long-term deposit rating of at least BBB from Standard & Poor's (or such lower
rating as may be acceptable to Standard & Poor's) and at least Baa2 from Moody's
(or such lower rating as may be acceptable to Moody's). If such Trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall, upon the request of the Company with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) or of the
Certificate Insurer, resign immediately in the manner and with the effect
hereinafter specified in this Article X.
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Section 10.9. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of resignation to the
Company and by mailing notice of resignation by registered mail, postage
prepaid, to the Certificate Insurer and the Owners at their addresses appearing
on the Register. A copy of such notice shall be sent by the resigning Trustee to
Moody's and Standard & Poor's. Upon receiving notice of resignation, the Company
shall promptly appoint a successor trustee or trustees reasonably acceptable to
the Certificate Insurer evidenced by its written consent by written instrument,
in duplicate, executed on behalf of the Trust by an Authorized Officer of the
Company, one copy of which instrument shall be delivered to the Trustee so
resigning and one copy to the successor trustee or trustees. If no successor
trustee shall have been appointed by the Company and have accepted appointment
within 30 days after the giving of such notice of resignation, the Trustee shall
give notice to the Certificate Insurer of such failure and the Certificate
Insurer shall have an additional 30 days to appoint a successor trustee. If
after such time no successor has been appointed and accepted then the resigning
trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Owner may, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible
under Section 10.8 hereof and shall fail to resign after written request
therefor by the Company or by the Certificate Insurer, the Certificate Insurer
or the Company with the written consent of the Certificate Insurer may remove
the Trustee and appoint a successor trustee by written instrument, in duplicate,
executed on behalf of the Trust by an Authorized Officer of the Company, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates, may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee to be removed, to the
successor trustee so appointed, to the Company and to the Certificate Insurer,
copies of the record of the act taken by the Owners, as provided for in Section
11.3 hereof.
(e) If the Trustee fails to perform its duties in accordance
with the terms of this Agreement or becomes ineligible to serve as Trustee, the
Certificate Insurer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, signed by the Certificate Insurer duly
authorized, one complete set of which instruments shall be delivered to the
Company, one complete set to the Trustee so removed and one complete set to the
successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Company shall promptly appoint a successor Trustee. If within
one year after such resignation, removal or incapability or the occurrence of
such vacancy, a successor Trustee shall be appointed by act of the Owners of a
majority of the Percentage Interests represented by the Class A Certificates
then Outstanding or, if there are no Class A Certificates then Outstanding, by
such majority of the Percentage Interest of the Class R Certificates delivered
to the Company and the retiring Trustee, the successor Trustee so appointed
shall forthwith upon its acceptance of such appointment become the successor
Trustee and supersede the successor Trustee appointed by the
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Company. If no successor Trustee shall have been so appointed by the Company or
the Owners and shall have accepted appointment in the manner hereinafter
provided, any Owner may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor Trustee.
(g) The Company shall give notice of any removal of the
Trustee by mailing notice of such event by registered mail, postage prepaid, to
the Certificate Insurer and to the Owners as their names and addresses appear in
the Register. Each notice shall include the name of the successor Trustee and
the address of its corporate trust office.
Section 10.10. Acceptance of Appointment by Successor Trustee.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company on behalf of the Trust, to the Certificate Insurer and to
its predecessor Trustee an instrument accepting such appointment hereunder and
stating its eligibility to serve as Trustee hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts, duties and obligations of its
predecessor hereunder; but, on request of the Company, the Certificate Insurer
or the successor Trustee, such predecessor Trustee shall, upon payment of its
charges then unpaid, execute and deliver an instrument transferring to such
successor Trustee all of the rights, powers and trusts of the Trustee so ceasing
to act, and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such Trustee so ceasing to act hereunder. Upon
request of any such successor Trustee, the Company on behalf of the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Company shall mail notice thereof by first-class
mail, postage prepaid, to the Owners at their last addresses appearing upon the
Register and to the Certificate Insurer. The Company shall send a copy of such
notice to Moody's and Standard & Poor's. If the Company fails to mail such
notice within ten days after acceptance of appointment by the successor Trustee,
the successor Trustee shall cause such notice to be mailed at the expense of the
Trust.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor shall be qualified and eligible under
this Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession
to Business of the Trustee. Any corporation or association into which the
Trustee may be merged or converted or with which it may be consolidated, any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee shall be the successor of the Trustee hereunder, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, however, that such corporation or association
shall be otherwise qualified and eligible under this Article X. In case any
Certificates have been executed, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such Trustee may
adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
Section 10.12. Reporting; Withholding. The Trustee shall
timely provide to the Owners the Internal Revenue Service's Form 1099 and any
other statement required by applicable Treasury
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regulations as determined by the Company and shall withhold, as required by
applicable law, federal, state or local taxes, if any, applicable to
distributions to the Owners, including but not limited to backup withholding
under Section 3406 of the Code and the withholding tax on distributions to
foreign investors under Sections 1441 and 1442 of the Code.
Section 10.13. Liability of the Trustee. The Trustee shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Company, the
Servicer or any Owner for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee or any such
Person against any liability which would otherwise be imposed by reason of
negligent action, negligent failure to act or bad faith in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
Subject to the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in any Account (except for any losses on obligations on
which the bank serving as Trustee is the obligor). In addition, the Company and
Servicer covenant and agree to indemnify the Trustee and the Certificate
Insurer, and when the Trustee is acting as Servicer, the Servicer, from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses (including legal fees and expenses) other than those resulting from the
negligence or bad faith of the Trustee. The Trustee and the Certificate Insurer
and any director, officer, employee or agent thereof may rely and shall be
protected in acting or refraining from acting in good faith on any certificate,
notice or other document of any kind prima facie properly executed and submitted
by the Authorized Officer of any Person respecting any matters arising
hereunder. Provisions of this Section 10.13 shall survive the termination of
this Agreement.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee and the
Certificate Insurer to act as co-Trustee or co- Trustees, jointly with the
Trustee, of all or any part of the Trust Estate or separate Trustee or separate
Trustees of any part of the Trust Estate and to vest in such Person or Persons,
in such capacity and for the benefit of the Owners, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in the case any event indicated in Sections 8.20(a) or
8.20(b) shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment (with the written consent of the Certificate
Insurer). No co-Trustee or separate Trustee hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 10.8 and no notice
to Owner of the appointment of any co-Trustee or separate Trustee shall be
required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate Trustee or
co-Trustee jointly (it being understood that such separate Trustee or
co-Trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that
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under any law of any jurisdiction in which any particular act or acts
are to be performed (whether as Trustee hereunder or as successor to
the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Trust Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate Trustee or co-Trustee,
but solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally
liable by reason of any act or omission of any other co-Trustee
hereunder; and
(iii) The Servicer and the Trustee acting jointly may at
any time accept the resignation of or remove any separate Trustee or
co-Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate Trustees and
co-Trustees, as effectively as if given to each of them. Every instrument
appointing any separate Trustee or co-Trustee shall refer to this Agreement and
the conditions of this Section 10.14. Each separate Trustee and co-Trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of or affording protection
to the Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer.
Any separate Trustee or co-Trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate Trustee
or co-Trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
The Trustee shall give to Moody's, the Company and the
Certificate Insurer notice of the appointment of any Co-Trustee or separate
Trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any
application or request by the Company, the Certificate Insurer or the Owners to
the Trustee to take any action under any provision of this Agreement, the
Company, the Certificate Insurer or the Owners, as the case may be, shall
furnish to the Trustee a certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of any documents is specifically required by any provision
of this Agreement relating to such particular application or request, no
additional certificate need be furnished.
Except as otherwise specifically provided herein, each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
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(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.2. Form of Documents Delivered to the Trustee. In
any case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person or that they be
so certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon an opinion of counsel,
unless such Authorized Officer knows, or in the exercise of reasonable care
should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Trustee or any opinion of counsel may be based,
insofar as it relates to factual matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Company or of the
Servicer, stating that the information with respect to such factual matters is
in the possession of the Company or of the Servicer, unless such Authorized
Officer or counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may also be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
Authorized Officer of the Trustee, stating that the information with respect to
such matters is in the possession of the Trustee, unless such counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous. Any opinion of
counsel may be based on the written opinion of other counsel, in which event
such opinion of counsel shall be accompanied by a copy of such other counsel's
opinion and shall include a statement to the effect that such counsel believes
that such counsel and the Trustee may reasonably rely upon the opinion of such
other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
Section 11.3. Acts of Owners. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "act" of the Owners signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee and the Trust, if made in the manner provided in this Section.
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(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall bind the
Owner of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.4. Notices, etc. to Trustee. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to or filed with the Trustee by any Owner, the Certificate Insurer or
by the Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver of
Notices. Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein expressly provided) if mailed, first-class
postage prepaid, to each Owner affected by such event or to whom such report is
required to be mailed, at the address of such Owner as it appears on the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice or the mailing of such report. In
any case where a notice or report to Owners is mailed in the manner provided
above, neither the failure to mail such notice or report nor any defect in any
notice or report so mailed to any particular Owner shall affect the sufficiency
of such notice or report with respect to other Owners, and any notice or report
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given or provided.
Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Owners shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Owners when such notice is required
to be given pursuant to any provision of this Agreement, then any manner of
giving such notice as shall be satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency
that rated any Certificates, failure to give such notice shall not affect any
other rights or obligations created hereunder.
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Section 11.6. Rules by Trustee and the Company. The Trustee
may make reasonable rules for any meeting of Owners. The Company may make
reasonable rules and set reasonable requirements for its functions.
Section 11.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
Section 11.8. Severability. In case any provision in this
Agreement or in the Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.9. Benefits of Agreement. Nothing in this Agreement
or in the Certificates, expressed or implied, shall give to any Person, other
than the Owners, the Certificate Insurer and the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 11.10. Legal Holidays. In any case where the date of
any Remittance Date, any Payment Date, any other date on which any distribution
to any Owner is proposed to be paid or any date on which a notice is required to
be sent to any Person pursuant to the terms of this Agreement shall not be a
Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date but may be made
on the next succeeding Business Day with the same force and effect as if made or
mailed on the nominal date of any such Remittance Date, such Payment Date or
such other date for the payment of any distribution to any Owner or the mailing
of such notice, as the case may be, and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on
such next succeeding Business Day.
Section 11.11. Governing Law. In view of the fact that Owners
are expected to reside in many states and outside the United States and the
desire to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 11.12. Counterparts. This instrument may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.13. Usury. The amount of interest payable or paid
on any Certificate under the terms of this Agreement shall be limited to an
amount which shall not exceed the maximum nonusurious rate of interest allowed
by the applicable laws of the State of New York or any applicable law of the
United States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error on the part of the Trustee acting on behalf of the Trust
and the Owner receiving such excess payment shall promptly, upon discovery of
such error or upon notice thereof from the Trustee on behalf of the Trust,
refund the amount of such excess or, at the option of such Owner, apply the
excess to the payment of principal of such Certificate, if any, remaining
unpaid. In addition, all sums paid or agreed to be paid to the Trustee for the
benefit of Owners of Certificates for the use,
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forbearance or detention of money shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such Certificates.
Section 11.14. Amendment. (a) The Trustee, the Depositor, the
Company and the Servicer, may at any time and from time to time, with the prior
approval of the Certificate Insurer but without the giving of notice to or the
receipt of the consent of the Owners, amend this Agreement for the purposes of
(i) removing the restriction against the transfer of a Class R Certificate to a
Disqualified Organization (as such term is defined in the Code) if accompanied
by an approving opinion of counsel experienced in federal income tax matters
addressed to the Certificate Insurer and the Trustee, (ii) complying with the
requirements of the Code including any amendments necessary to maintain REMIC
status of the assets of the Trust treated as a REMIC hereunder, (iii) curing any
ambiguity and (iv) correcting or supplementing any provisions of this Agreement
which are inconsistent with any other provisions of this Agreement; provided
that prior to the effectiveness of such amendment, the Company either (A)
delivers an opinion of counsel acceptable to the Trustee and the Certificate
Insurer that such amendment will not adversely affect in any material respect
the interest of the Owners and the Certificate Insurer or (B) delivers a letter
from each Rating Agency stating that such amendment will not result in a
withdrawal or reduction of the rating of the Class A Certificates without regard
to the Certificate Insurance Policy. Notwithstanding anything to the contrary,
no such amendment shall (a) change in any manner the amount of, or delay the
timing of, payments which are required to be distributed to any Owner without
the consent of the Owner of such Certificate, (b) change the percentages of
Percentage Interest which are required to consent to any such amendments,
without the consent of the Owners of all Certificates of the Class or Classes
affected then outstanding or (c) which affects in any manner the terms or
provisions of the Certificate Insurance Policy.
(b) This Agreement may be amended from time to time by the
Servicer, the Company, the Depositor and the Trustee with the consent of the
Certificate Insurer (which consent shall not be withheld if, in an opinion of
counsel addressed to the Trustee and the Certificate Insurer, failure to amend
would adversely affect the interests of the Owners) and the Owners of a 66 2/3%
of the Class A Certificates 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 Owners; provided, however, that no
such amendment shall be made that no such amendment shall 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
Owner of such Certificate or reduce the percentage for each Class the Owners of
which are required to consent to any such amendment without the consent of the
Owners of 100% of each Class of Certificates affected thereby.
(c) Each proposed amendment to this Agreement shall be
accompanied by an opinion of counsel nationally recognized in federal income tax
matters and reasonably acceptable to the Certificate Insurer addressed to the
Trustee and to the Certificate Insurer to the effect that such amendment would
not adversely affect the status of the Trust as a REMIC.
(d) The Certificate Insurer, the Owners, Moody's and Standard
& Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
Section 11.15. REMIC Status; Taxes. (a) The Tax Matters Person
shall prepare and file or cause to be filed with the Internal Revenue Service
federal tax or information returns with respect to the Trust and the
Certificates containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations and shall furnish
to Owners such statements
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or information at the times and in such manner as may be required thereby. For
this purpose, the Tax Matters Person may, but need not, rely on any proposed
regulations of the United States Department of the Treasury. The Tax Matters
Person shall indicate the election to treat the Trust as a REMIC (which election
shall apply to the taxable period ending December 31, 1996 and each calendar
year thereafter) in such manner as the Code or applicable Treasury regulations
may prescribe. The Company, as Tax Matters Person appointed pursuant to Section
11.17 hereof, shall sign all tax information returns filed pursuant to this
Section 11.15. The Tax Matters Person shall provide information necessary for
the computation of tax imposed on the transfer of a Class R Certificate to a
Disqualified Organization, an agent of a Disqualified Organization or a
pass-through entity in which a Disqualified Organization is the record holder of
an interest. The Tax Matters Person shall provide the Trustee with copies of any
Federal tax or information returns filed, or caused to be filed, by the Tax
Matters Person with respect to the Trust or the Certificates.
(b) The Tax Matters Person shall timely file all reports
required to be filed by the Trust with any federal, state or local governmental
authority having jurisdiction over the Trust, including other reports that must
be filed with the Owners, such as the Internal Revenue Service's Form 1066 and
Schedule Q and the form required under Section 6050K of the Code, if applicable
to REMICs. Furthermore, the Tax Matters Person shall report to Owners, if
required, with respect to the allocation of expenses pursuant to Section 212 of
the Code in accordance with the specific instructions to the Tax Matters Person
by the Company with respect to such allocation of expenses. The Tax Matters
Person shall collect any forms or reports from the Owners determined by the
Company to be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal
Revenue Service and to persons described in Section 860E(e)(3) and (6) of the
Code the information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Company covenants and agrees that within ten Business
Days after the Startup Day it shall provide to the Tax Matters Person any
information necessary to enable the Tax Matters Person to meet its obligations
under subsections (b) and (c) above.
(e) The Trustee, the Depositor, the Company and the Servicer
each covenants and agrees for the benefit of the Owners (i) to take no action
which would result in the termination of "REMIC" status for the Trust (ii) not
to engage in any "prohibited transaction", as such term is defined in Section
860F(a)(2) of the Code and (iii) not to engage in any other action which may
result in the imposition on the Trust of any other taxes under the Code.
(f) The Trust shall, for federal income tax purposes, maintain
books on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b) hereof, no
Eligible Investment shall be sold prior to its stated maturity (unless sold
pursuant to a plan of liquidation in accordance with Article IX hereof).
(h) Neither the Company nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which
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fee or other compensation is paid from the Trust Estate, other than as expressly
contemplated by this Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the
Trustee or the Company may engage in any of the transactions prohibited by such
clauses, provided that the Trustee shall have received an opinion of counsel
experienced in federal income tax matters and reasonably acceptable to the
Certificate Insurer, which opinion shall not be at the expense of the Trustee,
to the effect that such transaction does not result in a tax imposed on the
Trustee or cause a termination of REMIC status for the Trust; provided, however,
that such transaction is otherwise permitted under this Agreement.
Section 11.16. Additional Limitation on Action and Imposition
of Tax. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters and reasonably acceptable to the Certificate Insurer,
which opinion shall not be at the expense of the Trustee, to the effect that
such transaction does not result in a tax imposed on the Trust or cause a
termination of REMIC status for the Trust, (i) sell any assets in the Trust
Estate, (ii) accept any contribution of assets after the Startup Day or (iii)
agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the Trust as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" as defined in Section 860G(c) of the
Code, on any contribution to the Trust after the Startup Day pursuant to Section
860G(d) of the Code or any other tax (other than any minimum tax imposed by
Sections 23151(a) or 23153(a) of the California Revenue and Taxation Code) is
imposed, such tax shall be paid by (i) the Trustee, if such tax arises out of or
results from a breach by the Trustee of any of its obligations under this
Agreement, (ii) the Servicer, if such tax arises out of or results from a breach
by the Servicer of any of its obligations under this Agreement or (iii) the
Owners of the Class R Certificates in proportion to their Percentage Interests.
To the extent such tax is chargeable against the Owners of the Class R
Certificates, notwithstanding anything to the contrary contained herein, the
Trustee is hereby authorized to retain from amounts otherwise distributable to
the Owners of the Class R Certificates on any Payment Date sufficient funds to
reimburse the Trustee for the payment of such tax (to the extent that the
Trustee has not been previously reimbursed or indemnified therefor). The Trustee
agrees to first seek indemnification for any such tax payment from any
indemnifying parties before reimbursing itself from amounts otherwise
distributable to the Owners of the Class R Certificates.
Section 11.17. Appointment of Tax Matters Person. A Tax
Matters Person will be appointed for the Trust for all purposes of the Code, and
such Tax Matters Person will perform, or cause to be performed through agents,
such duties and take, or cause to be taken, such actions as are required to be
performed or taken by the Tax Matters Person under the Code. The Tax Matters
Person for the Trust shall be the Company as long as it owns a Class R
Certificate or, if the Company does not own a Class R Certificate, may be any
other entity selected by the Company that owns a Class R Certificate.
Section 11.18. The Certificate Insurer. The Certificate
Insurer is a third-party beneficiary of this Agreement. Any right conferred to
the Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policies. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Owners of the Class A Certificates
and shall be exercisable by the Owners of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding. At such time as the Class
A Certificates are no longer Outstanding hereunder and the Certificate Insurer
has been reimbursed for all
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Insured Payments to which it is entitled hereunder, the Certificate Insurer's
rights hereunder shall terminate.
Section 11.19. Maintenance of Records. Each Originator and
Owner of a Class R Certificate shall each continuously keep an original executed
counterpart of this Agreement in its official records.
Section 11.20. Notices. All notices hereunder shall be given
as follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: First Alliance Mortgage
Loan Trust, Series 1996-1
Tel: (714) 253-7575
Fax: (714) 253-7577
The Company: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92714-6203
Attention: Director: Secondary Marketing
Tel: (714) 224-8357
Fax: (714) 224-8366
The Servicer: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92714-6203
Attention: Cassandra Fraulino
Tel: (714) 224-8357
Fax: (714) 224-8366
The Depositor: Prudential Securities Secured Financing
Corporation
199 Water Street
26th Floor
New York, NY 10292
Attention: Director - Mortgage Finance Group
Tel: (212)
Fax: (212)
The Certificate
Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Surveillance Dept.:
Structured Finance Group (First Alliance
96-1)
Tel: (914) 765-3111
Fax: (914) 765-3919
95
<PAGE>
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity Monitoring
Department
Standard & Poor's: Standard & Poor's, A Division of The McGraw-
Hill Companies
26 Broadway
15th Floor
New York, New York 10004
Attention: Residential Mortgage
Surveillance Dept.
Underwriter: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292-2015
Attention: Director, Mortgage Finance Group
Tel: (212) 778-1000
Fax: (212) 778-5099
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<PAGE>
IN WITNESS WHEREOF, the Depositor, the Company, the Servicer
and the Trustee have caused this Agreement to be duly executed by their
respective officers thereunto duly authorized, all as of the day and year first
above written.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
By:_________________________________________
Name: ___________________________________
Title:___________________________________
FIRST ALLIANCE MORTGAGE COMPANY
By: ________________________________________
Name:____________________________________
Title:___________________________________
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
By: ________________________________________
Name: ___________________________________
Title: __________________________________
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:_________________________________________
Name:____________________________________
Title: __________________________________
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<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the ___ day of March, 1996, before me, a Notary Public,
personally appeared ____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
z WITNESS my hand and official seal.
[NOTARIAL SEAL]
- --------------------------------
Notary Public
98
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of March, 1996, before me, a Notary Public,
personally appeared ____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that she executed the
same in her authorized capacity, and that by her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
[NOTARIAL SEAL]
- --------------------------------
Notary Public
99
<PAGE>
EXHIBIT A-1
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-1
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS A-1 CERTIFICATE
(7.34% Class A-1 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in Group I formed by First Alliance
Mortgage Company, and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY
as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to Issuer ("First Alliance Mortgage Loan Trust 1996-1") or its agent for
registration of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
First Alliance Mortgage Company, the Depositor, any Originator or any of their
subsidiaries and affiliates. This certificate represents a fractional ownership
interest in Group I described herein, moneys in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee (i)
relating to the Mortgage Loans in Group I held by the Trust and (ii) pursuant to
the Class A-1 Certificate Insurance Policy.
No.: A-1-1 March 29, 1996 31846L AY2
Date CUSIP
$20,541,000 June 20, 2027
- --------------------------------------- --------------------------
Certificate Principal Amount Final Scheduled
Payment Date
Cede & Co.
Registered Owner
A-1-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool of fixed rate mortgage loans (the "Mortgage
Loans") secured by first or second mortgages or deeds of trust assigned to a
particular mortgage loan group ("Group I") which will be formed by First
Alliance Mortgage Company (the "Company" or, in its capacity as servicer, the
"Servicer"), a California corporation, and sold by the Company to Prudential
Securities Secured Financing Corporation (the "Depositor") and sold by the
Depositor to Bankers Trust Company of California, N.A., a national banking
association, as trustee (the "Trustee") on behalf of First Alliance Mortgage
Loan Trust 1996-1 (the "Trust") pursuant to that certain Pooling and Servicing
Agreement dated as of March 1, 1996 (the "Pooling and Servicing Agreement") by
and among the Depositor, the Company, the Servicer and the Trustee, (ii) such
amounts, including Eligible Investments and the proceeds of payments under the
Class A-1 Certificate Insurance Policy, as from time to time may be held in the
related Accounts (except as otherwise provided in the Pooling and Servicing
Agreement), each created pursuant to the Pooling and Servicing Agreement, (iii)
any Property relating to the Mortgage Loans in Group I, the ownership of which
has been effected in the name of the Servicer on behalf of the Trust as a result
of foreclosure or acceptance by the Servicer of a deed in lieu of foreclosure
and that has not been withdrawn from the Trust Estate, (iv) any Insurance
Policies relating to the Mortgage Loans in Group I and any rights of the Company
in any Insurance Policies relating to the Mortgage Loans in Group I, (v) Net
Liquidation Proceeds relating to the Mortgage Loans in Group I, (vi) the related
Certificate Insurance Policy, (vii) the rights of the Depositor against the
Company under the Purchase Agreement and (viii) the rights of the Company
against any Originator pursuant to the related Master Transfer Agreement and the
proceeds of any of the above. Such Mortgage Loans in Group I and other amounts
and property enumerated above are hereinafter referred to as "Group I."
The Certificate Principal Amount set forth above is equal to
the product of (i) the Percentage Interest represented by this Certificate and
(ii) the aggregate Original Certificate Principal Balance of the Class A-1
Certificates on March 29, 1996 (the "Startup Date"), which was $20,541,000. The
Owner hereof may receive principal payments on each Payment Date, as hereinafter
described, which will fully amortize such Certificate Principal Amount over the
period from the date of initial delivery hereof to the final Payment Date of the
Class A-1 Certificates. Therefore, the actual outstanding principal amount of
this Class A-1 Certificate, on any date subsequent to April 22, 1996 (the first
Payment Date) will be less than the Certificate Principal Amount set forth
above.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
A-1-2
<PAGE>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as First Alliance Mortgage Loan Trust 1996-1, Mortgage
Loan Asset Backed Certificates, Class A-1 Certificates (the "Class A-1
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Owner of this Certificate by virtue of acceptance hereof
assents and by which such Owner is bound. Also issued under the Pooling and
Servicing Agreement are Class A-2 Certificates and Class R Certificates; all
such Certificates are collectively referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 20th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date") commencing April 22, 1996, the Owners of the Class A-1
Certificates as of the close of business on the last business day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs (the "Record Date") will be entitled to receive the Class A-1
Distribution Amount relating to such Payment Date. Distributions will be made in
immediately available funds to such Owners, by wire transfer or otherwise, to
the account of such Owner at a domestic bank or other entity having appropriate
facilities therefor, if such Owner has so notified the Trustee at least 5
business days prior to the related record date, or by check mailed to the
address of the person entitled thereto as it appears on the Register.
Each Owner of record of a Class A-1 Certificate will be
entitled to receive such Owner's Percentage Interest in the amounts due on such
Payment Date to the Owners of the Class A-1 Certificates.
"Class A-1 Distribution Amount" means the sum of (x) the Group
I Principal Distribution Amount payable to the Owners of the Class A-1
Certificates pursuant to Section 7.5(d)(iv)(B) of the Pooling and Servicing
Agreement and (y) the Class A-1 Current Interest.
Class A-1 Current Interest means, with respect to interest
accruing on or after the Cut-Off Date and as of any Payment Date, the aggregate
amount of interest accrued on the Class A-1 Certificate Principal Balance
immediately prior to such Payment Date during the related Interest Accrual
Period at the Class A-1 Pass-Through Rate.
Group I Principal Distribution Amount means, with respect to
the Fixed Rate Certificates for any Payment Date, the lesser of:
(x) the Group I Total Available Funds plus any Group I Insured
Payment; and
(y) the excess, if any, of (i) the sum, without duplication of:
1. the Class A-1 Carry-Forward Amount,
2. the principal portion of all scheduled monthly
payments on the Mortgage Loans in Group I due on
or prior to the related Due Date during the
related Due Period, to the extent actually
received by the Trustee on or prior to the
related Remittance Date or to the extent
advanced by the Servicer on or
A-1-3
<PAGE>
prior to the related Remittance Date and any
Prepayments made by the respective Mortgagors
during the related Remittance Period,
3. the Loan Balance of each Mortgage Loan in Group
I that either was repurchased by the Company or
an Originator or purchased by the Servicer on
the related Remittance Date, to the extent such
Loan Balance is actually received by the Trustee
on or prior to the related Remittance Date,
4. any Substitution Amounts delivered by the
Company or an Originator on the related
Remittance Date in connection with a
substitution of a Mortgage Loan in Group I (to
the extent such Substitution Amounts relate to
principal), to the extent such Substitution
Amounts are actually received by the Trustee on
or prior to the related Remittance Date,
5. all Net Liquidation Proceeds actually collected
by the Servicer with respect to the Mortgage
Loans in Group I during the related Remittance
Period (to the extent such Net Liquidation
Proceeds relate to principal) to the extent
actually received by the Trustee on or prior to
the related Remittance Date,
6. the amount of any Group I Subordination Deficit
for such Payment Date,
7. the proceeds received by the Trustee of any
termination as set forth in Article IX hereof of
Group I (to the extent such proceeds related to
principal), and
8. the amount of any Subordination Increase Amount
with respect to Group I for such Payment Date,
to the extent of any Net Monthly Excess Cashflow
available for such purpose;
over
(ii) the amount of any Subordination Reduction Amount with
respect to Group I for such Payment Date.
If, on any Payment Date, the amount of Group I Total Available
Funds then on deposit in the Certificate Account is less than the Class A-1
Current Interest and the Group I Subordination Deficit on such Payment Date, the
Owners of the Class A-1 Certificates will receive on such Payment Date the
amount of the Group I Total Available Funds and the amount of such shortfall,
together with interest on such shortfall at one-twelfth of the Class A-1
Pass-Through Rate from such Payment Date to the next Payment Date (resulting in
a compounding of interest) (the "Class A-1 Carry-Forward Amount"), which will be
distributed to the Owners of the Class A-1 Certificates on the next Payment Date
or, if Group I Total Available Funds are insufficient to distribute such Class
A-1 Carry-Forward Amount in full on such Payment Date, then on succeeding
Payment Dates. Pursuant to and in accordance with the Class A-1 Certificate
Insurance Policy, the Certificate Insurer is required, to the extent of any
insufficiency in Group I Total Available Funds, to make Insured Payments
available to the Trustee necessary to distribute the full amount of the Class
A-1 Distribution Amount on each Payment Date. If the Certificate Insurer makes
timely payment under the Class A-1 Certificate Insurance Policy no Class A-1
Carry-Forward Amount will exist.
A-1-4
<PAGE>
Upon receipt of amounts under the Class A-1 Certificate
Insurance Policy on behalf of the Owners of the Class A-1 Certificates, the
Trustee shall distribute in accordance with the Pooling and Servicing Agreement
such amounts to the Owners of the Class A-1 Certificates.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable to any Owner shall be considered as having been paid by
the Trustee to such Owner for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter int o Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, the Depositor, the Company, any Originator or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans in Group I
and amounts on deposit in the Accounts (except as otherwise provided in the
Pooling and Servicing Agreement) and payments received by the Trustee pursuant
to the Class A-1 Certificate Insurance Policy, all as more specifically set
forth hereinabove and in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Certificate Insurance Policies of all amounts held by the Trustee and
required to be paid to such Owners pursuant to the Pooling and Servicing
Agreement upon the later to occur of (a) the final payment or other liquidation
(or any advance made with respect thereto) of the last Mortgage Loan in the
Trust Estate or (b) the disposition of all property acquired in respect of any
Mortgage Loan remaining in the Trust Estate or (ii) at any time when a Qualified
Liquidation of the Trust Estate is effected pursuant to the Pooling and
Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Servicer or the Certificate Insurer may, at its option, purchase from
the Trust all (but not fewer than all) remaining Mortgage Loans and other
property then constituting the Trust Estate, and thereby effect early retirement
of the Class A-1 Certificates, on any Remittance Date when the aggregate
outstanding Loan Balances of the Mortgage Loans in the Trust Estate is 10% or
less of the Original Aggregate Loan Balance and (ii)
A-1-5
<PAGE>
under certain circumstances relating to the qualification of the Trust as a
REMIC under the Code the Mortgage Loans may be sold, thereby affecting the early
retirement of the Class A-1 Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Estate.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered
Certificates in denominations of $1,000 certificate principal amount and
integral multiples of $1,000. As provided in the Pooling and Servicing Agreement
and subject to certain limitations therein set forth, Class A-1 Certificates are
exchangeable for new Class A-1 Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary.
A-1-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By:
--------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Trustee Authentication
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
A-1-7
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such Policy being on file at Bankers Trust
Company of California, N.A., Irvine, California, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Class A-1 Certificate Insurance Policy (the
"Policy"), thereby unconditionally and irrevocably guarantees to any Owner that
an amount equal to each full and complete Group I Insured Payment will be
received by the Trustee or its successor, on behalf of the Owners from the
Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Group I Insured Payment. The Insurer's obligation
under the Policy with respect to a particular Group I Insured Payment shall be
discharged to the extent funds equal to the Group I Insured Payment are received
by the Trustee, whether or not such funds are properly applied by the Trustee.
Group I Insured Payments shall be made only at the time set forth in the Policy,
and no accelerated Group I Insured Payments shall be made regardless of any
acceleration of the Obligations, unless such acceleration is at the sole option
of the Insurer. "Obligations" shall mean:
$20,541,000
First Alliance Mortgage Loan Trust 1996-1
Mortgage Loan Asset Backed Certificates
Class A-1
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust, the REMIC
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Group I Insured Payment that is a
Group I Preference Amount on the Business Day following receipt on a Business
Day by the Fiscal Agent (as described below) of (i) a certified copy of the
order requiring the return of such Group I Preference Amount, (ii) an opinion of
counsel satisfactory to the Insurer that such order is final and not subject to
appeal, (iii) an assignment in such form as is reasonably required by the
Insurer, irrevocably assigning to the Insurer all rights and claims of the Owner
relating to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to
such Owner directly unless such Owner has returned principal or interest paid on
the Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable under the Policy
no later than 12:00 noon, New York City time, on the later of the Payment Date
on which the related Group I Distribution Amount is due or the Business Day
following receipt in New York, New York on a Business Day by State Street Bank
and Trust Company, N.A. as Fiscal Agent for the Insurer, or any successor fiscal
agent appointed by the Insurer (the "Fiscal Agent") of a Notice (as described
below); provided that, if such Notice is received after 12:00 noon New York City
time on such Business Day, it will be deemed to be received on the following
Business Day. If any such Notice received by the Fiscal Agent is not in proper
form
A-1-8
<PAGE>
or is otherwise insufficient for the purpose of making a claim under the Policy,
it shall be deemed not to have been received by the Fiscal Agent for purposes of
this paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Group I Insured Payments due under the Policy, unless
otherwise stated in the Policy, will be disbursed by the Fiscal Agent to the
Trustee on behalf of the Owners by wire transfer of immediately available funds
in the amount of the Group I Insured Payment less, in respect of Group I Insured
Payments related to Group I Preference Amounts, any amount held by the Trustee
for the payment of such Group I Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the
Fiscal Agent shall in no event be liable to the Owners for any acts of the
Fiscal Agent or any failure of the Insurer to deposit, or cause to be deposited,
sufficient funds to make payments due under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of March 1, 1996 among Prudential Securities Secured Financing Corporation, as
Depositor, First Alliance Mortgage Company, as Company, First Alliance Mortgage
Company, as Servicer and Bankers Trust Company of California, N.A., as Trustee,
without regard to any amendment or supplement thereto unless the Insurer shall
have consented in writing thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in New York City or in the city in which
the corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Group I Insured Payment," with respect to the Class A-1
Certificates and as to any Payment Date, will equal the sum of (i) the excess,
if any, of (a) the sum of the Class A-1 Current Interest and the Group I
Subordination Deficit, if any, over (b) the Group I Total Available Funds (after
applying the cross collateralization provisions of Section 7.5(d)(ii)(A) and (B)
of the Agreement, after any deduction for the Group I Premium Amount and the
Group I Trustee Fee and after taking into account the portion of the Group I
Principal Distribution Amount to be actually distributed on such Payment Date
without regard to any Group I Insured Payment to be made with respect to such
Payment Date), plus (ii) the Group I Preference Amount.
"Group I Preference Amount" means any amount previously
distributed to an Owner on the Class A-1 Certificates that is recoverable and
sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time, in accordance with a final nonappealable order of a court having
competent jurisdiction.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Group I Insured Payment which
shall be due and owing on the applicable Payment Date.
"Owner" means each Owner of a Class A-1 Certificate as defined
in the Agreement who, on the applicable Payment Date, is entitled under the
terms of the applicable Class A-1 Certificate to payment thereunder.
A-1-9
<PAGE>
Capitalized terms used herein and not otherwise defined in the
Policy shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment or modification to the Agreement unless such amendment or modification
has been approved in writing by the Insurer.
Any notice under the Policy or service of process on the
Fiscal Agent may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th
Floor, New York, New York 10006, Attention: Municipal Registrar and Paying
Agency or such other address as the Fiscal Agent shall specify to the Trustee in
writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason, including payment, or provision
being made for payment, prior to the maturity of the Obligations.
MBIA INSURANCE CORPORATION
A-1-10
<PAGE>
EXHIBIT A-2
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-1
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS A-2 CERTIFICATE
(Variable Rate Class A-2 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in Group II formed by First Alliance Mortgage
Company, and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to Issuer ("First Alliance Mortgage Loan Trust 1996-1") or its agent for
registration of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
This certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
First Alliance Mortgage Company, the Depositor, any Originator or any of their
subsidiaries and affiliates. This certificate represents a fractional ownership
interest in Group II described herein, moneys in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee (i)
relating to the Mortgage Loans in Group II held by the Trust and (ii) pursuant
to the Class A-2 Certificate Insurance Policy.
No.: A-2-1 March 29, 1996 31846L AZ9
Date CUSIP
$31,878,000 June 20, 2027
- --------------------------------------- --------------------------
Certificate Principal Amount Final Scheduled
Payment Date
Cede & Co.
Registered Owner
A-2-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool of variable rate mortgage loans (the "Mortgage
Loans") secured by first lien mortgages or deeds of trust assigned to a
particular mortgage loan group ("Group II") which will be formed by First
Alliance Mortgage Company (the "Company" or, in its capacity as servicer, the
"Servicer"), a California corporation, and sold by the Company to Prudential
Securities Secured Financing Corporation (the "Depositor") and sold by the
Depositor to Bankers Trust Company of California, N.A., a national banking
association, as trustee (the "Trustee") on behalf of First Alliance Mortgage
Loan Trust 1996-1 (the "Trust") pursuant to that certain Pooling and Servicing
Agreement dated as of March 1, 1996 (the "Pooling and Servicing Agreement") by
and among the Depositor, the Company, the Servicer and the Trustee, (ii) such
amounts, including Eligible Investments and the proceeds of payments under the
Class A-2 Certificate Insurance Policy, as from time to time may be held in the
related Accounts (except as otherwise provided in the Pooling and Servicing
Agreement), each created pursuant to the Pooling and Servicing Agreement, (iii)
any Property relating to the Mortgage Loans in Group II, the ownership of which
has been effected in the name of the Servicer on behalf of the Trust as a result
of foreclosure or acceptance by the Servicer of a deed in lieu of foreclosure
and that has not been withdrawn from the Trust Estate, (iv) any Insurance
Policies relating to the Mortgage Loans in Group II and any rights of the
Company in any Insurance Policies relating to the Mortgage Loans in Group II,
(v) Net Liquidation Proceeds relating to the Mortgage Loans in Group II, (vi)
the Certificate Insurance Policies, (vii) the rights of the Depositor against
the Company under the Purchase Agreement and (viii) the rights of the Company
against any Originator pursuant to the related Master Transfer Agreement and the
proceeds of any of the above. Such Mortgage Loans in Group II and other amounts
and property enumerated above are hereinafter referred to as "Group II."
The Certificate Principal Amount set forth above is equal to
the product of (i) the Percentage Interest represented by this Certificate and
(ii) the aggregate Original Certificate Principal Balance of the Class A-2
Certificates on March 29, 1996 (the "Startup Date"), which was $31,878,000. The
Owner hereof may receive principal payments on each Payment Date, as hereinafter
described, which will fully amortize such Certificate Principal Amount over the
period from the date of initial delivery hereof to the final Payment Date of the
Class A-2 Certificates. Therefore, the actual outstanding principal amount of
this Class A-2 Certificate, on any date subsequent to April 22, 1996 (the first
Payment Date) will be less than the Certificate Principal Amount set forth
above.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
A-2-2
<PAGE>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized
Certificates designated as First Alliance Mortgage Loan Trust 1996-1, Mortgage
Loan Asset Backed Certificates, Class A-2 Certificates (the "Class A-2
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Owner of this Certificate by virtue of acceptance hereof
assents and by which such Owner is bound. Also issued under the Pooling and
Servicing Agreement are Class A-1 Certificates and Class R Certificates; all
such Certificates are collectively referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 20th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date") commencing April 22, 1996, the Owners of the Class A-2
Certificates as of the close of business on the last business day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs (the "Record Date") will be entitled to receive the Class A-2
Distribution Amount relating to such Payment Date. Distributions will be made in
immediately available funds to such Owners, by wire transfer or otherwise, to
the account of an Owner at a domestic bank or other entity having appropriate
facilities therefor, if such Owner has so notified the Trustee at least 5
business days prior to the related record date, or by check mailed to the
address of the person entitled thereto as it appears on the Register.
Each Owner of record of a Class A-2 Certificate will be
entitled to receive such Owner's Percentage Interest in the amounts due on such
Payment Date to the Owners of the Class A-2 Certificates.
Class A-2 Distribution Amount means the sum of (x) the Group
II Principal Distribution Amount payable to the Owners of the Class A-2
Certificates pursuant to Section 7.5(d)(iv)(D) of the Pooling and Servicing
Agreement and (y) Class A-2 Current Interest.
Class A-2 Current Interest means, with respect to interest
accruing on or after the Cut-Off Date and as of any Payment Date, the aggregate
amount of interest accrued on the Class A-2 Certificate Principal Balance
immediately prior to such Payment Date during the related Interest Accrual
Period at the Class A-2 Pass-Through Rate for such Payment Date.
Group II Principal Distribution Amount means with respect to
the Class A-2 Certificates for any Payment Date, the lesser of:
(x) the Group II Total Available Funds plus any Group II Insured
Payment; and
(y) the excess, if any, of (i) the sum, without duplication of:
1. the Class A-2 Carry-Forward Amount,
2. the principal portion of all scheduled
monthly payments on the Mortgage Loans in
Group II due on or prior to the related Due
Date during the related Due Period, to the
extent actually received by the Trustee on
or prior to the related Remittance Date or
to the extent advanced by the
A-2-3
<PAGE>
Servicer on or prior to the related
Remittance Date and any Prepayments made by
the respective Mortgagors during the related
Remittance Period,
3. the Loan Balance of each Mortgage Loan in
Group II that either was repurchased by the
Company or an Originator or purchased by the
Servicer on the related Remittance Date, to
the extent such Loan Balance is actually
received by the Trustee, on or prior to the
related Remittance Date,
4. any Substitution Amounts delivered by the
Company or an Originator on the related
Remittance Date in connection with a
substitution of a Mortgage Loan in Group II
(to the extent such Substitution Amounts
relate to principal), to the extent such
Substitution Amounts are actually received
by the Trustee, on or prior to the related
Remittance Date,
5. all Net Liquidation Proceeds actually
collected by the Servicer with respect to
the Mortgage Loans in Group II during the
related Remittance Period (to the extent
such Net Liquidation Proceeds relate to
principal) to the extent actually received
by the Trustee, on or prior to the related
Remittance Date,
6. the amount of any Group II Subordination
Deficit for such Payment Date,
7. the proceeds received by the Trustee of any
termination as set forth in Article IX
hereto of Group II (to the extent such
proceeds related to principal), and
8. the amount of any Subordination Increase
Amount with respect to Group II for such
Payment Date, to the extent of any Net
Monthly Excess Cashflow available for such
purpose;
over
(ii) the amount of any Subordination Reduction
Amount with respect to Group II for such
Payment Date.
If, on any Payment Date, the amount of Group II Total
Available Funds then on deposit in the Certificate Account is less than the
Class A-2 Current Interest and the Group II Subordination Deficit on such
Payment Date, the Owner of the Class A-2 Certificate will receive on such
Payment Date the amount of such Group II Total Available Funds, and the amount
of such shortfall, together with interest on such shortfall at one-twelfth of
the Class A-2 Pass-Through Rate from such Payment Date to the next Payment Date
(resulting in a compounding of interest) (the "Class A-2 Carry-Forward Amount"),
will be distributed to the Owner of the Class A-2 Certificate on the next
Payment Date or, if Group II Total Available Funds are insufficient to
distribute such Class A-2 Carry-Forward Amount in full on such Payment Date,
then on succeeding Payment Dates. Pursuant to and in accordance with the Class
A-2 Certificate Insurance Policy, the Certificate Insurer is required, to the
extent of any insufficiency in Group II Total Available Funds, to make Insured
Payments available to the Trustee necessary to distribute the full amount of the
Class A-2
A-2-4
<PAGE>
Distribution Amount on each Payment Date. If the Certificate Insurer makes
timely payment under the Class A-2 Certificate Insurance Policy no Class A-2
Carry-Forward Amount will exist.
Upon receipt of amounts under the Class A-2 Certificate
Insurance Policy on behalf of the Owner of the Class A-2 Certificate, the
Trustee shall distribute in accordance with the Pooling and Servicing Agreement
such amounts to the Owners of the Class A-2 Certificates.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable to any Owner shall be considered as having been paid by
the Trustee to such Owner for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub- Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, the Depositor, the Company, any Originator or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries relating to the Mortgage Loans in Group II
and amounts on deposit in the Accounts (except as otherwise provided in the
Pooling and Servicing Agreement) and payments received by the Trustee pursuant
to the Class A-2 Certificate Insurance Policy, all as more specifically set
forth hereinabove and in the Pooling and Servicing Agreement.
No Owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Certificate Insurance Policies of all amounts held by the Trustee and
required to be paid to such Owners pursuant to the Pooling and Servicing
Agreement upon the later to occur of (a) the final payment or other liquidation
(or any advance made with respect thereto) of the last Mortgage Loan in the
Trust Estate or (b) the disposition of all property acquired in respect of any
Mortgage Loan remaining in the Trust Estate or (ii) at any time when a Qualified
Liquidation of the Trust Estate is effected pursuant to the Pooling and
Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Servicer or the Certificate Insurer may, at its option, purchase from
the Trust all (but not fewer than all)
A-2-5
<PAGE>
remaining Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Class A-2 Certificates, on any
Remittance Date when the aggregate outstanding Loan Balances of the Mortgage
Loans in the Trust Estate is 10% or less of the Original Aggregate Loan Balance
and (ii) under certain circumstances relating to the qualification of the Trust
as a REMIC under the Code the Mortgage Loans may be sold, thereby affecting the
early retirement of the Class A-2 Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, upon compliance with the requirements
set forth in the Pooling and Servicing Agreement, have the right, with the
consent of the Certificate Insurer, to exercise any trust or power set forth in
the Pooling and Servicing Agreement with respect to the Certificates or the
Trust Estate.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-2 Certificates are issuable only as registered
Certificates in denominations of $1,000 certificate principal amount and
integral multiples of $1,000. As provided in the Pooling and Servicing Agreement
and subject to certain limitations therein set forth, Class A-2 Certificates are
exchangeable for new Class A-2 Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary.
A-2-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Trustee Authentication
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
As Trustee
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
A-2-7
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at Bankers Trust
Company of California, N.A., as trustee (the "Trustee"), Irvine, California.
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Class A-2 Certificate Insurance Policy (the
"Policy"), thereby unconditionally and irrevocably guarantees to any Owner that
an amount equal to each full and complete Group II Insured Payment will be
received by the Trustee or its successor, on behalf of the Owners from the
Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Group II Insured Payment. The Insurer's obligation
under the Policy with respect to a particular Group II Insured Payment shall be
discharged to the extent funds equal to the Group II Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Group II Insured Payments shall be made only at the time set forth in
the Policy, and no accelerated Group II Insured Payments shall be made
regardless of any acceleration of the Obligations, unless such acceleration is
at the sole option of the Insurer. "Obligations" shall mean:
$31,878,000
First Alliance Mortgage Loan Trust 1996-1
Mortgage Loan Asset Backed Certificates
Class A-2
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust, the REMIC
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Group II Insured Payment that is a
Group II Preference Amount on the Business Day following receipt on a Business
Day by the Fiscal Agent (as described below) of (i) a certified copy of the
order requiring the return of such Group II Preference Amount, (ii) an opinion
of counsel satisfactory to the Insurer that such order is final and not subject
to appeal, (iii) an assignment in such form as is reasonably required by the
Insurer, irrevocably assigning to the Insurer all rights and claims of the Owner
relating to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to
such Owner directly unless such Owner has returned principal or interest paid on
the Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable under the Policy
no later than 12:00 noon, New York City time, on the later of the Payment Date
on which the related Group II Distribution Amount is due or the Business Day
following receipt in New York, New York on a Business Day by State Street Bank
and Trust Company, N.A. as Fiscal Agent for the Insurer, or any successor fiscal
agent appointed by the Insurer (the "Fiscal Agent") of a Notice (as described
below); provided that, if such Notice is received after 12:00 noon, New York
City time on such Business
A-2-8
<PAGE>
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making a claim under the Policy, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Group II Insured Payments due under the Policy, unless
otherwise stated in the Policy, will be disbursed by the Fiscal Agent to the
Trustee on behalf of the Owners by wire transfer of immediately available funds
in the amount of the Group II Insured Payment less, in respect of Group II
Insured Payments related to Group II Preference Amounts, any amount held by the
Trustee for the payment of such Group II Insured Payment and legally available
therefor.
The Fiscal Agent is the agent of the Insurer only and the
Fiscal Agent shall in no event be liable to the Owners for any acts of the
Fiscal Agent or any failure of the Insurer to deposit, or cause to be deposited,
sufficient funds to make payments due under the policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of March 1, 1996 among Prudential Securities Secured Financing Corporation, as
Depositor, First Alliance Mortgage Company, as Company, First Alliance Mortgage
Company, as Servicer and Bankers Trust Company of California, N.A., as Trustee
without regard to any amendment or supplement thereto unless the Insurer shall
have consented in writing thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in New York City or in the city in which
the corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Group II Insured Payment," with respect to the Class A-2
Certificates and as to any Payment Date, will equal the sum of (i) the excess,
if any, of (a) the sum of the Class A-2 Current Interest and the Group II
Subordination Deficit, if any, over (b) the Group II Total Available Funds
(after applying the cross collateralization provisions of Section 7.5(d)(ii)(A)
and (B) of the Agreement, after any deduction for the Group II Premium Amount
and the Group II Trustee Fee and after taking into account the portion of the
Group II Principal Distribution Amount to be actually distributed on such
Payment Date without regard to any Group II Insured Payment to be made with
respect to such Payment Date), plus (ii) the Group II Preference Amount.
"Group II Preference Amount" means any amount previously
distributed to an Owner on the Class A-2 Certificates that is recoverable and
sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time in accordance with a final nonappealable order of a court having
competent jurisdiction.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Group II Insured Payment which
shall be due and owing on the applicable Payment Date.
A-2-9
<PAGE>
"Owner" means each Owner of a Class A-2 Certificate as defined
in the Agreement who, on the applicable Payment Date, is entitled under the
terms of the applicable Class A-2 Certificate to payment thereunder.
Capitalized terms used herein and not otherwise defined in the
Policy shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment or modification to the Agreement unless such amendment or modification
has been approved in writing by the Insurer.
Any notice under the Policy or service of process on the
Fiscal Agent may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th
Floor, New York, New York 10006 Attention: Municipal Registrar and Paying Agency
or such other address as the Fiscal Agent shall specify to the Trustee in
writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to the maturity of the Obligations.
MBIA INSURANCE CORPORATION
A-2-10
<PAGE>
EXHIBIT C
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
REPRESENTS AN INTEREST IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY,
IN SECTION 860G and 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE
WITHOUT REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R
CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION
860E(e)(5) OF THE CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR
POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN
CERTAIN TAXABLE INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING
ELECTRIC ENERGY OR PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY
ORGANIZATION (OTHER THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL
INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS
INCOME. NO TRANSFER OF THIS CLASS R CERTIFICATE WILL BE REGISTERED BY THE
TRUSTEE UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING,
AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A QUALIFIED ORGANIZATION
AND IS NOT ACQUIRING THE CLASS R CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED
ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED
TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY
GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN
AGENT ACTING FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CLASS R
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS
ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-1
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS R
Representing Certain Interests Relating to a Pool
of Mortgage Loans Formed by First Alliance Mortgage
Company and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY
This Certificate does not represent an interest in, or an
obligation of, nor are the underlying Mortgage Loans insured or guaranteed by,
First Alliance Mortgage Company, the Depositor, any Originator or any of their
subsidiaries and affiliates. This Certificate represents a fractional residual
ownership interest in the REMIC of the Trust described herein, moneys in certain
Accounts created pursuant to the Pooling and Servicing Agreement and certain
other rights relating thereto and is payable only from amounts received by the
Trustee relating to the Trust Estate.
No: R-1 Date: March 29, 1996
Percentage Interest: 100% June 20, 2027
--------------
Final Scheduled
Payment Date
First Alliance Mortgage Company
Registered Owner
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool of closed-end mortgage loans (the "Mortgage
Loans") formed by First Alliance Mortgage Company (the "Company"), a California
corporation, and sold by the Company, Prudential Securities Secured Financing
Corporation (the Depositor) and sold by the Depositor, to Bankers Trust Company
of California, N.A., as trustee (the "Trustee") on behalf of First Alliance
Mortgage Loan Trust 1996-1 (the "Trust") pursuant to that certain Pooling and
Servicing Agreement dated as of March 1, 1996 (the "Pooling and Servicing
Agreement") by and among the Company, the Company in its capacity as servicer
(the "Servicer") and the Trustee, (ii) such amount, including Eligible
Investments, as from time to time may be held in the Accounts created pursuant
to the Pooling and Servicing Agreement, (iii) any Property relating to the
Mortgage Loans, the ownership of which has been effected in the name of the
Servicer on behalf of the Trust as a result of foreclosure or acceptance by the
Servicer of a deed-in-lieu of foreclosure and that has not been withdrawn from
the Trust, (iv) Net Liquidation Proceeds relating to the Mortgage Loans, (v) any
Insurance Policies relating to the Mortgage Loans and any rights of the Company
in any Insurance Policies relating to such Mortgage Loans, (vi) the Certificate
Insurance Policies, (vii) the rights of the Depositor against the Company under
the Purchase Agreement and (viii) the rights of the Company against any
Originator pursuant to the related Master Transfer Agreement and the proceeds of
any of the above. Such Mortgage Loans and other amounts and property enumerated
above are hereinafter referred to as the "Trust Estate".
C-1
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly authorized
Certificates designated as First Alliance Mortgage Loan Trust 1996-1, Mortgage
Loan Asset Backed Certificates, Class R Certificates (the "Class R
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Owner of this Certificate by virtue of acceptance hereof
assents and by which such Owner is bound.
Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing
Agreement.
On the 20th day of each month or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a
"Payment Date"), commencing April 22, 1996, to the persons in whose names the
Class R Certificates are registered at the close of business on the last
business day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs (the "Record Date"), the Trustee will distribute
to each Owner of the Class R Certificates such Owner's Percentage Interest
multiplied by any amounts then available to be distributed to the Owners of the
Class R Certificates. Distributions will be made in immediately available funds,
by wire transfer or otherwise, to the account of such Owner at a domestic bank
or other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee at least 5 business days prior to the related record date,
or by check mailed to the address of the person entitled thereto as it appears
on the Register.
The Pooling and Servicing Agreement provides that only certain
miscellaneous amounts will be distributed to the Owners of the Class R
Certificates.
Upon receiving the final distribution hereon, the Owner hereof
is required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code or applicable state or local law by any Person from a distribution to
any Owner shall be considered as having been paid by the Trustee to such Owner
for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant
to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub- Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other
obligation of, or an interest in, nor are the underlying Mortgage Loans insured
or guaranteed by, the Depositor, the Company, any Originator or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Government National Mortgage Association, or
any other governmental agency. This Certificate is limited in right of payment
to certain collections and
C-2
<PAGE>
recoveries relating to the Mortgage Loans, all as more specifically set forth
hereinabove and in the Pooling and Servicing Agreement.
No Owner shall have the right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement, or
for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the Owner of any Certificate shall have the right which is
absolute and unconditional to receive distributions to the extent provided in
the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the
obligations created thereby will terminate upon the earlier of (i) the payment
to the Owners of all Certificates from amounts other than those available under
the Certificate Insurance Policies of all amounts held by the Trustee and
required to be paid to such Owners pursuant to the Pooling and Servicing
Agreement upon the later to occur of (a) the final payment or other liquidation
(or any advance made with respect thereto) of the last Mortgage Loan in the
Trust Estate or (b) the disposition of all property acquired in respect of any
Mortgage Loan remaining in the Trust Estate or (ii) at any time when a Qualified
Liquidation of a Trust Estate occurs pursuant to the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement additionally provides that
(i) the Servicer or the Certificate Insurer may, at its option, purchase from
the Trust all (but not fewer than all) remaining Mortgage Loans and other
property then constituting the Trust Estate, and thereby effect early retirement
of the Class R Certificates, on any Remittance Date when the aggregate
outstanding Loan Balances of the Mortgage Loans in the Trust Estate is 10% or
less of the Original Aggregate Loan Balance and (ii) under certain circumstances
relating to the qualification of the Trust as a REMIC under the Code the
Mortgage Loans may be sold, thereby affecting the early retirement of the Class
R Certificates.
The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
The Trustee is required to furnish certain information on each
Payment Date to the Owner of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class R Certificates are issuable only as registered
Certificates. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class R
C-3
<PAGE>
Certificates are exchangeable for new Class R Certificates evidencing the same
Percentage Interest as the Class R Certificates exchanged.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person
in whose name this Certificate is registered as the Owner hereof for all
purposes, and neither the Trustee or any such agent shall be affected by notice
to the contrary, except as may otherwise be specifically provided in the Pooling
and Servicing Agreement with respect to the Certificate Insurer.
C-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed on behalf of the Trust.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Trustee's Authentication
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
C-5
<PAGE>
EXHIBIT D
CERTIFICATE RE: PREPAID LOANS
I, ______________, ______________ of First Alliance Mortgage
Company, a California corporation, (the "Company"), hereby certify that between
the "Cut-Off Date" (as defined in the Pooling and Servicing Agreement dated as
of March 1, 1996 among Prudential Securities Secured Financing Corporation, the
Company, the Company in its capacity as servicer (the "Servicer") and Bankers
Trust Company of California, N.A., a national banking association, in its
capacity as trustee (the "Trustee")) and the "Closing Date" the following
schedule of "Mortgage Loans" have been prepaid in full.
Dated:
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
D-1
<PAGE>
EXHIBIT E
INITIAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Bankers
Trust Company of California, N.A., a national banking association, acting in its
capacity as trustee (the "Trustee") of a certain pool of mortgage loans (the
"Pool") heretofore conveyed in trust to the Trustee, pursuant to that certain
Pooling and Servicing Agreement dated as of March 1, 1996 (the "Pooling and
Servicing Agreement") by and among Prudential Securities Secured Financing
Corporation, First Alliance Mortgage Company, (the "Company"), the Company, in
its capacity as servicer (the "Servicer") and the Trustee;
WHEREAS, the Trustee is required, pursuant to Section 3.6 of
the Pooling and Servicing Agreement, to review the Files relating to the Pool on
or before the Startup Day; and
WHEREAS, Section 3.6 of the Pooling and Servicing Agreement
requires the Trustee to deliver this Initial Certification upon the satisfaction
of certain conditions set forth therein.
NOW, THEREFORE, the Trustee hereby certifies with respect to
each Mortgage Loan listed in the Schedules of Mortgage Loans (other than any
Mortgage Loan paid in full), which is attached hereto, that all documents
required to be delivered to it pursuant to the Pooling and Servicing Agreement
are in its possession, such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan and based on its
examination and only as to the foregoing documents, the information set forth on
the Schedules of Mortgage Loans as to loan number and address accurately
reflects information set forth in the File, except as attached thereto.
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A.,
as Trustee
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Dated:
[Attached Exception List]
E-1
<PAGE>
EXHIBIT F
FINAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Bankers
Trust Company of California, N.A., a national banking association, acting in its
capacity as trustee (the "Trustee") of a certain pool of mortgage loans (the
"Pool") heretofore conveyed in trust to the Trustee, pursuant to that certain
Pooling and Servicing Agreement dated as of March 1, 1996 (the "Pooling and
Servicing Agreement") by and among Prudential Securities Secured Financing
Corporation, First Alliance Mortgage Company, (the "Company"), the Company, in
its capacity as servicer (the "Servicer") and the Trustee;
WHEREAS, the Trustee is required, pursuant to Section 3.6 of
the Pooling and Servicing Agreement, to review the Files relating to the Pool
within a specified period following the Startup Day and to notify the Company
promptly of any defects with respect to the Pool, and the Company is required to
remedy such defects or take certain other action, all as set forth in Section
3.6 of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.6 of the Pooling and Servicing Agreement
requires the Trustee to deliver this Final Certification upon the satisfaction
of certain conditions set forth therein.
NOW, THEREFORE, the Trustee hereby certifies that it has
determined that all required documents (or certified copies of documents listed
in Section 3.5 of the Pooling and Servicing Agreement) have been executed or
received, and that such documents relate to the Mortgage Loans identified in the
Schedule of Mortgage Loans pursuant to Section 3.5(a) of the Pooling and
Servicing Agreement or, in the event that such documents have not been executed
and received or do not so relate to such Mortgage Loans, any remedial action by
the Company pursuant to Section 3.6 of the Pooling and Servicing Agreement has
been completed. The Trustee makes no certification hereby, however, with respect
to any intervening assignments or assumption and modification agreements.
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Dated:
F-1
<PAGE>
EXHIBIT G
DELIVERY ORDER
March __, 1996
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: First Alliance Mortgage Loan Trust, Series 1996-1.
Dear Sirs:
Pursuant to Article IV of the Pooling and Servicing Agreement,
dated as of March 1, 1996 (the "Pooling and Servicing Agreement") by and among
Prudential Securities Secured Financing Corporation, First Alliance Mortgage
Company, (the "Company"), the Company, in its capacity as servicer (the
"Servicer"), and Bankers Trust Company of California, N.A., a national banking
association, in its capacity as trustee (the "Trustee"), the Company HEREBY
CERTIFIES that all conditions precedent to the issuance of First Alliance
Mortgage Loan Trust 1996-1, Class A and Class R (the "Certificates"), HAVE BEEN
SATISFIED and HEREBY REQUESTS YOU TO AUTHENTICATE AND DELIVER said Certificates,
and to RELEASE said Certificates to the Owners thereof, or otherwise upon their
order.
Very truly yours,
FIRST ALLIANCE MORTGAGE COMPANY
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
G-1
<PAGE>
EXHIBIT H
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION 860E(e) OF
THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit.
2. That (i) the Investor is not a "disqualified organization"
and will not be a "disqualified organization" as of [date of transfer] (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or any
organization (other than a farmers' cooperative) that is exempt from federal
income tax unless such organization is subject to the tax on unrelated business
income); (ii) it is not acquiring the Class R Certificates for the account of a
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class R
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer any such Class R Certificate unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.
H-1
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to
be executed on its behalf, pursuant to authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this __ day of __________, ____.
[NAME OF INVESTOR]
By:___________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
Attest:
- ---------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of
Officer], known or proved to be the same person who executed the foregoing
instrument and to be the [Title of Officer] of the Investor, and acknowledged to
me that he executed the same as his free act and deed and the free act and deed
of the Investor.
Subscribed and sworn before me this ____ day of _______, ____.
- ---------------------------
NOTARY PUBLIC
COUNTY OF ________________
STATE OF _________________
My commission expires the ____ day of _______________, ____.
H-2
<PAGE>
EXHIBIT I
FORM OF NOTICE
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER:
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER:
State Street Bank and Trust Company, N.A.,
as Fiscal Agent For MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, New York 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of
_______________________________, as trustee (the "Trustee"), hereby certifies to
State Street Bank and Trust Company, N.A. (the "Fiscal Agent") and MBIA
Insurance Corporation (the "Insurer"), with reference to Certificate Guaranty
Insurance Policy Number: ____________ (the "Policy") issued by the Insurer in
respect of the $________ First Alliance Mortgage Loan Trust 1996-1, Mortgage
Loan Asset Backed Certificates, Class A[-1], [-2] (the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of March 1, 1996 (the "Agreement") among Prudential
Securities Secured Financing Corporation, as Depositor, First Alliance
Mortgage Company, as Company, First Alliance Mortgage Company, as
Servicer, the Trustee, as trustee for the Owners;
(ii) the [Class A-1] [Class A-2] Current Interest for the Class
Payment Date occurring on ________________ (the "Applicable Payment
Date") is $___________;
(iii) the Group [I][II] Subordination Deficit for the Applicable
Payment Date is $--------------;
(iv) the sum of Group [I][II] Total Available Funds available
under the Agreement to pay the [Class A-1] [Class A-2] Current
Interest and the Group [I][II] Subordination Deficit minus the Group
[I][II] Premium Amount for the Applicable Payment Date (the "Adjusted
Available Distribution Amount") is $_________;
(v) the amount by which the sum of (ii) and (iii) above exceeds
the Adjusted Available Distribution Amount in (iv) above is
$___________ (the "Group [I][II] Insured Payment");
I-1
<PAGE>
(vi) the Trustee is making a claim under and pursuant to the
terms of the Policy for the Insured Payment to be applied to payments
of the sum of (ii) and (iii) above for the Applicable Payment Date in
accordance with the Agreement; and
(vii) the Trustee directs that payment of the Group [I][II]
Insured Payment be made to the following account by bank wire transfer
of federal or other immediately available funds in accordance with the
terms of the Policy: [CERTIFICATE ACCOUNT].
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company Or
Other Person Files An Application For Insurance Or Statement Of Claim Containing
Any Materially False Information, Or Conceals For The Purpose Of Misleading,
Information Concerning Any Fact Material Thereto, Commits A Fraudulent Insurance
Act, Which Is A Crime, And Shall Be Subject To A Civil Penalty Not To Exceed
Five Thousand Dollars And The Stated Value Of The Claim For Each Such Violation.
Any capitalized term used in this Notice and not otherwise
defined herein shall have the meaning assigned thereto in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Notice under the Policy as of the ___ day of ____________, ____.
[TRUSTEE]
By:
--------------------------------------
Title:
--------------------------------------
I-2
<PAGE>
EXHIBIT J
Form of
Monthly Report
First Alliance Mortgage Company
Mortgage Loan Asset Backed Certificates
Series 1996-1
Statement to Certificateholders
[To be provided by Trustee]
J-1
<PAGE>
EXHIBIT K
FORM OF REQUEST FOR RELEASE
To: Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92714
Attn: First Alliance Mortgage Loan Trust, Series 1996-1
Date:
In connection with the administration of the mortgage loans
held by you as Trustee under a certain Pooling and Servicing Agreement dated as
of March 1, 1996 and by and among Prudential Securities Secured Financing
Corporation, First Alliance Mortgage Company, the Company in its capacity as
servicer (the "Servicer"), and Bankers Trust Company of California, N.A., in its
capacity as Trustee (the "Agreement"), the Servicer hereby requests a release of
the File held by you as Trustee with respect to the following described Mortgage
Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:
Reason for requesting file:
_______ 1. Mortgage Loan paid in full.
(The Servicer hereby certifies that all amounts
received in connection with the loan have been
or will be credited to the Certificate Account
(whichever is applicable) pursuant to the
Agreement.)
_______ 2. Mortgage Loan repurchased pursuant to Section 3.3, 3.4, 3.6(b) or
8.10(b) of the Agreement.
(The Servicer hereby certifies that the Loan
Purchase Price has been or will be paid to the
Certificate Account pursuant to the Agreement.)
_______ 3. Mortgage Loan substituted.
(The Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be
assigned and delivered to you along with the
related File pursuant to the Agreement.)
_______ 4. The Mortgage Loan is being foreclosed.
_______ 5. Other. (Describe)
K-1
<PAGE>
The undersigned acknowledges that the above File will be held by the
undersigned in accordance with the provisions of the Agreement and will be
returned to you, except if the Mortgage Loan has been paid in full, or
repurchased or substituted for by a Qualified Replacement Mortgage (in which
case the File will be retained by us permanently) and except if the Mortgage
Loan is being foreclosed (in which case the File will be returned when no longer
required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
FIRST ALLIANCE MORTGAGE COMPANY
By:
--------------------------------------
Name:
---------------------------------
Title:
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K-2
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</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Prospectus Supplement to the Prospectus
dated August 4, 1995 to Registration Statement No. 33-91148 of our report dated
February 1, 1995 on our audits of the consolidated financial statements of MBIA
Insurance Corporation and Subsidiaries (formerly known as Municipal Bond
Investors Assurance Corporation and Subsidiaries).
Coopers & Lybrand L.L.P.
March 28, 1995
New York, New York
