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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 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
New York, New York 10292
(Address of Principal (Zip Code)
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
1997-1 (the "Trust") issued approximately $100,000,000 in aggregate principal
amount of its Mortgage Pass-Through Certificates, Series 1997-1 (the
"Certificates"), on June 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
June 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 three classes of senior Certificates, the Class A-1
Certificates (the "Class A-1 Certificates"), the Class A-2 Certificates (the
"Class A-2 Certificates") and the Class A-3 Certificates (the "Class A-3
Certificates", and together with the Class A-1 Certificates and the Class A-2
Certificates, the "Class A Certificates") and one class of subordinated
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
fexed 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, 6.77% for the
Class A-2 Certificates and 7.255% for the Class A-3 Certificates.
The Class A-1 Certificates have an aggregate principal amount of $55,000,000,
the Class A-2 Certificates have an aggregate
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principal amount of $32,000,000, and the Class A-3 Certificates have an
aggregate principal amount of $13,000,000.
As of the Closing Date, the Mortgage Loans possessed the characteristics
described in the Prospectus dated June 10, 1997 and the Prospectus Supplement
dated June 6, 1997 filed pursuant to Rule 424(b)(2) of the Act on June 17, 1997.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated June 6, 1997, between Prudential
Securities Secured Financing Corporation and Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of June 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.
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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
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As Depositor and on behalf of Irwin
Home Equity Corporation Trust 1997-1
Registrant
By: /s/ Norman Chaleff
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Name: Norman Chaleff
Title: Vice President
Dated: July 8, 1997
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EXHIBIT INDEX
Exhibit No. Description
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1.1 Underwriting Agreement, dated June 6, 1996, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of June 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.
EXECUTION COPY
IRWIN HOME EQUITY
CORPORATION TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-1
UNDERWRITING AGREEMENT
Dated as of June 6, 1997
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
June 6, 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 June 6, 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/ Len Blum
---------------------------
Name: Len Blum
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Murray Weiss
------------------------
Name: Murray Weiss
Title: Vice President
[Signature Page to Underwriting Agreement]
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SCHEDULE I
Title of Offered
Securities: Irwin Home Equity Corporation Trust 1997-1,
Mortgage Pass-Through Certificates, Series 1997-1,
Class A Certificates (the "Offered Securities").
The Trustee will simultaneously issue the Class R
and the 1997-1 Additional Certificate representing
beneficial interests in the Irwin Home Equity
Corporation Trust 1997-1 (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 the Closing Date 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 June 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 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
June 6, 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 June 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 June 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),
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(e) the Trustee's rights with respect to the Mortgage Loans under all insurance
policies (other than the 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 June 6, 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."
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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 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
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declaration of a national emergency or war, and, in the reasonable opinion of
the Representative, makes it impracticable or inadvisable to offer or sell the
Offered Securities or (iii) if at or prior to the Closing Date, a general
moratorium on commercial banking activities in New York shall have been declared
by either federal or New York State authorities.
(d) The Representative shall have received, on the Closing Date, a
certificate dated the Closing Date and signed by an executive officer of the
Depositor to the effect that attached thereto is a true and correct copy of the
letter from each nationally recognized statistical rating organization (as that
term is 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
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of the Depositor herein at and as of such Closing Date as if made as of such
date, as to the performance by the Depositor of all of its obligations hereunder
to be performed at or prior to such Closing Date, and as to such other matters
as the Representative may reasonably request.
(k) The Servicer shall have furnished or caused to be furnished to the
Representative on the Closing Date a certificate of officers of such Servicer in
form and substance reasonably satisfactory to the Representative.
(l) The Certificate Insurance Policies shall have been duly executed and
issued at or prior to the Closing Date and shall conform in all material
respects to the description thereof in the Prospectus Supplement.
(m) The Representative shall have received, on the Closing Date, an opinion
of counsel to MBIA Insurance Corporation ("the Certificate Insurer"), dated the
Closing Date, in form and substance satisfactory to the Representative and
counsel for 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 June 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,
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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 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
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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.
(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
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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.
(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
8
<PAGE>
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 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
9
<PAGE>
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 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
10
<PAGE>
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,
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
11
<PAGE>
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 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.
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<PAGE>
(p) The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended, and the Trust Fund (as
defined in the Pooling and Servicing Agreement) is not required to be registered
under the Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in connection with the
execution, delivery and issuance of the Underwriting Agreement, this Agreement,
the Pooling and Servicing Agreement and the Offered Securities have been or will
be paid at or prior to the Closing Date.
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 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
13
<PAGE>
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 allegations or circumstances, be liable for the reasonable fees
and expenses of
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<PAGE>
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
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<PAGE>
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.
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
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<PAGE>
Underwriter pursuant to the Underwriting Agreement shall be mailed, delivered or
telegraphed and confirmed to such Underwriter at the address furnished by it.
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/ Len Blum
-------------------------
Name: Len Blum
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Murray Weiss
-------------------------
Name: Murray Weiss
Title: Vice President
[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]
EXECUTION COPY
================================================================================
POOLING AND SERVICING AGREEMENT
Dated as of June 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 1997-1
Mortgage Pass-Through Certificates,
Series 1997-1
Class A and Class R and the Additional Certificate
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. Definitions
Section 1.1 Certain Defined Terms................................ 1
Section 1.2 Provisions of General Application.................... 42
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........................................... 43
Section 2.2 Possession of Mortgage Files; Access
to Mortgage Files................................... 44
Section 2.3 Delivery of Mortgage Loan Documents................. 44
Section 2.4 Acceptance by Trustee of the Trust
Fund; Certain Substitutions;
Certification by Trustee............................ 48
Section 2.5 Designations under REMIC Provisions;
Designation of Startup Date......................... 51
Section 2.6 Execution of Certificates........................... 51
Section 2.7 Application of Principal and Interest............... 51
Section 2.8 Grant of Security Interest.......................... 51
Section 2.9 Further Assurances; Powers of
Attorney............................................ 52
Section 2.10 Conveyance of the Subsequent Mortgage
Loans............................................... 53
ARTICLE III Representations and Warranties
Section 3.1 Representations of the Servicer..................... 58
Section 3.2 Representations, Warranties and
Covenants of the Depositor.......................... 60
Section 3.3 Purchase and Substitution........................... 61
Section 3.4 Servicer Covenants.................................. 64
ARTICLE IV The Certificates
Section 4.1 The Certificates................................... 65
Section 4.2 Registration of Transfer and Exchange
of Certificates.................................... 65
Section 4.3 Mutilated, Destroyed, Lost or Stolen
Certificates....................................... 74
Section 4.4 Persons Deemed Owners.............................. 74
ARTICLE V Administration and Servicing of
the Mortgage Loans
<PAGE>
Section 5.1 Appointment of the Servicer....................... 75
Section 5.2 Subservicing Agreements Between the
Servicer and Subservicers......................... 78
Section 5.3 Collection of Certain Mortgage Loan
Payments; Collection Account...................... 79
Section 5.4 Permitted Withdrawals from the
Collection Account and Trustee
Collection Account................................ 82
Section 5.5 Payment of Taxes, Insurance and Other
Charges........................................... 84
Section 5.6 Maintenance of Casualty Insurance................. 84
Section 5.7 Servicer Account.................................. 85
Section 5.8 Fidelity Bond; Errors and Omissions
Policy............................................ 86
Section 5.9 Collection of Taxes, Assessments and
Other Items....................................... 87
Section 5.10 Periodic Filings with the Securities
and Exchange Commission; Additional
Information....................................... 87
Section 5.11 Enforcement of Due-on-Sale Clauses;
Assumption Agreements............................. 87
Section 5.12 Realization upon Defaulted Mortgage
Loans............................................. 89
Section 5.13 Trustee to Cooperate; Release of
Mortgage Files.................................... 92
Section 5.14 Servicing Fee; Servicing Compensation............. 92
Section 5.15 Reports to the Trustee; Collection
Account Statements................................ 93
Section 5.16 Annual Statement as to Compliance................. 94
Section 5.17 Annual Independent Public
Accountants' Servicing Report..................... 94
Section 5.18 Reports to be Provided by the
Servicer.......................................... 95
Section 5.19 Adjustment of Servicing Compensation
in Respect of Prepaid Mortgage Loans.............. 95
Section 5.20 Periodic Advances................................. 96
Section 5.21 Indemnification; Third Party Claims............... 96
Section 5.22 Maintenance of Corporate Existence
and Licenses; Merger or Consolidation
of the Servicer................................... 97
Section 5.23 Assignment of Agreement by Servicer;
Servicer Not to Resign............................ 98
Section 5.24 Servicer Purchase of Certain Mortgage
Loans............................................. 98
ARTICLE VI Distributions and Payments
Section 6.1 Establishment of Certificate Account,
Additional Certificate Account and
Pre-Funding Account; Deposits to the
Certificate Account, the Additional
<PAGE>
Certificate Account and the Pre-
Funding Account................................... 100
Section 6.2 Permitted Withdrawals From the
Certificate Account and The
Additional Certificate Account.................... 101
Section 6.3 Collection of Money............................... 103
Section 6.4 The Reserve Account and the
Certificate Insurance Policies.................... 103
Section 6.5 Distributions..................................... 106
Section 6.6 Investment of Accounts............................ 109
Section 6.7 Reports by Trustee................................ 110
Section 6.8 Additional Reports by Trustee and by
Servicer.......................................... 113
Section 6.9 Compensating Interest............................. 114
Section 6.10 Effect of Payments by the Certificate
Insurer; Subrogation.............................. 114
Section 6.11 Pre-Funding Account............................... 114
ARTICLE VII Default
Section 7.1 Events of Default................................. 116
Section 7.2 Trustee to Act; Appointment of
Successor......................................... 118
Section 7.3 Waiver of Defaults................................ 120
Section 7.4 Mortgage Loans, Trust Fund and
Accounts Held for Benefit of the
Certificate Insurer............................... 120
ARTICLE VIII Termination
Section 8.1 Termination....................................... 122
Section 8.2 Additional Termination Requirements............... 124
Section 8.3 Accounting Upon Termination of
Servicer.......................................... 125
ARTICLE IX The Trustee
Section 9.1 Duties of Trustee................................. 126
Section 9.2 Certain Matters Affecting the Trustee............. 132
Section 9.3 Not Liable for Certificates or
Mortgage Loans.................................... 134
Section 9.4 Trustee May Own Certificates...................... 134
Section 9.5 Trustee's Fees and Expenses;
Indemnity......................................... 134
Section 9.6 Eligibility Requirements for Trustee.............. 135
Section 9.7 Resignation and Removal of the
Trustee........................................... 135
Section 9.8 Successor Trustee................................. 136
Section 9.9 Merger or Consolidation of Trustee................ 137
Section 9.10 Appointment of Co-Trustee or Separate
Trustee........................................... 137
Section 9.11 Tax Returns; Old Interest Reporting............... 138
<PAGE>
Section 9.12 Retirement of Certificates....................... 139
ARTICLE X Miscellaneous Provisions
Section 10.1 Limitation on Liability of the
Depositor and the Servicer....................... 140
Section 10.2 Acts of Certificateholders;
Certificateholders' Rights....................... 140
Section 10.3 Amendment or Supplement.......................... 141
Section 10.4 Recordation of Agreement......................... 142
Section 10.5 Duration of Agreement............................ 142
Section 10.6 Notices.......................................... 142
Section 10.7 Severability of Provisions....................... 143
Section 10.8 No Partnership................................... 143
Section 10.9 Counterparts..................................... 143
Section 10.10 Successors and Assigns........................... 144
Section 10.11 Headings......................................... 144
Section 10.12 The Certificate Insurer Default.................. 144
Section 10.13 Third Party Beneficiary.......................... 144
Section 10.14 Intent of the Parties............................ 144
Section 10.15 Appointment of Tax Matters Person................ 144
Section 10.16 GOVERNING LAW CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL............... 144
<PAGE>
EXHIBITS
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 R Certificate
EXHIBIT B-5 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
<PAGE>
This Pooling and Servicing Agreement, relating to Irwin Home Equity
Corporation Trust 1997-1, dated as of June 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
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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 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.
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<PAGE>
"Additional Certificate" shall mean the certificate in the form of Exhibit
B-5 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.
"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 1997-1 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
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<PAGE>
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.
"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 and
one Class A-3 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 or Class A-3 Certificates, as the case may
be, shall be equal to the applicable Original Class A-1 Principal Balance,
Original Class A-2 Principal Balance or Original Class A-3 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.
4
<PAGE>
"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.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
"Certificate" shall mean any Series 1997-1 Class A Certificate or Series
1997-1 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.
"Certificate Insurance Policy" shall mean each of the Class A-1 Certificate
Insurance Policy and the Group II Certificate Insurance Policy.
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<PAGE>
"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 or any Class A-3 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. 24116, 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.
6
<PAGE>
"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 August 2018
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" with respect to any Remittance Date, will 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 (or as of June 16, 1997, in the case of the first Remittance
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.
7
<PAGE>
"Class A-1 Principal Distribution Amount" shall mean, with respect to the
Class A-1 Certificates for any Remittance Date, the lesser of:
(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 1997-1 REMIC carried out in accordance with a plan of
complete liquidation pursuant to Section
8
<PAGE>
8.2 hereof or pursuant to the optional termination of any of the
Trust Fund, the 1997-1 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 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 2006
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 6.77% 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,
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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 August 2013
Remittance Date.
"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 7.255% 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 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 June 18, 1997.
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"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.
"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 May 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
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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 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.
"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.
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"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, 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.
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"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) July 14, 1997, (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.
"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.
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"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 1997-1 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 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 1997-1 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.
"Group II Certificate Insurance Policy" shall mean the certificate guaranty
insurance policy no. 24115, and all endorsements thereto dated the Closing Date,
issued by the Certificate Insurer for the benefit of the Class A-2
Certificateholders and the Class A-3 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 and the Class A-3 Principal Balance for the related Remittance Date.
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"Group II Certificates" shall mean each of the Class A-2 Certificates and
the Class A-3 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 and the Class A-3 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 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 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 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 and
the Class A-3 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
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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 1997-1 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 1997-1
REMIC or Group II by either the Servicer or Certificate Insurer
in accordance with Section 8.1 hereof, up to the sum of the then
outstanding Class A-2 Principal Balance and Class A-3 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.
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"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 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.
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"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 offered quotations
(rounded upwards if necessary to the nearest whole multiple of
0.0625%).
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(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 270 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
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expenses in respect of an REO Mortgage Loan which have been netted against
related REO Proceeds.
"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 1997-1 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 1997-1 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
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Loans and thereby cause a termination of the 1997-1 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.
"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.
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"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 June 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.
"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) thePrincipal 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;
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(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;
(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.
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"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 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.
"1997-1 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 1997-1 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
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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 1997-1 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 1997-1 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 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 1997-1 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 1997-1 Certificates.
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"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 $55,000,000.
"Original Class A-2 Principal Balance" shall mean, as of the Startup Date
and as to the Class A-2 Certificates $32,000,000.
"Original Class A-3 Principal Balance" shall mean, as of the Startup Date
and as to the Class A-3 Certificates $13,000,000.
"Original Group I Pre-Funded Amount" shall mean $19,355,499.11.
"Original Group II Pre-Funded Amount" shall mean $15,735,032.74.
"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.
"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 or Class A-3 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 or the Original Class A-3
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
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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:
(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
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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 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 1997-1 REMIC to
fail to qualify as a REMIC at any time that the Class A Certificates are
outstanding or (ii) the 1997-1 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.
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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) July 14, 1997.
"Prepayment Assumption" shall mean a constant prepayment rate of 26%, used
solely for determining the accrual 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
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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 June 6,
1997, as amended and supplemented, relating to the Class A Certificates and
filed with the Commission in connection with the Registration Statement
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
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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 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.
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"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 or other official announcement or
interpretation relating to the REMIC and the REMIC Provisions issued after the
Closing Date.
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"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 July 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.
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"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 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.
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"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 1997-1.
"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
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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;
(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
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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.
"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.
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"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 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 1997-1 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.
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"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 1997-1, 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 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
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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 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 the Class A-1 Premium Percentage and the rates at which the
Servicing Fee and the Trustee's Fee are calculated.
"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 and the Class A-3 Principal Balance and
(ii) the Class A-3 Pass Through Rate times the Class A-3
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Principal Balance divided by the sum of the Class A-2 Principal Balance and the
Class A-3 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.
(c) 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.
(d) 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.
(e) 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 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.
(f) 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.
(c) 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 1997-1" and does
hereby appoint The Chase Manhattan Bank as Trustee in accordance with the
provisions of this Agreement.
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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, 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.
(c) 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.
(d) 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
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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 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;
provided, however, that any Mortgage Loan originated between September 1,
1996 and approximately April 30, 1997, with a credit
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limit or Principal Balance of less than $25,000 and which does not have a
second mortgage ratio of 25% or more shall be exempt from this requirement;
(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 $15,000 and $100,000; provided, however, that any Mortgage Loan
originated between September 1, 1996 and approximately April 30, 1997, with
a credit limit or Principal Balance of less than $25,000 and which does not
have a second mortgage ratio of 25% or more shall be exempt from this
requirement;
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
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
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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.
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 1997-1 formed pursuant to the Pooling and Servicing
Agreement dated as of June 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
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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, 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 simultaneously therewith request the obligor on such Mortgage Note to
execute and return a replacement Mortgage Note, 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. Upon the receipt of such replacement
Mortgage Note, the Trustee shall return the 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 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
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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 initialled 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 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 initialled 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
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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 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
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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 1997-1 REMIC for the purposes of the REMIC
Provisions. The 1997-1 REMIC shall be designated as the "Irwin Home Equity
Corporation Trust 1997-1 REMIC."
(b) The Closing Date will be the "startup day" of the 1997-1 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 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
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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 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.
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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 9.0% of the aggregate Principal Balances of
Subsequent Mortgage Loan which are HELOCs and 7.5% 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 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:
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(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 addressed to the Depositor, the Rating
Agencies
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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 more than
59 days 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 Loan shall be interest
only for 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 4.30%, (v) will not have any Subsequent Mortgage Loan with a Principal
Balance in excess of $237,654, (vi) such Subsequent Mortgage Loan will have a
Mortgage Interest Rate of at least 9.50%; (vii) each Subsequent Mortgage Loan
shall be secured by a single family residence, (viii) each Subsequent Mortgage
Loan shall be underwritten in accordance with the Underwriting Guidelines, (ix)
will not have any Subsequent Mortgage Loan with a maximum credit line limit in
excess of $300,000 and (x) 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
12.78%, (c) Subsequent Mortgage Loans with classifications of "E" will represent
approximately 95.92% of the HELOCs and Subsequent Mortgage Loans with
classifications of "G" and "F" will represent approximately 2.96% and 1.12% of
the HELOCs respectively, (d) will have a weighted average remaining term to
stated maturity of not more than 240 months, (e) will have a weighted average
second mortgage ratio of no less than 23.84%, (f) will have a weighted average
Combined Loan-toValue Ratio of not greater than 91.72%, (g) no more than 2% 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
1.5% 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 662 and a weighted average debt-to-income ratio of no more than 40.69%,
and (j)
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approximately 96.01% of the HELOCs shall be secured by single family residences,
approximately 1.77% of the HELOCs shall be secured by planned unit developments,
approximately 1.26% of the HELOCs shall be secured by condominiums and
approximately 0.82% 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%, 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 less than 10 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 9.25%,
(v) will not have any Subsequent Mortgage Loan with a Principal Balance in
excess of $132,500, (vi) each Subsequent Mortgage Loan shall be secured by a
single family residence, (vii) each Subsequent Mortgage Loan shall be
underwritten in accordance with the Underwriting Guidelines, and (viii) 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 14.12%, (b) will have a weighted
average remaining term to stated maturity of not more than 132 months, (c) will
have a weighted average Combined Loan-to-Value Ratio of not greater than 92.70%,
(d) no more than 2% 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 1.5% 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 96.19% of the HELs and Subsequent Mortgage
Loans with classifications of "G" and "F" will represent approximately 3.39% and
0.42% of the HELs, respectively, (g) the HELs will have a weighted-average
second mortgage ratio of no less than 24.66%, (h) the HELs (including the
Subsequent Mortgage Loans that are HELs) shall have a weighted average Credit
Bureau Score of at least 666 and a weighted average debt-to-income ratio of no
more than 40.15% and (i) approximately 95.16% of the HELs shall be secured by
single family residences, approximately 2.85% of the HELs shall be secured by
planned unit developments, approximately 1.13% of the HELs shall be secured by
condominiums and approximately 0.87% of the HELs shall be secured by
multi-family residences.
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(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 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 July 15, 1997 and (iv) no Subsequent Mortgage Loan that is a HEL may
have a Mortgage Interest Rate lower than 9.25%.
(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 4.30%; (ii) the weighted average Mortgage Interest Rates of
all HELs shall be no less than 14.12% (iii) no more than 2% 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 92%; (v) no more than 1.50% of the Mortgage Loans 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 July of 1997 the Depositor shall determine, and the Trustee
shall co-operate with the Depositor in determining, any necessary matters in
connection with the administration of the Pre-Funding Account. In the event that
any amounts are incorrectly released to the Owners of the Class R Certificates
from the Pre-Funding 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
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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;
(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
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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.
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;
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(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;
(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,
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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 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 1997-1 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.
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(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
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.
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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 R Certificate, Exhibit B-4 and in the case of the
Additional Certificate, Exhibit B-5. 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
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Trustee duly executed by the Holder or holder thereof or his attorney duly
authorized in 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. 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
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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 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
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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 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
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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
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.
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(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."
(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
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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 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.
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(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 1997-1 REMIC to cease to qualify as a REMIC and will not cause
(x) the 1997-1 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 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.
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(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 or Class A-3
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
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portion thereof in such Additional Certificate and the Holder of the Additional
Certificate shall retain its obligation under 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
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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.
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 1997-1 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 1997-1 REMIC
or (ii) result in the imposition on the 1997-1 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,
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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 "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.
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(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.
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
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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.
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 1997-1 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 June 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:
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(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;
(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
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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 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 1997-1 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.
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(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 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;
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(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 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.
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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.
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
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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 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
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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 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
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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 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
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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 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
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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:
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(i) Notwithstanding that the indebtedness evidenced by the related
Mortgage Note shall have been 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
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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 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
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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 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
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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 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
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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 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
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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 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
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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 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")
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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.
(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
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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 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
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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 and Pre-Funding Account; Deposits to the Certificate Account, the
Additional Certificate 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 1997-1, 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 1997-1, 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) 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 1997-1,
Class A" and which shall be an Eligible Account. The Trustee shall deposit the
Original Group I PreFunded 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.
(d) The Servicer may direct the Trustee in writing to invest the funds in
the Certificate Account and the PreFunding 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 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 1997-1
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
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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 and (iii) 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 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 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:
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(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;
(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).
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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 1997-1, 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
$5,402,877.62 in such Reserve Account, which represents the sum of 9.0% of the
Aggregate HELOC Trust Balance of the Cut-Off Date and 7.5% 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 Holders of the Class R Certificates pro rata in proportion to
their undivided beneficial ownership interest in the 1997-1 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
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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 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
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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 bankruptcy, insolvency, receivership
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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)
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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)
(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 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
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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;
(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 and to the Class
A-3 Certificateholders from the Group II Available Amount an amount equal
to the Class A- 3 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;
(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.
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(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 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 and the Holders of the Class A-3 Certificates on
account of principal shall not exceed the Original Class A-1 Principal Balance,
Original Class A-2 Principal Balance or Original Class A-3 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
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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 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 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;
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(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) and the principal amount of the Class A-3
Certificates (based on a Certificate in an original principal amount of
$1,000) then outstanding, and the outstanding amount of the Trust 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 PreFunding 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
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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 1997-1 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 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
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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 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
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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 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.
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(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.
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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
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benefit of its creditors, or voluntarily suspend payment of its
obligations;
(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
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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 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
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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, 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
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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
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.
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(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 and the Class A-3 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 and the Original
Class A-3 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
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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) 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 1997-1 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 and Class A-3 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
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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 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 1997-1
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- 1 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 1997-1 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
1997-1 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 1997-1
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
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(other than cash retained to meet claims) and the 1997-1 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 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
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absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
(ii) The Trustee shall not be 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
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(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 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 1997-1 REMIC formed hereunder shall constitute,
and that the affairs of the 1997-1 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 1997-1 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
1997-1 REMIC, using a calendar year as the taxable year for the 1997-1
REMIC;
(ii) make, or cause to be made, an election, on behalf of the 1997-1
REMIC, to be treated as a REMIC on the federal tax return of the 1997-1
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 1997-1 REMIC are within its
control, conduct such affairs of the 1997-1 REMIC at all times that any
Certificates are outstanding so as to maintain the status of the 1997-1
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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 1997-1
REMIC:
(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
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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, 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
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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 1997-1
REMIC with respect to such regular interests or bad debt deductions
claimed with respect to the Mortgage Loans;
(6) the amount and timing of any non-interest expenses of the
1997-1 REMIC: and
(7) any taxes (including penalties and interest) imposed on the
1997-1 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
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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 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
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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 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 1997-1 REMIC to
fail to qualify as a REMIC at any time that any Certificates are outstanding or
subject the 1997-1 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
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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 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
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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 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
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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 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
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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 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
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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.
Section 9.11 Tax Returns; Old Interest Reporting. The Servicer and the
Depositor, as applicable,
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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.
[Remainder of this page intentionally left blank]
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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
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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.
(d) The rights of the Certificateholders of Series 1997-1 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
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the interests of the Certificate Insurer), the Majority Certificateholders and
the Holders of the majority of the undivided beneficial ownership interest in
the 1997-1 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, that such change will not adversely
affect the status of the 1997-1 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,
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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 1997-1, (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 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.
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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 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
1997-1 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
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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, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
[End of Agreement.]
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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/ Len Blum
----------------------------
Name: Len Blum
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 Bishop
----------------------------
Name: Regina Bishop
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 June, 1997 before me, a Notary Public in and for the
State of New York, personally appeared Len Blum, 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 Austin
------------------------
Notary Public
My Commission expires May 16, 1999
<PAGE>
State of New York )
) ss.:
County of New York )
On the 18th day of June, 1997 before me, a Notary Public in and for the
State of New York, personally appeared Edwin K. Corbin, known to me to be a Vice
President of Finance, of Irwin Home Equity 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/ James A. Haney
--------------------------
Notary Public
My Commission expires July 24, 2000
<PAGE>
State of New York )
) ss.:
County of New York )
On the 18th day of June, 1997 before me, a Notary Public in and for the
State of New York, personally appeared Regina Bishop 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/ Cynthia Kerpen
---------------------------
Notary Public
My Commission expires___________________
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-1
CLASS A-1 CERTIFICATE
No. A-1 CUSIP: __________
Series 1997-1 Original
Certificate
Principal Balance:
$55,000,000
Pass-Through Rate: Original Percentage
Adjustable Rate Certificate Interest of this
Principal Balance Certificate: 100%
Represented by
this Certificate:
$55,000,000
Date of Pooling Cut-Off Date: First Remittance
and Servicing close of business Date: July 15,
Agreement: June May 31, 1997 1997
1, 1997
Servicer: Irwin Closing Date: Latest Maturity
Home Equity June 18, 1997 Date:
Corporation
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 June 1, 1997 among Irwin
Home
<PAGE>
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 June 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 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 July 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 1997-1, 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
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<PAGE>
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 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 A-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
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<PAGE>
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 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.
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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-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: June 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:
$55,000,000
Irwin Home Equity Corporation Trust 1997-1
Mortgage Pass-Through Certificates
Series 1997-1, 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
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<PAGE>
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 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 June 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
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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.
"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.
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<PAGE>
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
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<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-1
CLASS A-2
No. A-2 CUSIP:
Series 1997-1 Original
Certificate
Principal Balance:
$32,000,000
Pass-Through Rate: Original Percentage
Fixed Rate Certificate Interest of this
Principal Balance Certificate: 100%
Represented by
this Certificate:
$32,00,000
Date of Pooling Cut-Off Date: First Remittance
and Servicing close of business Date: July 15,
Agreement: June May 31, 1997 1997
1, 1997
Servicer: Irwin Closing Date: Latest Maturity
Home Equity June 18, 1997 Date:
Corporation __________________
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 June 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
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<PAGE>
pursuant to that certain Purchase and Sale Agreement dated as of June 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 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 July 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 1997-1 Mortgage Pass-Through
Certificates, Series 1997- 1, 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
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<PAGE>
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 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 A-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
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<PAGE>
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 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.
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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-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: June 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:
$32,000,000
Irwin Home Equity Corporation Trust 1997-1
Mortgage Pass-Through Certificates
Certificates Series 1997-1, 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
1
<PAGE>
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 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 June 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
2
<PAGE>
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-A2
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.
"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.
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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
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<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-1
CLASS A-3
No. A-3 CUSIP:____________
Series 1997-1 Original
Certificate
Principal Balance:
$13,000,000
Pass-Through Rate: Original Percentage
Fixed Rate Certificate Interest of this
Principal Balance Certificate: 100%
Represented by
this Certificate:
$13,000,000
Date of Pooling Cut-Off Date: First Remittance
and Servicing close of business Date: July 15,
Agreement: June May 31, 1997 1997
1, 1997
Servicer: Irwin Closing Date: Latest Maturity
Home Equity June 18, 1997 Date: ______
Corporation _________
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 June 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
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pursuant to that certain Purchase and Sale Agreement dated as of June 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 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 July 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 1997-1 Mortgage Pass-Through
Certificates, Series 1997- 1, 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
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<PAGE>
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 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 A-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
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<PAGE>
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 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.
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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-3 Certificate referred to in the within-mentioned
Agreement.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_______________________________________
Authorized Officer
Dated: June 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:
$13,000,000
Irwin Home Equity Corporation Trust 1997-1
Mortgage Pass-Through Certificates
Certificates Series 1997-1, 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
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<PAGE>
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 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 June 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
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<PAGE>
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-A2
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.
"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.
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<PAGE>
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
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<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 1997-1
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS R CERTIFICATE
Series 1997-1 Percentage Interest of this
Certificate: 100%
No. R-1 First Remittance Date:
July 15, 1997
Date of Pooling and Servicing Closing Date:
Agreement: June 18, 1997
June 1, 1997
Cut-Off Date: Latest Maturity Date:
close of business
May 31, 1997
Servicer Irwin Home Equity Trustee: THE CHASE MANHATTAN
Corporation BANK
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 1997-1 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 June 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 June 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 June 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 $64,909,468.15 and the Pre-Funding Account contains a deposit as of the
Closing Date of $35,090,531.85.
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On each Remittance Date, commencing on July 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"), 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
Certificatesdesignated as Irwin Home Equity Corporation Trust 1997-1 Mortgage
Pass-Through Certificates, Series 1997-1, 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 and Class A-3 Certificates, copies of which are
attached as Exhibits A-1 and A-2 respectively to the Agreement.
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<PAGE>
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 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.
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.
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<PAGE>
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 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.
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 one of the Class R
Certificates referred to in
the within-named Agreement
THE CHASE MANHATTAN BANK
not its individual capacity
but solely as Trustee
By:_______________________________
Authorized Officer
Dated: JUNE 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, 1997-1
ADDITIONAL CERTIFICATE
This Certificate represents an interest in
the Irwin Home Equity Corporation Trust, 1997-1
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 1997-1 issued
pursuant to the Pooling and Servicing Agreement, dated as of June 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
1
<PAGE>
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 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 1997-1 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) [June 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,
2
<PAGE>
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.
3
<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 June, 1997.
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_______________________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Additional Certificate referred to in the within-mentioned
Pooling and Servicing Agreement.
Dated: June 18, 1997 THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Trustee
By:_______________________________________
Authorized Officer
<PAGE>
CONTENTS OF MORTGAGE FILE
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
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; provided, however, that any Mortgage Loan originated
between September 1, 1996 and approximately April 30, 1997, with a
credit limit or Principal Balance of less than $25,000 and which does
not have a second mortgage ratio of 25% or more shall be exempt from
this requirement;
(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 $15,000 and $100,000; provided, however, that any
Mortgage Loan originated between September 1, 1996 and approximately
April 30, 1997, with a credit limit or Principal Balance of less than
$25,000 and which does not have a second
1
<PAGE>
mortgage ratio of 25% or more shall be exempt from this requirement;
(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 June 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.
2
<PAGE>
TRUSTEE CERTIFICATE AS TO MORTGAGE FILES
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
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 June 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 June, 1997.
THE CHASE MANHATTAN BANK
as Trustee
By:______________________________________
Authorized Signatory
<PAGE>
FORM OF INITIAL CERTIFICATION OF TRUSTEE
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
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 June 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 initialled 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 June, 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 1997-1
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 June 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 initialled 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 1997-1
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 June 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 1997-1
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 1997-1
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 June 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
<PAGE>
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.
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).
<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 1997-1
________________, 19__
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, New York 10001
Re: Irwin Home Equity Corporation Trust 1997-1 Mortgage
Pass-Through
Certificates, Series 1997-1, 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 1997-1, Class R (the "Certificates"), pursuant
to Section 4.2 of the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of June 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 1997-1
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 1997-1 Mortgage Pass-
Through
Certificates, Series 1997-1, 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 June 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:
<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 June 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"
<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
June, 1997.
IHE FUNDING CORP.
By:______________________________________
Name:
Title:
[SIGNATURE PAGE OF SEELER' OFFICER'S CERTIFICATE: PREPAID/LOANS]
<PAGE>
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
Schedule of Prepaid Loans
Loan Original Trust
Number Date Paid Off Product Type Balance
- ------ ------------- ------------ --------------
<PAGE>
FORM OF TRANSFEREE'S LETTER
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
[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 June 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
<PAGE>
(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").
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).
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<PAGE>
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.
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
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<PAGE>
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]
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<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:
<PAGE>
FORM OF SUBSEQUENT TRANSFER AGREEMENT
IRWIN HOME EQUITY CORPORATION TRUST 1997-1
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 1997-1, as Purchaser, pursuant to the
Pooling and Servicing Agreement dated as of June 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
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(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 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
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<PAGE>
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 provisions of this Subsequent Transfer Agreement shall control over
the conflicting provisions of the Pooling and Servicing Agreement.
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<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 1997-1
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.
<PAGE>
- --------------------------------------------------------------------------
IHE FUNDING CORP.
SUBSEQUENT TRANSFER AGREEMENT
IRWIN MORTGAGE POOL: 1997-1
JUNE 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
June 18, 1997
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Regina Bishop
Global Trust Services
Re: Pooling and Servicing Agreement (the "Agreement"), Mortgage Loan
Certificates, Series 1997-1, and Class R and Additional
Certificates, dated as of June 1, 1997 among Prudential
Securities Secured Financing Corporation, Irwin Home Equity
Corporation and The Chase Manhattan Bank (the "Trustee"), as
Trustee
Dear Ms. Bishop:
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 June __, 1997, in the favor of The
Chase Manhattan Bank, as Trustee of the Irwin Home Equity Corporation Trust
1997-1.
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 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
1
<PAGE>
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 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
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<PAGE>
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.
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<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 Bishop
Title: Vice President
Date: June 18, 1997
[SIGNATURE PAGE TO INSTRUCTIONS REGARDING LETTERS OF CREDIT]
<PAGE>
June 18, 1997
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Regina Bishop
Global Trust Services
Re: Pooling and Servicing Agreement (the "Agreement"), Mortgage Loan
Certificates, Series 1997-1, and Class R and Additional
Certificates, dated as of June 1, 1997 among Prudential
Securities Secured Financing Corporation, Irwin Home Equity
Corporation and The Chase Manhattan Bank (the "Trustee"), as
Trustee
Dear Ms. Bishop:
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 June 1, 1997, in the favor of The
Chase Manhattan Bank, as Trustee of the Irwin Home Equity Corporation Trust
1997-1.
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 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.
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<PAGE>
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 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
2
<PAGE>
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.
3
<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 Bishop
Title: Vice President
Date:
[Signature Page to Instructions Regarding Letters of Credit]
4
<PAGE>
June 18, 1997
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Regina Bishop
Global Trust Services
Re: Pooling and Servicing Agreement (the "Agreement"), Mortgage Loan
Certificates, Series 1997-1, Class A and Class R and Additional
Certificates, dated as of June 1, 1997 among Prudential
Securities Secured Financing Corporation, Irwin Home Equity
Corporation and The Chase Manhattan Bank, as Trustee
Dear Ms. Bishop:
Each of the undersigned hereby approves the letter of credit, Nos. , and ,
dated as of June __, 1997, issued by The Northern Trust Company in favor of The
Chase Manhattan Bank, as Trustee of the Irwin Home Equity Corporation Trust
1997-1 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.
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:
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement 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 the three years 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.
June 12, 1997
New York, New York
