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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): November 18, 1997
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One New York Plaza 10292
New York, New York (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (212) 778-1000
No Change
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Prudential Securities Secured Financing Corporation registered issuances of up
to $1,500,000,000 principal amount of Mortgage Pass-Through Certificates on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), by the Registration Statements on Form S-3
(Registration File No. 333-27355) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, Irwin Home Equity Corporation Trust
1997-2 (the "Trust") issued approximately $130,000,000 in aggregate principal
amount of its Mortgage Pass-Through Certificates, Series 1997-2 (the
"Certificates"), on November 18, 1997. This Current Report on Form 8-K is being
filed to satisfy an undertaking to file copies of certain agreements executed in
connection with the issuance of the Certificates, the forms of which were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") attached hereto as Exhibit 4.1, dated as of
November 1, 1997, between Prudential Securities Secured Financing Corporation,
Irwin Home Equity Corporation, in its capacity as servicer (the "Servicer"), and
The Chase Manhattan Bank, in its capacity as trustee (the "Trustee"). The
Certificates consist of four classes of senior Certificates, the Class A-1
Certificates (the "Class A-1 Certificates"), the Class A-2 Certificates (the
"Class A-2 Certificates"), the Class A-3 Certificates (the "Class A-3
Certificates") and the Class A-4 Certificates (the "Class A-4 Certificates", and
together with the Class A-1 Certificates, the Class A-2 Certificates, and the
Class A-3 Certificates, the "Class A Certificates") and one class of
subornidated Certificates (the "Class R Certificates"). Only the Class A
Certificates are being offered hereby. The Certificates initially evidence, in
the aggregate, 100% of the undivided beneficial ownership interests in the
Trust.
The assets of the Trust will be primarily (i) a pool of home equity floating
rate revolving credit line loans (the "HELOCs") and (ii) a pool of closed-end,
fixed rate home equity loans (the "HELs", and together with the HELOCs, the
"Mortgage Loans") secured in either case by mortgages on residential
one-to-four-family properties (the "Mortgaged Properties").
Interest distributions on the Class A Certificates are based on the applicable
Certificate Principal Balance and the then applicable Pass-Through Rate. The
Pass-Through Rate is adjustable for the Class A-1 Certificates, 6.425% for the
Class A-2 Certificates, 6.420% for the Class A-3 Certificates and 6.770% for the
Class A-4 Certificates (subject to certain step-up provisions).
The Class A-1 Certificates have an aggregate principal amount of $70,000,000,
the Class A-2 Certificates have an aggregate principal amount of $24,500,000,
the Class A-3 Certificates have an aggregate principal amount of $20,500,000 and
the Class A-4 Certificates have an aggregate principal amount of $15,000,000.
As of the Closing Date, the Mortgage Loans possessed the characteristics
described in the Prospectus dated June 10, 1997 and the Prospectus Supplement
dated November 11, 1997 filed pursuant to Rule 424(b)(2) of the Act on December
1, 1997.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated October 30, 1997, between Prudential
Securities Secured Financing Corporation and Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of November 1, 1997,
between Prudential Securities Secured Financing Corporation, Irwin Home Equity
Corporation, as servicer, and The Chase Manhattan Bank, as trustee.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of the MBIA Insurance Corporation and their report.
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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.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
As Depositor and on behalf of Irwin Home
Equity Corporation Trust 1997-2
By: /s/ Mary Alice Kohs
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Name: Mary Alice Kohs
Title: Vice President
Dated: December 1, 1997
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EXHIBIT INDEX
Exhibit No. Description
1.1 Underwriting Agreement, dated October 30, 1997, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of November 1,
1997, between Prudential Securities Secured Financing
Corporation, Irwin Home Equity Corporation, as servicer, and
The Chase Manhattan Bank, as trustee.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and
their report.
EXECUTED COPY
IRWIN HOME EQUITY
CORPORATION TRUST 1997-2
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-2
UNDERWRITING AGREEMENT
Dated as of October 30, 1997
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
October 30, 1997
Ladies and Gentlemen:
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 as of October 30, 1997 (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 deemed herein, terms defined in the Standard Provisions are used
herein as therein deemed. 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.
[signature page follows]
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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/ Mary Alice Kohs
-------------------------------
Name: Mary Alice Kohs
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Mary Alice Kohs
----------------------------------
Name: Mary Alice Kohs
Title: Vice President
[Signature Page to Underwriting Agreement]
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SCHEDULE I
Title of Offered
Securities: Irwin Home Equity Corporation Trust 1997-2, Mortgage
Pass-Through Certificates, Series 1997-2, Class A
Certificates (the "Offered Securities"). The Trustee
will simultaneously issue the Class R and the 1997-2
Additional Certificate representing beneficial interests
in the Irwin Home Equity Corporation Trust 1997-2 (the
"Trust"). Only the Class A Certificates are offered
hereby.
Terms of Offered
Securities: The Offered Securities shall have the terms set forth in
the Prospectus Supplement and shall conform in all
material respects to the descriptions thereof contained
therein, and shall be issued pursuant to a Pooling and
Servicing Agreement to be dated as of November 1, 1997
among the Depositor, Irwin Home Equity Corporation, as
Servicer, and The Chase Manhattan Bank, as Trustee.
Purchase Price: The purchase price for the Offered Securities shall be
99.6500% of the aggregate principal balance of the Class
A Certificates as of the Cut-Off Date.
Specified funds for
payment of
Purchase Price: Federal Funds (immediately available funds).
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about November 18, 1997 at 10:00 A.M. New York
City time or at such other time as the Depositor and the
Underwriter shall agree.
Closing Location: Offices of Dewey Ballantine, 333 South Hope Street, 30th
Floor, CA A 90071-1406.
Name and address of
Representative: Designated Representative: Prudential Securities
Incorporated.
Address for Notices,
etc.: One New York Plaza
New York, New York 10292
Attn: Len Blum
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
October 30, 1997
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 and in the Pooling and Servicing Agreement referred to
below.
SECTION 1. THE OFFERED SECURITIES. Pursuant to the applicable
Underwriting Agreement, the Depositor proposes to sell to the several
Underwriters named therein certificates (the "Securities") representing
beneficial ownership interests in a trust (the "Trust"), the trust property of
which consists of separate pools of home equity revolving credit line loans and
closed end home equity loan secured by mortgages on residential
one-to-four-family properties (the "Mortgage Loans" and together with all other
assets of the trust fund, the "Trust Fund"), including (a) each Mortgage Loan
which may be transferred to the trust pursuant to the provisions of the Pooling
and Servicing Agreement, dated as of November 1, 1997 (the "Pooling and
Servicing Agreement"), by and among the Depositor, Irwin Home Equity Corporation
(the "Servicer") and The Chase Manhattan Bank, as trustee (the "Trustee"), (b)
all rights of the Depositor under the Purchase and Sale Agreement, dated as of
November 1, 1997 (the "Purchase and Sale Agreement"), between Prudential
Securities Secured Financing Corporation and IHE Funding Corp., as Seller
thereunder, (c) such assets as from time to time are identified as REO Property
(as defined in the Pooling and Servicing Agreement) and collections thereon and
proceeds thereof, (d) all assets deposited in the Accounts (as defined in the
Pooling and Servicing Agreement), including any amounts on deposit in the
Accounts and invested in Permitted Investments (as defined in the Pooling and
Servicing Agreement), (e) the Trustee's rights with respect to the Mortgage
Loans under all insurance policies (other than the
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Class A-1 Certificate Insurance Policy or Group II Certificate Insurance Policy,
each as defined in the Pooling and Servicing Agreement) required to be
maintained pursuant to the Pooling and Servicing Agreement and any Insurance
Proceeds (as defined in the Pooling and Servicing Agreement), (f) all
Liquidation Proceeds (as defined in the Pooling and Servicing Agreement) and (g)
all Released Mortgaged Property Proceeds (as defined in the Pooling and
Servicing Agreement). The Securities will be issued pursuant to the Pooling and
Servicing Agreement.
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 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. 333-27355),
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 and including the date of the Underwriting
Agreement. The term "Base Prospectus" means the prospectus included in the
Registration Statement. The term "Prospectus" means the Base Prospectus together
with the prospectus supplement specifically relating to the Offered Securities,
as first filed with the Commission pursuant to Rule 424, and as further
supplemented by the Prospectus Supplement dated November 11, 1997. The term
"Preliminary Prospectus" means a preliminary prospectus supplement, if any,
specifically relating to the Offered Securities together with the Base
Prospectus.
SECTION 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.
SECTION 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."
SECTION 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
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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 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 substantially in the form of
Exhibit A attached hereto, 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 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
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attached thereto is a true and correct copy of the letter from each nationally
recognized statistical rating organization (as that term is deemed 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, as of the Closing Date,
an opinion of Dewey Ballantine, as special transaction counsel (the "Transaction
Counsel"), 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, as of the Closing Date,
an opinion of Dewey Ballantine, special 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-1 hereto.
(g) The Representative shall have received, as of the Closing Date,
an opinion of Matthew F. Souza, counsel to the Seller, dated the Closing Date,
in form and substance satisfactory to the Representative and the Transaction
Counsel, and containing opinions substantially to the effect set forth in
Exhibit B-2 hereto.
(h) The Representative shall have received, as of 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 opinions substantially to the effect set forth in Exhibit C
hereto.
(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.
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(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 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 March 31, 1997, 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 or other authorized officer of the Certificate
Insurer to the effect that the signer of such certificate has carefully examined
each Certificate Insurance Policy, the Insurance Agreement dated as of November
1, 1997 (the "Insurance 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:
1. 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 Insurance Agreement;
2. Each person who, as an officer or representative of the
Certificate Insurer, signed or signs the Certificate Insurance Policies,
the Insurance Agreement or any other document delivered pursuant hereto,
on the date thereof, or on the Closing Date, in connection with the
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;
3. 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;
4. The tables regarding the Certificate Insurer's capitalization set
forth in the
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Prospectus under the heading "THE CERTIFICATE INSURANCE POLICIES AND THE
CERTIFICATE INSURER" present fairly the capitalization of the Certificate
Insurer as of the dates and for such periods as are referenced in such
tables;
5. The execution and delivery of the Insurance Agreement and the
Policies and the compliance with the terms and provisions thereof will not
conflict with, result in a breach of, or constitute a default under any of
the terms, provisions or conditions or, the Restated Charter or By-Laws of
the Insurer, or any agreement, indenture or other instrument to which the
Insurer is a party;
6. The audited balance sheet of the Certificate Insurer as of
December 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 February 1, 1995 of Coopers & Lybrand,
independent certificated public accountants, copies of which are
incorporated by reference 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;
7. To the best knowledge of such officer, since no material adverse
change has occurred in the financial position of the Certificate Insurer
other than as set forth in the Prospectus; and
8. The issuance of the Certificate Insurance Policies and the
execution, delivery and performance of the Insurance Agreement have been
duly authorized by all necessary corporate proceedings. No further
approvals or filings of any kind, including, without limitation, any
further approvals of or further filing with any governmental agency or
other governmental authority, or any approval of the Certificate Insurer's
board of directors or stockholders, are necessary for the Certificate
Insurance Policies and the Insurance Agreement to constitute the legal,
valid and binding obligations of the Certificate Insurer.
(q) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative may
reasonably request.
SECTION 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.
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(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 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 Depositor's own expense,
an amendment or supplement which will correct such statement or omission or any
amendment which will effect such compliance.
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(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.
(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.
SECTION 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
12
<PAGE>
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 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, orders, 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 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, and certificates are in full
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<PAGE>
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
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 as of the Closing Date
the Pooling and Servicing Agreement will have been, duly authorized, executed
and delivered by the Depositor.
(i) As of 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,
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<PAGE>
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, 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 or any date on which Subsequent Mortgage
Loans are transferred by the Depositor to the Trust (each, a "Subsequent Funding
Date"), as the case may be, 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 or any Subsequent Funding Date, as the case may be, 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 and on any Subsequent Transfer Date, as the case may be, 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
15
<PAGE>
the Offered Securities, and on any Subsequent Transfer Date, as the case may be,
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. Notwithstanding the
foregoing, each of the Underwriters and the Depositor agrees and understands
that, in accordance with and pursuant to the Pooling and Servicing Agreement,
payments collected in respect of the Mortgage Loans allocable to the Additional
Balances on the Mortgage Loans will not be available to the holders of the
Offered Securities.
(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.
SECTION 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
Mortgage Loans except to the extent that the Depositor has been indemnified by
the Seller, under the Purchase and Sale Agreement, or the Servicer, under the
Pooling and Servicing Agreement. 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
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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 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
17
<PAGE>
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)
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.
(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 Sections 4, 5
and 6 of the Indemnification Agreement conflict with Section 7 hereof, the
provisions of Section 7 hereof shall govern.
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<PAGE>
SECTION 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.
SECTION 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.
SECTION 10. DEFAULT OF UNDERWRITERS. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters 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
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.
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<PAGE>
SECTION 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 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.
SECTION 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.
20
<PAGE>
SECTION 13. REPRESENTATIVE OF UNDERWRITERS. Any Representative
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.
SECTION 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 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.
SECTION 15. TIME OF THE ESSENCE. Time shall be of the essence of
each Underwriting Agreement.
SECTION 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.
[signature page follows]
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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/ Mary Alice Kohs
--------------------------------
Name: Mary Alice Kohs
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Mary Alice Kohs
----------------------------------
Name: Mary Alice Kohs
Title: Vice President
[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]
22
EXECUTED COPY
POOLING AND SERVICING AGREEMENT
Dated as of November 1, 1997
by and among
Prudential Securities Secured Financing Corporation
(Depositor)
and
Irwin Home Equity Corporation
(Servicer)
and
The Chase Manhattan Bank
(Trustee)
Irwin Home Equity Corporation Trust 1997-2
Mortgage Pass-Through Certificates,
Series 1997-2
Class A and Class R and the Additional Certificate
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS..........................................................1
SECTION 1.1 CERTAIN DEFINED TERMS........................................1
SECTION 1.2 PROVISIONS OF GENERAL APPLICATION...........................40
ARTICLE II ESTABLISHMENT OF THE TRUST SALE AND CONVEYANCE OF THE TRUST FUND...42
SECTION 2.1 SALE AND CONVEYANCE OF TRUST FUND; PRIORITY AND
SUBORDINATION OF OWNERSHIP INTERESTS; ESTABLISHMENT OF THE TRUST............42
SECTION 2.2 POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES......42
SECTION 2.3 DELIVERY OF MORTGAGE LOAN DOCUMENTS.........................43
SECTION 2.4 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN
SUBSTITUTIONS; CERTIFICATION BY TRUSTEE.....................................46
SECTION 2.5 DESIGNATIONS UNDER REMIC PROVISIONS; DESIGNATION OF STARTUP
DATE ..........................................................49
SECTION 2.6 EXECUTION OF CERTIFICATES...................................49
SECTION 2.7 APPLICATION OF PRINCIPAL AND INTEREST.......................49
SECTION 2.8 GRANT OF SECURITY INTEREST..................................50
SECTION 2.9 FURTHER ASSURANCES; POWERS OF ATTORNEY......................50
SECTION 2.10 CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS.................51
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................56
SECTION 3.1 REPRESENTATIONS OF THE SERVICER.............................56
SECTION 3.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR..58
SECTION 3.3 PURCHASE AND SUBSTITUTION...................................59
SECTION 3.4 SERVICER COVENANTS..........................................61
ARTICLE IV THE CERTIFICATES...................................................62
SECTION 4.1 THE CERTIFICATES............................................62
SECTION 4.2 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.......62
SECTION 4.3 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES...........70
SECTION 4.4 PERSONS DEEMED OWNERS.......................................70
ARTICLE V ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS..................71
SECTION 5.1 APPOINTMENT OF THE SERVICER.................................71
SECTION 5.2 SUBSERVICING AGREEMENTS BETWEEN THE SERVICER AND
SUBSERVICERS ..........................................................74
SECTION 5.3 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION
ACCOUNT ..........................................................75
SECTION 5.4 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT AND
TRUSTEE COLLECTION ACCOUNT..................................................77
SECTION 5.5 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES...............79
SECTION 5.6 MAINTENANCE OF CASUALTY INSURANCE...........................80
SECTION 5.7 SERVICER ACCOUNT............................................81
SECTION 5.8 FIDELITY BOND; ERRORS AND OMISSIONS POLICY..................81
SECTION 5.9 COLLECTION OF TAXES, ASSESSMENTS AND OTHER ITEMS............82
SECTION 5.10 PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION; ADDITIONAL INFORMATION..........................................82
SECTION 5.11 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS...83
SECTION 5.12 REALIZATION UPON DEFAULTED MORTGAGE LOANS...................84
SECTION 5.13 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES.............86
SECTION 5.14 SERVICING FEE; SERVICING COMPENSATION.......................87
SECTION 5.15 REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT STATEMENTS.......88
SECTION 5.16 ANNUAL STATEMENT AS TO COMPLIANCE...........................88
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SECTION 5.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.....89
SECTION 5.18 REPORTS TO BE PROVIDED BY THE SERVICER......................89
SECTION 5.19 ADJUSTMENT OF SERVICING COMPENSATION IN RESPECT OF
PREPAID MORTGAGE LOANS......................................................90
SECTION 5.20 PERIODIC ADVANCES...........................................90
SECTION 5.21 INDEMNIFICATION; THIRD PARTY CLAIMS.........................91
SECTION 5.22 MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER
OR CONSOLIDATION OF THE SERVICER............................................92
SECTION 5.23 ASSIGNMENT OF AGREEMENT BY SERVICER; SERVICER NOT TO RESIGN.92
SECTION 5.24 SERVICER PURCHASE OF CERTAIN MORTGAGE LOANS.................93
ARTICLE VI DISTRIBUTIONS AND PAYMENTS.........................................94
SECTION 6.1 ESTABLISHMENT OF CERTIFICATE ACCOUNT, ADDITIONAL CERTIFICATE
ACCOUNT, CAPITALIZED INTEREST ACCOUNT AND PRE-FUNDING ACCOUNT; DEPOSITS TO
THE CERTIFICATE ACCOUNT, THE ADDITIONAL CERTIFICATE ACCOUNT, CAPITALIZED
INTEREST ACCOUNT AND THE PRE-FUNDING ACCOUNT................................94
SECTION 6.2 PERMITTED WITHDRAWALS FROM THE CERTIFICATE ACCOUNT AND THE
ADDITIONAL CERTIFICATE ACCOUNT..............................................96
SECTION 6.3 COLLECTION OF MONEY.........................................97
SECTION 6.4 THE RESERVE ACCOUNT AND THE CERTIFICATE INSURANCE POLICIES..97
SECTION 6.5 DISTRIBUTIONS..............................................100
SECTION 6.6 INVESTMENT OF ACCOUNTS.....................................103
SECTION 6.7 REPORTS BY TRUSTEE.........................................104
SECTION 6.8 ADDITIONAL REPORTS BY TRUSTEE AND BY SERVICER..............107
SECTION 6.9 COMPENSATING INTEREST......................................107
SECTION 6.10 EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION.107
SECTION 6.11 PRE-FUNDING ACCOUNT........................................108
SECTION 6.12 CAPITALIZED INTEREST ACCOUNT...............................108
ARTICLE VII DEFAULT..........................................................110
SECTION 7.1 EVENTS OF DEFAULT..........................................110
SECTION 7.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR...................111
SECTION 7.3 WAIVER OF DEFAULTS.........................................114
SECTION 7.4 MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR BENEFIT
OF THE CERTIFICATE INSURER.................................................114
ARTICLE VIII TERMINATION.....................................................115
SECTION 8.1 TERMINATION................................................115
SECTION 8.2 ADDITIONAL TERMINATION REQUIREMENTS........................117
SECTION 8.3 ACCOUNTING UPON TERMINATION OF SERVICER....................118
ARTICLE IX THE TRUSTEE.......................................................119
SECTION 9.1 DUTIES OF TRUSTEE..........................................119
SECTION 9.2 CERTAIN MATTERS AFFECTING THE TRUSTEE......................124
SECTION 9.3 NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS..............126
SECTION 9.4 TRUSTEE MAY OWN CERTIFICATES...............................126
SECTION 9.5 TRUSTEE'S FEES AND EXPENSES; INDEMNITY.....................126
SECTION 9.6 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.......................127
SECTION 9.7 RESIGNATION AND REMOVAL OF THE TRUSTEE.....................127
SECTION 9.8 SUCCESSOR TRUSTEE..........................................128
SECTION 9.9 MERGER OR CONSOLIDATION OF TRUSTEE.........................129
SECTION 9.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE..............129
SECTION 9.11 TAX RETURNS; OLD INTEREST REPORTING........................131
SECTION 9.12 RETIREMENT OF CERTIFICATES.................................131
ARTICLE X MISCELLANEOUS PROVISIONS...........................................132
SECTION 10.1 LIMITATION ON LIABILITY OF THE DEPOSITOR AND THE SERVICER..132
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SECTION 10.2 ACTS OF CERTIFICATEHOLDERS; CERTIFICATEHOLDERS' RIGHTS.....132
SECTION 10.3 AMENDMENT OR SUPPLEMENT....................................133
SECTION 10.4 RECORDATION OF AGREEMENT...................................134
SECTION 10.5 DURATION OF AGREEMENT......................................134
SECTION 10.6 NOTICES....................................................134
SECTION 10.7 SEVERABILITY OF PROVISIONS.................................135
SECTION 10.8 NO PARTNERSHIP.............................................135
SECTION 10.9 COUNTERPARTS...............................................135
SECTION 10.10 SUCCESSORS AND ASSIGNS.....................................135
SECTION 10.11 HEADINGS...................................................135
SECTION 10.12 THE CERTIFICATE INSURER DEFAULT............................135
SECTION 10.13 THIRD PARTY BENEFICIARY....................................135
SECTION 10.14 INTENT OF THE PARTIES......................................136
SECTION 10.15 APPOINTMENT OF TAX MATTERS PERSON..........................136
SECTION 10.16 GOVERNING LAW CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL......................................................................136
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EXHIBITS
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EXHIBIT A-1 Specimen Class A-1 Certificate Insurance Policy
EXHIBIT A-2 Specimen Group II Certificate Insurance Policy
EXHIBIT B-1 Specimen Class A-1 Certificate
EXHIBIT B-2 Specimen Class A-2 Certificate
EXHIBIT B-3 Specimen Class A-3 Certificate
EXHIBIT B-4 Specimen Class A-4 Certificate
EXHIBIT B-5 Specimen Class R Certificate
EXHIBIT B-6 Specimen Additional Certificate
EXHIBIT C Contents of Mortgage File
EXHIBIT D Mortgage Loan Schedule
EXHIBIT E Trustee's Certificate as to Mortgage Files
EXHIBIT F Form of Initial Certification of Trustee
EXHIBIT G Form of Final Certification of Trustee
EXHIBIT H Form of Request for Release of Mortgage Files
EXHIBIT I Form of Transfer Affidavit and Agreement
EXHIBIT J Form of Transferor's Certificate
EXHIBIT K Form of ERISA Investment Representation Letter
EXHIBIT L Delinquency Collection Policies and Procedures
EXHIBIT M Form of Officer's Certificate of the Seller: Prepaid Loans
EXHIBIT N Form of Transferee's Letter
EXHIBIT O Form of Subsequent Transfer Agreement
EXHIBIT P Specimen Letters of Credit
EXHIBIT Q Instructions Regarding Letters of Credit
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This Pooling and Servicing Agreement, relating to Irwin Home Equity
Corporation Trust 1997-2, dated as of November 1, 1997 by and among Prudential
Securities Secured Financing Corporation, a Delaware corporation, in its
capacity as depositor of the Trust (the "Depositor"), Irwin Home Equity
Corporation, an Indiana corporation, in its capacity as servicer (the
"Servicer"), and The Chase Manhattan Bank, a banking corporation organized under
the laws of the State of New York, in its capacity as trustee (the "Trustee).
W I T N E S S E T H:
WHEREAS, the Depositor wishes to establish a trust which provides
for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Depositor also wishes to provide for the issuance from
time to time of a separate certificate (the "Additional Certificate")
representing interests in Additional Balances (as herein defined), the rights
with respect to which will be determined pursuant to this Agreement;
WHEREAS, the Servicer has agreed to service the Mortgage Loans,
which constitute the principal assets of the trust estate;
WHEREAS, The Chase Manhattan Bank 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 Depositor, the Servicer and the Trustee hereby
agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Defined Terms. Whenever used herein the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
"Accepted Servicing Practices" shall mean the Servicer's normal
servicing practices in servicing and administering mortgage loans for its own
account, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are
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located and will give due consideration to the Certificate Insurer's and the
Certificateholders' reliance on the Servicer; provided, further, that with
respect to any Mortgage Loan for which the related Monthly Payment has not been
received by the related Due Date, Accepted Servicing Practices shall also
include the policies and procedures set forth in the Delinquency Collection
Policies and Procedures.
"Account" shall mean any Eligible Account established hereunder.
"Accrual Period" shall mean (i) with respect to the Class A-1
Certificates and any Remittance Date, the period commencing on the 15th day of
the month immediately preceding the month in which such Remittance Date occurs
or, in the case of the first Remittance Date, the Closing Date, and ending on
the 14th day of the month in which such Remittance Date occurs and (ii) with
respect to the Group II Certificates and any Remittance Date, the period
commencing on the 1st day of the month immediately preceding the month in which
such Remittance Date occurs and ending on the last day of the month immediately
preceding the month in which such Remittance Date occurs.
"Addition Notice" shall mean, with respect to the transfer of
Subsequent Mortgage Loans to the Trust pursuant to Section 2.10 of this
Agreement, notice, which shall be given not later than five Business days prior
to the related Subsequent Transfer Date, of the Depositor's designation of
Subsequent Mortgage Loans to be sold to the Trust and (stating separately for
the HELOCs and the HELs) the aggregate principal balance and the weighted
average Mortgage Interest Rate and Gross Margin, if any, of such Subsequent
Mortgage Loans. Such Addition Notice shall include an electronic data file in a
form agreeable to the Trustee and the Certificate Insurer.
"Additional Balance" shall mean any amounts added, from time to
time, to the principal balance of a HELOC after the Cut-Off Date as a result of
the Mortgagor on the related Mortgage Note exercising the right to borrow
additional amounts under such Mortgage Loan.
"Additional Balance Factor" shall mean, as of any date of
determination, and for any HELOC, the quotient of the Additional Balance of such
HELOC and the Principal Balance of such HELOC.
"Additional Certificate" shall mean the certificate in the form of
Exhibit B-6 issued hereunder representing an undivided interest in the Trust
Fund in an amount equal to the Additional Balances of the HELOCs. The
identification of such Additional Balances shall be indicated, from time to
time, on one or more amended Mortgage Loan Schedules delivered from time to time
that shall specify that the interest in such Additional Balances has been
assigned to the Additional Certificate.
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"Additional Certificate Account" shall mean the Additional
Certificate Account(s) established in accordance with Section 6.1(b) hereof and
maintained by the Trustee.
"Additional Certificate Allocation" shall mean with respect to any
payment on, or monies collected in respect of, a HELOC, the sum of (a) Interest
Collections less the REMIC Daily Interest, plus (b) with respect to the
Principal Collections other than Liquidation Proceeds, zero, until the Trust
Balance of the related Mortgage Loan is reduced to zero, and thereafter, all
Principal Collections with respect to such Mortgage Loan, plus (c) with respect
to Liquidation Proceeds the product of such Liquidation Proceeds and the
Additional Balance Factor applicable to such HELOC plus (d) with respect to
daily interest or investment earnings on proceeds, collections, recoveries or
other amounts received in respect of a particular Mortgage Loan and on deposit
in the Collection Account or Trustee Collection Account, the product of such
day's interest or investment earnings and the Additional Balance Factor for such
HELOC.
"Additional Certificateholders" shall include any Holder of an
Additional Certificate.
"Additional Loan Group" shall mean the segregated pool of Additional
Balances. The Additional Loan Group shall be a sub-trust of the Trust. The
Additional Loan Group shall not be part of the 1997-2 REMIC.
"Administrative Costs" shall mean with respect to any Remittance
Date, the sum of the Trustee Fee, the applicable Certificate Insurance Premium
Amount and the Servicing Fee for such Remittance Date.
"Adverse REMIC Event" shall have the meaning set forth in Section
5.1(c).
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall mean this Pooling and Servicing Agreement,
including the Exhibits hereto, as amended or supplemented from time to time in
accordance herewith.
"Aggregate Trust Balance" shall mean the aggregated sum of the Trust
Balances of each of the Mortgage Loans as of any date of determination.
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"Aggregate HEL Trust Balance" shall mean the aggregated sum of the
Trust Balances of each of the HELs as of any date of determination.
"Aggregate HELOC Trust Balance" shall mean the aggregated sum of the
Trust Balance of each of the HELOCs as of any date of determination.
"Appraised Value" shall mean the appraised value of any Mortgaged
Property, based upon the appraisal made at the time the related Mortgage Loan is
originated.
"Assignment of Mortgage" shall mean, with respect to each Mortgage
Loan, an assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the Trustee
for the benefit of the Certificateholders, the Certificate Insurer and the
Additional Certificateholder.
"Authorized Denominations" shall mean, in the case of the Class A
Certificates, $1,000 or integral multiples of $1,000 in excess thereof;
provided, however, that one Class A-1 Certificate, one Class A-2 Certificate,
one Class A-3 Certificate and one Class A-4 Certificate each is issuable in a
denomination equal to an amount less than $1,000 such that the aggregate
denomination of all Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates or Class A-4 Certificates, as the case may be, shall be equal to
the applicable Original Class A-1 Principal Balance, Original Class A-2
Principal Balance, Original Class A-3 Principal Balance or Original Class A-4
Principal Balance and, in the case of Additional Certificate, in any
denomination necessary to reflect the then outstanding Additional Balances.
"Available Amount" shall mean each of the Group I Available Amount
and the Group II Available Amount.
"Available Funds Excess" shall have the meaning ascribed thereto in
Section 6.5.
"Business Day" shall mean any day other than (a) a Saturday or
Sunday, or (b) a day on which banking institutions in the States of California,
Illinois or New York are authorized or obligated by law or executive order to be
closed.
"Capitalized Interest Account" shall mean the Account created
pursuant to Section 6.1(c) hereof.
"Capitalized Interest Deposit Amount" shall mean for any Remittance
Date the sum of (i) the amount by which the product of (a) the sum of the Class
A-1 Pass-Through Rate, the Class A-1 Premium Percentage and the rate at which
the Trustee Fee is calculated and (b) the Group I Pre-Funded Amount as of the
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first day of the related Remittance Period exceeds investment earnings, if any
on the Group I Pre-Funded Amount and (ii) the amount by which the product of (a)
the sum of the Weighted Average Group II Pass-Through Rate, the Group II Premium
Percentage and the rate at which the Trustee Fee is calculated and (b) the Group
II Pre-Funded Amount as of the first day of the related Remittance Period
exceeds investment earnings, if any on the Group II Pre-Funded Amount; provided,
that such amount shall not exceed the difference between (i) the amount
necessary to make the allocations, disbursements and transfers required under
Sections 6.5(a)(i) - (vi) and (ii) the amount on deposit in the Certificate
Account on such Remittance Date.
"Capitalized Interest Requirement" shall mean the sum of the Group I
Capitalized Interest Requirement and the Group II Capitalized Interest
Requirement.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Certificate" shall mean any Series 1997-2 Class A Certificate or
Series 1997-2 Class R Certificate executed by the Trustee on behalf of the Trust
Fund and authenticated by the Trustee.
"Certificate Account" shall mean the Certificate Account established
in accordance with Section 6.1(a) hereof and maintained by the Trustee.
"Certificateholder" shall mean, except as provided in Article X,
each Person in whose name a Certificate is registered in the Certificate
Register, except that, solely for the purposes of giving any consent (except any
consent required to be obtained pursuant to Section 10.2), waiver, request or
demand pursuant to this Agreement, any Certificate registered in the name of the
Servicer or any Subservicer or the Seller, or any Affiliate of any of them,
shall be deemed not to be outstanding and the undivided interest in the related
REMIC evidenced thereby shall not be taken into account in determining whether
the requisite percentage of Certificates necessary to effect any such consent,
waiver, request or demand has been obtained. For purposes of any consent,
waiver, request or demand of Certificateholders pursuant to this Agreement, upon
the Trustee's request, the Servicer and the Seller shall provide to the Trustee
a notice identifying any of their respective Affiliates or the Affiliates of any
Subservicer that is a Certificateholder as of the date(s) specified by the
Trustee in such request. Any Certificates on which payments are made under
either Certificate Insurance Policy shall be deemed to be outstanding and held
by the Certificate Insurer to the extent of such payment.
"Certificate Insurance Agreement" shall mean that certain agreement
between the Certificate Insurer, the Depositor and the parties named therein.
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"Certificate Insurance Policy" shall mean each of the Class A-1
Certificate Insurance Policy and the Group II Certificate Insurance Policy.
"Certificate Insurance Premium Amount" shall mean each of the Class
A-1 Certificate Insurance Premium Amount and the Group II Certificate Insurance
Premium Amount.
"Certificate Insurer" shall be MBIA Insurance Corporation, a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Certificate Insurer Default" shall mean the failure, and
continuance of such failure, by the Certificate Insurer to make a payment
required under the Certificate Insurance Policy in accordance with its terms.
"Certificate Register" shall have the meaning described in Section
4.2(a).
"Civil Relief Act" shall mean the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
"Class" shall mean any designated Class of Certificates of this
Series or of any new Series issued hereunder.
"Class A Certificate" shall mean any Class A-1 Certificate, any
Class A-2 Certificate, any Class A-3 Certificate or any Class A-4 Certificate.
"Class A-1 Certificate" shall mean any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class A-1 Certificateholder" shall mean a Holder of a Class A-1
Certificate.
"Class A-1 Certificate Insurance Policy" shall mean the certificate
guaranty insurance policy no. 25184, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Class A-1
Certificateholders, a copy of which is attached hereto as Exhibit A-1. The
Certificate Insurance Policy shall not benefit the Additional Certificate.
"Class A-1 Certificate Insurance Premium Amount" shall mean, the
product of the Class A-1 Premium Percentage and the Class A-1 Principal Balance
for the related Remittance Date.
"Class A-1 Credit Enhancement Distribution Amount" shall mean the
excess, if any, of the Class A-1 Formula Distribution Amount over the Group I
Available Amount.
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"Class A-1 Distribution Amount" shall mean, with respect to the
Class A-1 Certificates for any Remittance Date, the amount distributed to the
Holders of the Class A-1 Certificates on such Remittance Date pursuant to
Sections 6.5(a)(iii) and (iv) hereof, which amount shall be the lesser of (a)
the Class A-1 Formula Distribution Amount for such Remittance Date and (b) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-1 Certificates for such Remittance Date.
"Class A-1 Final Scheduled Maturity Date" shall mean the January
2019 Remittance Date.
"Class A-1 Formula Distribution Amount" shall mean, with respect to
the Class A-1 Certificates for any Remittance Date, the sum of (a) the Class A-1
Interest Distribution Amount for such Remittance Date plus (b) the amount
described in clause (b) of the definition of Class A-1 Principal Distribution
Amount for such Remittance Date plus (c) any Class A-1 Formula Distribution
Amount remaining unpaid from any prior Remittance Date.
"Class A-1 Insured Payment" shall mean, the sum of (i) with respect
to any Remittance Date, the related Deficiency Amount plus (ii) any unpaid
Preference Amount.
"Class A-1 Interest Distribution Amount" shall mean, with respect to
the Class A-1 Certificates for any Remittance Date an amount equal to the
aggregate of interest accrued at the Class A-1 Pass-Through Rate during the
Accrual Period on the Class A-1 Principal Balance excluding (i) any Mortgage
Loan Interest Shortfall and (ii) any reductions in interest resulting from the
application of the Civil Relief Act, in each case as of such Remittance Date.
"Class A-1 Pass-Through Rate" shall be equal to 5.85063%, in the
case of the first Remittance Date, and with respect to each Remittance Date
thereafter, shall be equal to a per annum rate (calculated on the basis of
actual days elapsed divided by 360) equal to the lesser of (a) the sum of (i)
LIBOR on the Interest Determination Date plus (ii)0 21%, and (b) the Weighted
Average Rate Cap.
"Class A-1 Premium Percentage" shall have the meaning assigned
thereto in the Certificate Insurance Agreement.
"Class A-1 Principal Balance" shall mean, as of any date of
determination, the Original Class A-1 Principal Balance less any amount
distributed with respect to principal on the Class A-1 Certificates on all prior
Remittance Dates.
"Class A-1 Principal Distribution Amount" shall mean, with respect
to the Class A-1 Certificates for any Remittance Date, the lesser of:
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(a) the excess of the Group I Available Amount, plus any Class A-1
Insured Payment over the Class A-1 Interest Distribution Amount; and
(b) the sum, without duplication, of:
(1) that portion of all scheduled installments of principal in
respect of the HELOCs allocable to the Trust Balances of such HELOCs which is
received (or advanced) during the related Due Period together with all
unscheduled recoveries of principal (including Prepayments, Curtailments and
Deficient Valuations) allocable to the Trust Balances of such HELOCs actually
collected by the Servicer during the prior calendar month,
(2) the Trust Balance of each HELOC that either was, effective on
such Remittance Date, repurchased by the Seller or by the Depositor or purchased
by the Servicer during the preceding Due Period, but only to the extent the
amount equal to such Trust Balance is actually received by the Trustee,
(3) any Substitution Adjustment amounts delivered by the
Depositor on the related Remittance Date in connection with a substitution of a
HELOC, to the extent such Substitution Adjustments are actually received by the
Trustee,
(4) with respect to each HELOC that became a Liquidated Mortgage
Loan during the prior calendar month, the Trust Balance of such HELOC
immediately prior to the time when such HELOC became a Liquidated Mortgage Loan,
(5) any amount allocated to Group I remaining on deposit in the
Pre-Funding Account at the end of the Pre-Funding Period, and
(6) the proceeds received by the Trust Fund following any
termination of the 1997-2 REMIC carried out in accordance with a plan of
complete liquidation pursuant to Section 8.2 hereof or pursuant to the optional
termination of any of the Trust Fund, the 1997-2 REMIC or Group I by either the
Servicer or Certificate Insurer in accordance with Section 8.1 hereof, up to the
then outstanding Class A-1 Principal Balance.
"Class A-2 Certificate" shall mean any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit B-2 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class A-2 Certificateholder" shall mean a Holder of a Class A-2
Certificate.
"Class A-2 Distribution Amount" shall mean, with respect to the
Class A-2 Certificates for any Remittance Date, the amount distributed to the
Holders of the Class A-2
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Certificates on such Remittance Date pursuant to Sections 6.5(a)(iii) and (iv)
hereof, which amount shall be the lesser of (a) the portion of the Group II
Formula Distribution Amount allocable to the Class A-2 Certificates for such
Remittance Date and (b) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-2
Certificates for such Remittance Date.
"Class A-2 Final Scheduled Maturity Date" shall mean the July 2004
Remittance Date.
"Class A-2 Interest Distribution Amount" shall mean, with respect to
the Class A-2 Certificates for any Remittance Date an amount equal to the
aggregate of interest accrued at the Class A-2 Pass-Through Rate during the
Accrual Period on the Class A-2 Principal Balance excluding (i) any Mortgage
Loan Interest Shortfall and (ii) any reductions in interest resulting from the
application of the Civil Relief Act, in each case as of such Remittance Date.
"Class A-2 Pass-Through Rate" with respect to any Remittance Date,
will be equal to a 6.425% per annum rate (calculated on the basis of an assumed
month of 30 days and an assumed year of 360 days).
"Class A-2 Principal Balance" shall mean, as of any date of
determination, the Original Class A-2 Principal Balance less any Group II
Principal Distribution Amount distributed with respect to principal on the Class
A-2 Certificates on all prior Remittance Dates.
"Class A-3 Certificate" shall mean any Certificate designated as a
"Class A-3 Certificate" on the face thereof, in the form of Exhibit B-3 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class A-3 Certificateholder" shall mean a Holder of a Class A-3
Certificate.
"Class A-3 Distribution Amount" shall mean, with respect to the
Class A-3 Certificates for any Remittance Date, the amount distributed to the
Holders of the Class A-3 Certificates on such Remittance Date pursuant to
Sections 6.5(a)(iii) and (iv) hereof, which amount shall be the lesser of (a)
the portion of the Group II Formula Distribution Amount allocable to the Class
A-3 Certificates for such Remittance Date and (b) the amount (including any
applicable portion of any Insured Payment) available for distribution on account
of the Class A-3 Certificates for such Remittance Date.
"Class A-3 Final Scheduled Maturity Date" shall mean the May 2007
Remittance Date.
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"Class A-3 Interest Distribution Amount" shall mean, with respect to
the Class A-3 Certificates for any Remittance Date an amount equal to the
aggregate of interest accrued at the Class A-3 Pass-Through Rate during the
Accrual Period on the Class A-3 Principal Balance excluding (i) any Mortgage
Loan Interest Shortfall and (ii) any reductions in interest resulting from the
application of the Civil Relief Act, in each case as of such Remittance Date.
"Class A-3 Pass-Through Rate" with respect to any Remittance Date,
will be equal to a 6.420% per annum rate (calculated on the basis of an assumed
month of 30 days and an assumed year of 360 days).
"Class A-3 Principal Balance" shall mean, as of any date of
determination, the Original Class A-3 Principal Balance less any Group II
Principal Distribution Amounts distributed with respect to principal on the
Class A-3 Certificates on all prior Remittance Dates.
"Class A-4 Certificate" shall mean any Certificate designated as a
"Class A-4 Certificate" on the face thereof, in the form of Exhibit B-4 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein.
"Class A-4 Certificateholder" shall mean a Holder of a Class A-4
Certificate.
"Class A-4 Distribution Amount" shall mean, with respect to the
Class A-4 Certificates for any Remittance Date, the amount distributed to the
Holders of the Class A-4 Certificates on such Remittance Date pursuant to
Sections 6.5(a)(iii) and (iv) hereof, which amount shall be the lesser of (a)
the portion of the Group II Formula Distribution Amount allocable to the Class
A-4 Certificates for such Remittance Date and (b) the amount (including any
applicable portion of any Insured Payment) available for distribution on account
of the Class A-4 Certificates for such Remittance Date.
"Class A-4 Final Scheduled Maturity Date" shall mean the January
2014 Remittance Date.
"Class A-4 Interest Distribution Amount" shall mean, with respect to
the Class A-4 Certificates for any Remittance Date an amount equal to the
aggregate of interest accrued at the Class A-4 Pass-Through Rate during the
Accrual Period on the Class A-4 Principal Balance excluding (i) any Mortgage
Loan Interest Shortfall and (ii) any reductions in interest resulting from the
application of the Civil Relief Act, in each case as of such Remittance Date.
"Class A-4 Pass-Through Rate", with respect to any Remittance Date
prior to the date on which the sum of the Class A-2 Principal Balance, the Class
A-3 Principal Balance and the
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Class A-4 Principal Balance is less than 10% of the sum of (i) the aggregate
Trust Balances of the Mortgage Loans in Group II as of the Cut-Off Date and (ii)
the Original Group II Prefunded Amount, will be equal to a 6.770% per annum
rate, and with respect to any Remittance Date after the next succeeding
Remittance Date , will be equal to a 7.270% per annum rate (each rate calculated
on the basis of an assumed month of 30 days and an assumed year of 360 days).
"Class A-4 Principal Balance" shall mean, as of any date of
determination, the Original Class A-4 Principal Balance less any Group II
Principal Distribution Amounts distributed with respect to principal on the
Class A-4 Certificates on all prior Remittance Dates.
"Class R Certificate" shall mean any Certificate denominated as a
Class R Certificate and subordinate to the Class A Certificates in right of
payment to the extent set forth herein, which Certificate shall be in the form
of Exhibit B-3 hereto.
"Class R Certificateholder" shall mean a Holder of a Class R
Certificate.
"Closing Date" shall mean November 18, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collection Account" shall mean the Eligible Account established and
maintained by the Servicer for the benefit of the Certificateholders, the Holder
of the Additional Certificate and the Certificate Insurer pursuant to Section
5.3(a) hereof.
"Combined Loan-to-Value Ratio" shall mean, (i) the sum of (x) any
outstanding first mortgage balance as of the date of origination of the related
Mortgage Loan plus (y) the maximum available credit under the HELOC or the Trust
Balance of the HEL, as applicable as of the Cut-Off Date, divided by (ii) the
Appraised Value of such Mortgaged Property.
"Commission" shall mean the Securities and Exchange Commission.
"Compensating Interest" shall have the meaning defined in Section
6.9 hereof.
"Curtailment" shall mean, with respect to a Mortgage Loan, any
payment of principal received during a Due Period as part of a payment that is
in excess of the amount of the Monthly Payment due for such Due Period and which
is neither intended to satisfy the Mortgage Loan in full, intended as an advance
payment of an amount due in a subsequent Due Period, nor intended to cure a
delinquency.
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"Custodian" shall have the meaning defined in Section 2.2(c).
"Cut-Off Date" shall mean with respect to the Mortgage Loans
transferred to the Trust on the Closing Date, the close of business on October
31, 1997 and, with respect to Subsequent Mortgage Loans transferred to the Trust
on any Subsequent Transfer Date, the last day of the calendar month preceding
such Subsequent Transfer Date.
"Debt Service Reduction" shall mean, with respect to any Mortgage
Loan, a reduction by a court of competent jurisdiction of the Monthly Payment
due on such Mortgage Loan in a proceeding under the Bankruptcy Code, except such
a reduction that constitutes a Deficient Valuation or a permanent forgiveness of
principal.
"Deficiency Amount" shall mean, for any Remittance Date, (i) with
respect to the Class A-1 Certificates and the Class A-1 Insured Payment, the
excess of the Class A-1 Credit Enhancement Distribution Amount over the amount
then on deposit in and available to be withdrawn from the Reserve Account
(including amounts available to be drawn under any Eligible Letter of Credit) on
such Remittance Date and (ii) with respect to the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates and the Group II Insured
Payment, the excess of the Group II Credit Enhancement Distribution Amount over
the amount then on deposit in and available to be withdrawn from the Reserve
Account (including amounts available to be drawn under any Eligible Letter of
Credit) on such Remittance Date.
"Deficient Valuation" shall mean, with respect to any Mortgage Loan,
a valuation of the related Mortgaged Property by a court of competent
jurisdiction in an amount less than the then outstanding principal balance of
the Mortgage Loan, which valuation results from a proceeding initiated under the
United States Bankruptcy Code.
"Deleted Mortgage Loan" shall mean a Mortgage Loan replaced by a
Qualified Substitute Mortgage Loan or repurchased pursuant to Sections 2.4(b) or
3.3 hereof.
"Delinquency Calculation Amount" means, for any Remittance Date, the
sum of (i) the product of 0.25 and the aggregate Principal Balance of all
Mortgage Loans which are between 30 and 59 days delinquent, (ii) the product of
0.50 and the aggregate Principal Balance of all Mortgage Loans which are between
60 and 89 days delinquent, and (iii) the aggregate Principal Balance of all
Mortgage Loans which are more than 89 days delinquent.
"Delinquency Collection Policies and Procedures" shall mean the
servicing policies of the Servicer pertaining to delinquent mortgage loans
attached hereto as Exhibit L.
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"Delinquent" shall mean a Mortgage Loan is "delinquent" if any
payment due thereon is not made by the close of business on the day such payment
is scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment
has not been received by the close of business on the corresponding day of the
month immediately succeeding the month in which such payment was due, or, if
there is no such corresponding day (e.g., as when a 30-day month follows a
31-day month in which a payment was due on the 31st day of such month) then on
the last day of such immediately succeeding month. Similarly for "60 days
delinquent," "90 days delinquent" and so on.
"Depositor" shall mean Prudential Securities Secured Financing
Corporation, a Delaware corporation, and any successor thereto.
"Depository" shall mean the Depository Trust Company, 7 Hanover
Square, New York, New York 10004 and any successor Depository hereafter named.
"Determination Date" shall mean the fourth Business Day prior to the
Remittance Date.
"Direct Participant" shall mean any broker-dealer, bank or other
financial institution for which the Depository holds Class A Certificates from
time to time as a securities depositary.
"Due Date" shall mean the fifteenth day of each calendar month.
"Due Period" shall mean, with respect to each Remittance Date, the
period beginning on the opening of business on the first day of the calendar
month preceding the calendar month in which such Remittance Date occurs, and
ending at the close of business on the last day of the calendar month preceding
the calendar month in which such Remittance Date occurs.
"Eligible Account" shall mean either (A) a segregated trust account
or accounts maintained with a depositary institution which is acceptable to the
Certificate Insurer and to each Rating Agency and such trust account shall be
held in (i) the corporate trust account department of such depositary
institution or (ii) an institution with capital and surplus of not less than
$50,000,000, and a minimum unsecured debt rating of BBB by S&P or Baa3 by
Moody's or (B) an account or accounts maintained with an institution acceptable
to the Certificate Insurer and whose deposits are insured by the FDIC, the
unsecured and uncollateralized debt obligations of which institution shall be
rated AA or better by S&P and Aa2 or better by Moody's and the highest
short-term rating by S&P and Moody's, and which is (i) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution (including the Trustee) duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized,
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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, S&P and Moody's, having capital and surplus of not less
than $50,000,000, acting in its fiduciary capacity. Irwin Union Bank and Trust
Company and any of its Affiliates will be prohibited from holding any Eligible
Account hereunder.
"Eligible Letter of Credit" shall mean a letter of credit in form,
substance and amount and from a provider acceptable to the Certificate Insurer.
"ERISA" shall have the meaning defined in Section 4.2(i)(x) hereof.
"Event of Default" shall have the meaning described in Section 7.1.
"FDIC" shall mean the Federal Deposit Insurance Corporation and any
successor thereto.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation and
any successor thereto.
"Final Subsequent Transfer Date" shall mean with respect to Group I
or Group II the earliest to occur of (i) February 16, 1998, (ii) the occurrence
of an Event of Default and (iii) the date upon which the amount on deposit in
the Pre-Funding Account allocated to such Group is less than $100,000.
"Fiscal Agent shall mean State Street Bank and Trust Company, N.A.
"FNMA" shall mean the Federal National Mortgage Association and any
successor thereto.
"Foreclosure Profits" shall mean, as to any Remittance Date, the
excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan
that became a Liquidated Mortgage Loan during the month immediately preceding
the month of such Remittance Date over (ii) the sum of the unpaid principal
balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest
at the applicable Mortgage Interest Rate on the unpaid principal balance thereof
from the Due Date to which interest was last paid by the Mortgagor (or, in the
case of a Liquidated Mortgage Loan that had been an REO Mortgage Loan, from the
Due Date to which interest was last deemed to have been paid pursuant to Section
5.12) to the first day of the month following the month in which such Mortgage
Loan became a Liquidated Mortgage Loan.
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"Gross Margin" shall mean, as to each HELOC, the fixed percentage
set forth in the related Mortgage Note and indicated in the Mortgage Loan
Schedule as the "Gross Margin," which percentage is added to the applicable
prime rate on each Interest Adjustment Date to determine (subject to rounding,
any applicable statutory maximum interest rate, the Lifetime Floor and the
Lifetime Cap) the Mortgage Interest Rate on such HELOC until the next Interest
Adjustment Date.
"Group" shall mean each of Group I and Group II.
"Group I" shall mean the segregated pool of Mortgage Loans within
the Trust and the 1997-2 REMIC consisting of the HELOCs. Group I shall be a
sub-trust of the Trust.
"Group I Available Amount" shall mean for any Remittance Date the
sum of (i) the Servicer Remittance Amount for Group I and such Remittance Date
plus (ii) any portion of the Servicer Remittance Amount for Group II not
required to pay the Group II Formula Distribution Amount, the Trustee Fee for
Group II or the Group II Certificate Insurance Premium Amount minus (iii) the
Trustee Fee for Group I and the Class A-1 Certificate Insurance Premium Amount.
"Group I Capitalized Interest Requirement" shall mean, for any
Remittance Date, the product of (i) the Class A-1 Pass Through Rate for the
first Remittance Date plus the Class A-1 Premium Percentage plus the rate at
which the Trustee Fee is calculated minus 2.5% (ii) the Group I Pre-Funded
Amount and (iii) the quotient of the number of days from such Remittance Date to
the Remittance Date in February of 1998 and 360.
"Group I Net Available Funds Excess" shall have the meaning assigned
in the Certificate Insurance Agreement.
"Group I Pre-Funded Amount" shall mean the Original Group I
Pre-Funded Amount minus all amounts withdrawn from the Pre-Funding Account or
transferred to the Reserve Account in connection with the transfer of HELOCs to
the Trust Fund on any Subsequent Transfer Date.
"Group II" shall mean the segregated pool of the Mortgage Loans
within the Trust and the 1997-2 REMIC consisting of the HELs. Group II shall be
a sub-trust of the Trust.
"Group II Available Amount" shall mean for any Remittance Date the
sum of (i) the Servicer Remittance Amount for Group II and such Remittance Date
plus (ii) any portion of the Servicer Remittance Amount for Group I not required
to pay the Class A-1 Formula Distribution Amount, the Trustee Fee for Group I or
the Class A-1 Certificate Insurance Premium Amount minus (iii) the Trustee Fee
for Group II and the Group II Certificate Insurance Premium Amount.
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"Group II Capitalized Interest Requirement" shall mean, for any
Remittance Date, the product of (i) the Weighted Average Group II Pass-Through
Rate plus the Group II Premium Percentage plus the rate at which the Trustee Fee
is calculated minus 2.5%, (ii) the Group II Pre-Funded Amount and (iii) the
quotient of the number of Remittance Dates from such Remittance Date to the
Remittance Date in February of 1998 and 12.
"Group II Certificate Insurance Policy" shall mean the certificate
guaranty insurance policy no. 25185, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Class A-2
Certificateholders, of the Class A-3 Certificateholders and the Class A-4
Certificateholders, a copy of which is attached hereto as Exhibit A-2. The Group
II Certificate Insurance Policy shall not benefit the Additional Certificate.
"Group II Certificate Insurance Premium Amount" shall mean, the
product of (i) the Group II Premium Percentage and (ii) the sum of the Class A-2
Principal Balance, Class A-3 Principal Balance and the Class A-4 Principal
Balance for the related Remittance Date.
"Group II Certificates" shall mean each of the Class A-2
Certificates, the Class A-3 Certificates and the Class A-4 Certificates.
"Group II Credit Enhancement Distribution Amount" shall mean the
excess, if any, of the Group II Formula Distribution Amount over the Group II
Available Amount.
"Group II Formula Distribution Amount" shall mean, with respect to
the Class A-2 Certificates, the Class A-3 Certificates and the Class A-4
Certificates for any Remittance Date, the sum of (a) the Class A-2 Interest
Distribution Amount for such Remittance Date plus (b) the Class A-3 Interest
Distribution Amount for such Remittance Date plus (c) the Class A-4 Interest
Distribution Amount for such Remittance Date plus the amount described in clause
(b) of the definition of Group II Principal Distribution Amount for such
Remittance Date plus (d) any Group II Formula Distribution Amount remaining
unpaid from any prior Remittance Date.
"Group II Insured Payment" shall mean, the sum of (i) with respect
to any Remittance Date, the related Deficiency Amount plus (ii) any unpaid
Preference Amount.
"Group II Net Available Funds Excess" shall have the meaning
assigned in the Certificate Insurance Agreement.
"Group II Pre-Funded Amount" shall mean the Original Group II
Pre-Funded Amount minus all amounts withdrawn from the Pre-Funding Account or
transferred to the Reserve Account in
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connection with the transfer of HELs to the Trust Fund on any Subsequent
Transfer Date.
"Group II Premium Percentage" shall have the meaning assigned
thereto in the Certificate Insurance Agreement.
"Group II Principal Distribution Amount" shall mean, with respect to
the Class A-2 Certificates or after the Class A-2 Principal Balance has been
reduced to zero, the Class A-3 Certificates, or after the Class A-3 Principal
Balance has been reduced to zero, the Class A-4 Certificates for any Remittance
Date, the lesser of:
(a) the excess of the Group II Available Amount, plus any Group II
Insured Payment over the sum of the Class A-2 Interest Distribution Amount, the
Class A-3 Interest Distribution Amount and the Class A-4 Interest Distribution
Amount; and
(b) the sum, without duplication, of:
(1) that portion of all scheduled installments of principal in
respect of the HELs allocable to the Trust Balances of such HELs which is
received (or advanced) during the related Due Period together with all
unscheduled recoveries of principal (including Prepayments, Curtailments and
Deficient Valuations) allocable to the Trust Balances of such HELs actually
collected by the Servicer during the prior calendar month,
(2) the Trust Balance of each HEL that either was, effective on
such Remittance Date, repurchased by the Seller or by the Depositor or purchased
by the Servicer during the preceding Due Period, but only to the extent the
amount equal to such Trust Balance is actually received by the Trustee,
(3) any Substitution Adjustment amounts delivered by the
Depositor on the related Remittance Date in connection with a substitution of a
HEL, to the extent such Substitution Adjustments are actually received by the
Trustee,
(4) with respect to each HEL that became a Liquidated Mortgage
Loan during the prior calendar month, the Trust Balance of such HEL immediately
prior to the time when such HEL became a Liquidated Mortgage Loan,
(5) any amount allocated to Group II remaining on deposit in the
Pre-Funding Account at the end of the Pre-Funding Period, and
(6) the proceeds received by the Trust Fund following any
termination of the 1997-2 REMIC carried out in accordance with a plan of
complete liquidation pursuant to Section 8.02 hereof or pursuant to the optional
termination of any of the Trust Fund, the 1997-2 REMIC or Group II by either the
Servicer or Certificate Insurer in accordance with Section 8.1
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hereof, up to the sum of the then outstanding Class A-2 Principal Balance, Class
A-3 Principal Balance and Class A-4 Principal Balance.
"Hazardous Materials" shall mean any dangerous, toxic or hazardous
pollutants, chemical wastes or substances, including, without limitation, those
identified pursuant to CERCLA or any other federal, state or local environmental
related laws now existing or hereafter enacted.
"HEL" shall mean (i) each fixed rate closed end home equity loan
identified on the Mortgage Loan Schedule on the Closing Date, (ii) any
additional such fixed rate home equity closed end loans identified on the
Mortgage Loan Schedule after the Closing Date, as such schedule is amended and
supplemented from time to time to reflect the transfer of the Subsequent
Mortgage Loans which are HELs, the deletion of the Deleted Mortgage Loans which
are HELs and the substitution of Qualified Substitute Mortgage Loans which are
HELs for Deleted Mortgage Loans (iii) each Mortgage Note evidencing any loan
referred to in (i) or (ii) above, including all amounts now or hereafter due
under such Mortgage Notes whether relating to such loans or other loans which
may be made from time to time and (iv) the related Mortgage.
"HELOC" shall mean (i) each adjustable rate home equity revolving
credit line loan identified on the Mortgage Loan Schedule on the Closing Date,
(ii) any additional such home equity revolving credit line loans identified on
the Mortgage Loan Schedule after the Closing Date, as such schedule is amended
and supplemented from time to time to reflect the transfer of the Subsequent
Mortgage Loans which are HELOCs, the deletions of Deleted Mortgage Loans which
are HELOCs and the substitution of Qualified Substitute Mortgage Loans which are
HELOCs for Deleted Mortgage Loans (iii) each Mortgage Note evidencing any credit
line loan referred to in (i), (ii) or (iii) above, including all amounts now or
hereafter due under such Mortgage Notes whether relating to such credit line
loans or other loans which may be made from time to time and (iv) the related
Mortgage.
"Holder" shall mean each Person in whose name a Certificate, or an
Additional Certificate is registered in the Certificate Register, except that
solely for the purposes of giving any consent (except any consent required to be
obtained pursuant to Section 10.2), waiver, request or demand pursuant to this
Agreement, any Certificate, or Additional Certificate registered in the name of
the Servicer or any Subservicer or the Seller, or any Affiliate of any of them,
shall be deemed not to be outstanding and in the case of any Certificate, the
undivided interest in the Trust Fund evidenced thereby shall not be taken into
account in determining whether the requisite percentage of Certificates
necessary to effect any such consent, waiver, request or demand has been
obtained. For purposes of any consent, waiver, request or demand of the Holders
of the
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Additional Certificate pursuant to this Agreement, upon the Trustee's request,
the Servicer and the Seller shall provide to the Trustee a notice identifying
any of their respective Affiliates or the Affiliates of any Subservicer that is
a Holder of an Additional Certificate as of the date(s) specified by the Trustee
in such request.
"Indirect Participant" shall mean any financial institution for whom
any Direct Participant holds an interest in a Class A Certificate.
"Insured Payment" shall mean each of any Class A-1 Insured Payment
and any Group II Insured Payment.
"Insurance Proceeds" shall mean proceeds paid by any insurer
pursuant to any insurance policy covering a Mortgage Loan to the extent such
proceeds are not applied to the restoration of the related Mortgaged Property or
released to the related Mortgagor in accordance with Accepted Servicing
Practices. "Insurance Proceeds" do not include "Insured Payments."
"Interest Adjustment Date" shall mean with respect to a HELOC, the
date on which the Mortgage Interest Rate is or may be adjusted with respect to
such HELOC.
"Interest Collections" shall mean all amounts (including, without
limitation, Monthly Payments (or Periodic Advances in respect thereof) and
Liquidation Proceeds) collected on any Mortgage Loan allocable to interest
pursuant to the terms of the related Mortgage Note, or if no provision for
allocation is made therein, pursuant to the terms hereof.
"Interest Determination Date" shall mean, with respect to any
Accrual Period applicable to the Class A-1 Certificates, the second London
Business Day preceding the first day of such Accrual Period.
"Late Payment Rate" shall have the meaning assigned thereto in the
Certificate Insurance Agreement.
"LIBOR" shall mean, with respect to any Accrual Period applicable to
the Class A-1 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 Interest Determination Date, LIBOR for the related Accrual Period
applicable to the Class A-1 Certificates 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 Due Period shall be
the arithmetic mean of such
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offered quotations (rounded upwards if necessary to the nearest whole multiple
of 0.0625%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related Due
Period shall be the higher of (i) LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest Rate.
"Lifetime Cap" shall mean, as to any HELOC, the maximum Mortgage
Interest Rate set forth in the related Mortgage Note and indicated in the
Mortgage Loan Schedule.
"Lifetime Floor" shall mean, as to any HELOC, the minimum Mortgage
Interest Rate set forth in the related Mortgage Note and indicated in the
Mortgage Loan Schedule.
"Liquidated Mortgage Loan" shall mean a Mortgage Loan (i) with
respect to which the related Mortgaged Property has been acquired, liquidated
and/or foreclosed upon by the Servicer or (ii) which the Servicer has elected to
write down the outstanding Principal Balance of such Mortgage Loan that has been
delinquent for a period equal to or greater than 180 days to zero and, in either
case, with respect to which the Servicer determines that all Liquidation
Proceeds which it expects to recover have been recovered.
"Liquidated Loan Loss" shall mean, with respect to any Remittance
Date and Group, the aggregate of the amount of losses with respect to each HELOC
in the case of Group I and each HEL in the case of Group II which became a
Liquidated Mortgage Loan in the Due Period prior to such Remittance Date, equal
to the excess of (i) the unpaid principal balance of each such Liquidated
Mortgage Loan, plus accrued interest thereon in accordance with the amortization
schedule at the time applicable thereto at the applicable Mortgage Interest Rate
from the Due Date as to which interest was last paid with respect thereto
through the last day of the month in which such Mortgage Loan became a
Liquidated Mortgage Loan, over (ii) Net Liquidation Proceeds with respect to
such Liquidated Mortgage Loan.
"Liquidation Expenses" shall mean expenses incurred by the Servicer
in connection with the liquidation of any defaulted Mortgage Loan, REO Mortgage
Loan or REO Property (including, without limitation, legal fees and expenses,
committee or referee fees, and, if applicable, brokerage commissions and
conveyance taxes), any unreimbursed amount expended by the Servicer pursuant to
Sections 5.5, 5.6 and 5.12 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
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"Liquidation Proceeds" shall mean amounts received (or in the case
of Liquidated Mortgage Loans written-down by the Servicer, amounts deposited) by
the Servicer (including Insurance Proceeds) in connection with the liquidation
of defaulted or written-down Mortgage Loans or property acquired in respect
thereof, whether through foreclosure, sale or otherwise, including payments in
connection with such Mortgage Loans received from the Mortgagor, other than
amounts required to be paid to the Mortgagor pursuant to the terms of the
applicable Mortgage or to be applied otherwise pursuant to law.
"Loan Repurchase Price" shall have the meaning defined in Section
2.4(b).
"Loan-to-Value Ratio" or "LTV" shall mean, with respect to any
Mortgage Loan, the fraction, expressed as a percentage, the numerator of which
in the case of a HEL is 100% of the Trust Balance of such Mortgage Loan and in
the case of a HELOC is the maximum available credit with respect to such
Mortgage Loan, in either case, as of the Cut-Off Date, and the denominator of
which is the Appraised Value of the related Mortgaged Property, reduced by the
value of any lien superior to the lien of the Mortgage Loan.
"Local Collection Account" shall mean a Collection Account other
than the Trustee Collection Account.
"London Business Day" shall mean any day in which banks in the City
of London are open and conducting transactions in U.S. dollars.
"Majority Certificateholders" shall mean, with respect to the 1997-2
REMIC, the Holder or Holders of Class A Certificates evidencing an undivided
beneficial ownership interest in the REMIC in excess of 50% in the aggregate.
"Maturity Date" shall mean the latest possible maturity date as
defined in Section 1.860G-1(a)(4)(iii) of the proposed Treasury regulations, by
which the Certificates representing a regular interest in the 1997-2 REMIC would
be reduced to zero as determined under a hypothetical scenario that assumes,
among other things, that (a) scheduled interest and principal payments on the
Mortgage Loans are received in a timely manner, with no delinquencies or losses,
(b) there are no principal prepayments on the Mortgage Loans, (c) the Seller and
the Servicer will not repurchase any Mortgage Loan and neither the Seller, the
Servicer nor the Certificate Insurer will exercise its option to purchase the
Mortgage Loans and thereby cause a termination of the 1997-2 REMIC, and (d) the
HELOCs have an original term to maturity of 240 months and, on a latest maturing
loan basis, a remaining term to maturity of 240 months and the HELs have an
original term of maturity of 120 months and, on a latest maturing loan basis, a
remaining term to maturity of 120 months.
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"Monthly Payment" shall mean, as to any Mortgage Loan (including any
REO Mortgage Loan) and any Due Date, the scheduled payment of principal and
interest due thereon by such Due Date (after adjustment for any Curtailments and
Deficient Valuations occurring prior to such Due Date but before any adjustment
to such amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period). With respect to any Monthly Payment made by or on behalf of a Mortgagor
and received by the Servicer, 100% of the principal payment portion of such
Monthly Payment shall be applied to the outstanding Trust Balance until such
Trust Balance shall be reduced to zero; the interest payment portion of such
Monthly Payment shall be appropriately allocated to the Trust Balance and the
Additional Balance of such Mortgage Loan as provided for herein.
"Moody's" shall mean Moody's Investors Service, Inc., a corporation
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Certificate Insurer.
"Mortgage" shall mean the mortgage, deed of trust or other
instrument creating a lien on the Mortgaged Property to secure the Mortgage
Loan.
"Mortgage File" shall include the Mortgage Loan documents described
in Section 2.3 hereof and such documents as are applicable from those listed on
Exhibit C attached hereto.
"Mortgage Interest Rate" shall mean, as to any Mortgage Loan, the
per annum rate at which interest accrues on the unpaid principal balance
thereof, as adjusted from time to time, in the case of a HELOC, in accordance
with the provisions of the related Mortgage Note.
"Mortgage Loan" shall mean each HELOC and each HEL. Unless otherwise
clearly indicated by the context, Mortgage Loan shall be deemed to refer to the
related REO Mortgage Loan and REO Property.
"Mortgage Loan Interest Shortfall" shall mean, with respect to any
Remittance Date, as to any Mortgage Loan, any Prepayment Interest Shortfall for
which no payment of Compensating Interest is paid.
"Mortgage Loan Sale Agreement" shall mean the Mortgage Loan Sale
Agreement dated as of November 1, 1997, between Irwin Union Bank and Trust
Company, as seller thereunder, and IHE Funding Corp., as purchaser thereunder,
as such agreement may be amended, modified or supplemented from time to time.
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"Mortgage Loan Schedule" shall mean the list of the Mortgage Loans transferred
to the Trustee on the Closing Date as part of the Trust Fund and attached hereto
as Exhibit D (and also provided to the Certificate Insurer and the Trustee on a
computer readable magnetic tape or disk) and any Subsequent Mortgage Loans
transferred to the Trustee pursuant to any Subsequent Transfer Agreement and
attached to such Subsequent Transfer Agreement as an Exhibit (and also provided
to the Certificate Insurer and the Trustee on a computer readable magnetic tape
or disk). The identification of such Mortgage Loans shall be amended, from time
to time, in order to specify the interest in, and allocation of the Principal
Balance of a Mortgage Loan between the Trust Balance of such Mortgage Loan and
any Additional Balance assigned to the Additional Certificates. The Mortgage
Loan Schedule shall set forth at a minimum the following information as to each
Mortgage Loan:
(i) the Mortgage Loan identifying number;
(ii) whether such Mortgage Loan is a HEL or a HELOC;
(iii) the Principal Balance of the Mortgage Loan and the
allocation of such Principal Balance between the Trust Balance and any
Additional Balance for such Mortgage Loan:
(iv) the city, state and zip code of the Mortgaged Property;
(v) the type of property;
(vi) the current Monthly Payment as of the related Cut-Off Date;
(vii) the original number of months to maturity;
(viii) the scheduled maturity date;
(ix) the Trust Balance of such Mortgage Loan as of the related
Cut-Off Date;
(x) the Loan-to-Value Ratio at origination and the Combined
Loan-to-Value Ratio as of the Cut-Off Date;
(xi) the Mortgage Interest Rate as of the Cut-Off Date;
(xii) with respect to HELOCs, the Gross Margin;
(xiii) with respect to HELOCs, the first possible Interest
Adjustment Date after the Cut-Off Date;
(xiv) with respect to HELOCs, the Lifetime Cap;
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(xv) with respect to HELOCs, the Lifetime Floor;
(xvi) the Appraised Value;
(xvii) the documentation type (as described in the Underwriting
Guidelines);
(xviii) the loan classification (as described in the Underwriting
Guidelines); and
(xix) the lien priority of each Mortgage Loan.
Such "Mortgage Loan Schedule" may consist of multiple reports that collectively
set forth all of the information required, including the aggregate number of
Mortgage Loans and the Aggregate Trust Balance as of the Cut-Off Date. In
addition, a summary of the information regarding the Mortgage Loans shall be
included as a part of the Mortgage Loan Schedule which summary shall include
such consolidated and aggregated information as may be requested by the Trustee
or the Certificate Insurer from time to time.
"Mortgage Note" shall mean the original, executed note or other
evidence of indebtedness evidencing the indebtedness of a Mortgagor under a
Mortgage Loan.
"Mortgaged Property" shall mean the underlying property securing a
Mortgage Loan, consisting of a fee simple estate in a single parcel of land
improved by a Residential Dwelling.
"Mortgaged Property State" shall mean any state in which any
Mortgaged Property is located.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"Net Available Funds Excess" shall mean, as of any Remittance Date,
the excess, if any, of (x) the Available Funds Excess for such Remittance Date
over (y) the Reimbursement Amount for such Remittance Date, but in no event less
than zero.
"Net Foreclosure Profits" shall mean, as to any Remittance Date and
Group, the excess, if any, of (i) the aggregate Foreclosure Profits with respect
to HELOCs in the case of Group I and HELs in the case of Group II and for such
Remittance Date over (ii) the Liquidated Loan Loss with respect to HELOCs in the
case of Group I and HELs in the case of Group II and for such Remittance Date.
"Net Liquidation Proceeds" shall mean, as to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any
unreimbursed Periodic Advances made by the Servicer. For all purposes of this
Agreement, Net Liquidation Proceeds shall be allocated first to accrued and
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unpaid interest on the related Mortgage Loan and then to the unpaid principal
balance thereof. Such Net Liquidation Proceeds shall be applied on a pro rata
basis to the outstanding Trust Balance and the Additional Balance of such
Mortgage Loan as provided for herein.
"Net Mortgage Interest Rate" shall mean, with respect to each
Mortgage Loan at any time of determination, a rate equal to (i) the Mortgage
Interest Rate on such Mortgage Loan minus (ii) the sum of the rates (computed on
an annualized basis) used to determine the related Administrative Costs. Any
regular monthly computation of interest at such rate shall be based upon annual
interest at such rate on the applicable amount divided by twelve.
"Net REO Proceeds" shall mean, as to any REO Mortgage Loan, REO
Proceeds net of any related expenses of the Servicer.
"1997-2 REMIC" shall mean segregated pool of assets in Group I and
Group II, consisting of: (a) the Trust Balances of such Mortgage Loans as from
time to time are subject to this Agreement, together with the Mortgage Files
relating thereto and all collections thereon and proceeds thereof, (b) such
assets as from time to time are identified as REO Property of the 1997-2 REMIC
and collections thereon and proceeds thereof, (c) assets deposited in the
Certificate Account and assets deposited in the Reserve Account, including any
such amounts on deposit in the Certificate Account or the Reserve Account
invested in Permitted Investments or available to be drawn under an Eligible
Letter of Credit, (d) the Trustee's rights with respect to the Mortgage Loans
under all insurance policies (other than the Certificate Insurance Policy)
required to be maintained pursuant to this Agreement and any Insurance Proceeds,
(e) with respect to each Mortgage Loan that becomes a Liquidated Mortgage Loan
and the Trust Balance of which has been assigned to the 1997-2 REMIC,
Liquidation Proceeds allocable to such Trust Balance and (f) with respect to
each Mortgage Loan the Trust Balance of which has been assigned to the 1997-2
REMIC, Released Mortgaged Property Proceeds allocable to such Trust Balance.
"Nonrecoverable Advance" shall mean, with respect to any Mortgage
Loan, (a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.4(b), or (b) a Periodic Advance proposed to be
made in respect of a Mortgage Loan or REO Property either of which, in the good
faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to the Certificate Insurer and the Trustee no later than
the Business Day following such determination, would not be ultimately
recoverable pursuant to Section 5.4.
"Officer's Certificate" shall mean a certificate signed by the
Chairman of the Board, the President or a Vice President and the Treasurer, the
Secretary or one of the Assistant
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Treasurers or Assistant Secretaries of the Seller and/or the Servicer, or the
Depositor, as required by this Agreement.
"Opinion of Counsel" shall mean a written opinion of counsel, who
may, without limitation, be counsel for the Seller, the Servicer, the Trustee, a
Certificateholder or a Certificateholder's prospective transferee or the
Certificate Insurer (including except as otherwise provided herein, in-house
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to (a) the qualification of the 1997-2 REMIC as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of counsel who (i) is in
fact independent of the Seller, the Servicer and the Trustee, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Seller or the Servicer or the Trustee or in an Affiliate thereof, (iii) is not
connected with the Seller or the Servicer or the Trustee as an officer,
employee, director or person performing similar functions and (iv) is reasonably
acceptable to the Certificate Insurer. The Certificate Insurer shall be an
addressee on each Opinion of Counsel relating to, or otherwise affecting, the
Series 1997-2 Certificates.
"Original Class A-1 Principal Balance" shall mean, as of the Startup
Date and as to the Class A-1 Certificates, the aggregate principal balance of
the HELOCs as of the Cut-Off Date together with the Original Group I Pre-Funded
Amount equal to $70,000,000.
"Original Class A-2 Principal Balance" shall mean, as of the Startup
Date and as to the Class A-2 Certificates $24,500,000.
"Original Class A-3 Principal Balance" shall mean, as of the Startup
Date and as to the Class A-3 Certificates $20,500,000.
"Original Class A-4 Principal Balance" shall mean, as of the Startup
Date and as to the Class A-4 Certificates $15,000,000.
"Original Group I Pre-Funded Amount" shall mean $43,099,866.46.
"Original Group II Pre-Funded Amount" shall mean $36,899,748.63.
"Outstanding Mortgage Loan" shall mean, as to any Due Date, a
Mortgage Loan (including an REO Mortgage Loan) which has not been prepaid in
full prior to such Due Date, which did not become a Liquidated Mortgage Loan
prior to such Due Date and which was not repurchased by the Seller prior to such
Due Date pursuant to Section 2.4.
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"Ownership Interest" shall mean, as to any Certificate, any
ownership or security interest in such Certificate, including any interest in
such Certificate as the Holder thereof and any other interest therein, whether
direct or indirect, legal or beneficial, as owner or as pledgee.
"Owner-Occupied Mortgaged Property" shall mean a Residential
Dwelling as to which (a) the related Mortgagor represented an intent to occupy
as such Mortgagor's primary, secondary or vacation residence at the origination
of the Mortgage Loan, and (b) the Seller has no actual knowledge that such
Residential Dwelling is not so occupied.
"Percentage Interest" shall mean, with respect to a Class A-1
Certificate, Class A-2 Certificate, Class A-3 Certificate or Class A-4
Certificate, the portion of the total beneficial ownership interest in the
related Group evidenced by such Certificate, expressed as a percentage rounded
to four decimal places, equal to a fraction the numerator of which is the
original denomination of such Certificate and the denominator of which is the
Original Class A-1 Principal Balance, the Original Class A-2 Principal Balance,
the Original Class A-3 Principal Balance or the Original Class A-4 Principal
Balance as applicable. With respect to a Class R Certificate, the portion
evidenced thereby as stated on the face of such Certificate. With respect to an
Additional Certificate, the portion of the total beneficial ownership interest
in the Additional Balances on the HELOCs held by the Trust as stated on the face
of such Additional Certificate.
"Periodic Advance" shall mean the aggregate of the advances required
to be made by the Servicer on any Servicer Remittance Date pursuant to Section
5.20 hereof, the amount of any such advances being equal to the sum of: (i) all
Monthly Payments (net of the related Servicing Fee and any amount excluded from
the Servicer Remittance Amount pursuant to clauses (a)-(i) of the definition of
"Servicer Remittance Amount") on the Mortgage Loans that are not received by the
Servicer as of the close of business on the day preceding the related
Determination Date and have not been determined by the Servicer to be
Nonrecoverable Advances, plus (ii) with respect to each REO Property which was
acquired during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount equal to the
excess, if any, of (a) interest on the Trust Balance of the related REO Mortgage
Loan at the related Mortgage Interest Rate, net of the Servicing Fee, for the
most recently ended Due Period for the related Mortgage Loan over (b) the net
income from the REO Property transferred to the Certificate Account for such
Remittance Date.
"Permitted Investments" shall mean, as used herein, Permitted
Investments shall include the following:
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(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States and any
obligation of, or guaranties by, FHLMC or FNMA (other than senior debt
obligations and mortgage pass-through certificates guaranteed by FHLMC or FNMA)
shall be a Permitted Investment; provided, that at the time of such investment,
such investment is acceptable to the Certificate Insurer, but excluding any of
such securities whose terms do not provide for payment of a fixed dollar amount
upon maturity or call for redemption;
(b) federal funds and certificates of deposit, time and demand
deposits and banker's acceptances issued by any bank or trust company
incorporated under the laws of the United States or any state thereof and
subject to supervision and examination by federal or state banking authorities,
provided that at the time of such investment or contractual commitment providing
for such investment the short-term debt obligations of such bank or trust
company at the date of acquisition thereof have been rated A-1 + by S&P and P-1
by Moody's;
(c) commercial paper (having original maturities of not more than
180 days) rated A-1 + by S&P and P-1 by Moody's;
(d) investments in money market funds rated "AAAm" or "AAAm-G" by
S&P and "Aaa" by Moody's; and
(e) investments approved by S&P, Moody's and the Certificate Insurer
in writing delivered to the Trustee;
provided, that each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) 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
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to stated
maturity.
"Permitted Transferee" shall mean any Person other than (a) the
United States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (b) a foreign government, International
Organization or any agency or instrumentality of either of the foregoing, (c) an
organization (except certain farmers' cooperatives described in Section 521 of
the Code) which is exempt from tax imposed by Chapter I of the Code (including
the tax imposed by Section 511
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of the Code on unrelated business taxable income) on any excess inclusions (as
defined in Section 860E(c)(1) of the Code) with respect to any Class R
Certificate, (d) rural electric and telephone cooperatives described in Section
1381(a)(2)(C) of the Code and (e) any other Person so designated by the Trustee
based upon an Opinion of Counsel to the Trustee and the Certificate Insurer that
the transfer of an Ownership Interest in a Class R Certificate to such Person
may cause either (i) the 1997-2 REMIC to fail to qualify as a REMIC at any time
that the Class A Certificates are outstanding or (ii) the 1997-2 REMIC of the
Trust Fund or any Person having an Ownership Interest in any Class of
Certificates, other than such Person, to incur a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Class R Certificate to such Person. The terms
"United States," "State" and "International Organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by such governmental unit.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" shall have the meaning defined in Section 4.2(i)(x).
"Preference Amount" shall mean any amount previously distributed to
a Class A Certificateholder that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the U.S. Bankruptcy
Code as amended from time to time, in accordance with a final nonappealable
order of a court having competent jurisdiction.
"Preference Claim" shall have the meaning defined in Section 6.4(g).
"Pre-Funding Account" shall mean the account established pursuant to
Section 6.1(c) hereof.
"Pre-Funding Period" shall mean the period from the Closing Date
until, with respect to Group I or Group II, as applicable, the earliest of (i)
the date on which the amount on deposit in the Pre-Funding Account is less than
$100,000, (ii) the date on which an Event of Default occurs or (iii) February
16, 1998.
"Prepayment Assumption" shall mean a constant prepayment rate of
26%, used solely for determining the accrual
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of original issue discount and market discount on the Certificates for federal
income tax purposes.
"Prepayment Interest Shortfall" shall mean, with respect to any
Remittance Date, for each Mortgage Loan that was the subject during the related
Due Period of a Principal Prepayment or Curtailment, an amount equal to the
excess, if any, of (a) 30 days' interest on the Trust Balance of such Mortgage
Loan at a per annum rate equal to the Mortgage Interest Rate (or at such lower
rate as may be in effect for such Mortgage Loan pursuant to application of the
Civil Relief Act, any Deficient Valuation and/or any Debt Service Reduction)
minus the rate at which the Servicing Fee is calculated over (b) the amount of
interest actually remitted by the Mortgagor in connection with such Principal
Prepayment or Curtailment less any portion of such interest allocable to any
Additional Balance outstanding on such Mortgage Loan.
"Principal Balance" shall mean, as to any Mortgage Loan and
Remittance Date, the outstanding principal balance of such Mortgage Loan as of
the last day of the Due Period related to such Remittance Date after giving
effect to Principal Prepayments received and payments of principal collected
during such Due Period, Additional Balances drawn in such Due Period, Deficient
Valuations incurred prior to the Due Date in such Due Period and any
Curtailments applied by the Servicer in reduction of the unpaid principal
balance of such Mortgage Loan as of such Due Date.
"Principal Collections" shall mean all amounts collected with
respect to a Mortgage Loan, including, without limitation, Monthly Payments (or
Periodic Advances made in respect thereof), any Loan Repurchase Price and
Substitution Adjustments allocable to principal pursuant to the terms of the
related Mortgage Note, or, if no provision for allocation is made therein, in
accordance with the terms hereof.
"Principal Prepayment" shall mean any payment or other recovery of
principal on a Mortgage Loan equal to the outstanding Principal Balance thereof,
received in advance of the final scheduled Due Date which is not intended as an
advance payment of a Scheduled Monthly Payment. With respect to any Principal
Prepayment made by or on behalf of a Mortgagor and received by the Servicer,
100% of the principal payment portion of such Principal Prepayment shall be
applied to the outstanding Trust Balance until such Trust Balance shall be
reduced to zero and thereafter to the Additional Balance of such Mortgage Loan
as provided for herein.
"Prospectus Supplement" shall mean the Prospectus Supplement dated
November 11, 1997, as amended and supplemented, relating to the Class A
Certificates and filed with the Commission in connection with the Registration
Statement
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heretofore filed or to be filed with the Commission pursuant to Rule 424(b)(2)
or 424(b)(5).
"Purchase and Sale Agreement" shall mean the Purchase and Sale
Agreement, dated as of the date hereof, between the Seller and the Depositor and
relating to the sale of the Mortgage Loans to the Depositor.
"Qualified Appraiser" shall mean an appraiser, duly appointed by the
Servicer, who had no interest, direct or indirect, in the Mortgaged Property or
in any loan made on the security thereof, and whose compensation is not affected
by the approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
"Qualified Mortgage" shall have the meaning set forth from time to
time in the definition of "Qualified Mortgage" at Section 860G(a)(3) of the Code
(or any successor statute thereto).
"Qualified Substitute Mortgage Loan" shall mean a mortgage loan or
mortgage loans which (a) if a home equity line of credit loan, uses or use the
prime rate as its base interest rate and has or have a margin over such base
interest rate and, where applicable, maximum interest rate, at least equal to
those applicable to the Deleted Mortgage Loan for which it is to be substituted,
(b) if a closed end home equity loan, has an interest rate at least equal to the
Deleted Mortgage Loan for which it is to be substituted (c) relates or relate to
a detached one-family residence or to the same type of Residential Dwelling as
the Deleted Mortgage Loan for which it is to be substituted and in each case has
or have the same or a better lien priority as the Deleted Mortgage Loan for
which it is to be substituted and has or have the same occupancy status or is an
Owner-Occupied Mortgaged Property, (d) matures or mature no later than (and not
more than one year earlier than) the Deleted Mortgage Loan for which it is to be
substituted, (e) has or have a Combined Loan-to-Value Ratio or Combined
Loan-to-Value Ratios at the time of such substitution no higher than the
Combined Loan-to-Value Ratio of the Deleted Mortgage Loan for which it is to be
substituted, (f) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
not substantially less and not more than the Trust Balance of the Deleted
Mortgage Loan for which it is to be substituted as of such date, (g) satisfies
or satisfy the criteria set forth from time to time in the definition of
"qualified replacement mortgage" at Section 860G(a)(4) of the Code (or any
successor statute thereto), (h) has or have an applicable borrower or borrowers
with the same or better traditionally ranked credit status as the borrower or
borrowers
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under the Deleted Mortgage Loan for which it is to be substituted, and (i)
complies or comply as of the date of substitution with each representation and
warranty set forth in Sections 3.1 and 3.2 of the Purchase and Sale Agreement.
"Rating Agency" shall mean S&P or Moody's.
"Record Date" shall mean, with respect to any Remittance Date, the
close of business on the last day of the calendar month immediately preceding
the month in which such Remittance Date occurs. The Record Date for the first
Distribution Date shall be the Closing Date.
"Reference Banks" shall mean 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 Depositor 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.
"Reimbursement Amount" shall mean, as of any Remittance Date, the
sum of (i) all Insured Payments previously paid by the Certificate Insurer and
in each case not previously repaid to the Certificate Insurer pursuant to
Section 6.5(a)(v) hereof plus (ii) interest accrued on such Insured Payments not
previously repaid calculated at the Late Payment Rate from the date such Insured
Payment was paid, plus (iii) any amounts then due and owing to the Certificate
Insurer under the Certificate Insurance Agreement, as certified to the Trustee
by the Certificate Insurer, plus (iv) interest on such amounts at the Late
Payment Rate. The Certificate Insurer shall notify the Trustee and the Depositor
of the amount of any Reimbursement Amount.
"Released Mortgaged Property Proceeds" shall mean, as to any
Mortgage Loan, proceeds received by the Servicer in connection with (a) a taking
of an entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (b) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which are not released to the Mortgagor in accordance with applicable law,
Accepted Servicing Practices and this Agreement.
"REMIC" shall mean a "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code.
"REMIC Change of Law" shall mean any proposed, temporary or final
regulation, revenue ruling, revenue procedure
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or other official announcement or interpretation relating to the REMIC and the
REMIC Provisions issued after the Closing Date.
"REMIC Daily Interest" shall mean, with respect to any payment on a
Mortgage Loan made by or on behalf of the related Mortgagor, the portion of such
payment equal to the aggregate sum of the daily product (calculated for each day
in the Due Period) of (x) the outstanding Trust Balance of such Mortgage Loan on
such day and (y) the Mortgage Interest Rate applicable to such Mortgage Loan.
"REMIC Provisions" shall mean provisions of the federal income tax
law relating to real estate mortgage investment conduits, which appear at
Sections 860A through 860G of Subchapter M of Chapter I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
"Remittance Date" shall mean the 15th day of any month or if such
15th day is not a Business Day, the first Business Day immediately following,
commencing on December 15, 1997.
"REO Disposition" shall mean the final sale by the Servicer of a
Mortgaged Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
"REO Mortgage Loan" shall mean any Mortgage Loan which is not a
Liquidated Mortgage Loan and as to which the indebtedness evidenced by the
related Mortgage Note is discharged and the related Mortgaged Property is held
as part of the Trust Fund.
"REO Proceeds" shall mean proceeds received in respect of any REO
Mortgage Loan (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"REO Property" shall have the meaning described in Section 5.12.
"Representation Letter" shall mean letters to, or agreements with,
the Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
"Request for Release" shall mean a request for release in
substantially the form attached as Exhibit H hereto.
"Required Reserve Account Level" shall be determined in accordance
with the Certificate Insurance Agreement.
"Reserve Account" shall mean that Eligible Account more fully
described in Section 6.4 established by the Servicer for the benefit of the
Trust, the Certificateholders and the
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Certificate Insurer, from which withdrawals will be made for the payment of the
Class A-1 Credit Enhancement Distribution Amounts, Group II Credit Enhancement
Distribution Amounts and Reimbursement Amounts. The Reserve Account shall not
benefit any Additional Certificate.
"Reserve Interest Rate" shall mean, 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 0.0625%) 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.
"Residential Dwelling" shall mean a one -to four-family dwelling, a
unit in a planned unit development, a unit in a condominium development, a
townhouse or a manufactured housing unit which is non-mobile.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer assigned to the Corporate Trust Division (or any successor
thereto), including any Vice President, Senior Trust Officer, Trust Officer,
Assistant Trust Officer, any Assistant Secretary, any trust officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject. When used with respect to the
Seller or the Servicer, the President or any Vice President, Assistant Vice
President, or any Secretary or Assistant Secretary.
"S&P" shall mean Standard & Poor's Ratings Services, Inc. or any
successor thereto and if such corporation no longer for any reason performs the
services of a securities rating agency, "S&P" shall be deemed to refer to any
other nationally recognized statistical rating organization designated by the
Certificate Insurer.
"Seller" shall mean IHE Funding Corp., a Delaware corporation.
"Series" shall mean any designated Series of certificates issued
hereunder and governed by this Agreement. When used herein, "this Series" shall
refer to the Mortgage Pass-Through Certificates, Series 1997-2.
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"Servicer" shall mean Irwin Home Equity Corporation, an Indiana
corporation, or any successor appointed as herein provided.
"Servicer Employees" shall have the meaning as defined in Section
5.8 hereof.
"Servicer Remittance Amount" shall mean, with respect to any
Servicer Remittance Date and a Group, an amount equal to the sum of (i) all
unscheduled collections of principal and interest on the HELOCs in the case of
Group I and the HELs in the case of Group II (including Principal Prepayments,
Curtailments, Net REO Proceeds and Net Liquidation Proceeds, if any, and any
amounts deposited in the Collection Account or Trustee Collection Account in
connection with a repurchase of the HELOCs in the case of Group I and the HELs
in the case of Group II) collected by the Servicer during the Due Period and all
scheduled Monthly Payments due on the Due Date and received by the Servicer on
or prior to the Business Day preceding the related Determination Date, plus (ii)
all Periodic Advances made by the Servicer with respect to payments due to be
received on the HELOCs in the case of Group I and HELs in the case of Group II
on the related Due Date plus (iii) the amount of Compensating Interest due with
respect to HELOCs in the case of Group I and the HELs in the case of Group II
with respect to the related Due Period, plus (iv) either (A) for each Remittance
Date prior to the Final Subsequent Transfer Date, the amount transferred to the
Certificate Account with respect to such Group pursuant to Section 6.11 hereof,
or (B) for the Remittance Date immediately following the Final Subsequent
Transfer Date, any amount remaining on deposit in the Pre-Funding Account, plus
(v) any other amounts required to be placed in the Collection Account with
respect to HELOCs in the case of Group I and the HELs in the case of Group II by
the Servicer pursuant to this Pooling and Servicing Agreement but excluding,
without duplication, the following:
(a) amounts received on particular HELOCs in the case of Group I and
HELs in the case of Group II as late payments of principal or interest and
respecting which the Servicer has previously made an unreimbursed Periodic
Advance;
(b) the portion of Liquidation Proceeds used to reimburse any
unreimbursed Periodic Advances by the Servicer with respect to HELOCs in the
case of Group I and the HELs in the case of Group II;
(c) those portions of each payment of interest on a particular HELOC
in the case of Group I and the HEL in the case of Group II which represent the
Servicing Fee;
(d) that portion of Liquidation Proceeds and REO Proceeds with
respect to HELOCs in the case of Group I and the HELs in the case of Group II
which represents any unpaid Servicing Fee;
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(e) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(f) all amounts in respect of late fees, assumption fees, prepayment
fees and similar fees;
(g) all other amounts which are explicitly reimbursable to the
Servicer hereunder with respect to HELOCs in the case of Group I and the HELs in
the case of Group II, including (i) as provided in Section 5.4 hereof; and (ii)
any unreimbursed and accrued Liquidation Expenses; provided that the exclusion
of any such amounts pursuant to this subsection (g) on a particular Remittance
Date shall not thereby create a claim for an Insured Payment;
(h) the portion of Net Foreclosure Profits with respect to HELOCs in
the case of Group I and the HELs in the case of Group II representing any unpaid
Servicing Fee; and
(i) All amounts collected with respect to any HELOC allocable to the
Additional Balance of such HELOC pursuant to the definition of "Additional
Certificate Allocation" as set forth herein.
"Servicer Remittance Date" shall mean, with respect to any
Remittance Date, the 14th day of the month in which such Remittance Date occurs,
or if such day is not a Business Day, the first Business Day preceding such 14th
day.
"Servicer Account" shall mean the account created and maintained
pursuant to Section 5.7.
"Servicing Advances" shall mean all reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement proceedings, including foreclosures, (c) expenditures relating to
the purchase or maintenance of a first or second lien not included in the Trust
Fund on the Mortgaged Property, (d) the management and liquidation of the REO
Property, including reasonable fees paid to any independent contractor in
connection therewith, (e) compliance with the obligations (including
indemnification obligations) under Sections 5.2 (limited solely to the
reasonable and customary out-of-pocket expenses of the Subservicer), 5.5, 5.7,
5.9 or 5.10 (as related to Section 9.5), all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Servicer to the extent
provided in Section 5.4(a) and 5.10.
"Servicing Compensation" shall mean the Servicing Fee and other
amounts to which the Servicer is entitled pursuant to Section 5.14.
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"Servicing Fee" shall mean, as to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) 1.00% per annum, or up to 1.00% in the event that Irwin Home Equity
Corporation is succeeded by the Trustee or any other successor servicer
appointed as herein provided, and (b) the Principal Balance thereof. Such fee
shall be calculated and payable monthly only on amounts actually received in
respect of interest on such Mortgage Loan and shall be computed on the basis of
the same principal amount and for the period respecting which any related
interest payment on a Mortgage Loan is computed. The Servicing Fee includes any
servicing fees owed or payable to any Subservicer.
"Servicing Officer" shall mean any officer of the Servicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Trustee and the Certificate Insurer by the Servicer, as such
list may from time to time be amended.
"Startup Date" shall mean the day designated as such pursuant to
Section 2.5 hereof.
"Subsequent Mortgage Loans" shall mean those fixed rate closed end
home equity loans and adjustable rate home equity line of credit loans
transferred to the Trust Fund after the Closing Date as contemplated by Section
2.10 hereof.
"Subsequent Transfer Agreement" shall mean each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Trustee and the
Depositor substantially in the form of Exhibit O hereto, by which Subsequent
Mortgage Loans are sold and assigned to the Trust.
"Subsequent Transfer Date" shall mean any date on which Subsequent
Mortgage Loans are transferred to the Trust pursuant to Section 2.10 hereof.
"Subservicer" shall mean any Person with whom the Servicer has
entered into a Subservicing Agreement and who satisfies the requirements set
forth in Section 5.2(a) hereof in respect of the qualification of a Subservicer.
"Subservicing Agreement" shall mean any agreement between the
Servicer and any Subservicer relating to subservicing and/or administration of
certain Mortgage Loans as provided in Section 5.2(b), a copy of which shall be
delivered, along with any modifications thereto, to the Trustee and the
Certificate Insurer.
"Substitution Adjustment" shall mean, as to any date on which a
substitution occurs pursuant to Section 2.4 or 3.3, the amount (if any) by which
the aggregate principal balances (after
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application of principal payments received on or before the date of substitution
of any Qualified Substitute Mortgage Loans as of the date of substitution) are
less than the aggregate of the Trust Balances of the related Deleted Mortgage
Loans together with 30 days' interest thereon at the Mortgage Interest Rate.
"Tax Matters Person" shall mean the Person or Persons appointed
pursuant to Section 10.15 from time to time to act as the "tax matters person"
(within the meaning of the REMIC Provisions) of the 1997-2 REMIC.
"Tax Return" shall mean the federal income tax return on Internal
Revenue Service Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income
Tax Return," including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provision of federal, state or local tax laws.
"Total Expected Losses" shall mean, for any Remittance Date, the sum
of the Liquidated Loan Loss and the Delinquency Calculation Amount.
"Transfer" shall mean any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"Transfer Affidavit and Agreement" shall have the meaning as defined
in Section 4.2(i)(ii).
"Transferee" shall mean any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor" shall mean any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
"Trust" shall mean Irwin Home Equity Corporation Trust 1997-2, the
trust created hereunder.
"Trust Balance" shall mean, with respect to any Mortgage Loan, (i)
its original Trust Balance as shown on the Mortgage Loan Schedule on the Cut-Off
Date minus all payments of or in respect of principal allocated to the Trust
Balance of such Mortgage Loan, or (ii) from and after the date of substitution
of a Qualified Substitute Mortgage Loan for a Deleted Mortgage Loan, the
Principal Balance of the Qualified Substitute Mortgage Loan on the date of such
substitution minus all payments of or in respect of principal allocated to the
Trust Balance of such Mortgage Loan after the
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date of substitution. On and after the date upon which a Mortgage Loan becomes a
Liquidated Mortgage Loan, the Trust Balance for such Mortgage Loan shall equal
zero.
"Trust Fund" shall mean (a) each Mortgage Loan, including each
Subsequent Mortgage Loan, transferred to the Trust pursuant to the provisions
hereof, (b) all rights of or assigned to the Depositor under the Purchase and
Sale Agreement (and exclusive of any of its obligations), (c) such assets as
from time to time are identified as REO Property and collections thereon and
proceeds thereof, (d) all assets deposited in the Accounts, including any
amounts on deposit in the Collection Account, the Trustee Collection Account,
the Additional Certificate Account, the Certificate Account and the Reserve
Account and all amounts in the Accounts invested in Permitted Investments, (e)
the Trustee's rights with respect to the Mortgage Loans under all insurance
policies (other than the Certificate Insurance Policy) required to be maintained
pursuant to this Agreement and any Insurance Proceeds, (f) all Liquidation
Proceeds and (g) all Released Mortgaged Property Proceeds and (h) all rights
against the Seller arising under the Purchase and Sale Agreement.
"Trustee" shall mean The Chase Manhattan Bank, or its successor in
interest, or any successor trustee appointed as herein provided.
"Trustee Collection Account" shall mean the Eligible Account
established and maintained by the Trustee for the benefit of the
Certificateholders and the Holders of the Additional Certificate pursuant to
Section 5.3(a) hereof.
"Trustee Fee" shall mean, as to any Remittance Date, the fee payable
to the Trustee in respect of its services as Trustee that accrues at a monthly
rate equal to 1/12 of .005% of the Trust Balance of each Mortgage Loan as of the
immediately preceding Due Date.
"Trustee's Mortgage File" shall mean the documents delivered to the
Trustee or its designated agent pursuant to Section 2.3.
"Trustee's Remittance Report" shall have the meaning as defined in
Section 6.7.
"Underwriter" shall mean Prudential Securities Incorporated.
"Underwriting Guidelines" shall mean the underwriting guidelines of
the Seller, Irwin Union Bank and Trust Company and of the Servicer, a copy of
which is attached as an exhibit to the Purchase and Sale Agreement.
"United States Person" shall mean a citizen or resident of the
United States, a corporation, partnership or other entity
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created or organized in, or under the laws of, the United States or any
political subdivision thereof, or an estate or trust whose income from sources
without the United States is includible in gross income for United States
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States.
"Unpaid REO Amortization" shall mean, as to any REO Mortgage Loan
and any month, the aggregate of the installments of principal and accrued
interest deemed to be due in such month and in any prior months that remain
unpaid, calculated in accordance with Section 5.12.
"Weighted Average Rate Cap" shall mean with respect to the HELOC's
and the Class A-1 Certificates, on any Remittance Date, that maximum interest
rate computed to equal one-twelfth the weighted average Mortgage Interest Rate
for the HELOC's, net of (i) the Class A-1 Premium Percentage, (ii) the rates at
which the Servicing Fee and the Trustee's Fee are calculated and (iii) beginning
on the thirteenth Remittance Date, 0.50%.
"Weighted Average Group II Pass Through Rate" shall mean the sum of
(i) the Class A-2 Pass Through Rate times the Class A-2 Principal Balance
divided by the sum of the Class A-2 Principal Balance, the Class A-3 Principal
Balance and the Class A-4 Principal Balance, (ii) the Class A-3 Pass Through
Rate times the Class A-3 Principal Balance divided by the sum of the Class A-2
Principal Balance, the Class A-3 Principal Balance and the Class A-4 Principal
Balance and (iii) the Class A-4 Pass Through Rate times the Class A-4 Principal
Balance divided by the sum of the Class A-2 Principal Balance, the Class A-3
Principal Balance and the Class A-4 Principal Balance.
Section 1.2 Provisions of General Application. (a) All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP.
(b) The terms defined in this Article include the plural as well as
the singular.
(a) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(b) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(c) All calculations of interest relating to the Class A-1
Certificates (other than with respect to the Mortgage Loans, or as otherwise
specifically set forth herein) provided for herein shall be made on the basis of
actual days elapsed divided
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by a year comprised of 360 days. All calculations of interest relating to the
Group II Certificates (other than with respect to the Mortgage Loans, or as
otherwise specifically set forth herein) provided for herein, shall be made on
the of an assumed year of 360 days consisting of twelve 30 day months. All
calculations of interest with respect to any Mortgage Loan provided for herein
shall be made in accordance with the terms of the related Mortgage Note and
Mortgage or, if such documents do not specify the basis upon which interest
accrues thereon, on the basis of dividing actual days elapsed by a 365 day year.
(d) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Servicer; provided, however, that for
purposes of calculating distributions on the Certificates prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Mortgage Note and Mortgage to reduce the outstanding
principal balance of such Mortgage Loan on which interest accrues.
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ARTICLE II
Establishment of the Trust
Sale and Conveyance of the Trust Fund
Section 2.1 Sale and Conveyance of Trust Fund; Priority and
Subordination of Ownership Interests; Establishment of the Trust. (a) The
Depositor does hereby sell, transfer, assign, set over and convey to the Trust
for the benefit of the Certificateholders and the Additional Certificateholder
as their respective interests may, from time to time appear and the Certificate
Insurer without recourse but subject to the provisions in this Section 2.1 and
the other terms and provisions of this Agreement, all of the right, title and
interest of the Depositor in and to the Trust Fund, exclusive of the obligations
of the Depositor, Seller or any other party with respect to the Mortgage Loans.
In connection with such transfer and assignment, and pursuant to Section 2.6 of
the Purchase and Sale Agreement, the Depositor does hereby also irrevocably
transfer, assign, set over and otherwise convey to the Trustee all of its rights
(exclusive of its obligations) under the Purchase and Sale Agreement, including,
without limitation, its right to exercise the remedies created by Sections 2.5
and 3.4 of the Purchase and Sale Agreement for breaches of representations and
warranties, agreements and covenants of the Seller contained in Sections 3.1 and
3.2 of the Purchase and Sale Agreement.
(b) The rights of the Certificateholders and the Additional
Certificateholder to receive payments with respect to the Mortgage Loans in
respect of the Certificates and the Additional Certificates and all ownership
interests of the Certificateholders, shall be as set forth in this Agreement. In
this regard, all rights of the Class R Certificateholders to receive payments in
respect of the Class R Certificates, are subject and subordinate to the
preferential rights of the Class A Certificateholders to receive payments in
respect of the Class A Certificates and to the Certificate Insurer's rights to
receive the Reimbursement Amount. In accordance with the foregoing, the
ownership interest of the Class R Certificateholders in amounts deposited in the
Certificate Account or the Reserve Account from time to time shall not vest
unless and until such amounts are distributed in respect of the Class R
Certificates in accordance with the terms of this Agreement.
(a) The Depositor does hereby establish, pursuant to the further
provisions of this Agreement and the laws of the State of New York, an express
trust to be known, for convenience, as "Irwin Home Equity Corporation Trust
1997-2" and does hereby appoint The Chase Manhattan Bank as Trustee in
accordance with the provisions of this Agreement.
Section 2.2 Possession of Mortgage Files; Access to Mortgage Files.
(a) Upon the issuance of the Certificates and any Additional Certificates, the
ownership of each Mortgage Note,
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the Mortgage and the contents of the related Mortgage File related to each
Mortgage Loan is vested in the Trustee for the benefit of the Certificateholders
and the Additional Certificateholders and the Certificate Insurer, as their
respective interests may, from time to time, appear.
(b) Pursuant to Section 2.4 of the Purchase and Sale Agreement, the
Depositor has delivered or caused to be delivered the Trustee's Mortgage File
related to each Mortgage Loan to the Trustee.
(a) The Trustee may enter into a custodial agreement pursuant to
which the Trustee will appoint a custodian (a "Custodian") to hold the Mortgage
Files in trust for the benefit of the Trustee; provided, however, that the
custodian so appointed shall in no event be the Depositor or the Servicer or any
Person known to a Responsible Officer of the Trustee to be an Affiliate of any
of them.
(b) The Custodian shall afford the Depositor, the Certificate
Insurer and the Servicer reasonable access to all records and documentation
regarding the Mortgage Loans relating to this Agreement, such access being
afforded at customary charges, upon reasonable request and during normal
business hours at the offices of the Custodian.
Section 2.3 Delivery of Mortgage Loan Documents. (a) In connection
with each conveyance pursuant to Section 2.1, 2.2 or 2.10 hereof, the Depositor
has delivered or does hereby agree to deliver or cause to be delivered to the
Trustee the Certificate Insurance Policy and each of the following documents for
each Mortgage Loan sold by the Seller to the Depositor and sold by the Depositor
to the Trust Fund:
(i) The original Mortgage Note, endorsed by the holder of record
without recourse in the following form: "Pay to the order of ___________,
without recourse" and signed in the name of an authorized officer of the
holder of record, Irwin Union Bank and Trust Company, and if by the
Seller, by an authorized officer;
(ii) The original Mortgage with evidence of recording indicated
thereon; provided, however, that if such Mortgage has not been returned
from the applicable recording office, then such recorded Mortgage shall be
delivered when so returned;
(iii) An assignment of the original Mortgage, in suitable form for
recordation in the jurisdiction in which the related Mortgaged Property is
located, in the name of the holder of record of the Mortgage Loan by an
authorized officer (with evidence of submission for recordation of such
assignment in the appropriate real estate recording office for such
Mortgaged Property to be received by the Trustee
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within 45 days of the Closing Date or, with respect to Subsequent Mortgage
Loans, the Subsequent Transfer Date); provided, however, that Assignments
of Mortgages shall not be required to be submitted for recording with
respect to any Mortgage Loan which relates to the Trustee's Mortgage File
if the Trustee, each of the Rating Agencies and the Certificate Insurer
shall have received an opinion of counsel satisfactory to the Trustee,
each of the Rating Agencies and the Certificate Insurer stating that, in
such counsel's opinion, the failure to record such Assignment of Mortgage
shall not have a materially adverse effect on the security interest of the
Trustee in the Mortgage; provided, further, that any Assignment of
Mortgage for which an opinion has been delivered shall be recorded upon
the earlier to occur of (i) receipt by the Trustee of the Certificate
Insurer's written direction to record such Mortgage, (ii) the occurrence
of any Event of Default, as such term is defined in this Pooling and
Servicing Agreement, or (iii) a bankruptcy or insolvency proceeding
involving the Mortgagor is initiated or foreclosure proceedings are
initiated against the Mortgaged Property as a consequence of an event of
default under the Mortgage Loan; provided, further, that if the related
Mortgage has not been returned from the applicable recording office, then
such assignment shall be delivered when so returned (and a blanket
assignment with respect to each unrecorded Mortgage shall be delivered on
the Closing Date or, with respect to Subsequent Mortgage Loans, the
Subsequent Transfer Date);
(iv) Any intervening Assignments of the Mortgage with evidence of
recording thereon;
(v) Any assumption, modification, consolidation or extension
agreements; and
(vi) (1) The policy of title insurance (or a commitment for title
insurance, if the policy is being held by the title insurance company
pending recordation of the Mortgage) and the certificate of primary
mortgage guaranty insurance, if any, issued with respect to any Mortgage
Loan with a credit limit or Principal Balance in excess of $100,000 and
with respect to any Mortgage Loan which is in a first lien position;
(2) The limited liability title assurance with respect to any
Mortgage Loan in a second lien position with a credit limit or Principal
Balance between $35,001 and $50,000 and which has a second mortgage ratio
greater than 25% and with respect to any Mortgage Loan with a credit limit
or Principal Balance between $50,001 and $100,000; provided, however, that
in the case of any Mortgage Loans which have been prepaid in full after
the Cut-Off Date and prior to the date of the execution of this Agreement,
the Depositor, in lieu of delivering the above documents, hereby
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delivers to the Trustee a certification of an officer of the Seller of the
nature set forth in Exhibit M attached hereto; and provided, further,
however, that as to certain Mortgages or assignments thereof which have
been delivered or are being delivered to recording offices for recording
and have not been returned to the Seller in time to permit their delivery
hereunder at the time of such transfer, in lieu of delivering such
original documents, the Depositor is delivering to the Trustee a true copy
thereof with a certification by the Seller on the face of such copy
substantially as follows: "certified true and correct copy of original
which has been transmitted for recordation." The Seller has agreed
pursuant to the Purchase and Sale Agreement, that it will deliver such
original documents, together with any related policy of title insurance
not previously delivered, on behalf of the Depositor to the Trustee
promptly after they are received, and no later than 120 days after the
Closing Date; provided, however, that in those instances where the public
recording office retains the original Mortgage or Assignment of Mortgage
after it has been recorded or such original document has been lost by the
recording office, the Seller shall be deemed to have satisfied its
obligations hereunder if it shall have delivered to the Trustee a copy of
such original Mortgage or Assignment of Mortgage certified by the public
recording office to be a true copy of the recorded original thereof. The
Seller has agreed pursuant to the Purchase and Sale Agreement, at its own
expense, to record (or to provide the Trustee with evidence of recordation
thereof) each assignment within 45 days of the Closing Date or, with
respect to Subsequent Mortgage Loans, the Subsequent Transfer Date, in the
appropriate public office for real property records, provided that such
assignments are redelivered by the Trustee to the Seller upon the Seller's
written request and at the Seller's expense, unless the Seller (at its
expense) furnishes to the Trustee, the Certificate Insurer and the Rating
Agencies an unqualified Opinion of Counsel reasonably acceptable to the
Trustee to the effect that recordation of such assignment is not necessary
under applicable state law to preserve the Trustee's interest in the
related Mortgage Loan against the claim of any subsequent transferee of
such Mortgage Loan or any successor to, or creditor of, the Seller.
On or prior to the Closing Date, or, with respect to Subsequent
Mortgage Loans, the Subsequent Transfer Date, the Servicer, at its own expense
shall complete the endorsement of each Mortgage Note such that the final
endorsement appears in the following form:
"Pay to the order of _________, without recourse, Irwin Union
Bank and Trust Company.
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The Servicer, at its own expense shall also complete each Assignment
of Mortgage such that the final Assignment of Mortgage appears in the following
form:
"The Chase Manhattan Bank, as Trustee for Irwin Home Equity
Corporation Trust 1997-2 formed pursuant to the Pooling and
Servicing Agreement dated as of November 1, 1997, between Prudential
Securities Secured Financing Corporation as Depositor, Irwin Home
Equity Corporation as Servicer and The Chase Manhattan Bank, as
Trustee"
(b) Without diminution of the requirements of Sections 2.2(c) and
this Section 2.3, all original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be delivered to the Servicer by the
Seller on behalf of the Depositor pursuant to the Purchase and Sale Agreement,
and shall be held by the Servicer in trust for the benefit of the Trustee on
behalf of the Certificateholders and the Certificate Insurer. In the event that
any such original document is required pursuant to the terms of this Section 2.3
to be a part of a Mortgage File, the Servicer shall promptly deliver such
original document to the Trustee. In acting as custodian of any such original
document, the Servicer agrees further that it does not and will not have or
assert any beneficial ownership interest in the Mortgage Loans or the Mortgage
Files. Promptly upon the Depositor's and the Trust's acquisition thereof and the
Servicer's receipt thereof, the Servicer on behalf of the Trust shall mark
conspicuously each original document not delivered to the Trustee, and the
Seller's master data processing records evidencing each Mortgage Loan with a
legend, acceptable to the Trustee and the Certificate Insurer, evidencing that
the Trust has purchased the Mortgage Loans and all right and title thereto and
interest therein pursuant to the Purchase and Sale Agreement and this Agreement.
(c) In the event that any Mortgage Note required to be delivered
pursuant to this Section 2.3 is conclusively determined by any of the Seller,
the Servicer, the Custodian or the Trustee to be lost, stolen or destroyed the
Seller shall deliver a photostatic copy of such Mortgage Note and, within 14
days of the Closing Date or the later date upon which such Mortgage Note has
been conclusively determined to be lost, deliver to the Trustee a "lost note
affidavit" in form and substance acceptable to the Trustee, and shall further
agree to hold the Trustee and the Certificate Insurer harmless from any loss or
damage resulting from any action taken in reliance on the delivery and
possession by the Trustee of such lost note affidavit. Delivery by the Seller of
such lost note affidavit shall not affect the obligations of the Seller under
the Purchase and Sale Agreement with respect to the related Mortgage Loan.
Section 2.4 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. (a) The
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Trustee agrees to execute and deliver to the Depositor, the Certificate Insurer,
the Servicer and the Seller on or prior to the Closing Date an acknowledgment of
receipt of the Certificate Insurance Policies and, with respect to each initial
Mortgage Loan, the original Mortgage Note (with any exceptions noted), in the
form attached as Exhibit E hereto and declares that it will hold such documents
and any amendments, replacements or supplements thereto, as well as any other
assets included in the definition of Trust Fund and delivered to the Trustee, as
Trustee in trust upon and subject to the conditions set forth herein for the
benefit of the Certificateholders and the Certificate Insurer. The Trustee
agrees to execute and deliver to the Depositor, the Certificate Insurer, the
Servicer and the Seller on or prior to any Subsequent Transfer Date an
acknowledgement of receipt of original Mortgage Note with respect to each
Subsequent Mortgage Loan, in the form attached as Exhibit E hereto and declares
that it will hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets included in the definition of Trust Fund
and delivered to the Trustee, as Trustee in trust and subject to the conditions
set forth herein for the benefit of the Certificateholders and the Certificate
Insurer.
The Trustee agrees, for the benefit of the Certificateholders and
the Certificate Insurer, to review (or cause to be reviewed) each Trustee's
Mortgage File within 45 Business Days after the Closing Date or, with respect to
Subsequent Mortgage Loans, the Subsequent Transfer Date and to deliver to the
Seller, the Servicer, the Depositor and the Certificate Insurer a certification
in the form attached hereto as Exhibit F to the effect that, as to each Mortgage
Loan listed in the related Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in such certification
as not covered by such certification), (i) all documents required to be
delivered to it pursuant to Section 2.3 hereof and the Purchase and Sale
Agreement are in its possession, (ii) each such document has been reviewed by
it, has been, to the extent required, executed and has not been mutilated,
damaged, torn or otherwise physically altered (handwritten additions, changes or
corrections shall not constitute physical alteration if initialed by the
Mortgagor), appears regular on its face and relates to such Mortgage Loan. The
Trustee shall be under no duty or obligation to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face.
On or prior to the first anniversary of the Closing Date, the
Trustee shall deliver (or cause to be delivered) to the Servicer, the Seller,
the Depositor and the Certificate Insurer a final certification in the form
attached hereto as Exhibit G to the effect that, as to each Mortgage Loan and
Subsequent Mortgage Loan listed in the Mortgage Loan Schedule (other than any
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Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), and as to any document
noted in an exception included in the Trustee's initial certification, (i) all
documents required to be delivered to it pursuant to Section 2.3 hereof and the
Purchase and Sale Agreement are in its possession, (ii) each such document has
been reviewed by it, has been, to the extent required, executed and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan.
(b) If the Certificate Insurer or the Trustee during the process of
reviewing the Trustee's Mortgage Files finds any document constituting a part of
a Trustee's Mortgage File which is not executed, has not been received, is
unrelated to the Mortgage Loan identified in the related Mortgage Loan Schedule,
or does not conform to the requirements of Section 2.3 or the description
thereof as set forth in the related Mortgage Loan Schedule, the Trustee or the
Certificate Insurer, as applicable, shall promptly so notify the Servicer, the
Seller, the Certificate Insurer and the Trustee. In performing any such review,
the Trustee may conclusively rely on the Seller as to the purported genuineness
of any such document and any signature thereon. It is understood that the scope
of the Trustee's review of the Mortgage Files is limited solely to confirming
that the documents listed in Section 2.3 have been executed and received and
relate to the Mortgage Files identified in the related Mortgage Loan Schedule.
Pursuant to the Purchase and Sale Agreement, the Seller has agreed to use
reasonable efforts to cause to be remedied a material defect in a document
constituting part of a Mortgage File of which it is so notified by the Trustee.
If, however, within 60 days after the Trustee's notice to it respecting such
defect the Seller has not caused to be remedied the defect and the defect
materially and adversely affects the interest of the Certificateholders in the
related Mortgage Loan or the interests of the Certificate Insurer (in either
case in the reasonable determination of the Certificate Insurer), the Trustee
shall enforce the Seller's obligation pursuant to the Purchase and Sale
Agreement to either (i) substitute in lieu of such Mortgage Loan a Qualified
Substitute Mortgage Loan in the manner and subject to the conditions set forth
in Section 3.3 hereof or (ii) purchase such Mortgage Loan at a purchase price
equal to the outstanding Principal Balance of such Mortgage Loan as of the date
of purchase, plus the greater of (x) all accrued and unpaid interest thereon and
(y) 30 days' interest thereon, computed at the related Mortgage Interest Rate,
plus the amount of any unreimbursed Servicing Advances made by the Servicer with
respect to such Mortgage Loan, which purchase price shall be deposited in the
Trustee Collection Account prior to the next succeeding Servicer Remittance
Date, after deducting therefrom any amounts received in respect of such
repurchased Mortgage Loan or Loans and being held in the Collection Account
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or Trustee Collection Account for future distribution to the extent such amounts
have not yet been applied to principal or interest on such Mortgage Loan (the
"Loan Repurchase Price"); provided, however, that the Seller may not, pursuant
to clause (ii) preceding, purchase the Principal Balance of any Mortgage Loan
that is not in default or as to which no default is imminent unless the Seller
has theretofore delivered an Opinion of Counsel knowledgeable in federal income
tax matters which states that such a purchase would not constitute a prohibited
transaction under the Code.
(c) Upon receipt by the Trustee of a certification of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,
upon receipt of the related Trustee's Mortgage File, and the deposit of the
amounts described above into the Trustee Collection Account (which certification
shall be in the form of Exhibit H hereto), the Trustee shall release to the
Servicer for release to the Seller the related Trustee's Mortgage File and shall
execute, without recourse, and deliver such instruments of transfer furnished by
the Seller as may be necessary to transfer such Mortgage Loan to the Seller. The
Trustee shall notify the Certificate Insurer if the Seller fails to repurchase
or substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.5 Designations under REMIC Provisions; Designation of
Startup Date. (a) The Class A Certificates are hereby designated as the "regular
interests", and the Class R Certificates are designated the single class of
"residual interests" in the 1997-2 REMIC for the purposes of the REMIC
Provisions. The 1997-2 REMIC shall be designated as the "Irwin Home Equity
Corporation Trust 1997-2 REMIC."
(b) The Closing Date will be the "startup day" of the 1997-2 REMIC
within the meaning of Section 860G(a)(9) of the Code (the "Startup Date").
Section 2.6 Execution of Certificates. The Trustee acknowledges the
assignment to it of the Mortgage Loans and the delivery to it of the Trustee's
Mortgage Files relating thereto and, concurrently with such delivery, has
executed, authenticated and delivered to or upon the order of the Depositor, in
exchange for the Mortgage Loans, the Trustee's Mortgage Files and the other
assets included in the definition of Trust Fund, Certificates and the Additional
Certificate duly authenticated by the Trustee, and, in the case of the Class A
Certificates, in Authorized Denominations, evidencing the entire beneficial
ownership interest in the Trust Fund.
Section 2.7 Application of Principal and Interest. In the event that
Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than the
outstanding Principal Balance of the related Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a
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Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided, first to interest accrued at the Mortgage Interest Rate, then to
the principal owed on such Mortgage Loan.
Section 2.8 Grant of Security Interest. (a) It is the intention of
the parties hereto that the conveyance by the Depositor of the Trust Fund to the
Trustee on behalf of the Trust shall constitute a purchase and sale of such
Trust Fund and not a loan. In the event, however, that a court of competent
jurisdiction were to hold that the transaction evidenced hereby constitutes a
loan and not a purchase and sale, it is the intention of the parties hereto that
this Agreement shall constitute a security agreement under applicable law, and
that the Depositor shall be deemed to have granted and hereby grants to the
Trustee, on behalf of the Trust, a first priority perfected security interest in
all of the Depositor's right, title and interest in, to and under the Trust Fund
to secure a loan in an amount equal to the purchase price of the Mortgage Loans.
The conveyance by the Depositor of the Trust Fund to the Trustee on behalf of
the Trust shall not constitute and are not intended to result in an assumption
by the Trustee, the Certificate Insurer or any Certificateholder or the Holder
of the Additional Certificate of any obligation of the Seller or any other
Person in connection with the Trust Fund, including, but not limited to, the
obligation to advance additional amounts pursuant to the terms of the Mortgage
Note.
(b) The Depositor and the Servicer shall take no action inconsistent
with the Trust's ownership of the Trust Fund and shall indicate or shall cause
to be indicated in its records and records held on its behalf that ownership of
each Mortgage Loan and the assets in the Trust Fund are held by the Trustee on
behalf of the Trust. In addition, the Depositor and the Servicer shall respond
to any inquiries from third parties with respect to ownership of a Mortgage Loan
or any other asset in the Trust Fund by stating that it is not the owner of such
asset and that ownership of such Mortgage Loan or other Trust Fund asset is held
by the Trustee on behalf of the Trust.
Section 2.9 Further Assurances; Powers of Attorney. (a) The Servicer
agrees that, from time to time, at its expense, it shall cause the Seller and
Irwin Union Bank and Trust Company (and the Depositor also agrees that it
shall), promptly to execute and deliver all further instruments and documents,
and take all further action, that may be necessary or appropriate, or that the
Servicer or the Trustee may reasonably request, in order to perfect, protect or
more fully evidence the transfer of ownership of the Trust Fund or to enable the
Trustee to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Servicer and the Depositor will, upon the
request of the Servicer or of the Trustee execute and file (or cause to be
executed and filed) such real estate
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filings, financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be necessary
or appropriate.
(b) The Depositor hereby grants to the Servicer and the Trustee
powers of attorney to execute all documents on its behalf under this Agreement
and the Purchase and Sale Agreement as may be necessary or desirable to
effectuate the foregoing.
Section 2.10 Conveyance of the Subsequent Mortgage Loans. (a)
Subject to the conditions set forth in Section 2.3 above and paragraph (b) below
in consideration of the Trustee's delivery on the related Subsequent Transfer
Dates to or upon the order of the Depositor of all or a portion of the balance
of funds in the Pre-Funding Account, the Depositor shall on any Subsequent
Transfer Date transfer, assign, set over and otherwise convey without recourse,
to the Trust (i) with respect to Group I, all of its right, title and interest
in and to each Subsequent Mortgage Loan that is a HELOC and with respect to
Group II all of its right, title and interest in and to each Subsequent Mortgage
Loan that is a HEL, in each case listed on the Mortgage Loan Schedule delivered
by the Depositor to the Trustee on such Subsequent Transfer Date, (ii) all its
right, title and interest in and to principal collected and interest accruing on
each such Subsequent Mortgage Loan on and after the related Cut-Off Date; (iii)
all its right, title and interest in and to all Insurance Policies and all items
with respect to such Subsequent Mortgage Loans to be delivered pursuant to
Section 2.3 above and the other items in the related Mortgage Files; and (iv)
all its rights under each Subsequent Transfer Agreement; provided, however, that
the Depositor and/or Seller reserves and retains all its right, title and
interest in and to principal (including Prepayments) collected and interest
accruing on each such Subsequent Mortgage Loan prior to the related Cut-Off
Date. The transfer to the Trust by the Depositor of the Subsequent Mortgage
Loans set forth in the Mortgage Loan Schedule shall be absolute and shall be
intended by the Depositor, the Certificateholders, the Additional
Certificateholder and all parties hereto to constitute and to be treated as a
sale by the Depositor. The related Mortgage File for each Subsequent Mortgage
Loan shall be delivered to the Trustee prior to the Subsequent Transfer Date.
The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances of the Subsequent
Mortgage Loans so transferred of which 8.25% of the aggregate Principal Balances
of Subsequent Mortgage Loan which are HELOCs and 7.0% of the aggregate Principal
Balance of Subsequent Mortgage Loans which are HELs shall be transferred to the
Reserve Fund unless on or prior to the related Subsequent Transfer Date the
Servicer shall have provided an Eligible Letter of Credit in such amount to the
Trustee.
(b) The Depositor shall transfer to the Trust the Subsequent
Mortgage Loans and the other property and rights
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related thereto described in paragraph (a) above only upon the satisfaction of
each of the following conditions on or prior to the related Subsequent Transfer
Date:
(i) At least 5 Business Days prior to the Subsequent Transfer Date,
the Depositor shall have provided the Trustee, the Certificate Insurer,
Moody's and Standard & Poor's with an Addition Notice and shall have
provided any information in an electronic data file form as reasonably
requested by any of the foregoing with respect to the Subsequent Mortgage
Loans;
(ii) the Depositor shall have delivered to the Trustee and the
Custodian a duly executed written assignment (including an acceptance by
the Trustee) in substantially the form of Exhibit O (the "Subsequent
Transfer Agreement"), which shall include the Mortgage Loans Schedules,
listing the Subsequent Mortgage Loans and any other exhibits listed
thereon;
(iii) the Depositor shall have deposited in the Collection Account
all collections in respect of the Subsequent Mortgage Loans received on or
after the related Cut-Off Date;
(iv) as of each Subsequent Transfer Date, none of the Seller, the
Servicer or the Depositor was insolvent nor will any of them have been
made insolvent by such transfer nor is any of them aware of any pending
insolvency;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(vi) the Pre-Funding Period shall not have terminated;
(vii) the Depositor shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate confirming the satisfaction
of each condition precedent specified in this paragraph (b) and paragraphs
(c) and (d) below, and in the related Subsequent Funding Transfer
Agreement;
(viii) the Depositor shall have delivered to the Certificate
Insurer, the Rating Agencies and the Trustee Opinions of Counsel with
respect to the transfer of the Subsequent Mortgage Loans substantially in
the form of the Opinions of Counsel delivered to the Certificate Insurer
and the Trustee on the Startup Date (bankruptcy, corporate and tax
opinions); and
(ix) the Trustee shall have delivered to the Certificate Insurer and
the Depositor an Opinion of Counsel
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addressed to the Depositor, the Rating Agencies and the Certificate
Insurer with respect to the Subsequent Transfer Agreement substantially in
the form of the Opinion of Counsel delivered to the Certificate Insurer
and the Depositor on the Closing Date regarding certain corporate matters
relating to the Trustee.
(c) (i) the obligation of the Trust to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date for assignment to Group I is
subject to the following requirements: (i) such Subsequent Mortgage Loan may not
be 59 days or more contractually Delinquent as of the related Cut-Off Date and
not more than 1%, by aggregate Principal Balance, of all Subsequent Mortgage
Loans purchased by the Trust may be 30 or more days contractually Delinquent as
of the related Cut-Off Date; (ii) each such Subsequent Mortgage Loans shall be
interest only for approximately the first 10 years and then fully amortizing
with level payments over a term to maturity of not less than 10 years and
indexed to prime, (iii) such Subsequent Mortgage Loan will have a Combined
Loan-to-Value Ratio of not more than 100%, (iv) such Subsequent Mortgage Loan
shall have a Gross Margin of at least 1%, (v) will not have any Subsequent
Mortgage Loan with a Principal Balance in excess of $220,000, (vi) such
Subsequent Mortgage Loan will have a Mortgage Interest Rate of at least 9.50%;
(vii) each Subsequent Mortgage Loan shall be underwritten in accordance with the
Underwriting Guidelines, (viii) will not have any Subsequent Mortgage Loan with
a maximum credit line limit in excess of $300,000 and (ix) no such Subsequent
Mortgage Loan shall be associated with the purchase of a home; and following the
purchase of such Subsequent Mortgage Loans by the Trust, the HELOCs (including
the Subsequent Mortgage Loans that are HELOCs) (a) will have a weighted average
Gross Margin of at least 4.30%, (b) will have a weighted average Mortgage
Interest Rate of no less than 12.77%, (c) Subsequent Mortgage Loans with
classifications of "E" will represent approximately 97.00% of the HELOCs and
Subsequent Mortgage Loans with classifications of "G" and "F" will represent
approximately 2.00% and 1.00% of the HELOCs respectively, (d) will have a
weighted average remaining term to stated maturity of not more than 238 months,
(e) will have a weighted average second mortgage ratio of no less than 24.45%,
(f) will have a weighted average Combined Loan-to-Value Ratio of not greater
than 89.90%, (g) no more than 1.0% of the HELOCs (including the Subsequent
Mortgage Loans that are HELOCs) shall be secured by Mortgaged Properties located
in any one zip code, (h) no more than 1.20% of the HELOCs will be secured by
Mortgaged Properties that are not Owner Occupied Mortgaged Properties, (i) the
HELOCs (including the Subsequent Mortgage Loans that are HELOCs) shall have a
weighted average Credit Bureau Score of at least 654 and a weighted average
debt-to-income ratio of no more than 40.8%, and (j) approximately 87.25% of the
HELOCs shall be secured by single family residences, approximately 8.55% of the
HELOCs shall be secured by planned unit developments, approximately 3.25% of the
HELOCs shall be
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secured by condominiums and approximately 1.00% of the HELOCs shall be secured
by multi-family residences.
(ii) The obligation of the Trust to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date for assignment to Group II is subject
to the following requirements: (i) such Subsequent Mortgage Loan may not
be more than 59 days contractually Delinquent as of the related Cut-Off
Date, and not more than 1.00%, by aggregate Principal Balance, of all
Subsequent Mortgage Loans purchased by the Trust may be 30 or more days
contractually Delinquent as of the related Cut-Off Date; (ii) the
remaining term to maturity of such Subsequent Mortgage Loan may not be
more than 15 years, (iii) such Subsequent Mortgage Loan will have a
Combined Loan-to-Value Ratio of not more than 100%, (iv) such Subsequent
Mortgage Loan shall have a Mortgage Interest Rate of at least 9.85%, (v)
will not have any Subsequent Mortgage Loan with a Principal Balance in
excess of $200,000, (vi) each Subsequent Mortgage Loan shall be
underwritten in accordance with the Underwriting Guidelines, and (vii) no
such Subsequent Mortgage Loan shall be associated with the purchase of a
home; and following the purchase of such Subsequent Mortgage loans by the
Trust, the HELs (including the Subsequent Mortgage Loans that are HELs)
(a) will have a weighted average Mortgage Interest Rate of at least
13.83%, (b) will have a weighted average remaining term to stated maturity
of not more than 135 months, (c) will have a weighted average Combined
Loan-to-Value Ratio of not greater than 90%, (d) no more than 1.00% of the
HELs (including the Subsequent Mortgage Loans that are HELs) shall be
secured by Mortgaged Properties located in any one zip code, (e) no more
than 1.15% of the HELs will be secured by Mortgaged Properties that are
not Owner Occupied Mortgaged Properties, (f) the HELs with classifications
of "E" will represent approximately 96.00% of the HELs and Subsequent
Mortgage Loans with classifications of "G" and "F" will represent
approximately 3.00% and 1.00% of the HELs, respectively, (g) the HELs will
have a weighted-average second mortgage ratio of no less than 25.35%, (h)
the HELs (including the Subsequent Mortgage Loans that are HELs) shall
have a weighted average Credit Bureau Score of at least 656 and a weighted
average debt-to-income ratio of no more than 40.15% and (i) approximately
90.05% of the HELs shall be secured by single family residences,
approximately 5.60% of the HELs shall be secured by planned unit
developments, approximately 3.40% of the HELs shall be secured by
condominiums and approximately 1.15% of the HELs shall be secured by
multi-family residences.
(d) The obligation of the Trust to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the following additional
requirements, any of which may be waived or modified in any respect by the
Certificate
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Insurer by a written instrument executed by the Certificate Insurer;
(1) The obligation of the Trust to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date is subject to the following
additional requirements: (i) no such Subsequent Mortgage Loan may have a
Combined Loan-to-Value Ratio greater than 100%; (ii) no such Mortgage Loan
is secured by a Mortgaged Property which, at the time of the origination
of such Mortgage Loan, had an Appraised Value greater than $1,000,000;
(iii) the first payment on each such Subsequent Mortgage Loan may be due
no later than March 15, 1998 and (iv) no Subsequent Mortgage Loan that is
a HEL may have a Mortgage Interest Rate lower than 9.85%.
(2) After giving effect to the Trust's purchase of any such
Subsequent Mortgage Loan (i) the weighted average Gross Margins of all
HELOCs shall be no less than 4.3%; (ii) the weighted average Mortgage
Interest Rates of all HELs shall be no less than 13.83% (iii) no more than
1.00% of the Mortgage Loans held by the Trust shall be concentrated in any
single zip code; (iv) the HELOCs and the HELs shall each have a weighted
average Loan-to-Value Ratio no greater than 89.9% and 90% respectively;
(v) no more than 1.2% of the HELOCs and no more than 1.15% of the HELs by
aggregate Principal Balance related to Mortgaged Properties that are not
Owner Occupied Mortgaged Properties.
(e) In connection with each Subsequent Transfer Date and on the
Payment Date occurring in December of 1997, January of 1998 and February of
1998, the Depositor shall determine, and the Trustee shall co-operate with the
Depositor in determining, (i) the amount and correct dispositions of the
Capitalized Interest Requirements and the Capitalized Interest Deposit Amounts
and the amount then on deposit in the Pre-Funding Account, and (ii) any other
necessary matters in connection with the administration of the Pre-Funding
Account and of the Capitalized Interest Account. In the event that any amounts
are incorrectly released to the Owners of the Class R Certificates from the
Pre-Funding Account or the Capitalized Interest Account, such Owners or the
Depositor shall immediately repay such amounts to the Trustee.
(f) Any requirements or conditions set forth in clauses (c) and (d)
above my be waived or modified in writing by the Certificate Insurer; provided
that, as a condition to any such waiver or modification, the Certificate
Insurer, in its sole discretion, may modify the definition of Required Reserve
Account Level without the consent of any party hereto or any Certificateholder
or Additional Certificateholder.
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ARTICLE III
Representations and Warranties
Section 3.1 Representations of the Servicer. The Servicer hereby
represents and warrants to the Trustee, the Depositor, the Certificate Insurer
and the Certificateholders as of the Closing Date and during the term of this
Agreement:
(a) The Servicer is a duly organized corporation, validly existing
and in good standing under the laws of the state of its incorporation and has
all licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each Mortgaged Property State if the
laws of such state require licensing or qualification in order to conduct
business of the type conducted by the Servicer, and in any event the Servicer is
in compliance with the laws of any such state to the extent necessary to ensure
the enforceability of the related Mortgage Loan and the servicing of such
Mortgage Loan in accordance with the terms of this Agreement; the Servicer has
the full corporate power and authority to execute and deliver this Agreement and
to perform in accordance herewith; the execution, delivery and performance of
this Agreement (including all instruments of transfer to be delivered pursuant
to this Agreement) by the Servicer and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligation of the Servicer; and all
requisite corporate action has been taken by the Servicer to make this Agreement
valid and binding upon the Servicer in accordance with its terms;
(b) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Servicer;
(c) Neither the execution and delivery of this Agreement, nor the
performance of or compliance with the terms and conditions of this Agreement,
will conflict with or result in a breach of any of the terms, conditions or
provisions of the Servicer's charter or by-laws or any legal restriction or any
agreement or instrument to which the Servicer is now a party or by which it is
bound, or constitute a default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property is subject, or impair
the ability of the Trustee (or the Servicer as the agent of the Trustee) to
realize on the Mortgage Loans, or impair the value of the Mortgage Loans;
(d) The Servicer does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained in
this Agreement;
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(e) Except as previously disclosed to the Depositor, the Trustee and
the Certificate Insurer, there is no action, suit, proceeding or investigation
pending or, to the knowledge of the Servicer, threatened against the Servicer
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Servicer, or in any material impairment of the right
or ability of the Servicer to carry on its business substantially as now
conducted, or in any material liability on the part of the Servicer, or which
would draw into question the validity of this Agreement or the Mortgage Loans or
of any action taken or to be taken in connection with the obligations of the
Servicer contemplated herein, or which would materially impair the ability of
the Servicer to perform under the terms of this Agreement;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of or compliance by the Servicer with this Agreement
or the sale of the Mortgage Loans to the Depositor in accordance with the
Purchase and Sale Agreement, or the consummation of the transactions
contemplated by this Agreement, except for those consents, approvals or
authorizations which have been obtained prior to the Closing Date;
(g) Neither this Agreement nor any statement, report or other
document furnished by the Servicer pursuant to this Agreement or in connection
with the transactions contemplated hereby contains any untrue statement of fact
regarding the Servicer or omits to state a fact necessary to make the statements
regarding the Servicer contained herein or therein not misleading;
(h) The Servicer has delivered to the Depositor unaudited financial
statements as to its last complete fiscal year and any quarter subsequent
thereto ended more than 60 days prior to the execution of this Agreement. All
such financial statements fairly present the pertinent results of operations and
changes in financial position at the end of each such period of the Servicer and
its subsidiaries and have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved, except as set forth in the notes thereto. There has been no change in
the business, operations, financial condition, properties or assets of the
Servicer since the date of the Servicer's financial statements that would have a
material adverse effect on its ability to perform its obligations under this
Agreement; and
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.1 shall survive the delivery of the
respective Mortgage Files to the Trustee or to a custodian, as the case may be,
and inure to the benefit of the Trustee and the Certificate Insurer.
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Section 3.2 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Trustee that as of the date of this Agreement or as of such date specifically
provided herein:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to convey
the Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Depositor, all requisite corporate action having been
taken, and, assuming the due authorization, execution and delivery hereof by the
Servicer and the Trustee, constitutes or will constitute the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of, or registration
or filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by the Depositor
with this Agreement or the consummation by the Depositor of any of the
transactions contemplated hereby, except as have been received or obtained on or
prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
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(f) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the Depositor,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Depositor's reasonable judgment, might
materially and adversely affect the performance by the Depositor of its
obligations under this Agreement, or the validity or enforceability of this
Agreement; and
(g) 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 that would materially and adversely affect its
performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.2 shall survive delivery of the respective
Mortgage Files to the Trustee or to a custodian, as the case may be, and shall
inure to the benefit of the Trustee and the Certificate Insurer.
Section 3.3 Purchase and Substitution. (a) It is understood and
agreed that the representations and warranties set forth in Sections 3.1 and 3.2
of the Purchase and Sale Agreement shall survive delivery of the Certificates to
the Certificateholders. Pursuant to the Purchase and Sale Agreement, with
respect to any representation or warranty contained in Sections 3.1 or 3.2 of
the Purchase and Sale Agreement that is made to the best of the Seller's
knowledge, if it is discovered by the Servicer, any Subservicer, the Trustee,
the Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by the Seller, the Servicer, any Subservicer, the Trustee or the
Certificate Insurer of a breach of any of such representations and warranties
which materially and adversely affects the value of the Mortgage Loans or the
interest of the Certificateholders, or which materially and adversely affects
the interests of the Certificate Insurer or the Certificateholders in the
related Mortgage Loan in the case of a representation and warranty relating to a
particular Mortgage Loan (notwithstanding that such representation and warranty
was made to the Seller's best knowledge), the party discovering such breach
shall give prompt written notice to the others. Subject to the last paragraph of
this Section 3.3, within 60 days of the earlier of its discovery or its receipt
of notice of any breach of a representation or warranty, pursuant to the
Purchase and Sale Agreement, the Seller shall be required to (i) promptly cure
such breach in all material respects, (ii) purchase such Mortgage Loan on the
next succeeding Servicer Remittance Date, in the manner
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and at the price specified in Section 2.4(b) (in which case the Mortgage Loan
shall become a Deleted Mortgage Loan), (iii) remove such Mortgage Loan from the
Trust Fund (in which case the Mortgage Loan shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute Mortgage Loans; provided,
that, such substitution is effected not later than the date which is two years
after the Startup Date or at such later date, if the Trustee and the Certificate
Insurer receive an Opinion of Counsel to the effect that such substitution will
not constitute a prohibited transaction for the purposes of the REMIC provisions
of the Code or cause the 1997-2 REMIC to fail to qualify as a REMIC at any time
any Certificates are outstanding. Pursuant to the Purchase and Sale Agreement,
any such substitution shall be accompanied by payment by the Seller of the
Substitution Adjustment, if any, to the Servicer to be deposited in the Trustee
Collection Account.
(b) As to any Deleted Mortgage Loan for which the Seller substitutes
a Qualified Substitute Mortgage Loan or Loans, the Seller shall be required
pursuant to the Purchase and Sale Agreement to effect such substitution by
delivering to the Trustee a certification in the form attached hereto as Exhibit
H, executed by a Servicing Officer and the documents described in Sections
2.3(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Servicer
shall give written notice to the Trustee and the Certificate Insurer that such
substitution has taken place and shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan. Upon
such substitution, such Qualified Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects.
(d) It is understood and agreed that the obligations of the Seller
set forth in Sections 2.5 and 3.4 of the Purchase and Sale Agreement to cure,
purchase, substitute or otherwise pay amounts to the Trust or the Certificate
Insurer for a defective Mortgage Loan as provided in such Sections 2.5 and 3.4
constitute the sole remedies of the Trustee, the Certificate Insurer and the
Certificateholders with respect to a breach of the representations and
warranties of the Seller set forth in Sections 3.1 and 3.2 of the Purchase and
Sale Agreement. The Trustee shall give prompt written notice to the Certificate
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Insurer, Moody's and S&P of any repurchase or substitution made pursuant to this
Section 3.3 or Section 2.4(b) hereof.
(e) Upon discovery by the Servicer, the Trustee, the Certificate
Insurer or any Certificateholder that any Mortgage Loan does not constitute a
Qualified Mortgage, the Person discovering such fact shall promptly (and in any
event within 5 days of the discovery) give written notice thereof to the others
of such Persons. In connection therewith, pursuant to the Purchase and Sale
Agreement, the Seller shall be required to repurchase or substitute a Qualified
Substitute Mortgage Loan for the affected Mortgage Loan within 60 days of the
earlier of such discovery by any of the foregoing parties, or the Trustee's or
the Seller's receipt of notice, in the same manner as it would a Mortgage Loan
for a breach of representation or warranty contained in Section 3.1 or 3.2 of
the Purchase and Sale Agreement. The Trustee shall reconvey to the Seller the
Mortgage Loan to be released pursuant hereto in the same manner, and on the same
terms and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Section 3.1 or 3.2 of the Purchase and
Sale Agreement.
Section 3.4 Servicer Covenants. The Servicer hereby covenants to the
Trustee, the Depositor and the Certificate Insurer and the Certificateholders
that as of the Closing Date and during the term of this Agreement:
(a) The Servicer shall deliver on the Closing Date an opinion from
the general counsel or the corporate counsel of the Servicer as to general
corporate matters in form and substance reasonably satisfactory to Underwriter's
counsel and counsel to the Certificate Insurer.
(b) The Servicer may in its discretion (i) waive any prepayment
charge, assumption fee, late payment charge or other charge in connection with a
Mortgage Loan, and (ii) arrange a schedule, running for no more than 180 days
after the Due Date for payment of any installment on any Mortgage Note, for the
liquidation of delinquent items; provided, that the Servicer shall not agree to
the modification or waiver of any provision of a Mortgage Loan at a time when
such Mortgage Loan is not in default or such default is not imminent, if such
modification or waiver would be treated as a taxable exchange under Code Section
1001, unless such exchange would not be considered a "prohibited transaction"
under the REMIC Provisions.
It is understood and agreed that the covenants set forth in this
Section 3.4 shall survive the delivery of the respective Mortgage Files to the
Trustee or to a custodian, as the case may be, and inure to the benefit of the
Trustee and the Certificate Insurer.
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ARTICLE IV
The Certificates
Section 4.1 The Certificates. The Certificates and the Additional
Certificate shall be substantially in the forms annexed hereto as, in the case
of the Class A-1 Certificate, Exhibit B-1, in the case of the Class A-2
Certificate, Exhibit B-2, in the case of the Class A-3 Certificate, Exhibit B-3,
in the case of the Class A-4 Certificate, Exhibit B-4, in the case of the Class
R Certificate, Exhibit B-5 and in the case of the Additional Certificate,
Exhibit B-6. All Certificates and the Additional Certificate shall be executed
by manual or facsimile signature on behalf of the Trustee by an authorized
officer and authenticated by the manual or facsimile signature of an authorized
officer. Any Certificates and any Additional Certificate bearing the signatures
of individuals who were at the time of the execution thereof the authorized
officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
delivery of such Certificates or Additional Certificates or did not hold such
offices at the date of such Certificates. All Certificates and the Additional
Certificate issued hereunder shall be dated the date of their authentication.
Section 4.2 Registration of Transfer and Exchange of Certificates.
(a) The Trustee, as registrar, shall cause to be kept a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration of Certificates
and the Additional Certificate and the registration of transfer of Certificates
and the Additional Certificate. The Trustee is hereby appointed registrar for
the purpose of registering and transferring Certificates and the Additional
Certificate, as herein provided. The Certificate Insurer and the Servicer shall
be entitled to inspect and copy the Certificate Register and the records of the
Trustee relating to the Certificates and the Additional Certificate during
normal business hours upon reasonable notice.
(b) All Certificates and the Additional Certificate issued upon any
registration of transfer or exchange of Certificates and the Additional
Certificate shall be valid evidence of the same ownership interests in the Trust
and entitled to the same benefits under this Agreement as the Certificates and
the Additional Certificate surrendered upon such registration of transfer or
exchange.
(c) Every Certificate and Additional 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 Holder or holder thereof or his attorney duly
authorized in
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writing. Every Certificate shall include a statement of insurance provided by
the Certificate Insurer.
(d) No service charge shall be made to a Holder or holder for any
registration of transfer or exchange of Certificates and the Additional
Certificate, 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 and the Additional
Certificate; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(e) 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. The Class A-1 Certificates shall, except as otherwise provided in the
next paragraph, be initially issued in the form of a single fully registered
Class A-1 Certificate with a denomination equal to the Original Class A-1
Principal Balance. The Class A-2 Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Class A-2 Certificate with a denomination equal to the Original
Class A-2 Principal Balance. The Class A-3 Certificates shall, except as
otherwise provided in the next paragraph, be initially issued in the form of a
single fully registered Class A-3 Certificate with a denomination equal to the
Original Class A-3 Principal Balance. The Class A-4 Certificates shall, except
as otherwise provided in the next paragraph, be initially issued in the form of
a single fully registered Class A-4 Certificate with a denomination equal to the
Original Class A-4 Principal Balance. Upon initial issuance, the ownership of
each such Class A Certificate shall be registered in the Certificate Register in
the name of Cede & Co., or any successor thereto, as nominee for the Depository.
The Depositor 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 Certificate Register in the name of Cede & Co., as nominee of
the Depository, the Depositor, the Seller, the Servicer, the Trustee and the
Certificate Insurer shall have no responsibility or obligation to Direct or
Indirect Participants or beneficial owners for which the Depository holds Class
A Certificates from time to time as a Depository. Without limiting the
immediately preceding sentence, the Depositor, the Seller, the Servicer, the
Trustee and the Certificate Insurer 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 any Ownership Interest,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, 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 Certificateholder, of any amount with respect to any
distribution of principal or interest on the Class A Certificates. No Person
other than a Certificateholder shall receive a certificate evidencing such
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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
Certificateholders appearing as Certificateholders at the close of business on a
Record Date, the mane "Cede & Co." in this Agreement shall refer to such new
nominee of the Depository.
(f) In the event that (i) the Depository or the Servicer 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 Servicer or the Depository is unable to locate a
qualified successor or (ii) the Trustee at its sole option elects to terminate
the book-entry system through the Depository, the Class A Certificates shall no
longer be restricted to being registered in the Certificate Register in the name
of Cede & Co. (or a successor nominee) as nominee of the Depository. At that
time, the Servicer 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 Servicer, or such
depository's agent or designee but, if the Servicer does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificateholders transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, however, that any such reregistration shall be at the expense of the
Servicer.
(g) 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 as the case may be and all notices with respect to
such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) No transfer, sale, pledge or other disposition of any Class R
Certificate shall be made unless such disposition is made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
and effective registration or qualification under applicable state securities
laws or "Blue Sky" laws, or is made in a transaction that does not require such
registration or qualification. None of the Servicer, the Depositor, the Seller
or the Trustee is obligated under this Agreement to register the Certificates
under the Securities Act of 1933, as amended or any other securities law or to
take any action not otherwise required under this Agreement to permit the
transfer of the Class R Certificates without such registration or qualification.
Any such Certificateholder desiring to effect such transfer shall, and does
hereby agree to, indemnify the
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Trustee, the Depositor, the Seller, the Servicer and the Certificate Insurer
against any liability that may result if the transfer is not exempt or is not
made in accordance with such applicable federal and state laws. Promptly after
receipt by an indemnified party under this paragraph of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this paragraph,
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
paragraph. 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 appoint counsel reasonably satisfactory to such
indemnified party to represent the indemnified party in such action; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are in conflict with or contrary to the interests of
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to appoint counsel to defend such action
and approval by the indemnified party of such counsel, the indemnifying party
will not be liable to such indemnified party under this paragraph for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso of the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel for any indemnified party),
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. Under no circumstances shall the indemnified party enter
into a settlement agreement with respect to any lawsuit, claim or other
proceeding without the prior written consent of the indemnifying party.
(i) Each Person who has or who acquires any Ownership Interest in a
Class R Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably appointed the Servicer or its designee as its attorney-in-fact
to negotiate the terms of any mandatory sale under subclause (vii) below and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
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Ownership Interest in a Class R Certificate are expressly subject to the
following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a Permitted Transferee and a United States
Person and shall promptly notify the Trustee of any change or impending
change in its status as either a United States Person or a Permitted
Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall require delivery to
it, and shall not register the Transfer of any Class R Certificate until
its receipt of, an affidavit and agreement (a "Transfer Affidavit and
Agreement") attached hereto as Exhibit I from the proposed Transferee,
representing and warranting, among other things, that such Transferee is a
Permitted Transferee, that it is not acquiring its Ownership Interest in
the Class R Certificate that is the subject of the proposed Transfer as a
nominee, trustee or agent for any Person that is not a Permitted
Transferee, that for so long as it retains its Ownership Interest in a
Class R Certificate, it will endeavor to remain a Permitted Transferee,
and that it has reviewed the provisions of this Section 4.2(i) and agrees
to be bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if the Trustee
has actual knowledge that the proposed Transferee is not a Permitted
Transferee, no Transfer of an Ownership Interest in a Class R Certificate
to such proposed Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall agree (x) to require a Transfer Affidavit and
Agreement from any other Person to whom such Person attempts to transfer
its Ownership Interest in a Class R Certificate and (y) not to transfer
its Ownership Interest unless it provides a certificate (attached hereto
as Exhibit J) to the Trustee stating that, among other things, it has no
actual knowledge that such other Person is not a Permitted Transferee.
(v) Each Person holding or acquiring an Ownership Interest in a
Class R Certificate, by purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of temporary Treasury
Regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Class R Certificate, if it is, or is holding an
Ownership Interest in a Class R Certificate on behalf of, a "pass-through
interest holder."
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(vi) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and
Agreement. In addition, no Transfer of a Class R Certificate shall be made
unless the Trustee shall have received a representation letter, the form
of which is attached hereto as Exhibit N from the Transferee of such
Certificate to the effect that such Transferee is a United States Person
and is not a "disqualified organization" (as defined in Section 860E(e)(5)
of the Code).
(vii) Any attempted or purported transfer of any Ownership Interest
in a Class R Certificate in violation of the provisions of this Section
4.2 shall be absolutely null and void and shall vest no rights in the
purported transferee. If any purported transferee shall become a Holder of
a Class R Certificate in violation of the provisions of this Section 4.2,
then the last preceding Permitted Transferee shall be restored to all
rights as Holder thereof retroactive to the date of registration of
transfer of such Class R Certificate. The Trustee shall notify the
Servicer upon receipt of written notice or discovery by a Responsible
Officer that the registration of transfer of a Class R Certificate was not
in fact permitted by this Section 4.2. Knowledge shall not be imputed to
the Trustee with respect to an impermissible transfer in the absence of
such a written notice or discovery by a Responsible Officer. The Trustee
shall be under no liability to any Person for any registration of transfer
of a Class R Certificate that is in fact not permitted by this Section 4.2
or for making any payments due on such Certificate to the Holder thereof
or taking any other action with respect to such Holder under the
provisions of this Agreement so long as the transfer was registered after
receipt of the related Transfer Affidavit and Transfer Certificate. The
Trustee shall be entitled, but not obligated to recover from any Holder of
a Class R Certificate that was in fact not a Permitted Transferee at the
time it became a Holder or, at such subsequent time as it became other
than a Permitted Transferee, all payments made on such Class R Certificate
at and after either such time. Any such payments so recovered by the
Trustee shall be paid and delivered by the Trustee to the last preceding
Holder of such Certificate.
(viii) If any purported transferee shall become a Holder of a Class
R Certificate in violation of the restrictions in this Section 4.2, then
the Servicer or its designee shall have the right, without notice to the
Holder or any prior Holder of such Class R Certificate, to sell such Class
R Certificate to a purchaser selected by the Servicer or its designee on
such reasonable terms as the Servicer or its designee may choose. Such
purchaser may be the Servicer itself or any Affiliate of the Servicer. The
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proceeds of such sale, net of commissions, expenses and taxes due, if any,
will be remitted by the Servicer to the last preceding purported
transferee of such Class R Certificate, except that in the event that the
Servicer determines that the Holder or any prior Holder of such Class R
Certificate may be liable for any amount due under this Section 4.2 or any
other provision of this Agreement, the Servicer may withhold a
corresponding amount from such remittance as security for such claim. The
terms and conditions of any sale under this subclause (viii) shall be
determined in the sole discretion of the Servicer or its designee, and it
shall not be liable to any Person having an Ownership Interest in a Class
R Certificate as a result of its exercise of such discretion.
(ix) The provisions of Section 4.2(i) may be modified, added to or
eliminated, provided that there shall have been delivered to the Trustee
and the Certificate Insurer an Opinion of Counsel to the effect that such
modification of, addition to or elimination of such provisions will not
cause the 1997-2 REMIC to cease to qualify as a REMIC and will not cause
(x) the 1997-2 REMIC to be subject to an entity-level tax caused by the
Transfer of any Ownership Interest in a Class R Certificate to a Person
that is not a Permitted Transferee or (y) a Person other than the
prospective transferee to be subject to a REMIC-related tax caused by the
Transfer of an Ownership Interest in a Class R Certificate to a Percentage
that is not a Permitted Transferee.
(x) No transfer of a Class R Certificate or any interest therein
shall be made to any employee benefit plan or other retirement
arrangement, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such
plans, accounts or arrangements are invested, that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Code (each, a "Plan"), unless the prospective transferee of such Class
R Certificate provides the Servicer and the Trustee with a certification
of facts and, at the prospective transferee's expense, an Opinion of
Counsel which establish to the satisfaction of the Servicer and the
Trustee that such transfer will not result in a violation of Section 406
of ERISA or Section 4975 of the Code or cause the Servicer or the Trustee
to be deemed a fiduciary of such Plan or result in the imposition of an
excise tax under Section 4975 of the Code. In the absence of their having
received the certification of facts or Opinion of Counsel contemplated by
the preceding sentence, the Trustee and the Servicer shall require the
prospective transferee of any Class R Certificate to certify (in the form
of Exhibit K hereto) that (A) it is neither (i) a Plan nor (ii) a Person
who is directly or indirectly purchasing a Class R Certificate on
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behalf of, as named fiduciary of, as trustee of, or with assets, of a Plan
and (B) all funds used by such transferee to purchase such Certificates
will be funds held by it in its general account which it reasonably
believes do not constitute "plan assets" of any Plan.
(xi) Subject to the restrictions set forth in this Agreement, upon
surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall
execute, authenticate and deliver in the name of the designated transferee
or transferees, a new Certificate of the same Class and evidencing, in the
case of a Class A-1 Certificate, Class A-2 Certificate, Class A-3
Certificate or Class A-4 Certificate, the same Percentage Interest, and in
any other case, the equivalent undivided beneficial ownership interest in
the related REMIC and dated the date of authentication by the Trustee. At
the option of the Certificateholders, Certificates may be exchanged for
other Certificates of Authorized Denominations of a like aggregate
undivided beneficial ownership interest, upon surrender of the
Certificates to be exchanged at such office. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange
is entitled to receive. No service charge shall be made for any transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for transfer and exchange shall be canceled by the Trustee.
(j) Upon reasonable request of the holder of the Additional
Certificate, not more frequently than twice annually, and with the consent of
the Certificate Insurer and the Rating Agencies, the Trustee shall authenticate
and deliver one or more certificates or other instruments representing the right
to receive distributions in respect of Additional Balances drawn under the
HELOCs to the date of such request or any portion thereof. The rights of any
holders of such certificates or other instruments shall have the same priority,
be in lieu of and in no event exceed the rights of the Holder of the Additional
Certificate immediately prior to such authentication and delivery. Following
such authentication and delivery, rights reserved to the Holder of the
Additional Certificate hereunder, shall be allocated among the holders of such
certificates or other instruments and the Holder of the Additional Certificate
hereunder as determined by an executed written agreement between such parties
and the Trustee approved by the Certificate Insurer. Other than in connection
with such a transfer, the Holder of the Additional Certificate may not transfer
its Ownership Interest or any portion thereof in such Additional Certificate and
the Holder of the Additional Certificate shall retain its obligation under
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the HELOCs to advance Additional Balances to the related Mortgagors.
Section 4.3 Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Servicer, the Certificate Insurer
and the Trustee such security or indemnity as may reasonably be required by each
of them to save each of them harmless, then, in the absence of notice to the
Servicer, the Certificate Insurer and 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 tenor and representing an
equivalent beneficial ownership interest, but bearing a number not
contemporaneously outstanding. Upon the issuance of any new Certificate under
this Section 4.3, the Servicer and 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 and their fees and expenses connected therewith. Any duplicate
Certificate issued pursuant to this Section 4.3 shall constitute complete and
indefeasible evidence of ownership in the Trust Fund, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time.
Section 4.4 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer and subject to the provisions of
Section 4.2 and Article X, the Servicer, the Depositor, the Seller, the
Certificate Insurer and the Trustee may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving remittances pursuant to Section 6.5 and for all other purposes
whatsoever, and the Servicer, the Depositor, the Seller, the Certificate Insurer
and the Trustee shall not be affected by notice to the contrary.
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ARTICLE V
Administration and Servicing of the Mortgage Loans
Section 5.1 Appointment of the Servicer.
(a) Irwin Home Equity Corporation agrees to act as the Servicer and
to perform all servicing duties under this Agreement subject to the terms
hereof.
(b) The Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and the Certificate Insurer and shall have full power and
authority, acting alone or through one or more Subservicers, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer, in its own name or the name of a Subservicer, may, and is hereby
authorized and empowered by the Trustee to, execute and deliver, on behalf of
itself, the Certificateholders and the Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans, the insurance policies and accounts related thereto and the properties
subject to the Mortgages. Upon the execution and delivery of this Agreement, and
from time to time as may be required thereafter, the Trustee shall furnish the
Servicer or its Subservicers with any powers of attorney and such other
documents as may be necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Servicer
shall employ procedures consistent with Accepted Servicing Practices and in a
manner consistent with recovery under any insurance policy required to be
maintained by the Servicer pursuant to this Agreement.
The Servicer shall make any Mortgage Interest Rate adjustments on
each Interest Adjustment Date in compliance with applicable regulatory
adjustable mortgage loan requirements and the Mortgage Notes. The Servicer shall
establish procedures to monitor the Interest Adjustment Dates in order to assure
that it uses a published interest rate in determining an interest rate change,
and it will comply with those procedures. In the event a published interest rate
is no longer available, the Servicer shall choose a new comparable published
interest rate in accordance with the provisions hereof, of the applicable
Mortgage Note and of Accepted Servicing Practices, and shall provide the
Mortgagor, the Trustee and the Certificate Insurer with notice of the new
published interest rate sufficient under law and the Mortgage Note. The Servicer
shall execute and deliver all appropriate notices required by the applicable
adjustable mortgage loan laws and regulations and the Mortgage Loan Documents
regarding such Mortgage Interest Rate adjustments.
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If the Servicer fails to make a timely Mortgage Interest Rate
adjustment in accordance with the terms of the related Mortgage Notes, the
Servicer shall use its own funds to satisfy any shortage in the Mortgagor's
remittance so long as such shortage shall continue; any such amount paid by the
Servicer shall be reimbursable to it from any subsequent amounts collected on
account of the related Mortgage Loan with respect to such adjustments.
Costs incurred by the Servicer in effectuating the timely payment of
taxes and assessments on the property securing a Mortgage Note and foreclosure
costs may be added by the Servicer to the amount owing under such Mortgage Note
where the terms of such Mortgage Note so permit; provided, however, that the
addition of any such cost shall not be taken into account for purposes of
calculating the principal amount of the Mortgage Note and the Mortgage Loan
secured by the Mortgage Note or distributions to be made to Certificateholders.
Such costs shall be recoverable by the Servicer pursuant to Section 5.4.
Notwithstanding any other provision of this Agreement, the Servicer shall at all
times service the Mortgage Loans in a manner consistent with the provisions of
Sections 5.1(b) and 5.1(c).
(c) It is intended that the 1997-2 REMIC formed hereunder shall
constitute, and that the affairs of the REMIC 1995-2 shall be conducted so as to
qualify it as, a "real estate mortgage investment conduit" ("REMIC") as defined
in and in accordance with the REMIC Provisions. In furtherance of such
intentions, the Servicer covenants and agrees that it shall not take any action
or omit to take any action reasonably within the Servicer's control and the
scope of its duties more specifically set forth herein that would (i) result in
a taxable event to the Holders of the Certificates or endanger the REMIC status
of the 1997-2 REMIC or (ii) result in the imposition on the 1997-2 REMIC or the
Trust Fund of a tax on "prohibited transactions" (either clause (i) or (ii)
shall be an "Adverse REMIC Event.") The Servicer shall not take any action or
fail to take any action (whether or not authorized hereunder) as to which the
Trustee has advised it in writing that it has received an Opinion of Counsel to
the effect that an Adverse REMIC Event could occur with respect to such action,
and the Servicer shall have no liability hereunder for any action taken by it in
accordance with the written instruments of the Trustee. In addition, prior to
taking any action with respect to the Trust Fund that is not expressly permitted
under the terms of this Agreement, the Servicer will consult with the Trustee or
its designee and the Certificate Insurer, in writing, with respect to whether
such action could cause an Adverse REMIC Event to occur. The Trustee may consult
with counsel to make such written advice, and the cost of same shall be borne by
the party seeking to take the action not permitted by this Agreement. At all
times as may be required by the Code, the Servicer shall use its best efforts to
ensure that substantially all of the assets of the Trust will consist of
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"qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code. In the
event any specified time period or other requirement set forth in this Agreement
in respect of compliance with the REMIC Provisions becomes inconsistent with the
REMIC Provisions as the same may be amended, such specified time period or other
requirement shall also be deemed amended to comply with the requirements of this
Section, unless such amended time period or other requirements shall be less
protective of the interests of the Certificateholders and the Certificate
Insurer, in which case, to the extent consistent with the REMIC Provisions, the
former time period or requirement shall continue in force.
(d) Subject to Section 5.12, the Servicer is hereby authorized and
empowered to execute and deliver on behalf of the Trustee and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the Mortgaged Properties. If
reasonably required by the Servicer, each Certificateholder and the Trustee
shall execute any powers of attorney furnished to the Trustee by the Servicer
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Agreement.
(e) On and after such time as the Trustee receives the resignation
of, or notice of the removal of, the Servicer from its rights and obligations
under this Agreement, and with respect to resignation pursuant to Section 5.23,
after receipt by the Trustee and the Certificate Insurer of the Opinion of
Counsel required pursuant to Section 5.23, the Trustee or its designee approved
by the Certificate Insurer shall assume all of the rights and obligations of the
Servicer, subject to Section 7.2 hereof. The Servicer shall, upon request of the
Trustee but at the expense of the Servicer, deliver to the Trustee all documents
and records relating to the Mortgage Loans and an accounting of amounts
collected and held by the Servicer and otherwise use its best efforts to effect
the orderly and efficient transfer of servicing rights and obligations to the
assuming party.
(f) The Servicer shall deliver a list of Servicing Officers to the
Trustee and the Certificate Insurer by the Closing Date, which list may, from
time to time, be amended, modified or supplemented by the subsequent delivery to
the Trustee and the Certificate Insurer of any superseding list of Servicing
Officers.
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Section 5.2 Subservicing Agreements Between the Servicer and
Subservicers. (a) The Servicer may, subject to the prior written approval of the
Certificate Insurer (except as between the Servicer and the Trustee, as
Subservicer), enter into Subservicing Agreements with Subservicers for the
servicing and administration of the Mortgage Loans and for the performance of
any and all other activities of the Servicer hereunder. Each Subservicer shall
be either (i) a depository institution the accounts of which are insured by the
FDIC or (ii) another entity that engages in the business of originating,
acquiring or servicing loans, and in either case shall be authorized to transact
business in the state or states where the related Mortgaged Properties it is to
service are situated. In addition, each Subservicer will obtain and preserve its
qualifications to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates and any of the Mortgage Loans
and to perform or cause to be performed its duties under the related
Subservicing Agreement which shall provide that the Subservicer's rights shall
automatically terminate upon the termination, resignation or other removal of
the Servicer under this Agreement. Each account used by any Subservicer for the
deposit of payments on any of the Mortgage Loans shall be an Eligible Account.
(b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the Certificate Insurer and the Certificateholders for the servicing
and administering of the Mortgage Loans in accordance with the provisions of
this Agreement without diminution of such obligation or liability by virtue of
such Subservicing Agreements or arrangements or by virtue of indemnification
from the Subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Mortgage Loans. For purposes of this Agreement, the Servicer shall be deemed to
have received payments on Mortgage Loans when the Subservicer has received such
payments.
In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee may, with the prior written consent of the Certificate Insurer, or
shall, at the direction of the Certificate Insurer, either (i) assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into or (ii) notwithstanding anything to the
contrary contained in each such Subservicing Agreement, terminate the related
Subservicer without being required to pay any fee in connection therewith.
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Section 5.3 Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Servicer shall use its best efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement and any
applicable primary mortgage insurance policy, follow such collection procedures
as shall constitute Accepted Servicing Practices.
The Servicer shall establish and maintain in the name of the Trustee
two Collection Accounts (collectively, the "Collection Account"), in trust for
the benefit of the Holders of the Certificates, the Additional Certificates and
the Certificate Insurer, one of which shall be established and maintained with
the Trustee (the "Trustee Collection Account"). The Servicer shall promptly
provide notice to the Certificate Insurer, the Trustee and each Rating Agency of
any creation and establishment of a Collection Account hereunder. Each
Collection Account shall be established and maintained as an Eligible Account
and one Collection Account may be maintained at the Bank of the West. The
Certificate Insurer, in its sole discretion, may direct the Servicer to close
such Collection Account and to establish and maintain a replacement Collection
Account that is an Eligible Account. Neither the Collection Account nor the
Trustee Collection Account constitute assets of the 1997-2 REMIC.
On the Closing Date, the Servicer shall deposit in the Trustee
Collection Account any amounts representing the principal portion of Monthly
Payments on the Mortgage Loans made in respect of the November 15, 1997 Due Date
and received on or prior to the Cut-Off Date. On the third Business Day prior to
the first Remittance Date, the Servicer shall have deposited into the Trustee
Collection Account all of the following collections and payments received or
made by the Servicer in respect of monies due under the Mortgage Loans (other
than in respect of interest on the Mortgage Loans accrued on or before the Due
Date immediately preceding the Cut-Off Date), and shall, on a daily basis
thereafter (except as otherwise provided herein), deposit such collections and
payments into the Collection Account:
(i) all payments received after the Cut-Off Date on account of
principal on the Mortgage Loans and all Principal Prepayments,
Curtailments and all Net REO Proceeds collected after the Cut-Off Date;
(ii) all payments received after the Cut-Off Date on account of
interest on the Mortgage Loans (other than payments of interest that
accrued on each Mortgage Loan up to and including the Due Date immediately
preceding the Cut-Off Date);
(iii) all Net Liquidation Proceeds;
(iv) all Insurance Proceeds;
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(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.4 and 3.3 hereof; and
(vii) any amount expressly required to be deposited in the
Collection Account or Trustee Collection Account in accordance with
certain provisions of this Agreement, including, without limitation
amounts in respect of the termination of the Trust Fund (which shall be
deposited in the Trustee Collection Account), and amounts referenced in
Sections 2.4(b), 3.3(a), 3.3(c), 5.6, and 6.6(d) of this Agreement;
provided, however, that the Servicer shall be entitled, at its election, either
(a) to withhold and to pay to itself the applicable Servicing Fee from any
payment on account of interest or other recovery (including Net REO Proceeds) as
received and prior to deposit of such payments in the Collection Account or (b)
to withdraw the applicable Servicing Fee from the Collection Account after the
entire payment or recovery has been deposited therein; provided, further, that
with respect to any payment of interest received by the Servicer in respect of a
Mortgage Loan (whether paid by the Mortgagor or received as Liquidation
Proceeds, Insurance Proceeds or otherwise) which is less than the full amount of
interest then due with respect to such Mortgage Loan, only that portion of such
payment that bears the same relationship to the total amount of such payment of
interest as the rate used to determine the Servicing Fee bears to the Mortgage
Interest Rate borne by such Mortgage Loan shall be allocated to the Servicing
Fee with respect to such Mortgage Loan. All other amounts shall be deposited in
the Collection Account not later than the Business Day following the day of
receipt and posting by the Servicer. All amounts collected in respect of the
Mortgage Loans and on deposit in each Local Collection Account shall be
transferred on a regular monthly basis into the Trustee Collection Account.
Notwithstanding any regularly scheduled transfer of funds to the Trustee
Collection Account, the Servicer shall, not later than 3 Business Days prior to
each Remittance Date transfer to the Trustee Collection Account all funds in
each Local Collection Account that are to be included in the Servicer Remittance
Amount on the Servicer Remittance Date immediately preceding the Remittance
Date.
The Servicer shall direct, in writing, the institution maintaining
each Collection Account and the Trustee Collection Account to invest the funds
in the Collection Account or Trustee Collection Account, as the case may be,
only in Permitted Investments. No Permitted Investment shall be sold or disposed
of at a gain prior to maturity unless the Servicer has obtained
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an Opinion of Counsel (at the Servicer's expense) that such sale or disposition
will not cause the Trust Fund to be subject to the tax on income from prohibited
transactions imposed by Code Section 860F(a)(1), otherwise subject the Trust
Fund to tax or cause the 1997-2 REMIC to fail to qualify as a REMIC. All income
(other than any gain from a sale or disposition of the type referred to in the
preceding sentence) realized from any such Permitted Investment shall be for the
benefit of the Servicer as additional servicing compensation. The amount of any
losses incurred in respect of any such investments shall be deposited in the
Collection Account by the Servicer out of its own funds immediately as realized.
The foregoing requirements for deposit in the Collection Account
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of those described in the
last paragraph of Section 5.14 and payments in the nature of prepayment charges,
late payment charges or assumption fees need not be deposited by the Servicer in
the Collection Account. Notwithstanding any provision herein to the contrary,
the Servicer shall not deposit in any Collection Account, including the Trustee
Collection Account, any amount other than amounts required to be deposited
therein in accordance with the terms of this Agreement, and the Servicer shall
have the right at all times to transfer funds from the Collection Account to the
Trustee Collection Account. All funds deposited by the Servicer in the
Collection Account and the Trustee Collection Account shall be held therein for
the account of the Trustee in trust for the Certificateholders and the
Certificate Insurer until disbursed in accordance with Section 6.1 or withdrawn
in accordance with Section 5.4.
(b) Prior to the time of their required deposit in the Collection
Account, all amounts required to be deposited therein may be deposited in an
account in the name of Servicer, provided that such account is an Eligible
Account. All such funds shall be held by the Servicer in trust for the benefit
of the Certificateholders and the Certificate Insurer pursuant to the terms
hereof.
(c) The Collection Account may, upon written notice by the Trustee
to the Certificate Insurer, be transferred to a different depository so long as
such transfer is to an Eligible Account.
Section 5.4 Permitted Withdrawals from the Collection Account and
Trustee Collection Account. The Servicer is hereby authorized by the Trustee
(such authorization to be revocable by the Trustee at any time), from time to
time, to make withdrawals from the Collection Account or, as applicable, the
Trustee Collection Account but only for the following purposes:
(a) to reimburse itself from any funds in the Collection Account and
the Trustee Collection Account for any
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accrued unpaid Servicing Fees and for unreimbursed Periodic Advances and
Servicing Advances. The Servicer's right to reimbursement for unpaid Servicing
Fees and unreimbursed Servicing Advances shall be limited to late collections on
the related Mortgage Loan, including Liquidation Proceeds, Released Mortgaged
Property Proceeds, Insurance Proceeds and such other amounts on deposit in the
Collection Account as may be collected by the Servicer from the related
Mortgagor or otherwise relating to the Mortgage Loan in respect of which such
unreimbursed amounts are owed. The Servicer's right to reimbursement for
unreimbursed Periodic Advances shall be limited to late collections of interest
on any Mortgage Loan and to Liquidation Proceeds and Insurance Proceeds on
related Mortgage Loans;
(b) to reimburse itself for any Periodic Advances determined in good
faith to have become Nonrecoverable Advances, such reimbursement to be made from
any funds in the Collection Account and the Trustee Collection Account;
(c) to withdraw from the Collection Account or the Trustee
Collection Account any Preference Amount received from a Mortgagor;
(d) to withdraw any funds deposited in the Collection Account or
Trustee Collection Account that were mistakenly deposited therein;
(e) to withdraw from the Collection Account or the Trustee
Collection Account any funds needed to pay itself Servicing Compensation
pursuant to Section 5.14 hereof to the extent not retained or paid pursuant to
Section 5.3, 5.4 or 5.14;
(f) to withdraw from the Collection Account or the Trustee
Collection Account to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or replaced
pursuant to Section 2.4 or 3.3 or to pay to itself with respect to each Mortgage
Loan or property acquired in respect thereof that has been purchased pursuant to
Section 8.1 all amounts received thereon and not required to be deposited into
the Collection Account or the Trustee Collection Account as a result of such
repurchase or replacement;
(g) subject to the provisions of Section 5.20, to reimburse itself
from the Collection Account or the Trustee Collection Account for (i)
Nonrecoverable Advances that are not, with respect to aggregate Servicing
Advances on any single Mortgage Loan or REO Property, in excess of the Trust
Balance thereof and (ii) for amounts to be reimbursed to the Servicer pursuant
to Section 5.21;
(h) to withdraw from the Collection Account or the Trustee
Collection Account to pay to the Seller with respect to each Mortgage Loan the
excess, if any, of (i) interest accrued
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and unpaid on such Mortgage Loan on the Cut-Off Date, over (ii) interest on such
Mortgage Loan from the Due Date for such Mortgage Loan immediately preceding the
Cut-Off Date to the Cut-Off Date;
(i) to transfer funds from the Collection Account into the Trustee
Collection Account and to withdraw funds from the Collection Account and the
Trustee Collection Account necessary to make deposits to the Certificate Account
(which shall include the Trustee Fee) in the amounts and in the manner provided
for in Section 6.1 hereof;
(j) to pay itself any interest earned on or investment income earned
with respect to funds in the Collection Account or Trustee Collection Account;
(k) to withdraw from the Collection Account, any amount deposited
therein that is allocable to an Additional Balance and deposit such amount into
the Additional Certificate Account; and
(l) to clear and terminate the Collection Account and Trustee
Collection Account upon the termination of this Agreement.
The Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the Collection
Account pursuant to subclause (a).
Section 5.5 Payment of Taxes, Insurance and Other Charges. With
respect to each Mortgage Loan, the Servicer shall maintain accurate records
reflecting casualty insurance coverage.
With respect to each Mortgage Loan as to which the Servicer
maintains escrow accounts, the Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of primary mortgage guaranty insurance premiums, if any, and casualty
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Servicer in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. To the extent that a Mortgage does not
provide for escrow payments, the Servicer shall, if it has received notice of a
default or deficiency, monitor such payments to determine if they are made by
the Mortgagor.
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Section 5.6 Maintenance of Casualty Insurance. For each Mortgage
Loan, the Servicer shall maintain or cause to be maintained, to the extent
required by the related Mortgage Loan to be maintained by the Mortgagor, fire
and casualty insurance with a standard mortgagee clause and extended coverage in
an amount which is not less than the replacement value of the improvements
securing such Mortgage Loan or the unpaid principal balance of such Mortgage
Loan, whichever is less. If, upon origination of the Mortgage Loan, the
Mortgaged Property was in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) the Servicer will cause to be
maintained, to the extent required by the related Mortgage Loan to be maintained
by the Mortgagor, a flood insurance policy meeting the requirements of the
current guidelines of the Federal Insurance Administration with a generally
acceptable insurance carrier, in an amount representing coverage not less than
the least of (i) the unpaid principal balance of the Mortgage Loan, (ii) the
full insurable value of the Mortgaged Property or (iii) the maximum amount of
insurance available under the Flood Disaster Protection Act of 1973. With
respect to each Mortgage Loan, the Servicer shall also maintain fire insurance
with extended coverage and, if applicable, flood insurance on REO Property in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the improvements which are a part of such property and (ii) the principal
balance owing on such Mortgage Loan at the time of such foreclosure or grant of
deed in lieu of foreclosure plus accrued interest and related Liquidation
Expenses. It is understood and agreed that such insurance shall be with insurers
approved by the Servicer and that no earthquake or other additional insurance is
to be required of any Mortgagor or to be maintained on property acquired in
respect of a defaulted loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. Pursuant to Section 5.3, any amounts collected by the
Servicer under any insurance policies maintained pursuant to this Section 5.6
(other than amounts to be applied to the restoration or repair of the related
Mortgaged Property or released to the Mortgagor in accordance with Accepted
Servicing Practices) shall be deposited into the Collection Account, subject to
withdrawal pursuant to Section 5.4. Any cost incurred by the Servicer in
maintaining any such insurance shall be added to the amount owing under the
Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however,
that the addition of any such cost shall not be taken into account for purposes
of calculating the principal amount of the Mortgage Note or the Mortgage Loan
secured by the Mortgage Note or the distributions to be made to the
Certificateholders. Such costs shall be recoverable by the Servicer pursuant to
Section 5.4. In the event that the Servicer shall obtain and maintain a blanket
policy issued by an insurer that is acceptable to FNMA or FHLMC, insuring
against hazard losses on all of the Mortgage Loans, it shall conclusively be
deemed to have satisfied its obligation as set forth in the first
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sentence of this Section 5.6, it being understood and agreed that such policy
may contain a deductible clause, in which case the Servicer shall, in the event
that there shall not have been maintained on the related mortgaged or acquired
property an insurance policy complying with the first sentence of this Section
5.6 and there shall have been a loss which would have been covered by such a
policy had it been maintained, be required to deposit from its own funds into
the Collection Account the amount not otherwise payable under the blanket policy
because of such deductible clause.
Section 5.7 Servicer Account. In addition to the Collection Account,
the Servicer shall be permitted to establish and maintain one or more Servicer
Accounts (collectively, the "Servicer Account"), which shall be an Eligible
Account, in which the Servicer may deposit all payments by, and collections
from, the Mortgagors received in connection with the Mortgage Loans prior to the
Servicer's deposit of all such funds required to be deposited into the
Collection Account. Withdrawals may be made out of such collections in the
Servicer Account to reimburse the Servicer for any advances not otherwise
required to be made from the Collection Account or for any refunds made by the
Servicer of any sums determined to be overages, or to pay any interest owed to
Mortgagors on such account to the extent required by law, and in order to
terminate and clear the Servicer Account upon the termination of this Agreement
upon the termination of the Trust Fund.
Section 5.8 Fidelity Bond; Errors and Omissions Policy. (a) The
Servicer shall maintain with a responsible company, and at its own expense, a
blanket fidelity bond (a "Fidelity Bond") and an errors and omissions insurance
policy (an "Errors and Omissions Policy"), in a minimum amount acceptable to
FNMA or otherwise in an amount as is commercially available at a cost that is
not generally regarded as excessive by industry standards, with broad coverage
on all officers, employees or other persons acting in any capacity requiring
such persons to handle funds, money, documents or papers relating to the
Mortgage Loans ("Servicer Employees"). Any such fidelity bond and errors and
omissions insurance shall protect and insure the Servicer against losses,
including losses resulting from forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such Servicer Employees. Such fidelity bond
shall also protect and insure the Servicer against losses in connection with the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. No provision of this Section 5.8
requiring such fidelity bond and errors and omissions insurance shall diminish
or relieve the Servicer from its duties and obligations as set forth in this
Agreement. Upon the request of the Trustee, the Certificate Insurer or any
Certificateholder, the Servicer shall cause to be delivered to the Trustee, such
Certificateholder or the Certificate Insurer a certified true copy of such
fidelity bond and insurance policy. On the Closing Date, such bond and
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insurance is maintained with certain underwriters as may be specified in writing
to the Certificate Insurer and the Trustee, from time to time. Any such fidelity
bond or insurance policy shall not be canceled or modified in a materially
adverse manner without written notice to the Trustee and the Certificate
Insurer.
(b) The Servicer shall be deemed to have complied with this
provision if one of its respective Affiliates has such a Fidelity Bond and
Errors and Omissions Policy and, by the terms of such fidelity bond and errors
and omission policy, the coverage afforded thereunder extends to the Servicer.
The Servicer shall cause each and every Subservicer for it to maintain a policy
of insurance covering errors and omissions and a fidelity bond which would meet
the requirements of Section 5.8(a) hereof. Any such Fidelity Bond and Errors and
Omissions Policy shall not be canceled or modified in a materially adverse
manner without written notice to the Certificate Insurer.
Section 5.9 Collection of Taxes, Assessments and Other Items. The
Servicer shall deposit all payments by Mortgagors for taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items in the
Collection Account. Withdrawals from the Collection Account may be made to
effect payment of taxes, assessments, primary mortgage or hazard insurance
premiums or comparable items, to reimburse the Servicer out of related
collections for any advances made in the nature of any of the foregoing, to
refund to any Mortgagors any sums determined to be overages, or to pay any
interest owed to Mortgagors on such account to the extent required by law. The
Servicer shall advance the payments referred to in the first sentence of this
Section 5.9 that are not timely paid by the Mortgagors on the date when the tax,
premium or other cost for which such payment is intended is due, but the
Servicer shall be required to so advance only to the extent that such advances,
in the good faith judgment of the Servicer, will be recoverable by the Servicer
pursuant to Section 5.3 out of Liquidation Proceeds, Insurance Proceeds or
otherwise.
Section 5.10 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Trustee shall prepare or cause to be
prepared for filing with the Commission (other than the initial Current Report
on Form 8-K to be filed by the Depositor in connection with the issuance of the
Certificates) any and all reports, statements and information respecting the
Trust and/or the Certificates required to be filed (as set forth in written
instructions received from the Depositor within 10 Business Days of the Closing
Date), and shall solicit any and all proxies of the Certificateholders whenever
such proxies are required to be solicited, pursuant to the Securities Exchange
Act of 1934, as amended. The Depositor shall promptly file, and exercise its
best efforts to obtain a favorable response to, no-action requests with, or
other appropriate exemptive relief from, the Commission seeking the usual and
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customary exemption from such reporting requirements granted to issuers of
securities similar to the Certificates. Fees and expenses incurred by the
Trustee in connection with the foregoing shall be reimbursed pursuant to Section
9.5 and shall not be paid by the Trust.
Section 5.11 Enforcement of Due-on-Sale Clauses; Assumption
Agreements. In any case in which a Mortgaged Property is about to be conveyed by
the Mortgagor (whether by absolute conveyance or by contract of sale, and
whether or not the Mortgagor remains liable thereon) and the Servicer has
knowledge of such prospective conveyance, the Servicer shall effect assumptions
in accordance with the terms of any due-on-sale provision contained in the
related Mortgage Note or Mortgage. The Servicer shall enforce any due-on-sale
provision contained in such Mortgage Note or Mortgage to the extent the
requirements thereunder for an assumption of the Mortgage Loan have not been
satisfied to the extent permitted under the terms of the related Mortgage Note,
unless such provision is not exercisable under applicable law and governmental
regulations or in the Servicer's judgment, such exercise is reasonably likely to
result in legal action by the Mortgagor, or such conveyance is in connection
with a permitted assumption of the related Mortgage Loan. Subject to the
foregoing, the Servicer is authorized to take or enter into an assumption
agreement from or with the Person to whom such property is about to be conveyed,
pursuant to which such person becomes liable under the related Mortgage Note
and, unless prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Mortgage Interest Rate with respect to such Mortgage
Loan shall remain unchanged. The Servicer is also authorized to release the
original Mortgagor from liability upon the Mortgage Loan and substitute the new
Mortgagor as obligor thereon. In connection with such assumption or
substitution, the Servicer shall apply such underwriting standards and follow
such practices and procedures as shall be normal and usual for mortgage loans
similar to the Mortgage Loans and as it applies to mortgage loans owned solely
by it. The Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Trustee the
original copy of such assumption or substitution agreement, which copy shall be
added by the Trustee to the related Mortgage File and shall, for all purposes,
be considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. In connection with any
such assumption or substitution agreement, the Mortgage Interest Rate of the
related Mortgage Note and the payment terms shall not be changed. Any fee
collected by the Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Servicer as servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any conveyance by the
Mortgagor of the
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property subject to the Mortgage or any assumption of a Mortgage Loan by
operation of law which the Servicer in good faith determines it may be
restricted by law from preventing, for any reason whatsoever, or if the exercise
of such right would impair or threaten to impair any recovery under any
applicable insurance policy or, in the Servicer's judgment, be reasonably likely
to result in legal action by the Mortgagor.
Section 5.12 Realization upon Defaulted Mortgage Loans. Except as
provided in the last two paragraphs of this Section 5.12, the Servicer shall, on
behalf of the Trust, foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 5.3. In connection with
such foreclosure or other conversion, the Servicer shall follow Accepted
Servicing Practices. The foregoing is subject to the proviso that the Servicer
shall not be required to expend its own funds in connection with any foreclosure
or to restore any damaged property unless it shall determine that (i) such
foreclosure and/or restoration will increase the proceeds of liquidation of the
Mortgage Loan to Certificateholders after reimbursement to itself for such
expenses and (ii) such expenses will be recoverable to it through Liquidation
Proceeds (respecting which it shall reimburse itself for such expense prior to
the deposit in the Collection Account of such proceeds). The Servicer shall be
entitled to reimbursement of the Servicing Fee and other amounts due it, if any,
to the extent, but only to the extent, that withdrawals from the Collection
Account and the Trustee Collection Account with respect thereto are permitted
under Section 5.3.
The Servicer may foreclose against the Mortgaged Property securing a
defaulted Mortgage Loan either by foreclosure, by sale or by strict foreclosure,
and in the event a deficiency judgment is available against the Mortgagor or any
other person, may proceed for the deficiency.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be issued to the Trustee, or to the Servicer on behalf
of the Trustee and the Certificateholders. Notwithstanding any such acquisition
of title and cancellation of the related Mortgage Loan, such REO Mortgage Loan
shall be considered to be a Mortgage Loan held in the applicable REMIC of the
Trust Fund until such time as the related Mortgaged Property shall be sold and
such REO Mortgage Loan becomes a Liquidated Mortgage Loan. Consistent with the
foregoing, for purposes of all calculations hereunder, so long as such REO
Mortgage Loan shall be considered to be an Outstanding Mortgage Loan:
(i) Notwithstanding that the indebtedness evidenced by the related
Mortgage Note shall have been
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discharged, such Mortgage Note and the related amortization schedule in
effect at the time of any such acquisition of title (after giving effect
to any previous Curtailments and before any adjustment thereto by reason
of any bankruptcy or similar proceeding or any moratorium or similar
waiver or grace period) shall be assumed to remain in effect, except that
such schedule shall be adjusted to reflect the application of Net REO
Proceeds received in any month pursuant to the succeeding clause.
(ii) Net REO Proceeds received in any month shall be deemed to have
been received first in payment of the accrued interest that remained
unpaid on the date that such Mortgage Loan became an REO Mortgage Loan of
the applicable REMIC of the Trust Fund, with the excess thereof, if any,
being deemed to have been received in respect of the delinquent principal
installments that remained unpaid on such date. Thereafter, Net REO
Proceeds received in any month shall be applied to the payment of
installments of principal and accrued interest on such Mortgage Loan
deemed to be due and payable in accordance with the terms of such Mortgage
Note and such amortization schedule. If such Net REO Proceeds exceed the
then Unpaid REO Amortization, the excess shall be treated as a Curtailment
received in respect of such Mortgage Loan.
(iii) The Net REO Proceeds allocated to the payment of a related
Servicing Fee shall be limited to an amount equal to the product of (x)
the total amount of Net REO Proceeds allocable to interest multiplied by
(y) the fraction, the numerator of which is the interest rate at which the
Servicing Fee is determined and the denominator of which is the Mortgage
Interest Rate borne by such Mortgage Loan.
In the event that a REMIC of the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of such REMIC within two years after its acquisition thereby unless
(a) the Servicer shall have provided to the Trustee an Opinion of Counsel to the
effect that the holding by such REMIC of the Trust Fund of such Mortgaged
Property subsequent to two years after its acquisition (and specifying the
period beyond such two-year period for which the Mortgaged Property may be held)
will not cause such REMIC to be subject to the tax on prohibited transactions
imposed by Code Section 860F(a)(1), otherwise subject such REMIC or the Trust
Fund to tax or cause the applicable REMIC to fail to qualify as a REMIC at any
time that any Certificates are outstanding, or (b) the Servicer or the Trustee
(at the Servicer's expense) shall have applied for, at
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least 60 days prior to the expiration of such two-year period, an extension of
such two-year period in the manner contemplated by Code Section 856(e)(3), in
which case the two-year period shall be extended by the applicable period. The
Servicer shall further ensure that the Mortgaged Property is administered so
that it constitutes "foreclosure property" within the meaning of Code Section
860G(a)(8) at all times, that the sale of such property does not result in the
receipt by the applicable REMIC of the Trust Fund of any income from
non-permitted assets as described in Code Section 860F(a)(2)(B), and that such
REMIC does not derive any "net income from foreclosure property" within the
meaning of Code Section 860G(c)(2) with respect to such property.
In lieu of foreclosing upon any defaulted Mortgage Loan, the
Servicer may, in its discretion, permit the assumption of such Mortgage Loan if,
in the Servicer's judgment, such default is unlikely to be cured and if the
assuming borrower satisfies the Servicer's underwriting guidelines with respect
to mortgage loans owned by the Servicer. In connection with any such assumption,
the Mortgage Interest Rate of the related Mortgage Note and the payment terms
shall not be changed. Any fee collected by the Servicer for entering into an
assumption agreement will be retained by the Servicer as servicing compensation.
Alternatively, the Servicer may encourage the refinancing of any defaulted
Mortgage Loan by the Mortgagor.
Notwithstanding the foregoing, prior to instituting foreclosure
proceedings or accepting a deed-in-lieu of foreclosure with respect to any
Mortgaged Property, the Servicer shall make, or cause to be made, inspection of
the Mortgaged Property in accordance with the Accepted Servicing Practices and,
with respect to environmental hazards, such procedures as are required by the
provisions of the FNMA's selling and servicing guide applicable to single-family
homes and in effect on the date hereof. The Servicer shall be entitled to rely
upon the results of any such inspection made by others. In cases where the
inspection reveals that such Mortgaged Property is potentially contaminated with
or affected by hazardous wastes or hazardous substances, the Servicer shall
promptly give written notice of such fact to the Certificate Insurer, the
Trustee and each Class A Certificateholder. The Servicer shall not commence
foreclosure proceedings or accept a deed-in-lieu of foreclosure for such
Mortgaged Property without obtaining the consent of the Certificate Insurer.
Section 5.13 Trustee to Cooperate; Release of Mortgage Files. Upon
the payment in full of any Mortgage Loan, or the receipt by the Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer shall (i) immediately deliver to the Trustee a
notice substantially in the form of the Request for Release attached hereto as
Exhibit H (which request shall include a statement to the effect that all
amounts received in connection with such payment which are required to be
deposited in the applicable
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Collection Account pursuant to Section 5.3 have been or shall be so deposited)
and executed by a Servicing Officer and (ii) request delivery to it of the
Mortgage File. Upon receipt of such Request for Release, the Trustee, or the
Custodian on its behalf, shall promptly release the related Mortgage File to the
Servicer. Upon any such payment in full, the Servicer is authorized to give, as
agent for the Trustee and the mortgagee under the Mortgage which secured the
Mortgage Loan, an instrument of satisfaction (or assignment of mortgage without
recourse) regarding the property subject to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of such payment, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Collection Account. In connection therewith, the Trustee shall
execute and return to the Servicer any required power of attorney provided to
the Trustee by the Servicer and other required documentation in accordance with
Section 5.1(d). From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan and in accordance with Accepted Servicing
Practices, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a Request for Release signed by a Servicing Officer, release, or
cause the Custodian to release, the related Mortgage File to the Servicer and
shall execute such documents as shall be necessary to the prosecution of any
such proceedings. Such Request for Release shall obligate the Servicer to return
the Mortgage File to the Trustee when the need therefor by the Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer similar to the Request for
Release hereinabove specified, the Mortgage File shall be delivered by the
Trustee to the Servicer.
Section 5.14 Servicing Fee; Servicing Compensation. (a) The Servicer
shall be entitled, at its election, either (i) to pay itself the Servicing Fee
out of any Mortgagor payment on account of interest or Net REO Proceeds actually
collected prior to the deposit of such payment in the Collection Account or (ii)
to withdraw from the Collection Account or Trustee Collection Account such
Servicing Fee pursuant to Section 5.4. The Servicer shall also be entitled, at
its election, either (a) to pay itself the Servicing Fee in respect of each
delinquent Mortgage Loan out of Liquidation Proceeds in respect of such Mortgage
Loan or other recoveries with respect thereto to the extent permitted in Section
5.3(a) or (b) to withdraw from the Collection Account the Servicing Fee in
respect of each such Mortgage Loan to the extent of such Liquidation Proceeds or
other recoveries, to the extent permitted by Section 5.4(a).
The aggregate Servicing Fee is reserved for the administration of
the Trust Fund and, in the event of replacement of the Servicer as servicer of
the Mortgage Loans, for the payment of other expenses related to such
replacement. The
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aggregate Servicing Fee shall be offset as provided in Section 5.19. The
Servicer shall be required to pay all expenses incurred by it in connection with
its servicing activities hereunder (including maintenance of the hazard
insurance required by Section 5.5) and shall not be entitled to reimbursement
therefor except as specifically provided herein.
(b) Servicing compensation in the form of assumption fees, late
payment charges, tax service fees, fees for statement of account or payoff of
the Mortgage Loan (to the extent permitted by applicable law) or otherwise shall
be retained by the Servicer and are not required to be deposited in the
Collection Account.
Section 5.15 Reports to the Trustee; Collection Account Statements.
Not later than 15 days after each Remittance Date, the Servicer shall provide to
the Trustee and the Certificate Insurer a statement, certified by a Servicing
Officer, setting forth the status of the Collection Account and the Trustee
Collection Account as of the close of business on the related Servicer
Remittance Date, stating that all distributions required by this Agreement to be
made by the Servicer on behalf of the Trustee have been made (or if any required
distribution has not been made by the Servicer, specifying the nature and status
thereof) and showing, for the period covered by such statement, the aggregate of
deposits into and withdrawals from the Collection Account and the Trustee
Collection Account for each category of deposit specified in Section 5.3 and
each category of withdrawal specified in Section 5.4, the allocation of such
amounts between principal and interest collected on the Trust Balances and any
Additional Balances and the aggregate of deposits into the Certificate Account
and the Additional Certificate Account as specified in Sections 6.1(e) and
6.1(f), respectively. Such statement shall also state the aggregate unpaid
principal balance of all the Mortgage Loans as of the close of business on the
last day of the month preceding the month in which such Remittance Date occurs
and the allocation of such aggregated balances between the Trust Balances and
the Additional Balances. Copies of such statement shall be provided by the
Trustee to any Certificateholder upon request.
Section 5.16 Annual Statement as to Compliance. The Servicer will
deliver to the Trustee, the Certificate Insurer, S&P and Moody's not later than
the last day of the fifth month subsequent to the end of the Servicer's fiscal
year, an Officers' Certificate stating as to each signer thereof, that (i) a
review of the activities of the Servicer during the preceding calendar year and
of its performance under this Agreement has been made under such officer's
supervision, and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year, or if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. The first such
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Officers' Certificate shall be delivered in May 1998. Such Officers' Certificate
shall be accompanied by the statement described in Section 5.17 of this
Agreement. Copies of such statement shall, upon request, be provided to any
Certificateholder by the Servicer, or by the Trustee at the Servicer's expense
if the Servicer shall fail to provide such copies.
Section 5.17 Annual Independent Public Accountants' Servicing
Report. Not later than the last day of the fifth month subsequent to the end of
the Servicer's fiscal year, the Servicer, at its expense, shall cause a firm of
nationally recognized independent public accountants to furnish a statement to
the Trustee, the Certificate Insurer, S&P and Moody's to the effect that, on the
basis of an examination of certain documents and records relating to the
servicing of the mortgage loans being serviced by the Servicer under pooling and
servicing agreements similar to this Agreement (which agreements shall be
described in a schedule to such statement), conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers,
such firm is of the opinion that such servicing has been conducted in compliance
with the Uniform Single Attestation Program for Mortgage Bankers and that such
examination has disclosed no exceptions or errors relating to the servicing
activities of the Servicer (including servicing of Mortgage Loans subject to
this Agreement) that, in the opinion of such firm, are material, except for such
exceptions as shall be set forth in such statement. The first such statement
shall be delivered in May 1998. Copies of such statement shall, upon request, be
provided to Certificateholders by the Servicer, or by the Trustee at the
Servicer's expense if the Servicer shall fail to provide such copies. For
purposes of such statement, such firm may conclusively presume that any pooling
and servicing agreement which governs mortgage pass-through certificates offered
by the Depositor (or any predecessor or successor thereto) in a registration
statement under the Securities Act of 1933, as amended, is similar to this
Agreement, unless such other pooling and servicing agreement expressly states
otherwise.
Section 5.18 Reports to be Provided by the Servicer. (a) In
connection with the transfer of the Certificates, the Trustee on behalf of any
Certificateholder may request that the Servicer make available to any
prospective Certificateholder annual unaudited financial statements of the
Servicer (or, upon request, audited annual financial statements of the
Servicer's ultimate parent corporation) for one or more of the most recently
completed fiscal years for which such statements are available, which request
shall not be unreasonably denied or unreasonably delayed. Such annual unaudited
financial statements also shall be made available to the Certificate Insurer
upon request.
(b) The Servicer also agrees to make available on a reasonable basis
to the Certificate Insurer or any prospective Certificateholder a knowledgeable
financial or accounting officer
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for the purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer and to permit
the Certificate Insurer or any prospective Certificateholder to inspect the
Servicer's servicing facilities during normal business hours for the purpose of
satisfying the Certificate Insurer or such prospective Certificateholder that
the Servicer has the ability to service the Mortgage Loans in accordance with
this Agreement.
Section 5.19 Adjustment of Servicing Compensation in Respect of
Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the
Servicer shall be entitled to receive with respect to all of the Mortgage Loans
and each Remittance Date shall be offset on such Remittance Date by an amount
equal to the aggregate Prepayment Interest Shortfall with respect to all
Mortgage Loans which were subjects of Principal Prepayments during the Due
Period applicable to such Remittance Date. The amount of any offset against the
aggregate Servicing Fee with respect to any Remittance Date under this Section
5.19 shall be limited to the aggregate amount of the Servicing Fees otherwise
payable to the Servicer (without adjustment on account of Prepayment Interest
Shortfalls) with respect to (i) scheduled payments having the Due Date occurring
in the Due Period applicable to such Remittance Date received by the Servicer
prior to the Servicer Remittance Date, and (ii) Principal Prepayments,
Curtailments and Liquidation Proceeds received in the Due Period applicable to
such Remittance Date, and the rights of the Certificateholders to the offset of
the aggregate Prepayment Interest Shortfalls shall not be cumulative.
Section 5.20 Periodic Advances. If, on any Determination Date, the
Servicer determines that any Monthly Payments due on the Due Date immediately
preceding such Determination Date have not been received as of the close of
business on such Determination Date, the Servicer shall determine the amount of
any Periodic Advance required to be made with respect to such unpaid Monthly
Payments on the related Servicer Remittance Date. The Servicer shall, one
Business Day after such Determination Date, certify and deliver a magnetic tape
or diskette to the Trustee indicating the payment status of each Mortgage Loan
as of such Determination Date and shall cause to be deposited in the Trustee
Collection Account an amount equal to the Periodic Advance for the related
Servicer Remittance Date, which deposit may be made in whole or in part from
funds in the Collection Account being held for future distribution or withdrawal
on or in connection with Remittance Dates in subsequent months. Any funds being
held for future distribution to Certificateholders and so used shall be replaced
by the Servicer from its own funds by deposit into the Trustee Collection
Account on or before the Determination Date corresponding to any such future
Servicer Remittance Date to the extent that funds in the Trustee Collection
Account on such future Determination Date shall otherwise be less than the
amount required to be transferred to the Certificate Account in respect
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of payments to Certificateholders required to be made on the Remittance Date
related to such future Determination Date.
The Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such Periodic
Advance shall be deemed to have been made, such designation, except in cases of
manifest error, being conclusive for purposes of withdrawals from the Collection
Account or Trustee Collection Account pursuant to Section 5.4.
Section 5.21 Indemnification; Third Party Claims. (a) Each of the
Servicer, the Depositor, and the Seller (solely for the purpose of this Section
5.21, the "Indemnifying Parties") agrees to indemnify and to hold each of the
Servicer, the Depositor, the Trustee, the Seller, the Certificate Insurer and
each Certificateholder (solely for the purpose of this Section 5.21, the
"Indemnified Parties") 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 Indemnified Parties may, respectively, sustain
in any way related to the failure of any one or more of the Indemnifying Parties
to perform its respective duties in compliance with the terms of this Agreement.
Each Indemnified Party and the Servicer shall immediately notify the other
Indemnified Parties if a claim is made by a third party with respect to this
Agreement, and the Servicer shall with the consent of the Certificate Insurer,
such consent not to be unreasonably withheld, assume the defense of any such
claim and pay all expenses in connection therewith, including reasonable counsel
fees approved by the Certificate Insurer, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Indemnified
Parties in respect of such claim. The Trustee shall, out of the assets of the
Trust Fund, reimburse the Servicer in accordance with Section 5.14 hereof for
all amounts advanced by it pursuant to the preceding sentence except when the
claim relates directly to the failure of the Servicer to service and administer
the Mortgages in compliance with the terms of this Agreement; provided, that the
Servicer's indemnity hereunder shall not be in any manner conditioned on the
availability of funds for such reimbursement.
(b) The Trustee, at the written request of the Servicer (which the
Trustee may conclusively rely on) may, if necessary, reimburse the Servicer from
amounts otherwise distributable on the Class R Certificates for all amounts
advanced by the Servicer pursuant to Section 4.4(a)(ii) of the Purchase and Sale
Agreement, except when the claim relates directly to the failure of the
Servicer, if it is, or is an Affiliate of, the Seller, to perform its
obligations to service and administer the Mortgages in compliance with the terms
of the Purchase and Sale Agreement, or the failure of the Seller to perform its
duties in compliance with the terms of this Agreement.
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(c) The Trustee, at the written request of the Servicer (which the
Trustee may conclusively rely on) shall reimburse the Seller from amounts
otherwise distributable on the Class R Certificates for all amounts advanced by
the Seller pursuant to the second sentence of Section 4.4(a)(ii) of the Purchase
and Sale Agreement except when the relevant claim relates directly to the
failure of the Seller to perform its duties in compliance with the terms of the
Purchase and Sale Agreement.
Section 5.22 Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer. (a) The Servicer will keep in full effect its
existence, rights and franchises as a corporation, will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the Mortgage Loans and to perform its duties under this Agreement and will
otherwise operate its business so as to cause the representations and warranties
under Section 3.1 to be true and correct at all times under this Agreement.
(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution acceptable to the Certificate Insurer that has a net worth of at
least $15,000,000 and is a Permitted Transferee, and in all events shall be the
successor of the Servicer without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Servicer shall send notice of any such merger or
consolidation to the Trustee and the Certificate Insurer.
Section 5.23 Assignment of Agreement by Servicer; Servicer Not to
Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual written consent of
the Servicer, the Seller, the Certificate Insurer and the Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without the incurrence, in the reasonable judgment of the Certificate Insurer,
of unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Depositor and the Certificate Insurer. No such resignation shall
become effective until the Trustee or a successor appointed in accordance with
the terms of this Agreement has assumed the Servicer's responsibilities and
obligations hereunder in
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accordance with Section 7.2. The Servicer shall provide the Trustee, Moody's and
S&P and the Certificate Insurer with 30 days prior written notice of its
intention to resign pursuant to this Section 5.23.
Section 5.24 Servicer Purchase of Certain Mortgage Loans. On and
after the date upon which the Trust Balance of any HELOC has been reduced to
zero (from payments from sources other than the Servicer or any Affiliate of the
Servicer), the Servicer may purchase the related Mortgage Loan by depositing an
amount equal to the then outstanding Additional Balance with respect to such
Mortgage Loan into the Additional Certificate Account. After the deposit of such
amount the Trustee shall release such Mortgage Loan and the related Mortgage
File to or at the direction of the Servicer.
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ARTICLE VI
Distributions and Payments
Section 6.1 Establishment of Certificate Account, Additional
Certificate Account, Capitalized Interest Account and Pre-Funding Account;
Deposits to the Certificate Account, the Additional Certificate Account,
Capitalized Interest Account and the Pre-Funding Account. (a) The Trustee shall
establish and maintain the Certificate Account which shall be titled
"Certificate Account, The Chase Manhattan Bank, as trustee for the registered
holders of Mortgage Pass-Through Certificates, Series 1997-2, Class A and Class
R" and which shall be an Eligible Account. Notice of the establishment of the
Certificate Account shall be promptly provided in writing to each of the
Servicer, the Rating Agencies and the Certificate Insurer.
(b) The Trustee shall establish and maintain the Additional
Certificate Account which shall be titled "Additional Certificate Account, The
Chase Manhattan Bank, as trustee for the registered holders of Mortgage
Pass-Through Certificates, Series 1997-2, Additional Certificates." Notice of
the establishment of the Additional Certificate Account shall be promptly
provided in writing to each of the Servicer, the Certificate Insurer and the
Holder of the Additional Certificate.
(c) (i) The Trustee shall establish and maintain the Pre-Funding
Account which shall be titled "Pre-Funding Account, The Chase Manhattan Bank, as
trustee for the registered holders of Mortgage Pass-Through Certificates, Series
1997-2, Class A" and which shall be an Eligible Account. The Trustee shall
deposit the Original Group I Pre-Funded Amount from the proceeds of the sale of
the Class A-1 Certificates and the Original Group II Pre-Funded Amount from the
proceeds of the sale of the Group II Certificates into the Pre-Funding Account
on the Closing Date.
(ii) The Trustee shall establish and maintain the Capitalized
Interest Account which shall be titled "Capitalized Interest Account, The Chase
Manhattan Bank, as trustee for the registered holders of Mortgage Pass-Through
Certificates, Series 1997-2, Class A" and which shall be an Eligible Account.
The Trustee shall deposit the Capitalized Interest Requirement from the proceeds
of the sale of the Class A Certificates into the Capitalized Interest Account on
the Closing Date unless an Eligible Letter of Credit with respect to such amount
has been delivered to the Trustee on the Closing Date.
(d) The Servicer may direct the Trustee in writing to invest the
funds in the Certificate Account, the Capitalized Interest Account and the
Pre-Funding Account only in Permitted Investments which mature not later than
the second Business Day prior to the Remittance Date and thereafter all such
funds shall be held by the Trustee uninvested. No Permitted Investment shall be
sold or disposed of at a gain prior to maturity unless the
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Servicer has delivered to the Trustee an Opinion of Counsel (at the Servicer's
expense) that such sale or disposition will not cause the Trust Fund to be
subject to the tax on income from prohibited transactions imposed by Code
Section 860F(a)(1), otherwise subject the Trust Fund to tax or cause the 1997-2
REMIC to fail to qualify as a REMIC. All income (other than any gain from a sale
or disposition of the type referred to in the preceding sentence or such income
from amounts on deposit in the Pre-Funding Account) realized from any such
Permitted Investment shall be for the benefit of the Servicer as additional
servicing compensation. The amount of any losses incurred in respect of any such
investments shall be deposited in the Certificate Account by the Servicer out of
its own funds immediately as realized.
(e) On each Servicer Remittance Date, the Servicer shall cause to be
deposited in the Certificate Account (i) from funds on deposit in the Trustee
Collection Account, an amount equal to the Servicer Remittance Amount with
respect to Group I (net of the amount to be deposited pursuant to clause (ii)
below) and the Servicer Remittance Amount with respect to Group II (net of the
amount to be deposited pursuant to clause (ii) below), (ii) from funds on
deposit in the Collection Account or the Trustee Collection Account, the Net
Foreclosure Profits for the related Group, if any with respect to the related
Remittance Date, minus any portion thereof payable to the Servicer pursuant to
Section 5.3, net of the Additional Certificate Allocation, (iii) from funds on
deposit in the Capitalized Interest Account, the Capitalized Interest Deposit
Amount for such Remittance Date and (iv) from funds on deposit in the
Pre-Funding Account, any such amount that constitutes a portion of the Servicer
Remittance Amount.
(f) On the second Business Day prior to each Remittance Date, the
Trustee shall transfer funds on deposit in the Trustee Collection Account into
the Certificate Account in the amount specified by the Servicer pursuant to
Section 6.4(d) hereof. On each of the first three Remittance Dates, to the
extent funds in the Certificate Account are insufficient to pay the amounts
required by Sections 6.5(a)(i) - (vi), the Trustee shall withdraw from the
Capitalized Interest Account (or make a drawing on the Letter of Credit) and
deposit in the Certificate Account the related Capitalized Interest Deposit
Amount. On the Business Day prior to the Remittance Date immediately following
the end of the Pre-Funding Period the Trustee shall transfer all amounts then on
deposit in the Pre-Funding Account to the Certificate Account.
(g) On the second Business Day prior to each Remittance Date, the
Servicer shall cause to be deposited in the Additional Certificate Account, all
amounts on deposit in the Trustee Collection Account and the Collection Account
allocable to the Additional Certificate in accordance with the definition of
Servicer Remittance Amount and the definition of Additional
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Certificate Allocation hereof. All funds herein required to be deposited in the
Additional Certificate Account shall be allocated at the direction of the Holder
of the Additional Certificate.
Section 6.2 Permitted Withdrawals From the Certificate Account and
The Additional Certificate Account. The Trustee shall, in accordance with the
Servicer's written directions to the Trustee as described in Section 6.5,
withdraw or cause to be withdrawn
(a) funds from the Certificate Account for the following purposes:
(i) to effect the distributions described in Section 6.5(a);
(ii) to pay to or upon the direction of the Seller with
respect to each Mortgage Loan or property acquired in respect
thereof that has been repurchased or replaced pursuant to Section
2.4 or 3.3 or to pay to the Servicer with respect to each Mortgage
Loan or property acquired in respect thereof that has been purchased
all amounts received thereon deposited in the related Certificate
Account that do not constitute property of the Trust Fund;
(iii) to pay the Servicer any interest earned on or investment
income earned with respect to funds in the Certificate Account;
(iv) to return to the Trustee Collection Account any amount
deposited in the Certificate Account that was not required to be
deposited therein; and
(v) to clear and terminate the related Certificate Account
upon termination of the Trust Fund or any Group thereof pursuant to
Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (a)(i)
through (a)(v) listed above.
(b) funds from the Additional Certificate Account, for the following
purposes:
(i) to effect the distributions described in Section 6.5(b);
(ii) to pay to the Servicer any interest earned on or
investment income earned with respect to funds in the Additional
Certificate Account;
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(iii) to return to the Trustee Collection Account or the
Collection Account any amount deposited in the Additional
Certificate Account that was not required to be deposited therein;
and
(iv) to clear and terminate the Additional Certificate Account
upon termination of the Trust Fund pursuant to Article VIII hereof.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Additional Certificate Account pursuant to each of
subclauses (b)(i) through (b)(v).
Section 6.3 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, but not limited to, (a) all payments due on the Mortgage
Loans in accordance with the respective terms and conditions of such Mortgage
Loans and required to be paid over to the Trustee by the Servicer or by any
Subservicer and (b) Insured Payments. The Trustee shall hold all such money and
property received by it, as part of the Trust Fund and shall apply it as
provided in this Agreement.
Section 6.4 The Reserve Account and the Certificate Insurance
Policies. (a) On the Closing Date, the Trustee shall establish the Reserve
Account entitled "Reserve Account, The Chase Manhattan Bank, as trustee for the
registered holders of Mortgage Pass-Through Certificates, Series 1997-2, Class A
and Class R" for the benefit of the Trust, the Certificateholders and the
Certificate Insurer. The Trustee shall have exclusive control over such Reserve
Account and the sole right of withdrawal from such Account. On the Closing Date,
the Depositor shall make available under an Eligible Letter of Credit or, from
the proceeds of the offering of the Certificates, shall deposit an amount equal
to $3,836,278.61 in such Reserve Account, which represents the sum of 8.25% of
the Aggregate HELOC Trust Balance of the Cut-Off Date and 7.0% of the Aggregate
HEL Trust Balance as of the Cut-Off Date. The Trustee shall maintain the Reserve
Account at the Required Reserve Account Level as described in Section 6.5
hereof. If the amount in the Reserve Account decreases below the Required
Reserve Account Level, then on the next Remittance Date, the Trustee shall, to
the extent of the Available Funds Excess, transfer from the Certificate Account
the amount described in Section 6.5(a)(vi) and deposit such amount into the
Reserve Account. On any Remittance Date, any amount in the Reserve Account in
excess of the Required Reserve Account Level after the required distributions
described in Sections 6.5(a)(i)-(vi) shall be withdrawn from the Reserve Account
and paid to the
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Holders of the Class R Certificates pro rata in proportion to their undivided
beneficial ownership interest in the 1997-2 REMIC. Funds held in the Reserve
Account shall be invested in Permitted Investments at the written direction of
the Holders of the Class R Certificates that mature prior to the Business Day
prior to the next Servicer Remittance Date. No Permitted Investment shall be
sold prior to its maturity. The Holders of the Class R Certificates shall be
liable for any losses occurring with respect to the Permitted Investments held
in the Reserve Account.
(b) Not later than two Business Days prior to the Servicer
Remittance Date, the Trustee, based on the information provided to it by the
Servicer pursuant to Section 6.5 hereof, shall determine with respect to the
immediately following Remittance Date the amount to be on deposit in the
Certificate Account (such amount the result of the Servicer's remittance of the
Servicer Remittance Amount for Group I and the Servicer Remittance Amount for
Group II) reduced by (x) the sum of the amounts described in clauses (i) and
(ii) of Section 6.5(a) for the related Remittance Date, and further not
including (y) any Insured Payment.
(c) (i) Not later than 12:00 noon New York City time on the second
Business Day preceding each Remittance Date, the Trustee shall, if the Trustee
determines that the Group I Available Amount plus any amount available to be
transferred to the Certificate Account from the Reserve Account (or drawn under
an Eligible Letter of Credit) for the related Remittance Date is less than the
Class A-1 Formula Distribution Amount for such Remittance Date, 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 and such notice shall serve as
a claim for an Insured Payment in an amount equal to the Insured Payment due
with respect to the Class A-1 Certificates for and on such Remittance Date.
Unless the Class A-1 Credit Enhancement Distribution Amount is transferred to
the Certificate Account prior to the related Remittance Date, the Insured
Payment shall be deposited directly into the Certificate Account in accordance
with the Notice and the Class A-1 Certificate Insurance Policy.
(ii) Not later than 12:00 noon New York City time on the second
Business Day preceding each Remittance Date, the Trustee shall, if the
Trustee determines that the Group II Available Amount plus any amount
available to be transferred to the Certificate Account from the Reserve
Account (or drawn under an Eligible Letter of Credit) for the related
Remittance Date is less than the Group II Formula Distribution Amount for
such Remittance Date, complete a Notice in the form of Exhibit A to the
Group II Certificate Insurance Policy and submit such notice to the
Certificate Insurer and such notice shall serve as a claim for an Insured
Payment in an amount equal to the Insured Payment due with respect to the
Group II Certificates for and on such Remittance Date. Unless the Group II
Credit Enhancement Distribution Amount is transferred to the Certificate
Account prior to the related Remittance Date, the Insured Payment shall be
deposited directly into the
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Certificate Account in accordance with the Notice and the Group II
Certificate Insurance Policy.
(d) On the Business Day prior to each Remittance Date, (i) for which
an Insured Payment is required, the Trustee shall withdraw all funds on deposit
in the Reserve Account and draw all amounts available to be drawn under the
Eligible Letter of Credit in accordance with the letter of instructions
addressed to the Trustee dated as of the Closing Date attached hereto as Exhibit
Q and deposit such amount in the Certificate Account and (ii) for which no
Insured Payment is required, the Trustee shall withdraw from the Reserve Account
and if the amounts on deposits in the Reserve Account are insufficient shall
draw upon the Eligible Letter of Credit in accordance with the letter of
instructions addressed to the Trustee dated as of the Closing Date attached
hereto as Exhibit Q, in an aggregate amount equal to the Class A-1 Credit
Enhancement Distribution Amount and the Group II Credit Enhancement Distribution
Amount and deposit such amount in the Certificate Account to be used to make
distributions to the related Certificateholders on the related Remittance Date.
(e) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Certificate from moneys
received under either Certificate Insurance Policy. The Certificate Insurer
shall have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(f) In the event that the Trustee has received a certified copy of
an order of the appropriate court that any amount distributed on the Class A
Certificates, including any amounts represented by an Insured Payment, has been
voided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the related Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided amount distributed, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to
Certificateholders of the affected Certificates that, in the event any
Certificateholder's amount distributed is so recovered, such Certificateholder
will be entitled to payment pursuant to the related Certificate Insurance
Policy, a copy of which shall be made available through the Trustee, the
Certificate Insurer or the Certificate Insurer's fiscal agent, if any, and the
Trustee shall furnish to the Certificate Insurer or its fiscal agent, if any,
its records evidencing the payments which have been made by the Trustee and
subsequently recovered from Certificateholders, and dates on which such payments
were made.
(g) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable
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bankruptcy, insolvency, receivership or similar law (a "Preference Claim") of
any distribution made with respect to the Certificates. Each Certificateholder,
by its purchase of Certificates, the Servicer and the Trustee agree that, the
Certificate Insurer (so long as no Certificate Insurer Default exists) may at
any time during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Certificate Insurer shall be subrogated to, and each
Certificateholder, the Servicer and the Trustee hereby delegate and assign to
the Certificate Insurer, to the fullest extent permitted by law, the rights of
the Servicer, the Trustee and each Certificateholder in the conduct of any such
Preference Claim, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
Section 6.5 Distributions. No later than 12:00 noon California time
on the Determination Date, the Servicer shall deliver to the Trustee and to the
Certificate Insurer a report in computer-readable form specifying (x) the
outstanding Trust Balances and Additional Balances, if any, of each of the
Mortgage Loans as of the last day of the calendar month immediately preceding
the Due Period applicable to such Servicer Remittance Date, (y) such of the
information included in Section 6.7(c) as to the Mortgage Loans as the Trustee
may reasonably require or the Certificate Insurer may reasonably request and (z)
such information as to each Mortgage Loan as of the Record Date immediately
preceding such Servicer Remittance Date and such other information as the
Trustee shall reasonably require or the Certificate Insurer may reasonably
request. The Servicer shall include written direction to the Trustee (with a
copy delivered to the Certificate Insurer) specifying the following information
(which need not be in computer-readable form): (A) each amount to be transferred
by the Trustee from the Trustee Collection Account and/or the Collection Account
(i) to the Certificate Account, including (a) the Servicer Remittance Amount for
Group I and the Servicer Remittance Amount for Group II, (b) the Net Foreclosure
Profits for Group I (net of any portion payable to the Servicer and net of the
Additional Certificate Allocation portion thereof) and the Net Foreclosure
Profits for Group II (net of any portion payable to the Servicer) and (c) the
Periodic Advances for such Remittance Date; and (ii) to the Additional
Certificate Account(s), pursuant to Section 6.1(g); (B) instructions to the
Trustee regarding the amounts to be withdrawn from the Reserve Account and
deposited into the Certificate Account pursuant to Section 6.4(d) hereof; (C)
instructions to the Trustee regarding amounts to be drawn under the Eligible
Letter of Credit and (D) instructions to the Trustee specifying the amounts to
be withdrawn from the Certificate Account pursuant to Section 6.2(a)
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(including therein an itemization of the amounts to be distributed pursuant to
Section 6.2(a)(i) as specified in Section 6.5(a)(i)-(vii) and the amounts to be
withdrawn from the Additional Certificate Account(s) pursuant to Section 6.2(b)
(including therein an itemization of the amounts to be distributed pursuant to
Section 6.5(b)(i)-(ii)). The information with respect to the Remittance Date
provided by the Servicer to the Trustee and the Certificate Insurer on the
Determination Date shall also include the Class A-1 Formula Distribution Amount,
the Group II Formula Distribution Amount, the Class A-1 Pass-Through Rate, the
Weighted Average Rate Cap, the Weighted Average Group II Pass-Through Rate the
Class A-1 Premium Percentage and the Group II Premium Percentage, the aggregate
Class A-1 Principal Balance, the aggregate Class A-2 Principal Balance, the
aggregate Class A-3 Principal Balance, the aggregate Class A-4 Principal Balance
the Aggregate HELOC Trust Balance, the Aggregate HEL Trust Balance, the Class
A-1 Credit Enhancement Distribution Amount, the Group II Credit Enhancement
Distribution Amount and the Required Reserve Account Level. The Servicer shall
also calculate and provide the Group I Available Amount, the Group II Available
Amount, the Available Funds Excess, the Group I Net Available Funds Excess, the
Group II Net Available Funds Excess, if any, the amount of any Deficiency Amount
with respect to the Class A-1 Certificates, the amount of any Deficiency Amount
with respect to the Group II Certificates and any Insured Payment with respect
to the Class A-1 Certificates and any Insured Payment with respect to the Group
II Certificates and the amount required to be deposited into the Reserve Account
to bring the amount remaining on deposit in the Reserve Account together with
the amount available to be drawn under any Eligible Letter of Credit (after any
withdrawal by the Trustee, and subsequent transfer to the Certificate Account)
equal to the Required Reserve Account Level. Simultaneous with the delivery of
the foregoing information to the Trustee, the Servicer shall provide the Trustee
and the Certificate Insurer with a report including information specified in
each of Sections 6.7(a)(i)-(xi) and in Section 6.7(c)(i)-(vii).
(a) With respect to the Certificate Account (including, if deposited
into such Certificate Account, any withdrawals from the Reserve Account or any
Insured Payments), on each Remittance Date, the Trustee shall make the following
allocations, disbursements and transfers in the following order of priority, in
accordance with the information received pursuant to the immediately preceding
paragraph and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) to the Certificate Insurer, the Certificate Insurance Premium
Amount;
(ii) to the Trustee, an amount equal to the Trustee Fees then due to
it;
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(iii) to the Class A-1 Certificateholders from the Group I Available
Amount an amount equal to the Class A-1 Interest Distribution Amount, to
the Class A-2 Certificateholders from the Group II Available Amount an
amount equal to the Class A-2 Interest Distribution Amount, to the Class
A-3 Certificateholders from the Group II Available Amount an amount equal
to the Class A-3 Interest Distribution Amount and to the Class A-4
Certificateholders from the Group II Available Amount an amount equal to
the Class A-4 Interest Distribution Amount;
(iv) from the Group I Available Amount to the Class A-1
Certificateholders an amount equal to the Class A-1 Principal Distribution
Amount until the Class A-1 Principal Balance has been reduced to zero and
from the Group II Available Amount to the Class A-2 Certificateholders an
amount equal to the Group II Principal Distribution Amount until the Class
A-2 Principal Balance has been reduced to zero and from the Group II
Available Amount after the Class A-2 Principal Balance has been reduced to
zero to the Class A-3 Certificateholders an amount equal to the Group II
Principal Distribution Amount until the Class A-3 Principal Balance has
been reduced to zero, and from the Group II Available Amount after the
Class A-3 Principal Balance has been reduced to zero to the Class A-4
Certificateholders an amount equal to the Group II Principal Distribution
Amount until the Class A-4 Principal Balance has been reduced to zero;
(v) to the Certificate Insurer the lesser of (x) the excess of (i)
the amount in the Certificate Account (excluding Insured Payments) over
(ii) the amount of Insured Payments for such Remittance Date and (y) the
outstanding Reimbursement Amount, if any, as of such Remittance Date;
(vi) to the Reserve Account, an amount equal to the lesser of (x)
any amount then remaining in the Certificate Account after the
applications described in clauses (i) through (v) above (the "Available
Funds Excess") and (y) the amount necessary to bring the amount on deposit
in the Reserve Account together with the amount available to be drawn
under any Eligible Letter of Credit to the Required Reserve Account Level;
and
(vii) to the Holders of the Class R Certificates, the amount
remaining in the Certificate Account on such Remittance Date, if any.
(b) With respect to the Additional Certificate Account, on each
Remittance Date, the Trustee shall make the following disbursements and
transfers in the following order of priority, in accordance with the information
received pursuant to the first paragraph of this Section 6.5 and each such
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disbursement or transfer shall be treated as having occurred only after all
preceding disbursements and transfers have occurred:
(i) to the Servicer, any amounts representing interest earned on or
investment income earned with respect to funds on deposit in the
Additional Certificate Account; and
(ii) to or upon the direction of the Holder(s) of the Additional
Certificate(s) and the Additional Certificate(s), the corresponding
Percentage Interest of each such certificate of the amount remaining on
deposit on such Remittance Date in the Additional Certificate Account
after each of the foregoing distributions have occurred.
Notwithstanding the foregoing, the aggregate amounts distributed on all
Remittance Dates to the Holders of the Class A-1 Certificates, the Holders of
the Class A-2 Certificates, the Holders of the Class A-3 Certificates, the
Holders of the Class A-4 Certificates on account of principal shall not exceed
the Original Class A-1 Principal Balance, Original Class A-2 Principal Balance,
Original Class A-3 Principal Balance or Original Class A-4 Principal Balance, as
applicable.
Section 6.6 Investment of Accounts. (a) So long as no Event of
Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account (other than the
Reserve Account) held by the Trustee shall be invested and reinvested by the
Trustee, as directed in writing by the Servicer, in one or more Permitted
Investments bearing interest or sold at a discount and maturing not later than
the second Business Day prior to the next Remittance Date. If an Event of
Default shall have occurred and be continuing or if the Servicer does not
provide investment directions, the Trustee shall invest all Accounts in
Permitted Investments described in paragraph (d) of the definition of Permitted
Investments and maturing not later than the second Business Day prior to the
next Remittance Date. Notwithstanding anything to the contrary in this Section
6.6(a), all amounts received under the Certificate Insurance Policies shall
remain uninvested.
(b) If any amounts are needed for disbursement from any Account
(other than the Reserve 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. The Trustee shall not be liable for any investment loss or other
charge resulting therefrom unless the Trustee's failure to perform in accordance
with this Section 6.6 is the cause of such loss or charge or the Trustee is the
obligor of the related investment.
(c) Subject to Section 9.1 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in
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any Account held by the Trustee resulting from any investment loss on any
Permitted Investment included therein (except as provided in subsection (b) of
this Section 6.6).
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in any Account (excluding the Reserve Account)
shall be for the benefit of the Servicer as servicing compensation (in addition
to the Servicing Fee). The Servicer shall deposit in the related Account the
amount of any loss incurred in respect of any Permitted Investment held therein
which is in excess of the income and gain thereon immediately upon realization
of such loss, without any right to reimbursement therefor from its own funds.
Section 6.7 Reports by Trustee. (a) On each Remittance Date the
Trustee shall, provide a report delivered to it by the Servicer on the
Determination Date, as described in Section 6.5 hereof, to each Holder, to the
Certificate Insurer, to the Underwriter, to the Depositor, to the Servicer, to
S&P and to Moody's (the "Trustee Remittance Report"). Such report shall set
forth the following information:
(i) the amount of the distributions made on such Remittance Date
with respect to the Class A-1 Certificates, the Class A-2 Certificates,
the Class A-3 Certificates, the Class A-4 Certificates, the Class R
Certificates, and the Additional Certificates, including whether such
distributions were made to the holder of the corresponding certificate, or
to an account held by the Trust for the benefit of such corresponding
certificate;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Principal Prepayments
or other unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to interest and the
calculation thereof;
(iv) the amount of any Net Liquidation Proceeds included in such
distributions and the calculation thereof:
(v) the principal amount of the Class A-1 Certificates (based on a
Certificate in an original principal amount of $1,000), the principal
amount of the Class A-2 Certificates (based on a Certificate in an
original principal amount of $1,000), the principal amount of the Class
A-3 Certificates (based on a Certificate in an original principal amount
of $1,000) then outstanding, the principal amount of the Class A-4
Certificates (based on a Certificate in an original principal amount of
$1,000) then outstanding, and the outstanding amount of the Trust
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Balances (stated separately for HELs and HELOCs) and the Additional
Balances, in each case after giving effect to any principal payments made
on such Remittance Date:
(vi) the amount of any Insured Payment included in the amounts
distributed to the related Class of Class A Certificateholders on such
Remittance Date;
(vii) the amount of any Available Funds Excess and any Deficiency
Amount with respect to the Class A-1 Certificates and any Deficiency
Amount with respect to the Group II Certificates on such Remittance Date:
(viii) the amount of any Class A-1 Credit Enhancement Distribution
Amount or Group II Credit Enhancement Distribution Amount withdrawn from
the Reserve Account on such Remittance Date;
(ix) the amount then on deposit in the Reserve Account together with
the current Required Reserve Account Level (indicating the calculation for
each in such report), the amount then on deposit in the Pre-Funding
Account, the amount then on deposit in the Capitalized Interest Account
and the amount available to be drawn under all Eligible Letters of Credit
on such Remittance Date;
(x) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in each such distribution; and
(xi) the amounts, if any, of any related Liquidation Loan Losses for
the related Due Period.
Items (i), (ii) and (iii) above shall, with respect to the Class A
Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Holder of record if so requested in writing at any time during
each calendar year as to the aggregate of amounts reported pursuant to (i), (ii)
and (iii) with respect to the Certificates for such calendar year.
(b) All distributions made to the Certificateholders according to
Class or type of Certificate on each Remittance Date will be made on a pro rata
basis among the Certificateholders as of the next preceding Record Date based on
the proportional beneficial ownership interest in the 1997-2 REMIC as are
represented by their respective Certificates, and shall be made by wire transfer
of immediately available funds to the account of such Certificateholder at a
bank or other entity having appropriate facilities therefor, if, in the case of
a Class A Certificateholder, such Certificateholder shall own of record
Certificates of the same Class which have denominations
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aggregating at least $5,000,000 appearing in the Certificate Register and shall
have provided complete wiring instructions at least five Business Days prior to
the Record Date, and otherwise by check mailed to the address of such
Certificateholder appearing in the Certificate Register.
(c) In addition, on each Remittance Date the Trustee will distribute
to each Holder, to the Certificate Insurer, to the Underwriter, to the
Depositor, to S&P and to Moody's, together with the information described in
subsection (a) preceding, the following information with respect to the Mortgage
Loans as of the close of business on the last Business Day of the prior calendar
month (except as otherwise provided in clause (v) below), which is hereby
required to be prepared by the Servicer and furnished to the Trustee for such
purpose on or prior to the related Servicer Remittance Date:
(i) the total number of HELOCs and HELs and the aggregate Trust
Balances and Additional Balances, if any, thereof, together with the
number, aggregate principal balances of such HELOCs and HELs and the
percentage (based on the aggregate Trust Balances of the Mortgage Loans)
of the aggregate Trust Balances of such Mortgage Loans to the aggregate
Trust Balance of all Mortgage Loans in the related Group (A) 30-59 days
Delinquent, (B) 60-89 days Delinquent and (C) 90 or more days Delinquent;
(ii) the number, aggregate Trust Balances of all HELOCs and HELs and
percentage (based on the aggregate Trust Balances of the HELOCs or HELs)
of the aggregate Trust Balances of such Mortgage Loans to the aggregate
Trust Balance of all Mortgage Loans in the related Group in foreclosure
proceedings and the number, aggregate Trust Balances of all HELOCs and
HELs and percentage (based on the aggregate Trust Balances of the Mortgage
Loans) of any such HELOCs and HELs also included in any of the statistics
described in the foregoing clause (i);
(iii) the number, aggregate Trust Balances of all HELOCs and HELs
and percentage (based on the aggregate Trust Balances of the HELOCs and
HELs) of the aggregate Trust Balances of such Mortgage Loans to the
aggregate Trust Balance of all Mortgage Loans in the related Group
relating to Mortgagors in bankruptcy proceedings and the number, aggregate
Trust Balances of all HELOCs and HELs and percentage (based on the
aggregate Trust Balances of the HELOCs and HELs) of any such Mortgage
Loans are also included in any of the statistics described in the
foregoing clause (i);
(iv) the number, aggregate Trust Balances of all HELOCs and HELs and
percentage (based on the aggregate Trust Balances of the HELOCs and HELs)
of the aggregate Trust
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Balances of such Mortgage Loans to the aggregate Trust Balance of all
Mortgage Loans in the related Group relating to REO Mortgage Loans and the
number, aggregate Trust Balances of all HELOCs and HELs and percentage
(based on the aggregate Trust Balances of the HELOCs and HELs) of any such
Mortgage Loans that are also included in any of the statistics described
in the foregoing clause (i);
(v) the weighted average of (i) the Mortgage Interest Rate for the
HELOCs and for the HELs and (ii) the Net Mortgage Interest Rate for the
HELOCs and for the HELs on the Due Date occurring in the Due Period
related to such Remittance Date;
(vi) the weighted average remaining term to stated maturity of (a)
all HELOCs and (b) all HELs; and
(vii) the book value of any REO Property.
Section 6.8 Additional Reports by Trustee and by Servicer. (a) The
Trustee shall report to the Depositor, the Servicer
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 Depositor,
the Servicer or the Certificate Insurer may from time to time request in
writing.
(b) From time to time, at the request of the Certificate Insurer,
the Trustee shall report to the Certificate Insurer with respect to its actual
knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
the Purchase and Sale Agreement, the Mortgage Loan Sale Agreement or in Section
3.1 or 3.2 hereof.
Section 6.9 Compensating Interest. Not later than the close of
business on the third Business Day prior to the Remittance Date, the Servicer
shall remit to the Trustee (without right or reimbursement therefor) for deposit
into the Certificate Account an amount equal to the lesser of (a) the aggregate
of the Prepayment Interest Shortfalls for the related Remittance Date resulting
from Principal Prepayments during the related Due Period and (b) its aggregate
Servicing Fees received in the related Due Period (the "Compensating Interest").
Section 6.10 Effect of Payments by the Certificate Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policies
shall not be considered payment of the Certificates from the Trust. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate
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Insurer, the Depositor, the Servicer, the Trustee or the Certificate Registrar
(i) to the extent the Certificate Insurer makes payments, directly or
indirectly, on account of principal of or interest on the Certificates to the
Holders of such Certificates, the Certificate Insurer will be fully subrogated
to, and each Certificateholder, the Servicer and the Trustee hereby delegate and
assign to the Certificate Insurer, to the fullest extent permitted by law, the
rights of such Holders to receive such principal and interest from the Trust
Fund, including, without limitation, any amounts due to the Certificateholders
in respect of securities law violations arising from the offer and sale of the
Certificates, and (ii) the Certificate Insurer shall be paid such amounts but
only from the sources and in the manner provided herein for the payment of such
amounts. The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Certificate Insurer for action to preserve or enforce
the Certificate Insurer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.
Section 6.11 Pre-Funding Account.
(a) Funds deposited in the Pre-Funding Account shall be held in
trust by the Trustee for the Certificateholders and the Certificate Insurer for
the uses and purposes set forth herein. All income and gain realized from
investment of funds deposited in the Pre-Funding Account shall be transferred to
the Certificate Account on the Business Day immediately preceding each
Remittance Date. The Servicer shall deposit in the Pre-Funding Account the
amount of any net loss incurred in respect of any Permitted Investment
immediately upon realization of such loss, without any right of reimbursement.
(b) Amounts on deposit in the Pre-Funding Account shall be withdrawn
by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee, upon written
direction of the Depositor, shall release and apply amounts from the
Pre-Funding Account in accordance with Section 2.10(a) hereof upon
satisfaction of the conditions set forth in Sections 2.3 and 2.10 hereof;
and
(ii) On the Final Subsequent Transfer Date, the Trustee shall
deposit into the Certificate Account all amounts remaining in the
Pre-Funding Account.
Section 6.12 Capitalized Interest Account.
(a) Funds deposited in the Capitalized Interest Account shall be
held in trust by the Trustee for the Certificateholders and the Certificate
Insurer for the uses and purposes set forth herein. The Servicer shall deposit
in the
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Capitalized Interest Account the amount of any net loss incurred in respect of
Permitted Investments immediately upon realization of such loss, without any
right of reimbursement.
(b) On each of the first three Remittance Dates, to the extent funds
in the Certificate Account are insufficient to pay the amounts required by
Sections 6.5(a)(i) - (vi), the Trustee shall withdraw from the Capitalized
Interest Account (or make a drawing on the Letter of Credit) and deposit in the
Certificate Account the related Capitalized Interest Deposit Amount.
(c) On the Remittance Date following the Final Subsequent Transfer
Date, any amount remaining on deposit in the Capitalized Interest Account after
distributions pursuant to clause (b) above shall be withdrawn by the Trustee and
paid to the Depositor.
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ARTICLE VII
Default
Section 7.1 Events of Default. (a) In case one or more of the
following Events of Default by the Servicer shall occur and be continuing, that
is to say:
(i) any failure by the Servicer to remit to the Trustee any payment
required to be made by the Servicer under the terms of this Agreement or
to deliver the report required by Section 6.5 of this Agreement;
(ii) the failure by the Servicer to make any required Servicing
Advance or Periodic Advance;
(iii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements
on the part of the Servicer contained in this Agreement, or the breach of
any representation and warranty made pursuant to Section 3.1 to be true
and correct which continues unremedied for a period of 30 days after the
date on which written notice of such failure or breach, requiring the same
to be remedied, shall have been given to the Servicer, as the case may be,
by the Depositor or the Trustee or to the Servicer and the Trustee by any
Certificateholder or the Certificate Insurer;
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have
remained in force, undischarged or unstayed for a period of 60 days;
(v) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all of
the Servicer's property;
(vi) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
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(vii) as of any Remittance Date prior to the 60th Remittance Date,
Total Expected Losses exceed 6.75% of the aggregate Principal Balance of
the Mortgage Loans;
(viii) as of any Remittance Date following the 60th Remittance Date
but prior to the 120th Remittance Date, Total Expected Losses exceed
10.125% of the aggregate Principal Balance of the Mortgage Loans;
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied with respect to (i) - (ix) above, the
Trustee shall, but only at the direction of the Certificate Insurer or the
Majority Certificateholders with the consent of the Certificate Insurer, by
notice in writing to the Servicer and a Responsible Officer of the Trustee, (x)
remove the Servicer, and in the case of any removal at the direction of the
Majority Certificateholders, and in addition to whatever rights such
Certificateholders may have at law or equity to damages, including injunctive
relief and specific performance, (y) terminate all the rights and obligations of
the Servicer under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, as servicer; and (z) with respect to clauses (vii) through
(ix) above, the Trustee shall, but only at the direction of the Certificate
Insurer, after notice in writing to the Servicer and a Responsible Officer of
the Trustee, terminate all the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, as
Servicer. Upon receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Mortgage
Loans or otherwise, shall, subject to Section 7.2, pass to and be vested in the
Trustee or its designee approved by the Certificate Insurer and the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, at the expense of the Servicer, any
and all documents and other instruments and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents. The Servicer agrees to
cooperate (and pay any related costs and expenses) with the Trustee in effecting
the termination of the Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Trustee or its designee for
administration by it of all amounts which shall at the time be credited by the
Servicer to the Collection Account or thereafter received with respect to the
Mortgage Loans. The Trustee shall promptly notify the Certificate Insurer,
Moody's and S&P upon receiving notice of, or its discovery of, the occurrence of
an Event of Default.
Section 7.2 Trustee to Act; Appointment of Successor. (a) On and
after the time the Servicer receives a notice of termination pursuant to Section
7.1, or the Trustee and the
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Certificate Insurer receive the resignation of the Servicer evidenced by an
Opinion of Counsel pursuant to Section 5.23, or the Servicer is removed as
Servicer pursuant to Article VII, in which event the Trustee shall promptly
notify the Certificate Insurer and Moody's and S&P, except as otherwise provided
in Section 7.1, the Trustee shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof arising on or after the date of succession;
provided, however, that the Trustee shall not be liable for any actions or the
representations and warranties of any servicer prior to it and including,
without limitation, the obligations of the Servicer set forth in Sections 2.4
and 3.3. The Trustee, as Successor Servicer, or any other successor servicer
shall be obligated to pay Compensating Interest pursuant to Section 6.9 hereof;
the Trustee, as Successor Servicer is obligated to make advances pursuant to
Section 5.20 unless, and only to the extent the Trustee, as Successor Servicer
determines reasonably and in good faith that such advances would not be
recoverable pursuant to Sections 5.4(b), 5.4(g) or 5.4(j), such determination to
be evidenced by a certification of a Responsible Officer of the Trustee, as
Successor Servicer delivered to the Certificate Insurer.
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority
Certificateholders with the consent of the Certificate Insurer or the
Certificate Insurer so requests in writing to the Trustee, appoint, pursuant to
the provisions set forth in paragraph (c) below, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Certificate Insurer that has a net worth of not
less than $15,000,000 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.
(c) In the event the Trustee is the Successor Servicer, it shall be
entitled to the Servicing Compensation (including the Servicing Fee as adjusted
pursuant to the definition thereof) and other funds pursuant to Section 5.14
hereof as the Servicer if the Servicer had continued to act as servicer
hereunder. In the event the Trustee is unable or unwilling to act as successor
servicer, 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 hereunder as servicing compensation, together with the other
Servicing Compensation. Within thirty days after any such public announcement,
the Trustee shall negotiate and effect the sale,
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transfer and assignment of the servicing rights and responsibilities hereunder
to the qualifying party submitting the highest qualifying bid. 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 and the amount of any unreimbursed
Servicing Advances and Periodic Advances owed to the Trustee. After such
deductions, the remainder of such sum shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor.
(d) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. 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, at the Servicer's cost and expense, 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 that then have been or
should have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections received
by the Servicer after such removal or resignation shall be endorsed by it to the
Trustee and remitted directly to the Trustee or, at the direction of the
Trustee, to the successor servicer. Neither the Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. No appointment of a successor
to the Servicer hereunder shall be effective until the Trustee and the
Certificate Insurer shall have consented thereto, and written notice of such
proposed appointment shall have been provided by the Trustee to the Certificate
Insurer and to each Certificateholder. The Trustee shall not resign as servicer
until a successor servicer reasonably acceptable to the Certificate Insurer has
been appointed.
(e) Pending appointment of a successor to the Servicer hereunder,
the Trustee shall act in such capacity as hereinabove provided. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of that permitted the Servicer pursuant to Section 5.14, together
with other Servicing Compensation. The Servicer, the Trustee and such successor
shall
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take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 7.3 Waiver of Defaults. The Certificate Insurer or the
Majority Certificateholders may, on behalf of all Certificateholders, and
subject to the consent of the Certificate Insurer, waive any events permitting
removal of the Servicer as servicer pursuant to this Article VII; provided,
however, that the Majority Certificateholders may not waive a default in making
a required distribution on a Certificate without the consent of the holder of
such Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to S&P and Moody's.
Section 7.4 Mortgage Loans, Trust Fund and Accounts Held for Benefit
of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund and the
Mortgage Files for the benefit of the Certificateholders and the Certificate
Insurer and all references in this Agreement and in the Certificates to the
benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Certificate Insurer.
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ARTICLE VIII
Termination
Section 8.1 Termination. (a) This Agreement shall terminate upon
notice to the Trustee of either: (i) the later of the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due hereunder and the payment of all amounts due and payable to the
Certificate Insurer and the Trustee or (ii) mutual consent of the Servicer, the
Certificate Insurer and all Certificateholders in writing; provided, however,
that in no event shall the Trust established by this Agreement terminate later
than twenty-one years after the death of the last survivor of the descendants of
John D. Rockefeller, alive as of the date hereof.
(b) In addition, the Servicer may, at its option and at its sole
cost and expense (or, if the Servicer does not exercise this option, the
Certificate Insurer may, at its sole cost and expense), repurchase all of the
HELOCs in Group I or all of the HELs in Group II on any date on which the Class
A-1 Principal Balance with respect to the HELOCs or the sum of the Class A-2
Principal Balance, the Class A-3 Principal Balance, the Class A-4 Principal
Balance with respect to the HELs is less than 10% of the Original Class A-1
Principal Balance with respect to the HELOCs or the sum of the Original Class
A-2 Principal Balance, the Original Class A-3 Principal Balance and the Original
Class A-4 Principal Balance with respect to the HELs, on the next succeeding
Remittance Date, at a price equal to the sum of (i) the greater of (A) 100% of
the Trust Balance of each outstanding Mortgage Loan and each REO Mortgage Loan,
and (B) the fair market value (disregarding accrued interest) of the Mortgage
Loans and REO Properties in the related Group, determined as the average of
three written bids (copies of which shall be delivered to the Trustee and the
Certificate Insurer by the Servicer and the reasonable cost of which may be
deducted from the final purchase price) made by nationally recognized dealers
and based on a valuation process which would be used to value comparable
mortgage loans and REO property, plus (ii) the aggregate amount of accrued and
unpaid interest on the Mortgage Loans in the related Group through the related
Due Period and 30 days' interest thereon at a rate equal to the weighted average
of the Mortgage Interest Rates for the Mortgage Loans in the related Group, in
each case net of the Servicing Fee, plus (iii) any unreimbursed amounts due to
the Certificate Insurer under this Agreement or the Certificate Insurer
Agreement (the "Termination Price"). Any such purchase shall be accomplished by
deposit into the Certificate Account for the related Group of the Termination
Price. No such termination is permitted without the prior written consent of the
Certificate Insurer (i) if it would result in a draw on the related Certificate
Insurance Policy, or (ii)
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unless the Servicer shall have delivered to the Certificate Insurer an Opinion
of Counsel reasonably satisfactory to the Certificate Insurer stating that no
amounts paid hereunder are subject to recapture as preferential transfers under
the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101 et seq., as amended.
(c) If on any Remittance Date, the Servicer determines that there
are no outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than funds in the Certificate Account, the Servicer shall send a final
distribution notice promptly to each such Certificateholder in accordance with
paragraph (d) below.
(d) Notice of any termination, specifying the Remittance Date upon
which any Group, the Trust Fund or the 1997-2 REMIC will terminate and the
related Certificateholders shall surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Servicer by letter to each of the related Certificateholders identified to
the Servicer by the Trustee as the Certificateholders of record as of the most
recent Record Date, and shall be mailed during the month of such final
distribution before the Servicer Remittance Date in such month, specifying (i)
the Remittance Date upon which final payment of such Certificates will be made
upon presentation and surrender of Certificates at the office of the Trustee
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Remittance Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Trustee therein specified. The Servicer shall give such notice
to the Trustee therein specified. The Servicer shall give such notice to the
Trustee at the time such notice is given to Certificateholders. The obligations
of the Certificate Insurer hereunder shall terminate upon the deposit by the
Servicer with the Trustee of a sum sufficient to purchase all of the Mortgage
Loans and REO Properties as set forth above and when the Class A-1 Principal
Balance, Class A-2 Principal Balance, Class A-3 Principal Balance and Class A-4
Principal Balance has been reduced to zero.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice, all of the affected
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates and the cost thereof shall be paid out of the funds and other
assets which remain subject hereto. If within nine months after the second
notice all the affected Certificates
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shall not have been surrendered for cancellation, the Class R Certificateholders
shall be entitled to all unclaimed funds and other assets which remain subject
hereto and the Trustee upon transfer of such funds shall be discharged of any
responsibility for such funds and the Certificateholders shall look only to the
Class R Certificateholders for payment. Such funds shall remain uninvested.
Section 8.2 Additional Termination Requirements. (a) In the event
that the Servicer exercises its purchase option as provided in Section 8.1, the
1997-2 REMIC shall be terminated in accordance with the following additional
requirements, unless the Trustee has been furnished with an Opinion of Counsel
to the effect that the failure of the 1997-2 REMIC (or of any other REMIC of the
Trust Fund) to comply with the requirements of this Section 8.3 will not (i)
result in the imposition of taxes on "prohibited transactions" of such REMIC as
defined in Section 860F of the Code or (ii) cause such REMIC to fail to qualify
as a REMIC at any time that any Class A Certificates are outstanding:
(i) Within 90 days prior to the final Remittance Date the Servicer
shall adopt and the Trustee shall sign, a plan of complete liquidation of
the 1997-2 REMIC (or the applicable REMIC of the Trust Fund) meeting the
requirements of a "Qualified Liquidation" under Section 860F of the Code
and any regulations thereunder;
(ii) At or after the time of adoption of such a plan of complete
liquidation, which plan shall include a description of the method for such
liquidation and the price to be conveyed for all of the assets of the
1997-2 REMIC at the time of such liquidation, and at or prior to the final
Remittance Date, the Trustee shall sell all of the assets of the 1997-2
REMIC (or the applicable REMIC of the Trust Fund) to the Servicer for
cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to the Class A Certificateholders the related
Class A Principal Balance, plus one month's interest thereon at the
related Class A Pass-Through Rate, and (B) to the Class R
Certificateholders, all of such REMIC's cash on hand after such payment to
the Class A Certificateholders (other than cash retained to meet claims)
and the 1997-2 REMIC shall terminate at such time.
(b) By their acceptance of the Certificates, the Holders thereof
hereby agree to appoint the Servicer as their attorney in fact to: (i) adopt
such a plan of complete liquidation (and the Certificateholders hereby appoint
the Trustee as their attorney in fact to sign such plan) as appropriate or upon
the written request of the Certificate Insurer and (ii) to take such other
action in connection
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therewith as may be reasonably required to carry out such plan of complete
liquidation all in accordance with the terms hereof.
Section 8.3 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for the payments
or charges with respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the "Servicer" under this
Agreement.
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ARTICLE IX
The Trustee
Section 9.1 Duties of Trustee. (a) The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default has
occurred and has not been cured or waived, the Trustee shall exercise such of
the rights and power vested in it by this Agreement, and use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of this Agreement; provided, however,
that the Trustee shall not be responsible for the accuracy or content of any
resolution, certificate, statement, opinion, report, document, order or other
instrument furnished by the Servicer or the Seller hereunder. If any such
instrument is found not to conform on its face to the requirements of this
Agreement, the Trustee shall take action as it deems appropriate to have the
instrument corrected and, if the instrument is not corrected to the Trustee's
satisfaction, the Trustee will, at the expense of the Servicer notify the
Certificate Insurer and request written instructions as to the action it deems
appropriate to have the instrument corrected, and if the instrument is not so
corrected, the Trustee will provide notice thereof to the Certificate Insurer
who shall then direct the Trustee as to the action, if any, to be taken.
(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; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or
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opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or other officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificate Insurer or with the
consent of the Certificate Insurer, any Class of the Class A
Certificateholders holding Class A Certificates evidencing Percentage
Interests of such Class of at least 25%, 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;
(iv) The Trustee shall not be required to take notice or be deemed
to have notice or knowledge of any default or Event of Default (except an
Event of Default with respect to the nonpayment of any amount described in
Section 7.1(a)), unless a Responsible Officer of the Trustee shall have
received written notice thereof. In the absence of receipt of such notice,
the Trustee may conclusively assume that there is no default or Event of
Default (except a failure to make a Periodic Advance);
(v) 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 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; and
(vi) Subject to the other provisions of this Agreement and without
limiting the generality of this Section, the Trustee shall have no duty
(A) to see to any recording, filing, or depositing of this Agreement or
any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing
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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, the Trust Fund, the Certificateholders or
the Mortgage Loans, (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.
(d) It is intended that the 1997-2 REMIC formed hereunder shall
constitute, and that the affairs of the 1997-2 REMIC shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Trustee covenants and agrees
that it shall act as agent (and the Trustee is hereby appointed to act as agent)
and as Tax Matters Person on behalf of the 1997-2 REMIC, and that in such
capacities it shall:
(i) prepare, sign and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax
Return (Form 1066) and any other Tax Return required to be filed by the
1997-2 REMIC, using a calendar year as the taxable year for the 1997-2
REMIC;
(ii) make, or cause to be made, an election, on behalf of the 1997-2
REMIC, to be treated as a REMIC on the federal tax return of the 1997-2
REMIC for its first taxable year;
(iii) prepare and forward, or cause to be prepared and forwarded, to
the Trustee, the Certificateholders and to the Internal Revenue Service
and any other relevant governmental taxing authority all information
returns or reports as and when required to be provided to them in
accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the 1997-2 REMIC are within
its control, conduct such affairs of the 1997-2 REMIC at all times that
any Certificates are outstanding so as to maintain the status of the
1997-2 REMIC as a REMIC under the REMIC Provisions and any other
applicable federal, state and local laws, including, without limitation,
information reports relating to "original issue discount, as defined in
the Code, based upon the Prepayment Assumption and calculated by using the
issue price of the Certificates:
(v) not knowingly or intentionally take any action or omit to take
any action that would cause the termination of the REMIC status of the
1997-2 REMIC:
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(vi) pay the amount of any and all federal, state, and local taxes
imposed on the Trust Fund, prohibited transaction taxes as defined in
Section 860F of the Code, other than any amount due as a result of a
transfer or attempted or purported transfer in violation of Section 4.2,
imposed on the Trust Fund when and as the same shall be due and payable
(but such obligation shall not prevent the Trustee or any other
appropriate Person from contesting any such tax in appropriate proceedings
and shall not prevent the Trustee from withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The Trustee
shall be entitled to reimbursement in accordance with Sections 9.1(c) and
9.5 hereof
(vii) ensure that any such returns or reports filed on behalf of the
Trust Fund by the Trustee are properly executed by the appropriate person
and submitted in a timely manner;
(viii) represent the Trust Fund in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to any taxable year of
the Trust Fund, enter into settlement agreements with any governmental
taxing agency, extend any statute of limitations relating to any item of
the Trust Fund and otherwise act on behalf of the Trust Fund in relation
to any tax matter involving the Trust Fund;
(ix) as provided in Section 5.18 hereof, make available information
necessary for the computation of any tax imposed (1) on transferrers of
residual interests to transferees that are not Permitted Transferees or
(2) on pass-through entities, any interest in which is held by an entity
which is not a Permitted Transferee. The Trustee covenants and agrees that
it will cooperate with the Servicer in the foregoing matters and that it
will sign, as Trustee, any and all Tax Returns required to be filed by the
Trust Fund. Notwithstanding the foregoing, at such time as the Trustee
becomes the successor Servicer, the holder of the largest percentage of
the Class R Certificates shall serve as Tax Matters Person until such time
as an entity is appointed to succeed the Trustee as Servicer:
(x) make available to the Internal Revenue Service and those Persons
specified by the REMIC Provisions all information necessary to compute any
tax imposed (A) as a result of the Transfer of an Ownership Interest in a
Class R Certificate to any Person who is not a Permitted Transferee,
including the information described in Treasury regulations sections
1.860D-1(b)(5) and 1.860E-2(a)(5)with respect to the "excess inclusions"
of such Class R Certificate and (B) as a result of any regulated
investment company, real estate investment trust, common trust fund,
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partnership, trust, estate or organization described in Section 1381 of
the Code that holds an Ownership Interest in a Class R Certificate having
as among its record holders at any time any Person that is not a Permitted
Transferee. Reasonable compensation for providing such information may be
accepted by the Trustee;
(xi) pay out of its own funds, without any right of reimbursement
from the assets of the Trust Fund, any and all tax related expenses of the
Trust Fund (including, but not limited to, tax return preparation and
filing expenses and any professional fees or expenses related to audits or
any administrative or judicial proceedings with respect to the Trust Fund
that involve the Internal Revenue Service or state tax authorities), other
than the expense of obtaining any Opinion of Counsel required pursuant to
Sections 3.3, 5.10 and 8.2 and other than taxes except as specified
herein;
(xii) upon filing with the Internal Revenue Service, the Trustee
shall furnish to the Holders of the Class R Certificates the Form 1066 and
each Form 1066Q and shall respond promptly to written requests made not
more frequently than quarterly by any Holder of Class R Certificates with
respect to the following matters:
(1) the original projected principal and interest cash flows
on the Closing Date on the regular and residual interests created
hereunder and on the Mortgage Loans, based on the Prepayment
Assumption;
(2) the projected remaining principal and interest cash flows
as of the end of any calendar quarter with respect to the regular
and residual interests created hereunder and the Mortgage Loans,
based on the Prepayment Assumption;
(3) the Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and interest
cash flows described above;
(4) the original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or amortized
through the end of such calendar quarter with respect to the regular
or residual interests created hereunder and with respect to the
Mortgage Loans, together with each constant yield to maturity used
in computing the same;
(5) the treatment of losses realized with respect to the
Mortgage Loans or the regular interests created hereunder, including
the timing and amount of any cancellation of indebtedness income of
the 1997-2 REMIC with respect to such regular interests or bad debt
deductions claimed with respect to the Mortgage Loans;
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(6) the amount and timing of any non-interest expenses of the
1997-2 REMIC: and
(7) any taxes (including penalties and interest) imposed on
the 1997-2 REMIC, including, without limitation, taxes on
"prohibited transactions," "contributions" or "net income from
foreclosure property" or state or local income or franchise taxes;
and
(xiii) make any other required reports in respect of interest
payments in respect of the Mortgage Loans and acquisitions and
abandonments or Mortgaged Property to the Internal Revenue Service and/or
the borrowers, as applicable.
(e) In the event that any tax is imposed on "prohibited
transactions" of the REMIC as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" of the REMIC as defined in Section
860G(c) of the Code, on any contribution to the REMIC after the Startup Date
pursuant to Section 860G(d) of the Code, or any other tax 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 otherwise (iii) the holders of
the Class R Certificates in proportion to their undivided beneficial ownership
interest in the related REMIC as are represented by such Class R Certificates.
To the extent such tax is chargeable against the holders 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 Holders of the Class R Certificates on any Remittance 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).
Section 9.2 Certain Matters Affecting the Trustee. (a) Except as
otherwise provided in Section 9.1:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, Opinion
of Counsel, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete
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authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such opinion
of counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute,
conduct or defend by litigation hereunder or in relation hereto at the
request, or direction of the Certificate Insurer or any of the
Certificateholders, pursuant to the provisions of this Agreement, unless
such Certificateholders or the Certificate Insurer, as applicable, shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby;
nothing contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default (which has not been
cured), to exercise such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in its exercise as
a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement;
(v) prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by the Certificate
Insurer or Holders of any Class of Class A Certificates evidencing
Percentage Interests aggregating not less than 25% of such class;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require reasonable indemnity
against such expense or liability as a condition to 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 from the Servicer's own funds;
(vi) 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
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for other than its negligence or willful misconduct in the performance of
such act;
(vii) the Trustee shall not be required to give any bond or surety
in respect of the execution of the Trust created hereby or the powers
granted hereunder; and
(viii) 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.
(b) Following the Startup Date, the Trustee shall not knowingly
accept any contribution of assets to the Trust Fund, unless the Trustee shall
have received an Opinion of Counsel (at the expense of the Servicer) to the
effect that the inclusion of such assets in the Trust Fund will not cause the
1997-2 REMIC to fail to qualify as a REMIC at any time that any Certificates are
outstanding or subject the 1997-2 REMIC to any tax under the REMIC Provisions or
other applicable provisions of federal, state and local law or ordinances. The
Trustee agrees to indemnify the Trust Fund and the Servicer for any taxes and
costs, including any attorney's fees, imposed or incurred by the Trust Fund or
the Servicer as a result of the breach of the Trustee's covenants set forth
within this subsection (b).
Section 9.3 Not Liable for Certificates or Mortgage Loans. The
recitals contained herein (other than the certificate of authentication on the
Certificates) shall be taken as the statements of the Seller or the Servicer, as
the case may be, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of any Mortgage Loan or related document. The
Trustee shall not be accountable for the use or application of any funds paid to
the Servicer in respect of the Mortgage Loans or deposited in or withdrawn from
the Collection Account by the Servicer. The Trustee shall not be responsible for
the legality or validity of the Agreement or the validity, priority, perfection
or sufficiency of the security for the Certificates issued or intended to be
issued hereunder.
Section 9.4 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgor of Certificates
with the same rights it would have if it were not Trustee, and may otherwise
deal with the parties hereto.
Section 9.5 Trustee's Fees and Expenses; Indemnity. (a) The Trustee
acknowledges that in consideration of the performance of its duties hereunder it
is entitled to receive the Trustee Fee in accordance with the provision of
Section 6.5(a). Additionally, the Trustee hereby covenants, for the benefit of
the Depositor, that the Trustee has arranged separately with the Servicer for
the payment to the Trustee of all of the Trustee's expenses in connection
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with this Agreement, including, without limitation, all of the Trustee's Fees
and expenses in connection with any actions taken by the Trustee pursuant to
Section 9.12 hereof. For the avoidance of doubt, the parties hereto acknowledge
that it is the intent of the parties that the Depositor shall not pay any of the
Trustee's fees and expenses in connection with this transaction. The Trustee
shall not be entitled to compensation for any expense, disbursement or advance
as may arise from its negligence or bad faith, and the Trustee shall have no
lien on the Trust Fund for the payment of its fees and expenses.
(b) The Trust Fund, the Trustee and any director, officer, employee
or agent of the Trustee shall be indemnified by the Servicer and held harmless
against any loss, liability, claim, damage or expense arising out of, or imposed
upon the Trust or the Trustee, other than any loss, liability or expense
incurred by reason of (i) the acts of the Trustee not authorized or required
pursuant to this Agreement or taken pursuant to written instructions received
from the Servicer, the Certificate Insurer or the Majority Holders, or (ii) by
reason of the Trustee's reckless disregard of obligations and duties hereunder.
The obligation of the Servicer under this Section 9.5 arising prior to any
resignation or termination of the Servicer hereunder shall survive termination
of the Servicer and payment of the Certificates, and shall extend to any
co-trustee appointed pursuant to this Article IX.
Section 9.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be (a) a banking association organized and doing
business under the laws of any state or the United States of America subject to
supervision or examination by federal or state authority, (b) authorized under
such laws to exercise corporate trust powers, including taking title to the
Trust Fund assets on behalf of the Certificateholders (c) having a combined
capital and surplus of at least $50,000,000, (d) whose long-term deposits, if
any, shall be rated at least BBB by S&P and Baa3 by Moody's (except as provided
herein) or such lower long-term deposit rating as may be approved in writing by
the Certificate Insurer, and (e) reasonably acceptable to the Certificate
Insurer as evidenced in writing. If such banking association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 9.7.
Section 9.7 Resignation and Removal of the Trustee. (a) The Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Servicer, the Certificate Insurer and to
all Certificateholders. Upon receiving such notice of resignation, the Servicer
shall
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promptly appoint a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee and to the successor
trustee. A copy of such instrument shall be delivered to the Depositor, the
Certificateholders, the Certificate Insurer and the Seller by the Servicer.
Unless a successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.6 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer or the Certificate Insurer may remove the Trustee
and the Servicer shall, within 30 days after such removal, appoint, subject to
the approval of the Certificate Insurer, which approval shall not be
unreasonably delayed, a successor trustee by written instrument, in duplicate,
which instrument shall be delivered to the Trustee so removed and to the
successor trustee. A copy of such instrument shall be delivered to the
Depositor, the Certificateholders, the Certificate Insurer and the Seller by the
Servicer.
(c) If the Trustee fails to perform in accordance with the terms of
this Agreement, the Majority Certificateholders or the Certificate Insurer may
remove the Trustee and appoint a successor trustee acceptable to the Certificate
Insurer by written instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Servicer, one complete set to the Trustee
so removed and one complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 9.8.
(e) Upon any termination of, or appointment of any successor to the
Trustee hereunder, the Trustee shall promptly transfer all of the Residual
Interest (as defined under the Code) of the Trust to the successor Trustee.
Section 9.8 Successor Trustee. Any successor trustee appointed as
provided in Section 9.7 shall execute, acknowledge and deliver to the Depositor,
the Certificate Insurer, the
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Seller, the Servicer and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as trustee herein. The predecessor trustee
shall deliver to the successor trustee all Mortgage Files and related documents
and statements held by it hereunder, and the Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties and obligations. No
successor trustee shall accept appointment as provided in this Section unless at
the time of such acceptance such successor trustee shall be eligible under the
provisions of Section 9.6. Upon acceptance of appointment by a successor trustee
as provided in this Section, the Servicer shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to Moody's and S&P. If the Servicer fails
to mail such notice within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Servicer.
Section 9.9 Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation or national banking association resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or national banking association succeeding to the business of
the trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 9.6, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 9.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
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 to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
9.10, 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
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appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.6 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 9.8 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) 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 Article IX. 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.
(d) 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. The Trustee shall not be
responsible for any action or inaction of any such separate trustee or
co-trustee, provided that the Trustee appointed such separate trustee or
co-trustee with due care. 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.
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Section 9.11 Tax Returns; Old Interest Reporting. The Servicer and
the Depositor, as applicable, upon request, will promptly furnish the Trustee
with all such information as may be reasonably required in connection with the
Trustee's preparation of all Tax Returns of the Trust Fund or for the purpose of
the Trustee responding to reasonable requests for information made by
Certificateholders in connection with tax matters and, upon request within seven
(7) Business Days after its receipt thereof, the Servicer shall (a) sign on
behalf of the Trust Fund any Tax Return that the Servicer is required to sign
pursuant to applicable federal, state or local tax laws, and (b) cause such Tax
Return to have been returned to the Trustee for filing and for distribution to
Certificateholders if required.
Section 9.12 Retirement of Certificates. The Trustee shall, upon the
retirement of the Certificates pursuant hereto or otherwise, furnish to the
Certificate Insurer a notice of such retirement, and, upon retirement of the
Certificates and the expiration of the term of the Certificate Insurance Policy,
shall surrender the Certificate Insurance Policy to the Certificate Insurer for
cancellation.
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ARTICLE X
Miscellaneous Provisions
Section 10.1 Limitation on Liability of the Depositor and the
Servicer. Neither the Depositor nor the Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust, the Certificateholders or the Certificate Insurer
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Depositor or the Servicer or any such
Person against any breach of warranties or representations made herein, or
against any specific liability imposed on each such party pursuant to this
Agreement or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations or duties hereunder. The Depositor
or the Servicer and any director, officer, employee or agent of the Depositor or
the Servicer may rely in good faith on any document of any kind which, prima
facie, is properly executed and submitted by any appropriate Person respecting
any matters arising hereunder.
Section 10.2 Acts of Certificateholders; Certificateholders' Rights.
(a) Except as otherwise specifically provided herein, whenever Certificateholder
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Certificateholders if the Majority
Certificateholders or the Certificate Insurer agrees to take such action or give
such consent or approval.
(b) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof or thereof.
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(d) The rights of the Certificateholders of Series 1997-2 will be
determined pursuant to this Agreement. The rights of the Holders of any
certificates or other instruments which may be issued by the Trustee pursuant to
Section 4.2 of this Agreement shall be determined by a supplement with respect
thereto. Such supplement may provide for any other agreements between the
parties hereto as long as such agreements do not violate, as to any Certificate,
certificates or other instruments, Section 10.3.
Section 10.3 Amendment or Supplement. (a) This Agreement may be
amended or supplemented from time to time by the Servicer, the Depositor and the
Trustee by written agreement, upon the prior written consent of the Certificate
Insurer (which consent shall not be withheld if, in the Opinion of Counsel
addressed to the Trustee and the Certificate Insurer, failure to amend would
adversely affect the interests of the Certificateholders and such consent would
not adversely affect the interests of the Certificate Insurer), without notice
to or consent of the Certificateholders to cure any ambiguity, to correct or
supplement any provisions herein, to comply with any changes in the Code, or to
make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, at the expense of the party requesting the change, delivered
to the Trustee and the Certificate Insurer, adversely affect in any material
respect the interests of any Certificateholder; and provided, further, 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 Holder of such Certificate, or change the
rights or obligations of any other party hereto without the consent of such
party. The Trustee shall give prompt written notice to Moody's and S&P of any
amendment made pursuant to this Section 10.3 or pursuant to Section 6.9 of the
Purchase and Sale Agreement.
(b) This Agreement may be amended or supplemented from time to time
by the Servicer, the Depositor and the Trustee with the consent of the
Certificate Insurer (which consent shall not be withheld if, in the Opinion of
Counsel addressed to the Trustee and the Certificate Insurer, failure to amend
would adversely affect the interests of the Certificateholders and such consent
would not adversely affect the interests of the Certificate Insurer), the
Majority Certificateholders and the Holders of the majority of the undivided
beneficial ownership interest in the 1997-2 REMIC as is represented by the Class
R 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 Holders; provided, however, that no such amendment
shall be made unless the Trustee and the Certificate Insurer receive an Opinion
of Counsel, at the expense of the party requesting the change,
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that such change will not adversely affect the status of the 1997-2 REMIC as a
REMIC or cause a tax to be imposed on such REMIC; and provided, further, 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 Holder of such Certificate or reduce the
percentage for the Holders of which are required to consent to any such
amendment without the consent of the Holders of 100% of Certificates affected
thereby.
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Section 10.4 Recordation of Agreement. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer at the Certificateholders' expense on direction
and at the expense of Majority Certificateholders requesting such recordation,
but only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Mortgage Loans.
Section 10.5 Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 10.6 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, Irwin Home Equity Corporation,
12677 Alcosta Boulevard, Suite 500, San Ramon, California 94583, Attention: Fern
Prosnitz, Chief Counsel, and Edwin Corbin, Vice President of Finance (with
copies to the Seller), (ii) in the case of the Seller, IHE Funding Corp., 500
Washington Street, Columbus, Indiana 47201, Attention: Greg Ehlinger, Vice
President, with an additional copy of such notice simultaneously delivered to
the Servicer, (iii) in the case of the Trustee, The Chase Manhattan Bank, 450
West 33rd Street, New York New York 10001 Attention: Global Trust Services,
Irwin Home Equity Corporation Trust Series 1997-2, (iv) in the case of the
Certificateholders, as set forth in the Certificate Register, (v) in the case of
Moody's, 99 Church Street, New York, New York 10007 Attention: Chris Peters,
(vi) in the case of S&P, 26 Broadway, New York, New York 10004 Attention:
Residential Mortgage Surveillance Group, (vii) in the case of the Certificate
Insurer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured
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Portfolio Management--Structured Finance, (viii) in the case of the Fiscal
Agent, to State Street Bank and Trust Company, 61 Broadway, 15th Floor, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency (or such
other address as the Fiscal Agent or the Certificate Insurer shall specify to
the Trustee in writing) and (ix) in the case of the Depositor or the
Underwriter, One New York Plaza, New York, New York 10292, Attention: John
Herbert, Associate. Any such notices shall be deemed to be effective with
respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Certificateholders shall be effective upon mailing or
personal delivery.
Section 10.7 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.
Section 10.8 No Partnership. Nothing herein contained shall be
deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor and not as agent for the Certificateholders.
Section 10.9 Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
Section 10.10 Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the Servicer, the Depositor, the Trustee and
the Certificateholders and their respective successors and permitted assigns.
Section 10.11 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 10.12 The Certificate Insurer Default. Any right conferred
to the Certificate Insurer shall be suspended during any period in which a
Certificate Insurer Default exists. At such time as the Certificates are no
longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer's rights hereunder shall
terminate.
Section 10.13 Third Party Beneficiary. The parties agree that each
of the Seller and the Certificate Insurer is
135
<PAGE>
intended and shall have all rights of a third-party beneficiary of this
Agreement.
Section 10.14 Intent of the Parties. It is the intent of the
Depositor and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
Section 10.15 Appointment of Tax Matters Person. The Holders of the
Class R Certificates hereby appoint the Trustee to act as the Tax Matters Person
for the 1997-2 REMIC for all purposes of the Code. The Tax Matters Person will
perform, or cause to be performed, such duties and take, or cause to be taken,
such actions as are required to be performed or taken by the Tax Matters Person
under the code. The Holders of the Class R Certificates may hereafter appoint a
different entity as their agent, or may appoint one of the Class R
Certificateholders to be the Tax Matters Person.
Section 10.16 GOVERNING LAW CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE SERVICER AND THE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH IN SECTION 10.6 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE
PREPAID. THE DEPOSITOR, THE SERVICER AND THE TRUSTEE EACH HEREBY WAIVE ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE DEPOSITOR, THE SERVICER OR THE TRUSTEE TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS
TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE DEPOSITOR, THE SERVICER AND THE TRUSTEE EACH HEREBY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH,
136
<PAGE>
RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
[End of Agreement.]
137
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trustee and the Depositor have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as
Depositor
By: /s/ Mary Alice Kohs
------------------------------
Name: Mary Alice Kohs
Title: Vice President
IRWIN HOME EQUITY CORPORATION
as Servicer
By: /s/ Edwin K. Corbin
------------------------------
Name: Edwin K. Corbin
Title: Vice President -
Finance & Servicing
THE CHASE MANHATTAN BANK as
Trustee
By: /s/ Regina Bergeland
------------------------------
Name: Regina Bergeland
Title: Vice President
[Signature Page to Pooling and Servicing Agreement]
<PAGE>
State of New York )
) ss.:
County of New York )
On the 18th day of November, 1997 before me, a Notary Public in and
for the State of New York, personally appeared Mary Alice Kohs, known to me to
be Vice President of Prudential Securities Secured Financing Corporation, the
corporation that executed the within instrument and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunder to set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Peter D. Austin
------------------------------
Notary Public
My Commission expires May 16, 1997
[Notary's Acknowledgement Page to Pooling and Servicing Agreement]
<PAGE>
State of California )
) ss.:
County of Contra Costa )
On November 14, 1997 before me, James A. Haney, a Notary Public in
and for said County and State, personally appeared Edwin K. Corbin, 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 entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ James A. Haney
------------------------------
Notary Public
[Notary's Acknowledgement Page to Pooling and Servicing Agreement]
<PAGE>
State of New York )
) ss.:
County of New York )
On the 17th day of November, 1997 before me, a Notary Public in and
for the State of New York, personally appeared Regina Bergeland known to me to
be a Vice President of The Chase Manhattan Bank, the corporation that executed
the within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Margaret H. Price
------------------------------
Notary Public
My Commission expires April 22, 1999
[Notary's Acknowledgement Page to Pooling and Servicing Agreement]
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-2
CLASS A-1 CERTIFICATE
No. A-1-1 CUSIP: 464124 AG1
Series 1997-2 Original Certificate
Principal Balance:
$70,000,000
Pass-Through Rate: Original Certificate Percentage Interest of this
Adjustable Rate Principal Balance Certificate: 100%
Represented by this
Certificate:
$70,000,000
Date of Pooling and Cut-Off Date: close First Remittance Date:
Servicing Agreement: of business December 15, 1997
November 1, 1997 October 31, 1997
Servicer: Irwin Home Closing Date: Latest Maturity Date:
Equity Corporation November 18, 1997 January 15, 2019
Trustee: The Chase
Manhattan Bank
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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 certifies that Cede & Co. is the registered owner of a
Class A-1 percentage interest (the "Percentage Interest") in a pool of home
equity revolving credit line loans secured by mortgages on one- to four-family
properties (the "HELOCs") serviced by Irwin Home Equity Corporation (hereinafter
called the "Servicer", in its capacity as servicer under that certain Pooling
and Servicing Agreement (the "Agreement") dated as of November 1, 1997 among
Irwin Home Equity Corporation, as servicer, Prudential Securities Secured
Financing Corporation, as depositor (the "Depositor") and The Chase Manhattan
Bank, as trustee (the "Trustee")). The HELOCS were originated or acquired by IHE
Funding Corp. and sold to the Depositor pursuant to that certain Purchase and
Sale Agreement dated as of November 1, 1997 between the Depositor and IHE
Funding Corp. (the "Seller"). The HELOCs will be serviced by the Servicer
pursuant to the terms and conditions of the Agreement, certain of the pertinent
provisions of
<PAGE>
which are set forth herein. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the holder of this Certificate by virtue of the
acceptance hereof assents and by which such holder is bound.
On each Remittance Date, commencing on December 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month immediately preceding the month of such
Remittance Date (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class A-1 Certificates on such Remittance Date
pursuant to Section 6.5 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage Pass-Through Certificates, Series 1997-2,
Class A-1 (herein called the "Certificates") and representing undivided
ownership of (i) the Trust Balances of such HELOCs as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto and
all collections thereon and proceeds thereof (other than payments of interest
that accrued on each HELOC up to the Cut-Off Date), (ii) such assets as from
time to time are allocable to the Class A-1 Certificateholders and identified as
REO Property and collections thereon and proceeds thereof, assets that are
deposited in the Accounts, including amounts on deposit in such Accounts and
invested in Permitted Investments, (iii) the Trustee's rights with respect to
the Trust Balances of the HELOCs under all insurance policies required to be
maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the Class
A-1 Certificate Insurance Policy, (v) Net Liquidation Proceeds allocable to the
Trust Balances of the HELOCs and (vi) Released Mortgaged Property Proceeds
allocable to the Trust Balances.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Certificate Insurer or
the Trustee and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association, the Federal Housing
Administration or the Veterans Administration or any other governmental agency.
The Certificates are limited in right of payment to certain collections and
recoveries respecting the HELOCs and Insured Payments under the Certificate
Insurance Policy, all as more specifically set forth herein and in the
Agreement. In the event Servicer funds are advanced with
2
<PAGE>
respect to any Mortgage Loan, such advance is reimbursable to the Servicer from
related recoveries on such Mortgage Loan.
MBIA Insurance Corporation (the "Certificate Insurer") has
issued a surety bond with respect to the Class A-1 Certificates, a copy of which
is attached as Exhibit B-1 to the Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereon or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in New York,
New York duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
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 Servicer, the Depositor, the Seller and the Trustee and
any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage Loans
3
<PAGE>
and REO Properties at a price determined as provided in the Agreement (the
exercise of the right of the Servicer to purchase all the Mortgage Loans and
property in respect of Mortgage Loans will result in early retirement of the
Certificates), the right of the Servicer to purchase being subject to Class A-1
Certificate Principal Balance at the time of purchase being less than ten
percent (10%) of the scheduled Principal Balance of the HELOCs as of the Cut-Off
Date plus the Group I Original Pre-Funded Amount.
Unless this Certificate has been countersigned by the Trustee,
by manual signature, this Certificate shall not be entitled to any benefit under
the Agreement or be valid for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-1 Certificate referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Signatory
Dated: November 18, 1997
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at The Chase
Manhattan Bank, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Certificate Insurance Policy (the "Policy"),
thereby unconditionally and irrevocably guarantees to any Holder (as described
below) that an amount equal to each full and complete Insured Payment will be
received by the Trustee, or its successors as trustee for the Holders, on behalf
of the Holders from the Insurer, for distribution by the Trustee to each Holder
of each Holder's proportionate share of such Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the
Policy, and no accelerated 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:
$70,000,000
Irwin Home Equity Corporation Trust 1997-2
Mortgage Pass-Through Certificates
Series 1997-2, Class A-1
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust, any REMIC
established by the Trust or the Trustee for withholding taxes, if any (including
interest and penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a 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 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 Holder relating to or arising under the
Obligations against the debtor which made such Preference Amount or otherwise
with respect to such Preference Amount and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Holder in any legal
proceeding related to such Preference Amount, 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 Holder and not to any Holder directly
unless such Holder 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 Holder.
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 (i) the Remittance
Date on which the Class A-1
<PAGE>
Distribution Amount is due or (ii) the second 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 or is
otherwise insufficient for the purpose of making 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.
Insured Payments due under the Policy unless otherwise stated
therein will be disbursed by the Fiscal Agent to the Trustee on behalf of the
Holders by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such 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 Holders 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 herein, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of November 1, 1997 by and among Prudential Securities Secured Financing
Corporation, as Depositor, Irwin Home Equity Corporation, as Servicer, and the
Trustee, as trustee, without regard to any amendment or supplement thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the states of New York,
Illinois or California 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.
"Class A-1 Distribution Amount" means, for any Remittance
Date, the amount distributed to the Holders of the Class A-1 Certificates on
such Remittance Date pursuant to Sections 6.5(a)(iii) and (iv) of the Agreement,
which amount shall be the lessor of (a) the Class A-1 Formula Distribution
Amount for such Remittance Date and (b) the amount (including any applicable
portion of any Insured Payment) available for distribution on account of the
Class A-1 Certificates for such Remittance Date.
"Deficiency Amount" means the excess of the Class A-1 Credit
Enhancement Distribution Amount over the amount then on deposit in and available
to be withdrawn from the Reserve Account (or available to be drawn under any
Eligible Letter of Credit) on such Remittance Date.
"Insured Payment" means, as of each Remittance Date, any
Deficiency Amount and (ii) the unpaid Preference Amount.
2
<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by fax substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Payment which shall be
due and owing on the applicable Remittance Date.
"Holder" means each Class A-1 Certificateholder (as defined in
the Agreement and other than the Trustee, the Seller, the Depositor, the
Servicer or any Sub-Servicer) who, on the applicable Remittance Date, is
entitled under the terms of the Class A-1 Certificate to payment thereunder.
"Preference Amount" means any amount previously distributed to
a Holder 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.
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 of the Insurer 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 maturity of the Obligations.
MBIA INSURANCE CORPORATION
3
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-2
CLASS A-2
No. A-2-1 CUSIP:464124 AH9
Series 1997-2 Original Certificate
Principal Balance:
$24,500,000
Pass-Through Rate: Original Certificate Percentage Interest of this
Principal Balance Certificate: 100%
Represented by this
Fixed Rate: 6.425% Certificate:
$24,500,000
Date of Pooling and Cut-Off Date: close of First Remittance Date:
Servicing Agreement: business October 31, 1997 December 15, 1997
November 1, 1997
Servicer: Irwin Home Closing Date: November Latest Maturity Date: July
Equity Corporation 18, 1997 15, 2004
Trustee: The Chase
Manhattan Bank
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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 certifies that Cede & Co. is the registered owner of a
Class A-2 percentage interest (the "Percentage Interest") in a pool of closed
end home equity loans secured by mortgages on one- to four-family properties
(the "HELs") serviced by Irwin Home Equity Corporation (hereinafter called the
"Servicer", in its capacity as servicer under that certain Pooling and Servicing
Agreement (the "Agreement") dated as of November 1, 1997 among Irwin Home Equity
Corporation, as servicer, Prudential Securities Secured Financing Corporation,
as depositor (the "Depositor") and The Chase Manhattan Bank, as trustee (the
"Trustee")). The HELS were originated or acquired by IHE Funding Corp. and sold
to the Depositor pursuant to that certain Purchase and Sale Agreement dated as
of November 1, 1997 between the Depositor and IHE Funding Corp. (the "Seller").
The HELs will be serviced by the Servicer pursuant to the terms and conditions
of the Agreement, certain of the pertinent provisions of which are set forth
<PAGE>
herein. To the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
On each Remittance Date, commencing on December 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month immediately preceding the month of such
Remittance Date (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class A-2 Certificates on such Remittance Date
pursuant to Section 6.5 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as Irwin Home Equity Corporation Trust 1997-2 Mortgage
Pass-Through Certificates, Series 1997-2, Class A-2 (herein called the
"Certificates") and representing undivided ownership of (i) the Trust Balances
of such HELs as from time to time are subject to the Agreement, together with
the Mortgage Files relating thereto and all collections thereon and proceeds
thereof (other than payments of interest that accrued on each HEL up to the
Cut-Off Date), (ii) such assets as from time to time are allocable to the Class
A-2 Certificateholders and identified as REO Property and collections thereon
and proceeds thereof, assets that are deposited in the Accounts, including
amounts on deposit in such Accounts and invested in Permitted Investments, (iii)
the Trustee's rights with respect to the Trust Balances of the HELs under all
insurance policies required to be maintained pursuant to the Agreement and any
Insurance Proceeds, (iv) the Class A-2 Certificate Insurance Policy, (v) Net
Liquidation Proceeds allocable to the Trust Balances of the HELs and (vi)
Released Mortgaged Property Proceeds allocable to the Trust Balances.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Certificate Insurer or
the Trustee and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association, the Federal Housing
Administration or the Veterans Administration or any other governmental agency.
The Certificates are limited in right of payment to certain collections and
recoveries respecting the HELs and Insured Payments under the Certificate
Insurance Policy, all as more specifically set forth herein and in the
Agreement. In the event Servicer funds are advanced with
2
<PAGE>
respect to any Mortgage Loan, such advance is reimbursable to the Servicer from
related recoveries on such Mortgage Loan.
MBIA Insurance Corporation (the "Certificate Insurer") has
issued a surety bond with respect to the Class A-2 Certificates, a copy of which
is attached as Exhibit B-2 to the Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereon or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in New York,
New York duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
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 Servicer, the Depositor, the Seller and the Trustee and
any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage
3
<PAGE>
Loans and REO Properties at a price determined as provided in the Agreement (the
exercise of the right of the Servicer to purchase all the Mortgage Loans and
property in respect of Mortgage Loans will result in early retirement of the
Certificates), the right of the Servicer to purchase being subject to Class A-2
Certificate Principal Balance at the time of purchase being less than ten
percent (10%) of the scheduled Principal Balance of the HELs as of the Cut-Off
Date plus the Group II Original Pre-Funded Amount.
Unless this Certificate has been countersigned by the Trustee,
by manual signature, this Certificate shall not be entitled to any benefit under
the Agreement or be valid for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-2 Certificate referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Signatory
Dated: November 18, 1997
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at The Chase
Manhattan Bank, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Certificate Insurance Policy (the "Policy"),
thereby unconditionally and irrevocably guarantees to any Holder (as described
below) that an amount equal to each full and complete Insured Payment will be
received by the Trustee or its successors, as trustee for the Holders, on behalf
of the Holders, from the Insurer, for distribution by the Trustee to each Holder
of each Holder's proportionate share of such Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the
Policy, and no accelerated 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:
$24,500,000
Irwin Home Equity Corporation Trust 1997-2
Mortgage Pass-Through Certificates
Certificates Series 1997-2, Class A-2
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust, any REMIC
established by the Trust or the Trustee for withholding taxes, if any (including
interest and penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a 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 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 Holder relating to or arising under the
Obligations against the debtor which made such Preference Amount or otherwise
with respect to such Preference Amount and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Holder in any legal
proceeding related to such Preference Amount, 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 Holder and not to any Holder directly
unless such Holder 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 Holder.
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 (i) the Remittance
Date on which the Class A-2
<PAGE>
Distribution Amount is due or (ii) the second 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 or is
otherwise insufficient for the purpose of making 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.
Insured Payments due under the Policy unless otherwise stated
therein will be disbursed by the Fiscal Agent to the Trustee on behalf of the
Holders by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such 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 Holders 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 herein, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of November 1, 1997 by and among Prudential Securities Secured Financing
Corporation, as Depositor, Irwin Home Equity Corporation, as Servicer, and the
Trustee, as trustee, without regard to any amendment or supplement thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the states of New York,
Illinois or California 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.
"Class A-2 Distribution Amount" means, for any Remittance
Date, the amount distributed to the Holders of the Class A-2 Certificates on
such Remittance Date pursuant to Sections 6.5(a)(iii) and (iv) of the Agreement,
which amount shall be the lesser of (a) the Class A-2 Formula Distribution
Amount for such Remittance Date and (b) the amount (including any applicable
portion of any Insured Payment) available for distribution on account of the
Class A-2 Certificates for such Remittance Date.
"Deficiency Amount" means the excess of the Group II Credit
Enhancement Distribution Amount over the amount then on deposit in and Available
to be withdrawn from the Reserve Account (or available to be drawn under any
Eligible Letter of Credit) on such Remittance Date.
"Insured Payment" means, (i) as of each Payment Date, pay
Deficiency Amount and (ii) the unpaid Preference Amount.
2
<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by fax substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Payment which shall be
due and owing on the applicable Remittance Date.
"Holder" means each Class A-2 Certificateholder (as defined in
the Agreement and other than the Trustee, the Seller, the Depositor, the
Servicer or any Sub-Servicer) who, on the applicable Remittance Date, is
entitled under the terms of the Class A-2 Certificate to payment thereunder.
"Preference Amount" means any amount previously distributed to
a Holder 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.
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 of the Insurer 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 maturity of the Obligations.
MBIA INSURANCE CORPORATION
3
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-2
CLASS A-3
No. A-3-1 CUSIP: 464124 AJ5
Series 1997-2 Original Certificate
Principal Balance:
$20,500,000
Pass-Through Rate: Original Certificate Percentage Interest
Principal Balance of this Certificate: 100%
Represented by this
Fixed: 6.420% Certificate:
$20,500,000
Date of Pooling and Cut-Off Date: close of First Remittance Date:
Servicing Agreement: business October 31, 1997 December 15, 1997
November 1, 1997
Servicer: Irwin Home Closing Date: Latest Maturity Date:
Equity Corporation November 18, 1997 May 15, 2007
Trustee: The Chase
Manhattan Bank
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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 certifies that Cede & Co. is the registered owner of a
Class A-3 percentage interest (the "Percentage Interest") in a pool of closed
end home equity loans secured by mortgages on one- to four-family properties
(the "HELs") serviced by Irwin Home Equity Corporation (hereinafter called the
"Servicer", in its capacity as servicer under that certain Pooling and Servicing
Agreement (the "Agreement") dated as of November 1, 1997 among Irwin Home Equity
Corporation, as servicer, Prudential Securities Secured Financing Corporation,
as depositor (the "Depositor") and The Chase Manhattan Bank, as trustee (the
"Trustee")). The HELS were originated or acquired by IHE Funding Corp. and sold
to the Depositor pursuant to that certain Purchase and Sale Agreement dated as
of November 1, 1997 between the Depositor and IHE Funding Corp. (the "Seller").
The HELs will be serviced by the Servicer pursuant to the
<PAGE>
terms and conditions of the Agreement, certain of the pertinent provisions of
which are set forth herein. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the holder of this Certificate by virtue of the
acceptance hereof assents and by which such holder is bound.
On each Remittance Date, commencing on December 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month immediately preceding the month of such
Remittance Date (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class A-3 Certificates on such Remittance Date
pursuant to Section 6.5 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as Irwin Home Equity Corporation Trust 1997-2 Mortgage
Pass-Through Certificates, Series 1997-2, Class A-3 (herein called the
"Certificates") and representing undivided ownership of (i) the Trust Balances
of such HELs as from time to time are subject to the Agreement, together with
the Mortgage Files relating thereto and all collections thereon and proceeds
thereof (other than payments of interest that accrued on each HEL up to the
Cut-Off Date), (ii) such assets as from time to time are allocable to the Class
A-3 Certificateholders and identified as REO Property and collections thereon
and proceeds thereof, assets that are deposited in the Accounts, including
amounts on deposit in such Accounts and invested in Permitted Investments, (iii)
the Trustee's rights with respect to the Trust Balances of the HELs under all
insurance policies required to be maintained pursuant to the Agreement and any
Insurance Proceeds, (iv) the Class A-3 Certificate Insurance Policy, (v) Net
Liquidation Proceeds allocable to the Trust Balances of the HELs and (vi)
Released Mortgaged Property Proceeds allocable to the Trust Balances.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Certificate Insurer or
the Trustee and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association, the Federal Housing
Administration or the Veterans Administration or any other governmental agency.
The Certificates are limited in right of payment to certain collections and
recoveries respecting the HELs and Insured Payments under the Certificate
Insurance Policy, all as more specifically set forth herein and in the
Agreement. In the event Servicer funds are advanced with
2
<PAGE>
respect to any Mortgage Loan, such advance is reimbursable to the Servicer from
related recoveries on such Mortgage Loan.
MBIA Insurance Corporation (the "Certificate Insurer") has
issued a surety bond with respect to the Class A-3 Certificates, a copy of which
is attached as Exhibit B-3 to the Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereon or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in New York,
New York duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
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 Servicer, the Depositor, the Seller and the Trustee and
any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders, or (ii) the purchase by the
Servicer of all outstanding Mortgage Loans and REO Properties at a price
determined as provided in the Agreement (the exercise of
3
<PAGE>
the right of the Servicer to purchase all the Mortgage Loans and property in
respect of Mortgage Loans will result in early retirement of the Certificates),
the right of the Servicer to purchase being subject to Class A-3 Certificate
Principal Balance at the time of purchase being less than ten percent (10%) of
the scheduled Principal Balance of the HELs as of the Cut-Off Date plus the
Group II Original Pre-Funded Amount.
Unless this Certificate has been countersigned by the Trustee,
by manual signature, this Certificate shall not be entitled to any benefit under
the Agreement or be valid for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-3 Certificate referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Signatory
Dated: November 18, 1997
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at The Chase
Manhattan Bank, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Certificate Insurance Policy (the "Policy"),
thereby unconditionally and irrevocably guarantees to any Holder (as described
below) that an amount equal to each full and complete Insured Payment will be
received by the Trustee or its successors, as trustee for the Holders, on behalf
of the Holders, from the Insurer, for distribution by the Trustee to each Holder
of each Holder's proportionate share of such Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the
Policy, and no accelerated 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:
$20,500,000
Irwin Home Equity Corporation Trust 1997-2
Mortgage Pass-Through Certificates
Certificates Series 1997-2, Class A-3
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust, any REMIC
established by the Trust or the Trustee for withholding taxes, if any (including
interest and penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a 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 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 Holder relating to or arising under the
Obligations against the debtor which made such Preference Amount or otherwise
with respect to such Preference Amount and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Holder in any legal
proceeding related to such Preference Amount, 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 Holder and not to any Holder directly
unless such Holder 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 Holder.
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 (i) the Remittance
Date on which the Class A-3
<PAGE>
Distribution Amount is due or (ii) the second 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 or is
otherwise insufficient for the purpose of making 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.
Insured Payments due under the Policy unless otherwise stated
therein will be disbursed by the Fiscal Agent to the Trustee on behalf of the
Holders by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such 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 Holders 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 herein, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of November 1, 1997 by and among Prudential Securities Secured Financing
Corporation, as Depositor, Irwin Home Equity Corporation, as Servicer, and the
Trustee, as trustee, without regard to any amendment or supplement thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the states of New York,
Illinois or California 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.
"Class A-3 Distribution Amount" means, for any Remittance
Date, the amount distributed to the Holders of the Class A-3 Certificates on
such Remittance Date pursuant to Sections 6.5(a)(iii) and (iv) of the Agreement,
which amount shall be the lesser of (a) the Class A-3 Formula Distribution
Amount for such Remittance Date and (b) the amount (including any applicable
portion of any Insured Payment) available for distribution on account of the
Class A-3 Certificates for such Remittance Date.
"Deficiency Amount" means the excess of the Group II Credit
Enhancement Distribution Amount over the amount then on deposit in and Available
to be withdrawn from the Reserve Account (or available to be drawn under any
Eligible Letter of Credit) on such Remittance Date.
"Insured Payment" means, (i) as of each Payment Date, pay
Deficiency Amount and (ii) the unpaid Preference Amount.
2
<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by fax substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Payment which shall be
due and owing on the applicable Remittance Date.
"Holder" means each Class A-3 Certificateholder (as defined in
the Agreement and other than the Trustee, the Seller, the Depositor, the
Servicer or any Sub-Servicer) who, on the applicable Remittance Date, is
entitled under the terms of the Class A-3 Certificate to payment thereunder.
"Preference Amount" means any amount previously distributed to
a Holder 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.
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 of the Insurer 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 maturity of the Obligations.
MBIA INSURANCE CORPORATION
3
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-2
CLASS A-4
No. A-4-1 CUSIP: 464124 AK2
Series 1997-2 Original Certificate
Principal Balance:
$15,000,000
Pass-Through Rate: Original Certificate Percentage Interest
Principal Balance of this Certificate: 100%
Represented by this
Fixed Rate: 6.770% Certificate:
$15,000,000
Date of Pooling and Cut-Off Date: close of First Remittance Date:
Servicing Agreement: business October 31, 1997 December 15, 1997
November 1, 1997
Servicer: Irwin Home Closing Date: Latest Maturity Date:
Equity Corporation November 18, 1997 January 15, 2014
Trustee: The Chase
Manhattan Bank
Unless this Certificate is presented by an authorized
representative of the Depository Trust Company, a New York corporation ("DTC"),
to the Depositor 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 certifies that Cede & Co. is the registered owner of a
Class A-4 percentage interest (the "Percentage Interest") in a pool of closed
end home equity loans secured by mortgages on one- to four-family properties
(the "HELs") serviced by Irwin Home Equity Corporation (hereinafter called the
"Servicer", in its capacity as servicer under that certain Pooling and Servicing
Agreement (the "Agreement") dated as of November 1, 1997 among Irwin Home Equity
Corporation, as servicer, Prudential Securities Secured Financing Corporation,
as depositor (the "Depositor") and The Chase Manhattan Bank, as trustee (the
"Trustee")). The HELS were originated or acquired by IHE Funding Corp. and sold
to the Depositor pursuant to that certain Purchase and Sale Agreement dated as
of November 1, 1997 between the Depositor and IHE Funding Corp. (the "Seller").
The HELs will be serviced by the Servicer pursuant to the
<PAGE>
terms and conditions of the Agreement, certain of the pertinent provisions of
which are set forth herein. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the holder of this Certificate by virtue of the
acceptance hereof assents and by which such holder is bound.
On each Remittance Date, commencing on December 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the month immediately preceding the month of such
Remittance Date (the "Record Date"), in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class A-4 Certificates on such Remittance Date
pursuant to Section 6.5 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of a duly authorized issue of
Certificates designated as Irwin Home Equity Corporation Trust 1997-2 Mortgage
Pass-Through Certificates, Series 1997-2, Class A-4 (herein called the
"Certificates") and representing undivided ownership of (i) the Trust Balances
of such HELs as from time to time are subject to the Agreement, together with
the Mortgage Files relating thereto and all collections thereon and proceeds
thereof (other than payments of interest that accrued on each HEL up to the
Cut-Off Date), (ii) such assets as from time to time are allocable to the Class
A-4 Certificateholders and identified as REO Property and collections thereon
and proceeds thereof, assets that are deposited in the Accounts, including
amounts on deposit in such Accounts and invested in Permitted Investments, (iii)
the Trustee's rights with respect to the Trust Balances of the HELs under all
insurance policies required to be maintained pursuant to the Agreement and any
Insurance Proceeds, (iv) the Class A-4 Certificate Insurance Policy, (v) Net
Liquidation Proceeds allocable to the Trust Balances of the HELs and (vi)
Released Mortgaged Property Proceeds allocable to the Trust Balances.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Certificate Insurer or
the Trustee and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association, the Federal Housing
Administration or the Veterans Administration or any other governmental agency.
The Certificates are limited in right of payment to certain collections and
recoveries respecting the HELs and Insured Payments under the Certificate
Insurance Policy, all as more
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<PAGE>
specifically set forth herein and in the Agreement. In the event Servicer funds
are advanced with respect to any Mortgage Loan, such advance is reimbursable to
the Servicer from related recoveries on such Mortgage Loan.
MBIA Insurance Corporation (the "Certificate Insurer") has
issued a surety bond with respect to the Class A-4 Certificates, a copy of which
is attached as Exhibit B-3 to the Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereon or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in New York,
New York duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
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 Servicer, the Depositor, the Seller and the Trustee and
any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate
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<PAGE>
Insurer and all Certificateholders, or (ii) the purchase by the Servicer of all
outstanding Mortgage Loans and REO Properties at a price determined as provided
in the Agreement (the exercise of the right of the Servicer to purchase all the
Mortgage Loans and property in respect of Mortgage Loans will result in early
retirement of the Certificates), the right of the Servicer to purchase being
subject to Class A-4 Certificate Principal Balance at the time of purchase being
less than ten percent (10%) of the scheduled Principal Balance of the HELs as of
the Cut-Off Date plus the Group II Original Pre-Funded Amount.
Unless this Certificate has been countersigned by the Trustee,
by manual signature, this Certificate shall not be entitled to any benefit under
the Agreement or be valid for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A-4 Certificate referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Signatory
Dated: November 18, 1997
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at The Chase
Manhattan Bank, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium
and subject to the terms of the Certificate Insurance Policy (the "Policy"),
thereby unconditionally and irrevocably guarantees to any Holder (as described
below) that an amount equal to each full and complete Insured Payment will be
received by the Trustee or its successors, as trustee for the Holders, on behalf
of the Holders, from the Insurer, for distribution by the Trustee to each Holder
of each Holder's proportionate share of such Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the
Policy, and no accelerated 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:
$15,000,000
Irwin Home Equity Corporation Trust 1997-2
Mortgage Pass-Through Certificates
Certificates Series 1997-2, Class A-4
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Trust, any REMIC
established by the Trust or the Trustee for withholding taxes, if any (including
interest and penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a 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 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 Holder relating to or arising under the
Obligations against the debtor which made such Preference Amount or otherwise
with respect to such Preference Amount and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Holder in any legal
proceeding related to such Preference Amount, 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 Holder and not to any Holder directly
unless such Holder 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 Holder.
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 (i) the Remittance
Date on which the Class A-4
<PAGE>
Distribution Amount is due or (ii) the second 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 or is
otherwise insufficient for the purpose of making 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.
Insured Payments due under the Policy unless otherwise stated
therein will be disbursed by the Fiscal Agent to the Trustee on behalf of the
Holders by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such 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 Holders 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 herein, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of November 1, 1997 by and among Prudential Securities Secured Financing
Corporation, as Depositor, Irwin Home Equity Corporation, as Servicer, and the
Trustee, as trustee, without regard to any amendment or supplement thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the states of New York,
Illinois or California 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.
"Class A-4 Distribution Amount" means, for any Remittance
Date, the amount distributed to the Holders of the Class A-4 Certificates on
such Remittance Date pursuant to Sections 6.5(a)(iii) and (iv) of the Agreement,
which amount shall be the lesser of (a) the Class A-4 Formula Distribution
Amount for such Remittance Date and (b) the amount (including any applicable
portion of any Insured Payment) available for distribution on account of the
Class-A4 Certificates for such Remittance Date.
"Deficiency Amount" means the excess of the Group II Credit
Enhancement Distribution Amount over the amount then on deposit in and Available
to be withdrawn from the Reserve Account (or available to be drawn under any
Eligible Letter of Credit) on such Remittance Date.
"Insured Payment" means, (i) as of each Payment Date, pay
Deficiency Amount and (ii) the unpaid Preference Amount.
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<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by fax substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Payment which shall be
due and owing on the applicable Remittance Date.
"Holder" means each Class A-4 Certificateholder (as defined in
the Agreement and other than the Trustee, the Seller, the Depositor, the
Servicer or any Sub-Servicer) who, on the applicable Remittance Date, is
entitled under the terms of the Class A-4 Certificate to payment thereunder.
"Preference Amount" means any amount previously distributed to
a Holder 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.
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 of the Insurer 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 maturity of the Obligations.
MBIA INSURANCE CORPORATION
3
<PAGE>
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. ANY RESALE, TRANSFER OR
OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION
MAY BE MADE ONLY (i) IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION
OR QUALIFICATION AND (ii) IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.2 OF
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES AN OPINION OF COUNSEL AND AN
AFFIDAVIT TO THE TRUSTEE THAT SUCH TRANSFEREE IS A PERMITTED TRANSFEREE (AS
DEFINED IN THE POOLING AND SERVICING AGREEMENT) OR AN AGENT OF A PERMITTED
TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY
TRANSFER OF THIS CLASS R CERTIFICATE TO A PERSON OTHER THAN A PERMITTED
TRANSFEREE OR AN AGENT OF A PERMITTED TRANSFEREE, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT
LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST THEREIN SHALL BE MADE TO ANY
EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL
RETIREMENT ACCOUNTS AND ANNUITIES, KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS
AND SEPARATE ACCOUNTS IN WHICH SUCH PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED
THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR THE INTERNAL REVENUE CODE OF 1986 ("CODE"), EXCEPT IN
ACCORDANCE WITH THE PROCEDURES DESCRIBED HEREIN.
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS R CERTIFICATE
Series 1997-2 Percentage Interest of
this Certificate: 100%
No. R-1 First Remittance Date:
December 15, 1997
Date of Pooling and Servicing Agreement: Closing Date:
November 1, 1997 November 18, 1997
Cut-Off Date: Latest Maturity Date:
close of business November 15, 2018
October 31, 1997
Servicer Irwin Home Equity Trustee:THE CHASE MANHATTAN BANK
Corporation
This certifies IHE Funding Corp. is the registered owner of
the Class R percentage interest (the "Percentage Interest") in a segregated pool
of assets (the 1997-2 REMIC) within a trust fund consisting primarily of a pool
of home equity revolving credit line loans and a pool of closed-end home equity
loans in each case secured by mortgages on one- to four-family, residential
properties (the "Mortgage Loans") serviced by Irwin Home Equity Corporation
(hereinafter called the "Servicer", in its capacity as a servicer under that
certain Pooling and Servicing Agreement (the "Agreement")), dated as of November
1, 1997 among Irwin Home Equity Corporation, as servicer, Prudential Securities
Secured Financing Corporation, as depositor (the "Depositor"), and The Chase
Manhattan Bank, as trustee (the "Trustee"). The Mortgage Loans were originated
or acquired by IHE Funding Corp. in accordance with that certain Mortgage Loan
Sale Agreement, dated as of November 1, 1997 between Irwin Union Bank and Trust
Company and IHE Funding Corp., and transferred to the Depositor in accordance
with that certain Purchase and Sale Agreement, dated as of November 1, 1997
between IHE Funding Corp., as seller thereunder (the "Seller") and the
Depositor. The Mortgage Loans will be serviced by the Servicer pursuant to the
terms and conditions of the Agreement, certain of the pertinent provisions of
which are set forth herein. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the holder of this Certificate by virtue of the
acceptance hereof assents and by which such holder is bound. The Mortgage Loans
have aggregate outstanding principal balances, at the close of business on the
Cut-Off Date herein referred to, after application of payments made on or before
such date, of $50,000,384.91 and the Pre-Funding Account contains a deposit as
of the Closing Date of $79,999,615.09.
On each Remittance Date, commencing on December 15, 1997, the
Trustee shall distribute to the Person in whose name this Certificate is
registered on the last day of the calendar month immediately preceding the month
of such Remittance Date (the "Record Date"),
<PAGE>
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Class R
Certificates on such Remittance Date pursuant to Section 6.5 of the Agreement.
Distributions on this Certificate will be made by the Trustee
by wire transfer of immediately available funds to the account of the Person
entitled thereto as shall appear on the Certificate Register without the
presentation or surrender of this Certificate (except for the final distribution
as described below) or the making of any notation thereon, at a bank or other
entity having appropriate facilities therefor, if such Person shall own of
record Certificates of the same Class which have denominations aggregating at
least $5,000,000 appearing in the Certificate Register and shall have so
notified the Trustee at least five business days prior to the related Record
Date, or by check mailed to the address of such Person appearing in the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Trustee in New York, New
York.
This Certificate is one of the duly authorized issue of
Certificates designated as Irwin Home Equity Corporation Trust 1997-2 Mortgage
Pass-Through Certificates, Series 1997-2, Class R (herein called the
"Certificates") and representing undivided ownership.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Seller, the Servicer, the Certificate Insurer or
the Trustee and are not Insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association, the Federal Housing
Administration or the Veterans Administration or any other governmental agency.
The Certificates are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans, all as more specifically set forth
herein and in the Agreement. In the event Servicer funds are advanced with
respect to any Mortgage Loan, such advance is reimbursable to the Servicer from
related recoveries on such Mortgage Loan.
MBIA Insurance Corporation (the "Certificate Insurer") has
issued two surety bonds, one with respect to the Class A-1 Certificate, and the
other with respect to the Class A-2 , Class A-3 and Class A-4 Certificates,
copies of which are attached as Exhibits A-1 and A-2 respectively to the
Agreement.
Subject to certain restrictions, the Agreement permits the
amendment thereof by the Depositor, the Servicer and the Trustee. Subject to the
rights of the Certificate Insurer, the Agreement permits the Majority
Certificate- holders to waive, on behalf of all Certificateholders, any default
by the Servicer in the performance of its obligations under the Agreement and
its consequences, except a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
2
<PAGE>
As provided in the Agreement and subject to certain
limitations therein set forth, including, without limitation, with respect to
the Class R Certificates, execution and delivery as appropriate of the Transfer
Affidavit and Agreement (attached as an exhibit to the Agreement) and the
Transfer Certificate (attached as an exhibit to the Agreement) described in
Section 4.2(i) of the Agreement, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in New York,
New York, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
No transfer of a Class R Certificate or any interest therein
shall be made to any employee benefit plan or other retirement arrangement,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each, a "Plan"), unless
the prospective transferee of a Class R Certificate provides the Servicer and
the Trustee with a certification of facts and, at its own expense, an Opinion of
Counsel which establish to the satisfaction of the Servicer and the Trustee that
such transfer will not result in a violation of Section 406 of ERISA or Section
4975 of the Code or cause the Servicer or the Trustee to be deemed a fiduciary
of such Plan or result in the imposition of an excise tax under Section 4975 of
the Code.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, this Certificate is exchangeable for a new Certificate evidencing the
same undivided ownership interest, as requested by the holder surrendering the
same.
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 Servicer, the Depositor, the Seller and the Trustee and
any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon
notice to the Trustee of: (i) the later of (a) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or periodic Advances of same by the Servicer), or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee or (b) mutual consent of the Servicer,
the Certificate insurer and all Certificate-holders, or (ii) subject to certain
restrictions described in the Agreement, the purchase by the Servicer of the
last of two Groups of all outstanding Mortgage Loans and REO Properties at a
price determined as provided in the Agreement (the exercise of
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<PAGE>
the right of the Servicer to purchase all the Mortgage Loans and property in
respect of Mortgage Loans will result in early retirement of the Certificates),
such right of the Servicer to purchase being subject to the related Class A
Principal Balance at the time of purchase being less than ten percent (10%) of
the related original Class A Principal Balance. By its acceptance of this
Certificate, the Certificateholder hereby appoints the Servicer as its
attorney-in-fact to negotiate the sale and effect the transfer of a Class R
Certificate in accordance with Section 4.2(i) of the Agreement and to adopt a
plan of liquidation of the Trust Fund. Unless this Certificate has been
countersigned by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This one of the Class R Certificates referred to
in the within-mentioned Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:___________________________
Authorized Signatory
Dated: NOVEMBER 18, 1997
<PAGE>
ADDITIONAL CERTIFICATE
THIS CERTIFICATE OR ANY INTEREST HEREIN MAY NOT BE
TRANSFERRED, ASSIGNED, EXCHANGED OR CONVEYED, EXCEPT IN ACCORDANCE WITH SECTIONS
4.2 AND 4.3 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
No. 1 One Unit
IRWIN HOME EQUITY
CORPORATION TRUST, 1997-2
ADDITIONAL CERTIFICATE
This Certificate represents an interest in
the Irwin Home Equity Corporation Trust, 1997-2
Evidencing a 100% interest in the Additional Balances on the
Mortgage Loans and in the Additional Mortgage Loans held by the Trust (the
"Trust"), the assets of which consist primarily of a pool of home equity
revolving credit line loans secured by mortgages on residential one-to-four
family properties (the "Mortgage Loans").
(Not an interest in or obligation of Prudential Securities
Secured Financing Corporation, IHE Funding Corp., ("IHE"), or any of their
affiliates.)
This certifies that Irwin Union Bank and Trust Company is the
registered owner of an interest in the Irwin Home Equity Corporation Trust
1997-2 issued pursuant to the Pooling and Servicing Agreement, dated as of
November 1, 1997 (the "Pooling and Servicing Agreement"; such term to include
any amendment or Supplement thereto) by and among Prudential Securities Secured
Financing Corporation, as Depositor (the "Depositor"), Irwin Home Equity
Corporation (in such capacity, the "Servicer"), as Servicer, and The Chase
Manhattan Bank, as Trustee (the "Trustee"). The corpus of the Trust consists of
all of the assets of, and all right, title and interest in and to the Trust
Fund, on and after the Cut-Off Date, all proceeds generated from the assets of
such Trust Fund, all monies as are from time to time deposited in the Accounts
and any other account or account maintained for the benefit of the
Certificateholders and the Holders of the Additional Certificate and all monies
as are from time to time available to the Trust under any enhancement for any
Series for payment to Certificateholders and the Holders of the Additional
Certificate. The Additional Certificate represents the interest of the Holder of
the Additional Certificate in and to the Trust Fund which is limited to the
right to receive principal payments, interest payments and certain other
collections and proceeds, as more fully specified in the Pooling and Servicing
Agreement. This Additional Certificate does not represent any interest in the
Trust Balances of the Mortgage Loans or any interest thereon not allocable to
the Additional Balances.
This Certificate is merely a summary of the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties, and obligations of
the Trustee. A copy of the Pooling and Servicing Agreement may be requested from
the Trustee by writing to the Trustee at The Chase Manhattan Bank, 450 West
<PAGE>
33rd Street, 10th Floor, New York, New York, Attention: Institutional Trust
Group. To the extent not defined herein capitalized terms used herein have the
meanings ascribed to them in the Pooling and Servicing Agreement.
This Certificate is the Additional Certificate, which
represents a 100% interest in the Additional Balances held by the Trust,
including the right to receive the collections and other amount at the times and
in the amounts specified in the Pooling and Servicing Agreement. This Additional
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the holder hereof by virtue
of the acceptance hereof assents and by which the holder hereof is bound.
The interest represented by this Additional Certificate at any
time in the assets in the Trust shall not exceed the Trust's interest in the
Additional Balances at such time. In addition to the Additional Certificate,
certificates will be issued to investors pursuant to the Pooling and Servicing
Agreement, which represent the interests of the certificateholders in the Trust.
This certificate shall not represent any interest in the Certificate Account,
the Trustee Collection Account, the Collection Account or the Reserve Account of
Series 1997-2 except as specifically provided in the Pooling and Servicing
Agreement.
Subject to certain conditions in the Pooling and Servicing
Agreement, the obligations created by the Pooling and Servicing Agreement and
the Trust created thereby shall terminate upon the earlier of (i) [November 15,
2019] and (ii) the day after the date on which funds shall have been deposited
in the Collection Account or Trustee Collection Account sufficient to pay the
Principal Balance of the Mortgage Loans plus applicable certificate interest
accrued through the last day of the interest accrual period for such Remittance
Date in full on all Certificates to the extent permitted by the Pooling and
Servicing Agreement.
Upon the termination of the Trust pursuant to Article VIII of
the Pooling and Servicing Agreement and the surrender of the Additional
Certificate, the Trustee shall assign and convey to the Holder hereof (without
recourse, representation or warranty) all right, title and interest of the Trust
in the Additional Balances represented hereby. The Trustee shall execute and
deliver such instruments of transfer and assignment, in each case without
recourse, as shall be reasonably requested by the Transferor to vest in the
Transferor all right, title and interest which the Trustee had in the applicable
assets.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
2
<PAGE>
.IN WITNESS WHEREOF, PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION has caused the Trustee to issue this Additional Certificate No. 1,
and to be duly executed by the Trustee on this, the 18th day of November, 1997.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:____________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Additional Certificate referred to in the
within-mentioned Pooling and Servicing Agreement.
Dated: November 18, 1997 THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:____________________________
Authorized Signatory
<PAGE>
CONTENTS OF MORTGAGE FILE
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
The Mortgage File for each Mortgage Loan shall include each of
the following documents and each other document added to such file from time to
time:
(1) The original Mortgage Note;
(2) The original Mortgage with evidence of recording indicated
thereon; provided, however, that if such recorded Mortgage has been lost or
destroyed by the recording office, a copy of such Mortgage certified by the
recording office to be a true copy of such Mortgage shall instead be required;
(3) A recorded assignment of the original Mortgage, or, until
such assignment is returned from the applicable recording office, evidence of
submission for recordation of such assignment in such recording office;
(4) Any intervening Assignments of the Mortgage with evidence
of recording thereon;
(5) Any assumption, modification, consolidation or extension
agreements;
(6) (A) The policy of title insurance (or a commitment for
title insurance, if the policy is being held by the title insurance company
pending recordation of the Mortgage) and the certificate of primary mortgage
guaranty insurance, if any, issued with respect to any Mortgage Loan with a
credit limit or Principal Balance in excess of $100,000 and with respect to any
Mortgage Loan which is in a first lien position; and
(B) The limited liability title assurance with respect to
any Mortgage Loan in a second lien position with a credit limit or Principal
Balance between $35,001 and $50,000 and with a second mortgage ratio greater
than 25% and with respect to any Mortgage Loan with a credit limit or Principal
Balance between $50,001 and $100,000;
(7) Other related documents which are added to such file from
time to time.
Capitalized terms used herein but not otherwise defined herein shall have the
meanings assigned in the Pooling and Servicing Agreement, dated as of November
1, 1997, by and among Prudential Securities Secured Financing Corporation, as
Depositor, Irwin Home Equity Corporation, as Servicer and The Chase Manhattan
Bank, as Trustee.
<PAGE>
TRUSTEE CERTIFICATE AS TO MORTGAGE FILES
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
The undersigned, a duly authorized representative of The Chase
Manhattan Bank, a New York banking corporation, as Trustee (the "Trustee")
pursuant to the Pooling and Servicing Agreement dated as of November 1, 1997 by
and among Prudential Securities Secured Financing Corporation, a Delaware
corporation, as Depositor of the Trust, Irwin Home Equity Corporation, an
Indiana corporation, as Servicer, and the Trustee (hereinafter as such agreement
may have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Pooling and Servicing Agreement"), does hereby certify as
follows:
A. Capitalized terms used in this Certificate have their
respective meanings set forth in the Pooling and Servicing Agreement. References
herein to certain subsections are references to the respective subsections of
the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section
2.4(a).
C. The undersigned is a Responsible Officer.
D. This Certificate is being delivered on or prior to the
Closing Date.
E. Pursuant to and in accordance with the limitations set
forth in Section 2.4(a), the Trustee hereby acknowledges receipt of the Class
A-1 Certificate Insurance Policy, the Group II Certificate Insurance Policy and
each Mortgage Note (with exceptions noted on the schedule attached hereto) as
identified in the Mortgage Loan Schedule and declares it will hold such
documents and any amendments, replacements or supplements thereto, as well as
any other assets included in the definition of Trust Fund and delivered to the
Trustee, as Trustee in trust upon and subject to the conditions set forth herein
for the benefit of the Certificateholders and the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed this 18th day of November, 1997.
THE CHASE MANHATTAN BANK
as Trustee
By:_____________________________
Authorized Signatory
<PAGE>
FORM OF INITIAL CERTIFICATION OF TRUSTEE
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
The undersigned, a duly authorized representative of The Chase
Manhattan Bank, as Trustee (the "Trustee") and pursuant to the Pooling and
Servicing Agreement dated as of November 1, 1997 by and among Prudential
Securities Secured Financing Corporation, a Delaware corporation, as Depositor
of the Trust, Irwin Home Equity Corporation, an Indiana corporation, as
Servicer, and the Trustee (hereinafter as such agreement may have been, or may
from time to time be, amended, supplemented or otherwise modified, the "Pooling
and Servicing Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their
respective meanings set forth in the Pooling and Servicing Agreement. Reference
herein to certain subsections are references to the respective subsections of
the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section
2.4(a).
C. The undersigned is a Responsible Officer.
D. This Certificate is being delivered by the date specified
in Section 2.4(a).
E. Pursuant to and in accordance with the limitations set
forth in Section 2.4, the Trustee hereby certifies and declares that, with noted
exceptions on attached schedule, (i) all documents required to be delivered
pursuant to Section 2.3 hereof and the Purchase and Sale Agreement are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed this 18th day of November, 1997.
THE CHASE MANHATTAN BANK
as Trustee
By:____________________________
Authorized Signatory
<PAGE>
SCHEDULE
[List here with respect to each applicable Mortgage Loan, any
defects relating to the form of the assignment of the related Mortgage]
<PAGE>
FORM OF FINAL CERTIFICATION OF TRUSTEE
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
The undersigned, a duly authorized representative of The Chase
Manhattan Bank, as Trustee (the "Trustee") and pursuant to the Pooling and
Servicing Agreement dated as of November 1, 1997 by and among Prudential
Securities Secured Financing Corporation, a Delaware corporation, as Depositor
of the Trust, Irwin Home Equity Corporation, an Indiana corporation, as
Servicer, and the Trustee (hereinafter as such agreement may have been, or may
from time to time be, amended, supplemented or otherwise modified, the "Pooling
and Servicing Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their
respective meanings set forth in the Pooling and Servicing Agreement. Reference
herein to certain subsections are references to the respective subsections of
the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section
2.4(a).
C. The undersigned is a Responsible Officer.
D. This Certificate is being delivered by the date specified
in Section 2.4(a).
E. Pursuant to and in accordance with the limitations set
forth in Section 2.4, the Trustee hereby certifies and declares that, with noted
exceptions on attached schedule, (i) all documents required to be delivered
pursuant to Section 2.3 hereof and the Purchase and Sale Agreement are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed this ____ day of _____________, 19__.
THE CHASE MANHATTAN BANK
as Trustee
By:____________________________
Authorized Signatory
<PAGE>
SCHEDULE
[List here with respect to each applicable Mortgage Loan, any
defects relating to the form of the assignment of the related Mortgage]
<PAGE>
REQUEST FOR RELEASE
OF MORTGAGE FILES TO SERVICER
IRWIN HOME EQUITY CORPORATION
TRUST 1997-2
The undersigned, a duly authorized representative of Irwin
Home Equity Corporation, an Indiana corporation (the "Servicer"), as Servicer
pursuant to the Pooling and Servicing Agreement dated as of November 1, 1997 by
and among Prudential Securities Secured Financing Corporation, as Depositor of
the Trust, Irwin Home Equity Corporation, an Indiana corporation, as Servicer,
and The Chase Manhattan Bank, a New York banking corporation, as Trustee
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their
respective meanings set forth in the Pooling and Servicing Agreement. References
herein to certain sections and subsections are references to the respective
sections and subsections of the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section
2.4(c), 3.3(b), or 5.13.
C. The Servicer is the Servicer under the Pooling and
Servicing Agreement.
D. The undersigned is a Servicing Officer.
E. Pursuant to the Pooling and Servicing Agreement, the
Servicer hereby requests release to it of the Mortgage File held by the Trustee
with respect to the following described Mortgage Loan for the reason indicated
below.
F. All amounts required to be deposited in the Collection
Account pursuant to the Pooling and Servicing Agreement in connection with this
release have been deposited in the Collection Account.
<PAGE>
Mortgage Loan No.:
Mortgagor's Name:
Reason for Requesting Mortgage File:
_____ 1 Pursuant to Section 2.4(c), a purchase of a Mortgage Loan has
occurred.
_____ 2 Pursuant to Section 2.4(c), a substitution of a Mortgage Loan
has occurred.
_____ 3 Pursuant to Section 5.13, payment of any Mortgage Loan has
been either made in full or the Servicer has received a
notification that payment in full will be escrowed in a manner
customary for such purposes.
_____ 4 Pursuant to Section 3.3, a breach of a representation or
warranty has occurred.
_____ 5 Pursuant to 3.3(e), the Mortgage Loan does not constitute
a Qualified Mortgage.
_____ 6 Other [Insert description of other servicing requirement].
The Servicer represents that release to it of such Mortgage
File is required for the reason herein set forth and acknowledges that the
above-referenced Mortgage File will be held by the Servicer in accordance with
the provisions of the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the Servicer has caused this Certificate
to be duly executed this ____ day of ____________, ____.
Irwin Home Equity Corporation
as Servicer
By:_____________________________
Authorized Signatory
<PAGE>
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
RESIDUAL CERTIFICATEHOLDER AFFIDAVIT PURSUANT TO
SECTION 860E(e) OF THE INTERNAL REVENUE CODE OF 1986
Re: Irwin Home Equity Corporation
Mortgage Pass-Through Certificates, Series 1997-2
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, [Name of Officer], under penalties of perjury, declare
that, to the best of my knowledge and belief, the following representations are
true, correct and complete and being first sworn, depose and say:
1. That I am the [Title of Officer] of [Name of Transferee]
(the "Investor") (taxpayer identification number ____________), on behalf of
which I have the authority to make this affidavit.
2. That the Investor is acquiring a Class R Certificate (a
"Residual Certificate") in the initial principal amount of $0.00, which Residual
Certificate represents a residual interest in the Trust Estate established by
Prudential Securities Secured Financing Corporation (the "Depositor") to secure
its Mortgage PassThrough Certificates, for which a real estate mortgage
investment conduit ("REMIC") election has been made under Section 860D of the
Internal Revenue Code of 1986, as amended (the "Code").
3. That no purpose of the acquisition of the Residual
Certificate is to avoid or impede the assessment or collection of federal income
tax.
4. That the Investor is a Permitted Transferee, as defined in
that certain Pooling and Servicing Agreement dated as of November 1, 1997.
5. That the Investor is not a "Disqualified Organization" (as
defined below), and that the Investor is not acquiring the Residual Certificate
for the account of, or as agent nominee of, or with a view to me transfer of
direct or indirect record or beneficial ownership to, a Disqualified
Organization. For the purposes hereof, a Disqualified Organization is any of the
following: (i) the United States, any state or political subdivision thereof,
any foreign government, any international organization or any agency or
instrumentality of any of the foregoing; (ii) any organization (other than a
farmer's cooperative as defined in Section 521 of the Code) that is exempt from
federal income taxation (including taxation under the unrelated business taxable
income provisions of the Code); or (iii) any rural telephone or electrical
service cooperative described in Section 1381(a)(2)(C) of the Code.
<PAGE>
6. That the Investor acknowledges that Section 860E(e) of the
Code imposes a substantial tax on the transferor or, in certain circumstances,
on an agent for the transferee, with respect to any transfer of any interest in
any Residual Certificate to a Disqualified Organization.
7. That the Investor (i) is not a plan that is subject to the
Department of Labor regulation set forth in 29 C.F.R. ss. 2510.3-101 (the "Plan
Asset Regulations") or (ii) has provided a "Benefit Plan Opinion" to The Chase
Manhattan Bank, as Certificate Registrar. A "Benefit Plan Opinion" is an opinion
of counsel satisfactory to the Trustee, the Issuer and the Servicer to the
effect that the proposed transfer will not (a) cause the assets of the REMIC to
be regarded as plan assets for purposes of the Plan Asset Regulations or (b)
give rise to a fiduciary duty on the part of the Depositor, the Servicer or the
Trustee.
8. That the Investor is a "U.S. Person" as that term is
defined in the Transferee's Letter of even date herewith, and that the Investor
is the beneficial owner of the Residual Certificate, and is not holding the
Residual Certificate as nominee for any other person.
9. That the Investor acknowledges that as the holder of the
Residual Certificate, to the extent the Residual Certificate would be treated as
a noneconomic residual interest within the meaning of Treasury Regulation
Section 1.860E-1(c)(2), the Investor may incur tax liabilities in excess of cash
flows generated by the Residual Certificate and that the Investor intends to pay
taxes associated with holding the Residual Certificate as they become due.
10. That the Investor is not acquiring its ownership interest
in the Class R Certificate that is the subject of the proposed Transfer as a
nominee, trustee or agent for any person that is not a Permitted Transferee,
that for so long as it retains its Ownership Interest in a Class R Certificate,
it will endeavor to remain a Permitted Transferee, and that it has reviewed the
provisions of Section 4.2 of the Pooling and Servicing Agreement and agrees to
be bound by them.
11. That the Investor is not a "pass-through interest holder"
within the meaning of temporary Treasury Regulation Section 1.67-3T(a)(2)(i)(A).
2
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to
be duly executed on its behalf, by its [Title of Officer] and its seal to be
hereunto attached, this ____ day of _______, 199_.
By:_____________________________
Name:
Title:
Personally appeared before me [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Title of Officer] of the Investor, and acknowledged to me that he executed
the same as his free act and deed and as the free act and deed of the Investor.
Subscribed and sworn before me
this ____ day of _______, 199_.
______________________________
Notary Public
My commission expires ________________.
<PAGE>
FORM OF TRANSFEROR'S CERTIFICATE
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
________________, 19__
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, New York 10001
Re: Irwin Home Equity Corporation Trust 1997-2 Mortgage Pass-Through
Certificates, Series 1997-2, Class R Certificates
Ladies and Gentlemen:
This letter is delivered to you in connection with the
transfer by _____________________ (the "Seller") to ______________________ (the
"Purchaser") of a ___% Percentage Interest of Irwin Home Equity Corporation
Mortgage Pass-Through Certificates, Series 1997-2, Class R (the "Certificates"),
pursuant to Section 4.2 of the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of November 1, 1997 among Irwin Home Equity
Corporation, as servicer (the "Company"), Prudential Securities Secured
Financing Corporation, as depositor, and The Chase Manhattan Bank, as trustee
(the "Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Seller hereby
certifies, represents and warrants to, and covenants with, the Company and the
Trustee that:
1. No purpose of the Seller relating to the transfer of the
Certificates by the Seller to the Purchaser is or will be to impede the
assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to
the Trustee and the Company a transfer affidavit and agreement in the form
attached to the Pooling and Servicing Agreement as Exhibit I. The Seller does
not know or believe that any representation contained therein is false.
3. The Seller has no actual knowledge that the proposed
Transferee is not both a United States Person and a Permitted Transferee.
Very truly yours,
________________________________
(Seller)
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
FORM OF ERISA INVESTMENT REPRESENTATION LETTER
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
Irwin Home Equity Corporation
12677 Alcosta Boulevard, Suite 500
San Ramon, CA 94583
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, New York 10001
Re: Irwin Home Equity Corporation Trust 1997-2 Mortgage
Pass-Through Certificates, Series 1997-2,
Class R Certificates
The undersigned (the "Purchaser") proposes to purchase certain
Class R Certificates (the "Certificates"). In doing so, the Purchaser hereby
acknowledges and agrees as follows:
Section 1. Definitions. Each capitalized term used herein and
not otherwise defined shall have the meaning given it in the Pooling and
Servicing Agreement, dated as of November 1, 1997 (the "Agreement"), among
Prudential Securities Secured Financing Corporation, as Depositor (the
"Depositor"), Irwin Home Equity Corporation, as Servicer (the "Servicer") and
The Chase Manhattan Bank, as Trustee (the "Trustee") relating to the
Certificates.
Section 2. Representations and Warranties of the Purchaser. In
connection with the proposed transfer, the Purchaser represents and warrants to
the Depositor and the Trustee that the Purchaser is not a pension or benefit
plan or individual retirement arrangement that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or to Section 4975
of the Code or an entity whose underlying assets are deemed to be assets of such
a plan or arrangement by reason of such plan's or arrangement's investment in
the entity, as determined under U.S. Department of Labor Regulations 29 C.F.R.
ss. 2510.3-101 or otherwise.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this ERISA
Investment Representation Letter to be validly executed by its duly authorized
representative as of the date first above written.
[NAME OF PURCHASER]
By:________________
Name:
Title:
2
<PAGE>
OFFICER'S CERTIFICATE OF THE SELLER: PREPAID LOANS
The undersigned, a duly authorized representative of IHE
Funding Corp., a Delaware corporation (the "Seller"), as Seller under the
Pooling and Servicing Agreement dated as of November 1, 1997 by and among
Prudential Securities Secured Financing Corporation, as Depositor, Irwin Home
Equity Corporation, an Indiana corporation, as Servicer, and The Chase Manhattan
Bank, a New York banking corporation as Trustee and Custodial Agent (as such
agreement may be amended, supplemented or otherwise modified from time to time,
the "Pooling and Servicing Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their
respective meanings set forth in the Pooling and Servicing Agreement. References
herein to certain Sections and subsections are references to the respective
Sections and subsections of the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section
2.3.
C. Pursuant to Section 2.3, the following Mortgage Loans have
been prepaid in full after the Cut-off Date and prior to the date of the
execution of the Pooling and Servicing Agreement:
Mortgage Loan No.: "See Attached Schedule"
3
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate
to be executed and delivered on its behalf by its duly authorized officer on
this 18th day of November, 1997.
IHE FUNDING CORP.
By:_____________________________
Name:
Title:
[SIGNATURE PAGE OF SELLER' OFFICER'S CERTIFICATE: PREPAID/LOANS]
4
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
Schedule of Prepaid Loans
Loan Original Trust
Number Date Paid Off Product Type Balance
- ------ ------------- ------------ --------------
5
<PAGE>
FORM OF TRANSFEREE'S LETTER
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
[TRANSFEROR]
[ADDRESS]
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, New York 10001
Ladies and Gentlemen:
We propose to purchase a Irwin Home Equity Corporation,
Mortgage Pass-Through Certificates Class R Certificate (a "Residual
Certificate") issued under a Pooling and Servicing Agreement, dated as of
November 1, 1997, among Prudential Securities Secured Financing Corporation, as
Depositor, Irwin Home Equity Corporation, as Servicer, The Chase Manhattan Bank,
as trustee (the "Pooling and Servicing Agreement"). Capitalized terms used but
not defined herein shall have the meanings set forth in the Pooling and
Servicing Agreement. We are delivering this letter pursuant to Section 4.2(i) of
the Pooling and Servicing Agreement.
1. We certify that on the date hereof we have simultaneously
herewith delivered to you an affidavit certifying, among other things, that (A)
we are not a Disqualified Organization and (B) we are not purchasing such
Residual Certificate on behalf of a Disqualified Organization. We understand
that any breach by us of this certification may cause us to be liable for a tax
imposed upon transfers to Disqualified Organizations.
2. We acknowledge that we will be the beneficial owner of the
Residual Certificate and that the Residual Certificate will be registered in our
name and not in the name of a nominee.
3. We certify that no purpose of our purchase of the Residual
Certificate is to avoid or impede the assessment or collection of tax.
4. We represent that:
(a) we understand that the Residual Certificate
represents for federal income tax purposes a
"residual interest" in a real estate mortgage
investment conduit; and
(b) we understand that as the holder of a
Residual Certificate we will be required to
take into account, in determining our taxable
income, our pro rata percentage interest of
the taxable income of the applicable Trust
REMIC in accordance with all applicable
provisions of the Internal Revenue code of
1986, as amended (the "Code")
<PAGE>
5. We understand that if, notwithstanding the transfer
restrictions, the Residual Certificate is in fact transferred to a Disqualified
Organization, a tax may be imposed on the transferor of such Residual
Certificate. We agree that any breach by us of these representations shall
render such transfer of such Residual Certificate by us absolutely null and void
and shall cause no rights in the Residual Certificate to vest in the transferee.
6. The sale to us and our purchase of the Residual Certificate
constitutes a sale for tax and all other purposes and each party thereto has
received due and adequate consideration. In our view, the transaction represents
fair value, representing the results of arms length negotiations and taking into
account our analysis of the tax and other consequences of investment in the
Residual Certificate.
7. We expect that the purchase of the Residual Certificate,
together with the receipt of the price, if any, therefor will be economically
neutral or profitable to us overall, after all related expenses (including
taxes) have been paid and based on conservative assumptions with respect to
discount rates, prepayments and other factors necessary to evaluate
profitability.
8. We are a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust that is subject to U.S. federal income tax regardless of the source of its
income. We are duly organized and validly existing under the jurisdiction of our
organization. We are neither bankrupt nor insolvent nor do we have reason to
believe that we will become bankrupt or insolvent. We have conducted and are
conducting our business so as to comply in all material respects with all
applicable statutes and regulations. The person executing and delivering this
letter on our behalf is duly authorized to do so, the execution and delivery by
us of this letter and the consummation of the transaction on the terms set forth
herein are within our corporate power and upon such execution and delivery, this
letter will constitute our legal, valid and binding obligation, enforceable
against us in accordance with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting the right of creditors generally and to general principles
of equity and the discretion of the court (regardless of whether enforcement of
such remedies is considered in a proceeding in equity or at law).
9. Neither the execution and delivery by us of this letter,
nor the compliance by us with the provisions hereof, nor the consummation by us
of the transactions as set forth herein, will (A) conflict with or result in a
breach of, or constitute a default or result in the acceleration of any
obligation under, our articles or by-laws or, after giving effect to the
consents or the taking of the actions contemplated by clause (B) of this
subparagraph, any of the provisions of any law, governmental rule, regulation,
judgment, decree or ordering binding on us or our properties, or any of the
provisions of any indenture or mortgage or any other contract or instrument to
which we are a party or by which we or any of our properties is bound, or (B)
require the consent of or notice to or any filing with, any person, entity or
governmental body, which has not been obtained or made by us.
10. We anticipate being a profit-making entity on an ongoing
basis.
2
<PAGE>
11. We have filed all required federal and state income tax
returns and have paid all federal and state income taxes due; we intend to file
and pay all such returns and taxes in the future. We acknowledge that as the
holder of the Residual Certificate, to the extent the Residual Certificate would
be treated as a noneconomic residual interest within the meaning of Treasury
Regulation Section 1.860E-1(c)(2), we may incur tax liabilities in excess of
cash flows generated by the Residual Certificate and that we intend to pay taxes
associated with holding the Residual Certificate as they become due.
12. We agree that in the event that at some future time we
wish to transfer any Residual Certificate, we will transfer such Residual
Certificate only to a transferee that:
(a) is not a Disqualified Organization and is not
purchasing such Residual Certificate on
behalf of a Disqualified Organization;
(b) is a Permitted Transferee as defined in the
Pooling and Servicing Agreement; and
(c) has delivered to the Certificate Registrar an
affidavit and a transferee letter in the form
of Exhibit I to the Pooling and Servicing
Agreement, as appropriate, and a Transferee's
certificate in the form of Exhibit J to the
Pooling and Servicing Agreement and, if
requested by the Registrar, an opinion of
counsel, in form acceptable to the Registrar,
that the proposed transfer will not cause the
Residual Certificate to be held by a
Disqualified Organization.
13. We are knowledgeable and experienced in financial,
business and tax matters generally and in particular, the investment risks and
tax consequences of REMIC residuals that provide little or no cash flow, and are
capable of evaluating the merits and risks of an investment in the Residual
Certificate; we are able to bear the economic risks of an investment in the
Residual Interest Certificate.
14. In addition, we acknowledge that the Registrar will not
register the transfer of a Residual Certificate to a transferee that is a
non-U.S. Person.
15. Any Transferee shall promptly notify the Trustee of any
change or impending change in its status as either a U.S. Person or a Permitted
Transferee.
16. "U.S. Person" shall mean a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
or an estate or trust that is subject to U.S. federal income tax regardless of
the source of its income.
17. We hereby designate the Trustee as our fiduciary to
perform the duties of the tax matters person for the REMIC.
[Remainder of Page Intentionally Left Blank]
3
<PAGE>
IN WITNESS WHEREOF, we have caused this instrument to be duly executed on our
behalf, by our [Title of Officer], this ____ day of _______, 199_.
Very truly yours,
[NAME OF TRANSFEREE]
By:_____________________________
Name:
Title:
4
<PAGE>
FORM OF SUBSEQUENT TRANSFER AGREEMENT
IRWIN HOME EQUITY CORPORATION TRUST 1997-2
Irwin Union Bank and Trust Company as Originator, IHE Funding
Corp. as Seller, Prudential Securities Secured Financing Corporation, as
Depositor, and Irwin Home Equity Corporation Trust 1997-2, as Purchaser,
pursuant to the Pooling and Servicing Agreement dated as of November 1, 1997
among Prudential Securities Secured Financing Corporation, as Depositor, Irwin
Home Equity Corporation, as Servicer and The Chase Manhattan Bank, as Trustee
(the "Pooling and Servicing Agreement"), hereby confirm their understanding with
respect to the sale by the Seller and the purchase by the Purchaser of those
Mortgage Loans listed on the attached Schedule of Mortgage Loans (the
"Subsequent Mortgage Loans").
Conveyance of Subsequent Mortgage Loans. The Originator does
hereby irrevocably sell, transfer, assign, set over and otherwise convey to the
Seller, without recourse (except as otherwise explicitly provided for herein)
all of its right, title and interest in and to the Subsequent Mortgage Loans,
exclusive of the obligations of the Originator with respect to the Subsequent
Mortgage Loans but including specifically, without limitation, the Mortgages,
the Mortgage Files and all other documents, materials and properties appurtenant
thereto and the Mortgage Notes, including all interest and principal collected
by the Originator on or with respect to the Subsequent Mortgage Loans on or
after the related subsequent Cut-Off Date, together with all of its right, title
and interest in and to the proceeds received on or after such subsequent Cut-Off
Date of any related insurance policies on behalf of the Seller. The Originator
shall deliver the original Mortgage or mortgage assignment with evidence of
recording thereon (except as otherwise provided by the Pooling and Servicing
Agreement) and other required documentation in accordance with the terms set
forth in Section 2.10 of the Pooling and Servicing Agreement.
The Seller does hereby irrevocably sell, transfer, assign, set
over and otherwise convey to the Depositor, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Subsequent Mortgage Loans, exclusive of the obligations of the
Seller or any other Person with respect to the Subsequent Mortgage Loans but
including specifically, without limitation, the Mortgages, the Mortgage Files
and all other documents, materials and properties appurtenant thereto and the
Mortgage Notes, including all interest and principal collected by the Seller on
or with respect to the Subsequent Mortgage Loans on or after the related
subsequent Cut-Off Date, together with all of its right, title and interest in
and to the proceeds received on or after such subsequent Cut-Off Date of any
related insurance policies on behalf of the Depositor. The Seller shall deliver
the original Mortgage or mortgage assignment with evidence of recording thereon
(except as otherwise provided by the Pooling and Servicing Agreement) and other
required documentation in accordance with the terms set forth in Section 2.10 of
the Pooling and Servicing Agreement.
The Depositor does hereby irrevocably sell, transfer, assign,
set over and otherwise convey to the Purchaser, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Subsequent Mortgage Loans, exclusive of the obligations of the
Depositor or any other Person with respect to the Subsequent Mortgage Loans but
including specifically, without limitation, the Mortgages, the Mortgage Files
and all
<PAGE>
other documents, materials and properties appurtenant thereto and the Mortgage
Notes, including all interest and principal collected by the Depositor on or
with respect to the Subsequent Mortgage Loans on or after the related subsequent
Cut-Off Date, together with all of its right, title and interest in and to the
proceeds received on or after such subsequent Cut-Off Date of any related
insurance policies on behalf of the Purchaser. The Depositor shall deliver the
original Mortgage or mortgage assignment with evidence of recording thereon
(except as otherwise provided by the Pooling and Servicing Agreement) and other
required documentation in accordance with the terms set forth in Section 2.10 of
the Pooling and Servicing Agreement.
The expenses and costs relating to the delivery of the
Subsequent Mortgage Loans specified in this Subsequent Transfer Agreement and
the Pooling and Servicing Agreement shall be borne by the Seller.
The Originator and the Seller hereby affirm the
representations and warranties set forth in the Mortgage Loan Sale Agreement and
the Purchase and Sale Agreement, respectively, that relate to the Subsequent
Mortgage Loans on the date hereof. The Originator and the Seller each hereby
deliver notice and confirm that each of the conditions set forth in Section
2.10(b) of the Pooling and Servicing Agreement are satisfied as of the date
hereof.
The Depositor hereby affirms any of its representations and
warranties set forth in the Purchase and Sale Agreement that relate to the
Subsequent Mortgage Loans as of the date hereof. The Depositor hereby delivers
notice and confirms that each of the conditions set forth in Section 2.10(b) to
the Pooling and Servicing Agreement are satisfied as of the date hereof.
Additional terms of the sale are attached hereto as Attachment
A.
To the extent permitted by applicable law, this Agreement, or
a memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in all
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Servicer
at the Certificateholders' expense on the direction of the Majority
Certificateholders, but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders or is necessary for the administration or servicing of
the Mortgage Loans.
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to the principles of conflicts of laws.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
All terms and conditions of the Pooling and Servicing
Agreement are hereby ratified, confirmed and incorporated herein, provided that
in the event of any conflict the
2
<PAGE>
provisions of this Subsequent Transfer Agreement shall control over the
conflicting provisions of the Pooling and Servicing Agreement.
3
<PAGE>
Terms capitalized herein and not defined herein shall have
their respective meanings as set forth in the Pooling and Servicing Agreement.
IRWIN UNION BANK AND
TRUST COMPANY
as Originator
By:____________________________
IHE FUNDING CORP.
as Seller
By:____________________________
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
as Depositor
By:____________________________
THE CHASE MANHATTAN BANK
as Trustee for
IRWIN HOME EQUITY
CORPORATION
TRUST 1997-2
By:____________________________
Dated:
Attachments
A. Addition Notice.
B. Schedule of Subsequent Mortgage Loans.
C. Corporate Opinions of the Originator, the Seller and the Depositor.
D. Officer's Certificates.
E. Bankruptcy Opinion.
F. Tax Opinion.
G. Trustee's Certificate.
H. Wire Transfer Instructions.
I. Conveyance Agreement.
J. Recordation Opinion.
4
<PAGE>
- -------------------------------------------------------------------------
IHE FUNDING CORP.
SUBSEQUENT TRANSFER AGREEMENT
IRWIN MORTGAGE POOL: 1997-2
NOVEMBER 1997
- -------------------------------------------------------------------------
1 .CUTOFF DATE 31 MAY 1997 (DD MONTH YEAR)
1A. PRICING DATE 14 JULY 1997 (DD MONTH YEAR)
2. SUBSEQUENT CLOSING DATE
2A. DAYS - CUTOFF TO CLOSING
3. POOL PRINCIPAL BALANCE
AS OF THE CUTOFF DATE
4. NET PURCHASE PRICE 100.00%
EQUALS:
PLUS:
5. ACCRUED INTEREST $
EQUALS:
6. NET PROCEEDS $
7. PASSTHROUGH RATE %
SEE FORMULA BELOW
8. FIRST DISTRIBUTION DATE
9. MAXIMUM CLTV
10. REQUIRED MINIMUM COUPON
11. MAXIMUM BALLOON PERCENTAGE
12. MAXIMUM CONCENTRATION PCT
13. MAXIMUM VACATION &
INVESTOR OWNED PCT
13A MAXIMUM THIRD LIENS
14. ADDITIONAL REPS & WARRANTIES:
15. OTHER MATTERS
<PAGE>
LETTER OF CREDIT INSTRUCTIONS
November 18, 1997
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Regina Bergeland
Global Trust Services
Re: Pooling and Servicing Agreement (the "Agreement"),
Mortgage Loan Certificates, Series 1997-2, and
Class R and Additional Certificates, dated
as of November 1, 1997 among Prudential Securities
Secured Financing Corporation, Irwin Home Equity
Corporation and The Chase Manhattan Bank (the
"Trustee"), as Trustee
Dear Ms. Bergeland:
The undersigned, the Holders of the Class R Certificates
issued under the above-captioned Agreement, do hereby direct the Trustee,
pursuant to Section 6.4(a) of the Agreement, and for so long as the Reserve
Account is required to be maintained, to accept for deposit in the Reserve
Account, as a Permitted Investment, a letter of credit (the "Letter of Credit")
issued by The Northern Trust Company (the "L/C Issuer"), dated as of November
17, 1997, in the favor of The Chase Manhattan Bank, as Trustee of the Irwin Home
Equity Corporation Trust 1997-2.
Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Agreement.
With respect to the Letter of Credit, we hereby instruct the
Trustee as follows:
1. In determining the amount in the Reserve Account for the
purpose of Section 6.4(a) or 6.4(b) of the Agreement, the Trustee shall include
the Maximum Amount (as defined in the Letter of Credit) of the Letter of Credit
less the amount required to be on deposit in the Capitalized Interest Account
pursuant to Section 6.1(c) of the Agreement as an amount on deposit in the
Reserve Account.
2. Not later than 4:00 p.m. New York City time on the second
Business Day preceding each Remittance Date, if the Trustee has determined that
the sum of the amounts referenced in clauses (i), (ii), (iii) and (iv) of
Section 6.5(a) of the Agreement exceeds the amount then on deposit in the
Certificate Account plus the amount of any cash on deposit in the Reserve
Account, the Trustee shall cause to be presented to the L/C Issuer a drawing
certificate
<PAGE>
in proper form (in the form attached to the Letter of Credit as Annex 1) for
payment thereunder and otherwise in conformity with the terms thereof for an
amount equal to such excess.
3. Not later than 4:00 p.m. New York City time on the second
Business Day preceding each Remittance Date, if the Trustee has determined that
an Insured Payment is required, the Trustee shall cause to be presented to the
L/C Issuer a drawing certificate in proper form (in the form attached to the
Letter of Credit as Annex 1) for payment thereunder and otherwise in conformity
with the terms thereof for an amount equal to the Maximum Amount.
4. If: (i) as of any date that is thirty (30) days prior to
the stated expiration date of the Letter of Credit, a letter of credit
acceptable to each of the Certificate Insurer and the Rating Agencies, in the
sole discretion of each, as a Permitted Investment (which may be a renewal or
extension of the expiring Letter of Credit) in at least the same amount as the
amount then available for drawing under the expiring Letter of Credit has not
been delivered to the Trustee; (ii) an Acceleration Certificate (as defined in
the Letter of Credit) has been delivered to the Trustee; or (iii) 30 days after
the Trustee receives notice from the Certificate Insurer that the credit rating
of the L/C Issuer has been downgraded below either "A-1" or "AA-" by Standard &
Poor's Ratings Service or either "P-1" or "Aa3" by Moody's Investors Service,
Inc. unless the Trustee receives notice from the Certificate Insurer that such
ratings have been reinstated above such level prior to the expiration of such 30
day period; the Trustee shall, on the next Business Day, cause to be presented
to the L/C Issuer a drawing certificate in proper form (in the form attached to
the Letter of Credit as Annex 1) for payment thereunder and otherwise in
conformity with the terms thereof for an amount equal to the Maximum Amount.
5. Upon receipt by the Trustee of the proceeds of a drawing
under the Letter of Credit, (i) the Trustee will deposit the same directly to
the Reserve Account, (ii) no portion of such proceeds shall be applied by the
Trustee for any other purpose than as specified in Section 6.4 of the Agreement,
and (iii) no portion of such proceeds shall be commingled with other funds held
by the Trustee.
6. The Trustee shall send copies of each drawing certificate
sent to the L/C Issuer and any Acceleration Certificate received by the Trustee
from the L/C Issuer to the Class R Certificateholders, the Certificate Insurer
and the Rating Agencies.
7. In the event, and only in such event, that (a) (i) the sum
of the Maximum Amount of the Letter of Credit and the cash on deposit in the
Reserve Account (net of any investment earnings on deposit therein) exceeds (ii)
the Required Reserve Account Level and (b) the Trustee obtains the prior written
approval of the Certificate Insurer, the Trustee shall execute and present to
the L/C Issuer a Reduction Certificate, in the form attached to the Letter of
Credit as Annex 3, for a reduction in the Maximum Amount equal to the excess of
(i) over (ii).
8. The Trustee shall surrender the Letter of Credit to the L/C
Issuer on the earlier to occur of (i) expiration of the Letter of Credit and
(ii) termination of the Trust.
These instructions may not be modified or revoked except by a
written instrument acknowledged by the Certificate Insurer.
2
<PAGE>
Please sign below to indicate your acknowledgement of receipt
of this letter and your agreement to its terms.
IHE FUNDING CORP.
By:_________________________________
Name: Gregory F. Ehlinger
Title: Vice President and Treasurer
ACKNOWLEDGED AND AGREED:
THE CHASE MANHATTAN BANK
By:________________________________
Name: Regina Bergeland
Title: Vice President
Date: November 18, 1997
[SIGNATURE PAGE TO INSTRUCTIONS REGARDING LETTERS OF CREDIT]
3
<PAGE>
November 18, 1997
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Regina Bergeland
Global Trust Services
Re: Pooling and Servicing Agreement (the "Agreement"), Mortgage
Loan Certificates, Series 1997-2, and Class R and Additional
Certificates, dated as of November 1, 1997 among Prudential
Securities Secured Financing Corporation, Irwin Home Equity
Corporation and The Chase Manhattan Bank (the "Trustee"), as
Trustee
Dear Ms. Bergeland:
The undersigned, the Holders of the Class R Certificates
issued under the above-captioned Agreement, do hereby direct the Trustee,
pursuant to Section 6.12 of the Agreement, and for so long as the Capitalized
Interest Account is required to be maintained, to accept for deposit in the
Capitalized Interest Account, as a Permitted Investment, a letter of credit (the
"Letter of Credit") issued by The Northern Trust Company (the "L/C Issuer"),
dated as of November 17, 1997, in the favor of The Chase Manhattan Bank, as
Trustee of the Irwin Home Equity Corporation Trust 1997-2.
Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Agreement.
With respect to the Letter of Credit, we hereby instruct the
Trustee as follows:
1. In determining the amount in the Capitalized Interest
Account for the purpose of Section 6.1(c) of the Agreement, the Trustee shall
include the Maximum Amount (as defined in the Letter of Credit) of the Letter of
Credit less the amount required to be on deposit in the Reserve Account pursuant
to Section 6.4(a) or 6.4(b) of the Agreement as an amount on deposit in the
Capitalized Interest Account.
2. Not later than 4:00 p.m. New York City time on the second
Business Day preceding each of the first three Remittance Dates, the Trustee
shall cause to be presented to the L/C Issuer a drawing certificate in proper
form (in the form attached to the Letter of Credit as Annex 1) for payment
thereunder and otherwise in conformity with the terms thereof for an amount
equal to the Capitalized Interest Deposit Account.
3. If: (i) as of any date that is thirty (30) days prior to
the stated expiration date of the Letter of Credit, a letter of credit
acceptable to each of the Certificate Insurer and the
<PAGE>
Rating Agencies, in the sole discretion of each, as a Permitted Investment
(which may be a renewal or extension of the expiring Letter of Credit) in at
least the same amount as the amount then available for drawing under the
expiring Letter of Credit has not been delivered to the Trustee; (ii) an
Acceleration Certificate (as defined in the Letter of Credit) has been delivered
to the Trustee; or (iii) 30 days after the Trustee receives notice from the
Certificate Insurer that the credit rating of the L/C Issuer has been downgraded
below either "A-1" or "AA-" by Standard & Poor's Ratings Service or either "P-1"
or "Aa3" by Moody's Investors Service, Inc. unless the Trustee receives notice
from the Certificate Insurer that such ratings have been reinstated above such
level prior to the expiration of such 30 day period; the Trustee shall, on the
next Business Day, cause to be presented to the L/C Issuer a drawing certificate
in proper form (in the form attached to the Letter of Credit as Annex 1) for
payment thereunder and otherwise in conformity with the terms thereof for an
amount equal to the Maximum Amount.
4. Upon receipt by the Trustee of the proceeds of a drawing
under the Letter of Credit, (i) the Trustee will deposit the same directly to
the Certificate Account, (ii) no portion of such proceeds shall be applied by
the Trustee for any other purpose than as specified in Section 6.12 of the
Agreement, and (iii) no portion of such proceeds shall be commingled with other
funds held by the Trustee.
5. The Trustee shall send copies of each drawing certificate
sent to the L/C Issuer and any Acceleration Certificate received by the Trustee
from the L/C Issuer to the Class R Certificateholders, the Certificate Insurer
and the Rating Agencies.
6. The Trustee shall surrender the Letter of Credit to the L/C
Issuer on the earlier to occur of (i) expiration of the Letter of Credit and
(ii) termination of the Trust.
These instructions may not be modified or revoked except by a
written instrument acknowledged by the Certificate Insurer.
2
<PAGE>
Please sign below to indicate your acknowledgement of receipt
of this letter and your agreement to its terms.
IRWIN HOME EQUITY CORPORATION,
as Servicer
By:_____________________________
Name: Edwin Corbin
Title: Vice President - Finance
and Servicing
ACKNOWLEDGED AND AGREED:
THE CHASE MANHATTAN BANK
By:________________________________
Name: Regina Bergeland
Title: Vice President
Date:
[Signature Page to Instructions Regarding Letters of Credit]
3
<PAGE>
November 18, 1997
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Regina Bergeland
Global Trust Services
Re: Pooling and Servicing Agreement (the "Agreement"), Mortgage
Loan Certificates, Series 1997-2, Class A and Class R and
Additional Certificates, dated as of November 1, 1997
among Prudential Securities Secured Financing Corporation,
Irwin Home Equity Corporation and The Chase Manhattan Bank
(the "Trustee"), as Trustee
Dear Ms. Bergeland:
Each of the undersigned hereby approves the letter of credit,
Nos. , and , dated as of November __, 1997, issued by The Northern Trust Company
in favor of The Chase Manhattan Bank, as Trustee of the Irwin Home Equity
Corporation Trust 1997-2 as a Permitted Investment for the Reserve Account for
so long as the credit rating assigned to The Northern Trust Company is equal to
or better than "A-1" and "AA-" by Standard & Poor's Ratings, a division of the
McGraw Hill Companies and "P-1" and "Aa3" by Moody's Investors Service, Inc.
<PAGE>
Capitalized terms used herein shall have the meanings set
forth in the Agreement.
Sincerely,
STANDARD & POOR'S, A DIVISION OF
MCGRAW-HILL
By:_____________________________
Name:
Title:
MOODY'S INVESTORS SERVICE, INC.
By:_____________________________
Name:
Title:
MBIA INSURANCE CORPORATION
By:_____________________________
Name:
Title:
2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Irwin Home Equity Corporation Trust 1997-2 of our report dated February 3, 1997,
on our audits of the consolidated financial statements of MBIA Insurance
Corporation and Subsidiaries as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996. We also consent to the
reference to our firm under the caption "Report of Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
November 11, 1997
